Insurers are watching the slow march of bird flu with a “mixture of apprehension and hope”, says ratings agency Standard & Poor’s (S&P). Worldwide losses of as much as $273 billion are possible under the worst-case scenario developed by the industry.

S&P Chief Economist David Wyss says the bird flu has had little, if any, effect so far on the credit quality of the sectors that suffered most during the severe acute respiratory syndrome (SARS) outbreak in 2003 – airlines, tourism, health care, and gaming and lodging.

More optimistic insurance models show global insured losses of $20-27.3 billion, reflecting medical advances and containment efforts of the type used against the SARS outbreak.

Whatever the final total, a pandemic would cause losses across nearly all insurance sectors: health, commercial, life, life and property reinsurance, and retrocession. The only sector that might not suffer a hit would be personal lines.

Mr Wyss says the mutation of bird flu into a human virus that causes a global pandemic may be months or even years away, but the mere prospect of such an outbreak has led to a controlled panic in the worldwide medical community and the corridors of government.

“Should a worst-case scenario develop, businesses that depend on large numbers of people congregating – such as airlines, lodging, leisure, and restaurants – would suffer serious setbacks.

“So would poultry producers and some insurers, and hospitals would be strained to their limits,” he said. “These effects would be offset to some extent by a brightened outlook for producers of non-poultry foods, for drug makers, and for companies that sell fast internet access for telecommuting.”