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Standard business interruption policies do not provide coverage against communicable diseases such as COVID-19, and were not actuarially priced to do so, major insurer organizations said in a letter sent Thursday to California members of Congress.
The letter was sent in response to concerns raised by members of California’s congressional delegation over COVID-19 and the exclusions for viruses and pandemics in standard commercial policies, the National Association of Mutual Insurance Companies said in a statement.
Recent estimates show that business continuity losses just for small business of 100 employees or fewer could reach up to $383 billion per month, while the total surplus of the U.S. property/casualty insurance industry is only $800 billion, the five insurer trade groups said in the letter.
“The insurance industry must protect our solvency to pay on promises we have made to policies,” the letter stated.
Insurers will ensure that “prompt payments are made in instances where coverage exists,” according to the letter, adding that insurers are already working with customers on issues such as flexibility in premium payments.
The American Property Casualty Insurance Association on Monday upped its estimate of closure losses for small businesses to as high as $431 billion per month.
The California Department of Insurance on March 26 called on insurers doing business in the state to provide information relating to business interruption, civil authority, contingent business interruption, and supply chain coverage provided by existing commercial insurance policies.
However, California lawmakers have yet to introduce bills seeking to force insurers to retroactively cover COVID-19 business interruption losses. So far, Louisiana, New York, Ohio, Massachusetts and New Jersey have introduced such bills.
The April 2 letter to U.S. Democratic Reps. Gilbert Cisneros and Rep. Mike Thompson and 31 other California lawmakers was signed by the National Association of Mutual Insurance Cos., the Independent Insurance Agents & Brokers of America, the American Property Casualty Insurance Association, the Reinsurance Association of America and the Council of Insurance Agents & Brokers.
Meanwhile, momentum continues to build for the creation of a federal pandemic risk and insurance backstop.
In a letter to clients Thursday, John Doyle, president and CEO of Marsh LLC, said a public/private pandemic risk insurance program is “essential” to accelerate economic recovery and provide much-needed protection against future pandemic risks.
Mr. Doyle has also written to Congress and the Trump Administration to offer Marsh’s assistance in creating such a program.
More insurance and risk management news on the coronavirus crisis here.
A survey by U.K.-based insurance broker Aon PLC found that business interruption is one of the fastest growing risks facing businesses, IT-Online reports. Political strikes, cyber attacks and natural disasters are elevating the chances of business interruption.