The US Treasury Department has penned a letter to lawmakers voicing its opposition to legislation that would force insurers to retroactively cover business interruption (BI) claims connected to the COVID-19 pandemic.
In the letter, Treasury Principal Deputy Assistant Secretary Frederick Vaughan criticised bills introduced by several states that aim to make insurers pay for disruption to business operations caused by the lockdown.
“While insurers should pay valid claims, we share your concerns that these proposals fundamentally conflict with the contractual nature of insurance obligations and could introduce stability risks to the industry,” Vaughan stated.
Among the states to push for legal action over BI claims are Pennsylvania, New Jersey, New York, Ohio, Massachusetts, South Carolina, and Louisiana.
But there was been widespread opposition to legislation throughout the re/insurance industry, with many senior figures arguing that it could bankrupt companies and drive up premiums in other areas.
Vaughan added that the Treasury expects to work with Congress, the states, the National Association of Insurance Commissioners, and other stakeholders to determine how best to move forward in addressing losses attributable to both current and future pandemics.
Some market commentators have argued that a government reinsurance backstop will be necessary to provide adequate pandemic cover for businesses in future, via a model similar to the Terrorism Risk Insurance Act.