(Corrects typographical error in link in 3rd paragraph)
By Suzanne Barlyn
May 21 (Reuters) - With U.S. insurance companies facing criticism and lawsuits over their response to the coronavirus outbreak, three industry groups on Thursday proposed putting the U.S. Federal Emergency Management Agency in charge of a taxpayer-backed program to protect businesses from revenue losses during future pandemics.
The program would allow businesses to buy “revenue replacement assistance” - up to 80% of payroll and other expenses - based on past years’ tax return data, the groups said.
Insurers announced the plan after facing multiple lawsuits, fierce political pressure and criticism from customers with business interruption policies over not covering their financial hardships due to the novel coronavirus pandemic.
While these policies may cover revenue losses from hurricane damage, lightning strikes or cars crashing into buildings, they either exclude or do not specifically cover a pandemic, however much it may interrupt business.
“Pandemic risk protection has been largely unavailable in the private marketplace because it is inherently uninsurable,” said the groups said on Thursday.
Some insurers want pandemic policies to be backed by the U.S. government, similar to the government-supported commercial terrorism products that followed the attacks of Sept. 11, 2001. The terrorism program requires insurers to pay part of the claims, before U.S. taxpayers take over.
But major industry groups said they oppose a similar cost-sharing plan for pandemics, which pose a more wide-reaching and long-running risk than a terrorism incident in a specific area.
Under their proposal for a fully taxpayer funded plan, payments would be automatically triggered after a U.S. president declares a “viral emergency,” provided businesses bought the protection at least 90 days earlier, the groups said.
The program should consider buying reinsurance each year to protect U.S. taxpayers, the groups said. (Reporting by Suzanne Barlyn; Editing by David Gregorio)