WASHINGTON – The COVID-19 pandemic has exposed weaknesses in several fundamental lines of business insurance.
To help address market inadequacies before they hinder further economic recovery, the National Restaurant Association recently joined with a broad range of industries and business owners, to form the Business Continuity Coalition. The association also submitted to a congressional subcommittee an outline of what an optimal insurance backstop for pandemic risk should include.
The association recently told the House Financial Services Subcommittee on Housing, Community Development and Insurance that, just as private insurance companies were unwilling to take on terrorism risk following 9/11, insurance companies are unwilling and unable to take on the amount of risk posed by a future pandemic.
To meet the market’s current need, the association supports creating a public-private insurance program similar to the Terrorism Risk Insurance Act. In the event of a government-declared pandemic health emergency, this kind of backstop would enable employers to keep payrolls and supply chains intact, limit job losses and furloughs, reduce stress on the financial system and speed economic recovery when government-imposed limitations on operations are lifted.
To ensure that any pandemic risk insurance program meets the needs of a broad range of groups, it should adhere to defined principles, including:
• Scope. Any federal backstop should support not only non-physical-damage business interruption coverage, but also other pandemic-affected lines of insurance, such as event cancellation, workers compensation, building/construction insurance and general and employment practices liability insurance.
• Private insurer utilization. Insurers should be included in any pandemic insurance program to involve a number of industry ad- vantages; determine appropriate premiums to reduce taxpayer outlays; use the existing infrastructure to pay claims; and leverage insurer expertise in risk mitigation to help businesses understand how they can reduce pandemic risk, comply with imposed requirements and get their businesses up and running quickly.
• Availability. Eligible insurers should be required to either share some portion of the risk in the primary NDBI coverage layer or support other covered lines of insurance as a condition of being permitted to sell any government-supported NDBI coverage. Any pandemic program must balance the need to ensure participation with the reality that insurers cannot take on too much uncertain exposure.