RMS says studies show that more severe pandemics than the 1918 outbreak are possible, and probabilistic estimation of a virus incorporating H5N1 - the virus that recently caused avian flu in Asia - suggests that there is a 20% chance of a pandemic that is more severe than that experienced in 1918.

The company, which provides products and services for catastrophe risk management, has developed an Influenza Pandemic Risk Model that is intended to help insurers assess the losses they will experience from pandemics with all of the different permutations of potential characteristics and outcomes.

Earlier this year US and UK regulators urged financial institutions to devise contingency plans for dealing with a possible widespread outbreak of avian flu.

HSBC has drawn up business continuity plans on the assumption that up to half of its staff could fall ill at the peak of the next flu pandemic - double the number advised by the World Health Organisation.

The bank said it had made preparations for staff that might have to care for family members to work from home using video link and teleconference facilities.

Early drafts of US Government plans estimate that up to 40% of the workforce may be absent during a widespread outbreak. Advance copies of the report seen by PA indicate the Government is preparing for a worst-case scenario of up to two million deaths in the US.

"While a pandemic will not damage power lines, banks or computer networks, it has the potential ultimately to threaten all critical infrastructure by its impact on an organization's human resources by removing essential personnel from the workplace for weeks or months," the report says.

New research released by the Australian arm of insurance group Aviva and conducted by Mercer found that half of corporate respondents in the UK (52%) had formed a crisis management team to address pandemic preparedness planning, compared to 38% in the US. Australia was found to be the least-ready nation among the 38 surveyed with just 35% of respondents saying their firm was preparing for a possible pandemic.

The survey found that preparations for bird flu were more advanced in countries that had previously encountered the Sars virus – China, Singapore, Taiwan, Hong Kong, Vietnam and Canada.

Aviva Australia says it has undertaken initial steps to prepare for a possible bird flu outbreak and has drawn up contingency plans for employees off work due to illness or caring for others.

The group has also established a remote site to to decentralise operations if necessary.