With testimony from a variety of stakeholders from insurance, to retail, to think tanks, the hearing reinforced the need for a federal-level discussion on insuring against pandemic losses, as well as introducing viable solutions to protect both policyholders and insurers. As witnesses pointed out, insurers are unable to plan for and cover massive losses associated with global pandemics, and only the federal government has the financial capacity to support struggling businesses during a crisis of this magnitude.
Below are some key highlights from today’s hearing:
Representative Trey Hollingsworth (R-IN-9) highlighted the importance of upholding American economic principles and basic contract law, saying that “forcing insurers to pay out claims for which they did not collect premiums retroactively” is not a solution, but instead, the “rewriting of tens of thousands of contracts across this country, ripping apart the very basis of contract law which has underpinned our free market economy for 240 years.”
In his opening statement, Senior Corporate Counsel for Shelter Insurance, Brian Kuhlmann emphasized that pandemics are uninsurable. He explained that insurance works best when the accidental losses of a few can be broadly spread. Yet, “where losses are catastrophic, unconstrained by geography, across the entire economy, insurance is not always an option to be the means of the relief many need. Global pandemics fall into this category of uninsurable risks.” He added that it is clear that global pandemics do not meet the requirements for insurability, therefore, an alternative mechanism is necessary to protect businesses from future pandemics.
Michelle McLaughlin, chief underwriting officer of Chubb’s small business and commercial middle market divisions, reinforced that the private insurance market cannot underwrite the massive losses associated with global pandemics. She suggested that any pandemic insurance solution will require substantial involvement of the federal government and that insurers “can and should play a meaningful role in providing future pandemic risk coverage that would protect local and national economies and businesses small to large.”
John Doyle, President and CEO of Marsh, pointed toward the necessity of a strong and resilient U.S. economy in his testimony, and made clear that without a pandemic risk solution, the economy will not have the capacity to bounce back from COVID-19 or a future pandemic event: “[C]reating a public-private pandemic risk solution can instill confidence in businesses, accelerate our economic recovery, and provide needed protection against future pandemics. A pandemic risk insurance program is essential for all of our policyholders, no matter their size.”