ACLI Seeks Study On Federal Backup For Life Insurers’ Terrorist Losses
The American Council of Life Insurers will ask Congress to commission a study on whether there is a need to establish a federal backup for life insurance losses caused by terrorism and on the feasibility of a federal program.
ACLI Representative Herb Perone says the Washington-based Council will try to attach language establishing the study to whatever legislation moves through Congress regarding terrorism and the property-casualty industry.
Perone emphasizes that ACLI is not asking for any government assistance. He characterizes an Oct. 18 article in the New York Times suggesting ACLI is seeking government assistance as “dead wrong.”
Life insurers, he says, will have no problem absorbing the losses arising from the Sept. 11 terrorist tragedy.
Moreover, Perone says, ACLI is “absolutely neutral” on the notion of creating a government reinsurance pool or other facility for terrorism losses.
ACLI understands the extreme importance of this issue to the property-casualty industry, he says, noting that life insurance industry losses from the Sept. 11 tragedy are a small fraction of those faced by p-c insurers.
What ACLI is seeking, Perone says, is something more academic and theoretical–a commission to look at worst-case scenarios and when, if ever, it would be appropriate for the life insurance industry to seek assistance from the government.
Perone emphasizes that the entire economy is in “uncharted territory.” While life insurers feel no compelling need to be part of any pool, he says, it would be irresponsible not to sit down with people from government to analyze possible scenarios.
The industry, he says, is doing what it should do for its policyholders, which is to manage risk and prepare for the unexpected.
Specifically, the ACLI plan contemplates a nine-member commission, comprised as follows: two from the Treasury Department, one from the Commerce Department, one from the Office of Homeland Security, one from the National Association of Insurance Commissioners, two from the primary insurance industry and two from the reinsurance industry.
Currently, the discussion over a federal role in terrorism insurance focuses on the p-c industry, whose consensus plan to create a private, state-chartered reinsurance pool backed up by the Treasury Department appears to be dead.
Instead, the Bush administration is proposing a three-year direct loss sharing arrangement in which the federal government would pay up to 90% of losses following a terrorism event.
Details of the proposal are still being developed. A hearing on the proposal was scheduled for Oct. 18, but was postponed indefinitely due to the anthrax scare that shut down much of the Capitol complex.