The acting New York state insurance superintendent says Congress should include group life in a new, expanded federal terrorism reinsurance program.

Eric DiNallo, New York Gov. Eliot Spitzer’s nominee to head the state insurance department, spoke up for group life today in New York, at a hearing organized by the Capital Markets, Insurance and Government Sponsored Enterprises subcommittee of the House Financial Services Committee.

Committee members are developing a proposal for extending the current Terrorism Risk Insurance Program, which excludes coverage for group life insurance, workers’ compensation insurance and other lines of coverage.

“Like workers’ compensation, group life insurance coverage is vulnerable to geographic risk concentration problems,” DiNallo said, according to a written version of his remarks.

“If a business has 1,000 employees at a given location, the pricing employed by life insurers for group products probably assumes that 3 or 4 employees might die in a given year,” DiNallo said. “If instead, a location with 1,000 employees is hit by a terror attack and all of them die, the insurer has an enormous financial exposure from a single occurrence.”

Regulators are reluctant to approve terrorism coverage exclusions or limits in group life contracts, and employers are reluctant to buy coverage containing such exclusions, DiNallo said.

“Although there is some level of private reinsurance available for group life coverage, it is not sufficient to cover catastrophic terrorism losses,” DiNallo said.

Roger Ferguson, chairman of Swiss Re America Holding Corp., Armonk, N.Y., also recommended that Congress add group life to the federal terrorism reinsurance program.

“A very large scale attack can cause a massive number of mortality claims that threatens the stability of even the leading group life insurers,” Ferguson warned.

“Group life insurers have asked that a separate recoupment mechanisms be created for group life insurers,” Ferguson said. “This seems logical and reasonable.”

Rep. Carolyn Maloney, D-New York, said at the hearing that a terrorism program extension bill should be completed by the end of April, but she did not talk about what the extension bill would look like.

Steve Tuckey contributed information to this report.