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Pandemic Business Interruption Program 

Developed by Chubb 

July 8, 2020 
Program Summary 

Some risks can create losses so great that they are not insurable in the private insurance 

market without substantial government support, including catastrophic terrorism, 

nuclear accidents and pandemics. These catastrophic events can cause massive economic 

disruption as governments struggle, as they have in response to COVID–19, to provide 

efective and timely assistance through programs cobbled together after the disaster has 

struck. Not surprisingly, these ad hoc programs can lead to inefciencies, substantial delay 

and uncertainty, as well as real and perceived unfairness in aid distribution. 

There is a better way. Chubb believes that a public–private partnership program can be 

implemented before the next pandemic that recognizes the difering needs of small and 

large businesses and will provide: 

• Afordability and certainty for small businesses about the amount of fnancial support

available if a pandemic shuts down the economy.

• Quick and efcient payment of a pre–determined sum to small businesses without the

need to adjudicate individual claims.

• An incentive to keep people employed, rather than relying on unemployment relief.

• A market–oriented program for larger businesses intended to support and stimulate the

private market for pandemic coverage.

• Insurance industry risk–sharing with the federal government, together with a better

understanding of pandemic risk, risk mitigation and preparedness, increasing over time.

These are key components of Chubb’s Pandemic Business Interruption Program. The 

Program has two elements: a program for small businesses that provides an immediate 

cash infusion when a pandemic is declared and a separate voluntary program for medium 

and large businesses with losses paid through the existing industry claims adjudication 

process. Both depend on the federal government assuming a substantial percentage of 

the risk, through direct U.S. Treasury funding to insurers for the small business program, 

and through a newly created government–run reinsurance entity for medium and large 

business losses. 

“Chubb believes 

that a public– 

private partnership 

program can be 

implemented before 

the next pandemic 

that recognizes 

the difering needs 

of small and large 

businesses.” 

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For Small Businesses — Business Expense Insurance Program (BIP) 

The objective is to provide immediate cash to small businesses so that they can continue to 

pay employees and ongoing business expenses, thereby limiting economic disruption. 

• In the event of a government–declared pandemic and ensuing lockdown, insured

businesses with 500 or fewer employees will receive a pre–determined payment based on 

a multiple of monthly payroll expenses. This simple (parametric) structure provides for 

an accelerated claims payment process.

• Following the declaration, payments will be made promptly and efciently leveraging the

industry’s existing claims expertise and infrastructure and after a waiting period.

• All P&C insurers currently writing business insurance must ofer the program to small

businesses. Businesses that decline the coverage must acknowledge they will not be

covered for pandemic business losses or be eligible for federal program benefts. This

opt–out is intended to encourage broad participation.

• The total program capacity foats as determined by the government. As an example of

how this might work, using a 14–day waiting period and a multiple of three–month payroll

expenses, we estimate an aggregate limit of $750 billion in two layers:

• The frst layer is $250 billion with the industry’s share of $15 billion in year one, rising

to $30 billion over the course of 20 years. Insurers handle payment of the insured

amount, absorbing 6% of frst–dollar claims up to a carrier’s market share of the $250

billion industry limit, rising to 12% over time. The government funds the balance up to

the industry limit of $250 billion.

• The second layer is up to $500 billion excess of the $250 billion layer, which is 100%

funded by the government.

• The U.S. Treasury establishes a line of credit facility with participating insurers as

benefciaries. This guarantee facilitates prompt payment by insurers with the certainty

that the government share will be funded.

• The program will be afordable 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]. This refects the reality that only the federal government has

sufcient resources to meet the full extent of pandemic loss, which is not insurable in the

private sector.

“The objective is to 

provide immediate 

cash to small 

businesses so that 

they can continue to 

pay employees and 

ongoing business 

expenses, thereby 

limiting economic 

disruption.” 

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For Medium and Large Businesses — Pandemic Re 

The objective is to promote market–based pandemic risk mitigation for medium and 

large businesses with government support provided through Pandemic Re, a government 

reinsurance entity created for this purpose. 

• Available to businesses with more than 500 employees, Pandemic Re is an indemnity– 

based program in which both the insurance industry and the government are paid an 

appropriate risk–adjusted price for pandemic cover. 

• Participation by businesses and insurers is voluntary. Participating insurers retain a 

portion of each risk and reinsure the rest to Pandemic Re. 

• The business interruption coverage would be written on modifed standard industry 

forms, providing payment for business expenses with a maximum payout of $50 million 

per policy. 

• The total program capacity is $400 billion of aggregate limit. The industry share in year 

one is a maximum of $15 billion, rising to $30 billion in year 10 of the program. 

• Insurers collect 100% of the premium, retain their proportional share and cede the 

balance to Pandemic Re for government share. Insurers pay claims, which are drawn 

down on Pandemic Re’s letter of credit for government share of loss. 

• Government support through Pandemic Re is expected to stimulate development of 

additional private sector capacity above the current program. 

“Pandemic Re is an 

indemnity–based 

program in which 

both the insurance 

industry and the 

government are paid 

an appropriate risk– 

adjusted price for 

pandemic cover.” 

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Key Advantages of the Chubb Plan 

• Recognizes and responds to diferent circumstances in a pandemic for small businesses, 

many facing immediate shut–down and limited fnancial resources versus medium and 

large businesses, which may be more capable of operating during a pandemic and have 

deeper fnancial resources. 

• Commits insurance industry capital and provides opportunity for increased risk–sharing 

over time as direct and secondary markets develop, ultimately lessening government 

pandemic burden. The industry develops valuable risk management and risk 

mitigation knowledge and experience to encourage better societal behaviors related 

to pandemic risk. 

• Leverages insurance industry claims expertise and existing payment capabilities to 

provide prompt payment to mitigate economic distress without requiring creation of 

complex government claims adjudication and payment process. 

• Provides transparency, certainty of relief and a level playing feld for businesses faced 

with pandemic loss, reducing economic disruption as businesses will have sufcient 

resources to maintain private sector payrolls and pay expenses. 

• Encourages fscal responsibility as a program with clearly defned mechanisms, triggers 

and benefts defned before a pandemic strikes, which will be more efcient and more 

equitable than ad hoc government relief programs created during a crisis. 

• Pandemic Re provides opportunity for the government to participate in a reinsurance 

program at private market terms. 

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Chubb Pandemic Business Interruption Program 

Part I — Business Expense Insurance Program (BIP) Part II — Pandemic Re 

Policyholder Small businesses with 500 or fewer employees Large and medium businesses with more than 500 employees 

Purchase Strong opt out; ~90% take up expected Open market (~30% take up expected) 

Premium Risk appropriate premium for insurers’ share; 

no government premium 

Risk appropriate premium for insurers’ and government’s share 

Claim Adjustment Simple parametric structure provides for an accelerated claims 

payment process 

Indemnity–based program with traditional claims handling 

Policy Limit Three months payroll (plus operating costs for certain classes) Up to three months of expense, with a maximum of $50 million 

Fraud Policyholder certifcation and Federal tax return fling process Insurers’ claims adjudication process 

Risk Mitigation Waiting period (14 days) Waiting period (30 days, or longer as desired). Insured risk 

management program, helped by underwriting assessment 

Program Limit $750 billion limit (Layer 1 = $250 billion; Layer 2 = up to $500 billion) $400 billion limit (30% take up rate => $300 billion) 

Government Share $735 billion limit (Layer 1 = $235 billion; Layer 2 = up to $500 billion) $385 billion limit (30% take up rate => $285 billion) 

Industry Share Year 1 $15 billion limit $15 billion limit 

Industry Share Growth Industry share rises $0.75 billion annually, stops at $30 billion in year 20 Industry share grades up after year fve to $30 billion in year 10 

Carrier Share Carrier pays 6% of frst–dollar claims up to carrier’s market share 

of industry limit, growing to 12% by year 20. Government pays 

remaining share of frst–dollar claims 

Carrier pays 5% of frst–dollar claims until industry limit is reached, 

growing to 10% by year 10. Government pays remaining share of 

frst–dollar claims 

Qualifying Triggers 1) U.S. Centers for Disease Control and Prevention medical criteria

2) Declaration of Emergency by U.S. Department of Health and Human Services or President

3) Federal, state, or local lockdown in force

4) Excluding COVID–19

Loss Payments Insurer drawdown on line of credit facility for government share of payments 

Line of Credit 

Facility Issuer 

Money Center Bank Syndicate or Federal Reserve Bank of New York 

Line of Credit Guarantor U.S. Treasury

Program Inception and 

Expiration Date 

Program inception date is January 1, 2021 and the expiration is December 31, 2040; policies renew annually 

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