Federal lawmakers have introduced a bill to create a government-backstopped pandemic insurance program similar to the Terrorism Risk Insurance Act, but insurance representatives have questioned whether such an approach will prove adequate to respond to a future pandemic, Best’s Insurance News & Analysis reported.

U.S. Rep. Carolyn Maloney, D-N.Y., introduced the Pandemic Risk Insurance Act of 2020, which would create the Pandemic Risk Reinsurance Program. The bill, H.R. 7011, has 20 co-sponsors.

“We want to solve a market failure by allowing companies to purchase business interruption insurance that covers pandemics so they can stay in business and keep their workers employed,” Maloney said Tuesday. “The pandemic has caused unprecedented damage to our economy. We need to create a federal backstop like we did with TRIA,” she said. 

Under the bill, membership would be voluntary, but participating carriers would be required to offer pandemic coverage in all their business interruption policies. The federal backstop would not be triggered until a future public health emergency accounts for aggregate business interruption losses of $250 million. Once triggered, the PRRP would cover 95% of additional losses up to $500 billion in a single year, with the remaining 5% spread among the insurers. 

The National Retail Federation provided input in developing the legislation, which is modeled Terrorism Risk Insurance Act enacted after the Sept. 11, 2001, attacks that made it difficult for businesses to obtain insurance coverage against acts of terrorism.

“Congress must take swift action on a solution to provide all businesses protection against future pandemic risks,” Leon Buck, NRF vice president for government relations, said in a press release. “The development of a public-private partnership to address this risk will provide certainty for businesses and organizations of all sizes and will ensure that we can meet future pandemic events with greater resilience.”

The American Property Casualty Insurance Association, along with the National Association of Mutual Insurance Companies and the Independent Insurance Agents & Brokers of America Inc., has proposed an alternative strategy, called the Business Continuity Protection Program. It would be managed by the Federal Emergency Management Agency and provide financial assistance, not insurance, for businesses in the event of a future pandemic.

Des Moines attorney Jim Carney, whose firm represents several Central Iowa restaurant owners that earlier this month filed lawsuits against their insurance companies after having claims denied, said recently that he is working with additional clients and expects more business interruption cases to be filed, including non-restaurant retailers. To read a related Business Record article, click here.