Last Friday, Rep. Carolyn Maloney (D-New York) introduced legislation to create a federal backstop to prevent economic losses from future pandemics. The bill, H.R. 7011, and known as the Pandemic Risk Insurance Act (PRIA), is based on the Terrorism Risk Insurance Act (TRIA), which was created in the aftermath of the 9/11 terrorist attacks.

In a press conference on Tuesday, Rep. Maloney noted that “millions of small businesses, nonprofits, mom-and-pop shops, retailers, and other businesses are being left out in cold and will never be able to financially recover from the coronavirus crisis because their businesses interruption insurance excludes pandemics.”

“We cannot allow this to happen again,” she said. “These employers and their employees need to know that they will be protected from future pandemics, which is why I am introducing the Pandemic Risk Insurance Act.”

Like the TRIA program, this new PRIA legislation would be a public-private solution where the federal government would serve as a backstop in an effort to maintain marketplace stability and share the burden alongside the insurance industry for future pandemics.

The bill would not be retroactive, and participation would be voluntary for insurance carriers. Participating insurers would be required to provide business interruption insurance policies that would include coverage for pandemics and the deductible for these participating insurers would be equal to 5% of their direct earned premium for all lines of property-casualty insurance in the previous year. The federal share of compensation above a company’s individual deductible would be 95% while the insurer would be responsible for the remaining 5% up to the program cap of $750 billion. The program would be “triggered” after $250 million in aggregate industry losses and following the declaration of a covered public health emergency.  

The Big “I” believes there is merit in including the PRIA model in public policy discussions on how to cover future pandemics and considering its pros and cons, but there are questions being raised by some in the insurance market regarding the effectiveness of the TRIA approach in this new context. Insurers in particular are noting concerns and opining that the TRIA model does not recognize that pandemics are uninsurable risks and that the exposures are fundamentally different in nature and scope.

As a result, last week, the Big “I” joined the American Property Casualty Insurance Association and the National Association of Mutual Insurance Companies in announcing its support for a different approach: the Business Continuity Protection Program (BCPP).

The BCPP is designed to bolster the country’s economic resilience by providing timely and efficient financial protection and payroll support to the private sector in the event of a future declared public health emergency.

The program would allow businesses to purchase revenue replacement assistance through state-regulated insurance entities, including independent insurance agents and brokers, that voluntarily participate with the BCPP. The BCPP would be run by FEMA with limited administrative assistance from private contractors. Businesses would be able to purchase revenue replacement assistance up to 80% of payroll and other expenses through the BCPP. Relief would be automatically triggered and immediately paid following a presidential viral emergency declaration and local closures.

As efforts on PRIA and other proposals like the BCPP progress, the Big “I” will make the most up-to-date government affairs information available on the coronavirus resource page and in the weekly News & Views e-newsletter.

Joseph Cortina is Big “I” director, federal government affairs.