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2. Background
This report explores the plausible financial impact for
workers compensation, health, group and individual life,
and AD&D insurers from excess mortality and morbidity
caused by catastrophe events.A general range of causes
and trends of mass casualty events are discussed, but
the main focus of the report is on modeling the frequency
and severity of losses from earthquake and terrorism,
and exploring detailed scenarios of losses caused by
industrial accidents and influenza.
2.1 Routine Payouts in Life and Health
Approximately 2.5 million people die each year in the
U.S. About 40% of those deaths result in approximately
$40 billion in insurance payouts under life policies.An
average of 5,000 work-related fatalities occur and several
million people become injured or ill in the workplace
each year, receiving compensation and benefits under
workers compensation insurance amounting to billions
of dollars.The health insurance industry covers approximately
70% of the people treated in hospitals, with medical
treatment costs totaling $1.2 trillion.
The impact of a catastrophe that kills hundreds or
even thousands of people, tragic though it may be in
human terms, may be only a marginal event in terms of
the additional financial costs to the insurance industry.
However, variations from the mean would be significant
for the insurance industry if hundreds of thousands
of additional casualties were caused by extreme events.
Events on the level of a pandemic disease or a terrorist
attack using weapons of mass destruction are possible
and could cause catastrophic casualty levels, and are considered
later in this report.
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