Some risks can create losses so great that they are not insurable in the private insurance market without substantial government support, including catastrophic terrorism, nuclear accidents and pandemics. These catastrophic events can cause massive economic disruption as governments struggle, as they have in response to COVID–19, to provide effective and timely assistance through programs cobbled together after the disaster has struck. Not surprisingly, these ad hoc programs can lead to inefficiencies, substantial delay and uncertainty, as well as real and perceived unfairness in aid distribution.
There is a better way. Chubb believes that a public–private partnership program can be implemented before the next pandemic that recognizes the differing needs of small and large businesses and will provide:
These are key components of Chubb’s Pandemic Business Interruption Program. The Program has two elements: a program for small businesses that provides an immediate cash infusion when a pandemic is declared and a separate voluntary program for medium and large businesses with losses paid through the existing industry claims adjudication process. Both depend on the federal government assuming a substantial percentage of the risk, through direct U.S. Treasury funding to insurers for the small business program, and through a newly created government–run reinsurance entity for medium and large business losses.
Chubb Urges U.S. and Insurers to Team Up for Future Pandemic Costs, Bloomberg, 7/8/2020
U.S. insurance industry rift deepens over pandemic cover, Financial Times, 7/8/2020