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Insurance & the Coronavirus — Lots to Cover

Posted By Administration, Tuesday, March 24, 2020

This — of course — is an evolving story. Property and casualty insurance is being asked to play a greater part in what will likely be the economic recovery of the country. Health insurers will see demands as well.

How all this shakes out is a huge unknown.

Business interruption coverage is going to see the biggest impact. Just how much impact starts with a lawsuit filed last week by a New Orleans, Louisiana restaurant. It wants a judge to make a declaration saying its business interruption policy will cover damages if its ordered to close.

The restaurant’s attorney is John Houghtaling. It is his contention that insurance agents — prompted by insurers — are telling their clients that their business interruption policies will not cover the shutdowns ordered because of the Coronavirus.

“I can’t imagine how defense counsel are going to walk into court and say that coronavirus does not cause damage to property, or contaminate property,” he said. “I’ve talked to restaurant owners from here to New York City and they all being told the exact same thing by their agents.”

Congress is also getting into the act as 18 members of the U.S. House asked insurers to pay the business interruption claims even if the policies exclude that coverage. The request went to the American Property Casualty Insurance Association (APCIA), the National Association of Mutual Insurance Companies (NAMIC), the Council of Insurance Agents and Brokers (CIAB) and an insurance agent association.

The group zipped a letter back and said no and that business interruption policies “do not, and were not designed to, provide coverage against communicable diseases such as COVID-19.”

At the same time, the letter says insurers will be open to helping in other ways.

“The U.S. is in the midst of a national crisis that will require federal assistance that provides funding directly to those American individuals and businesses most in need. Our organizations stand ready to work with Congress on solutions that provide the necessary relief as soon as possible,” the letter said.

Here’s what the industry is saying and how it is responding.

Jon Bergner of the National Association of Mutual Insurance Companies (NAMIC) said, “Yes, there are a lot of nascent ideas being floated as we all try to get a handle on responding to COVID-19. NAMIC members are facing many of the same challenges as the entire business community, who are also NAMIC members’ policyholders.”

And he — and others in the industry — want Congress to provide direct assistance to businesses to keep them from failing. Just as importantly, Bergner wants this assistance to be simple and easy to access.

“Speed and efficiency are top priorities when it comes to providing emergency aid, and all the more so given the unprecedented scale of this crisis. Involving the insurance industry as an added layer of administration would only serve to make the system slower, even under the best of circumstances, and should be avoided at this point,” he said.

The Insurance Information Institute’s CEO Sean Kevelighan spoke to government officials on a web address hosted by the National Association of Insurance Commissioners (NAIC). He said the reason there is little coverage for something like a pandemic is because there is no way to write such a risk in a way a business could afford to buy.

“It is important to appreciate that as much as this is a catastrophe of historic magnitude, there are more on the horizon — hurricanes, wildfires, floods — and we must remain prepared in the way that we have long-planned, so again, we can continue act as the financial first responder that we have been for several centuries,” Kevelighan said.

David Sampson heads the American Property Casualty Insurers Association (APCIA) and he agrees with Kevelighan. Insurance — Sampson notes — is to respond to insured risks that have been underwritten and not to pay claims that haven’t been anticipated.

He does agree that perhaps a federal solution such as TRIA is in order.

House Financial Services Committee Chair Rep. Maxine Waters of California wants to introduce a bill called the Pandemic Risk Insurance Act. It would be very similar to TRIA.

In the meantime, AM Best has developed a stress test to assess the impact of COVID-19 on insurers. It will look at risk-adjusted capital levels, investment portfolios, reserve adequacy and other risk factors.

Source links: Insurance Journal — link 1, link 2, Carrier Management, Insurance Business America

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