Earlier this week, the American Action Forum (AAF) held a virtual forum examining the COVID-19 policy responses and their successes and failures in providing relief for businesses during the pandemic. In a companion report, AAF Director of Financial Services Policy Thomas Wade dove into the state of play of financial support for businesses during this crisis

In his piece, Wade discusses several important topics, including the Federal Reserve’s emergency lending facilities, business interruption (BI) insurance, and protecting businesses from a new class of coronavirus litigation. 

Former Nebraska Governor and U.S. Senator Ben Nelson, a longtime insurance executive and regulator, said the following after the event: 

“The COVID-19 pandemic has brought unprecedented financial harm and uncertainty for businesses across the country. If COVID-19 has shown us anything is that global pandemics are uninsurable; only the federal government has the financial ability to provide business relief during this crisis. AAF’s report comes as a timely and crucial reminder that while some financial relief measures have been enacted, they have not done enough to support American business owners during this crisis. Now it’s time for Congress to come together to find a government-backed solution that brings much-needed relief for struggling businesses around the country.” 

Wade provides an important summary of the ongoing BI debate in his report, highlighting the implications of the absence of a federal backstop during a pandemic for insurers and businesses alike. 

• Wade reiterates what insurers have been showing for months: only the government has the financial means to provide business relief during a crisis of this scope and magnitude. “Despite most insurance policies explicitly excluding viral risks, insurers face enormous pressure to pay business-interruption claims; a possible solution in the future is to create a federal reinsurance program with a backstop, allowing insurers to write pandemic-related policies.”
  

• Additionally, he points out that without a federal solution, businesses are turning to litigation against insurers. Still, courts are overwhelmingly siding with insurance companies because contracts are clear. “The primary battleground for insurers are courts across the world; in the United States a growing number of courts appear to be finding in favor of insurers by noting the necessity of physical damage as a trigger to business interruption insurance.”
  

• Wade also emphasizes, “Without further government aid, the temporary closure of hundreds of thousands of small businesses could be permanent by the time the national emergency is lifted.” He continues, “the government’s role must be to provide the financial relief required to keep businesses afloat and not choose winners or losers by vilifying certain industries, from insurers to landlords.”

For a full event recap, check out FAIR’s latest blog post. For more information on the ongoing BI debate, visit fairinsure.org.