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GOP senators urge Trump to protect insurers from state legislation

Seven GOP senators sent a letter to President TrumpDonald John TrumpTrump alludes to possible 2024 run in White House remarks Trump threatens to veto defense bill over tech liability shield Tiger King's attorney believes they're close to getting pardon from Trump MORE 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 ScottTimothy (Tim) Eugene ScottDemocrats lead in diversity in new Congress despite GOP gains The Hill's 12:30 Report - Presented by Capital One - Pfizer unveils detailed analysis of COVID-19 vaccine & next steps GOP senators congratulate Harris on Senate floor MORE (R-S.C.), Mike CrapoMichael (Mike) Dean CrapoMcConnell in tough position as House eyes earmark return Mnuchin to put 5B in COVID-19 relief funds beyond successor's reach Democrats accuse Mnuchin of sabotaging economy in dispute with Fed MORE (R-Idaho), Thom TillisThomas (Thom) Roland TillisRep. Mark Walker announces Senate bid in North Carolina Grassley returns to Capitol after having coronavirus McConnell halts in-person Republican lunches amid COVID-19 surge MORE (R-N.C.), Mike RoundsMike RoundsRepublican frustration builds over Cabinet picks Senate GOP open to confirming Yellen to be Biden's Treasury secretary Democrats brush off calls for Biden to play hardball on Cabinet picks MORE (R-S.C.), Pat ToomeyPatrick (Pat) Joseph ToomeyAppeals court rules NSA's bulk phone data collection illegal Dunford withdraws from consideration to chair coronavirus oversight panel GOP senators push for quick, partial reopening of economy MORE (R-Pa.), Ben SasseBen SasseTrump transition order follows chorus of GOP criticism The Memo: Trump election loss roils right Whoopi Goldberg blasts Republicans not speaking against Trump: 'This is an attempted coup' MORE (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.