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Buyers, insurers call for 9/11-type fund to relieve COVID-19 impact

Buyers, insurers call for 9/11-type fund to relieve COVID-19 impact

More than 30 policyholder groups from retail and other sectors hard-hit by the COVID-19 pandemic on Tuesday joined with major insurance organizations to call on the Trump administration and Congress to create a federal recovery fund to provide liquidity to businesses.

The so-called COVID-19 Business and Employee Continuity and Recovery Fund would be financed by the government and overseen by a special federal administrator, according to a letter sent to the White House and Congressional leaders from the trade groups.

The proposed recovery fund, which is modeled after the 9/11 Victims Compensation Fund set up in the wake of the September 11, 2001, terrorist attacks, would provide a mechanism to distribute immediate relief to eligible businesses.

The idea is to help with “economic recovery and mitigate a larger financial crisis resulting from widespread disruption of economic activity,” the groups wrote in the letter.

The fund would help businesses retain and rehire employees, maintain worker benefits and meet operating expense obligations, they said.

“The purpose of this package is so that no business, think of a restaurant or any type of small business, has to lay people off and close the doors. The idea is you keep them open and allow them to maintain their payroll and have revenue at a time when nobody can occupy or visit their business,” said Jimi Grande, senior vice president, government affairs at the National Association of Mutual Insurance Companies in Washington.

The fund is "an additional tool to address the economic challenges brought on by this unprecedented crisis and mitigate a larger shut down of the economy,” David Sampson, president and CEO of the American Property Casualty Insurance Association in Washington said in a statement.

The plan would authorize the U.S. Treasury to set up a program run by the special administrator to distribute hundreds of billions of dollars in relief to small and large businesses and to contract with third parties, such as insurers, agents and brokers, to help with application filing and review, industry sources said.

Third parties that choose to help with the program would then be shielded from liability, except for negligence, willful misconduct or fraud, sources said.

“The intention here is to say if you participate in this effort and help distribute these funds that you’d be protected from being sued for that activity helping with this fund, not for anything else you may or may not have been doing,” said Mr. Grande.

Insurer groups have previously stated that most business interruption policies exclude coverage for losses related to infectious diseases, such as COVID-19. Some policyholders, however, have sued their insurers for coverage.

Compensation under the proposed program would be distributed to eligible businesses according to a formula based on payroll, payroll support, operating expenses, lost income of sick employees, industry sources said.

Some eligible businesses could see interim expedited relief in as soon as 15 days after the program goes into effect, they said.

The proposed fund would not preclude the future development of a federal backstop for pandemic risk insurance, said Charles Symington, senior vice president of external, industry and government affairs at the Independent Insurance Agents & Brokers of America.

“Discussion around a Pandemic Risk Insurance Act or another model for future pandemics is a public policy debate that will occur. That is a worthy one and it should occur,” he said. A draft bill proposing a federal backstop was circulated earlier this month.

“This is about dealing with an immediate crisis… Our members, agents and brokers want to be there for their clients at times of need and this proposal provides a solution to the economic challenges that clients are facing,” Mr. Symington said.

The New York-based Risk & Insurance Management Society Inc., which was not a signatory to the letter, on Tuesday said its external affairs committee has extended its support to Congressional leaders to provide the risk professional’s perspective as they work to develop the bill’s details.

The goals of the plan are “laudable,” said Robert Hartwig, clinical associate professor and director of the Risk and Uncertainty Management Center at the University of South Carolina in Columbia, in an emailed response.

“Nobody questions the need for the nation to have in place an efficient, rapid response mechanism to address the economic consequences of pandemic risk,” Mr. Hartwig said via email.

However, he remained “skeptical” about significant insurer involvement in the proposal.

“It’s not clear to me how inserting the P/C insurance industry into this adds materially to the value of the process. It’s clear to me why broker/agent groups advocating for their clients might support this but the value proposition for insurers is dubious,” Mr. Hartwig wrote in the email.

The letter was signed by major insurer groups including the American Property Casualty Insurance Association, the Council of Insurance Agents and Brokers, the IIABA, NAMIC, the Reinsurance Association of America and the Wholesale Specialty & Insurance Association.

More insurance and risk management news on the coronavirus crisis here