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Small businesses — including those in the hard-hit travel industry — may soon be able to purchase insurance policies that would cover future pandemic-related losses.
Introduced by U.S. representative Carolyn B. Maloney yesterday, the Pandemic Risk Insurance Act of 2020 (PRIA) offers small businesses a way to financially protect themselves from future global health crises through a set of widely available, affordable, government-backed small business interruption insurance policies that include coverage for pandemics.
During a May 26 press conference about the bill, Maloney explained that current small business interruption policies may apply to circumstances outside the business owner’s control, such as natural disasters, but that they specifically exclude pandemics.
However, with the introduction of the Pandemic Risk Reinsurance Program within the Department of the Treasury (a key component of PRIA), policyholders, insurers and the federal government would “share the risks” of such a crisis.
Under the program, policy holders will still pay premiums and have deductibles. But when a pandemic hits, the burden of the losses will be shared between the insurance company and the federal government in a 5/95 split (with the government capping its reinsurance at $750 billion per year). Participation will be voluntary for insurance providers and optional for small businesses to purchase.
“This is a true public/private partnership,” Maloney said. “We all recognize that pandemics are unique, and the economic effects of pandemics can be devastating. Without a government backstop for insurance, it’s not clear that insurers would — or could — cover pandemics. There is an immediate need to create a mechanism to provide relief for millions of struggling business owners."
This country needs PRIA. This legislation is the cornerstone of a proactive approach in managing the risks and impacts of pandemics and epidemics in the future.
The legislation closely mirrors the Terrorism Risk Insurance Act (TRIA), which was introduced in 2002 following 9/11 and applies to terrorism insurance coverage. Like PRIA, TRIA also allowed the U.S. government to provide reinsurance coverage in a “system of shared public and private compensation.”
“TRIA successfully unlocked the terrorism insurance market, got the economy moving again and put people back to work,” Maloney said. “And that’s what we are trying to do with the Pandemic Risk Insurance Act, too.”
If passed, the bill’s Pandemic Risk Reinsurance Program would go into effect for health emergencies declared on or after Jan. 1, 2021.
The U.S. Travel Association — representing an industry that is suffering a devastation that is nine times worse than 9/11 — is one of more than 20 stakeholders who are championing PRIA in its initial form.
“We have to look forward and prepare for the next crisis, including if this virus flares up again next year, and PRIA is a part of that effort,” said Tori Emerson Barnes, executive vice president of public affairs and policy for U.S. Travel. “We are really happy to work with Congresswoman Maloney and her staff to make sure this bill works for the entirety of the industry, including the meetings and events sector.”
Among the most beneficial provisions of the bill is the mandatory inclusion of event cancellation in all policies, along with the assurance that small businesses won’t see a huge spike in premiums, Emerson Barnes said.
Leon Buck, the vice president of government relations, banking and financial services for the National Retail Federation, is also an early supporter of the bill, and also emphasizes the importance of its inclusion of event cancellation coverage.
“This is absolutely vital not just for the retail industry, but for hotels and lodging, the travel industry and for convention bureaus in cities,” he said. “These business sectors hold large conventions and generate billions of dollars annually — not just for their organizations — but for the cities and locales that host them.”
“When businesses could not obtain coverage for acts of terrorism after 9/11, Congress stepped in,” he added. “It’s time for Washington to do the same for pandemics. This country needs PRIA. This legislation is the cornerstone of a proactive approach in managing the risks and impacts of pandemics and epidemics in the future.”
The DetailsRep. Carolyn Maloneymaloney.house.govU.S. Travel Associationwww.ustravel.org