Companies have little or no bird flu insurance, warns broker Aon

October 31 2005

Businesses warned of cash flow problems, supply chain hold-ups and staff absences which would follow an outbreak with MANY businesses, including those operations depending on sensitive supply chains, finding they have little or no insurance cover against the effects of avian flu.

With the infection beginning to hit Europe, leading insurance broker and risk management consultant Aon has called on corporates to take action to protect their performance.

Despite the considerable risks of a flu pandemic, a report from Aon highlights that insurance markets currently offer little protection aside from life assurance and sickness cover, which means that robust business continuity planning must go to the top of the corporate agenda.

The broking group has published a 'white paper' on the risks faced by businesses, under the title Pandemic Influenza: Managing the Risks of an Invisible Threat.

The World Health Organisation has already urged countries to prepare for the massive social and economic disruption which a pandemic would bring.

Aon underlines its case by pointing out that Sars, although less infectious and virulent than avian flu, hit the economies of east and southeast Asia hard. According to the Asian Development Bank, the overall loss in demand and business revenue was some $60bn.

An outbreak of avian flu would cause shutdowns in travel, tourism and import and export, said Aon.

Businesses would encounter cash flow problems as employees fell sick or took time off to care for family members, or were prevented from travelling by quarantine and fuel shortages. The UK government predicted that normal sickness rates of between 2% and 6% could double, and that up to 25% of the workforce would be absent for between five and eight days over a three-month period.

Businesses that increasingly use overseas suppliers and integrated 'just in time' techniques faced supply chain interruption, with some materials being quarantined.
Aon said that in spite of these risks, research by the Chartered Management Institute showed businesses had given little consideration to the possible impacts.
Business continuity plans prioritised loss of information technology capacity and telecoms, fire, loss of access to site, utility outage and terrorist damage.

Hugh Leighton, a risk consultant at Aon, said: 'Businesses must acknowledge that the outbreak of a flu pandemic is a genuine risk and one of the greatest threats to future performance. Experts describe an outbreak in terms of 'when', not 'if'.However, research and historic Sars experience shows that little is being done to address the risks.

'As a result of the experience of SARS and limitations in business interruption cover for infectious diseases, broadly speaking a pandemic will be an uninsured event whereby the cost will be retained by the business.

'To ignore this risk is tantamount to a dereliction of duty.'

END

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