Insurance companies are being pressured by the federal government to pay for the massive influx of business interruption insurance claims filed in the wake of the COVID-19 pandemic – something the industry is worried could lead to not just insolvencies, but the destabilization of the entire economic landscape.
Last week, 18 legislators of the House told insurance trade groups that their members should recognize financial losses triggered by the outbreak as part of their policyholders’ business interruption coverage. The bipartisan letter was signed by 12 Democrats and six Republicans.
In response, state insurance regulators this week issued a warning that forcing insurers to pay for the numerous business interruption claims could bankrupt the sector, Politico reported.
Even the insurers themselves are concerned about how paying for all business interruption claims could impact the industry.
“If policymakers force insurers to pay for losses that are not covered under existing insurance policies, the stability of the sector could be impacted,” said American Property Casualty Insurance Association (APCIA) president and CEO David Sampson in a recent statement.
To help find an alternative solution, insurance trade associations such as the APCIA and the Reinsurance Association of America have initiated discussions with other business trade groups about the creation of a federal program that could direct money to affected businesses.
One of the proposals being discussed among the trade groups is a “Federal Business Interruption and Workers’ Protection Recovery Fund” that is modeled after the September 11 Victim Compensation Fund, which would make assistance available to all businesses.
Sampson confirmed with Politico that APCIA is “discussing public policy options with many industry and stakeholder groups.” The president also recognized the need for “liquidity solutions” for the business community amid the pandemic, and said that the association has yet to settle on a specific proposal.
“Ideally, if they want to deliver the money quickly, they won’t put insurers in the middle,” National Association of Mutual Insurance Companies senior vice-president of government affairs Jimi Grande told Politico. “But we want to be available to help if that’s ultimately the way they go.”