Federal Pandemic Insurance Act Revived In Congress; Another Chance For Frazzled Indie Producers And Industry As Costs Soar

Rep. Carolyn Maloney (D-NY) has unveiled a second iteration of her bill introduced in May 2020 to help U.S, businesses including Hollywood survive the financial hit of Covid and future pandemics.

Costs and risks for independent production ballooned after private insurers, hit by massive Covid claims and heavy losses, excluded communicable disease from all policies and, basically, won’t reinstate them unless they’re forced to. This second go-round of the Pandemic Risk Insurance Act, or PRIA, does just that, requiring insurers to participate in the program, administered by the Secretary of Treasury. It calls for the government to shoulder 95% of insurers’ pandemic-related claims. Coverage would kick in if the Secretary of Health and Human Services declares a significant outbreak of infectious disease as a “covered public health emergency.”

Insurance companies have resisted PRIA, insisting that pandemics are not insurable.

“For the film and TV industry, the pandemic is far from over,” said Jean Prewitt, President & CEO of the Independent Film & Television Alliance. “The inability to secure full insurance coverage for the risks inherent in film and television production — standard for our industry and required to lock-in financing — since March 2020, continues to damage production and production-related jobs across the U.S.

“We need partnership with the federal government to restore the eco-system on which our industry depends,” she added. “The Pandemic Risk Insurance Act introduced today would create the public-private solution that is needed.”

Partisan gridlock in Congress has made passing of anything a heavy lift, and this bill has a long way to travel. The first PRIA languished for months. Maloney said optimistically during a House Financial Services subcommittee hearing a year ago that she hoped to get the legislation passed during President Joe Biden’s first 100 days.

It’s the only federal option under consideration now. A separate effort by an industry consortium called ACICP had been pushing hard for a temporary government Covid-loss backstop — like the ongoing scheme in the UK that has revived production so successfully there. The American Coalition for Independent Content Production was tied specifically to entertainment, unlike PRIA which crosses sectors. It shut down for lack of support, including from the industry, as some felt that a broader coalition was better and that focus on a temporary backstop could distract from efforts for a longer-term solution like PRIA.

The group that helped mold PRIA 2021 is the Business Continuity Coalition, consisting of policyholders representing more than 70 million workers across the U.S. including 50-plus industry organizations and companies from broadcasting, communications, construction, entertainment, events, gaming, healthcare, hospitality, housing, manufacturing, restaurant, retail and risk management, real estate and healthcare.

The Motion Picture Association said the plan “would produce the long-term certainty that the film, television, and streaming industry needs to further innovate and grow the creative economy.”

“We are grateful for the leadership of Representative Maloney to take on this critical issue for our industry,” said Patrick Kilcur, the organization’s EVP of U.S. Government Affairs.

PRIA 2021 has advocates in the Senate and supposedly more bipartisan interest than the 2020 version. In July, the Securities, Insurance and Investment Subcommittee (of the Senate Committee of Banking Housing and Urban Affairs), chaired by Sen. Robert Menendez (D-NJ), discussed the issue at a hearing called “Examining Frameworks to Address Future Pandemic Risk.” Menendez, Krysten Sinema (D-AZ) and several others are said to be engaged.

In terms of timing, legislators have tended to talk about PRIA as if it’s meant to deal with the next pandemic, not this one (although Covid is lingering longer than many imagined).

But it’s better than a poke in the eye as independent producers continue scrambling to finance projects and widely available pandemic insurance the key to a return to normalcy — or at least a new normal. Deep-pocketed streamers and studios self-insure, but independents can’t. Banks and many financiers won’t back indie productions that don’t have Covid insurance.

Producers have been tapping private equity and other funders that charge higher rates than banks and often require steep contingency fees be set aside. At the same time, Covid costs can run 10% or more of budget. And the price of traditional production insurance, which still is necessary even with the pandemic exclusion, has shot up. Completion bonds, which guarantee lenders that a production will be delivered on time and on budget, also exclude Covid. Smaller productions have been opting to forgo completion bonds altogether to save the fee.

As Covid risks have diminished with vaccines and Delta appears to be receding, banks have begun trickling back, some say, but it’s pretty nascent.

For U.S. Production

PRIA covers businesses in the U.S. Insurance companies will set the terms and costs of policies but the bill stipulates that they can’t “differ materially from the terms, conditions, amounts, limits, deductibles, or self-insured retentions and other coverage limitations applicable to losses arising from events other than public health emergencies.”

It ensures the availability of pandemic risk coverage in all critical commercial lines of insurance, including non-property-damage business interruption and specialty lines such as event cancellation and film production. PRIA’s event-cancellation insurance defines an event as “a trade show, consumer show, exhibition, fair, conference, convention, meeting, seminar, charity event, auction, gala dinner, competition, sporting event, film or television production, award show, or other similar event or production.”

It “means insurance, including production package insurance, that indemnifies an insured for losses that occur as a consequence of (A) cancellation, abandonment, delay, or rescheduling (whether full or partial) of an event; or (B) non-appearance at an event of a principal speaker or performer or unavailability of an essential element, including covered key talent or cast members, required for achievement of the event’s purpose.”

The broad property and casualty insurance coverage includes excess insurance, workers’ compensation insurance, commercial general liability insurance, directors and officers’ liability insurance.

PRIA also includes so-called “parametric non-damage business interruption insurance” that’s less applicable to film and TV production but is to many other industries. It compensates the insured for a portion of 180 days’ fixed costs and payroll and is triggered “irrespective of physical status or condition of the insured physical location and without need for specific proof of loss” under certain conditions.

PRIA sets the economic recovery period at five years from the day it’s enacted. If another pandemic hit (or specifically “a public health emergency is certified which applies to the whole of the country or to states comprising at least 40% of the country’s population), the act would be extended for another five years.

The Secretary will submit a report to the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate after one year (and every subsequent year) evaluating the program, which will terminate on December 31, 2031 — presumably unless Congress renews it.