Insurers don’t have enough resources to cover business interruption losses in a disaster as comprehensive as the one posed by widespread small business closures from the COVID-19 pandemic, a group of insurance industry associations told two members of California’s congressional delegation.

“Insurance coverage works by spreading risk, but that model simply cannot account for a situation in which losses are catastrophic and nearly universal. Standard business interruption policies do not, and were not designed to, provide coverage against communicable diseases such as COVID-19, and as such, were not actuarially priced to do so,” the groups wrote.

“It is worth noting that recent estimates show that business continuity losses just for small businesses of 100 employees or fewer could amount to between $220 billion to $383 billion per month. Meanwhile, the total surplus for all of the U.S. home, auto, and business insurers combined to pay all future losses is only $800 billion,” the groups said in a letter dated April 2.

“Our organizations stand ready to work with Congress on solutions that provide the necessary relief as soon as possible,” their letter also said. “The loan programs instituted by the CARES Act provide a down payment on economic support for Main Street businesses, but additional liquidity will be required for impaired industries and businesses to avoid an unprecedented systemic, economic crisis.”

CARES is the acronym for the rescue package Congress enacted March 27.

The letter was addressed to California Democratic Reps. Gil Cisneros and Mike Thompson, who sparked the issue with their own letter, cosigned by a bipartisan group of 31 other California lawmakers, asking state Insurance Commissioner Ricardo Lara to force insurers to honor business interruption provisions after hearing from small businesses that many insurers were refusing to do so.

“I’m disappointed that insurance companies are unable to cover losses — as a result of our historic global pandemic — under business interruption insurance. We’ve seen too many small businesses shut down, reduce staff members, or drastically limit service,” Cisneros said in a statement when he released his March 31 letter to Lara.

The letter to Cisneros and Thompson was signed by representatives of the National Association of Mutual Insurance Companies, Independent Insurance Agents and Brokers of America, American Property Casualty Insurance Association, Reinsurance Association of America and the Council of Insurance Agents and Brokers.

The groups urged Congress to establish a COVID-19 recovery fund backed by the federal government and led by a special administrator “with the ability to enter into contracts with interested businesses to administer the Recovery Fund and facilitate the distribution of federal funds and liquidity to impacted businesses and their employees.”

In numbers updated since the letter, APCIA estimated losses from closing small businesses with 100 or fewer employees would be $255 billion to $431 billion per month — while premiums for commercial property risks in key insurance lines were about $6 billion a month.

“Pandemic outbreaks are uninsured because they are uninsurable,” APCIA’s President and CEO David A. Sampson said in an April 6 statement. “Any action to fundamentally alter business interruption provisions specifically, or property insurance generally, to retroactively mandate insurance coverage for viruses by voiding those exclusions, would immediately subject insurers to claim payment liability that threatens solvency and the ability to make good on the actual promises made in existing insurance policies.”

Jimi Grande, NAMIC’s senior vice president of government affairs, expressed a similar sentiment in an April 3 statement, saying no insurance company or industry can cover the pandemic’s costs to businesses and the economy.

“Insurance companies are doing all they can to help those affected by the pandemic, such as increasing flexibility on premium payments and claims, and we will continue to be there as we enter the season for wildfires, tornadoes, and hurricanes,” Grande added.