Life insurers and their reinsurers are most likely to be the hardest hit by a bird flu pandemic, but it is unlikely there will be widespread downgrades to the life, general or reinsurance sectors, according to ratings agency Fitch Ratings.

In a special report published last week, Fitch says life insurers, general insurers and reinsurers would all be affected by any falls in the investment market that could accompany a bird flu outbreak.

“If the outbreak is relatively short-lived, the overall impact is likely to be temporary,” the report says.

Lauren Kalinowski, an Associate Director in Fitch’s US Insurance Group in New York, says downgrades would be most likely if the virus mutates to allow human-to-human transmission and leads to a considerable increase in mortality claims or investment market losses.

“The companies most affected would be those with concentrations of mortality risk,” she said.

Using various published expert opinions, Fitch estimates 400,000 deaths could occur in Europe and 209,000 in the US in a bird flu pandemic.

Under these assumptions, Fitch considers that the increase in claims could amount to as much as $US18 billion ($25 billion) in the US and £20 billion ($48 billion) in Europe.