The coronavirus pandemic has brought serious financial challenges to the U.S. economy. PIA National has been actively engaged in the development of legislation to ensure emergency support for employees and businesses. Besides these exigent coronavirus response laws, PIA National has been evaluating various policy proposals that have been circulating in the last few weeks. As Congressional offices begin to assemble a fourth coronavirus response bill, we’re providing an overview of several of the policies under consideration.
Pandemic Risk Insurance Act Program
One such proposal comes from House Financial Services Committee Chairwoman Maxine Waters (D-CA), who has proposed a Pandemic Risk Insurance Act program (PRIA). This provision, not yet introduced, would create a reinsurance program like the Terrorism Risk Insurance Act (TRIA) program, but for losses resulting from pandemics. Like the TRIA program, which PIA National supports, the federal government would serve as a backstop to maintain market stability and to share the financial burden of a pandemic with the private sector. The goal of the program would be to promote the availability and affordability of pandemic risk insurance coverage.
PIA National is actively engaged with Congressional staff on the PRIA proposal and will continue to work with staff going forward. A PRIA program would not help the many businesses that are currently struggling. For that reason, we have noted in our communication with policymakers that a PRIA program should not be the focus of imminently pending legislation. Rather, we have encouraged Congress to instead focus on solutions that will provide urgently needed aid to economically struggling businesses in the near term.
Business Interruption Coverage
PIA National strongly opposes another proposal that has sparked interest in Congress: retroactive business interruption (BI) coverage. Broadly speaking, this proposal would retroactively expand business interruption insurance policies, which typically do not cover losses resulting from viruses, to cover business losses resulting from the coronavirus, essentially overriding customary requirements that any loss be a direct result of damage to property or its physical loss.
PIA National is ardently against any proposal that would undermine existing insurance practices, particularly one that would undermine contractual relationships between businesses and threaten the financial stability of the insurance sector. PIA National believes such a proposal is shortsighted and would have cascading unintended consequences to the detriment of both policyholders and members of industry in the long term.
PIA-Supported Business Recovery Fund
PIA National, along with other groups like the Reinsurance Association of America (RAA), sent a letter in March to Congress and the administration recommending a proposal to assist businesses affected by mandatory closures, quarantines, and other measures intended to slow the spread of the virus.
The proposal would create a Business and Employee Continuity and Recovery Fund within the U.S. Department of the Treasury. Modeled on the September 11th Victim Compensation Fund, the Recovery Fund would be operated by the federal government and run by a presidential appointee authorized to enter into contracts with interested businesses to administer the Recovery Fund and facilitate the distribution of financial resources to affected businesses. The Recovery Fund would provide short-term liquidity for businesses by creating a simple form that could be electronically filed to help companies continue to pay their employees and stay solvent until they are permitted to resume regular operations.
PIA National believes this Recovery Fund is a sensible way to help struggling businesses during this unprecedented time without unnecessarily and irrevocably damaging existing contract law and business practice. We will continue to encourage policymakers to include it in coronavirus legislation considered in the weeks to come.