NAMIC Testifies at House Hearing, Offers Solution for Future Pandemic Economic Response

INDIANAPOLIS, Indiana, Nov. 20 -- The National Association of Mutual Insurance Companies issued the following news release on Nov. 18:

The National Association of Mutual Insurance Companies today laid out a path for Congress to use the lessons of the economic devastation COVID-19 has inflicted on businesses and their employees to prepare for the next pandemic.

Testifying at a virtual hearing of the House Financial Services Subcommittee on Housing, Community Development and Insurance, Brian Kuhlmann, senior corporate counsel for NAMIC board member, Shelter Insurance Companies, explained how pandemics run counter to the fundamental principles of risk spreading, making them inherently uninsurable.

"It is impossible to diversify pandemic risk and spread losses across different groups, which is a fundamental tenet of insurance," he said. "COVID-19 is affecting tens of millions of businesses simultaneously, and the number of businesses in need of coverage greatly exceeds the capacity of the insurance industry to provide that coverage. Understanding that global pandemics are uninsurable, an alternative mechanism will be necessary to protect businesses from future pandemic-related economic shutdowns."

Speaking on behalf of NAMIC and the American Property Casualty Insurance Association, Kuhlmann noted that the government response to COVID-19 has rightly been focused on providing aid and liquidity directly to businesses and Americans in need. However, he added that Congress could create a solution in advance that would be more efficient and effective.

"Whatever that mechanism looks like, it should be focused on providing real, efficient, and effective financial assistance to all American businesses and non-profits," he said. "Our industry believes that our risk expertise and infrastructure can help with pandemic solutions even if we cannot shoulder the direct financial burden of pandemic losses. To that end, we have studied relevant catastrophic protection models, met with many stakeholders and businesses, and put together a proposal called the Business Continuity Protection Program."

If enacted, the BCPP would establish a federal program through which businesses and non-profits could purchase revenue protection from the government at subsidized rates, providing up to 80 percent of three months of expenses, including payroll, rent, and other operating costs, through licensed insurance professionals. The program would operate using a parametric trigger mechanism, meaning that payment would be made immediately if the trigger conditions - a public health viral emergency declaration - were met.

"This process would put cash in the hands of businesses immediately, avoiding a long, detailed coverage analysis or a drawn-out claims adjustment process," Kuhlmann said, adding that additional program or specialty coverages could also be made available through the program if needed.

Importantly, Kuhlmann said, the BCPP proposal would ensure that companies could afford to protect themselves from future pandemics. "Because pricing for the BCPP product would be federally subsidized, the cost could be made more affordable than other proposed programs," he explained, "thus encouraging a high take-up rate, which is essential for preserving the broader economy during a crisis."