Munich Re at Impasse with Regulators over Holocaust Claims

The dialogue between the California Department of Insurance (CDI) and Germany’s Munich Re came down to a legal standoff in March with respect to the reinsurer’s perceived delays in turning over documents related to Holocaust-era policies and policyholders.

According to the CDI, on Sept. 21, 1999, it reached an agreement with Munich Re which stipulated that it would provide the CDI with all its Holocaust-era reinsurance treaties and policyholder listings. However, on Jan. 6, 2000, the CDI received a letter in which Munich Re denied that it had any obligation to produce copies of the treaties or lists, some of which included records for Munich Re’s affiliate, Dusseldorf-based Victoria Lebensversiche-rung AG. After receipt of that letter, hearings were held before an administrative law judge to address the issue of Munich Re’s compliance with the CDI’s requests for records.

“We need to be able to photocopy all the lists,” said Ryan Staley, deputy press secretary for the CDI. “It doesn’t do anyone any good for us to take a glance at them. We need full unfettered access. They clearly weren’t going to offer that.”

On Feb. 17, Munich Re reportedly said it had received an offer from Victoria agreeing to give American regulators onsite access to possible WWII-era claims. However, Munich Re maintained that it was precluded by German corporate law from ordering Victoria to accede to all of Quackenbush’s demands. Deputy Insurance Commissioner Dan Edwards labeled Munich Re’s gesture “disingenuous” and said the reinsurer might face penalties.

Several days later, CDI Administrative Judge Michael Jacobs ruled that the CDI did indeed have the jurisdiction to punish Munich Re if the company failed to fully comply with Quackenbush’s requests. Although Munich Re no longer operates in California, the CDI said that the firm is still under the Commissioner’s jurisdiction based on the withdrawal statute. Furthermore, Munich Re’s U.S. affiliate, American Reinsurance Co., is currently licensed to operate in California. Therefore, a failure by Munich Re to satisfactorily comply with the CDI’s requests could jeopardize American Re’s license to do business there.

Munich Re was a no-show after being subpoenaed by the CDI to appear at a March 20 hearing in San Francisco. This resulted in more legal maneuvering as Munich Re continued to challenge Quackenbush’s authority to compel Munich Re officials to be deposed in California while the CDI sought to affirm that authority.

On the other side of the world, concurrent discussions involving representatives of the governments of Germany and five eastern and central European countries, German industry, and Holocaust victim organizations, among others, sought to hammer out an accord with respect to compensating victims of Nazi-era slave labor. U.S. Deputy Treasury Secretary Stuart Eizenstat served as U.S. government envoy to the discussions.

One of the major haggling points was whether payment for certain Holocaust-era insurance policies would be covered by Germany’s proposed settlement. Directly involved in that dispute was the company, Victoria, which wanted policies it had written in Eastern Europe to be covered by the proposed German fund.

On March 23, a settlement was reached under which Germany agreed to set up a foundation to distribute $5 billion dollars to former Nazi slave and forced laborers. It was also reported that a minimum of $270 million would be set aside for certain WWII-era insurance policies. Moreover, the separate International Commission on Holocaust Era Claims (ICHEC) would oversee the insurance portion of the fund, in part by auditing the five European insurers it counts as members.

Indeed, New York’s Insurance Commissioner recently warned American Re that it could face fines of as much as $1,000 a day if the state’s requests for WWII-era policy lists for Victoria were not fulfilled. American Re indicated that it might take the New York issue to court. In fact, on Feb. 8, American Re did sue Pennsylvania’s regulator over issues stemming from Holocaust-era policies in that state.

Furthermore, Gerling’s U.S. affiliates filed a suit naming Quackenbush as a defendant in U.S. District Court in Sacramento on March 16. The suit, similar to one filed by Gerling in Florida, alleges that California’s new Holocaust registry law is unconstitutional.

Certainly, with that law’s compliance deadline of April 7 right around the corner, things are likely to heat up for any companies still perceived to be dawdling.

“We’ve always encouraged a company like Munich Re to join the international commission,” CDI’s Staley said. “But in terms of what they owe to California, they have to let the Commissioner go in and check out the records.”

Topics California USA Claims Europe Reinsurance Germany