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The U.S. Department of the Treasury on Friday said officials have concerns about proposals to compel insurers to pay business interruption losses arising from the COVID-19 pandemic.
While insurers should pay valid claims, requiring them to retroactively cover exposures to lost business income could destabilize the sector, said Frederick W. Vaughan, principal deputy assistant secretary in the Office of Legislative Affairs, in a letter disclosed on Twitter on Monday.
In the letter to Rep. Ted Budd, a Republican who serves on the House Financial Services Committee, the official referred to various efforts by lawmakers in several states and at the federal level related to business interruption coverage. Lawmakers in several states have introduced legislation that would compel insurers to pay business interruption losses to small business forced to close amid coronavirus lockdown requirements and then have the insurers apply to state officials for reimbursement.
“While insurers should pay valid claims, we share your concerns that these proposals fundamentally conflict with the contractual nature of insurance obligations and could introduce stability risks to the industry,” the letter states.
The Treasury “looks forward” to working with Congress, states and insurance trade associations to determine “how best to move forward in addressing losses attributable to the current and potential future pandemics,” the letter states.
A broad coalition of insurers and business organizations has called for the creation of a federal backstop to cover future pandemic risks.
More insurance and risk management news on the coronavirus crisis here.
Restaurants in Florida and New Jersey filed class-action lawsuits against Chubb Ltd. in federal court on Monday seeking coverage for coronavirus-related lost business income.