Business Continuity Coalition

Principles for Legislative Solution for Pandemic Insurance Coverage

The magnitude of the COVID-19 pandemic’s financial and social impacts has exposed significant 

shortcomings and vulnerabilities in our country’s preparedness for and resilience to systemic 

catastrophic events of this scale and nature. 

This includes gaps in insurance protection for losses from business interruption occurring 

arguably in the absence of “physical damage” to the business location. Gaps for the pandemic 

risk in other lines of insurance have also been revealed or developed as a result of this year’s 

crisis. 

While there is no currently foreseeable solely-private insurance solution, the expertise and risk

capacity of the insurance and reinsurance sectors have an important role to play. Development 

of a public-private partnership with the right incentives for all parties is the only option to mitigate 

future economic impact of pandemics and accelerate economic recovery from COVID-19. 

Members of the Business Continuity Coalition believe any pandemic risk insurance program 

should adhere to the following principles:

1) Scope: Any Federal backstop should support not only non-physical-damage business 

interruption (NDBI) coverage but also other pandemic impacted lines of insurance, such 

as event cancellation, workers compensation, production or cast insurance (for film and 

TV productions), and general and employment practices liability insurance. These lines 

may need to be supported by a robust backstop even for a recurrence of COVID-19. 

2) Private Insurer Utilization: Insurers should be included in any pandemic insurance 

program to involve a number of current industry advantages: (1) determine appropriate 

premiums to reduce taxpayer outlays; (2) use existing claims-paying infrastructure to pay 

claims; and (3) leverage insurer expertise in risk mitigation to help businesses understand 

how they can reduce pandemic risk, comply with imposed requirements, and get their 

businesses up and running expeditiously.

3) Availability: Eligible insurers should be required either to share some portion of the risk 

in the primary NDBI coverage layer or to support other covered lines of insurance as a 

condition of being permitted to sell any government-supported NDBI coverage. Any 

pandemic program must properly balance the need to ensure participation with the reality 

that insurers cannot take on too much uncertain exposure. 

4) Affordability: Premiums for the program should not aim to cover full program costs.

During an initial economic recovery period, the backstop should be without premium, after 

which the government should charge at least some premium for the risk it bears, but 

policymakers should not expect premiums to cover the full cost of the program. Premium 

levels should be set to result in widespread take-up. 

5) Intergenerational Financing: A government pandemic insurance program should not 

only provide backstop comprehensive protection, but can and should assume the risk of 

spreading the financing of “black swan” events over decades. 
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6) Rapid Claims Payment/Minimum Transaction Costs: Any primary NDBI program 

should be structured as parametric coverage which would be triggered by defined external 

conditions (national health declaration + state/local action affecting specified business 

categories) without recourse to usual proof-of-loss; although use of proceeds might be 

audited. A Federal Reserve liquidity facility should be authorized to ensure rapid pay-outs.

7) Pooling Alternative for Offer of NDBI Coverage: Insurers that do not wish to underwrite 

the primary NDBI coverage directly should be given the option to support a joint 

underwriting facility for that coverage which would also enjoy the Federal backstop 

support. 

8) Stop-Loss As Well As Quota-Share Protection: Federal reinsurance protection for both 

NDBI primary program and for other covered lines should be offered, on an optional paid 

basis, in the form of stop-loss protection in addition to the co-share element, given the 

potentially extreme cumulative risk of pandemic losses. 

9) Utilization of Reinsurance and Capital Markets: The Federal program should, like 

NFIP, be encouraged to foster development and use of private reinsurance markets as 

well as capital markets’ alternative risk-transfer mechanism to further reduce or protect 

taxpayer exposure.

10) Continuity: A Federal pandemic risk insurance program should be administered by a 

Federal entity housed within the Department of Treasury with continuous existence, such 

as the WW II-era War Damage Corporation (later wound-down) or the Federal Crop 

Insurance Corporation.