EUROPE – CEIOPS, the Committee of European Insurance and Occupational Pensions Supervisors, will meet next week to discuss how to minimise the effects of a possible bird flu pandemic on the industry.

A CEIOPS official told IPE the members’ meeting will be held on Tuesday and Wednesday next week. “So, we cannot comment until then,” she said.

The meeting follows a warning from the International Monetary Fund that pension and insurance regulators would need to be on watch if the disease hit financial markets. They might need to exercise “temporary forbearance” as markets tumble.

Meanwhile, the Dutch Central Bank has warned that bird flu could give the world economy one “considerable slap”.

According to an article in the latest DNB Magazine, “The Netherlands is especially vulnerable because our economy is open.”

The DNB Quarterly Bulletin added the consequences for the Dutch financial sector are especially important because at 8.5% the Dutch financial sector accounts for a relatively large share of the market sector’s added value.

“Not only banks are important to the Netherlands but also insurers and pension funds. A catastrophic death rate can affect the funding ratio of pension funds,” said the report.

It continued: “If a relatively large group of people aged 65 and over die, the liabilities of pension funds decrease, and other things being equal, the funding ratio of pension funds may even improve.

“This effect on the funding ratio is generally mitigated by more pension benefit payments to surviving dependants.”

The report also explained that if primarily people with poor health die in a pandemic, the remaining life expectancy figure increases for surviving pensioners and active participants. This means that pension funds would need to make allowances for a possible higher benefit payment period.

“Finally, there is also the possibility of a concentration of risks for pension funds because certain professional groups (medical staff) would be relatively more vulnerable to influenza.

According to the report, the issue now is whether existing business continuity plans pay sufficient attention to the specific dangers of an influenza pandemic at a time when financial institutions have no experience of how to bear the consequences.

Stress tests were suggested as one way for financial institutions to gain a better understanding of “how resistant to calamity they are”.

According to the report, European and other governments have adopted an active stance to the issue, and increasing resources are being made available to limit the spread of avian flu.

Consulting firm Mercer last week said that a possible upside to a potential pandemic of avian influenza is that pension fund liabilities may be cut.