S&P’s Says SARS Could Damage Health of Emerging Asian Companies

Standard & Poor’s reports that a recent outbreak of a pneumonia-like illness known as Severe Acute Respiratory Syndrome (SARS) in greater China and southeast Asia is unlikely to have any immediate impact on its ratings on insurance companies and banks in the region.

It added, however, that the short-term financial performance of banks and the business growth of insurance companies operating in the regional economies worst affected by the illness are likely to come under pressure.

In the insurance industry, possible travel and medical insurance claims generated by SARS are likely to be limited, while business interruption risk caused by the illness is not likely to be covered by most existing policies.

Insurance claims generated by SARS, including life insurance claims, are likely to have only a limited financial impact on insurance companies in the region.

Some providers of employee compensation policies, especially in Hong
Kong, may be affected by increased employer liability claims if employees fall ill or die as a result of SARS contracted in the course of employment, but any such claims on individual companies are likely to prove manageable, at least for the time being. New business generation may, however, be negatively affected if the dampening effect of SARS on the growth rates of affected regional economies is prolonged

Nevertheless, it is highly likely that any economic disruption will be moderate over the medium term assuming the outbreak is effectively contained in the months ahead. Although the full extent to which the infection may spread is difficult to ascertain, the number of cases recorded is small in relation to the populations of the countries and territories where its presence has been identified.

At the time of writing, about 3,000 cases of SARS had been reported
globally. Of these, two-thirds had been recorded in Hong Kong and in mainland China, where the infection is thought to have originated. The population of Hong Kong is 7 million, while that of China is 1.3 billion.

SARS generates pneumonia-like symptoms and is caused by a previously unidentified pathogen.