Legislation To Create TRIA-Like Federal Pandemic Backstop Introduced
May 28, 2020
A bill that would create a federal pandemic risk backstop has been introduced in Congress. Rep. Carolyn B. Maloney (D-NY), senior member of the House Financial Services Committee, introduced H.R. 7011, the Pandemic Risk Insurance Act (PRIA) of 2020, on Wednesday.
The legislation would create the Pandemic Risk Reinsurance Program (PRRP), a system of shared public and private compensation for business interruption losses resulting from future pandemics or public health emergencies, according to a statement from Congresswoman Maloney's office.
According to the statement, PRIA would require insurance companies to offer business interruption insurance policies that cover pandemics while the Pandemic Risk Reinsurance Program would provide a backstop to ensure sufficient capacity to cover losses and protect the US economy against a resurgence of COVID-19 or other future pandemics.
The statement compares PRIA to the Terrorism Risk Insurance Act (TRIA) in providing a federal backstop to maintain marketplace stability and share the burden of losses with private industry.`
Under the measure, insurer participation in the program would be voluntary, with insurers signing up on an annual basis. Participating insurers would be required to provide business interruption insurance policies—including event cancellation—that include pandemics.
The PRRP would be triggered when aggregate insured losses for a covered public health emergency exceed $250 million. Once the PRRP is triggered, the federal share of compensation would equal 95 percent of insured losses that exceed the insurer's deductible. The bill sets a $750 billion program cap for federal compensation. If losses exceed the cap, the Treasury secretary would be authorized to determine the pro rata share of federal compensation beyond the cap.
"Millions of small businesses, nonprofits, mom-and-pop shops, retailers, and other businesses are being left out in the cold and will never be able to financially recover from the coronavirus crisis because their business interruption insurance excludes pandemics," Congresswoman Maloney said in the statement. "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."
Congresswoman Maloney's statement indicated the PRIA legislation enjoys the endorsement of organizations representing a variety of different industries, including the Risk and Insurance Management Society and the Council of Insurance Agents & Brokers. According to the statement, Marsh & McLennan Companies is also among those backing the measure.
May 28, 2020