After weeks of deliberation, the Pandemic Risk Insurance Act, or “PRIA” has been introduced into the U.S. Congress. On May 26th, Rep. Carolyn Maloney, a member of the House Financial Services Committee, introduced H.R. 7011, the “Pandemic Risk Insurance Act of 2020” (the “Current PRIA Bill”).
We have previously discussed a draft version of PRIA here. Like the draft version, the Current PRIA Bill mirrors many of the fundamental mechanics of the Terrorism Risk Insurance Act, or “TRIA”, which was established in the wake of September 11, 2001 to help provide adequate terrorism coverage in the United States. Unlike TRIA, the Current PRIA Bill is voluntary in nature and allows for participating insurers (including U.S. and alien surplus lines insurers on the Quarterly Listing of Alien Insurers of the NAIC) to essentially receive reinsurance coverage from the U.S. Secretary of the Treasury (the “Treasury”), subject to various retentions, deductibles and limits thereon, only if they so choose to participate.
Some differences between the Current PRIA Bill and previous draft versions include, but are not limited to the following:
- The Current PRIA Bill would now apply to all public health emergencies declared after January 1, 2021;
- The Current PRIA Bill now includes within the definition of “Insurer” captive insurance companies and self-insurance arrangement by municipalities;
- The Current PRIA Bill, unlike previous draft versions of PRIA, does not contemplate the charging by the Secretary of reinsurance premiums payable by participating insurers to establish a Pandemic Risk Insurance Fund;
- An enhanced definition of “business interruption insurance” is now set forth in the Current PRIA Bill that includes event cancellation insurance and other non-property contingent business interruption insurance, including losses from suspended business operations due to a civil order related to a public health emergency;
- A cap on the Treasury’s participation under the Current PRIA Bill of $750 billion of aggregate insured losses (rather than the previous draft’s cap of $500 billion); and
- Under the Current PRIA Bill, an insurer may reinstate a pandemic-related exclusion on an in-force business interruption insurance policy for failure of an insured to pay the increased premium only if such policy has been in effect for less than 5 months and, in such case, only if the increase in premium for covered public emergencies is 15% or less of the original premium under such insurance policy.
Rep. Maloney has indicated that over two dozen national business and trade associations support the Current PRIA Bill; however, not everyone is on board. In a joint press release, the National Association of Mutual Insurance Companies (“NAMIC”), the American Property Casualty Insurance Association (“APCIA”) and the Independent Insurance Agents & Brokers of America (“IIA”) stated that “a TRIA-like program, with an industry financial role, does not square with the fundamental notion that pandemics are not insurable risks.”
Instead, NAMIC, APCIA and IIA have unveiled the “Business Continuity Protection Program” or “BCPP” that would be designed to provide payroll assistance (up to 80% of payroll), employee benefits and operating expenses triggered by a presidential viral emergency declaration. Like PRIA, the BCPP would be voluntary in nature and assistance would be provided through state-regulated insurance entities. There is not currently significant optimism regarding the BCPP’s future, with Rep. Maloney remarking that it is “not going to pass [through Congress].”
We will continue to monitor both the Current PRIA Bill and the BCPP and we will report on any newsworthy developments.
Visit our COVID-19 Resource Center often for up-to-date information to help you stay informed of the legal issues related to COVID-19.