Most insurance experts believe legislative proposals that would require insurers to cover business-interruption (BI) claims stemming from COVID-19 related shutdowns, even if the insurance policies exclude pandemic-related losses, threaten the solvency of the insurance industry. This is the finding of a survey conducted by the National Association of Insurance Commissioners (NAIC) and the Wisconsin School of Business Center for Insurance Policy and Research.
The survey also found most experts believe the private
market will have a difficult time efficiently supplying BI coverage for
pandemics, given the systemic, correlated, and non-diversifiable nature of the
Many survey respondents felt only the federal government can
provide coverage for correlated risks because it can spread the cost through
taxation, long-run borrowing, and deficit financing. But whether provided by
only the federal government or the private market, the pricing and
affordability of coverage were indicated to be issues for both.
Most said they believe the private market can supply BI
coverage for pandemics with an effective federal partnership. Some questioned
whether the Terrorism Risk Insurance Program (TRIP) is a good model for
pandemic insurance, given the similarities between the pandemic and terrorism
The complete survey can be found here.