COVID-19 Business Interruption Relief Legislation Drafted by Butler University Risk Manager

By: | March 26, 2020

Zachary S. Finn, AINS, ARM, is the Clinical Professor & Director of the Davey Risk Management & Insurance Program, Lacy School of Business, at Butler University. He can be reached at [email protected]

This draft of pandemic risk and insurance legislation is currently in the hands of members of Congress. It was written by Butler University risk management professor Zach Finn after he recently called for action in an open letter.

Outline of Amended Terrorism, Pandemic Risk Insurance Act of 2020 (TP-RIA)

Coverage under the Terrorism Risk Insurance Act (TRIA) shall be immediately liberalized, midterm, to include Pandemics, and the associated perils of virus, communicable diseases, quarantines, Government ordered repatriation and border closings.

  • Coverage shall be backdated to include current Business Interruption losses for the Corona Virus, COVID-19 Pandemic of 2020
  • Insureds who previously declined TRIA coverage will be given a one-time opportunity to retroactively purchase coverage at three times (3x) the original TRIA premium quoted
  • The amended Terrorism, Pandemic Risk Insurance Act (TP-RIA) shall serve as an organized backstop and risk pool for future losses for Pandemics and the aforementioned associated perils.
    • *Combining of two uncorrelated perils in a risk pool should reduce the standard deviation around future projected losses, ultimately providing a more efficient risk relief valve for the economy.
  • TP-RIA is critical to stabilizing the market for business interruption and event cancellation insurance.
    • Insurance for Pandemics is critical in these coverage forms in order to ensure the financial stability of a number of U.S. industries including events, leisure, travel, higher education, etc.
    • Business Interruption losses are rippling through the economy like a contagion in the form of contingent business interruption losses. This must be prevented at all costs. 

A Certified Act of Pandemic shall be immediately declared by The Secretary of the Treasury triggering payment under TP-RIA

  • Losses will be adjusted and paid exactly as if a Terrorism Event were the Certified Act causing Business Interruption.
  • This action will immediately restore the market for business interruption and event cancellation insurance.
  • The action will immediately put capital in the economy, in the right place, in the form of business interruption claim payments (for which blanket loss advances can be issued) and insurance agent commissions.
    • Business Interruption insurance includes coverage for payroll
  • The action will immediately put an end to the prospect of years of insurance litigation regarding the application of coverage terms and conditions, definitions, exclusions, etc.
  • This action will immediately restore certainty to American Businesses, the American People and the stock market. &

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The R&I Editorial Team can be reached at [email protected]