Standard & Poor’s Ratings Services is tackling the credit concerns associated with a possible bird flu pandemic.

The ratings agency notes that 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”.

The rating agency says that in a worst-case scenario, 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. 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.

“The bird flu has had little, if any, effect so far on the credit quality of the sectors that suffered most during the SARS outbreak, notably airlines, tourism, health care, and gaming and lodging,” said Standard & Poor’s chief economist David Wyss. “We do not expect to take any rating actions in the near term associated with the possible risk of an avian flu pandemic, but we will continue to monitor developments and reassess our views as events unfold.”

Meanwhile, S&P says insurers are watching the march of avian flu with a mixture of apprehension and hope. The industry’s worst-case models, assuming the disease jumps from birds to humans, predict overall losses worldwide of US$71.3 billion to US$200 billion. More optimistic models show US$15 billion to US$20 billion of insured losses, reflecting medical advances and containment efforts of the type that corralled Severe Acute Respiratory Syndrome (SARS) in 2003. “Whatever the final total, a pandemic would cause losses in 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,” it suggests.

At this time, Standard & Poor’s says it does not expect avian flu to affect credit quality of rated U.S. poultry processors. Although export sales do not make up a sizable portion of the companies’ revenues and earnings, their profitability would be negatively affected by the downward pressure on commodity broiler prices due to the closure of substantially all of the key international markets, it predicts. “Alternatively, if the bird flu does not hit the U.S., U.S. poultry exports could be in greater demand, which could positively affect the rated processors’ results,” it adds.