Congresswoman Carolyn B. Maloney (D-NY), senior member of the House Financial Services Committee, recently held a panel discussion on the Pandemic Risk Insurance Act of 2020 (PRIA) where she invited multiple parties to share their thoughts on the proposed system of shared public and private compensation for business interruption losses resulting from future pandemics or public health emergencies.
Marsh’s Tarique Nageer, terrorism placement advisory leader, participated in the discussion, presenting a strong case for a public private partnership (PPP) to address pandemic risk in the future. According to Nageer, the last several months plagued by the COVID-19 pandemic have “demonstrated that traditional insurance solutions and the commercial insurance market are not equipped by themselves to fully provide businesses and others with the protection they need from the enormous cost of pandemics.”
Nageer argued: “Only the credit and the balance sheet power of the US government can help create the necessary risk program to harness financial and social benefits of insurance to help mitigate pandemic economic-related losses, and provide a greater certainty about a sustained long-term recovery.”
Insurers also have a role to play. That role, according to Nageer, is in providing its traditional function of mitigating risk, but that can only be achieved if the right economic incentives are created via a PPP solution for insurers, policyholders, and the government, he added.
“When the suggestion is made that pandemics are uninsurable, what’s really being inferred is that pandemics are not fully insurable without support from the federal government,” said Nageer. “That’s why we’re here [...] to figure out how to structure a partnership between the federal government and the private sector to provide protection and resilience against future pandemics. In the face of this challenge, we shouldn’t throw up our hands and defer responsibility. We’re here to join hands with the government to craft a user-friendly solution.”
Every industry either has or will be impacted by the coronavirus pandemic in some way. Marsh recently published a pandemic risk protection infographic, which highlights COVID-19’s effect on commercial insurance markets. The brokerage giant wrote: “While there is considerable uncertainty regarding total insured losses in 2020, current industry estimates range from $50 billion to $100 billion.” It attributes these losses to COVID-19’s ongoing disruptive impacts, an active natural catastrophe season, and “the unknown potential of another major event before year-end.”
The Marsh infographic zooms in on various commercial lines of insurance that have been hit hard by the pandemic, including: property and business interruption, event cancelation, casualty/workers’ compensation, directors and officers liability, and employment practices liability. In all of these lines, insurers are restricting capacity, raising prices, and tightening relevant policy language, terms and conditions, thus making it more difficult for policyholders to secure adequate coverage. Insurers are also scrutinizing risks much more diligently, especially in industries like retail, healthcare, hospitality, habitational real estate and public entity.
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“The complex nature of pandemic risks means that we need strong national pandemic management. This requires insurers working with and backed by the federal government being able to write pandemic insurance policies,” Nageer told Rep. Maloney. “Widespread take up - the purchasing of pandemic insurance coverage - would make the insurance sector the first line of economic response for future outbreaks.
“One of the keys to building a more proactive and agile response to the next pandemic is an insurance market and risk management partnership that helps facilitate coverage and aligns the needs of insurance buyers and insurers to avoid losses, while incentivizing pandemic preparedness and mitigation.”
He concluded his initial argument by saying: “We simply cannot wait until COVID-19 is controlled. The stakes for our policyholders regarding this risk are too high to defer action.”