NAIC Hears: Lobby For Fed Backstop
By Jim Connolly
NU Online News Service, March 18, 11:11 a.m. EST, Reno, Nev.?Insurers need to hammer home with Congress that backstop legislation is needed to ensure continued insurance coverage and the health of their industry, a trade group representative told regulators.
The remarks by Rodger Lawson, president of the Alliance of American Insurers, Downers Grove, Ill., before the National Association of Insurance Commissioners were not unique. Indeed, the mantra insurers and regulators kept repeating during the meeting here was the need to tell federal legislators they require help.
Because the sky did not fall Jan. 1, when Congress failed to enact legislation despite industry predictions of dire consequences from a lack of reinsurance, there is the perception that no problem exists, Larry Mirel, commissioner of the District of Columbia said during the NAIC's spring meeting.
And absent another terrorism attack, according to Mr. Mirel, it is not likely that legislation will be passed.
But Mr. Lawson and others urged that if a problem exists and it needs to be addressed soon, then insurers need to make their lawmakers aware of the problem.
During several sessions, Edwin Harper, senior vice president of Fortis Inc.'s Washington office, explained what the problem means to group life insurers.
Mr. Harper said that group life insurance is being hard hit and, "for the average American family, the cornerstone of life insurance is the insurance that they get at work. It is a plain vanilla life contract and it is cheap."
However, according to Mr. Harper, reinsurance for group life writers has dried up and "without reinsurance, the economics of group life is turned on its head. It can't continue the way it has been."
Mr. Harper spelled out the economics. If there are 1,000 people in a building, then $100,000 of premium might be collected with the hope of making $10,000, he said. Prior to Sept. 11, terrorism insurance was free but, following the World Trade Center event, two cases of 1,000 lives would cost $90 million.
What will happen, Mr. Harper continued, is that primary group underwriters will not write for cities.
Workers' compensation rates are also being impacted, according to David Counts, a Texas legislator and former president of the National Conference of Insurance Legislators in Albany, N.Y.
Mr. Counts, a legislator as well as a businessman, said that worker compensation rates for his business is likely to increase 100 percent. He said such an increase could cause him to lay off workers and that such a trend would be bad for the economic health of the country.
Speaking of Congress, he said, "They are not going to move until we show them. They see a little smoke in the hall, but they don't see fire."
New Jersey Assemblywoman Clare Farragher, R-Freehold, noted that the long-term effects of the WTC disaster are not yet known, particularly the health effects to those living and working in lower Manhattan.
Sonia Larkin-Thorne, a representative with American Insurance Association, Washington, said her company, The Hartford, Hartford, Conn., took a $1.2 billion loss because of the World Trade Center and has subsequently taken steps to ensure that future risks meet policyholder and shareholder goals.
The benefit to consumers, Ms.Larkin-Thorne continued, is to make sure that "American insurance remains available in this country."
(Jim Connolly is a senior editor with NU's Life & Health/Financial Services edition)
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