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Congresswoman Proposes Federal Pandemic Insurance Plan

As the battle over insurance for COVID-19 losses rages in courts, one congresswoman has proposed a bill aimed at creating protections from the next pandemic.

On May 26, 2020, New York Representative Carolyn Maloney introduced a bill in Congress that would create a reinsurance program underwritten by the United States government covering pandemic-related business interruption losses.  Dubbed the Pandemic Risk Insurance Act, H.R. 7011 provides for a $750 billion fund available for pandemic-related losses.  Insurers participating would be on the risk for the first $250 million in qualified losses, and would then have access to reinsurance coverage for 95% of their losses up to the cap of $750 billion.  If losses exceed that cap, the Treasury Secretary is empowered to determine additional pro-rata compensation for insurers. 

Timing is one important limitation to this legislation as proposed.  The bill defines “Covered Public Health Emergency” as an outbreak of infectious disease that is (a) certified by the Secretary of Health and Human Services as a public health emergency, and (b) declared an emergency on or after January 1, 2021.  This may be too little, too late with a second wave of COVID-19-related losses anticipated for the fall of 2020.

This bill follows in the footsteps of the 18-year old Terrorism Risk Insurance Act (TRIA), which recently received a seven year reauthorization from Congress in December 2019.  TRIA was enacted in the aftermath of 9/11 to fill a gap in the insurance market for losses caused by acts of terrorism, and it succeeded in encouraging insurers to begin offering specialty coverage to their policyholders for this risk.  Given the success of the TRIA program, the introduction of H.R. 7011 is a very positive sign for business owners navigating the risks of reopening and creating business plans for operations in a world that can no longer ignore the risk of global pandemic.

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