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Editor's note: Reporting for this article was conducted by RMS researchers Andrew Coburn, Alexandra Cohen, Maura Sullivan and Gordon Woo using the new influenza pandemic risk model by Risk Management Solutions Inc. It is said to be the first insurance application of a science-based infectious-disease model. The article was written by Associate Editor Matthew Brodsky.

It begins on January 9, 2007. That's when the H5N1 virus goes global, mutating so that it can be passed from one human to the next. Seven days later, a cluster of 30 unusual flu cases appears in the state of Penang in Malaysia. This cluster is a telltale sign of the beginning of a pandemic, the "starting gun." Clinical tests confirm this. It's a new strain of the H5N1 virus that has infected these 30 people. The population in Penang--the population of the world--has no innate immunity to this new strain.

The press calls it the "Asian Killer Flu" in 120-point headlines. Stock markets around the world bottom out. The New York Stock Exchange suspends trading to stop the bleeding. Even the experts don't know how bad the pandemic will be.

But they're trying to gauge it, and stymie it. The World Health Organization team in Penang is issuing stockpiled anti-viral drugs to local health teams. They in turn are quarantining people confirmed to have the new flu strain and giving them the anti-virals. Other experts are trying to gauge just how fast this bug can spread, how easily it can be passed. They still don't know its lethality, but their early analysis suggests the virus is very transmissible.

And it got out. By day 30 of the pandemic, in early February, cases are reported in Singapore and Hong Kong. China reports cases. Japan declares a national pandemic alert in response to its first cases. Experts announce what has been made plain--the virus' seven-day-long incubation period allows people carrying the virus to travel before they become symptomatic. Seven days is longer than the incubation period for any other flu strain. Global spread is possible.

In fact, the long incubation period in combination with high infection rates--up to 1 in 10,000 in major international hub cities--gives pretty good odds that infected passengers are traveling around the planet on jet planes.

Air travel in Southeast Asia downshifts. Australia goes so far as to close its borders to all outside traffic except for air travel deemed "essential to national security." Nearly 99 percent of traffic is stopped, yet 250 people still enter its borders every day. The United States sets up a health-screening program at its ports and airports. Passengers who appear sick are quarantined. All over the world, public fear and government intervention basically shut down all international air travel.

Panic around the world is also focused on the WHO--how could it delay announcing to the world that stage 6 of the global pandemic was upon us? A WHO spokesman responds: "We needed to be sure." But it got out.

In March, the flu makes its way around the world. By the middle of the month, about 700,000 people are already hospitalized in Japan, despite 4 million doses of Tamiflu distributed over the first eight days of the month to those older than 75 and younger than 15, as well as to health-care workers. The anti-viral does little to stop the spread, though it lowers the death rate of severe cases by three-quarters. In the United States, the first cases are reported in Los Angeles on March 14, in New York on March 16. Europe cringes as its first outbreak appears on March 22. And for all of its prevention measures, Australia falls prey to the pandemic just three weeks after the country closed its borders.

There is some hope still. L'Institut Pasteur in Paris beats the competition on day 55--March 4--and is the first organization to isolate the H5N1 "Killer Asian Flu" strain, which is needed to make a vaccine. Scientists narrow down the virus' transmissibility, and they hone in on its death rate: less than 5 percent of cases are fatal. Experts also discover that this H5N1 virus is behaving like the 1918 pandemic. It disproportionately kills healthy folks between the ages of 18 and 44--not seniors or children. The virus seems to cause a "cytokine storm," a reaction in an immune system not quite unlike AIDS. Its twisted logic--the healthier you are before infection, the worse off you are during. It's the 1918 pandemic repeated in the highly integrated, very congested world of 2007. Knowledge can only help so much.

The American people feel the pandemic in April. More than 2 million people seek hospital care. Many of the sick find hospitals crowded, unable to accommodate them. Schools and other civic buildings become infirmaries.

Space is not the only issue. Supplies of the anti-viral Tamiflu are running low after an early rush of prescriptions. Other critical supplies, like ventilators and decongestant drugs, are scarce. Doctors and nurses are getting sick themselves, or staying home in fright. Local police and fire departments are plagued by absenteeism. The National Guard is called up to plug the gaps.

By the end of April, about 250,000 Americans are dead from the flu. In Japan, the death toll tops what will eventually be its halfway point there--175,000.

In May, Europe and previously unaffected regions suffer their peaks of the pandemic. But the light at the end of the tunnel seems visible ahead, for the living. The weekly death counts--a grim measuring stick, but an effective one--start to drop in Asia. And in the United States, the Food and Drug Administration produces its first batches of the vaccine.

It's a race. The Asian Killer Flu rages on in the West through May and June. By the end of the pandemic in June, up to one-third of all Americans have been infected. About 2 million have died. But it's a race at this point to produce enough vaccine to stop a second wave at the start of traditional flu season later in the year. If all goes well, sufficient quantities of the vaccine should be available by midsummer--about six months after the start of the pandemic.

Soon, 40 million doses of the vaccine are being produced every month. That sounds like a lot, but more than one dose may be necessary per person for adequate protection. Governments are left with tough choices on who should get the vaccines first--the young, the work force, health-care employees? In developing countries, where the vaccine is even in shorter supply, only the rich receive doses.

Those who are not given first shot at the vaccines are left to rage at the inequity, fear the coming winter or hunt desperately for doses of the vaccine on the black market or across international borders. When the Northern Hemisphere flu season hits at the start of winter, only 10 percent to 50 percent of the population of developed countries has been given the vaccine.

Clusters of cases again appear in the United States and Europe. On all-day media coverage of the pandemic, experts warn about the second wave, such as the one that occurred in the great Spanish Flu Pandemic of 1918. The pandemic circles the globe in three distinct waves through the winter of 2007/2008. When it is all over, an additional 300,000 people are dead in the United States alone. Thankfully, however, the general population receives enough vaccine in 2008 through 2009 to develop a "herd" immunity to the virus by the spring of 2009. No longer will H5N1 pose a pandemic threat, although the strain will always float among the human population as a cause of "normal" flu.

WORST-CASE SCENARIO

The above scenario is all the more sobering when you consider that the Killer Asian Flu is not the worst-case scenario that we face today. The 1918 pandemic was not the worst-case scenario in its day.

RMS has modeled this worst case. It is the nightmare scenario, combining the deadliness of H5N1 with the ease of spread of normal flu. Called the "Nigerian Virus" scenario after its starting point, such a pandemic would have no precedent. Like the Killer Asian Flu, the Nigerian Virus would result from a completely new strain of H5N1, a so-called reassortment of the bird flu virus. Like our previous scenario, the Nigerian Virus would begin in January 2007. And again, similarly, this very severe scenario would see the new H5N1 affect not the old and young, but the young and middle-aged adult. This is again because of the cytokine storm, when a healthy immune system overreacts to the flu virus. It then sends too many antibodies to fight the infection, which instead potentially block airways and cause suffocation and respiratory distress in the victim.

Unlike the Killer Asian Flu, this nightmare flu would be more lethal. The Nigerian Virus would kill one out of three people it infected. Usually, with viruses with such high lethality, the bug kills victims too quickly--before victims can transmit the virus to new hosts. But in the case of the Nigerian Virus, one sector of society, children for example, would high infection rates but low death rates, so they can pass it on to other sectors that would have very high death rates. What's worse, the eventual vaccine would prove to have low efficacy, and despite massive government efforts, a second wave of the flu would hit in Year Two with 50 percent of Year One's impact. RMS has also outlined less severe pandemic outbreaks. The first and least dangerous, the so-called "European Influenza," would break out in November 2006, and have low infection and mortality rates. It would mirror the pandemic that occurred in 1968, which was the mildest in the 20th century. The second and more severe scenario is RMS' "Russian Flu," which would start in April 2008. It would reap about twice as many deaths as the 1957 epidemic (about 140,000 deaths in the United States, 2 million to 4 million worldwide). The virus here would have a high infectiousness rate and a lethality 10 times that of the European Influenza.

One important similarity among all four scenarios--they all would start in the same way. No matter if it's the Killer Asian Flu or the Russian Flu, the situation on the ground would be very similar for the first few weeks. That's because it would take that long--as shown in our timeline--for authorities to determine just how virulent the strain of flu is. During those terrifying early moments, everyone would assume the worst--and act accordingly.

Of course, these four scenarios only represent some of many situations that could occur when the avian flu pandemic strikes (remember, there seems to be no if about it). All four are fictional, though among them, they depict all feasible pandemic characteristics and illustrate some of the major differences between one outbreak and another.

When the actual pandemic takes flight, its severity will depend on all of these characteristics of the virus, along with other factors like the location of the original outbreak, government countermeasures, the public's reaction, vaccine development and the efficacy of anti-virals.

RMS has come up with 1,890 pandemic events by running the variables through its new Influenza Pandemic Risk model. In putting together the model, RMS used new scientific understanding from virology, epidemiology and mathematical biology.

The model enables an insurance company to assess the likelihood of losses from different pandemic severities, providing figures for expected loss, return periods of loss above specified thresholds, technical rate for layers of excess loss and other important metrics of risk. Insurers could use these metrics to establish the scale of the risk posed by pandemic influenza relative to capital, and to explore ways of managing risk through risk transfer using reinsurance or the capital markets.

Insurers could find individual pandemic scenarios from the model useful in demonstrating the magnitude and distribution of possible loss, and assisting in understanding how specific variables affect the payouts. Scenarios could also be helpful in establishing the time periods over which claims will be incurred to assist with claims-payment strategies.

MATTHEW BRODSKY is associate editor of Risk & Insurance®.

April 15, 2006

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