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Butler insurance expert: Treat pandemic like terrorism attack

FILE - Dec. 31, 2019, file photo shows a view of the U.S. Capitol Building in Washington. (AP Photo/Susan Walsh, File)

INDIANAPOLIS (Inside INdiana Business) — A Butler University professor is urging Congress to institute a Pandemic Risk Insurance Act to help cover some of the costs associated with the COVID-19 pandemic, a move he says that will get businesses up and running again.

“Every business in America doesn’t understand where they’re going to get their money from,” said Zach Finn, director of the Davey Risk Management and Insurance program at Butler.

Finn and a group of colleagues say the PRIA that is similar to the Terrorism Risk and Insurance Act. TRIA was written and put into law following the terrorist attacks on September 11, 2001, and economic turmoil.

Finn says it essentially acts as a type of reinsurance for commercial property and casualty insurance policies, helping to recoup losses for businesses.

“As soon as you turn business interruption and pandemic insurance back on and you turn it on for coronavirus, and you let people who didn’t have it before, get it. Now all of a sudden people with losses are getting paid,” said Finn. “We need to get all this uncertainty off American businesses and individuals’ balance sheets and use the insurance industry. It’s just a more efficient way for the government to backstop the insurance industry so that this coverage can exist in the private marketplace.”

Many businesses were not able to purchase insurance protection against future terrorist attacks. In response, Congress enacted TRIA in 2002 to provide a government reinsurance backstop in case of another large-scale terrorist attack.

As Finn explained, a standard business insurance policy alone would not cover business interruption losses caused by terrorism, nor will it cover losses from the pandemic.

“Eighty percent of all entities do not have insurance for a pandemic,” said Finn.

The TRIA ensures adequate resources are available for businesses to recover and rebuild if they are the victims of a terrorist attack, or in this case, a pandemic.

Using Butler University as an example, Finn explains if Hinkle Fieldhouse were to burn down, business interruption insurance would pay not only to rebuild the structure, but it would pay for lost revenue while construction is underway, it would cover payroll, insurance and property taxes.

“So, business interruption is great insurance. The problem is our businesses are interrupted because of a pandemic, and it doesn’t include it,” said Finn. “We could start to adjust business interruption and event cancellation losses and turn the market for that coverage back on.”

Finn says the PRIA has the attention of the U.S. House Financial Services Committee, but it has stalled there.

Finn says the TRIA needs to be retroactively offered to anyone who previously declined the coverage. He fears without PRIA being retroactive, there will be years of claims litigation. Finn says if courts invalidate coverage exclusions, it could destabilize the insurance industry.

He says Congress must take action now so the country would be ready for the next national catastrophe, whether it’s terrorism, a pandemic, or some other unforeseen event.

In an interview with Inside INdiana Business, Butler insurance professor Zach Finn says a terrorism insurance program can work for pandemics.
Finn wonders if should there be bailouts for institutions, like Butler.