[Federal Register: December 11, 2002 (Volume 67, Number 238)]
[Notices]
[Page 76208-76209]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr11de02-66]
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DEPARTMENT OF THE TREASURY
Departmental Offices; Study of the Impact of Threat of Terrorism
on Availability of Group Life Insurance
AGENCY: Department of the Treasury, Departmental Offices.
ACTION: Notice; request for comments.
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SUMMARY: Recently enacted terrorism insurance legislation requires the
Secretary of the Treasury (Treasury) to study, on an expedited basis,
whether adequate and affordable catastrophe reinsurance for acts of
terrorism is available to life insurers in the United States that issue
group life insurance, and the extent to which the threat of terrorism
is reducing the availability of group life insurance for consumers in
the United States. To assist in this study, the Treasury is soliciting
comments on the questions listed below.
DATES: Comments must be in writing and received by January 10, 2003.
ADDRESSES: Send comments by e-mail to grouplifestudy@do.treas.gov.
Please include your name, affiliation, address, e-mail address, and
telephone number. All submissions should be captioned ``Comments on
Group Life Insurance Study''.
FOR FURTHER INFORMATION CONTACT: Lucy Huffman, Project Manager, Office
of Microeconomic Analysis, 202-622-0198; John Worth, Acting Director,
Office of Microeconomic Analysis, 202-622-2683; U.S. Treasury
Department.
SUPPLEMENTARY INFORMATION: Section 103(h) of the Terrorism Risk
Insurance Act of 2002 (Public Law No. 107-297)
[[Page 76209]]
(Act) requires the Treasury to study, on an expedited basis, whether
adequate and affordable catastrophe reinsurance for acts of terrorism
is available to life insurers in the United States that offer group
life insurance, and the extent to which the threat of terrorism is
reducing the availability of group life insurance coverage for
consumers in the United States. To the extent that the Treasury
determines that such coverage is not or will not be reasonably
available to both such insurers and consumers, the Treasury is directed
to apply, in consultation with the National Association of Insurance
Commissioners, the provisions of the Act, as appropriate, to group life
insurers; and provide such restrictions, limitations, or conditions
with respect to any financial assistance provided that Treasury deems
appropriate, based on this study.
The purpose of the Act is to establish a temporary Federal program
that provides for a transparent system of shared public and private
compensation for insured losses resulting from acts of terrorism, in
order to protect consumers by addressing market disruptions and ensure
the continued widespread availability and affordability of property and
casualty insurance for terrorism risk; and to allow for a transitional
period for the private markets to stabilize, resume pricing of such
insurance, and build capacity to absorb any future losses, while
preserving state insurance regulation and consumer protections.
Treasury is soliciting comment in response to the following
questions, including empirical data in support of such comments where
appropriate and available.
I. The Impact of Terrorism Risk on Group Life Insurers
1.1 Who are the suppliers of the group life insurance in the U.S.;
who are the buyers; and how are sellers and buyer brought together?
1.2 What is the corporate status of group life insurers? Are they
generally stand-alone companies, or affiliates of other corporations?
If the latter, what are the major business interests of the other
corporations?
1.3 What characterizes group life insurance offerings? Please
describe typical terms of coverage, offer and renewal procedures, and
other relevant information.
1.4 How is group life insurance regulated in the U.S.? Are there
significant differences in group life regulation among the states and,
if so, what are these differences?
1.5 What are the risk exposures of customers and how are they
concentrated--by locality, by type of employer, other? What is the
annual premium structure for these different exposures?
1.6 What amounts of loss exposure are typically reinsured? Please
describe the structure of typical reinsurance contracts, including the
period of coverage and typical renewal process.
1.7 What was the amount of group life insurance losses in the
terrorist attack of September 11, 2001; and how was it distributed--
losses to insurers versus losses to reinsurers? How was it distributed
within each group?
1.8 What was the availability and price of reinsurance in the
period before and following September 11, 2001, for group life
insurance? What is it today? Please be specific by type and amount of
coverage available, deductible, sublimit, renewability, and other
relevant characteristics.
1.9 What is the current capacity of group life insurers in the U.S.
to bear terrorism risk, individually and as affiliates of other
companies, taking into consideration their reinsurance situation?
Please provide empirical support for responses as available and
appropriate.
1.10 Are there other sources of protection for terrorism risks in
group life insurance, e.g., through capital markets? To what extent are
these sources used currently? What are the issues associated with
expanded use of these sources?
1.11 Please address and provide empirical support for whether group
life insurers have reasonable access to adequate and affordable
catastrophe reinsurance, and, if not, why inclusion in the Act would
correct this situation. In so doing, please compare the magnitude and
scope of the situation of group life insurers to the situation previous
to the passage of the Act of those property and casualty insurers that
are included in the Act.
II. The Impact of Terrorism Risk on Group Life Insurance Markets
2.1 Please describe in detail, current group life insurance market
conditions, including availability and pricing, by type and location of
employers and other purchasers.
2.2 What is the impact of terrorism risk on group life insurance
availability for employees and other consumers? Please describe in as
much detail as possible which employees and other consumers have been
significantly affected, including availability and pricing, by type and
location of employer or other purchaser of group life coverage.
2.3 What is the cost and availability of alternative sources of
life insurance coverage for those employees and other consumers
affected by the reduced availability and affordability of group life
insurance?
2.4 Please explain and provide empirical support concerning the
extent to which the threat of terrorism is reducing reasonable
availability of group life insurance coverage for employees and other
consumers in the U.S., and whether it would continue to be reduced if
group life insurers continue to be excluded from the Program. Please
compare the magnitude and scope of the impact on consumers of not
including group life insurance to the impact on consumers previous to
the passage of the Act of those property and casualty insurance lines
covered under the Act. Please explain how inclusion would correct this
situation.
III. The Potential for Inclusion in the Federal Program
3.1 Treasury presumes that, if it would be appropriate to include
group life insurance under the Act, Treasury would apply the current
provisions of the Act to group life insurers. If this is not the case,
please discuss and provide a detailed explanation of the changes that
would need to be made to implement the Program for group life insurers.
Please include discussion of any operational difficulties with applying
the current provisions in the Act to group life insurers, any other
characteristics of group life insurance that should be considered with
respect to any financial assistance if group life insurers were
included under the Act, and the benefits and costs, including
administrative costs, of any proposed changes to the provisions for
group life insurers.
Dated: December 3, 2002.
Mark Warshawsky,
Deputy Assistant Secretary for Economic Policy, Microeconomic Analysis.
[FR Doc. 02-31211 Filed 12-10-02; 8:45 am]
BILLING CODE 4810-25-P