industry to consider, was in final form.

Secretary Mathews

requested the insurers to respond to him in Washington on Friday, July 30. A copy of one of the Secretary's telexes to insurance executives, sent July 29, is attached as an exhibit.

That initial insurance program is detailed in the documents which the insurers then considered and copies of those are attached as exhibits. One is entitled, "Swine Flu Vaccine Program" and the other, "Swine Flu Excess." Also attached is the July 28, 1976 draft of contract between the government and contractor. In summary: one primary insurance policy with an aggregate limit of $50 million, retrospectively rated with a minimum premium of $2 million and a maximum premium of $40 million, was to be provided and shared by the four manufacturers. Pursuant to a statute to be enacted, the government would indemnify the manufacturers for claims not covered by that primary insurance, while the manufacturers would reimburse the government for any such indemnity payments which resulted from a manufacturer's failure to carry out its contractual responsibilities or from its negligence. $50 million insurance coverage against that liability to the government would be provided each manufacturer for a fixed premium of $375,000 per policy.

Secretary Mathews was informed on Friday morning, July 30, that the insurers believed the program could be carried out

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and were beginning their best efforts to do that with the essential help of the insurance brokers for the four manufacturers. Indeed, by the afternoon of Monday, August 2, commitments had been made to insure 90% of the $50 million primary insurance coverage which the initial program called for, but commitments to the additional or excess layer of coverage were proving hard to secure.

By that time, however, the premises of that program were already shifting and within a few days were completely changed.

The government agencies concerned were concluding that the nature of the Swine Flu Immunization Program required that legislation to deal with the program's special liability problems should protect all program participants, and not simply the manufacturers, against claims other than for their negligence and should bring the government in as the sole defendant for all claims, whatever the legal theory, using the procedures of the Federal Tort Claims Act. On Tuesday, August 3, this Subcommittee had approved the essential form of the bill, later enacted as S. 3735, (P.L. 94-380, the National Swine Immunization Program of 1976) carrying out that conclusion.

Moreover, by the end of that week the government agencies concerned had reconsidered and ruled out a retrospective premium determination, deciding that insurance costs should be fixed from the outset of the program.

The Final Insurance Program and Its Fulfillment

The insurance industry, meaning the insurance brokers for the four manufacturers, the handful of insurance company executives who were familiar with the risks involved because their companies were insuring those manufacturers or because they had participated in the efforts to put together the initial program, and the insurance trade association executives who participated in the formulation and negotiation of that program, began as early as Thursday, August 5, to put together the insurance commitments which the final program would require.

The details of that program were reported to this Subcommittee on September 13, by Mr. Harder and Mr. Greiner, and the efforts necessary to fulfill that program were simply described as carrying out what was "not an easy task". As Mr. Harder put it, "The underwriting community... took a great deal of teaching."

That was an understatement.

Those teaching or selling

efforts entailed explaining to as many of the hundreds of insurance underwriters as possible the details of the government's relationship to the development of the vaccine and to the manufacturing and distribution process, as well as its testing procedures and controls over the release of the vaccine, the details of the different methods of manufacture, shipment and delivery, of the nature of the warnings and other information

to be given to those innoculated and of the controls necessary to ascertain that such information and warnings were indeed given and that the vaccine given each person innoculated would be definitely identified. Underwriters frequently requested

data which might enable them and their counsel to evaluate the expected legal consequences of the statute which Congress was then considering and of the contract which the manufacturers and HEW were then negotiating.

With the cooperation of HEW, this educational process

was begun with a seminar to which all insurance underwriters who could be reached on short notice were invited and which was held on Monday, August 9, in the HEW auditorium.

Representatives of

the manufacturers explained their testing and production processes, representatives of the Bureau of Biologics reviewed the government's program of testing and controls as it related to those processes and representatives of HEW reviewed other aspects of the program including systems for distritubtion and deliveries of the vaccine.

The educational efforts there begun took more than a month to complete. A number of major insurers, including some who had agreed to take part in the initial insurance program, decided in their own good judgment that they should not participate at all. It was particularly difficult to complete the second layer of coverage, which called for a commitment of

capacity to liabilities which could total $200 million. A number of insurers, including some who finally agreed to commit their capacity, regarded the premium as inadequate. Others had unresolved doubts about the application, interpretation and validity of P.L. 94-380.

Many United States insurers undoubtedly made commitments which they might not have otherwise made to the program, because they were moved to demonstrate social and political commitment to an immunization program, believed to be vitally necessary to the public interest of the United States. Those seeking to complete the necessary underwriting commitments had to go not only to United States insurers, including the life insurance community as well as the property/casualty underwriters, but also to the foreign insurance market where there was naturally considerably less interest in motivations which it regarded as essentially political and peculiar to the United States. Nevertheless, it was necessary to have substantial participation by that market. Despite many rejections, a sufficient participation was obtained at virtually the last minute through the efforts of one of the lead underwriters at Lloyd's, London. That underwriter later commented, that even though he had eventually supported the vaccine insurance program, he thought that "the premium was too thin for the deal".