Insurers Support Public/Private Solution for Future Pandemics

As the insurance industry, businesses, courts and governments continue to seek coverage solutions to offer insurance protection options to businesses for future pandemics like COVID19 the recent news from Washington last week is interesting. New York Representative Maloney hosted a meeting related to her proposed PRIA legislation, H.R. 7011) that included a range of shareholders including insurers, businesses, trade groups and others so as to share their views on creating an insurance solution.

There is, of course, decades of precedent for such a public-private partnership for risks that the private insurance industry has deemed uninsurable within the private market. Such programs include the National Flood Insurance Program, dating back decades and administered within FEMA, the Federal Crop Insurance Corporation, the Terrorism Risk Insurance Act (TRIA) and the Federal Deposit Insurance Corporation in addition to a large number of state programs such as Florida’s property and windstorm insurer, Citizens Property Insurance Corporation.

Whether such a program for pandemics will ever be created remains to be seen (our guess is one will be created) but as we follow this important topic we want to share the following recent article about the proposed federal legislation from our friends at Advisen which we think you might find useful.     

Risk and insurance leaders offer support for PRIA backstop measure

By Erin Ayers, Advisen

Business and insurance representatives last week urged Congress to quickly craft a federal solution for insuring pandemic risk moving forward, with most advocating for a public-private partnership between insurers and the government.

Rep. Carolyn Maloney (D-NY) hosted a roundtable on her PRIA legislation (H.R. 7011) last week, inviting stakeholders from businesses, associations, and the insurance industry to offer their views. She cited tremendous interest in her bill, saying she had “never authored a bill that has generated as much support as this one.”

“There is broad consensus that we need a program like the one created by PRIA – to provide business owners and our economy with better stability in the event of any future pandemics,” she said. “Congress needs to be proactive in helping businesses protect themselves from economic losses as a result of pandemics, which, as we’ve seen, can be devastating to businesses of all sizes — from the mom and pop grocery down the street to institutions like Lord & Taylor.”

According to Patrick Sterling, head of risk management for the Texas Roadhouse restaurant chain and a member of the RIMS board of directors, RIMS “does not agree with those who say that pandemics are not insurable.”

He told the group that many RIMS members’ insurance policies have “failed to cover” the impact of the pandemic.

“As a united front, carriers and the federal government can develop a solution to share the financial risk of future pandemics. RIMS members believe a public-private program will establish a viable insurance market and create certainty for businesses across the country,” said Sterling.

Jean Prewitt, president and CEO of the Independent Film & Television Alliance, told listeners that for IFTA members, “this year has been disastrous” with production shutdowns and cinema closures. The entertainment industry is looking not for new coverage with PRIA, but resumption of coverage that was readily available before the pandemic, she added. Communicable disease exclusions have been instituted since March, leaving many film and TV productions unable to proceed.

“At the end of the day, what we really want to see is the insurance industry coming back … to fulfill the role that they have fulfilled in the past,” said Prewitt. “We’re not just talking about the future and some event that may not happen. We are still in this pandemic. We need to start putting in place the essential elements to get business restarted.”

The insurance industry’s largest trade groups favor a different approach than PRIA, but individual firms and the National Association of Professional Insurance Agents (PIA) and the Council of Insurance Agents and Brokers (CIAB) support the measure.

“The last several months have demonstrated that traditional insurance solutions — and the commercial insurance market — cannot fully provide businesses and others with the protection they need from the enormous costs of pandemics. Only the credit and power of the US government can help create the necessary risk program to harness the financial and social benefits of insurance to mitigate pandemic related economic losses and provide greater certainty about a sustained recovery. But the insurance industry has a role to play, too,” said Tarique Nageer, terrorism placement advisory and leader for Marsh & McLennan Companies’ property practice. The partnership would fuel economic recovery as well as encourage pandemic risk preparedness, he said.

The government must absorb the “lion’s share” of losses, according to Joe Wayland, executive vice president and general counsel for Chubb, but “the private insurance industry can and should take on some of that risk.”

“It is essential to develop a program now that will provide certainty about prompt relief to allow businesses, particularly small businesses, to keep their employees on the payroll and to pay rent and other expenses,” said Wayland.

Robert Gordon, senior vice president of policy, research, and international for the American Property Casualty Insurance Association, told the group that “a multilayered approach” with a federally funded base layer of coverage is necessary, creating a “scaffold” for the private industry to “potentially build on over time” and provide additional coverage.

Maloney, who was active in the passage of the Terrorism Risk Insurance Act in 2002, told attendees of the videoconference that TRIA had “been a screaming success” in helping the economy recover after the Sept. 11 attacks and she now hopes to do the same for pandemic risk. Even TRIA and later extensions did not sail through Congress, she said, adding, “It was always a huge struggle to get it passed, even though it was a good idea and it worked.”

Maloney introduced the PRIA bill in May. She said it would not be retroactive or mandatory for insurers.

“I do not believe in retroactive legislation … I think people need to know the rules of the game. “I do not believe in forcing insurers to pay for losses that were never covered in their business plans, I think that’s terribly unfair,” said Maloney, adding, “I don’t understand why anyone’s against it, because you don’t have to participate in it if you don’t want to.”