Advisen FPN

Advisen Front Page News - Wednesday, May 27, 2020

US House lawmaker introduces pandemic reinsurance backstop bill


US House lawmaker introduces pandemic reinsurance backstop bill

Legislation calls for federal government to take on 95% of losses

By Erin Ayers, Advisen

Rep. Carolyn Maloney (D-NY) introduced her much-anticipated Pandemic Risk Insurance Act of 2020 (PRIA) legislation, calling upon Congress to pass the measure and create a public-private partnership as it did with the Terrorism Risk Insurance Act of 2002.

The bill (HB-7011) would create the Pandemic Risk Reinsurance Program (PRRP) within the U.S. Treasury Department. Once triggered at $250 million in losses due to any future public health emergency, the insurance industry would pay a 5% deductible and the federal government would take on 95% of the losses, up to an annual aggregate of $750 billion.

After the terrorist attacks of Sept. 11, 2001, the market for terrorism coverage dried up, leaving properties open to the risk and halting new construction.

“You couldn’t even insure a hot dog stand,” said Maloney, adding that the only coverage available was very expensive.

The enactment of TRIA in 2002 “unlocked the terrorism insurance market, got the economy moving again and put people back to work,” she said. The goal of PRIA is the same, according to the lawmaker, who serves on the U.S. House Financial Services Committee.

“We want to solve a market failure by allowing companies to purchase business interruption insurance that covers pandemics,” Maloney said in a video introducing her bill. The denial of pandemic-related BI claims has put the survival of many businesses in question, she explained.

The legislation calls for a federal study of insurance industry capacity, pricing, and limits for pandemic risk as well as the impact of the program on smaller insurers.

Participation in the program would be voluntary for insurers, but those that do participate would be required to offer business interruption and event cancellation insurance. The bill would also nullify any existing exclusions used by participating insurers unless policyholders have agreed to them.

Maloney urged Congress to pass the bill before another wave of the COVID-19 pandemic strikes the nation, estimated by public health officials to come as early as September.

“With this backstop, the insurance industry will have more certainty and will be able to safely underwrite this unique risk,” Maloney said. The legislation is supported by Marsh & McLennan, The Council of Insurance Agents & Brokers (CIAB), RIMS, and over 20 associations representing thousands of retailers, nonprofits, and other organizations.

“It’s the only bill I’ve written that people are endorsing before it’s even introduced,” she said.

Three insurance trade groups --  the American Property Casualty Insurers Association, National Association of Mutual Insurance Companies, and the Independent Insurance Agents & Brokers of America -- introduced a proposal for a federally-funded option for insuring pandemic risk, similar to the National Flood Insurance Program (NFIP). APCIA and NAMIC have said they would not be in favor of a reinsurance backstop modeled on TRIA.

Maloney did not comment directly on the proposal, but said it was “encouraging to see the insurance industry’s agreement with so many members of Congress and policyholders across the country that pandemic insurance is a viable, actuarially sound product and that there is an immediate need to create a mechanism to provide relief for millions of struggling business owners.”

Supporters of the legislation say a pandemic reinsurance backstop is essential to shore up the economy and save businesses. Tori Emerson Barnes of the U.S. Travel Association estimated that the impact of the COVID-19 pandemic on the travel industry has been nine times harder than 9/11.

Leon Buck of the National Retail Federation said during the video conference that retailers expect to lose $730 billion for the first three months of the pandemic, and $1.5 trillion over the course of the year. The damage done, without passage of PRIA, he added, would be “virtually irreparable.”

Editor Erin Ayers can be reached at

St. John's University