Push On To Have Group Life Qualify Under Terrorism Insurance Bill
A growing faction within the life insurance industry is making a last ditch effort to include group life insurance among the lines of coverage that would qualify for federal assistance for losses caused by terrorism, the National Underwriter has learned.
Several sources, mainly on the property-casualty side of the business, say several life insurers have been pressing their case on Capitol Hill that group life should be covered under any federal terrorism reinsurance bill on the same basis as workers compensation.
“They see themselves as having the same problem as we have with workers comp,” says one p-c lobbyist, who asked not to be identified.
That is, he says, the possibility of substantial losses if a terrorist attack causes the deaths of perhaps thousands of people at one location covered by one group life policy.
Moreover, this lobbyist says, many life insurers insist they have been unable to secure adequate reinsurance for policies at certain “high risk” locations, such as nuclear power plants.
But several of the p-c lobbyists contacted by NU say there is a split within the life insurance industry.
Some large life insurers, they say, have been able to put together private reinsurance programs for their group life businesses.
For competitive reasons, these lobbyists say, the life insurers with private reinsurance programs have not been supporting the effort to include group life in the terrorism insurance bills.
Currently, both bills (H.R. 3210, the House version, and S. 2600, the Senate version) mandate a federal government study on the impact of another major terrorist attack on the life insurance industry.
Jack Dolan, a spokesman for the American Council of Life Insurers, Washington, notes that life insurers have long supported the study.
“ACLI supports a federal study to determine what role, if any, the federal government should play in the event of a catastrophe causing deaths at such great levels as to challenge the industrys claims paying ability,” Dolan says.
However, he adds, “ACLI is assisting individual companies efforts for a federal backstop for group life insurance.”
P-c lobbyists are split on the politics of the effort. One lobbyist says he is pleased life insurers are trying to include group life in the legislation.
Their effort, he says, broadens the coalition in favor of the legislation and helps buttress the case made by p-c companies of widespread gaps in the terrorism reinsurance market.
But another p-c lobbyist says he is unhappy group life insurers are getting involved. He says members of Congress, particularly in the Senate, are trying to scale back as much as possible any federal assistance to the insurance industry.
He says these members may react very negatively to an effort to expand potential federal government liability.
One lobbyist assesses the chances for including group life in any terrorism legislation as less than 50%.
“However,” he says, “the issue is definitely in play.”
Under H.R. 3210, the federal government would provide assistance in the form of loans to insurers that experience significant losses due to a terrorist attack.
Insurers would have to repay the loans, but could pass on the costs to insureds by imposing a surcharge on commercial policies.
By contrast, S. 2600 establishes a quota share program, in which the federal government would pay up to 90% of losses arising from a terrorist attack. The insurance industry would not have to repay the government for any assistance.
The p-c industry strongly prefers S. 2600 to H.R. 3210.
A House-Senate conference committee will try to work out the differences between the bills and put together a consensus.
House Financial Services Committee Chairman Mike Oxley, R-Ohio, said last week he is very confident Congress will pass a bill before adjournment, possibly before the end of September.
In other news, ACLI is urging the Federal Election Commission not to try to bar foreign-controlled U.S. corporations, including U.S. subsidiaries of foreign corporations, from making contributions to political candidates.
The issue arises from the Bipartisan Campaign Reform Act of 2002, the so-called McCain-Feingold bill, that places limits on campaign contributions.
The bill bans contributions from foreign nationals made “directly or indirectly,” but the term “indirectly” is not clearly defined.
Carl Wilkerson, chief counsel for securities and litigation with ACLI, notes the term “indirectly” appears in a section of the bill that revised a 1971 law banning contributions made directly “or through any other person.”
The phrase has been interpreted as not barring contributions from U.S. subsidiaries. But the new law changes the phrase “or through any other person” to “indirectly,” he notes.
The FEC, in a request for comments, says the reason for Congress changing the terminology is unclear, but that the term “indirectly” could be construed as having a broader meaning than the previous language.
But Wilkerson says construing the term more broadly is not justified because there is a dearth of legislative history supporting it. The FEC, he says, should not substitute its judgment for that of Congress.
A broad interpretation, Wilkerson says, would disenfranchise U.S. businesses and employees who participate in their employers PACs of the ability to participate fully in the election process.
Reproduced from National Underwriter Life & Health/Financial Services Edition, September 16, 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.