Tuesday, May 26, 2020

Insurance Trade Groups: "Pandemics simply are not insurable risk..."

Way back in 2013 we were writing about the "temporary (2002)" Terrorism Risk Insurance Act. (TRIA)
And as recently as three weeks ago.

From Artemis, May 22:
Association’s propose federal program for “uninsurable” pandemic risk
U.S. insurance and reinsurance industry associations have launched a proposal for a industry-backed pandemic risk backstop, called the Business Continuity Protection Program (BCPP) as an alternative to the legislative proposal for a Pandemic Risk Insurance Act (PRIA) reinsurance backstop.

The National Association of Mutual Insurance Companies (NAMIC), the American Property Casualty Insurance Association (APCIA), and the Independent Insurance Agents & Brokers of America, Inc. said that the “industry-backed Business Continuity Protection Program (BCPP) would provide revenue replacement assistance for payroll, employee benefits, and operating expenses following a presidential viral emergency declaration.”
“Pandemics simply are not insurable risks; they are too widespread, too severe, and too unpredictable for the insurance industry to underwrite,” explained Charles Chamness, NAMIC’s president and CEO. “As we’ve seen in the past few months, pandemics are a national problem, and we need a national solution. NAMIC, APCIA, and the Big ‘I’ had one goal in mind in developing the BCPP – crafting a solution that would provide meaningful support for employees, businesses, and the economy as a whole.”

The BCPP proposal would provide protection against widespread economic shutdowns due to a future pandemic and is federally backed in preference to PRIA which requires industry financial support.

“A TRIA-like program, with an industry financial role, does not square with the fundamental notion that pandemics are not insurable risks. The risks are too fundamentally different in nature and scope,” the association’s said.

“We need a sustainable solution that provides simplicity, certainty, and immediate relief to impacted businesses,” David Sampson, APCIA’s president and CEO said. “The BCPP is designed to bolster the country’s economic resilience through timely and efficient financial protection and payroll support in the event of a future public health emergency. We look forward to continued dialogue with the business community to meet their needs in this vitally important public policy discussion.”
The model would see businesses able to purchase a level of revenue replacement assistance through state-regulated insurance entities that voluntarily participate in the BCPP.
The association say the BCPP would provide “simple, immediate relief for employers that are directed to close.”....

Related, Sunday's Insurance Oh-Oh: "French court orders insurer to pay restaurant’s business interruption losses from coronavirus".

September 2013 
Terrorism, Insurance, and Corporate Welfare

July 2014
It's Time to Stop Subsidizing Warren Buffett and the Rest of the Insurance Gang (BRK; TRV; ALL; CB)
We're not intending to call out just Mr. Buffett's heavyweight property/casualty and reinsurance operations but rather the whole herd of porkers feeding at this particular trough.

It's just that since his comments at the 2002 annual meeting that the odds of a nuclear attack on Manhattan were "inevitable" by 2052, Buffett has carried water for the whole industry.
Page 9 of the BRK 2002 Annual Report has some more of his thoughts. It's all about the money.

Because the "temporary" 'Terrorism Risk Insurance Act' backstop is in place, the insurers and reinsurers are able to sell product that has brought in at least $40 Billion in profits in the last thirteen years.
(premiums paid with no claims pretty much drops straight to the profit line)

I understand the New York Congressional delegation, from Schumer down to the newest Rep. being all for the reauthorization, it's a pretty sweet deal if you can get the rest of the country to subsidize your real estate market but be forthright and say you're in favor of corporate welfare.

One last point. A nuke in NYC causes at least a $Trillion in damage and I'm guessing the insurers haven't squirreled-away that $40 Bil so they'll be able to meet their obligations when the time comes or as capacity to do more risk-management-good-works.

What I'm saying is, just be honest: the government will end up paying anyway so there's no reason to hand out $3 billion a year while we wait for the "inevitable". And at his core, Warren is an insurance salesman from Omaha....
May 6, 2020 
Re/Insurance: "Berkshire Hathaway will write pandemic cover 'at the right price', Buffett says" (BRK)
As with terrorism insurance Warren would rather that governments take the risks,* the downside is just so huge.
And combining the two threats, terrorism and pandemic, considering how awful things have gotten in New York with the Coronavirus you have to ask what would be the result of a concerted bio-terrorism attack?
From "Two Factoids On The Covid-19 Situation In New York York City", way back on March 27
...And the troubling news.
Through Thursday at 5pm there have been 4720 hospitalizations.
Bad enough on its own but when combined with the reports of hospitals being overwhelmed you have to ask, what if something really, really big happened?

New York is one of the top two or three terrorism targets in the United States. How would the system respond if there were say 25,000 bioterrorism or biochemical terrorism victims in one day?
Or even 10,000?
You'd have thought that of all the places on earth that would have been prepared it would have been New York City, but no.
4700 hospitalizations seems so quaint with New York deaths over 25,000 40 days later. ...
And many more, just a laugh-a-minute here in our little corner of the internet.