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A public/private risk-sharing program for pandemic risk insurance remains a key objective for buyers, the Risk and Insurance Management Society Inc. said Friday after insurance groups raised concerns over the structure of a backstop.
Industry consensus on the details of any legislation has not been reached, but RIMS and other key players including Marsh LLC have reiterated their support for a workable solution.
“The idea and the introduction of a pandemic risk act solution remains a top legislative priority for RIMS,” said RIMS Director of Government Affairs Whitney Craig, in an email.
“The society continues to work closely with congressional leaders to support their efforts to address pandemic-related business interruptions and we are also committed to keeping our members informed of the latest developments on this front,” Ms. Craig said.
Marsh LLC also continues to believe that a public/private pandemic risk solution is in the “best interest of our clients,” Marsh said in an emailed statement.
“Since sending letters to Congress and the Administration offering our assistance, we have been in regular contact with policyholders, trade groups, insurers, and government officials to try to come to a consensus on a prospective program,” Marsh said.
The comments came after reports Thursday that industry groups representing some of the largest property/casualty insurers might oppose a legislative proposal to create a pandemic risk insurance program.
The draft bill outlining the proposed Pandemic Risk Insurance Act of 2020 has been circulating on Capitol Hill, modeled on the Terrorism Risk Insurance Act that was enacted after the September 11, 2001, terrorist attacks.
The National Association of Mutual Insurance Companies, a trade group representing more than 800 insurers, said it supports a federal solution to protect businesses in a future pandemic, but the current proposal is “not the right solution.”
“What we object to is trying to use a model that just doesn’t work for a pandemic. The PRIA proposal is modeled after the Terrorism Risk Insurance Program, which was carefully designed to address a specific type of risk,” said Jon Bergner, NAMIC’s vice president, public policy and federal affairs.
The proposal “attempts to utilize the complex business interruption insurance product – with its physical damage requirements, numerous exclusions, time period limitations, negotiated caps on payment, and claims adjustment procedures – as the vehicle to preserve the entire U.S. economy,” he said in an email.
Zachary Finn, clinical professor and director of the Davey Risk Management & Insurance Program, Lacy School of Business, at Butler University, who helped formulate a PRIA proposal said the program would act as a mechanism to pay some percentage of business interruption claims.
“Yes, insurers would need to pay for some losses; however, my intent is for that to be a negotiated amount with the government that is less than the potential cost of litigation, loss of premium, uncertainty, etc., from the status quo,” Mr. Finn said via email.