Britain’s Financial Services Authority (FSA) is asking insurance companies about their ability to withstand a deluge of claims on life insurance policies if the country were hit by a bird flu pandemic.
The regulator has also asked financial firms to prepare plans to continue operating in the event of their staff being struck by the flu, in the light of warnings that 10% of personnel could be off work for three months.
A high death rate among 30-to-50-year-olds would affect insurers more than deaths of the elderly or very young as these are the people most likely to have life insurance policies.
The FSA’s contingency planning for Avian flu emerged in its submission to a Treasury select committee of MPs, which this week questioned Sir Callum McCarthy and John Tiner, chairperson and CE of the watchdog, on issues from consumer credit to hedge funds.
McCarthy told the committee he was concerned about the possibility of misselling of new, self-invested personal pensions (Sipps). He admitted there would be a ”time gap” between their launch and the regulatory regime under which they would operate. Sipps are due to launch in April, but any regulations are likely to take an extra year to draft.
On consumer credit, McCarthy said the FSA did not want to be handed control of the sector as it would have to deal with at least 100 000 licences. He repeated his concerns about the sale of payment protection insurance, which is highly profitable for the banks but has been criticised for being unnecessary in many cases.
On the subject of wholesale markets, McCarthy admitted that ”at least” one hedge fund is being investigated for market conduct. — Â