Agents See Hope In New Legislation

“This is a serious problem,” says Doug Bates, assistant vice president with the American Council of Life Insurers, Washington.

“We are trying to figure out how serious,” he says, adding, “Hopefully, we wont have to worry about it too long.”

Bates says ACLI is working to get Congress to address the issue immediately upon its return on Jan. 23.

Bates notes that the provision in H.R. 3529 also contains an important technical change regarding the method used to calculate foreign reserves that would be of great benefit to life insurers doing business abroad.

Currently, Bates says, when determining how much income can be deferred, foreign life insurance subsidiaries must make two calculations.

First, he says, they must do a calculation using the reserving method in the foreign country. Then, he says, they must recalculate for U.S. tax purposes using U.S. reserve methodology.

Bates says the U.S. methodology, however, usually results in a smaller reserve than is required in the foreign country.

H.R. 3529, Bates notes, contains language allowing life insurance companies to use the foreign countrys methodology in calculating reserves so long as the Treasury Department says the methodology is valid and not just a way to hide income.

This, Bates says, is a major change and ACLI will encourage Congress to include it in any bill addressing Subpart F.

Finally, the fate of legislation that would commission a Treasury Department study of the possible impact of another major terrorist event on the life insurance industry remains uncertain.

A lot will depend on what happens in the property-casualty market and on the results of a General Accounting Office study recently requested by the House Financial Services Committee.

The Senate recessed until Jan. 23 without enacting legislation that would create a federal terrorism insurance backstop for the p-c industry as well as establish the life insurance study.

As a result of the Senates failure to act, the National Underwriter has learned that the Financial Services Committee has asked the GAO to examine the state of the terrorism reinsurance market in preparation for a hearing expected to take place shortly after Congress returns.

Many p-c industry lobbyists believe that what happens next in Congress depends on what happens in the marketplace.

The key, says Carl Parks, senior vice president of federal affairs for the National Association of Independent Insurers, a major p-c group, is the sense that members of Congress develop during the recess of the extent of economic dislocation caused by Congress’ failure to act.

If members get a sense that there is a major disruption in the economy, Parks says, they will act. But if not, he says, they probably will not act.

Reproduced from National Underwriter Life & Health/Financial Services Edition, January 7, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

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