Government insurance for business interruption losses from pandemics: An evaluation of its feasibility and possible frameworks

Many businesses have suffered severe economic losses due to the COVID‐19 pandemic Because property business interruption (BI) policies generally do not cover losses caused by a virus, this has led to proposals for some form of government program that would provide this coverage We explain why private BI pandemic insurance on a broad scale is infeasible Arguably, BI pandemic insurance has substantial positive externalities and this has implications with respect to the desirability of government provision of this coverage and its financing Our paper considers the goals of a government BI pandemic insurance program and the challenges it would face with respect to its design and implementation and how they could be addressed In this context, we evaluate current proposals for such a program, including legislation currently being considered by the Congress We conclude that creating such a program requires thorough and careful consideration of its features and the tradeoffs involved with its structure The essential question for policymakers is whether the best possible program would be in the public interest and increase social welfare Further, political considerations will likely influence the design of any program in ways that would make it less efficient and possibly less equitable