Senate lawmakers heard testimony yesterday about the importance of establishing a federal pandemic risk / business continuity insurance program during a hearing entitled “Examining Frameworks to Address Future Pandemic Risk.” (See webcast and witness statements).

Public-Private Backstop

• Senator Bob Menendez (D-NJ), above, chairman of the Senate Banking Subcommittee on Securities, Insurance, and Investment, stated in his opening remarks, “We must determine the extent to which businesses, private insurance providers, and the federal government are able to share the risk of losses due to a pandemic. Each presents different ideas on how much risk is borne by the private sector versus the federal government, and the approach to paying claims.”
• Menendez also noted that of the eight million businesses with commercial insurance policies with business interruption coverage, 83 percent also carried a clause excluding claims from viral contamination, disease, or pandemic – and that 82 percent of claims have been closed without payment. (Menendez remarks)

Roundtable & Coalition Efforts

• The Roundtable is part of the Business Continuity Coalition (BCC), which offered testimony during the hearing on how a public-private backstop program for pandemic risk insurance – similar to the Terrorism Risk Insurance Act (TRIA) program – is urgently needed. Charles Landgraf of Arnold & Porter, above, testified on behalf of the BCC. (See written testimony and video at 1:00:20)
• The coalition includes 44 trade associations and major companies representing more than 70 million workers from healthcare and dining/hospitality to real estate, construction, finance, manufacturing, media and film, live entertainment, professional sports and professional services.
• The BCC’s testimony emphasized how pandemic risk is possibly the largest unhedged risk exposure in the U.S. economy. The coalition’s statement also shows how a precedent for government involvement in insurance markets exists for a broad range of risks – including terrorism (TRIA), flood (NFIP), and crop risk (FCIC) – where private markets fail to provide the economy with the coverage it needs.
• A detailed, section-by-section description of the BCC Recommended Proposal urges the design of any pandemic risk insurance program to address core principles, including: scope, availability and affordability; private insurer utilization; a pooling alternative for offerinf non-damage business interruption insurance (NDBI) coverage; stop-loss and quota-share protection; and utilization of reinsurance and capital markets.
• A New Jersey small business owner, Adenah Bayoh, testified on behalf of the National Restaurant Association (NRA) in support of the BCC proposal, stated, "This country needs a Pandemic Risk Insurance Program to ensure that Main Street businesses and employees have certainty and continuity in the ability to navigate the impact of a future pandemic."

• Subcommittee Chairman Menendez and the Ranking Member Tim Scott (R-SC) added during the hearing that there are likely to be several more Senate hearings on pandemic risk insurance.
• In the House, the BCC submitted a hearing statement for the record for a Nov. 29, 2020 House Financial Services Subcommittee hearing on “Insuring against a Pandemic: Challenges and Solutions for Policyholders and Insurers.”

Both Senate and House subcommittees played important role in the seven-year extension of the Terrorism Risk Insurance Program (TRIP) enacted in 2020. (Roundtable Weekly, Dec. 13 and Dec. 20, 2019)

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