Pandemic risk act enters US Congress

New legislation that would enable a US government-backed pandemic risk insurance pool has entered Congress. Congresswoman Carolyn Maloney, senior member of the House Financial Services Committee, joined with various stakeholders to introduce the Pandemic Risk Insurance Act of 2020 (PRIA). PRIA is endorsed by RIMS, the Risk Management Society and Marsh & McLennan Companies among others.

The legislation will create the Pandemic Risk Reinsurance Program, a system of shared public and private compensation for business interruption losses resulting from future pandemics or public health emergencies.

The Pandemic Risk Insurance Act would be an important step in Congress’s prevention efforts against economic losses from future pandemics by both requiring insurance companies to offer business interruption insurance policies that cover pandemics, and creating a Pandemic Risk Reinsurance Program to ensure that there is sufficient capacity to cover these losses and protect the US economy in anticipation of a resurgence of COVID-19 and future pandemics, noted Maloney in a statement.

Like the Terrorism Risk Insurance Act (TRIA), the US federal government would serve as a backstop to maintain marketplace stability and to share the burden alongside private industry.

“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,” said Maloney. “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.”

“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, US 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.”

“Congress must take swift action and begin contemplating a solution to provide all businesses protection against future pandemic risks,” added Leon Buck, National Retail Federation vice president for Government Relations, Banking and Financial Services. “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.”

There have been calls from European risk management associations, including FERMA, Airmic and GVNW, for similar public private approaches to insuring future pandemics.