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Prepared Remarks by Commissioner Chuck Quackenbush
California Department of Insurance

United States House Banking and Financial Services Committee
Hearing on Holocaust Victims’ Claims
Thursday, February 12, 1998

Mr. Chairman and members of the Committee, I thank you for inviting me to speak today before the House Banking and Financial Services Committee on a very important issue that confronts not only Congress, but every insurance regulator in the United States. You have already heard the testimony of Commissioner Senn from the State of Washington, who described why the National Association of Insurance Commissioners has devoted so much time and energy into investigating allegations that insurance companies refused to honor insurance policies paid for in good faith by Holocaust victims. Commissioner Senn and I are deeply committed, as I know every member of Congress is, to resolving all outstanding claims and holding all insurance companies that sold policies to Holocaust victims in Europe during the 1930’s and 1940’s accountable for their actions and their failure to act in good faith over the last 50 years.

Since the NAIC Holocaust Issues Working Group was formed last year, we have learned a great deal about how some insurance companies treated claims made by Holocaust victims and their families. We have learned about the extent of the collaboration between some of the insurance companies and the German government during the pre-war and war years and that this collaboration involved the marketing and sale of insurance policies, typically life and property, that these companies never intended to honor. Indeed, many of these policies were paid not to the beneficiaries but to their policyholders’ captors -- the Nazi regime who relocated and murdered millions of their citizens and the citizens of Eastern European nations that the Nazis conquered before and during the war.

Background

In the 1930's and 1940's insurance was sold extensively throughout Europe to middle and working class people. Many people invested their money in life insurance policies and in annuities as retirement planning tools as pensions were not widely available. Dowry and education policies were also very common. These policies were purchased when a child was born and paid when a daughter married or a son commenced higher education.

As the repression preceding World War II spread, and later, as the war and Holocaust developed, more and more people purchased these insurance products in an effort to secure their assets, to be used when and if they survived the horror. Insurers marketed policies to this vulnerable population for this purpose. Insurers offered, for extra premium, policies that would pay in "New York Dollars" because of the rampant instability of the various currencies at the time.

Many of the claimants actually have insurance policies or policy numbers. Most of the claimants were children during the war and many are certain that their parents and relatives had insurance because they recall the agent coming to the house for payment. The majority of claimants have no actual knowledge of whether or not their parents were insured but think that they must have been because they owned businesses, because they were wealthy, or because they were very responsible and would have wanted to do everything possible to provide for their families. There is also a vast potential group of heirless policyholders - those who perished in concentration camps before they had children, and whose whole families perished with them - many of these people had insurance.

Hearings in California

Over the past six months, my department has invested significant energy and resources into determining the scope of this problem. We have held hearings to hear testimony from Holocaust victims who produced copies of their original policies. We heard from other victims who could produce nothing but memories of conversations with their parents who purchased life insurance policies. We heard from people such as Alan Stern, whose grandfather, Moshe Stern, bought a life insurance policy knowing that his life was in danger as the Nazi war machine persecuted his people. We heard from attorneys involved in the federal class action lawsuit filed in New York City on behalf of Holocaust victims against two dozen insurance companies. Shimon Samuels, European Director of the Simon Wiesenthal Center, provided an historical perspective on the close working relationship between certain insurance and financial services companies and the German government to finance the war effort. These hearings have been vital to preparing insurance regulators for the challenge of acting on behalf of American Holocaust victims to ensure full and prompt payment of insurance claims.

What we have discovered during these hearings is that we are not dealing with a few isolated incidents of payments not made to policyholder, but a potentially widespread industry practice to enrich themselves at the expense of those people who were first relocated, terrorized, and subsequently butchered by the Nazi regime. The reasons given are several -- no death certificate; proceeds of policies sold to Jews were already paid to the Nazis; reparations to Holocaust survivors were made by the German government and cover insurance proceeds; companies located in eastern bloc countries were taken over by communist regimes and so there are no assets available to pay claims. These rationalizations are unconvincing and do not relieve the insurance companies of their obligation to honor policies paid for in good faith by their customers. And, frankly, they are not unlike some of the excuses I have listened to from some of our troubled insurance companies. It is estimated that if these policies were paid today at present value with currency adjustment and with interest, the total due could reach into the billions of dollars.

I have become increasingly frustrated with the slow pace that some insurance companies are choosing to adopt in responding to the our efforts to resolve this issue. Representatives from eight insurance companies were invited to tell their side of the story at our hearings. All but one of the insurers refused to attend the hearing. The one company that did appear made substantial progress in responding to my request for access to its archives of policies from this era and I expect to have access to it with the next few months.

Last week my department issued subpoenas ordering the officers of Generali to appear at a public hearing I will hold on February 19 in San Francisco to discuss their company’s handling of unpaid claims of Holocaust victims. At that hearing I will make it very clear that the insurance commissioners are united in their support for Holocaust victims and that continued reluctance to act in good faith toward resolving these claims will have serious consequences for Generali and other insurance companies and their American subsidiaries.

I am prepared to revoke the certificate of authority, which allows a company to sell insurance in California, for Generali and any of its American subsidiaries, if it fails to take the steps that I will outline at the hearing in San Francisco.

In addition, my department has filed a motion to intervene in a federal class action lawsuit in order to protect the interests of California claimants. Arguments on my department’s request to intervene in the lawsuit are currently set to be heard on March 20, 1998. This effort will provide our department additional leverage in securing payment of outstanding claims.

Coordinated Strategy to Secure Records of Claims

The task ahead of us presents a great challenge. The insurance commissioners and the Holocaust survivor community have already encouraged those who have any information to step forward. Indeed, many have. But there are potentially thousands of individuals who may not be aware of their right to step forward, and even if they did, many of them have little or no documentation on insurance policies for which they are the named beneficiaries. In many cases, the only records of insurance policies yet unpaid are under the control of the insurance companies themselves.

The challenge for American insurance regulators now is to ensure that the records of insurance policies housed in archives throughout Europe -- in Italy, Germany, and Switzerland, France and Austria in particular -- are secured from tampering. Ensuring the integrity of these records and combing through them to identify which claims have yet to be paid and identifying surviving beneficiaries presents an enormous challenge that we cannot fail to undertake.

I propose today a coordinated strategy involving American and insurance regulators and private firms with accounting and legal expertise to gather, review, and analyze the archives of each of the insurance companies who did business in Europe during the pre-war and war years. This information should be compiled into a database for the retention of the policy information and claimant information. The on-site teams should be supervised by an American based steering committee consisting of an accountant, an attorney, an economist and a representative of the commissioner. The project would involve approximately 15 companies located in 5 countries (Switzerland, France, Italy, Germany and Austria). In order to address the myriad issues that would unfold, the team must have varied expertise. In addition to firms with accounting and legal expertise, the team should include experts in insurance archeology, economists, and public relations professionals. My department is currently exploring how this approach might be accomplished, including identification of a funding source.

It is my understanding that several bills have been introduced in Congress that would require all insurers to disclose any financial information they have in connection with individuals who survived or died in the Holocaust, under penalty of losing their right to do business in the United States. It also exempts claimants from applicable statutes of limitations, provided those claims were commenced after December 31, 1910. This date is particularly important as the California Department of Insurance begins to investigate allegations that Armenians who suffered at the hands of the Ottoman Empire in the genocide of 1915-1922 also were denied payment of life insurance claims taken purchased as early as 1910. I applaud Congress’s efforts on this matter and any legislative effort to ensure that insurance regulators have the tools they need to identify potential claimants and hold insurance companies accountable for any and all actions in connection with these claims.

Under your leadership and through the coordinated efforts of the National Association of Insurance Commissioners, I am confident that we can make significant progress in the near future to ensure the full and prompt payment of claims to Holocaust victims. Thank you for the opportunity to be present today to share my thoughts with you on how we can accomplish this important task.

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