As of press time, it is expected that Rep. Carolyn Maloney (D-New York) will introduce legislation in the U.S. House of Representatives that would create a federal backstop to prevent economic losses from future pandemics. The bill, known as the Pandemic Risk Insurance Act (PRIA), is modeled on the Terrorism Risk Insurance Act (TRIA), which was created in the aftermath of the 9/11 terrorist attacks.
Like TRIA, the proposed PRIA would be a public-private partnership where the federal government would serve as a reinsurance backstop in an attempt to maintain marketplace stability and share the burden alongside the insurance industry for future pandemic-related losses.
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 serious questions regarding the effectiveness of the TRIA approach in this new context. Insurers in particular are raising concerns and noting that the TRIA model does not recognize that pandemics are uninsurable risks and that the exposures are fundamentally different in nature and scope.
As efforts on PRIA and other proposals 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.