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Could Swine Flu Have a Positive Impact on Life Insurers?

Life insurers and their investors don't seem bothered about the swine flu epidemic that's invaded the U.S. And this could be the reason why: just the mere threat of swine flu, which has already caused almost 200 deaths in Mexico, might scare people into buying more life insurance or buying a policy if they don't already have one.

Dr. Steven Weisbart, who studies plagues, pandemics and terrorism for the Insurance Information Institute, told BNET Financial in an interview that the September 11, 2001 attack on the World Trade Center caused a spike in life insurance purchases. Applications were up 6.0 percent in the next quarter and 4.0 percent in each of the following two quarters. However, the "9/11 effect" wore off by the time the first anniversary of the worst attack on American soil rolled around.

Weisbart, the author of a 2006 study based on recent epidemics in the U.S., said the life insurance industry could weather a swine flu surge, even in the remote likelihood of an outbreak comparable to the 1918 Spanish influenza epidemic that killed two million people.

He estimates that such a pandemic would result in $155 billion of payouts. But while some insurers, weakened by bad stock market investments, could fail, the life insurance industry overall would handle its own version of a banking-style "stress test."

"There's a safety net in the form of state insurance guaranty funds, and the insurance companies also have reinsurance," he said. Reinsurance is insurance for insurers, and payouts on those policies might actually make some companies healthier, he said.

Insurers are reporting first quarter earnings, with MetLife, Travelers and Hartford Financial having reported yesterday, and Lincoln National and Prudential due to report next week. Thus far there hasn't been a single question from analysts or investors on any of the insurers' conference calls about swine flu.

Perhaps the swine flu is becoming a known quantity. It even has a name, "N1H1" and it appears the Mexican variety, which has caused the most casualties, is winding down.

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