In this report, the Committee on Capital Markets Regulation (the “Committee”) assesses the role of business interruption insurance (“BII”) during the COVID-19 pandemic and evaluates proposals to reform BII so that U.S. businesses can insure against losses from future pandemics.
In Part I of this report, we review the experience of BII during the COVID-19 pandemic. In Part II, we evaluate the three main proposals for the federal government to ensure that businesses have access to pandemic BII: the Pandemic Risk Insurance Act (“PRIA”), the Business Continuity Protection Program (“BCPP”), and the Pandemic Business Interruption Program (“PBIP”).
We compare the terms of each proposal, measure the government and insurers’ maximum possible exposure under each proposal and assess concerns regarding each program’s design. We then compare these proposals with the government support programs that addressed the economic impact of COVID-19 on small businesses, including the Small Business Administration’s Paycheck Protection Program (the “PPP”) and the Federal Reserve’s Main Street Lending Program (the “MSLP”).
In the conclusion, we consider the key difficulties in designing a pandemic BII program. We conclude that the best course for policymakers may be to: (i) establish a modest BCPP program to be quickly triggered at the onset of a pandemic; and (ii) supply any further government support as necessary through enhanced versions of the PPP and MSLP.
The report can be accessed here.