US Treasury opposed to rewriting of policies
Two pieces of encouraging news:
- A senior member of the US Treasury called Frederick W Vaughan has written a letter to Congressman Ted Budd, in response to his letter to the US President (see our earlier article here) making it clear that the Treasury is opposed to the wholesale forcing of BI claims payments by insurers. The letter says that the Treasury is aware that various US states are attempting "legislative measures to retroactively change the terms of insurance contracts and compel coverage of COVID-19 BI losses." The letter goes on to say "While insurers should pay valid claims, we share your concerns that these proposals fundamentally conflict with the contractual nature of insurance obligations and could introduce stability risks to the industry."
This is an important signal to the US insurance industry, coming as it does from the senior Principal Deputy Assistant Secretary, Office of Legislative Affairs at the U.S. Department of the Treasury.
The letter goes on to say "Treasury looks forward to working with Congress, the states, the National Association of Insurance Commissioners, and other stakeholders in determining how to best move forward in addressing losses attributable to the current and potential future pandemics."
2. Washington DC City Council had been planning draft legislation along the lines mentioned above has apparently opted not to move ahead with the idea.
The US insurance trade group APCIA has lobbied hard, with David Sampson, the association’s president and CEO, writing about the liabilities that would become payable as a result "These numbers dwarf the premiums for all relevant commercial property risks in the key insurance lines for D.C., which are estimated at $16 million a month,” and “We oppose constitutionally flawed legislation that retroactively rewrites insurance contracts and threatens the stability of the sector, to the detriment of all policyholders.”
We have hoped that common sense would prevail and while "one swallow does not a summer make" hopefully this means that some of the political pressure will abate. It will not necessarily disappear for a while.
The issues with individual wordings with unclear coverage remains.