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Big ‘I’ Testifies Before Congress on Pandemic Risk

The Big "I" noted that pandemics produce an immense magnitude of potential financial losses and do not allow for an insurance-like spreading of risk.
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big ‘i’ testifies before congress on pandemic risk

This week, Republicans from the U.S. House of Representatives' Committee on Financial Services held a roundtable to discuss pandemic risk.

The roundtable consisted of three panels. The first panel included testimony from various academic experts, the second panel included testimony from policyholders, and the third panel included witnesses from the insurance industry.

Wyatt Stewart, assistant vice president at the Big “I," testified on behalf of the association on the insurance industry panel. Robert Gordon, senior vice president at the American Property Casualty Insurance Association (APCIA), Scott Sinder, outside chief legal officer at the Council of Insurance Agents and Brokers (CIAB), and Andrew Pauley, public policy counsel at the National Association of Mutual Insurance Companies (NAMIC), also testified.

In his testimony, Stewart noted that pandemics produce an immense magnitude of potential financial losses and do not allow for an insurance-like spreading of risk, making it impossible for the private marketplace to provide traditional coverage and protection to the millions of businesses and nonprofit entities in the United States.

Stewart went on to say that if Congress ultimately considers the establishment of a new government mechanism for addressing future pandemics, it should satisfy the following principles:

  • Any potential legislative solution must effectively meet the needs of the businesses independent agents and brokers serve and the carriers we work with, who represent our markets.
  • Given the unique nature of pandemic risk, it would be essential that the federal government bear all—or nearly all—of the financial responsibility for business losses associated with COVID-19-like events. The insurance industry is simply unable to cover these potential losses.
  • The product or program designed to fill this protection gap must reflect the unique nature of pandemics. Among other things, this means the product must be parametric in nature and avoid the need for insurance-like claims adjustment.

Throughout the testimony, Stewart noted that the Big “I" worked with APCIA and NAMIC on developing the Business Continuity Protection Program (BCPP), which the Big “I" believes would meet the three principles noted above.

The BCPP would work more like a prospective Paycheck Protection Program (PPP) than an insurance product and would establish a voluntary federal program within the U.S. Treasury Department that allows for the purchase of short-term revenue replacement assistance for business interruption caused by a pandemic.

Finally, Stewart noted that if Congress moves forward with legislation, the Big “I" would recommend starting the discussion with something closer to the BCPP as opposed to a reinsurance backstop. As Congress considers various proposals to provide economic support to businesses for future pandemics, the Big “I" will remain at the center of the discussion and provide updates via News & Views.

Teddie Norton Reilly is Big “I" director of government affairs operations.

Wednesday, March 9, 2022
On the Hill