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Evan G. Greenberg, chairman and CEO of Chubb Ltd., on Thursday renewed calls on Capitol Hill for a public-private partnership for pandemic risk, saying such a program would lessen the financial blow of a future pandemic.
Mr. Greenberg’s comments came as he testified at a hearing of the U.S. Senate Banking Committee’s Subcommittee on Securities, Insurance and Investment to examine frameworks to address future pandemic risk.
Combining the insurance industry’s risk insight with the government’s balance sheet capability to take on “pandemic tail risk” would provide an “affordable, efficient liquidity backstop for small businesses and a market-based program for larger businesses,” Mr. Greenberg said.
However, Robert Hartwig, clinical associate professor and director of the Risk and Uncertainty Management Center at the University of South Carolina in Columbia questioned whether such a program was needed.
“Bearing in mind all of the pandemic insurance frameworks under consideration were developed during the very early months of the pandemic, it is worth considering their prospective utility given the benefit of hindsight and nearly 18 months experience managing the pandemic,” Mr. Hartwig said in his testimony.
Government relief via fiscal and monetary stimulus succeeded in delivering “very substantial assistance to consumers, businesses and entire industries,” Mr. Hartwig said. Whether any of the proposed programs would lead to a “discernibly superior outcome” for businesses or the economy overall is not clear, he said.
Robert Gordon, senior vice president, policy research and international, at the American Property Casualty Insurance Association, an insurance industry trade group, agreed.
“While the U.S. has been devastated by the ongoing pandemic, our country has also been able to economically recover much faster than many other regions around the world,” Mr. Gordon said in his virtual testimony.
But lawmakers questioned whether Congress should be doing nothing but waiting for the next pandemic to strike. The government response to the pandemic in the form of fiscal and monetary stimulus was done “on the fly,” said Sen. Robert Menendez, (D-New Jersey) who chaired the hearing.
“I’m not sure it wouldn’t have been more efficient if we had prepared for the possibility and thought about what that might mean,” Sen. Menendez said.
Most small businesses were unable to obtain pandemic relief through their insurance policies, Sen. Menendez said. Of 8 million businesses with commercial insurance policies that included business interruption coverage, 83% had an exclusion for virus or pandemic claims, according to National Association of Insurance Commissioners data.
Others testifying said a risk-sharing mechanism for pandemics was critical.
Parts of pandemic risk are insurable but not without significant government support, said Martin South, president, United States and Canada division of Marsh LLC, in virtual testimony during the hearing.
“Property and liability insurance policies are severely limited in their ability to respond to pandemic-related losses,” Mr. South said.
“The magnitude of global economic losses, the difficulty in predicting what actions governments will take to contain infectious disease and the potential for rapid changes in consumer demand make pandemic risk impossible for insurers and reinsurers to assume without government backing,” Mr. South said.