Commissioners To Weigh Group Life Terrorism Exclusions

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Terrorism exclusions for group life and health contracts are slated to be considered this week by insurance commissioners.

Montana Commissioner John Morrison, who is chairing the effort of the National Association of Insurance Commissioners, Kansas City, Mo., says the discussion will center on these issues: solutions available to the industry, the lack of availability of catastrophe reinsurance coverage and possible solvency issues.

The price of catastrophic terrorism event reinsurance, or cat cover, has increased anywhere from 300% to 1400% since Sept. 11, according to interviews.

“That is, if you can get it,” says Donna Mundy, senior vice president, government relations with UnumProvident Corp. in Portland, Me.

The number of reinsurers that have made it available to UnumProvident has been whittled down from a field of 12 to a lone reinsurer, she adds.

Employers are already being hit with large health insurance increases and may not buy other insurance if the cost is too high, she adds.

Fortis received one cat quote that was pulled back and another offer for 10% of the cat cover needed, says Ed Harper, a senior vice president in Fortis’s Washington office.

Lack of cat cover will mean tighter underwriting and fewer quotes than a year ago, he says. “There will be less competition and less availability.”

The American Council of Life Insurers, Washington, still wants a Congressional study on the issue but realizes the need for exclusions on a case-by-case basis, according to Michael Lovendusky, ACLI senior counsel.

Lovendusky says that if there is a major attack such as the sarin gas attack on the Tokyo subway, then insurers could pay through state guaranty funds. The March 20, 1995 attack on the Tokyo subway system killed 12 and injured more than 5,000.

But consumer advocates such as Robert Hunter of the Consumer Federation of America in Washington, ask what private mechanisms such as pooling or securitizations are being considered.

Group carriers are being asked why they raised concerns so late in 2001.

Mundy says the answer is simple: until mid-November when reinsurers began refusing coverage, it was considered a property-casualty issue.


Reproduced from National Underwriter Life & Health/Financial Services Edition, March 4, 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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