Avian flu: bracing for a pandemic: as the threat of a global avian flu outbreak intensifies, insurance companies must evaluate their readiness and take immediate steps to mitigate the impact.

High above the jungles of Southeast Asia, a flock of migrating birds circles downward, landing on a pond adjacent to a small hog farm. Several of the birds are infected with the H5N1 virus, commonly known as the avian flu virus. When they fly away, they leave behind excretions and secretions containing cells of that virus.

Some time later, a pig rooting around near the pond inhales a particle containing the virus, which breaks loose and binds itself to receptors outside a cell in the pig's airway. The virus shell fuses with the membrane, moves through it and then releases its RNA (ribonucleic acid, which serves as the template for transferring genes into protein) into that cell. The viral RNA copies itself to a messenger RNA moving back through the cell, further reproducing itself. Before long, the virus is spread throughout the swine.

This ominous scenario has probably repeated itself thousand of times over last 10 years. But in this case, the pig is also infected with a human influenza virus. The two viruses intermingle, swapping genes through a process called re-assortment and producing a strain that combines the severity of the H5N1 virus with the human-to-human transferability of the common flu.

Just a couple of days later, as the farmer and his visiting cousin are feeding the pigs, the cousin inhales a small particle of excrement containing this new strain of flu. In a few days, he is coughing and sneezing, and on his return flight to Hong Kong, he infects many other passengers, each of whom passes the virus to other travelers. Before long, this chain of events has ignited a virulent pandemic that spreads illness and death around the world, severely straining the global health care system and devastating businesses worldwide.

A Predictable Pattern

This scenario is just one example of how a global avian flu pandemic could break out. That it is based on everyday events only highlights how easily such a cataclysmic outbreak could begin. Experts estimate that there have been between 10 and 13 influenza pandemics in the world since 1700, and that a pandemic will occur every 30 to 50 years. The last three pandemics--the Spanish flu in 1918, the Asian flu in 1957 and the Hong Kong flu in 1968--all occurred in the last century.

Given this pattern, the probability of another pandemic within our lifetimes is not considered remote. And that possibility is becoming more alarming each week as the media reports the rapid spread of the avian flu across countries and continents. As of this writing, all 100-plus deaths from the virus have occurred among people who have had direct contact with wild birds and infected poultry. But fears are growing that the virus will soon mutate into a form that can be readily transmitted from person to person.

In a December 2005 report to Congress, the Congressional Budget Office (CBO) developed two pandemic…