Insurance trade groups propose federally-backed pandemic solution
Advisen
Insurance trade groups propose federally-backed pandemic solution
By Erin Ayers, Advisen
Three of the nation’s largest insurance industry trade groups unveiled a plan for a taxpayer-funded federal program that would provide financial assistance to businesses facing economic hardship during future pandemics.
The National Association of Mutual Insurance Companies, the American Property Casualty Insurance Association, and the Independent Insurance Agents & Brokers of America announced that the proposed pandemic solution would quickly provide funds covering up to 80% of payroll, employee benefits, and operating expenses upon declaration of a national public health emergency. The Business Continuity Protection Program as outlined by the groups would allow businesses to buy coverage
The insurance industry faces significant litigation over business interruption claims in both state and federal courts. Insurers have maintained that insurance policies are not designed to cover this type of risk and that only the federal government could respond financially to this scale of disaster.
“Pandemics simply are not insurable risks; they are too widespread, too severe, and too unpredictable for the insurance industry to underwrite,” said Charles Chamness, NAMIC’s president and CEO. “As we’ve seen in the past few months, pandemics are a national problem, and we need a national solution. NAMIC, APCIA, and the Big ‘I’ had one goal in mind in developing the BCPP – crafting a solution that would provide meaningful support for employees, businesses, and the economy as a whole.”
Other options have been floated in Congress over the last two months, including a mechanism modeled on the Terrorism Risk Insurance Act (TRIA). Insurers have not supported this approach, highlighting the “fundamentally different” nature and scope of pandemic risks from terrorism.
“We need a sustainable solution that provides simplicity, certainty, and immediate relief to impacted businesses,” said David Sampson, APCIA’s president and CEO. “The BCPP is designed to bolster the country’s economic resilience through timely and efficient financial protection and payroll support in the event of a future public health emergency. We look forward to continued dialogue with the business community to meet their needs in this vitally important public policy discussion.”
Under the proposed plan, businesses and nonprofit organizations could buy three months of revenue replacement assistance – based on the prior year’s tax returns -- from insurers that opt to participate in the plan. It would provide up to 80% of payroll (excluding higher-paid workers), benefits, and other operating expenses. Participants would also have to certify the funds would be used to keep employees on the payroll, subject to audit.
Payments from the BCPP would be administered primarily by the Federal Emergency Management Agency (FEMA) with “limited” assistance from private contractors. Businesses would have to have bought protection at least 90 days before a viral outbreak emergency is declared by the president, the groups explained. The federal declaration would automatically trigger the pre-agreed upon coverage, with no need for claims adjustment, similar to parametric solutions.
The BCPP could consider buying reinsurance to protect taxpayers, the groups said, and the program would provide pandemic risk mitigation strategies and safety standards for businesses buying protection.
“The small business community is looking to our industry to provide leadership to ensure there is immediate assistance available during future pandemics,” said Bob Rusbuldt, IIABA president and CEO. “The BCPP is a simple, efficient, and effective plan to provide the needed financial security for American businesses. This program gets immediate funding to businesses when they need it most.”
Editor Erin Ayers can be reached at eayers@advisen.com
