The Risk Management and Insurance Society (RMIS) invited Brad Wood, a UW-Madison MBA alumnus and the Senior Director of Marriott’s Global Risk Management Organization to speak about the Pandemic Risk Insurance Act (PRIA). Nearly 90 RMIS attendees were eager to learn from his industry knowledge.
Mr. Wood began his presentation with an overview of Marriott’s company profile and their risk management framework. He talked about his experience with the Terrorism Risk Insurance Act (TRIA) and how Marriott was at the forefront of the aftermath of the 9/11 attacks. He went through a brief overview of TRIA and how it worked as a federal reinsurance program that covered only commercial property and casualty losses with a $200 million loss trigger and $100 billion limit capacity. Mr. Wood used TRIA as a lead in to the not yet enacted Pandemic Risk Insurance Act (PRIA).
PRIA was proposed in the House of Representatives in May 2020 and was created to act much like TRIA, but for the business interruption companies are currently facing as a result of the COVID-19 pandemic. PRIA has been a source of contention as many insurer associations do not believe that pandemics are insurable risks. Mr. Wood expanded on this thought by relating the risk analysis of frequency versus severity to pandemic events, and how historical trends show that there may not be a significant number of pandemics in the future to create an effective pooling benefit. Mr. Wood then presented some alternatives to PRIA like a plan proposed by Chubb as well as the efforts of the Business Continuity Coalition which is a policyholder group. He concluded that a different bill will probably be passed to stabilize the lending community and the greater national economy.
During the Q & A portion of the night, participants asked about the terminology of “public health emergencies” included in PRIA and if events like the opioid epidemic would be covered under this definition. Mr. Wood responded that the wording would probably evolve and become more specific as the policy is processed, but also warned about the unintended consequences of policy definitions. Another participant asked if it is plausible to assume that businesses will buy into this coverage, Mr. Wood considered the fact that some businesses are doing better than ever, and others are severely struggling. He highlighted that regardless of businesses’ performance, PRIA would need a high buy-in, in order for the law of large numbers and the pooling effect to work.
In summary, Mr. Wood was an engaging presenter who carefully weighed the pros and cons of PRIA while incorporating his own business experience at Marriott and the historic passage of TRIA. I found the intersection of public policy, private insurance, and government backstops to be an interesting topic. His presentation was thought provoking and applicable to the risk and insurance coursework here at UW-Madison. Thank you to Mr. Wood for taking the time to share your experiences with attendees. And thank you to the students and staff who organized this educational and successful event!