Transcript Influenza Pandemics Aligning Solutions for Institutions

Influenza Pandemics
Aligning Solutions for Institutions and Individuals
Max J. Rudolph, FSA CFA MAAA
Rudolph Financial Consulting, LLC
Iowa Actuarial Club
February 23, 2007
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Teachable Moment?
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Topics
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Overview/History of Pandemic Risk
Recent Developments
Risk to Insurers/Institutions
Discussion of SOA Pandemic Research
Project
Overview/History
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Recently 3-4 influenza pandemics per
century
20th century
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1968 Hong Kong flu (H3N2)
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1957 Asian flu (H2N2)
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50% of deaths above age 65
Many of rest were young
65% of deaths above age 65
1918 Spanish flu (H1N1)
 99% of deaths below age 65
Pandemics
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Definition
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Multiple waves common
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New strain of virus with limited immunity
Ability to infect humans
Ability to transmit between humans (H2H)
Mutations attack different groups in each wave
High morbidity (25-30%), low mortality
(<<1%)
Global is local, and local is global
Phases of Pandemic Alert
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Inter-pandemic phase
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Pandemic Alert Period
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3 very limited H2H
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4 new virus with H2H cases
5 significant H2H transmission
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Pandemic
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1 low risk of human cases
2 new virus in animals, no human cases
6 efficient/sustained H2H transmission
Why a severe scenario could happen
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Supply chain constraints
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Virus mutations build resistance to drugs
At risk population (HIV, cancer, diabetes)
Poverty and malnutrition
Reaction time
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Health care
Food/Energy/Services
Travel
Vaccines take 6-9 months to develop
Why a severe scenario won’t happen
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Better health care
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Intensive care units
Germ theory
Antibiotics
Antivirals
Better coordination between human and
animal disease researchers
Working toward a vaccine
Influenza Basics
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8 genes made of RNA
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Can live for up to 2 days on hard surfaces (air?)
lungs are only human cells with the right enzyme
RNA mutates easily (DNA does not)
Proteins
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Hemagglutinin (H)
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Neuraminidase (N)
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helps flu to enter cell
helps flu spread from cell
2006 vaccine (set Feb 2006) H3N2, H1N1
1918-20 Pandemic
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Worst in recorded history
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50 to 100 million died worldwide
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675,000 died in US
Virus mutated directly from birds
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Other recent pandemics used reassortment (pigs)
Could it be repeated?
Developed world impacted less
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Mostly fall 1918
Sanitation
Better able to deal with secondary infections
Smaller percentage aged 20-40
Background on 1918
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WWI
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Poison gas
Crowded conditions
Bond drives
Politicians overrode health inspectors
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recall China’s response to SARS
Fear/rumor
Abnormal Mortality Curve
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W shaped curve experienced in 1918
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Peak for ages 20-40
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50% of deaths
Immune system turns on self
Limited impact over 65
Mortality Curve: U or W Shape?
Source: 1918 Influenza: the Mother of All Pandemics
Jeffery K. Taubenberger* and David M. Morens†
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Symptoms
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Very sudden: 1-2 hours healthy to sick
Fevers: 101-105 degrees
Eyes burn
Severe aches in muscles, joints, backs,
heads
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As if they had “been beaten all over by a club”
Patient drowns – fluid in lungs (ARDS)
First Wave
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Spring 1918 - normal flu
Very contagious – especially for young,
healthy adults
Second Wave
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Late summer/fall 1918 – deadly
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Secondary infections
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Some protection if infected by first wave
Pneumonia
Heart
Neurological
The Numbers
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About 25% contracted flu and 20-100 million
died worldwide
US: 25% morbidity, 2.5% mortality
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675,000 died in US (population is 3 times
larger today)
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.25 * .025 = .6% excess mortality
More US deaths than all 20th century combat
deaths
Impact of Poverty
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Combination of poverty/secondary infections
drives greater impact in 3rd world countries
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High risk today
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Large percentage of overall mortality
1918 - India/Russia/Iran had 7-10% die
HIV/TB/malaria
Areas of malnutrition
Africa
Current: Bird Flu (H5N1)
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All influenza strains come from birds
Reassortment/Adaptive mutation
H5N1 is responsible for current bird
pandemic
Watch for clusters as virus mutates
H2H strain likely less virulent
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Current Statistics (WHO Feb 16)
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2003: 4 cases, 4 deaths
2004: 46 cases, 32 deaths
2005: 97 cases, 42 deaths
2006: 116 cases, 80 deaths
2007: 11 cases, 9 deaths
Total: 274 cases, 167 deaths
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61% mortality
qx rising since September 2006
Risk to Insurers
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Insurance risk
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Economic risk (liquidity)
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Reinsurer solvency
Business continuity
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Global recession likely
Counterparty risk
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Mortality and morbidity
Claims and customer service
Pandemic Scenarios
US Dept HHS
Characteristic
Illness
Outpatient medical
care
Hospitalization
ICU care
Mechanical
Ventilation
Deaths
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Moderate (1958like)
90 million (30%)
Severe(1918-like)
45 million (50%)
45 million (50%)
865,000
9,900,000
128,750
1,485,000
64,975
742,500
209,000
1,903,000
90 million (30%)
What is the cost?
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Life Insurers (per ACLI 2005 Fact Book)
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Gross Net Amount at Risk
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Statutory Surplus
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$99 billion or 40% of surplus
Reinsurance ceded – face amount
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$250 billion
Excess deaths 0.6%
Cost: Flat Extra (before tax benefit and reinsurance)
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$16.5 trillion
$1.9 trillion
Other factors – health, payout annuities, GMDB
Insured vs. Population Mortality
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Insured mortality about 60% of population
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Factors favoring insured mortality:
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60% have life insurance
Socio-economic
Health insurance
Nonsmoking
Disease burden
BUT 1918 flu killed healthiest
Flu Season of 1999-2000
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Annual flu arrived early
System caught unprepared, no capacity
Equipment shortfalls
Nurse shortage
Economic Risk
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Global recession: estimated GDP drop of 3%
Asset default rate will spike
Interest rates will reduce (offset)
Who will buy your assets?
Liquidity event?
Counterparty Risk
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Reinsurers have low Reserves set aside
relative to Face Amount
Other catastrophes will not go away
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12 to 18 month event
Might not be able to pay promptly, if at all
Will direct writers survive if reinsurers fail?
Business Continuity Risk
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Advance planning and communication is critical
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High absenteeism due to sick, caring for family
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Minimal notice once clusters form
Assume 40-50%
Succession planning
Multiple locations (field offices/international)
SOA Study
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Actuaries consider mortality risk our specialty
Insurance Information Institute (Weisbart)
estimates of mortality claims surge risk
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Moderate scenario: $31 B
Severe scenario: $133 B
SOA research project to be released in the
next month
Issues
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Just-in-time supply chain
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Back up plans rely on internet
Allocation
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Hospitals: oxygen, gloves, ventilators
Individuals: medicine, parts, food, energy, garbage
Will FedEx, UPS and US Post Office deliver
Pockets of social unrest?
Vaccines
Hospital beds
Emergency personnel
Economic: no built in recovery
Advice
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What should you do?
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React proactively
Set up internal influenza team
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Advice for employees
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HR practices (send sick home, pay practices)
Reinsurer risk
Telecommuting/multiple shifts
Privacy issues
Stockpile supplies
Use available resources from county, CDC, WHO
Bibliography
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America’s Forgotten Pandemic
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Flu: The Story of the Great Influenza Pandemic
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John M. Barry
The Monster at Our Door: The Global Threat of Avian
Flu
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Gina Kolata
The Great Influenza: The Epic Story of
the Greatest Pandemic in History
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Alfred W. Crosby
Mike Davis
“With the recent development of hygiene and sanitation as marked
as it is, the world felt safe against the possibilities of any new
conflagration from influenza. But the experience of the last two
years has demonstrated that we are not so far advanced in our
knowledge of this disease, of its cause and of the methods of its
control as we thought we were.”
James D. Craig and Louis I. Dublin
Actuarial Society of America
Transactions (Vol. XX, Part 1 No. 61)
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Thank you!
[email protected]
(402) 895-0829
www.rudolphfinancialconsulting.com
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