The Pandemic Risk Insurance Act of 2020 (PRIA) has been introduced by Rep. Maloney alongside various stakeholders. This legislation will create the Pandemic Risk Reinsurance Program, and is seen as a vital step in Congress’s prevention efforts against economic losses from future pandemics.
H.R. 7011, PRIA, was introduced yesterday by Congresswoman Carolyn B. Maloney, a senior member of the House Financial Services Committee, alongside various industry and trade association leaders.
The economic fallout from the ongoing COVID-19 pandemic has been significant. Across the U.S., businesses of all shapes and sizes continue to be financially challenged, and the fact that the majority of business interruption policies do not cover pandemics, means that some will likely never financially recover from the current crisis.
The systemic nature of pandemic risk means that it’s extremely challenging or, according to some, impossible to insure in a sustainable manner. This realisation has resulted in calls for the establishment of a government reinsurance backstop for pandemic risks, similar to that seen with TRIA.
The introduction of PRIA and the Pandemic Risk Reinsurance Program (PRRP) signals a step in the right direction.
An announcement explains that PRIA would require insurance companies to offer business interruption policies that cover pandemics, with the reinsurance backstop in place to ensure that there’s enough capacity to cover these losses and protect the country’s economy in anticipation of a second wave of COVID-19 and future pandemics.
As with TRIA, the government would serve as a backstop to maintain marketplace stability and to share the financial burden alongside the private industry.
The PRRP will only be triggered when aggregate insured losses for a covered public health emergency exceed $250 million, and once triggered, the federal share of the compensation would be equal to 95% of insured losses that exceed the insurer deductible.
The PRRP would have a huge $750 billion program cap for federal compensation, and, if losses go above this cap then the Treasury Secretary is authorised to determine the pro-rata share of compensation beyond the $750 billion limit.
In addition, the PRIA bill does not stop insurers from purchasing reinsurance protection in the private markets.
“Millions of small businesses, nonprofits, mom-and-pop shops, retailers, and other businesses are being left out in cold and will never be able to financially recover from the coronavirus crisis because their businesses interruption insurance excludes pandemics.
“We cannot allow this to happen again. These employers and their employees need to know that they will be protected from future pandemics, which is why I am introducing the Pandemic Risk Insurance Act,” said Congresswoman Maloney.
Chai Jindasurat, Policy Director at Nonprofit New York, an association of more than 1,500 nonprofits, added: “Nonprofits in New York have lost countless millions of dollars in revenue, thousands of staff, and even shut down due to the COVID-19 pandemic, and nonprofits are consistently denied insurance claims for these losses. None of us know when this pandemic will end or when another will begin.
“Congresswoman Maloney’s Pandemic Risk Insurance Act is a proactive, market-friendly insurance solution to fund and cover future business losses that will create much-needed stability for our economy and our communities.”
For complex, truly systemic risks such as pandemics, terrorism and climate change, it’s become clear over the years that no single party can tackle these issues alone, with the skills and experience of both public and private sector entities required to adequately address such challenges.
The introduction of PRIA follows a proposal from industry trade groups last week, with the NAMIC, APCIA, and the Big “I” proposing a new pandemic solution called the Business Continuity Protection Program (BCPP).
“9/11 exposed the need for terrorism risk insurance, and since the impact of coronavirus on the travel industry has been nine times that of 9/11, it is very sensible to offer a similar backstop for pandemics,” said Tori Emerson Barnes, U.S. Travel Association Executive Vice President for Public Affairs and Policy. “This measure will go a long way in giving businesses the confidence they need to reopen, which will be vital to a rapid, robust and sustained economic recovery. Congresswoman Maloney and the other co-sponsors of PRIA deserve enormous credit for initiating this crucial step to restore American jobs and put the country back on the road to prosperity.”
Leon Buck, National Retail Federation Vice President for Government Relations, Banking and Financial Services, added: “Congress must take swift action and begin contemplating a solution to provide all businesses protection against future pandemic risks. The development of a public-private partnership to address this risk will provide certainty for businesses and organizations of all sizes and will ensure that we can meet future pandemic events with greater reliance. Not every pandemic will have worldwide impact, but when and where one occurs it is likely to result in a nearly total cessation of business. This legislation is the cornerstone of a proactive approach in managing the risk and impact of a pandemic or epidemic in the future.”
While Susan Robertson, CAE; American Society of Association Executives President and CEO, added: “The Pandemic Risk Insurance Act offers a critical solution for associations and others devastated by event cancellations, slashed reserves and sharp membership declines amid COVID-19.
“ASAE thanks and applauds Congresswoman Maloney for introducing this important bill, which will no doubt help provide America’s 62,000 associations the security they need to fully reignite our community’s far-reaching economic impact through industry-focused conferences, workforce development and educational programming, among other critical services.”