WASHINGTON — The terrorist attacks on the World Trade Center and other facilities on Sept. 11, 2001 were “a disaster… that neither our country nor the insurance industry had dared to contemplate,” as stated by New York Insurance Superintendent Greg Serio in congressional testimony later that month.
The event took its toll on Serio — his predecessor was killed in the attack. Two MetLife associates housed in a sales office in the World Trade Center were also among a total of 2,976 people who died in the multi-pronged attack.
“Without question, the assaults of September 11 represent the costliest disaster in American history,” said Michael Oxley, chairman of the House Financial Services Committee, at a hearing on the issue later in the month.
Oxley also sought to sooth the country by saying that the committee had received assurances that insurers would not attempt to invoke the acts-of-war exclusions contained in their policies.
However, losses to the life insurance industry were estimated at only $1.3 billion, just three percent of total losses, and represented less than 5 percent of total premiums written in 2001, according to estimates from the Insurance Information Institute.
Sy Steinberg, chairman, president and CEO of New York Life Insurance Co., put it into perspective this way, said during the 9/11 hearing:
“While the amount of these claims is staggering, the monetary exposure is, in fact, a fraction of the $52 billion in death claims paid last year by the life insurance industry as a whole, and therefore, will not have a material adverse impact on the industry.”
It follows that there were few insurance industry regulatory changes as a result. The most significant long-term regulatory impact was, the attacks prompted enactment of the Terrorism Risk Insurance Act in November 2002, which provides a federal “backstop” for claims related to acts of terrorism. The program deals only with property and casualty claims, not life. It has been reauthorized twice, but has not yet resulted in any losses to the taxpayer.
Life Insurance Council of New York officials also said that besides the death of Neil Levin, the state’s former insurance commissioner, and the two MetLife employees, no other life insurance official died on that fateful day.
This chart from the Insurance Information Institute represents the percentages of losses to various factions of the insurance industry as a result of the Sept. 11, 2001 terrorist attacks.
What about brokerages?
Insurance brokerages suffered a large toll, with Marsh & McLennan losing 295 employees and 63 consultants; Aon Corp., 175; Guy Carpenter 2 and Zurich Insurance 4.
It was also the worst terrorist attack on record in terms of fatalities and insured property losses, which totaled about $25.2 billion (in 2015 dollars), with total claims of about $43.6 billion (in 2015 dollars), including property, life and liability insurance claim costs, according to the Insurance Information Institute.
But there was more to the industry’s response than dollar signs.
“This is a time for the insurance industry to be visible,” New York Life Insurance Co.’s Sternberg said during a House Financial Services Committee hearing convened later in September 2001. “This is a time for us to be charitable. And this is a time for us to stand as a pillar of stability in a none-too-stable world.”
So the insurance companies worked with regulators to deal with the issue of some 9/11 victims having no death certificates, while the American Council of Life Insurers worked with the New York Life Insurance Council to develop an affidavit to complete these claims.
ACLI CEO Carroll Campbell also met with administration officials, including President George W. Bush the week before the hearing to “make clear the life industry was ‘strong and ready to pay the claims,’” according to an ACLI official.
MetLife and New York Life were also part of a broad industry response that included stepping up purchases of stock in U.S. companies as well as donations to the Red Cross and charities established to help people impacted by the attack.
Michael Oxley, chairman of the House panel, specifically described the 9/11 losses as a “clash” event.
That is, Oxley said, “the insurance industry incurred multiple losses in different lines of coverage arising from the same underlying cause.” He explained that clash events are riskier for insurers as they give rise to claims from a variety of different customers under different types of policies, in a scenario outside of normal assessments for aggregate exposures.
A key to the life insurance industry’s response was that companies waived the traditional requirement for a death certificate. At MetLife, chairman and CEO the late Robert Benmosche said the company relied on airplane passenger manifests or a communication from the employer. Benmosche noted that more than $53 million were approved for payment before September was approved for payment to beneficiaries, “with the first payment being authorized three days after the tragic events.”
Benmosche said that a significant number of MetLife’s policyholders in the World Trade Center were insured through group life insurance programs. Benmosche said that MetLife worked closely with employers affected by the disaster to process life insurance claims quickly.
This includes the Federal Employees Group Life Insurance program, which covers some of the individuals in the Pentagon.
“For group life insurance, the employer typically keeps the records of beneficiaries. In the event that an employer’s beneficiary designation records are lost or destroyed, there may be alternative sources to verifying beneficiary designations,” Benmosche said.
In addition, he said, many group life insurance policies have what is known as a “facility of payment” clause which permits insurers to pay benefits to the employee’s spouse, children or estate (generally in that order) if no beneficiary was designated by the employee.
At the hearing, Benmosche noted the human toll. He said employees at MetLife had “lost family and friends.”
And he said, “For all of us, the devastation of lower Manhattan is close to home, and its magnitude is difficult to grasp.”
He added that, “Like those of you who live or work in Washington, D.C., we feel keenly the shock and the sadness that reverberated throughout the country on Sept. 11th, and said that to help employees cope with the emotional aftereffects of the attacks, MetLife had arranged for trauma and grief counselors to be available at sites in New York City, Jersey City, New Jersey and Johnstown, Pa.
This photograph of the “Tribute in Light” was taken in 2015. (Photo: iStock)
At New York Life, Sternberg said, the first of those claims was paid Sept. 22 “for a young Cantor Fitzgerald employee… “The $190,000 death benefit was delivered to his surviving relatives on Saturday by their New York Life agent,” Sternberg testified at the hearing.
Another touching loss was that of Neil Levin, who had stepped down as insurance commissioner in April of 2001 to become executive director of the Port Authority of New York and New Jersey. Levin was attending a meeting at Windows on the World on the 107th floor of Tower One of the World Trade Center when an airplane crashed into the building.
“Personally, I lost a valued colleague and a good friend on that day — I will miss Neil’s guidance and insight regarding the rapid changes in financial services regulation,” Serio, his successor, testified at the House FSC hearing.
“But, I am comforted with the knowledge that the vision and leadership that Neil brought to the department, including the creation of our Capital Markets Bureau, have not only improved our regulation of the insurance industry but have served as the foundation we have used to respond to this crisis,” Serio said.
“The department’s response to this disaster, in so many ways, is Neil Levin’s true legacy,” Serio said.
Serio’s involvement in the aftermath of the disaster was significant. Serio has served as a partner and managing director of Park Strategies, LLC., a New York consulting and lobbying firm since 2005. He coordinated the New York department’s response and recovery from those events, working with local, state and federal agencies, the insurance communities’ many sectors and individual insured’s to expedite the settlement of claims and restore the financial condition of the New York property insurance and life insurance industries.
He led many of the efforts of the National Association of insurance Commissioners (NAIC) in responding to the issues arising from those events. Serio also served, in the aftermath of the event, as a member and NAIC representative on the Financial Services and Banking Information Infrastructure Committee of the United States Treasury, a component of President George W. Bush’s Critical Infrastructure Protection Initiative.
Kathleen Sebelius, NAIC president and Kansas insurance commissioner at the time, noted at the hearing the key role of insurance in our society.
She said that after the immediate shock, many other people across America and the world “began wondering about the impact of these immense losses upon their own lives.”
She said the “anguish of coping with what was known to be lost was soon augmented by uncertainty and fears over what might be lost in the future.”
That is where insurance comes in, she said. “Insurance coverage is unique in that it is a product that most people only encounter when they are under the stress of unhappy, often extreme circumstances.
“Although insurance payments cannot fully compensate for personal and emotional losses, they typically do offer one of the first glimmers of hope for those who face the daunting prospects of starting life over again after disastrous losses,” she concluded.