My New OpEd on Federal Reinsurance

I have a new OpEd in Morning Consult about the need for Congress and the White House to pass legislation broadening federal reinsurance to include viral pandemics.

Amidst COVID-19, some politicians are trying to retroactively insert pandemic risk into business interruption contracts — even when the contracts explicitly exclude these risks. It makes for a good soundbite, but it defies the fundamental tenet of contract law. And more importantly, it gets the math wrong: the total surplus for auto, home, and business insurers in the U.S. is about $800 billion, while COVID-19 losses could be in the many trillions.

Such drastic action could effectively shut down the American insurance industry overnight, and by extension, the American economy.

As I argue: President Trump, and Members of Congress ought to create a federal backstop for pandemic exposure, modeled after the Terrorism Risk Insurance Act that was passed after 9/11. This new backstop would cover viral pandemics, new types of cyber-attacks, and other rare but catastrophic events. It would enable insurers to offer pandemic insurance at an affordable price, which would inject confidence into the system and unlock credit.

And, especially important, it would give the next stimulus package a fighting chance at success.

Read the OpEd here: Next Stimulus Package Won’t Work Without an Overhaul of Government Reinsurance.