Home / International / Chubb wants government-backed BI 'before the next pandemic'
13 July 2020
Global insurer Chubb wants a business interruption (PI) facility backed by US Government reinsurance that would be similar to terrorism measures introduced after the 9/11 attacks.
It says some risks can create losses so great that they are “not insurable” in the private insurance market without substantial government support. These include catastrophic terrorism, nuclear accidents and pandemics.
“Chubb believes that a public-private partnership program can be implemented before the next pandemic that recognises the differing needs of small and large businesses [in the US],” Chubb says.
“This reflects the reality that only the Federal Government has sufficient resources to meet the full extent of pandemic loss, which is not insurable in the private sector.”
The proposal suggests a program for small businesses that provides an immediate cash infusion when a pandemic is declared. This “simple parametric structure provides for an accelerated claims payment process,” giving three months’ payroll plus operating costs for certain classes.
It also proposes a separate voluntary program for businesses of more than 500 employees, with losses paid through the existing industry claims adjudication process.
Both depend on the Government “assuming a substantial percentage of the risk”, it says, through direct US Treasury funding to insurers for the small business program, and through a government-run reinsurance entity for medium and large business losses.
The proposal would provide affordability and certainty for small businesses if a pandemic shuts down the economy, quick and efficient payment of a pre-determined sum without the need to adjudicate individual claims, and an incentive to keep people employed.
“The program will be affordable for small businesses because the premium is only for the risk assumed by the insurer and will represent a small percentage of their typical annual insurance expense,” it says.
Chubb is proposing the program begin on January 1 and run until the end of 2040, with policies renewed annually. It would exclude COVID-19.
“There is a better way,” Chubb says, describing the COVID-19 response in the US as “ad hoc”.