ABA Joins National Retail Federation in Calling for Pandemic Risk Insurance Program

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On April 20, the American Booksellers Association joined with the National Retail Federation and 15 other business organizations in sending a letter to Congress in support of a federal program to help businesses obtain insurance coverage for pandemics. The American Society of Association Executives, International Council of Shopping Centers, and Retail Industry Leaders Association were among the cosignatories.

The letter, addressed to Speaker Pelosi, Majority Leader McConnell, Minority Leader McCarthy, and Democratic Leader Schumer, called for the establishment of a pandemic risk insurance program, modeled after a terrorism risk insurance program (TRIA) following 9/11.

“Retailers and other businesses across the country have seen unprecedented losses related to COVID-19 that weren’t covered under most current insurance policies and won’t be covered if there’s a second wave of the virus next winter. At this point it’s virtually impossible to obtain pandemic coverage for the future, but a federally insured pandemic risk insurance program would provide businesses of all sizes the certainty they need and help rebuild confidence,” said David French, senior vice president for government relations at NRF, in a press release.

The Pandemic Risk Insurance Act (PRIA), the organizations say in their letter, would “mandate that businesses who could demonstrate significant business interruption and sharp decline in present and future revenue would be insured, through a pre-funded risk pool, in the case of a pandemic or epidemic.” Additionally, the act would allow businesses to recoup lost revenue resulting from the cancellation of large events.

PRIA would establish a federal backstop by creating a federal loss-sharing program for certain insured losses resulting from a certified pandemic or epidemic. Under the act, insurance companies would be required to offer policies that cover pandemics; in exchange, the federal government would reimburse insurers when claims for a pandemic exceed $250 million nationwide. Insurers would pay a premium to receive coverage from the program. PRIA would only cover future pandemics, not the current COVID-19 outbreak, and would be capped at $500 billion annually.

“This approach would serve as a cornerstone to a proactive and prospective approach to managing the risk of a widespread and catastrophic pandemic or epidemic in the future,” the letter states. “A pandemic insurance program would help rebuild confidence and security for our businesses and serve as a critical first step to recovery and future resilience.”


The Honorable Nancy Pelosi
Speaker
U.S. House of Representatives
Washington, DC 20515

The Honorable Kevin McCarthy
Minority Leader
U.S. House of Representatives
Washington, DC 20515

The Honorable Mitch McConnell
Majority Leader
United States Senate
Washington, DC 20510

The Honorable Chuck Schumer
Democratic Leader
United States Senate
Washington, DC 20515

Dear Speaker Pelosi and Leaders McConnell, McCarthy, and Schumer:

We, the undersigned organizations, represent a broad coalition of the business community, and we commend you for passage of the Coronavirus Aid, Relief, and Economic Security (CARES) Act as a necessary step to address the challenges associated with the COVID-19 pandemic. Thank you for your leadership in response to one of the most significant health threats and economic disruptions in our nation’s history.

While it is imperative to take immediate action to address the current economic crisis, we also believe that Congress must take swift action and begin contemplating a solution to provide all businesses protection against future pandemic risk, which, we should anticipate, could come as early as this fall. U.S. businesses are already working hard to make sure that consumers can soon return to economic activity safely, and are planning for a robust return. But the private and public sectors together must face the existing risk. The development of a public-private partnership to address this risk will create certainty for businesses and organizations of all sizes across the United States, and it will ensure that we can meet future pandemic events with greater resilience.

We are in full support of a Pandemic Risk Insurance bill, also known as the “Pandemic Risk Insurance Act of 2020” (PRIA) which would mandate that businesses who could demonstrate significant business interruption and sharp decline in present and future revenue would be insured, through a pre-funded risk pool, in case of a pandemic or epidemic. This Act would also allow businesses to recoup lost revenue when large events are cancelled, thus resulting in substantial losses. The Act would create a federal “backstop” (much like the Terrorism Risk Insurance Act [TRIA]) for insurance claims related to a pandemic or epidemic. The specific purpose of PRIA would be to provide for a federal loss-sharing program for certain insured losses resulting from a certified epidemic/pandemic.

A pandemic is an insurable risk and has been modeled and reinsured in the past; not every pandemic will wreak total destruction, and some might be more regional, but when one occurs, it is likely to result in a total cessation of businesses.

This approach would serve as a cornerstone to a proactive and prospective approach to managing the risk of a widespread and catastrophic pandemic or epidemic in the future. Already, while we are still struggling with the severe collateral consequences of COVID-19, U.S. businesses wishing to renew their insurance coverage have been told that the pandemic risk insurance and reinsurance market has no capacity. The vanishingly few businesses who have been able to obtain pandemic coverage endorsements to their policies will not be covered for COVID-19, or any mutation of it, if the virus returns this winter.

A federally insured pandemic risk insurance program would provide businesses of all sizes with the certainty that they need to renew leases, invest in real estate, order inventory, plan for capital improvements, and hire and re-hire workers in the coming months. PRIA would also provide a mechanism for immediate and predictable economic recovery should the nation face another pandemic — even one of lesser magnitude than COVID-19.

In sum, a pandemic insurance program would help rebuild confidence and security for our businesses and serve as a critical first step to recovery and future resilience.

Thank you for your consideration, and for your leadership at this time of great challenge.

Sincerely,

American Booksellers Association
American Hotel & Lodging Association (AHLA)
American Society of Association Executives
Asian American Hotel Owners Association
Building Owners and Managers Association (BOMA) International
CCIM Institute
Institute of Real Estate Management
Institute of Scrap Recycling Industries
International Association of Amusement Parks and Attractions
International Council of Shopping Centers (ICSC)
International Franchise Association
National Multifamily Housing Council
National Restaurant Association
National Retail Federation
National Waste & Recycling Association
Retail Industry Leaders Association
The Travel Technology Association
U.S. Travel Association

cc:

The Honorable Maxine Waters, Chairwoman, Committee on Financial Services
The Honorable Mike Crapo, Chairman, Senate Committee on Banking, Housing and Urban Affairs
The Honorable Patrick McHenry, Ranking Member, Committee on Financial Services
The Honorable Sherrod Brown, Ranking Member, Senate Committee on Banking, Housing and Urban Affairs
The Honorable Carolyn Maloney, Member, House Financial Services Committee