ASAE and other members of the Business Continuity Coalition (BCC) urged lawmakers in a Senate Banking subcommittee hearing today to develop a public/private program to mitigate event cancellation, business interruption and related losses from a future pandemic or other devastating event.
The Senate Banking Subcommittee on Securities, Insurance and Investment convened the hearing to “explore solutions to the economic challenges a future pandemic would bring,” Senate Banking Committee Chairman Sherrod Brown (D-OH) said in his opening statement.
Brown said he has heard from small business owners who learned last year that their business interruption coverage included in their insurance policies would not protect them from losses incurred during the COVID-19 pandemic. The insurance industry has countered that if those policies had covered business losses resulting from the pandemic, the industry might have collapsed.
L. Charles Landgraf, senior counsel at Arnold & Porter in Washington, DC, testified on behalf of the BCC at the hearing and said that a public/private backstop program similar to the Terrorism Risk Insurance Act (TRIA) program enacted in 2002 after the 9/11 attacks is urgently needed.
“Closures and shutdowns caused by COVID-19 last year, of course, had massive impacts on business activity and employment, not to mention all of our lives in myriad ways,” Landgraf said. “These closures/shutdowns brought immediate focus on the ‘business interruption’ insurance which many American businesses – small, medium and large – had purchased to protect basic operating revenue needs in times of disruption. It also brought into relief the disagreement between insurers and policyholders over whether a pandemic infection constituted ‘physical damage’ necessary to trigger coverage under many of those business interruption policies.”
The gap in insurance coverage extends beyond business interruption, however, Landgraf said. Event cancellation coverage is especially critical for the nonprofit association community. ASAE’s Research Foundation surveyed association professionals in December 2020 and found that 79 percent of respondents reported no coverage available last year for event cancellation and only 3 percent reported being able to secure future coverage that includes communicable diseases.
ASAE, a member of BCC’s steering committee, submitted comments for the hearing in support of BCC’s testimony and proposal for a public/private backstop solution to address gaps in coverage and protect organizations against future pandemic risk.
“Event cancellation coverage is paramount for our community, as major in-person trade shows, conferences and events account for an average of 35 percent of total annual revenue for associations,” said ASAE President and CEO Susan Robertson, CAE. “We exist, fundamentally, to support industries and professions vital to our economy. To continue to fulfill our duty, associations and others need a pandemic risk solution with robust event cancellation to help fully reignite our community’s programs, services and far-reaching economic impact.”