NU Online News Service, April 28, 2004, 5:40 p.m. EDT, Washington – The Terrorism Risk Insurance Act should include group life insurance, a senior member of the House Financial Services Committee says.[@@]
“Group life insurance has characteristics similar to commercial property-casualty insurance in that there is excessive concentration of risks,” says Rep. Paul Kanjorski, D-Pa., who spoke during a committee hearing.
Group life insurers have remained in the marketplace despite a lack of reinsurance, and this has caused a significant amount of anxiety both in the life insurance industry and among people who obtain their life insurance coverage through their employers, Kanjorski says.
New York Insurance Superintendent Greg Serio agrees. In testimony before the committee he says that a Treasury Department decision in August 2003 against extending TRIA to group life insurance has left a “wide gap.”
Even the Treasury secretary acknowledged at the time he made the decision that there was a general lack of catastrophic reinsurance coverage for group life insurers, Serio says.
This lack of reinsurance continues to this day, and, without reinsurance, insurance companies will find it increasingly difficult to assume terrorism risk on their own, Serio says.
Congress, Serio says, needs to seriously consider inclusion of group life insurance policies under TRIA in any discussions surrounding TRIA’s reauthorization.
Wayne A. Abernathy, assistant Treasury secretary for financial institutions, says the decision to exclude group life was based on the statute.
Abernathy says the Treasury Department was required to make 2 inquiries. One was whether private reinsurance was available. The department’s study showed that reinsurance had receded.
However, the second inquiry looked at whether primary coverage had receded, and the Treasury Department found that primary coverage had not receded significantly.
As a result, Abernathy says, the group life market failed to qualify for inclusion in TRIA.
“Our hands were tied,” Abernathy says.
Meanwhile, a coalition of insurance and business groups has launched a major lobbying effort to include group life in any TRIA reauthorization.
The American Council of Life Insurers, the Financial Services Roundtable and the Group Life Coalition, an organization that represents insurance companies that write group life, are running advertisements in Capitol Hill newspapers calling for inclusion of group life.
In addition, the groups sent a letter to House Financial Services Committee Chairman Mike Oxley, R-Ohio, stating that failing to include group life in TRIA could affect the solvency of primary insurers in the event of a terrorist attack.
Phil Anderson, a lobbyist who represents the Group Life Coalition, says the Treasury Department’s 2003 determination that group life not be covered by TRIA is not well-documented.
Rather than presenting a body of work, he says, the department did little more than issue a press release saying that it was not ready to include group life under TRIA.