May 26 (Reuters) – U.S. legislation introduced on Tuesday would create a taxpayer-backed insurance program to protect businesses from revenue losses during future pandemics and require insurers to pay a slice of the claims.
The legislation, introduced by Rep. Carolyn Maloney, a Democrat from New York, would provide up to $750 billion in taxpayer funds to pay insurance claims for business loss revenue during future pandemics. Insurers would first have to pay out a total in $250 million in losses, according to the bill.
Insurers are turning their focus to future pandemics after facing lawsuits, political pressure and criticism from customers who say insurers’ business interruption policies denied their claims for losses resulting from the coronavirus pandemic.
While these policies may cover revenue losses from lightning strikes or cars crashing into buildings, they either exclude or do not specifically cover a pandemic, despite the business interruption it causes.
Maloney’s bill proposes a model that is similar to government-supported commercial terrorism products that followed the attacks of Sept. 11, 2001, requiring insurers to pay part of the claims, before U.S. taxpayers take over.
Major insurance industry groups oppose having to share in losses with the government, saying that pandemics are “inherently uninsurable.”
Instead, they proposed putting the Federal Emergency Management Agency (FEMA) in charge of a fully taxpayer-backed program to protect businesses from future pandemic revenue losses.
Insurers would voluntarily participate in the Maloney plan. Their annual deductibles would be equivalent to 5% of their premiums earned during the preceding calendar year.
The government would pay 95% of the insured loss portion that exceeds the deductible, according to the bill.
The bill, drafts of which have been circulating for weeks, would also require several studies, including one to determine whether some U.S. markets have “unique capacity constraints” making it difficult for insurers to provide coverage.
(Reporting by Suzanne Barlyn in Washington Crossing, Pennsylvania; Editing by Aurora Ellis)