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Insurance trade groups propose federal pandemic solution

22nd May 2020 - Author: Luke Gallin

A new, industry-backed federal program designed specifically to help businesses meet the financial challenges from future pandemics has been proposed by the National Association of Mutual Insurance Companies (NAMIC), the American Property Casualty Insurance Association (APCIA), and the Independent Insurance Agents & Brokers of America, Inc. (Big “I”).

The new pandemic solution, Business Continuity Protection Program (BCPP), would provide businesses with revenue replacement assistance for payroll, employee benefits, and operating expenses following a presidential viral emergency declaration.

According to an announcement on the proposal, the new solution has been designed to meet the needs of customers of all shapes and sizes, providing them with much needed protection against economic shutdowns due to the outbreak of a virus.

The BCPP solution is in response to the financial challenges facing many businesses as a result of government enforced lockdown measures in an effort to tackle the COVID-19 pandemic, with many finding that their business interruption policies simply do not cover pandemics, creating a really difficult situation.

Charles Chamness, NAIC’s President and Chief Executive Officer (CEO), commented: “Pandemics simply are not insurable risks; they are too widespread, too severe, and too unpredictable for the insurance industry to underwrite.

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“As we’ve seen in the past few months, pandemics are a national problem, and we need a national solution. NAMIC, APCIA, and the Big ‘I’ had one goal in mind in developing the BCPP – crafting a solution that would provide meaningful support for employees, businesses, and the economy as a whole.”

As the COVID-19 outbreak has intensified in the U.S., there’s been discussion around the potential for a state-backed reinsurance program, similar to TRIA which was created in the aftermath of 9/11 as a terrorism backstop, to address pandemics.

However, according to the industry trade groups, a TRIA-like program does not square with the fundamental notion that pandemics are uninsurable risks.

David Sampson, President and CEO of the APCIA, said: “We need a sustainable solution that provides simplicity, certainty, and immediate relief to impacted businesses. The BCPP is designed to bolster the country’s economic resilience through timely and efficient financial protection and payroll support in the event of a future public health emergency. We look forward to continued dialogue with the business community to meet their needs in this vitally important public policy discussion.”

The BCPP has been designed so that it would provide revenue replacement assistance that would reimburse up to 80% of payroll, benefits, and expenses for three months. Businesses would purchase their desired volume of revenue replacement assistance via state-regulated insurers that voluntarily participate with the new program. Funds will be automatically distributed following a Presidential viral emergency deceleration, and, closure decelerations would specify which types of businesses are partly or fully closed.

The BCPP would be run by the Federal Emergency Management Agency (FEMA), and the program would also be able to purchase reinsurance to protect federal taxpayers.

“The small business community is looking to our industry to provide leadership to ensure there is immediate assistance available during future pandemics. The BCPP is a simple, efficient, and effective plan to provide the needed financial security for American businesses. This program gets immediate funding to businesses when they need it most,” said Bob Rusbuldt, President and CEO of Big “I”.

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