Currently, there is a movement by some industry personnel and legislators to expand the Terrorism Risk Insurance Act (TRIA) to include pandemics. There is a discussion draft of a bill, and a summary of that bill here. So, is a federal backstop program that is part of, or similar to, TRIA feasible or advisable? Its too early to tell, but below are some initial caveat emptor thoughts.CatastropheLegislation & Regulation
FIRST, TRIA has not been tested, so we dont know if this backstop program actually works, how well it might work and how it might affect the insurance industrys ability to assume risk in the future, much less be able to effectively respond to terrorist acts.
In addition, for a claim to fall under TRIA, it must be caused by a traditional covered peril found in most property insurance policies. In the case of PRIA, the pandemic itself is the peril, and it can affect the entire population.
SECOND, following that thought, the industry has significant financial assets but not manpower. Weve already seen how difficult it is for government and all of its resources to respond to regionally localized claims involving hurricanes, tornados, flooding and wildfires.
The ability of the insurance industry to adjust claims on a nationwide basis would likely be extremely limited, raising the question of whether “insurance” is the proper mechanism for responding to truly catastrophic national or global exposures like pandemics.
THIRD, just as the manpower issue cannot be understated, neither can the required expertise of adjusters.