As expected, the US House of Representatives has introduced the Pandemic Risk Insurance Act. (PRIA) Authored by New York Representative Carolyn and cosponsored by 20 different Congressmen, this act is modeled after the similar legislation TRIA in that it’s supposed to be a stopgap for insurance carriers in the event of a pandemic much like TRIA was for terrorism.
Under the legislation as proposed, the program is completely voluntary to insurers. “Insurers that do participate would offer pandemic-related business interruption and event cancellation coverage, and they would be reimbursed by a federal backstop for some of their losses.” The coverage payouts would not kick in until the losses exceed $250 Million dollars aggregate with a cap of $750 Billion. “The federal share of losses would be 95 percent of insured losses above each insurer’s deductible. The insurer deductible is defined as “the value of the participating insurer’s direct earned premiums during the immediately preceding calendar year, multiplied by 5 percent.” [1] These losses are expected to cover event cancellation on top of business interruptions and if signed are expected to go into effect on January 1st, 2021.
While the federal bill is getting support from various congressmen, some insurance carriers aren’t as willing. Three insurance trade groups—The National Association of Mutual Insurance Companies, the American Property Casualty and Insurance Association, and the Independent Insurance Agents & Brokers of America—offered an entirely different proposal, releasing a press statement describing a “Business Continuity Protection Program” (BCPP). Under this BCPP, they propose that FEMA run the program and that could buy such coverage at 80 percent of their combined payroll and expenses.
One thing is clear though, Congress and the industry are on the same page when it comes to business interruptions. How they get there, differs but in the end, legislation like PRIA will mitigate future events such as what happened during COVID.
[1] https://www.claimsjournal.com/news/national/2020/05/27/297274.htm