While ASAE and the business community back legislation that would protect groups from business interruption losses resulting from future pandemics, opposition to the Pandemic Risk Insurance Act was evident during a November 19 hearing.
Despite widespread backing from ASAE and the business community, legislation that would protect organizations from business interruption losses resulting from future pandemics or public health emergencies continues to garner little support from Republicans or the insurance industry.
Opposition to the Pandemic Risk Insurance Act (PRIA), introduced earlier this year by Rep. Carolyn Maloney (D-NY) and endorsed by ASAE and others, was evident during a hearing held on November 19 by the House Financial Services Subcommittee on Housing, Community Development, and Insurance.
Witnesses representing the insurance industry testified that global pandemics fall into the category of uninsurable risks and that business continuity losses resulting from the COVID-19 pandemic would be so catastrophic that they would have bankrupted the insurance industry.
“If property casualty insurers were to assume all of those losses, they would exceed the annual industry revenues from business interruption coverage in a single day and would bankrupt the entire industry within a month,” said Brian Kuhlmann, senior corporate counsel for Shelter Insurance Company, who testified on behalf of the American Property Casualty Insurance Association and the National Association of Mutual Insurance Companies.
However, Maloney’s bill calls for a system of shared losses between the federal government and private insurers in the event of a future pandemic. Modeled on the Terrorism Risk Insurance Act (TRIA) of 2002, created after the 9/11 terrorist attacks, the federal government would serve as a backstop to maintain marketplace stability and to share the burden alongside private industry. PRIA would reimburse insurers when claims related to a pandemic or epidemic exceed $250 million nationwide and covered businesses would have to demonstrate that they had suffered significant business interruption with a sharp decline in revenue.
Maloney said at the hearing that large and small businesses that have shuttered during this months-long pandemic could have been saved had this type of insurance model been available.
“Small businesses across the country have closed their doors forever,” Maloney said. “Trade associations—like the 2,200 members of the American Society of Association Executives that support my bill—have cancelled their annual events that provide the bulk of their funding without any event cancellation insurance to cover pandemic-related losses. And entire industries like live entertainment have grinded to a halt.”
A New York City gift shop owner testified on behalf of the National Retail Federation about the challenges facing retailers like herself without this type of protection against future pandemics.
This country needs the Pandemic Risk Insurance Act,” said Ann Cantrell, owner of Annie’s Blue Ribbon General Store. “Not every pandemic will have a worldwide impact, but when and where one occurs, it is likely to once again result in a nearly total cessation of business. This legislation is the cornerstone of a proactive approach in managing the risk and impact of a pandemic in the future. It is time for a real solution to solve a real problem.”