NU Online News Service, May 18, 2004, 6:17 p.m. EDT – A Democratic senator says the Bush administration put buildings ahead of people when it opposed placing group life insurance under the protection of the Terrorism Risk Insurance Act.[@@]
Sen. Tim Johnson, D-S.D., a member of the Senate Banking Committee, made that charge today at a committee hearing on TRIA.
Johnson said that he is very disappointed that group life insurance is not included under TRIA and that group life should be part of any extension of the federal terrorism reinsurance program.
In a time of loss, he said, a life insurance policy makes a difference for a family that otherwise might have to sell its home or have trouble putting food on the table.
One of the most obvious market shifts following the Sept. 11, 2001, terrorist attacks is the disappearance of group life reinsurance, Johnson said.
But Brian Roseboro, Under Secretary for Domestic Finance at the U.S. Treasury Department, who testified at the hearing, said that in deciding not to include group life under TRIA, Treasury was following the criteria outlined in the statute itself.
Roseboro said TRIA required Treasury to perform a 2-pronged analysis in order to determine whether to include group life as a covered risk: Treasury had to find evidence that both group life insurance and group life reinsurance were unavailable.
Group life reinsurance was unavailable when Treasury did its analysis, but primary insurance was still widely available, Roseboro said.
Roseboro added that Treasury is continuing to watch the group life market.
Delaware Insurance Commissioner Donna Lee Williams, who represented the National Association of Insurance Commissioners, Kansas City, Mo., noted in a comment included in her formal, written testimony but left out of her oral statement at the hearing that the NAIC has not taken a formal position on whether group life should be included in TRIA or in any other form of federal backstop legislation.
However, Williams said, Congress should be aware that group life insurers have no statutory obligation to cover deaths resulting from acts of terrorism.
The employer, the insurer, the insurance industry in general and the American economy would suffer if any insurer were only able to pay a fraction of the policy face amount in a mass casualty situation, Williams said.
Furthermore, Williams said, state insurance regulators are not inclined to approve exclusionary or limiting language in jurisdictions in which they have approval authority over the wording in group life contracts.
“Although there is some level of private reinsurance available for group life coverage, it is not sufficient to cover a catastrophic terrorism loss situation,” Williams said.
Jacques Dubois, chairman of Swiss Re America, said that adding group life to TRIA would give group life insurers the protection they need to insure the lives of people in the workplace.
“As a public policy matter, state regulators have decided that this basic insurance now covering 158 million Americans is vital,” he said.
Indeed, Dubois said, Swiss Re believes that individual life insurance should also be included under TRIA. He noted that Swiss Re has joined other companies in sponsoring a study by RAND Corp., Santa Monica, Calif., on terrorism risk and loss potential.