Rep. Maloney Hosts Discussion on Pandemic Risk Insurance Act
WASHINGTON, DC — Congresswoman Carolyn B. Maloney (D-NY), senior member of the House Financial Services Committee, was joined today by stakeholders from the small business community and the insurance industry to emphasize the urgent need for Congress to pass the H.R. 7011, the Pandemic Risk Insurance Act (PRIA).
PRIA, introduced by Rep. Maloney on May 26, 2020, would create a framework for insurance companies to offer business interruption insurance policies that cover pandemics, and would create a reinsurance program with a federal backstop to ensure the insurance industry has enough capacity to insure losses caused by pandemics. The Federal backstop will make sure that these business interruption policies are both widely available and affordable for small businesses, and maintain marketplace stability.
“As we saw during today’s roundtable, there is broad consensus that we need a program like the one created by PRIA – to provide business owners and our economy with better stability in the event of any future pandemics. A forward-looking, public-private partnership like this, one supported by a federal backstop, will help businesses keep their employees on payroll and weather the storm that a public health emergency brings. Congress needs to be proactive in helping businesses protect themselves from economic losses as a result of pandemics, which, as we’ve seen, can be devastating to businesses of all sizes — from the mom and pop grocery down the street to institutions like Lord & Taylor,” said Congresswoman Maloney.
“Thank you, Congresswoman Maloney. It is a privilege to join you today and support your critically important legislation. With 50,000 members across the country, ASAE is the largest organization representing the nonprofit association sector and its workforce. Associations also engage in a wide variety of activities that benefit industries, professions and workers through far-reaching career and economic development programs, such as post-secondary skills training, product and safety service standards and hosting major in-person events and conferences, among other programming. Major events and conferences, which serve as a boon to stakeholders and local economies, are the lifeblood of our nonprofit association community. ASAE has called for a PRIA-like program since March soon after our current crisis took hold. And, since late May, ASAE has proudly and actively supported your Pandemic Risk Insurance Act, which is essential to sustaining our community and so many others during this challenging time,” said Susan Robertson, President and CEO, American Society of Association Executives (ASAE).
“The Council member insurance agencies and brokerage firms annually sell or place approximately 90 percent – well over $300 billion – of all U.S. commercial insurance products and services. A wide swath of Council Member clients – many of whom are represented by others on this panel today – have been struggling to deal with the economic challenges posed by the pandemic and the associated government ordered business shutdowns. There was little to no insurance available pre-crisis to cover the associated economic losses. The strong consensus of the Council’s Board is that we should work to ensure that – if there is a next time – there is a mechanism already in place to try to minimize such economic disruption and to compensate America’s businesses for the associated losses,” said Scott Sinder, Chief Legal Counsel, Council of Insurance Agents and Brokers (CIAB).
“Many of our many small business members who own restaurants, retail and service businesses believed their business interruption insurance policy would protect them when facing unexpected events over which they have no control like a government ordered shut down. They paid premiums for years only to learn that when the coverage is needed their claims are being denied. Small businesses do not and never will have enough capital to survive a prolonged business closure. That is why they carry business interruption insurance…We need an insurance program in place that provides business owners with the ability to protect against these catastrophic events. That is what insurance is for. That is what all these business owners thought they were buying with all the years of premiums. This legislation will make it possible for small business owners to have the protection they need to run their businesses,” said Scott Baskin, CEO, Small Business Advisory Council (SBAC).
“The last several months have demonstrated that traditional insurance solutions — and the commercial insurance market — cannot fully provide businesses and others with the protection they need from the enormous costs of pandemics. Only the credit and power of the US government can help create the necessary risk program to harness the financial and social benefits of insurance to mitigate pandemic related economic losses and provide greater certainty about a sustained recovery. But the insurance industry has a role to play, too. If we create the right economic incentives for insurers, policyholders, and the government, insurance can serve its traditional function of mitigating risk. A number of our partners in the insurance industry have put forth thoughtful proposals to addressing pandemic risk, and we look forward to collaborating on a solution. Congresswoman Maloney – we and our clients’ greatly appreciate the leadership and initiative you have put forth to keep help steer the conversation around this topic,” said Tarique Nageer, Terrorism Placement Advisory and Leader, Property Practice, Marsh & McLennan Companies.
“Thank you, Chairwoman Maloney for your ongoing commitment to protecting American businesses, including your leadership following the 9/11 terrorist attacks and on pandemics today. Protecting Main Street America will require a multilayered approach including a fully federal government funded affordable base layer coverage and a public-private partnership to provide additional coverage to businesses. This multilayered solution would create a scaffold that the private market could potentially build on over time. We look forward to working with you to help forge a solution that works for all stakeholders,” said Robert Gordon, senior vice president, policy, research and international, American Property Casualty Insurance Association (APCIA).
“The global pandemic has affected people and businesses in ways that were previously unimaginable. The sobering fact is that next big thing we can’t imagine today could have similar effects. We also know from good experience that when individuals, businesses — including insurers and reinsurers — and government team up and all do our part, we can come up with ways of softening the blow of the next big thing when it looks similar to the unimaginable current one. We believe that it’s our collective responsibility to ensure this resilience. On behalf of our thousands of American employees, we thank the Chairwoman for her very early and continued leadership in finding a solution. We stand ready to work productively with the Chairwoman and all the stakeholders to achieve this necessary certainty,” said Don Preston Jr., Senior Vice President, Swiss Re Americas.
“The extraordinary disruption of social and economic life that occurred in response to COVID-19 gave rise to economic losses that are too great to be insurable by the private sector…The economic response to catastrophes of this magnitude therefore must be borne primarily by governments. This principal of ultimate government responsibility should be at the heart of an insurance program to address losses for a future pandemic. And it is essential to develop a program now that will provide certainty about prompt relief to allow businesses, particularly small businesses, to keep their employees on the payroll and to pay rent and other expenses. While the government must take on a lion’s share of the risk, we strongly believe that the private insurance industry can and should take on some of that risk,” said Joe Wayland, Executive Vice President and General Counsel, Chubb Group.
“Chairwoman Maloney knows our industry and our residents well—better than most in Congress—and we are grateful for her leadership in putting forward the Pandemic Risk Insurance Act. We believe the public-private approach as put forward in PRIA is key to ensuring pandemic coverage is widely available and affordable to apartment operators and will go to great lengths in providing needed economic certainty and stability in the wake of any future pandemic. I’d like to thank Chairwoman Maloney for her continued leadership on this issue and so many others that are critical to the multifamily industry and its residents,” said Kevin Donnelly, Vice President for Government Affairs, National Multifamily Housing Council (NMHC).
“As the economic shutdown resulting from the COVID-19 pandemic began to weigh on the economy, Nareit joined with a number of other business groups to explore the formation of a Business Continuity Coalition (BCC), a joint effort to support the work of public policymakers to find ways to limit potential economic damage from future pandemics and other national emergencies. Through the BCC, Nareit is supportive of a business continuity insurance program that, in the event of a future government-mandated shutdown, will enable businesses and other employers to keep payrolls and supply chains intact, protecting the jobs of their employees. Through the BCC, Nareit supports a sound public-private program that meets the needs of a broad range of groups: workers, businesses, insurers, lenders, and taxpayers. As we learned through development of the Terrorism Risk Insurance Act, it is far better to plan and prepare now for the next time than to wait for the next crisis. Madam Chairwoman, in closing, I want to thank for your leadership in the past with respect to TRIA and your very constructive leadership today in the context of evolving economic risks related to pandemic-related and other potential government shutdowns of the economy,” said Steve Wechsler, President and CEO, NAREIT.
“Even with stores starting to reopen, many retailers’ sales remain far below where they were a year ago. And with new outbreaks spreading across the country, there is the threat that retailers could be ordered to close once again. That makes this bill more urgent than ever. Unfortunately, the unprecedented losses that occurred when retailers had to close their doors this spring were not covered under most business interruption insurance policies. And without PRIA they won’t be covered if there are new shutdowns because at this point it is virtually impossible to obtain pandemic coverage. This public-private partnership would provide a mechanism for predictable recovery should the nation face additional shutdowns. With the trajectory of the current pandemic still uncertain, Congress must take immediate action,” said Leon Buck, Vice President for Government Relations, Banking and Financial Services, National Retail Federation.
“The film and television production business was paralyzed worldwide by this year’s pandemic. Production activity was halted in early March, leaving scores of projects incomplete and costs rising as staff and cast waited for activity to resume. But the toll on new projects is more devastating. Since March, the insurance industry has excluded from its film industry coverage any loss caused by any “communicable disease.” IFTA is here today to urge Congress to pass legislation this year providing that the federal government will share the financial risk of massive losses from the ongoing and future communicable disease-based emergencies. We need support from government to create the incentive for the private insurance sector to resume writing the necessary insurance for the film industry at commercially reasonable rates and to allow film and television production to move forward in the U.S, ” said Jean Prewitt, President and CEO, Independent Film & Television Alliance (IFTA).
“As the risk management lead for Texas Roadhouse, my industry peers, and many others, are continuing to struggle to manage the complexities of the COVID-19 pandemic - as many of our existing policies fail to cover its impact. RIMS does not agree with those who say that pandemics are not insurable. As a united front, carriers and the federal government can develop a solution to share the financial risk of future pandemics. RIMS members believe a public-private program will establish a viable insurance market and create certainty for businesses across the country. This collaboration makes sense and that is why we support the Pandemic Risk Insurance Act of 2020 – HR 7011,” said Patrick Sterling, Head of Risk Management Texas Roadhouse, Member, RIMS Board of Directors.
“PIA National believes that keeping a future pandemic from causing economic disaster requires, in the near term, a public-private partnership. The insurance industry did not cause this economic catastrophe, but the insurance community can be part of the solution. In the past, similar steps have been taken to create a market for flood insurance and terrorism risk insurance, and, while it will be challenging, we can do it again with pandemics. We support PRIA, and we remain open to improvements to help prevent, to the extent possible, future economic uncertainty like what we are experiencing today, ” said Wayne White, President-elect, National Association of Professional Insurance Agents (PIA).
Video of today’s roundtable discussion is available here.
Background on PRIA
Millions of Americans remain unemployed and hundreds of thousands of businesses have had to close their doors forever due to the pandemic’s economic impact. Business interruption insurance policies typically compensate business owners when they have to shut down due to circumstances outside their control, but those policies explicitly exclude pandemics.
In response, Congresswoman Maloney introduced H.R. 7011, the Pandemic Risk Insurance Act. Bill text available here.