Industry Fights For Group Life In TRIA

“Rather, it creates a new structure that materially increases the capacity of the industry to bear the risk. A government-mandated pooling structure would greatly increase the amount of risk that could be handled in this second layer. The costs and risks associated with this mandatory pooling would be largely borne by the group life insurers. It is estimated that with the right structure a terrorist event that produced 100,000 deaths could be handled without any government funds.”

In proposing a government-mandated pooling of risk, Harper was joined at the hearing by John Sinnott, vice chairman of Marsh & McLennan Companies Inc., who also represented the Council of Insurance Agents and Brokers, and Lawrence Mirel, Washington, D.C., insurance commissioner.

Noting that he was not speaking on behalf of the NAIC, Mirel called for creation of a pool-re mechanism similar to that used in Great Britain to protect against insolvency in the case of terrorism losses. Mirel’s proposal is for the government to back such a program in cases where the losses exceed the pool’s capacity.

Another theme of the hearing was that Democrats said time was of the essence since TRIA in its present form expires Dec. 31 and that the obvious short-term solution was to extend TRIA for two years and then work on a long-term program.

But the Republican leadership of the committee warned that such an approach would not work because it was unacceptable to the Bush administration, as stated in the Treasury report.

In his testimony, Csiszar said that “as with workers’ compensation, potential losses under group life insurance can be enormous, given the concentration of risk in some workplaces. Group life insurance products provide valuable protection to more than 150 million citizens and in many instances is their only life insurance.

“As we protect our nation’s assets we must not neglect protection of the economic security of its workers,” Csiszar said. “PCI, therefore, strongly supports the addition of group life coverage to the program.”

But CFA’s Hunter was just as insistent that such an inclusion was unnecessary. “There is no meaningful evidence that justifies expanding TRIA to cover group life insurance,” Hunter said. “The Treasury Department already has rejected the request to expand the current TRIA to include group life. That was the right decision. Even the National Association of Insurance Commissioners, a group well known to be very industry-friendly and particularly concerned about solvency and any possibility of undue risk, has refused to allow group life exclusions.”

Hunter added, “It is likely that a major reason that both the Treasury Department and NAIC have rejected the appeals of life insurers for relief is that these insurers have not attempted all meaningful measures to spread their risk privately.

“CFA has not received a single complaint from a consumer or business indicating that there is a problem in the life insurance market. Since there are no exclusions allowed by the NAIC, we would likely be hearing about rising costs if they were rising, but we are hearing no complaints at all.”

Sen. Chris Dodd, D-Conn., and Sen. Hillary Clinton, D-N.Y., called for a simple extension of the TRIA program through legislation that Dodd co-sponsored with Sen. Robert Bennett, R-Utah, which also calls for inclusion of group life.

‘Quite simply, Congress needs to insure the people inside the buildings, too’