The Self-Insurance Institute of America (SIIA) advocated for the Pandemic Risk Insurance Act of 2020 (PRIA) to include captive insurance participation in its early stages, according to Ryan Work, vice president of government relations for SIIA.
In April, Work sent a letter addressed to Maxine Waters, a US representative for California's 43rd congressional district and chairwoman of House Financial Services on the proposal to create a pandemic risk reinsurance pool.
In his letter, he outlined that SIIA supported a federal framework for a pandemic risk insurance programme that would create a risk-sharing model similar to Terrorism Risk Insurance Pool (TRIP) that is between policyholders, insurers and the federal government.
He said: “Also, as with TRIP, SIIA supports a PRIA model enabling captive insurance companies to have access (along with the commercial insurance companies).”
Work explained the functions of a captive insurance company and highlighted that “the flexibility of captives is important, as a one-size-fits-all approach does not oftentimes work for the complex risk management needs for a captive owner.”
He noted: “In the case of captive insurance, policyholders would be responsible for losses up to a specific deductible.”
“A captive insurance programme would then provide business interruption coverage beyond that to a certain threshold, with the federal government offering an overall financial backstop", he continued.
However, Work stated that “the creation of a pandemic risk pool would create a needed market for pandemic risk coverage, capping the total insurance losses that insurance companies, including captive insurers, would face".
Recently, the PRIA bill was introduced by Carolyn Maloney, US representative for New York's 12th congressional district and a senior member of the House Financial Services Committee, alongside several stakeholders.
The aim of the legislation is to create a programme that will cover losses and protect the US economy in anticipation of a resurgence of COVID-19 and future pandemics.
Commenting on the introduction of PRIA, Work said: “SIIA is pleased to see the inclusion of captive insurance as an option in the PRIA proposal, and applauds Congress for taking the first step towards the creation of a needed pandemic reinsurance programme.”
He highlighted that “much like TRIA, PRIA would ensure coverage for a number of unique coverage situations made apparent during the COVID-19 pandemic. Since the beginning of policy discussion on this proposal earlier this spring, SIIA has advocated for both its creation and the ability of captive participation".
“We appreciate Maloney’s leadership on this and will continue to support legislative efforts to this effect,” he noted.
Work added: ”More importantly, the creation of PRIA would allow American businesses access to needed risk protection for future pandemics. As we have seen time and time again, many businesses are already utilising captives to deal with claims directly related to COVID-19, even now, something that will be even more important to consider in future potential disruptive events to the business supply chain and customers in general.”
