WASHINGTON, D.C. – U.S. Senator Bob Menendez (D-N.J.),Chairman of the Senate Banking Subcommittee on Securities, Insurance, and Investment, today chaired a hearing entitled “Examining Frameworks to Address Future Pandemic Risk.”  During its first hearing, the Subcommittee heard testimony from a group of experts, business leaders, and insurance providers to explore whether Congress should consider a pandemic risk insurance program to limit the economic damage of future global catastrophic events such as the COVID-19 pandemic.

According to the National Association of Insurance Commissioners, of the eight million businesses with commercial insurance policies that included business interruption coverage, 83 percent also included a clause excluding claims from viral contamination, disease, or pandemic, leading to 82 percent of claims being closed without payment.

This pandemic unleashed havoc throughout our economy. Across the country, businesses suffered massive losses as a result of stay-at-home orders and other containment measures necessary to slow the spread of COVID-19.  During the height of the pandemic, 74 percent of all small businesses reported falling revenues from the previous week, and small business ownership dropped by 22 percent,” said Senate Banking Subcommittee on Securities, Insurance, and Investment Chairman Menendez in his opening remarks. “In a state like New Jersey that was particularly hard hit at the onset of this crisis, 92 percent of small businesses experienced revenue losses and 41percent temporarily closed. These losses were particularly concentrated in minority communities and in certain industries, such as restaurants and leisure and hospitality.” 

Most of New Jersey’s small businesses were not able to obtain relief through their insurance policies. As a result of this, 84 percent of New Jersey small business owners had to apply to the Paycheck Protection Program (PPP) and 58 percent applied for Economic Injury Disaster Loans (EIDL).

One New Jersey small business owner, Adenah Bayoh attended today’s subcommittee hearing as a witness. Bayoh, who escaped the civil war in her native country of Liberia at age 13, immigrated to the United States, and is now one of the most successful entrepreneurs in the state. Bayoh owns and operates several individual IHOP franchises in Newark, Paterson, and Irvington, where she is the second largest employer in the Township. She also owns other restaurants and a real estate development portfolio with several major residential and commercial urban redevelopment projects across northern New Jersey.

“Despite all of my hard-earned successes, everything came crashing down in March of last year, when restaurants were among the first businesses to shutdown,” said Bayoh at today’s subcommittee hearing. “I had business interruption insurance with Chubb and Liberty Mutual. It was to cover 12 months of actual loss of business income, if something ever happened to my business and I needed to shut down. I paid annually an average of $ 275,000.00 in insurance premiums.  When the pandemic hit, I immediately contacted my insurance company.  My broker advised me that viruses and pandemics were excluded from insurance policies like mine and (…) there would be no relief from my insurance company. I was shocked to find that my insurance coverage was not there for me when I needed help the most.  This harsh reality soon set in. I began trying desperately to figure out how to cover my financial obligations and, most importantly, how to take care of the people who rely on me to feed their families.”

Other witnesses at today’s hearing included Evan Greenberg, Chief Executive Officer of Chubb; Dr. Robert Hartwig, Director of the University of South Carolina’s Center for Risk and Uncertainty Management, a Clinical Associate Professor who studies the insurance industry; Charles Landgraf, Senior Counsel at Arnold & Porter, on behalf of the Business Continuity Coalition, who has over three decades of experience in insurance legislative initiatives and brings vast technical expertise to the discussion; and Martin South, President of Marsh US and Canada.

“A robust debate on this topic has already begun in the business and insurance communities. We must determine the extent to which businesses, private insurance providers, and the federal government are able to share the risk of losses due to a pandemic. We will also examine a number of pandemic risk insurance proposals and frameworks put forward by business coalitions and the insurance industry in the wake of this crisis. Each presents different ideas on how much risk is borne by the private sector versus the federal government, and the approach to paying claims,” added Chairman Menendez. “Your insights will help Congress grapple with the challenge of better preparing our economy for future pandemics and taking steps to ensure our businesses are not as vulnerable to economic shocks as they were toCOVID-19.”

Chairman Menendez’s full opening remarks can be found here. The full subcommittee hearing can be watched here.