House Committee Interrogates Pandemic Risk Insurance Proposals as Industry Groups Urge Swift Action

Carolyn Maloney - November 06, 2019  - Getty-H 2020
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During a hearing on Thursday, members of Congress generally thanked Rep. Carolyn Maloney for bringing the issue forward with The Pandemic Risk Insurance Act of 2020, while expressing skepticism about the current state of that proposal and others.

One day after major entertainment industry groups urged that pandemic risk insurance is a "key factor to America’s economic recovery," The U.S. House Committee on Financial Services heard arguments for and against several proposals for that insurance on Thursday.

Lack of pandemic risk insurance coverage has plagued film and television producers attempting to get projects off the ground amid COVID-19, as many banks require insurance coverage for production loans but traditional insurers aren't covering coronavirus-related business losses. Some smaller-budget projects have proceeded by forgoing insurance altogether and shouldering the financial risk.

During the Committee’s virtual hearing "Insuring against a Pandemic: Challenges and Solutions for Policyholders and Insurers," Congress members generally thanked Rep. Carolyn Maloney (D-NY) for bringing the issue of insurance forward with The Pandemic Risk Insurance Act of 2020, a bill introduced in May, while expressing skepticism about the current state of that proposal and others, including the Business Continuity Protection Program, introduced by insurance groups.

Maloney's PRIA seeks to require insurance companies that opt into the program to offer business interruption policies that cover pandemics and other infection-related public health emergencies, using the Terrorism Risk Insurance Act of 2002 as a model for the public-private partnership. PRIA would also create a Pandemic Risk Reinsurance Program under the Department of the Treasury so that private companies and the federal government could share fiscal responsibility for such claims. PRIA, if passed, will go into effect on Jan. 1, 2021.

Witnesses at Thursday's hearing included Annie’s Blue Ribbon General Store owner Ann Cantrell, who spoke on behalf of the National Retail Federation and argued for PRIA to be passed; Marsh president and CEO John Doyle, who also argued for a "public-private partnership" between insurance companies and the federal government; Shelter Insurance chief corporate counsel Brian Kuhlmann, speaking on behalf of the American Property Casualty Insurance Association and the National Association of Mutual Insurance Companies, who maintained that pandemic risk is uninsurable and supported the BCPP; Chubb North America chief underwriting officer Michelle Melendez McLaughlin, who spoke to a separate Chubb proposal for Congress; and International Center for Law and Economics executive editor and senior fellow R.J. Lehmann, who said changes to business interruption insurance policies would not help many businesses and added that a risk-mitigation solution "shouldn't be just an insurance-related program."

During the hearing's question and answer session, several Congress members and witnesses expressed their belief that PRIA, based on TRIA, wouldn't work as written because pandemics and terrorism are two very different kinds of events. While terrorist events are "localized, the risk itself can be spread out throughout the country… a pandemic is occurring simultaneously across the country with claims that would have to be paid out throughout the country," Kuhlmann said. With PRIA's liability capped at $750 billion, several hearing participants also voiced concerns that participating insurance companies would be on the hook for all claims made above that threshold and therefore that few would take part. Others spoke to fears that businesses would not buy business interruption insurance that covers pandemic risks in the first place, considering that about only one third of them did pre-COVID-19.

"Could that $750 billion be spent better in directly aiding businesses? I think likely," Lehmann said.

There were still others, including a number of Republican participants, who felt that deciding on insurance solutions mid-pandemic was premature. "Republicans are committed to working in a bipartisan way but as we do that, I think we need to take a step back and [not] have a preconceived outcome," Rep. Steve Stiver (R-OH), one of the committee's ranking members,  said in his opening remarks.

As she posed questions during the hearing, Maloney clarified of her bill, PRIA, "This is just a marker, a proposal, a draft to be improved upon. This is not the endgame by any means. It's easier to work through a draft… I'm open to all suggestions."

Cantrell, for her part, defended PRIA, saying that pandemic risk insurance would have been "a gamechanger" for her during COVID-19. "I understand the Pandemic Risk Insurance Act is a solution that will only cover future pandemics… but it still needs to be passed," she said.

Prior to the hearing, industry groups including the Motion Picture Association, the Independent Film & Television Alliance, The Internet & Television Association, IATSE, Directors Guild of America, NAB, Producers Guild of America, NPACT and SAG-AFTRA co-signed a letter to the chairmen and ranking members of the U.S. House Committee on Financial Services that underscored the importance of PRIA. "The restart of our industries in the U.S. cannot begin on a widespread basis without protection against the ongoing pandemic risks," the signatories wrote. "We urge Congress to move expeditiously to pass bi-partisan legislation that creates a public private insurance solution in which the government shares the financial risk of losses related to pandemics so that we in the film, TV, and sports industries can return to production. Such a program would help protect jobs and reduce economic damage from pandemics."

The letter added, "The legislation introduced by Representative Carolyn Maloney is a positive step and we support this hearing as an essential next step to addressing this issue."

Watch the full hearing below.