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Insurance Groups Offer Alternative Pandemic Backstop Proposal

Money and an Hourglass
May 22, 2020

A group of insurance trade associations has proposed a new federal program that would provide a revenue replacement backstop for businesses affected by future pandemics.

The taxpayer-backed Business Continuity Protection Program (BCPP) proposed by the National Association of Mutual Insurance Companies (NAMIC), the American Property Casualty Insurance Association, and the Independent Insurance Agents and Brokers of America, Inc., would provide participating businesses with revenue replacement assistance for payroll, employee benefits, and operating expenses following a presidential viral emergency declaration.

The BCPP would reimburse businesses for up to 80 percent of payroll, benefits, and expenses for 3 months. Under the proposed revenue backstop program, businesses could purchase their desired level of revenue replacement assistance through state-regulated insurance entities that voluntarily participate with the BCPP, with applications based on the prior year's tax return.

Relief would be triggered automatically following a federally declared public health emergency.

The Federal Emergency Management Agency, with limited administrative assistance from private contractors, would administer the program. Each year, the BCPP would consider purchasing reinsurance to protect federal taxpayers.

Under the plan, the BCPP would work with risk mitigation experts to develop pandemic and viral risk mitigation guidelines and safety standards for businesses that would be provided to purchasers of revenue protection at the time of application and payment.

The industry groups offered their proposal as an alternative to pandemic backstop plans under discussion that would be based on the Terrorism Risk Insurance Act (TRIA). In a statement, the group said that "a TRIA-like program, with an (insurance) industry financial role, does not square with the fundamental notion that pandemics are not insurable risks. The risks are too fundamentally different in nature and scope."

"Pandemics simply are not insurable risks; they are too widespread, too severe, and too unpredictable for the insurance industry to underwrite," Charles Chamness, NAMIC's president and CEO, said in the statement.

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