U.S. Insurers Propose Taxpayer-Funded Business-Loss Coverage For Future Pandemics

With U.S. insurance companies facing criticism over their response to the coronavirus outbreak, three industry groups on Thursday proposed putting the Federal Emergency Management Agency (FEMA) in charge of a taxpayer-backed program to protect businesses from revenue losses during future pandemics.

The program would allow businesses to buy “revenue replacement assistance” of up to 80% of payroll and other expenses, the groups said.

Insurers announced the plan after facing lawsuits, political pressure and criticism from customers with business interruption policies over not covering their financial hardships due to the coronavirus pandemic.

While these policies may cover revenue losses from lightning strikes or cars crashing into buildings, they either exclude or do not specifically cover a pandemic, despite the business interruption it causes.

The insurance groups said that pandemic coverage is “inherently uninsurable.”

Many insurers want future pandemic business coverage to be backed by the U.S. government, but are at odds over how to execute a plan.

Some want a program similar to the government-supported commercial terrorism products that followed the attacks of Sept. 11, 2001, and require insurers to pay part of the claims, before U.S. taxpayers take over.

“We think that a program where policyholders, insurers, and the government each have risk will create the right economic incentives so that we mitigate the impact of the next event and not just look to the government to finance it,” said John Doyle, president and chief executive officer of insurance broker Marsh, which is lobbying for a terrorism-type program.

But the groups oppose a cost-sharing plan because pandemics pose a more wide-reaching, long-running risk than a terrorism incident.

Under their proposal for a fully taxpayer-funded plan, payments would be automatically triggered after a U.S. president declares a “viral emergency,” provided businesses bought the protection at least 90 days earlier, they said.