Triple-I CEO Tells U.S. House—Global Pandemics Are Uninsurable

On May 21, Triple-I
CEO Sean Kevelighan testified before the U.S. House of Representatives’ Small Business Committee on the subject of business interruption
coverage.

Since the
outbreak of COVID-19, some legislators and advocates have pushed for policies
that would retroactively force insurers to pay for claims their insurance
policies were not priced to cover. The U.S. House session, “Business Interruption Coverage: Are
Policyholders Being Left Behind?
,”
gave members of the committee the opportunity to hear from policyholders and
other interested stakeholders.

“An event like a global pandemic is uninsurable,” said Kevelighan in his statement. “Unlike a typical covered catastrophe, which is limited in terms of geography and time, pandemics have the potential to impact everywhere, all at once…. As such, this type of magnitude requires government resources to step in and provide support.”

Property
business insurance, in general, is meant to cover physical damage from perils
like fire, tornado, or hurricane,” he said. Forcing insurers to cover losses
related to the pandemic – which don’t involve physical damage to property – would
cost the industry between $150 billion to $400 billion per month.

“Make no
mistake; retroactive business interruption payouts would bankrupt insurers,”
said Kevelighan.  “A recent Triple-I
economic analysis determined this type of approach would decimate the
industry’s financial resources in a matter of months, and at a time it needs
those monies for major natural disasters that insurance policies cover, such as
tornadoes, hurricanes, and wildfires.”

 “Any efforts to retroactively rewrite business
interruption policies are not only unconstitutional (Article I) but would
imperil the insurance industry’s ability to pay covered insurance claims filed
by American homeowners, drivers, and injured workers,” Kevelighan said.

“The current
government shut-down orders do not trigger the vast majority of standard
business interruption policies because those orders do not qualify as direct
physical loss to property—a requirement under the policies,” he said.

“The insurance
industry is stepping up for Americans, with the likes of $10.5 billion in
personal auto insurance premium relief, $220 million in charitable donations,
and even more by keeping nearly two million Americans employed so insurance
customers will be covered, and have their claims handled, when other disasters
strike,” Kevelighan concluded.

View the full testimony and a recording of the webcast here.

The insurance industry is united in its position that pandemics are uninsurable, and the industry has some formidable support in that view. In a letter to the committee, the National Association of Insurance Commissioners (NAIC) said: “The current COVID-19 crisis has highlighted that many existing business interruption (BI) policies have specific exclusions for viruses or other diseases, and coverage is generally only triggered by actual physical damage. Therefore, these policies were generally not designed or priced to provide coverage for claims arising from COVID-19.”

The NAIC letter
said that the group opposes efforts to legislatively apply business
interruption coverage retroactively to claims based on COVID-19 and “has
serious concerns that requiring retroactive coverage of BI claims based on
COVID-19 would pose significant risks to the solvency of insurance companies
and could have systemic impacts on the industry as a whole and potentially the
financial system.”

And in a letter
to President Trump on May 18, six Republican Senators warned that altering
insurance law to cover all pandemic claims under business interruption policies
would devastate the capital reserved for paying other insurance claims.