Life Insurers Testify Before Congress On Industry Response To Tragedy
By Steven Brostoff
Washington
Life insurers will be able to withstand the losses arising from the Sept. 11 terrorist tragedy, but there could be some solvency concerns in the future, says one top life insurance executive.
Sy Sternberg, chairman and president of New York Life, says that claims resulting from the terrorist attack could be in the range of $2 billion to $6 billion. While the amount of these claims is staggering, he says, it is a fraction of the $52 billion in death claims paid by the life insurance industry last year.
Thus, Sternberg says, the losses will not have a materially adverse impact on the industry.
Sternberg spoke at a House Financial Services Committee hearing on insurance issues arising out of the Sept. 11 terrorist attacks.
But there are concerns, Sternberg says, since life insurers are major investors in corporate America.
"If the economy worsens, and the quality of assets deteriorates, life insurers could have problems on the asset side of the balance sheet," he says. "This could have long-term solvency implications, especially for weaker companies."
Robert H. Benmosche, chairman of MetLife, adds that in the wake of the attack, it is understandable that concerns are raised about the long-term financial well-being of the insurance industry.
He estimates MetLifes after tax losses related to the disaster at $250 million to $300 million. These losses, Benmosche says, will reduce earnings by 35 cents to 40 cents per share for the third quarter of 2001.
But while MetLifes exposure is substantial, he says, it is more than capable of sustaining the losses.
MetLife, Benmosche notes, has some $255 billion in total assets.
During the hearing, Sternberg and Benmosche described the efforts of their companies to settle claims quickly and efficiently.
Sternberg notes that rather than requiring a death certificate, New York Life is using airline passenger manifests and employer certification as evidence of death.
The company is also relying on certification from its own agents, who in many cases knew the victims and their families and can personally attest to the loss.
Benmosche says that using the same types of evidence, MetLife has already approved more than $53 million in payments to beneficiaries, with the first payment being authorized three days after the tragedy.
