Heat around solving the thorny issue of pandemic insurance for a struggling nation — and the crucial businesses that entertain it — is rising heading into the long holiday weekend. Rep. Carolyn Maloney (D-N.Y) has set a Tuesday press conference to introduce a bill that proposes a government backstop for 95% of claims. It’s legislation that has evolved over the past few weeks and now specifically includes film and TV production under event cancellation, a form of business interruption.
Meanwhile, the insurance industry has planted a flag with its own solution, one that calls for the federal government, through the Federal Emergency Management Agency, to set up a kind of risk-transfer mechanism that is not traditional insurance because, it insists, pandemics are uninsurable.
“Pandemics simply are not insurable risks; they are too widespread, too severe, and too unpredictable for the insurance industry to underwrite,” said Charles Chamness, CEO of the National Association of Mutual Insurance Companies, in a proposal by trade groups representing 90% of the industry.
This is the insurers’ first attempt to tackle the issue of spiraling claims, widespread losses and overall business carnage across sectors that all need pandemic insurance to resume operations and, since March, have not been able to get it. They have called their plan the Business Continuity Protection Program, or BCPP. Under it, businesses could purchase “revenue replacement assistance” to cover up to 80% of payroll and other expenses for three months.
Jean Prewitt, president and CEO of the Independent Film & Television Alliance, said the insurance industry proposal, which was posted on NAMIC’s website Thursday and just started circulating, “has nothing to do with film and would not solve the gap in production going forward.” The group is backing Maloney’s PRIA — the Pandemic Risk Insurance Act of 2020. Maloney will be joined by representatives of the U.S. Travel Association, the National Retail Federation and Nonprofit New York in a press conference Tuesday afternoon.
Film and television has been fairly well covered until now by civil authority, imminent peril and cast insurance. As Deadline reported, film and TV productions that had been shut down will be covered under existing policies if and when they resume. But financing for new productions can be at risk if they can’t get proper insurance — a requirement for completion bonds.
Insurers would have zero liability under thee NAMIC plan, which would create a new federal program for pandemic relief administered by FEMA. It would provide assistance for payroll, employee benefits and operating expenses following a presidential “viral emergency declaration.”
Jonathan Bergner, VP Public Policy and Federal Affairs at NAMIC, the industry’s largest trade group, said the uniquely catastrophic nature of a pandemic that “hits everywhere all at the same time” is impossible for insurance companies to handle not just financially but in terms of infrastructure needed for claims processing. Hurricane Katrina in 2005 generated 3 million claims – the most of any disaster, he said — while it’s estimated that COVID-19 has generated more than 30 million.
Maloney, the New York Democrat, chairs the House Oversight Committee and is a senior member of the House Financial Services Committee. Her proposal, which is the farthest along of several being worked on in Congress and the one most appealing to TV and film production, would have insurers continue to offer similar policies to those from the pre-COVID-19 era – where production was covered. But insurance companies would only be responsible for a portion, 5%, of pandemic-related claims, with the government shouldering the rest. Her bill is modeled on the Terrorism Risk Insurance Program, created after the 9/11 terrorist attacks under the Terrorism Risk Insurance Act, or TIRA.
Insurers argue that COVID-19 is nothing like terrorism, which is local and limited by geography and time. “A TRIA-like program, with an industry financial role, does not square with the fundamental notion that pandemics are not insurable risks. The risks are too fundamentally different in nature and scope,” Chamness said.
A few of the BCPP’s main points: applications are based on past years’ tax return data; businesses certify that they will use any funds received for retaining employees and paying necessary operating expenses and that they will follow applicable federal pandemic guidance; and the plan excludes highly compensated employees, employee benefits and operating expenses.
Businesses would need to have purchased a plan three months before an emergency declaration.
Bergner stressed simplicity – as in a one-page electronic application that includes information directly from the business’ previous annual tax return – and no need to file claims. The emergency declaration would automatically trigger payments. The kind of federal “viral” emergency declaration specified doesn’t exist now, so it would have to be created.
Prewitt said the proposal looks like another kind of PPP (Paycheck Protection Program) — tangential to the financial issues around “having to shut down a multimillion-dollar production.” They can’t be resolved by looking at a prior tax return, she noted. She said the Maloney bill will need a lot of tweaking still, but the insurance industry proposal is basically a non-starter for production.
The plan calls for “post-relief auditing for valid use of funds enforced through fines, required repayment, and criminal penalties.”
The federal government already has its hands full and its coffers running low (it’s basically printing money) to fund programs from the PPP for small businesses, to big industry loans — including special aid to some like airlines, to enhanced unemployment benefits to individuals. There’s already some debate over how smoothly and well some of these programs have been rolled out.
Another issue is timing. A high-level political staffer said the idea is for the Maloney bill, which is seeking Republican support, is to be signed into law by President Donald Trump by year’s end. Bergner indicated that insures are looking at a longer lead time. TRIA took 14 months to set up, he noted.
“What I will say is we need to get this right,” he said. “We think that the process should take as long as it needs to take to get the solution right.”