Financial Services Subcommittee hearing on creating a federal pandemic Risk Insurance program. Even when they are not recognized by the chair. Members are also reminded that they are responsible for muting and unmuting themselves, and to admit themselves after they are finished speaking. Consistent with the regulation accompanying house rest 965, staff will only mute members and witnesses as appropriate. When not recognized to avoid any background noise. Members are reminded that all house rules relating to order and the corn to this remote hearing. History is entitled insuring against a pandemic, challenges and solutions for policyholders and insurers. And i now recognize myself for three minutes to give an opening statement. According to the Congressional Research service, 110 Million People worldwide could enter a state of extreme poverty due to the Global Economic contraction, and here in the United States 657 Million People have filed for Unemployment Insurance since march of this year. The harmful effects of this pandemic on the stability of Small Businesses like restaurants cannot be overstated. There have been literally dozens of restaurants in my home district in st. Louis that a closed many permanently as a result of this pandemic. And with them the vendors who sell them goods, the farmers who grow the food, the truck drivers, Storage Facilities and entire supply chains are all affected. Though many businesses have insurance, most of the policies have exclusions for pandemics, which are likely to be upheld in the courts. I would add that for many Small Businesses around this country, the probability of even assuming to enforce a policy suing unlikely given the high cost of litigation. On the other hand, it is not realistic or practical to expect the Insurance Industry to shoulder the astronomical costs of a Global Pandemic. Has estimated that pain all claims regardless of exclusions would amount to 1 trillion per month. While i i applaud the introducn of legislation by my colleagues, like congressman thompson and congresswoman maloney and input from industry, my bottom line is that any solution will need effective buyin from industry and deal with the conundrum posed by the fact that many of the Business Interruption insurance cases being adjudicated have been dismissed not only because of virus exclusions but also because of the lack of direct physical loss or damage. And our businesses there is an expectation that you would have some skin in the game particularly if you are going to partition or even accept government assistance. Indeed, perhaps industry could work with Business Owners and consumer groups to devise a type of umbrella policy for which the business and is insured by everything because the Current System is rife with confusion and complexity. Because it is my firm belief that a Small Business owner should not need a battalion of lawyers to handle their Insurance Claim after faithfully paying their premium. And i look forward it to testimony of our witnesses as we roll up our sleeves and try to find a viable solution. And at this time the chair now recognizes Ranking Member performance for an opening statement. I recognize your. Thank you, chairman clay. I want to tha you for competing this year. First i would like to take a moment to thank our colleague fromew york congresswoman maloney for her efforts to put forward an idea as early as may of thisear. Public should be applauded as a symbolic first step. I would lik to take a step backward and put this i perspective. The problemsnd solutions that we are going to discuss today are about creating a plan for the next pandemic ear for that reason [inaudible] so much more important that we get this right then we do it fast. Congresswoman maloney has reached out to me andsked for bipartisan collaboration. I feel very strongly as you do do, mr. Chairman, that any product thate put forward most ofeaningful support from both parties and ultimately if were going to have any impact on Senate Deliberations when it really big votes we need a bipartisan agreement. As the Ranking Member of the subcommittee i can tell you republicans are committed to working in a bipartisan way but we need to make sure thats we do that i think again would te a step back and dont start with a priests conceived notion of an outcome. En we take a ste back maybe will use an injured in a tomat or end upith a noninsurance approach like a pandemic ppp grant your answer, parametric ppp gran but whatever we do we must first make sure it solves the problem of businesses that are shut down during theext pandemic. Some of my colleagues today may focus on existing framework in place for the risk insance but it want to be reall clear. A scale and sco of the pandemic is orders of magnitude bigger than a terrorist attack. You illustrated that, mr. Chairman. We should spend her time today trying to understand the nature of the pblem and the issues around those four people who will be testifying tay. People that are experiencing the problem day today. Fuhermore, as we have seen the pandemic has proved disastrous for onetime large events. Any solution that we address must lookt cancellation as well. Thats something that is not in this proposed legislation. I would like now to yield some time to the Ranking Member mr. Mckinley but before i do while im not advocating f anyone proposal, i would ask unanimous consent to enter the business critical distance to get to the record. They did not have a witness that was allowed for this so mr. Chairman, would like to ask unanimous consent t enter the statement into the record. Without objectionhe statement is aepted. Now, mr. Stivers, i am going to recognize the chairwoman of the committee and then i will recognize mr. Mchenry. I just want to give him some of my time, but thank you for holding this hearing, mr. Chairman. I think this is a critical first step. I look forward to working with you to get things done. I yield back. T gentleman yields back and now i rognize the chairwoman of the full committee, the gentlewoman from california, one minute. Thank you very much, chairman clay. When the covid19 pandemic it in march, Small Businesses were devastated and have largely been unable to rely on their Business Interruption insurance policies to cover these losses. [inaudible] Economic Forecasters are warning that Small Businesses, many of which have not recovered from the destruction they have experienced already this year may permanently close it policy makers dont act. Congress has an Important Role to play but with the election of president president elect biden, i am hopeful the government will respond to this pandemic with effective leadership which has been and continues to be absent under the current president. So i am looking forward to todays discussion of the various half forward and i think the witnesses that we will let here today. I yield back. Thank you, mr. Chairman. I think the chairwoman and i now recognize the Ranking Member of the full committee, the gentleman from north carolina, for two minutes, mr. Mchenry. Thank you, chairman clay. Chairman clay, thank you for your leadership. You have been a strong advocate for your deeply held convictions during her time in congress, and i want to commend you for also your bipartisan work in congress. And its been an honor to serve with you here on the Financial Services committee. Thank you. Thank you. I appreciate the committee holding this hearing. I know its been delayed because of the nature of this Election Year and whats happened across the last couple of months. Its an important issue to tens of millions of americans, and Small Business folks. I appreciate the work of the gentlelady from new york, ms. Maloney, what she is done on this issue is put a marker down to show that congress should get to work on a pandemic response. For future pandemics. And while i have concerns about the construct of her legislation, pria Company Think there are number of unsolved problems in it, it is such a nice first step to start this conversation. There are some unworkable parts of what she is laid out. Theres some unresolved parts but i think we can work through and come to a bipartisan agreement that would have lasting impacts on Small Businesses and folks across the country. Instead, i think our businesses do deserve a bipartisan solution that builds on existing successful ideas that we have put in place over this last year. I think we need to look at solutions that incentivize participation. We need to look at solutions that are scalable. Solutions that use our statebystate, harnessed the power of our statebystate regulatory environment. And look at existing programs like tpp that have saved millions of Small Businesses. So thank you, mr. Chairman. Thanks for your leadership and look forward to the testimony today. Thank you so much, mr. Mchenry. Now i want to recognize the chairwoman of the committee on oversight and reform, a gentlelady from new york, ms. Maloney for two minutes. Thank you, chairman. The cirwoman waters and subcommittee chair clay for holding this important hearing. After the terrorist attacksf 9 11 the economy i new york completely shut down. We couldnt build anything because Insurance Companies would not ensure any pperty against terrorist attacks. So we came together in a bipartisan way and passedria. Tria successfully unlockedhe maet, got the economy moving again and put peoe back to work and thas what were trying to do with the panmic Risk Insurance act. Tens of thousands of Small Businesses have closed their doors pernently, entire industries from travel, film, television have been upended and they have no way to protect themselves from future pandemic related losses. Currently this is interruption insurance policy exclusively excludes pandemics. We cant continue to eose our economy as Small Businesses to this level of risknd expect them to recover. We know the federal government will sp entering theext crisis, so why not be proactive and develop a longterm solution . Tria is a starting point for a forwardlookingublicprivate pria risksharing rtnership that would provide a fedel backstop for business terruption policies that includeoverage for pandemics. Pr would create a totally voluntary pgram. Insurers could provide policies if they wanted to and policyholders could purchase them if they wanted to. It is totally voluntary. A broad consensus has emerged that pandemic risk is insurable with an appropriate federal backstop and this is supported by more than 50 stakeholder ganizations. At this point we are debating the best way to structure such a prram and im willing to collaborate with any of my colleagues, democrati republican and take holders to improve this bl and do just that. We must be proactive, mr. Chairman. May i place in the record the list of the 50 orgizations and Insurance Companies that are now supporting . Witht objection, and the gentlewoman time has expired thank you. Today we welcome the testimo of our distinguished witnees, ann cantrell, owner of annies blue ribbon general store, on behalf of the National Retail federation we also have john yle, president and ceo of marsandclennan. Brian kuhlmann, chief corporate counse shelter insurance, on behalf of ap cia and namic. Michelle melendez mclaughlin, chief underwriting officer of chubb north america r. J. Lehmann, executive editor and senior fellow International Center for law and economics. Our witnesses are reminded that your oral testimony would be limited to five minutes. You should be able to see a timer on you screen, and we will indicate how much time you have left and a chime will go off at the end of your time. I would ask you to be mindful of the tiber and quickly wrap up your testimony if you use chime so we can be respectful of both the witnesses and the Committee Members time. Without objection your written statement will be made part of the record. Ms. Cantrell, you a now recognized for fe minutes to give an oral presentation of your testimony. You may proceed. Good morning, chairman clay and Ranking Member. It is an honor to appear before today to discuss pandemic Risk Insurance from a Paul Saunders perspective. I would like to give a special shout it from women thanks to a congresswoman beluga velazquez is been chamfered for womenowned businesses. We have been women owned and operated since the geico and im so proud she chairs the house business come house Small Business committee. The fact this hearing is being held shows members really do care about people on main street. The National Federation has parted with congresswoman maloney to respond to the pandemic Risk Insurance act and would like to thank her for leadership on this issue. We look for to bring muchneeded detection and relief to retailers across the country have been suffering during this crisis. Retail sales and jobs have been devastated by the pandemic pick this up not only a Health Crisis that economic crisis. It is an honor to appear today a gap of the internet them junior from brooklyn, new york, right had the pleasure and honor of owning us striving gift shop. People look to us as a pillar of light and hope in the neighborhood. Kids with a friend at the shop to pick up to get for the teacher ear pierced by the kit with the tree from our store if there to get a shot at the doctor or reward them if they get good report card. Neighbors come in to see whats new. However, all this change in march when the whole world started to cave in and around is because of covid19. When my team and i discussed closing on friday the 13th i called my Insurance Company. My broker has been with me since beginning and is never steered me wrong. We have an honest relationship and he knows my business. I love you and his wife, my shop on instagram. He taught me my favorite, a measure risk and thats exactly what he called my move to new location seven years ago when redouble our Square Footage and quadrupled our business. He is often extremely helpful and straightforward and our member probably show him our new place and showing him our company is interposed that would cover 12 months if something should happen to my business i need her to down. I have all risk special interest in the hartford Central Insurance Company which cost 6180 annually. This has included workers comp which i also carry. This is a big expense for Small Business, why i thought would help in crisis situations. However, sharp realities density. I quickly learned buyers with independent excludes a mention policies like mine. Use go even though we were ordered to close a business by the governor. There would be no release from our Insurance Company because it is not considered a business in russia because it is not Property Damage Insurance Company should not be process of denying policyholders coverage when they need it the most. What happens to your in a good hands, or like a Good Neighbor . As i read back when your conversations by heart sinks with the desperation much on as a fully what was happening. Even as i followed the post of social musing restaurants would be covered and reached out for help and guidance there was no relief in sight. I made calls to my landlord as i tried to figure out how to keep covering financial obligations and pay my team members. I kept trying to figure out our next move. The next two months have been the docks of my life. Not because the answer given this a dedicated use my life have been so sad and stressful. Fortunately we did receive a 58,000 ppp loan and up like to thank members of congress who supported the cares act which helped us keep afloat. We were closed for over three months missing some really big holiday selling. In the same timeframe we made 300,000. This too we made a little more than half. I understand the pandemic solution would only cover future pandemics but it still needs to be passed. As soon as possible because we never know when the next pandemic will come. We certainly didnt see this in coming. I urge members of congress to provide some sort of relief to business that were forced to close by mandate during covid19 even if it is not in the form of Business Interruption insurance or such. I would like to note the National Retail federation is a member of the Business Continuity coalition. They seek that on widespread availability and affordability of nondamaged Business Interruption Insurance Coverage but also restoration and expansion pandemic coverage and other lines. This includes production, liability and other lines that been hardhit by covid19. The pandemic Risk Insurance ask what is twp. A program that help businesses obtain Insurance Coverage for pandemic model on the program for terrorism insurance established following 9 11. When businesses do not obtain coverage for act of terrorism after 9 11 congress stepped in. Its time for washington to do the same for the pandemic. Not any independent life worlde impact but when one occurs it is likely again result in nearly total this legislation is a cornerstone of the proactive in managing the risk and impacts of the pandemic in the future. Its time for real solution to solve a real problem. Thank you for inviting here and im ready for any questions you may have. I do so much, ms. Cantrl. Mr. Doyle, you are now recognized for five minutes to give an oral presentation of your ttimony. You may proceed. Thank you, and good morning, members the committee. I am the president and ceo of march, the Worlds Largest Insurance Broker and the business of the marsh and Mclennan Companies to appreciate the opportunity to speak with you about the need for Publicprivate Partnership to ensure pandemic risk. While the covid19 pandemic is first and foremost, the human tragedy, which is a concern about its impact on the economy and on our clients. Our primary role as an Insurance Broker and risk advice is to be an advocate for our clients which is what i do with you all today. At marsh we believe the Publicprivate Partnership is the best option to pursue for pandemic or solution. For that reason which recognize the leading role congresswoman maloney has that in the debate including introducing the legislation that has brought us here today. Although some have suggested congress should delight until the current pandemic is over, we feel there are compelling reasons to act now here first, acting out in the publicprivate pandemic risk solution will accelerate the economic recovery by reducing uncertainty. Moving forward Capital Markets will seek assurance that companies have protection against prospective pandemic risks. The pace of recovery will depend upon the nature and degree of confidence in the marketplace. Second, taking action and will provide financial protection against future pandemics in part by absorbing some of the pandemics initial financial shock. Third, if we start now with time in the right solution we can convinced the risk curve for future pandemics. Insurance creates the right economic incentives to drive change in society. Moving quickly will help us to harness Risk Management and to build a more resilient economy. By definition pandemics are global many clients and insurers cannot diversify against them as they can with other catastrophes. This takes about pandemic risk for policyholders and these include businesses and organizations of all sizes and from all sectors are too high to defer action. As we have thought about developing a workable solution, the following principles have guided us. First we look at Risk Mitigation and resilience. How should the solution be designed so an event measure to encourage resilience in the community . For example, should it incentivize preventative measures on the part of insurers . Should it invest for reserves and resilience initiatives or appealing to ongoing government commitment to build resilience in the system . Next is the funding problem. A Publicprivate Partnership could facilitate increased private Market Participation over time with an appropriate level of industry commitment. Third, a third principle involves the scope of coverage. The coverage be compulsory for interest to offer, and should also be compulsory at some level to purchase . Next is distribution and an operating model. The solution must contemplate infrastructure required to operate the scheme on a Going Forward basis and the technology that is needed to meet its objectives. Finally, the claim process. A solution must include a welldefined trigger that identifies relevant thresholds and specifies how and when claims are to be paid. I cried and part of u. S. Government is essential to creating a program that harnesses the financial social benefits of insurance to mitigate pandemic where economic losses while also providing greater certainty about assisting recovery. At the same time i believe the Insurance Industry has a role to play your to which you may be asking, are pandemics insurable . The answer is complex. The less of months have demonstrated traditional Insurance Solutions and the commercial Insurance Market do not fully provide businesses and others with the protection they need against the enormous costs of the pandemic. Pandemic insurance has existed for a long time but has really been purchased. Its tossed in the low likelihood of any that makes policyholders reluctant to ensure against it. At the same time various insurance policies explicitly exclude pandemic risk. The main reason for that is the payouts while sporadic could be so enormous that they exceed the insurers capacity to bear the despite the Many Companies are looking to existing policies for help with the ongoing financial loss from covid19. Covid19. Even with a specific pandemic insurance in place, insurers will undoubtedly pay out tens of billions of dollars in covid19 related losses. Nevertheless, some policyholders will be disappointed. The complex nature of pandemic risk means that we need Strong National pandemic Risk Management. This requires insurers, act by the federal government, to raise pandemic tension causes a for brokers to infrastructure. Widespread pandemic coverage would make the insurance sector the first line of economic response in future outbreaks. A a Publicprivate Partnership will help facilitate coverage, align the needs of insurance buyers and insurers to avoid losses, and incentivize pandemic risk preparedness to mitigation. The risk program can spur new technologies, Insurance Products and processes to mitigate the losses associated with pandemics. While the private partnerships have proven to build resilience in the economy, while pandemic risk is very different than terrorism or jobrelated, if we create economic incentive for our insurers, [inaudible] thank you and i look forward to your question. Thank you, mr. Doyle. And at this time we will go to ms. Mclaughlin. You are now recognized for five minutes to give an oral presentation of your testimony. Please proceed. Please unmute. Okay, you are on. Sorry. Good morning, chairman conaway, Ranking Member stivers, and subCommittee Members. My name is Michelle Melendez mclaughlin. I am the chief underwriting officer for the Small Business and commercial middlemarket at chairman. Child. Chubb is one of the largest insurers a small medium and Large Businesses around the world with over 16,000 employees and 44 branches. Thank you for inviting me t speak regding pandemic risk and our ideas for creating a Publicprivate Partnership that includes risksharing id Insurance Industry. My will give me a unique insight into the economic effects of ndemics, especially for Small Business consumers, and i appreciate the opportunity to discuss our perspective with you. Covid19 is shown pandemics are not only tragic in their impact on Peoples Health and lives but also devastating in their impact on the economy and peoples livelihoods. We believe the insurance instry has an Important Role to play alongside the federal government in providing assistance to businesses to blood economi impact of future pandemics blunt. Some risks can create losses so great that youe not insurable in the private Insurance Market without sstantial government support. And t next unlike other catastrophes like wildfires in hurricanes are not limited to specific geography, time period or risk class but instead can affect entire economies and almost every busines the private Insurance Market cannot underwrite the shutdown of the u. Economy, but with substantial government involvement the Insurance Industry cant and should have a meaningful role in providing coverage as partf a Publicprivate Partnership can and suld it will lead to gater understanding of pandemic risk of better preparness and approved mitigation. Chubb has my dues and critical framework to up congrs think about ways to do that. Our proposal h two comnents built arou five key attributes. We need a progr tt provides a meaningful role for the insunce industry to share pandemic risk with the government, a structure that recognizes the immediate needs of Small Business. Provide affordability and choice for Small Businesses with strong incentives to purchase coverage and tely claim payments in cris. Program should provide incentives for broad participation by the Insurance Industry and the fiscally responsible. The first component addresses the needs o Small Businesses and this i can focusn and Large Businesses. We have bifurcated the program because pandemics affect small and Large Businesses differently. They require a different approach. Th details are included in my written testimonyut briefly part one is for Small Businesses. It provides coverage for u to three months of payroll plus other expenses suc as rent and utilities. Claims are based on a predetermined amount and paid automatically when the proam is triggered. This provides policyholders with certainty that theyere received timely financial asstance after an event. The industry share of the risk increases from 15 billion in first year of the program to 30 billion ove 20 years. To address the concern that some insurers might not have the Financial Capacity to assume risk, eachndividual ensure retention is based on its market share. So small in share with less market sre would assume less liability under the program. Policyhoers would only pay for privatesector coverage, not the government provide assistance in which keeps bnging affordable. Part two creates a federal reinsunce facility for businesses with more than 500 employees. Private Insurance Companies that choose to sell coverage right pandemic policies at market term and retain some portion of the risk. The rest would beeinsured to panre which would be paid a rates for providing coverage. Purchase would be voluntary and insurers could elect one to three months of coverage with a maximum payout of 50 million per policy. We estimate panrexposure would be 400 billion with private insurers absorbing 15 15 biln of that in year one increasing 30 billion in year ten of the program. Our propol is one of several that has been suggested in recent mths. The framework to answer all the questions but we believe addressing the unique nds of small medium and Large Businesses and a significant risk taking role for the industry is critical to the success of any progr. We appreciate your interest in r perspective and look for to working with you on this critical issue. Thank you. Thank you so much, ms. Mclaughlin. And now we will recognize mr. Kuhlmann mr. Lehmann. Mr. Lehmann, you are recognize for five minutes to begin an oral presentation. You may proceed. Iq chairman clay, Ranking Member stivers and members of the subcommittee. I am r. J. Lehmann, senior fellow with the International Center for law and economics. I concur with the other witnesses the problem of pandemic risk is one of the Insurance Industry not solve on its own. I would go further and raise the question of whether insurance is actually the best structure for this problem. Insurance is a system of Risk Transfer pic it is not a system economic assistance. The committee has heard from you before on the danger of moral hazard insurance and im going to be clear that i dont actually have those concerns about the proposal before you today. I would if the plan were to backstop workers comp or liability. Thats what you do need price signals to signal to businesses to invest in mitigation and protect their employees and their customers. Business interruption is a different story. Theres no moral hazard because theres nothing a a business cn do to avoid a pandemic. So there may be a role for the federal government to support Business Interruption but understandably, only about a third of businesses have Business Interruption. Less then so would end up buying pandemic business direction. Pria would remove policies but it doesnt it with and claim disputes. Any property Insurance Claim including for Business Interruption needs to show damage to the property. The legal theory in covid claims that surface contamination is physical damage is a bit of a bank shot. Most closures have nothing to do with contaminated surfaces. This is as close to avoid transmission to people. Thats not covered by property insurance. Also does a pandemic claim requited to be a shutdown . Because businesses plummeted before any shutdowns. Plummeted in places where there were no shutdowns and its stay depressed after the shutdowns were lifted. Business failed because consumers did not want to be infected. The rest of Insurance Claim for that. The best argument for a Publicprivate Partnership is that insurers can help policyholders to mitigate risk. Its important to ask mitigate the risk of what . Is that the risk business is unsafe as american thats not a liability. The risk you would be trying to reduce this risk of business will shut down. But in a pandemic we want businesses to shut down. We want them to have a safety net so that they can shut down and survive and not lobby to lift lock down or just because thats a get situation where schools are close but bars and jews are open. Speaking as someone who was long preached the gospel riskbased insurance, i am telling you do not want this to be a riskbased program. A riskbased program would be tech from second work remotely to pay the least but restaurants, Community Theaters and churches would pay the most. I dont think thats the outcome we want. Consider how much has changed since proposals like previous and the bbc p were introduced. I with the tree that i think the three much benefit cap was my idea back in april. That seemed generous. It doesnt look like that now. Pria originalism 500 billion program. Now its 750 billion program. Not program. Not only is clearly not enough but given it a structure one part of money if it were in place during covid, it would all be eaten up by new york before we got to the second wave, the third wave. We can try to draw some lessons but lets be humble about how little we knew we know even abe current pandemic. The lessons i draw is you want broad participation with a bias towards Small Business. Large business already have a lot of Insurance Options available including captives which i suspect will discuss more today. This shouldnt should be just e industry program. The banks and payroll processes who helped market it when it comes to distribute benefits you dont want to go to the claims adjuster process. There are not enough adjusted to the process takes forever and as i mentioned earlier some of those claims will end up in court. A a parametric trigger is much better, get the money of the doors quickly as possible. It also specifies benefits can will be used for items like a role in rate. You could argue that either way the lawmakers should understand thats in a Business Interruption usually works. A business can make an interruption claim at the same time lay off all its employees. Another option is just state crater on programs and try to partial reimburse them and outset of that few would have a run of the danger that pria hoses. Above all my regulation is you take your time, ad Hoc Solutions might be as good as it gets, get help to the business, workers and community who need it right now. Dont legislate for the next pandemic while in the midst of the current one. Thank you, and i would happy to answer any questions. Thank you so much, mr. Lehmann. And now well go to mr. Kuhlmann. You are now recognized for five minutes. Assuming we can you. Mr. Coleman, you can unmute, too. Thank you, chairman clay, Ranking Member stivers, note of the subcommittee. Enter the opportunity to be here today. My name is brian kuhlman. I am the senior Corporate Counsel for shelter Insurance Companies. Shelters and Mutual Company that is had code and columbia, missouri, and was founded in 1946 primarily to serve the insurance needs of missouri farmers. Our success as navalist to go into company that now writes auto, property, business and Life Insurance in 21 21 states. And even connects business with internationally. I needed them half of the american property and Casualty Insurance association, apc iea, and the National Association of mutual Insurance Companies, namic which together represent more than 90 home auto and Business Ventures in the country. When the covid19 pandemic first hit earlier this year shelter to prompt and strong action to serve the needs of our policyholders. As a Mutual Company we ask is because of our policyholders who put their faith in us and expect us to be there when you have a claim. Since march we provided premium relief, liberalized grace period and work with policyholders on a casebycase basis to help them through the current financial challenges. Additionally, the Shelter Foundation is offering each of our 1400 agents each 1000 to designate for a charity in the area working to respond to local covid19 needs. Shelters over doing the right thing and will continue to respond to this rapidly evolving situation. We will continue to do the right thing by opera sellers, agents and employees. Corp. Is still provide consumers with peace of mind by developing risk solutions. As this committee and conquer scope out the important work ahead of plan for future pandemics, however it is imperative we understand a core principle. Not every risk is insurable. The reality is that insurers and insurance regulation across the country understand the Global Pandemic risk is generally uninsurable in the private market. This was true before covid19 and it will be true after covid19 for a number of reasons including it is impossible to diversify pandemic risk and to spread losses across different groups which is a fundamental part of interest or covid19 is affecting millions of businesses simultaneously and a number of businesses need protection greatly exceed the capacity of the Insurance Industry to provide that protection. Understanding the Global Pandemics are uninsurable, an alternate mechanism will be necessary to protect businesses from future pandemics. Whatever that mechanism looks like he should be focused on providing real, efficient and effective finance assistance to all american businesses and nonprofits. Our industry believes that our risk expertise and infrastructure can help with the Pandemic Solutions even if we cannot shoulder the direct financial burden of the pandemic losses. To that end with study relevant catastrophic protection models, met with many stakeholders and businesses and put together a proposal called the Business Continuity protection plan, or the content. Modeled loosely after the war damages Insurance Corporation created by congress during world war ii, the bcpp would provide straightforward revenue replacement solution for businesses and nonprofits of all sizes. The bcpp would set up a program for the history couldnt administrate revenue replacement products available to any business or nonprofit in the u. S. America Small Business could access the product for a simple application purchase up to three months, up to 80 revenue replacement distributor license insurance professionals. Businesses could then use these funds to pay salaries, rent and other operating costs during the pandemic. A parametric trigger mechanism would eliminate the friction to ensure a quick automated relate on the occurrence of condition established in advance. This process would put cash and enhance the businesses immediately, avoiding a long detailed coverage analysis or complex claims adjustment procedures. Responding directly to Stakeholder Feedback the bcpp also contemplates an Access Program of event cancellation provision for customers who seek this additional protection or are in need of more specialized coverages. Most important the bcpp is also the current proposal that would be most affordable for americas Small Businesses. Even with a federal backstop coverage under the other proposals would likely be far more expensive and most businesses could afford because pricing for the bcpp product would be federally subsidized, the cost we might more affordable than other programs, encouraging high takeup rate which is essential for preserving the broader economy during a crisis. We are appreciative of the ideas and the proposals have been brought forward by congressional leaders in the Business Community to address the pandemic risk challenges. We are committed to working with you on solutions that could provide effective and affordable protection. Thank you very much. Thank you, mr. Kuhlmann. Let me thank all the Witnesses Today for the testimony. We will now move to the questioning of witnesses, and i recognize myself for five minutes. According to the National Association of insurance commissioners, over 184,000 Business Interruption claims have been made during the covid19 pandemic, and less than 1 of these claims have been paid out. I would make the point that to own and operate a business in this country you should not need a battalion of insurance lawyers at your side to understand and make claims on your policy, if necessary. And most Business Owners are not experts on Business Interruption insurance, exclusions, and other language that is frustrating to understand. Especially when you are trying to pay your staff, deal with payroll taxes and protect against other potential liability. Ms. Cantrell, this is for you. Can you please share for us policyholders perspective, what kind of toll as this had on businesses like your own, especially the many businesses who believe they have policies that would protect them . Thank you very much. Many of my colleagues quite honestly have closed their businesses not able to survive and this is devastating in so many ways. One colleague has 34 people working for and others have been in business for 18 years. Its been stressful and just try to figure out what ourext move will be. [background sounds] thank you for that resnse. Mr. Kuhlmann, after the terrist attacks of september 11, 2001,enders would not support Major Construction projects without first guanteeing that the project had trorism insurance, which at the time was virtually unavailable or extremely unaffordable. Congress responded by passing tria in 2002. Today, today, were condering the pandemic Risk Insurance act, which is based largely on ta, although the cost to thensurer of a terrorism event is immense. The scale of the pandemic is even bger. Mr. Kuhlmann, are pandemics and terrorism events comparably or no such data tria model can be used to provide affordable coverage for pandemics, to . Thank you for your question, mr. Chairman. I dont belve that it is an acceptable model. Terrorism risk is by its very natu a very different ris that a pandemic risk. The trorism risk is something that is localized, and the risk itself can be spread out throughout the country, where as claims that are paid up for the localized one certain region. A pandemic, o the other hand, is something that is occurring multaneously across the country with claims he would have to be paid out simultaneously thrghout the country. Its just a very different risk. Thank you, chairman. Let me follow up with that. While largely successful, tria has faced criticism for relatively low rates among Small Businesses in attempting to replicate pria, the pria model for pandemics. Is there a risk where replicating as well . Thank you, chairman. I do believe that you would indeed exacerbate the problem that you outline with tria, that we dont necessarily feel that all the criticisms are warranted of tria, but i think basing this on a similar model would exacerbate that because of the inability to spread the risk. Yeah, and all the other ways that tria model if were to use for pandemics and do you have any thoughts on that . I think the risk is as i said, mr. Chairman, its just a very different risk that i dont think can be based off of tria or this purse. I think the product would be unfordable, too. Thank you. Fair enough, and thank you, and i now recognize the distinguished Ranking Member for five minutes, mr. Stivers. Mr. Stivers, unmute. Can you hear me . Yes. Thank you, mr. Chairman. Mr. Chairman, i appreciate those questions. Going to step back and look at the scope and scale of tria compared to pria, the risk because i think there is some big differences here. I think its hard to make the tria model work for a pandemic. My first question is to history below. Thanks for being here today. With the current version of pria tapping liability at 750 billion, we assume you ito shut down the United States economy for two months and many analysts have said its about 1 trillion a month. Assume it is a twomonth shutdown because of the next pandemic. Anything above 750 750 billio would be responsible for that . Thats more than the total reserves of the entire property and casualty industry. Thank you, congressman as you suggested in your opening remarks, as did the chairman, we applaud congresswoman maloney for putting a proposal on the table. Theres no question it has limitations, a as some of my fell participant on this panel testifying before you today, e economic consequences of the pandemic are quite different or can be quite different that a terrorism event. We would need to find a way to scale up on that capacity, depending upon can the overall ambitions of wouldnt just for the record, wouldnt it be true about the 750 billion lit, insurance compies would be unhooked until theyre completely broken and bankrupt . I think thats right. Or it would be reluctant to participate, presuming the voluntary rticipation. Because of that i think you will find almost no Insurance Companies that would be willing to persistent in the current model that we a talking about today of the draft legislation. I think that is part of the key, an people will not participate wont work. I really appreciate that. Byhe way i appreciate our coersations when we talked, and i appreciate you taking a sensible face approach. I think we all need to take a step back and start with the principal faith approach and sit said that as of the groupf the graduate forward on this. He may be an insurancebased approach. Maybe another approac frankly, i do like building private capity but i am troubled byhe fact its hard make government takings and insurable risk. What we can do is tap the liability of each individual Insurance Company so that at some small level and grow over time, as a bankrupt eity but i dont think we can make this risk and i would like to ask mr. Kuhlmann, do you believe theres any way to make this insurable risk . I think by its very nature i dont believe it could be. I think the fact that you would have the tens of millions of businesses at the same time. Okay. Assuming we cant make it and insurable risks come if we did use an insurance model at each insurance, have an exact dollar stop loss, how comforting with the ptu, depending on where that stoploss is, then well talk abou what that means to a federal partner in a second. I think, congressman, the an insurancebased model you also have to factor in the adjusting process for that and the cost and the type of the adjusting process for that. And the affordability. Its a parametric trgerbased approach and not, because on a pandemi theres not time or scale for the adjustment process heressume for a second it is a parametric approach. If we look at this current color pandemic, weve had wildfires in colorado, weve had a tornado in arkansas, weve had hurricanes in louisiana. These are our policyholders that we are therefore, that we are paying out and taking care. And to do that i dont have a few seconds left so i would like, you kw, interested in answering that. Ms. Mclaughlin, wld conversation [inaudible] dely important part that is missing. Im sorry, Ranking Member stivers, i had a hard time hearing your question. I was asking if youve had any ceo about event cancellation [inaudible] have you . About our event cancellation coverage . Certainly our proposal is trying to cover main street america. So the proposal we put forward really doesnt contemplate event cancellation but certainly the framework we can expand as we see if that is needed in the future salt. I yield back. The time of the gentleman has expired. I now recognize the chairwoman of the Small Business committee, the gentlewoman from new york, ms. Velazquez, for five minutes. Thank you, mr. Chairman. Ms. Cantrell, its very nice to see you again. Ms. Cantrell, i am concerned about the impact of covid19, how could is impacting our nation Small Businesses. Back in may we held a forum in my committee on Business Interruption. I just would like to ask you hold on a moment. Do you think that if we had a program in place, like the ones were discussing here today on the pandemic Risk Insurance act, your business would be in a stalker financial position and better to withstand the economic downturn . Absolutely. It would be, it wouldve been a game changer for me and countless others and in our Community Around the country, absolutely. Thank you. Mr. Kuhlmann, since the start of the covid19 pandemic, your consistent maintain pandemic insurance interaction is uninsurable risk. Instead, your organization has proposed the creation of a Business Continuity Protection Program. Can you explain why you believe Business Interruption is uninsurable risk . And then can you explain how the Business Continuity Protection Program will work . Share. Thank you, congresswoman. As i have said previously that i think it is an uninsurable risk, certainly for small and mediumsized insurers such as shelter where you would have millions of claims all at the same time throughout the entire country. Its just something that would not be an insurable risk for us, edit dont think quite frankly most companies. But i think the bcpp that we are proposed, it would be a program that would be come have a parametric trigger where, because it is a federal program and it would be subsidized by the federal government, it would be premiums that would be paid but they would be affordable for Small Businesses, for nonprofits throughout the country, and it would be delivered to the Agency Network that is currently out there and highly regulated by the states. People would be able to buy in purchase either up to 80 of their lost revenue for up to 90 days. And i think thank you. I do have another question. Mr. Doyle, marsh was one of the First Companies to advocateor the creation of the publicprivate plan of pandemic risk insuran. First, how would you respondo what mr. Kuhlmann just said . Second, can you explain why marsh visavis that if the right incentives are created, Insurance Companies traditional function of mitigating risk . Thank you very much for the question. I recognize its complex. I recognize its a unique at risk. With talked about the lack of diversification a bit, but we have many clients just like ms. Cantrell who are suffering and under great distress at the moment and they need us to tackle hard at the moment which is why we are here. I fundamentally believe in the social benefits of insurance we will be able to if we structure the program in the right way to invest in new technologies, better collect and manage data, to build models and new ways of working. I am right nested in my office in new york city and midtown manhattan my experience, to work today was very different in my experience was on march 12. Recognize the gentleman from florida, mister posey, for five minutes. Thank you for holding this meetintoday. I appreciate the well intended efforts by the sponsor to help Small Businesses but i am afraid what we have is a proposal for anoth Government Program that will not work without subsidies. We are being asked t underwrite Government Programs to ensure business losses and do so for those who cannot pay off for such losse from an essential policy point of view is there any justification to justi the Business Operation due to a pandemic but not for interruptions due to a financial crisis especially the one we had in 2008 . That would be a difficult distinction to make. There is a role for government, whether there is a need to rate an Insurance Program and whether an Insurance Program is the best way to spend 750 billion particularly when as you mentioned earlier only a minority of businesses have Business Interruptions and do not own your property, you would not possibly benefit from the program, could it be spent better. Lets get to that, provide the help we need today, about that. Thank you for the complete and precise comments. The model after the terrorism Risk Insurance program i voted for longterm reauthorization, in this case there is no existing market for endemic insurance for the creation of it. We canst try to force something into a terrorism model. With business participation due to high costs to tie pandemic errors to a risk based crises. Can you elaborate on this . That is exactly the point we would make, to force the coverage to companies or even if you make it voluntary you would have not a great takeup among Insurance Companies, with less takeup among ensure themselves. It would then become even more expensive with less participation. Thank you, back to mister lehman. We have various models for dealing with greater risk in the country now. For example the National Flood Insurance Program and the entire range of programs providing insurance for floods, hurricanes and earthquakes. The government is in this case the insurer of last resort so to speak. Rather than creating a program that has associated more hazard you can integrate business with cost sharing. Would that be as effective as a subsidized Insurance Program to provide greater control and achieve integration with the fema programs, appreciate your thoughts on that. A good argument to be made the pandemic is more like a public catastrophe than it is an economic program. Some versions considered this a way to respond to public closure, that piece of it, a public responsibility and reimbursing people, for pure economic reasons. Actuarially, physicly the gentlemans time has expired and i am ing to list members, to not ask the question, will you yield back. Certainly, thank you. In missouri, you are recognized. Extremely important we deal with this issue. What i want to focus on, i understand the Program Proposed all, some amount of risk for different types of business vehicles depending on the policy, just for a bit on this issue and to specifically talk about risk tolerance of private sectors before it makes sense. I would like the witnesses if you would to discuss the broad tolerance of the entrance market under various situations. Is the fbi he independent analytical body evaluating this question and if so, when can we expect some data, are we blowing in the wind right now . Any other panelist, please . Im not aware of that. In transition, we wl see, wise to direct, to examine the question of availability coverage with other coverages, Business Interruption is not the on Insurance Coverage in the pandemic, we respond to liability claims for that as well. We are dealing with an extremely Important Program and as far as i know we are dealing with it without data. From the other witnesses. Speak to it. We have been designing our program and we have the data for our own company and we are looking to create a program that insurers get in the game here but with guard rails. From a Small Business standpoint, to limit the exposure by the insurance carriers market share so we have finite exposure and cause actuarial sound rates to those carriers for the insurers portion before those businesses. To the department of treasury office, the afternoon, to work in coordination with the industry, relevant stakeholders providing an assessment, with any efforts underway to address possible shortcomings. The United States congress is an important issue, data that everyone can at least understand its parameters and right now, it is a big deal. If we have to vote on something today we would be voting in ignorance. We dont have data. With an issue like this is significant as it is, presenting data. I think are there other witnesses . What does the silence mean . We would support you getting that information. The and ric, gathering data, we support getting any data we can to review that. I am sure your wife is not. Thank you. At this time we will go to the gentleman from new york. For five minutes. Thank you to chairman clay, Ranking Member stivers, for holding this hearing today. I represent new yorks first congressional district, the first and hardest hit by covid19 long islanders are toughnd found ways to adapt to the pandemic but many businesses are facing difficult decisions as we reach the colder mths, restaurants, gyms and other businesses once ain facing restrictions how and when they operate. Congress did a great job coming tother not as republicans or decrats but as americans that enacted the paycheck Protection Program to provide needed liquidity, vital Congress Comes together againnd passes another round of ppp funding to help businesses whether any government places restrictions, thinking about ways to have liquidity measures ready to assist Small Businesses, and im grateful representative maloney,o reauthorize, started an important nversation how to be proactive for future pandemics but dig a littldeeper, there are other potential soluons more efficiently for Small Businesses. One thing we learn from this crisis ithe importance of getting quickly to Small Businesses to shut down through fault of their own. Talk about the difficultie of using Business Interruption insunce project and the claims process during the pandemic. You would have to have specialized adjusters handling these claims and it is almost a form of Forensic Accounting to evaluate the claims, sufficiently and equip quickly as possible, still going to be not as timely as needed in a situation like a pandemic and also very expensive to less of the premiums. A more efficient way to provide liquidity to businesses that are not business interrupted insurance. We feel that the cbp would be the way with the trigger to almost immediately get funds into the hands of policyholders in that regard. Melinda maclaughlin, a paradox that can be triggered by damage to property and there are other specialized insurance out there like production insurance or event cancellation insurance, financing film production, and with Insurance Coverage. The proposal we put forth is addressing mainstream america but we think we created a framework that once we got the elements combined with her, that we mentioned here today. Construction halted in new york city because lenders did not want to extend credit without protecting the underlying collateral, and funding for new york citys recovery, many lenders stepped up and provided forbearance that do not have the cash flow to meet scheduled debt payments not sustainable in the long term but the solution would be preferable. Whether insurance product is the best method do you foresee Market Forces leading to a necessity, Proactive Solutions to provide liquiditys during a pandemic so these loans are safer and sounder. It is possible. In the case of terrorism the Insurance Market coverage that previously introduced exclusion, that is not the situation we are facing. Very few businesses had hoped for a pandemic before covid19, lenders providing that. I dont imagine lenders are going to ask an insurance project that did not exist. To foreclose, there is no market. I want to recognize the gentlewoman from ohio. Are you there . If not, we will come back to ms. Beatty and i will recognize the gentleman from texas and the subcommittee of investigation mister our green. Mister green. Thank you, mister chairman. Thank the Ranking Member, the chairman of the full committee. Your testimony was quite moving, one phrase that you use you indicated you are experiencing the darkest, when you multiply this, similar situations, there was a lot of pain and for me, it was about individual distances, i have a statement indicating losses for businesses during the pandemic for as much as 441 billion per month. It says to me this is about time. I would like to see a better solution if possible. The economy, not just the individual distance. And i am willing to work across the aisle to accomplish such a thing. I want to ask you about something related to policies in general. Were you the opinion you had coverage of the pandemic at the time you were experiencing this . Yes, thank you for your question. When paying into insurance i thought i was covered for all situations. There are many things insunce Companies Think of i is a siness owner would not think of and that was one of them but i certainly absolutely thought i was covered and the main topic was all my colleagues when we speak daily,eally dark times that we are still in them, how to pay employees, payroll protection, getting that and insurance as well. Many of us talk about how we have been paying in for years to something that wasnt going to help us now. That is a concern, your testimony sparked interest. How it is. Beneficial to have had a notice. When you know it you are fine. It is difficult for you, with the expectation others, recoveries that you didnt have or have that expectation. It was a letdown. It helps you to some extent or you need to look elsewhere for that kind of coverage. Hindsight is 2020. Whether it is my insunce, the government helps in some ways with those things. Would it have helped . I wouldnt ve known to ask for it. I think there was much uncertainty, so much uncertainty, so much hope that things would be time is limited. What im trying to get at, to work with some sort of disclosure to dictate over many years and find out, with that and others. Discretion would be great. And it is not covered. When i talked to my Insurance Company, he is saying this will cover you. My time is up. Thank you so much and i would like to go to the gentleman, you are recognized for five minutes. Thank you for convening todays hearing and thank you to the Ranking Member and i think the witnesses. Miss cantrellif you are still on, youre still on. I wouldcho what congressman green said. I find it compelling and everybody who listed to it found it compelling and we probably all head constituents in our dtricts, we heard the same or similar stories. My question follows up on what congressman green was asking you. If priya was in existence or you have the coverage again or Business Continuity Protection Program was in existence, you had to litigate your claim what woulbe a the affect your district . If i took legal action ainst my Insurance Company . If the coverage did in fact exist but you had to litigate what would be the affect your business . I dont have the resources to take on an Insurance Company. I havent talked to my Insurance Company since this time. In good faith if we dont try to work things out with our Insurance Company then my coverage would keeas well. It never occurred to me for litigation, that is not in my mindset and didnt think it was gointo work in my favor. Same question. If you didnt have to litigate but it took six months to get your claim paid what would be the affect your business . If i knew it was coming, i felt that way with pcp, that was something about the very helpful and pportive and keep us going. I nt speak for others but knowing something wacoming would be helpful. If you knew it would take 12 months for your claim to be paid, it would have a detrimental effect on your business. 12 months is a devastating time when your rent is really high and payroll costs. My point you would need that claim to be paid ia fairly quick manner. Absolutely. The way it is drafted now, is there any prohibition for a policyholder to receive payment to have their claim paid and at some point in the relatively shortterm future. That wouldnt be unusual but the insurance contract could specifically be insuring payroll but that would depend on the contract between the insurer and the insured. It does not propose anything that would limit that. Priya didnt exist the way it is drafted now, it was paid, the employees were laid off, what would be the affect on the economy . These are the relationships between businesses and customers, the goal was to put all these businesses into an induced coma to tackle the virus or hope it comes back to normal. It may not come back to normal but that is how it is restructured, insurance is not structured the same way. Along those lines, if priya were created, the challenges establishing new permanent federal Program Designed to affect pandemic related losses. Priya has the certification, at a local matter for the most part, in the Public Health zone. Thank you, mister chairman. I wanted to now go to the gentlewoman who is chair of the other side, putting this issue to the subcommittees attention. You are recognized for five minutes. Let me express how sad i am that you are not returning. To help so many people, thank the Ranking Member and others that are here today. The ceo of marcia, the only company that could ensure new york with lloyds of london during that time. Pandemics, the effects of pandemic can be devastating, a broad consensus by research from your company, pandemic risk, with an appropriate federal backstop. I want first to thank march for all the research you provided on this issue and make it available to all of us. Can you explain why any federal program must include a federal backstop, being able to ensure pandemic risk. A number of analysts who believe pandemic risks are not insurable. Your comments on that. Thank you for hearing your comments. The prior congress and questions so apologies, thank you for your leadership. Pandemics are global, unlike other cat risks, and the risk bearing capacity to ultimately there. Many insurers have come through, and on thpanel today being an important voice, the industry has a big role to play and i would submit, putting businesses in a coma in a future state. You will totally change the outcome of the next pandemic. Can you hear me . We can hear you. I wasnt able to hear the response so i will ask get tt responses in writing. I want to ask miss maclaughlin, this would require risks with the federal government. The industry does have wherewithal to take risk, it was a mistake, they could not have a risk at all. A leader is say they support it. Can you explain why rksharing is possible but necessary for any federal program. Thank you for your leadership on this as well. For the industry to participate in aolution, because of the dustrys knowledge and experience to help drive better behave years. Our involvement a partnership, Publicprivate Partnership. And incentivize Risk Mitigation. And and risksharing over ti secondary markets develop for the financial rden in the future. Thank you for your work with Small Business. Any other store i see out right now. They have so much hope and Financial Stability in the future. I juswant to say to Small Businesses across the country who clostheir doors forever, organizations that signed the American Society supported by bill have canceled annual event, funding with event cancellation insance. This is to cover related losses and this is just a marker, a proposal, a draft. To work off a draft without anything without a point of reference to build un. Im en to all suggestions. You are very welcome for that perspective at this time we will go to the gentleman from tennessee, mister rose, five nutes. Mier rose. They are trying to get on this. I will tell you what. We will come back to mister rose. Are you there . Takg a little while. There are sti some difficulties. I tell you what, we will have to come back to you. I will go to mister style of wisconsin when we come back. Canou hear me . Yes. Now we can hear you. Go ahead. I was an muted. Must not have taken. Thank you, thank you for holding this important hearing. We have been trying to hold this hearing since june. Im glad we can discuss this important issue today. The covid19 pandemic devastated businesses nationwide, the government mandated shutdown led to massive furloughs, layoffs and closures, programs like the paycheck Protection Program made it so businesses across the country including my home state keep their doors open and employees on the payroll. This program was critical because in all instances, the financl losses our businesses face, and and any legislation. And and voluntary participation, the legislation attached to the hearing today, fail to pass that test, but i do appreciate the chairman for recognizing this bill as a starting point and being willing to work across the aisle for the solutions that have their advantages and disadvantages a worthy of other consideration as we seek bipartis consensus. And and and setting aside the mechanics of priya would even work, and high cost of coverage. And to participate in the program. The makthe option to participate. I dot imagine many traditional property and casualty insurers, the administrative cost would be pretty lge. They are only retaining 5 , the 750 is exhausted given that sites of events, there could be moneover that. It is unclear how that would work out. It would largely be of interest r specialty operators and risk retention, largely serve individual policyholders, what you see as well that a good portion of the backstop. What would happen if insurers who choose to participate in the program made coverage unaffordable for mo Small Business. The cost of administering it, would be pret expensive, and businesses thahave Indoor Dining and those sorts of thgs, person to person interaction would have more expensive coverage. If you are a Small Business, you would is you did before the pandemic, it is not going to happen. You would point out the general difficulties of using insurance, several of the proposals being discussed in the hearing today including priya follow the insurance model. Would you explain to the committee why the insurance model is not an efficient and effective way. The first parof it. And and a lot of the lockdowns were lived in th country in september, they thought business is noal and it wasnt the shutdown that there is no Insurance Claim, and no bad insurance. My time has expired. This hearing is an important first step in the complicated issue and working with my colleagues on both sides to find the solution and the yield back. Couldnt agree with you more. At this time i saw the gentlewoman from ohio. You are still on. Apparently she is not a. We will now recognize the gentleman from Washington State for five minutes. Im not going to take that much time. I dont have a question, but quick comments i like to make the first of which is to thank the panelists very much, it is a profoundly interesting conversation focused on effective approaches to deal with what we are experiencing right now but it does serve as an opportunity to underscore, the circumstance that we are in and i hope things are not exaggerated or repeated too often. American families and businesses are hurting on an unprecedented scale. What we have done in the past, the ppp and unemployment extension, these have run out. Businesses, seed corn and are on the brink of wholesale bankruptcies and it is incumbent on his congress to act and figure out a way to bridge the gaps as we have seen with the spread of covid19 even among our colleagues. Weve got to figure out a way to act. Under a point of personal privilege is to express to you mister chairman how much i enjoyed serving with you. I wish you all the best, for the collaboration experienced over eight years. I wish you godspeed. Thank you so much. Let me now recognize the gentleman from wisconsin, you are recognized. Thank you for having todays wonderful hearing. You for some specific questions. One of the things you have had not hidden this discussion is your Insurance Markets are regulated, i really required, when these pandemics came online, to your knowledge, have all 50 states allowed exclusions for pandemics in their policies to maintain solvency . Your exclusion, the viral exclusion propagated by the Standard Organization for a lot of policy language. Big picture, 50 state regulators acrs the country reached e same conclusion to your knowledge on that. What would be the demand for this . A lot of conversations comparing treo to priya . We had 9 11 and others coming online, terrorism risk coverage, free markets not providing them, congressalled to act to address real market demand. To your knowledg is there a market demand by bank loan covenant or otr market demand that is driving us forward a it would relate to providing this type of panmic coverage at a national level. I have heard anecdotal chatter, that may be something lenders are looking at but i know of no evidence, it is a common requirement so it seems very unlikely for banks to require what doesnt exist. In a sense they did in tria. You saw the markets, for lack of a better phrase following 9 11, the catastrophic ls, congress wasalled to act because there was a hiccup for lack of a better phrase as related to providing liquidity in the reaestate industry. To pandemic insurance. Tria following 9 11, existing terrorism insurance disappeared. You didnt have pandemic coverage before covid19 and dont have it now. Following sars it was carved out in many programs. One thing, the triggering event would shift from traditional Insurance Coverage, being an actual occurrence, to a triggering event that would require possibly an act of congress, with moral or political hazard, the pressure that would be placed as a decisionmaker in a political environment versus a tornado that comes through a tn. Whether or not tre was a tornado that came through, this would be a triggering event. Other instances you n think of whe a government actor, political actor wld control the triggering event has played out relating to potential moral hazards. The only real comparison is tria where the treasury secretary has to certify a terrorist even we never had a terrorist event and this thugh the various proposals, the chosen and priya and so forth they have consider different stakeholders making those decisions. Public officl will have pressure. From the comparison standpointpretty knowledgeable how the trigger should work but you dont see other instances where what i consider freemarket private insurance triggered by political action. Usually events are defined. I yield back. The gentleman from florida, mister lawson, are you there . Can you hear me . Yes. I can see you. You have five minutes. A really important hearing. Businesses all over the country, there was an article in the Philadelphia Business in general, 700 lawsuits brought by policy owners, that d9 businesses that got coverage. Covid19 pandemic and as sure as every claim, that covid19 does not constitute direct physical loss. Are damaged. The courage because of the virus, tangibly destroyed the property and any other damages. From the policy perspective in this issue. And the panel thinks about that. Are you asking about the litigation part of it . The litigation part, the reason is Health Insurance area, everybody has a preexisting condition based on the virus and so forth. There is so much litigation involved, it ensures they are not also profits. I understand and as i mentioned earlier i didnt file legal action. And the governors orders. Theres nothing i can do. To make any money at all. This is what we are talking about today. To support Small Businesses at all. I dont take any legal action but the others have. Anyone on the panel like to respond . I cant hear. Is that john . If i see any hands. Anybody on the panel, premium charges, i have a dividend challenge, and the pandemic risk. Do you believe some type of governmental Backstop Program may be necessary, to be widely available to us businesses for the whole panel. The panel agrees the private market alone is not going to cover a risk like the covid19 pandemic. Th is what we all agree with. It itoo correlated a risk. You are not going to have justified a sution, what that something is. I dont think anyone they dont want to capitalize on it. Congressman, can you hear me w . Apologies. We have been working on half of 10,000 policyholders together cims paid. It is excluded which is why we are here. We need a program that covs this risk Going Forward struured in a way that encourages participation, subsidized by the government, a ick and simple trigger to get liquidity into t system, keep business ali and create the right incentives over time. With all due respect to other panelists, putting the business in a coma we ought to set our sights higher. The gentleman from florida, appreciate that line of questioning. Now we will go to the gentleman from texas. You are recognized for five minutes. I want to say how much of an honor it is to wk with you, you will be missed. I appreciate the time we had together. And the bipartisan bill, hr 7671, along wi a list of supporters records. The paycheck Protection Program, reducing restrictions, and this legislation to address future pandecs in the National Retail federation, with witnesses, legislation for that. The hearing record, without objections so honored. I want to ask a comment. Being overoked by some, the basic principle desigd to cover the losses of the few paid for by the many. In this case a Global Pandemic or nional pandemic is a major loss of everyone paid for by everyone but also want you to comment on this idea of a mandate for insurers. Some suggested it might help to solve the issue we are talking about today. If we mandate insurers offer this coverage, would that work and what are the intended consequences to the market as well. I believe i put in my written statement, have the Global Economy shutdown, the Insurance Industry alone cannot carry them back, there will never be a scenario, an event of this size, correlation is not possible for the Insurance Industry on its own. On the question of a mandate, included in every policy, miss cantrell doesnt have to know. The question, if you add the cost, 2 thirds of businesses dont. That is an open question. You are not getting the outcome that you want. Mister doyle, i heard from brokers around the country that the availability of pandemic related insurance disappeared and some have indicated to me congress should wait until after the crisis is over before contemplating a program to address future the incidents are catastrophic and only affected certain areas. A 1time incident the very next day, talking about what we do because the attack had happened, in this case the pandemic is still ongoing whereas potentially not even through the worst of it. Whether congress should wait until after this is complete before we talk about a longterm solution from an insurance perspective. The market for pandemic insurance was limited prior to covid19 and more limited today. Our clients are facing these risks, and have no ways to deal with them at the moment but i mentioned in my prepared remarks it is fundamental and critical to the economic recovery that we act and act quickly. As we all talked about what congresswoman maloney has put forward for a conversation, but we cant wait, we have to move soon. Mister chairman, i yield back. I think the gentleman for the testimony. We go to the gentlewoman from california, who is also the chairwoman of the full committee, representative warner. You are recognized. [inaudible to work with you on this committee and Financial Services. I would like to let you know that we will miss you. We will miss you, will mission rk will miss your leadership. In particular on housing. [inaudible] but many members know [inaudible] hello . [inaudible] we are familyembers. That your cousin is [inaudible] its a hugeamily. We are respectful and we wish you the best. [inaudible] so thank you, chairman clay. Thank you so much, madam chair. And cousin. Thank you. Now that they know they wont hold that against you that you are my cousin. [laughing] i hope not. Thank you. Thank you. I will turn out to a question for ms. Mclaughlin. Is she in the room . I am, chairwoman, yes. Thank you. The largest Industry Trade groups have argued that pandemic simple can unleash insured against. Their proposed solution puts all of the responsibility for helping businesses and insuring against the risk of the pandemic on the federal government, but not everyone within the Insurance Industry agrees. With cases of covid19 was for striking, spiking in the spring, this interruption losses estimated at over 1 trillion each month. And so i would like to ask you do you think the federal government should be entirely on the hook for these costs . What do you think . I dont think the federal government should be entirely on the hook. I think the Insurance Industry should play about this as well but because we need to protect our Balance Sheets we need to make sure the role of the Insurance Industry has some guardrails and thats what the chubb roku has presented is presented a finite exposure for the Insurance Industry and as we learn about this over time we think that exposure or limit will grow. Well, i want to thank you for your explanation and your concerns, and the way that you describe the role that each should play. Let me follow up, ms. Cantrell. I want to thank you and im going to ms. Cantrell. When the pandemic first broke up and your business was forced to shut down what with the expenses that you are most urgent, that you might have expected your insurance policy to cover . Yes, thank you so much for the question. First of all are with which is very high. Payroll costs, Health Insurance, ou bills, all the financial obligations overdue from buying in the retail cycle, so all of those. So you are able to basically identify how government and insurers can play a role and you believe the trump proposal would accomplish that . Im not that familiar with the chubb proposal. Im not that familiar. But do you think that both the Insurance Industry and government could or should play a role . Absolutely. Do you think the Insurance Industry should not be left to try to bear the burden of the cost of covid19 or pandemic, is that right . I think it should be shared with the backstop, yes. I thank you very much. Mr. Chairman, i will yield back the balance of my time. The cirwoman yields back, and at this time we go to the gentleman from indiana, mr. Hollingsworth. You are recognized for five minutes. Thank you so much, and really appreciate your service to the bcommittee and to the commtee as a whole. Number one, i want to talk about all the bad ideas were throwing around here and certainly one to put a nail in the coffin of what i think is the absolute worst idea thats ever been brought forth about how we handle this, that is forcing insurers to pay out claims for which they did not collect premiums retroactively. This is not even an idea. But even a solution. Its a rewriting of tens of thousands of contracts across this country. Ripping across the very basis of contract law which is under in a free market economy for 240 years. It is a violation of those basic principles. In addition i think we all need to remember that every state regulator approves the exclusion of pandemic insurance as a part of Business Interruption insurance. That was approved by red and blue state regulators across the country. I think thats been lost in the conversation. I want to thank my first question to [inaudible] and will ask where using the word insurance a lot in his hearing come in this dialogue but really zooming out i continue to hear from industry from experts and academics that this is truly an uninsurable risk for the industry. Can you elaborate on why this is an uninsurable risk . Thank you for the question. The very nature of the pandemic, the fact it is occurring at all at the same time for tens of millions of businesses all at the same time all over the country, its not something we can spread the risk around as mr. Lehman said pickett something that you use many to play for the claims of the few, and this would be everyone attempting to try to pay for everything at once. When you hear of the members talk about how they what government involved in this privatepublic partnership. With a mean by government involvement is either one or two things. Number one tryin toeduce the very high premiums that pandemic insurance wouldost if those in the private stor because they want to improve uptake. If you reduce premiums com for the absorption of the massive contemporaneous lses that would occur. Thats what i hr people say by public iolvement in this. The first is most disconcerting because what i hear from all these member s gosh this would improve economic stability, we need more people to tak this out so the risks areower. If more people are taking it out it means weave lowered the premiums dmatically not reflecting the real underlyin risk tha is being taken he did bu Insurance Companies for by the governmentecause in and of itself if it were insurable the cost would be very, very high. Isnt that correct . That is absolutely correct. The affordability is very key. Thats probably the bcpp is a way that you would have the product a much more affordable and could be bought on Small Businesses and nonprofits all over the country. The more people buy into of course the cost of it will go down. Right. As you said the more people that buy into it the more concurrent losses your also would have which means you need a government Balance Sheet to step in because if uptake is very, very good to have a good problem of a lot of people getting paid up but the bad problem of a lot of people making those payments been taxpayers and that continues to be a deep concern to hoosiers and two americans alike. The second big thing i want to touch on is this notion that in the future, future congresses are going to say to american businesses hey, you paid into this program, working to give you a recovery but your business next door which is suffering mightily in his future pandemic will not get paid out. Ive only been in congress for years but have borne witness to many a times will we do not make such a distinction. Inclination future congresses will be to pay everybody, give everybody a recovery to help spur the economy along. And then no one will buy the insurance quoteunquote insurance next breath because of a recognized everyone get the same payment whether they paid into the program or not. So i think this will hearing is about a lot of bad ideas that are masked under good Economic Policy or masked massed under e but are not actually either. With that i will yield back. Thank you, mr. Hollingsworth. And now i want to recognize my friend and neighbor to theorth from iowa, cindy axne will have five mutes, you are recognized. Unmute come first. Thank you, chairman. Its so good to see you. And really grateful to be here having his syria on a really important topic right now. We all know that our country has been it incredibly hard by this pandemic. Can you all here okay or am i echoing . You are echoing. Perhaps our technicians can help. Try it again, cindy. Lets try this again. Still echoing. I tell you what, then we come back to let me hear you now. Go ahead. How does this sound . Still an echo. Mr. Gonzalez of ohio, and then ll will come back to y, cindy. Kay. Mr. Gonzalez, you are recognized for five minutes. Thank you, mr. Chairman, and thank you to everybody for participating in this hearing. Obviously a lot of thought has gone into the various proposals and i appreciate that. I dont want to be too negative on the work because in the people are sincerely trying to solve what is a very difficult problem. Having said that i do want to associate myself mr. Hollingsworth, almost in full. It seems awfully premature and i have heard from mr. Kuhlmann, im curious what mr. Lehman would offer an mr. Doyle would say. Does anybody believe this is an insurable risk . Congreman, i guess i will go first. The are risks within the pandemic that are insurable. It is not possible for the industry at the macro level to ensure the entire pandemic. You can have policy that is discrete, has caps so long as those caps will be respected, and insurable right it is not nearly enough with the sizef the problem. Precisely. Again i will be very quick because fraly trade did as good a job as you could possibly due to reflect my personal views. Tray. We are in middle of this. I thi its very premature and, quit frankly, arrogant to think that we could right now sit here and Workable Program that would ensure us against future pandemics. Personally, i think what we probably should do is navigate our way through this current pandemic, review how all the programs would put in place worked come what worked well, what didn work well, what adjustments will be making future pandecs and then move forward from there. But i do appreciate we are all trying our best but that would b my take. Thank you for the hearing. Take you for recognizing me, and i yield back. The gentleman from ohio yields back. I would like to go back to the gentlewoman from iowa, ms. Axne. Ms. Axne, are you there . No, okay, she is not there then so we will go to mr. Timmins of south carolina. Mr. Timmins, you are recognized for five minutes. Thank you, mr. Chairman. And mr. Chairman, thank you very Great Service to this committee and to the house as a whole. I wish you the best in the future. We will all no doubt miss your leadership. Thank you. So we find ourselves in the midst of a disaster. Make no mistake this pandemic has devastated folks all over the country. The very same people who send us to congress to be their voice in these critical decisions. As a Small Business owner myself i feel the intense pain of many beloved local stores, restaurants and my district who will not be opening any time soon if they ever do reopen. These places operate on thin margins and rely on loyal customers many of them are unwilling or unable to return to the ways are accustomed to shopping and this is not the Business Owners fault. From what ive heard today any longterm solution must work for all parts of the economy. Most important it must help those were forced to close their business by the government. On that note, mr. Kuhlmann, would tria has proposed address the problems so many of our small Business Owners are curly facing pria . We believe the bcpp is a better model than the proposed pria many because of the, back in the insurance model for handling in the amount of time that it would take to actually adjust the claims versus the bcpp which could give money directly in the hands of the needed Small Businesses. Thank you, congressman. But you would agree it would not necessarily, but not affect smokers which were most focus on helping, is that a fair statement . And i believe part of that is the affordability of it. I think mr. Chairman, will be much more affordable than pria model which i think just would not be affordable for most Small Businesses cooperate on as you said very thin margins. I agree. If pria had been the law last year, does anybody on this call want to estimate the cost to the federal government or portion of these losses . Does anybody have guesstimates . Were talking trillions, im guessing. Yes, congressman. That is why issue didnt exist, the private market would have solved to this already. This is why we need the ultimate support of the federal government. Certainly appreciate my colleagues willingness to put her idea on paper. I dont believe this is a realistic solutio my colleagues have made solid points, ensuring the risk proposed by potential terrorist attacks as a post a Global Pandemic of they just couldnt beore different. Terror attacks even t worst and most of us in ones are typically confined to relatively all geographic areas and have a very clear beginning and end. Pandemics on the other hand, by definition are occurring everywhere at once for for the unknown amount of time. To think we c essentially copy d paste our plan for ensuring against terrorism against the paemic just doesnt work. Furthermore, i believe tt the time to plan for the next one to care yetter 100 year pandemic is not in the middle of the current one. Nothing were discussing today will hp ms. Cantrell or any of th other businesses in our districts that are facing the prospect of closing now. The terrorist act wasery helpful but it was over seven months ago. Our inaction in congress is quite frankly disgraceful. When the government puts people out of work due to no fault of their own for safety purposes of our citizenry, it must step in and mak this business and individuals al we have neglected our duty and must act immediately. Many businses and my district were able to get ppp loans, and that is something we all agree on. We need to make sure businesses that are still suffering that have the revenue loss are able to get assistant. If were going to st tm down we have an obligation, an obligation to make sure ty get through this pandemic. I believe we can get this done. I believe when you d get it done quickly and i look for to working with my colleues to get to this pandemic andhen finding a good policybased solution that will allow us to prepare for the next one. Th that, mr. Chairman, i yield the bance of my time. Thank you. Tha you, mr. Timmons. Let me say that if you have any relationship with your two to u ascenders, i would urge that you talk to them about getting back to the negotiating table with speaker pelosis well as with treasury secretary mnuchin. And that would help us address the issues that you raise. Mr. Chaman, i have been pushing it as hard as i can put at the end of the day when you tell people that are being adverselyffected by covid, not bailout states insolvent pension funds. We can find a way forward im sure. And we asked the congress have to believe we want to help the American People during this Global Health pandemic. Let me go on and lets try ms. Axne one more time. You are recognized for five minutes come ms. Axne. How does this sound . Much better. It sounds like you. Perfect. Thank you so much for putting up with my technical difficulties. I never thought i would be saying that in the middle of a hearing, butere we go. Thank you so much, chairman, for holding thi and for having here. Th is an a cold important topic of course for Small Businesses across the country who have been hit so har with this pandemic. We could be looking at 4050 of our resurants closing and in te next six months and thats one example with covid uncontrollablyetting worse across this country. So the starting pointor what we discussed here today is that businesses in my district and around the country find o in march that eve if they were in a 3040 of companies that have busine interruption insurance it likely didnt cover pandems. Mr. Doyle, none of the proposals were discussing today would be retroactive and cover covid 19 losses, is correct . That is correct. Thank you. Now i know the estimates for the losses were more tha 400 billion per month for just the smallest businesses. Ms. Mclaughlin or mr. Kuhlmann, i wonder how much do you think we might be talking about and shrink what do you have an estimate for the losses so far this year . I dont have an estimate of the losses for this year. Okay, okay. Mr. Kuhlmann, do you . No, i do not. All right. For any of the witnesses if this were just to be covered over all, do you have a sense of what kind of premiums we would be talking about relative to current insurance . Congresswoman, what im suggesting is that we developed a program that encourages participation, need to and some would be subsidized by the government, the u. S. Government Balance Sheet. I would make the case government is ultimately holding the risk today. Whats missing today whether the cares act or the bcpp are the social benefits of insurance, and we can mitigate the future impact of pandemics on our economy if the private market and government and our policyholders come together. I very much appreciate that would have to be honest. Its hard for me to evaluate propulsid to cover future pandemics when no one knows what those premiums might be. Thats an important piece of what this looks like. Mr. Doyle and mr. Kuhlmann give any sense of what percentage of businesses might want pandemic coverage either with or without a federal subsidy . If you include a federal subsidy how large you estimate that subsidy to be . Its hard to say what the ultimate takeup rate would be, congresswoman. Of course it would depend upon how we structure notably price the program. But a government subsidy would be required and we need to figure out the modeling and the data behind that. Okay. So no clear understanding right now at this point on the kind of premium and or the types of subsidies that would be necessary for that is my understanding. It would boldly depend upon the amount of risk the government would be willing to backstop for the private market. Okay. Now this crisis of course unfortunately has shown us first and how many of our businesses cant even go weeks without some revenue coming in and theres another issue have to address year which is how fast we can give relief to the businesses that need it. We certainly saw that with the ppp the spring how much a difference even a few weeks can make in getting that in the folks hands. I know firsthand processing Insurance Claim this, and thats without making a claim all at the same time. And in of the how quickly would business really get the help they need during a pandemic . I would take an edge for each one of you or any one of you on that. For me, congresswoman, a parametric trigger come if we could set the right trigger we could get that claim paid quickly, within weeks. Within weeks, he said . Yes. I think, congresswoman, bcpp with a parametric trigger would be immediate. You would not have a traditional claims process where you having an adjuster try to do some forensic accountant and determine the amount of the claim. I think under the bcpp it would be [inaudible] congresswoman, under the chubb program will get a parametric structure for Small Businesses so we can get the funds enhance of the Small Businesses as quickly as possible. Okay, okay. Thank you for that. Since this proposal are all forwardlooking i i want to mae sure the solution that works for the businesses that need it. Lastly i just want to make sure we dont raise costs for businesses so much that insurance could be unaffordable and push them out of business right now as were coming out of a pandemic. We also risk charging business for something they wont even use. So thank you so much for your answers to give me some clarity, and chairman, i yield back thank you so much, ms. Axne. And i understand the Ranking Member from ohio, mr. Stivers, once to make a closing statement. I just want a point of personal privilege, mr. Chairman. Please go ahead. I would be very brief. I think history is another example of showing your leadership and what you have done to make congress better,o make america stronger, and to serve their constituents, mr. Chairman, and i for one am very proud to have worked with you. And i want to say good luck to you in your future, and that we will all miss you very deeply and your expertise come hard work, your diligence and your caring nature, mr. Chairman. Thank you so much for making a country bent and represent the best of us. Today is just another example of that for a great hearing today. Thanks for making a difference for america. God bless you in the future, mr. Chairman. Into so much, mr. Stivers. Let me first say thank you so much let me first say i want to thank our witnesses for the testimony today. Without objection all members will have five legislative days within which to submit additional written questions for the witnesses to the chair which will be forwarded to the witnesses for the response. I asked our witnesses to please respond as probably as you are able. Without objection all members will have five legislative days within which to submit extraneous material. To the chair for inclusion in the record. And i remind members to submit written questions and material for the email address provided to your staff. Without objection i would like to submit a letter from Ranking Member stivers and i to President Trump for the record and also a letter to house leadership, both letters address pandemic Risk Insurance. And now in closing, the searing has certainly raised interesting and intriguing issues on how to best protect businesses of all sizes during a Global Health pandemic. And i want to thank chairman maloney for bringing this issue to the forefront, and i am certain this will not be the last we hear of this issue more than likely. This will be the last hearing that i chair of this subcommittee since i will be leaving the house at the end of the 116th congress. Let me say that it has been an honor and privilege to serve in this august body, and a distinction only experienced by some 11,000 americans throughout our nations history. As chair waters mentioned, we are relatives, but to me, to all of the members of this committee and this congress, i look at you all like we are family, and hold you in my heart as such. And i wish you all success in the 117th congress, and god bless you all here this hearing is adjourned. Thank you. This afternoon a conversation with dr. Robert mayfield, director of the centers for Disease Control and prevention come on the current state of the pandemic from the u. S. Chamber of commerce live at 5 p. M. Eastern on cspan2 come on my cspan. Org or listen live on the free cspan radio app. Booktv on cspan2 has top nonfiction books and authors every weekend. Coming up this weekend saturday at 1 p. M. Eastern from the recent virtual brooklyn book festival. Watch booktv on cspan2 this weekend. The Washington Post talk with former National Security adviser to President Trump, john bolton. He was asked about the trump administrations decision on a rant from withdrawing troops from the middle east and the number ofan other issues. Good afternoon. I am robert costa with the Washington Post, National Political reporter. Today your Washington Post live we welcome back when of the more highprofile former members of President Trumps administration, allan holt highprofile critic who served as National Security adviser to President Trump and previously served in of the republican administrations here ambassador john bolton. Welcome a back. Glad to be with you. Thanks for having. Ambassador bolton, as you look at the landscape in sight of the transition period during this lameduck. Make after the electioo
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