NEW YORK, N.Y., January 17 – A moderate avian flu outbreak similar to the 1957 and 1968 flu pandemics could significantly impact the life insurance industry, generating $31 billion in additional death claims, according to a new analysis by the Insurance Information Institute (I.I.I.). A severe avian flu outbreak along the lines of the 1918 pandemic could have a far more serious effect, causing an estimated $133 billion in additional death claims.

Although many variables might affect the number of people who could catch and die from the avian flu, the U.S. Department of Health and Human Services projects that in a severe flu pandemic similar to the 1918 experience, 1.9 million people in the U.S. could die, I.I.I said. The HHS projects 209,000 deaths from a moderate influenza pandemic, based on the 1957 and 1968 outbreaks. In a typical year, 36,000 Americans die from the flu.

Using the HHS severe death forecast of 1.9 million, the I.I.I. estimates that the dollar value of death claims from the flu would be $54 billion for group life insurance policies and $79 billion for individual life insurance policies, a total of $133 billion. The comparable numbers for a moderate pandemic are $11 billion for group life insurance and $20 billion for individual life insurance, for a total of $31 billion.

Given the lack of modern experience with vast health disasters and the numerous public health false alarms " from mad cow disease to swine flu " it is more difficult to predict the effect of an influenza pandemic on life insurance companies than to forecast the potential damage from landfalling hurricanes, said I.I.I. economist Dr. Steven Weisbart.

The effect of a pandemic on a particular life insurance company would depend on many factors. These include:

Where a companys insureds are located in relation to outbreaks of the disease, including exposure to certain foreign markets (especially Asia) where the outbreak may be more severe;

The extent to which a companys particular investments are affected by the spread of the disease;

How easily a company can convert assets into cash for the purpose of paying benefits;

The diversification and character of a companys products (e.g., whether it writes group life insurance, or whether it also writes other lines of business that remain profitable);

How conservatively a company has calculated its reserves;

What a companys reinsurance arrangements are (and how well its reinsurers handle the claims ceding insurers make against them);

How strong a companys capital and surplus position is entering the pandemic;

To what extent a company is able to raise additional capital under pandemic circumstances.

Weisbart further observed that reinsurance might help mitigate the loss, but since the life reinsurance market is highly concentrated, and all companies with reinsurance would be seeking reimbursements at the same time, questions about some life reinsurers ability to pay could arise.

The I.I.I. report can be downloaded at http://www.iii.org/media/hottopics/additional/birdflu/.