GOP senators urge Trump to protect insurers from state legislation
Seven GOP senators sent a letter to President Trump on Friday asking that he commit to protecting the insurance industry from proposals in state legislatures that would require insurance companies to retroactively cover small-business losses due to the coronavirus pandemic.
Many small-business insurance policies do not cover pandemics when it comes to losses from business interruptions.
State lawmakers in New York, New Jersey, Ohio and Massachusetts have introduced bills that would retroactively require small-business insurance policies to cover losses due to closures from the coronavirus.
The letter to Trump, obtained by The Hill, warns that the new state-level legislation would result in enormous financial losses for the business insurance industry. The letter is signed by Sens. Tim Scott (R-S.C.), Mike Crapo (R-Idaho), Thom Tillis (R-N.C.), Mike Rounds (R-S.C.), Pat Toomey (R-Pa.), Ben Sasse (R-Neb.), and David Perdue (R-Ga.).
The GOP senators argued that the proposed changes “undermine our understanding of contractual obligations” and would serve to “help one segment of the economy by seriously harming another.”
They said the insurance companies did not charge premiums associated with pandemic risks and therefore do not have the capital required to cover losses due to the coronavirus closures.
“If the insurance industry were now forced retroactively to cover perils that were never accounted for commercial insurers could experience significant economic strain and/or insolvencies, given the magnitude of the current cumulative estimated claims,” the senators wrote.
“Adding another point of stress during these times, this would likely put our businesses in an even worse position — draining the U.S. insurance reserves to pay these claims could leave us in a position of having inadequate reserves to cover claims that are actually intended to be covered, such as damage from wind, fire, hail, and other covered perils,” they added.
Under the state-level bills, insurers would be able to seek recompensation directly from the states, which would pay out through new fees on the insurance industry.
The idea has been met with fierce opposition from insurance industry lobbyists.
The GOP senators argued that Congress has already addressed covering small-business losses through billions of dollars’ worth of new lending facilities.
The senators warned that retroactively requiring insurance companies to cover business closure losses because of the pandemic would “create major unintended consequences for new contractual relationships.”
They warned that the changes would be “litigated in the courts for years,” guaranteeing that “no money would make it to small businesses that need it.”
“We stand ready and willing to work with you and our Congressional colleagues to ensure that U.S. small businesses have the funds they need to survive this difficult time,” the senators wrote.
“However, we cannot help one segment of the economy by seriously harming another. We must continue to work diligently to get the PPP funds out to as many small businesses as quickly as possible. If it becomes clear at some future point that we need additional funds or facilities to get necessary federal money in the hands of small businesses, we will work to achieve that goal at that time,” they added.
The Hill has removed its comment section, as there are many other forums for readers to participate in the conversation. We invite you to join the discussion on Facebook and Twitter.