Bird flu in Europe

Europe

While it acknowledges that a severe human flu pandemic would clearly have a significant impact on all aspects of the economy, rating agency Standard & Poor’s does not see avian flu as currently posing a threat to European corporate ratings. Christian Wenk, credit analyst with Standard & Poor’s European Corporate Ratings says that as long as it essentially affects only birds, S&P believes avian flu could have some small but noticeable impact on Europe’s transport, travel, hotel, and leisure sectors due to some limited concerns by travellers, as well as on the correlated luxury goods sector. But this would likely have only a minor effect on credit quality,” Mr Wenk says. In a related report released at the same time, S&P notes that the global impact of a severe flu pandemic on life reinsurers could be as high as US$11.5bn. S&P believes that the pooling of risk by reinsurers in the event of a harsh global pandemic might be less beneficial than it would be for a localised shock or natural catastrophe. In response, some reinsurers have issued mortality catastrophe notes, while retrocession is also used. Reinsurers may look to use their financial flexibility and issue new equity or debt, although during a mortality shock the ability to do this might be reduced due to the risk of re-emergence of the virus and further waves of claims.