Navigating the Insurance Landscape Amidst the COVID-19 Pandemic: A Comprehensive Analysis

The Battle Over Business Interruption Insurance

The Financial Times reports that U.S. lawmakers and lawyers are considering efforts to force insurance companies to pay claims related to the coronavirus pandemic. Congress is also debating the need for legislation to require insurers to cover costs from business interruption caused by the pandemic. U.S. insurers contend that their business interruption policies exclude coverage for pandemics, arguing that making such coverage retroactive would cause the industry to collapse. Joseph Wayland, general counsel for the U.S. insurer Chubb, said the losses would overwhelm insurers' ability to pay, and that forcing these companies to take responsibility for risks they never underwrote nor charged for represented an existential threat.

The Economic Impact of Forcing Insurers to Cover Pandemic Losses

A Wall Street Journal editorial argues that forcing the costs of the economic disruption caused by the coronavirus pandemic upon insurers would cause long-term economic damage unless a federal backstop is put in place. The editorial says if business interruption insurance 'can be stretched and exclusions nullified during a crisis,' insurers will conclude that such coverage is not worth the risk and will drop the product. This could lead to a significant reduction in available insurance products, further exacerbating economic instability.

Insurers' Response and the Potential for a Federal Backstop

Despite the challenges, insurers are not standing idly by. The Triple-I Fact Sheet, 'Insurers Are Engaged In the COVID-19 Crisis,' outlines how the industry's financial stability allows insurers to keep the promises made to policyholders in the event of tornadoes, hurricanes, or wildfires. It also notes how insurers are contributing to COVID-19 related charities, such as food banks and medical supplies. Additionally, there is momentum for a federal backstop, with progress being made on legislation that would provide a federal backstop for pandemic risk insurance, similar to the federal terrorism insurance program.

For readers, it's crucial to understand the limitations and exclusions in your insurance policies, especially during times of crisis. Stay informed about legislative developments that could impact your coverage and consider consulting with insurance professionals to ensure you have the appropriate coverage for your business or personal needs.