Key segments of the property/casualty insurance industry, which is facing mounting claims for business interruption losses from the pandemic, have thrown their lobbying weight behind a proposed federal program to replace revenues lost by businesses shut down during pandemics like COVID-19.
The federal program, called the Business Continuity Protection Program, or BCPP, would allow businesses to purchase revenue replacement coverage for up to 80 percent of payroll and other expenses. Businesses would purchase the federal revenue replacement assistance through state-regulated insurance entities that participate with BCPP on a voluntary basis, but the aid would come from the Federal Emergency Management Agency (FEMA), which would run the program.
The program is another entry in the growing number of proposals targeted at bringing relief to businesses suffering losses that insurers say are in most cases not covered by business interruption policies.
Two insurance carrier groups — the National Association of Mutual Insurance Companies and the American Property Casualty Insurance Association— along with the largest agents group, the Independent Insurance Agents & Brokers of America, announced their outline of the BCPP on Thursday.
“Pandemics simply are not insurable risks; they are too widespread, too severe and too unpredictable for the insurance industry to underwrite,” said Charles Chamness, NAMIC’s president and CEO, in a joint media statement. “As we’ve seen in the past few months, pandemics are a national problem, and we need a national solution.”
“We need a sustainable solution that provides simplicity, certainty and immediate relief to impacted businesses,” said David Sampson, APCIA’s president and CEO.
Rates charged by the program would be calculated as a percentage of the payroll and applicable expenses each participating organization seeks to replace. “That percentage will be uniform for all participants and will not vary based on geography, industry or risk,” NAMIC said.
Business could purchase the federal coverage through an insurance agent or a carrier.
“The small business community is looking to our industry to provide leadership to ensure there is immediate assistance available during future pandemics,” said Bob Rusbuldt, Big “I” president and CEO. “The BCPP is a simple, efficient and effective plan to provide the needed financial security for American businesses. This program gets immediate funding to businesses when they need it most.”
Other features of the proposed program include:
- To get the assistance, businesses would have to certify that they will use any funds received for retaining employees and paying necessary operating expenses—and also that they will follow applicable federal pandemic guidance.
- Relief payments would be automatically triggered and paid immediately once there is a presidential viral emergency declaration. No advance documentation or claims adjustment would be needed.
- Protection would have to be purchased at least 90 days before the presidential declaration of a public health emergency. The release of funds is automatically triggered following such a declaration.
- Businesses would be allowed to choose a desired level of protection for three months’ relief for up to 80 percent of payroll (excluding highly compensated employees), employee benefits and operating expenses.
- BCPP would be able to purchase private reinsurance to protect federal taxpayers.
While the proposed BCPP, like the National Flood Insurance Program, is run by FEMA, in other respects it’s very different from the NFIP. Jimi Grande, senior vice president of government relations for NAMIC, noted that it would be unlike the NFIP in that it would feature a parametric trigger —a presidential declaration of a viral emergency — and a formulaic payout.
As part of the application process, eligible businesses—which would include any firm incorporated in the U.S. or its territories, including nonprofits—would be required to attest both to compliance with federal pandemic guidelines and to “certify that any relief assistance would be used to retain employees and keep the business viable.”
In administering funds, however, there would be some post-relief audits performed ensuring value use of funds. Invalid uses would result in fines, required repayment and criminal penalties.
According to the trade groups, the BCPP would work with risk mitigation experts to develop pandemic risk mitigation guidelines and safety standards for businesses. These would be provided to the businesses applying for federal relief at the time of application and payment.
Source: Wells Media
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