Roundtable Weekly
Senate Hearing Focuses on Need for Federal Pandemic Risk Insurance Program
July 23, 2021

Senate lawmakers heard testimony yesterday about the importance of establishing a federal pandemic risk / business continuity insurance program during a hearing entitled β€œExamining Frameworks to Address Future Pandemic Risk.” (See webcast and witness statements).

Public-Private Backstop

  • Senator Bob Menendez (D-NJ), above, chairman of the Senate Banking Subcommittee on Securities, Insurance, and Investment, stated in his opening remarks, β€œWe must determine the extent to which businesses, private insurance providers, and the federal government are able to share the risk of losses due to a pandemic. Each presents different ideas on how much risk is borne by the private sector versus the federal government, and the approach to paying claims.”
  • Menendez also noted that of the eight million businesses with commercial insurance policies with business interruption coverage, 83 percent also carried a clause excluding claims from viral contamination, disease, or pandemic – and that 82 percent of claims have been closed without payment. (Menendez remarks)

Roundtable & Coalition Efforts

  • The Roundtable is part of the Business Continuity Coalition (BCC), which offered testimony during the hearing on how a public-private backstop program for pandemic risk insurance – similar to the Terrorism Risk Insurance Act (TRIA) program – is urgently needed. Charles Landgraf of Arnold & Porter, above, testified on behalf of the BCC. (See written testimony and video at 1:00:20)
  • The coalition includes 44 trade associations and major companies representing more than 70 million workers from healthcare and dining/hospitality to real estate, construction, finance, manufacturing, media and film, live entertainment, professional sports and professional services.
  • The BCC’s testimony emphasized how pandemic risk is possibly the largest unhedged risk exposure in the U.S. economy. The coalition’s statement also shows how a precedent for government involvement in insurance markets exists for a broad range of risks – including terrorism (TRIA), flood (NFIP), and crop risk (FCIC) – where private markets fail to provide the economy with the coverage it needs.
  • A detailed, section-by-section description of the BCC Recommended ProposalΒ urges the design of any pandemic risk insurance program to address core principles, including: scope, availability and affordability; private insurer utilization; aΒ pooling alternative for offerinf non-damage business interruption insurance (NDBI) coverage; stop-loss and quota-share protection; and utilization of reinsurance and capital markets.
  • A New Jersey small business owner, Adenah Bayoh, testified on behalf of the National Restaurant Association (NRA) in support of the BCC proposal, stated, "This country needs a Pandemic Risk Insurance Program to ensure that Main Street businesses and employees have certainty and continuity in the ability to navigate the impact of a future pandemic."

Both Senate and House subcommittees played important role in the seven-year extension of the Terrorism Risk Insurance Program (TRIP) enacted in 2020. (Roundtable Weekly, Dec. 13 and Dec. 20, 2019)

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