Thursday, March 23, 2006

Banks, Insurers Told to Plan for Bird Flu

The Globe and Mail, Paul Waldie & Sinclair Stewart, 23 March 2006

Canada's top financial industry regulator is pushing the country's banks and insurers to draw up plans to cope with a possible outbreak of avian flu.

The Office of the Superintendent of Financial Institutions has sent letters to three major industry associations -- the Canadian Bankers Association, Insurance Bureau of Canada and the Canadian Life and Health Insurance Association -- asking what actions they have taken to prepare for a pandemic and who at the association "has been tasked with co-ordinating your activities."

"In recent months increasing attention has been paid to the possibility of an outbreak of avian flu," says the letter signed by assistant superintendent Julie Dickson. "While public health experts cannot predict whether an easily communicable human strain of 'avian flu' will result in a serious outbreak of influenza in the near future, the potential for such an outbreak raises significant issues in terms of business continuity and resilience practices."

Rod Giles, an OSFI spokesman, said the letter is only a first step and the regulator also plans to meet with individual financial institutions.

"The key here is that the financial sector needs to be aware of the potential, really, for an outbreak and needs to consider how such an event could impact their operations," Mr. Giles said. "We're going to be conveying to them our expectation but in general it's consistent with business continuity planning." He added that this is the first time OSFI has taken such an active stand. Officials from the three organizations said they had received the letter and they are working with their members on preparations.

According to the World Health Organization, the H5N1 strain of avian flu has killed 103 people since it re-emerged in 2003. The virus was initially concentrated in Asia but has since spread to parts of Europe. While all of those who have died were in contact with dead or diseased birds, public health officials are concerned the virus might mutate and become transmissible among humans. In a report this week, the Canadian Manufacturers & Exporters (CME) estimated that a pandemic would cause between 11,000 and 58,000 deaths in Canada, and wipe out about 5 per cent of the national economy.

The memory of the outbreak of severe acute respiratory syndrome, or SARS, three years ago is still fresh in the minds of many businesses. The 375 cases of SARS overwhelmed the health care system and had an estimated economic impact of $2-billion across Canada.

Many financial institutions, such as Sun Life Financial Inc., are already well along with preparations.

As one of Canada's largest insurers, Sun Life has more concerns than most about a possible outbreak of avian flu. On the one hand, it has to have a plan in place to ensure its businesses continue to operate effectively: A task complicated by the fact that it has units across Asia, which is considered more vulnerable to a pandemic. The benefit of being international, however, is that it can shift the workload from countries that have been hurt by the flu to other areas that are safe.

On the other front, Sun Life has to ensure it has the financial strength to pay out life insurance claims, which would obviously be expected to rise if there was a mass outbreak. Sun Life began working on the avian flu issue nearly a year ago, and has created a steering committee that includes the company's chief medical officer.

The insurer has already done some predictive modelling to gauge its ability to withstand the financial hit. Sun Life considered a scenario in which the normal death rate for people between 25 and 75 would triple: Roughly double the number of deaths that occurred in the influenza epidemic of 1918. Even with that grim outcome, however, the insurer determined it would still be able to service its customers.

"We're assessing significantly worse mortality than actually occurred in 1918," said Tom Reid, a spokesman for the company. "Under the extreme scenario we've looked at, we still have the capital to run the business."

The country's largest banks have also been preparing themselves for a possible avian flu problem. Some of the banks have their own doctors, who help shape programs to keep employees healthy, whether it be limiting face-to-face contacts between executives, or keeping masks on hand for branch staff and head office personnel.

The banks also have an open conference line with one another that automatically kicks in during any crisis and allows them to develop co-ordinated responses.