During the 1930's and 1940's, life insurance was a popular form of savings and investment — a way to safeguard a family’s assets, assist in retirement planning, provide for a dowry or save for the education of children. After the Nazis came to power in Germany, they systematically confiscated the insurance assets, including the cash value of life insurance policies of Jews and other designated enemies of the Nazi regime. After the war, European insurers often rejected insurance claims of Holocaust victims and heirs who lacked the required documentation.
Fifty years later, Europe’s largest insurers, many with affiliates in the United States, have been named as defendants in class action lawsuits that seek recovery of unpaid Holocaust-era insurance claims. Reportedly, European insurers have denied payment obligation on Holocaust-era insurance claims for five basic reasons: nationalization of insurers’ assets; wartime Germany’s confiscatory regulations and decrees targeted towards Jews and other enemies of the state; lack of policyholder documentation; policy cancellation from non-payment of premiums; and invalidation of claims due to statutes of limitations.
European insurers make several arguments to support their claims for non-payment: (1) the assets supporting Holocaust-era insurance policies — policy reserves held in the form of government securities or real estate — were expropriated by the respective Soviet-controlled Communist governments in Central and Eastern Europe; (2) during and after the war the German government, not they, were liable for the Jewish insurance monies they had paid out to the Nazi regime; (3) Holocaust survivors and heirs were paid billions of dollars as indemnification and compensation by the Federal Republic of Germany under its post-war restitution programs; and 4) U.S. insurance regulators and the courts have no jurisdiction over their dealings.
U.S. insurance regulators and their trade group, the National Association of Insurance Commissioners (NAIC), are uniquely positioned to assist Holocaust survivors and their heirs in resolving unpaid Holocaust-related insurance claims. In October 1998, the NAIC established the International Commission on Holocaust Era Insurance Claims (ICHEIC) to determine the current status of Holocaust-era insurance and promulgate a valuation and claims process to settle unpaid Holocaust-era insurance claims
Congressional interest has set in motion legislative activities that would allow Holocaust survivors to sue German insurers that denied Holocaust-era insurance claims, regardless of the decisions made by the ICHEIC.
In the 1930's and 1940's, Europeans customarily purchased insurance to safeguard their family’s future, assist in retirement planning, provide for a dowry or save for the education of children. Some fifty years later, an international effort is now underway to assign insurance liability for unpaid and unclaimed insurance policies bought before 1946 by people who became victims of Nazi persecution.
Europe’s largest insurers have been named as defendants in class action lawsuits, alleging the companies avoided payment to policyholders, beneficiaries or their heirs on life insurance policies issued between 1920 and 1940 to people who became victims of the Nazi regime. European insurers identified in this matter currently engage in extensive insurance business in the United States, either directly or through multiple branches and subsidiaries; in some cases, they provide U.S. insurers with a worldwide network of insurance facilities to meet the insurance needs of U.S. companies with international operations.
European insurance companies refused to pay many Holocaust-era insurance claims for several reasons: (1) the socialization (nationalization) of insurance company assets in Central and East European countries after the war transferred to various governments and successor entities the legal and moral responsibility for unpaid and unclaimed insurance policies; (2) confiscatory regulations and decrees in Germany forced insurers to pay insurance proceeds and the cash values of life insurance policies to the Nazi regime, and Germany’s postwar restitution programs compensated individual Holocaust victims for specific claims as well as for Germany’s general responsibility for the Holocaust; (3) the beneficiaries lacked death certificates to redeem their murdered relatives’ insurance policies; (4) policies lapsed (canceled) for non-payment of premiums; (6) claims were invalidated by the passage of time.1 Holocaust survivors and heirs, as well as their supporters, assert that these are rationalizations for the non-payment of claims and do not relieve the European insurers of their obligation to honor legitimate unpaid claims.
Triggering the Holocaust-era insurance claims issue was the disclosure of previously secret documents stored in archives in the former Soviet Union that provide evidence that high-ranking European insurance company representatives in Germany, Switzerland, Italy, and Austria were “co-conspirators” with Nazi leaders in confiscating insurance assets from German Jews and other victims of Nazi persecution.2
Another factor triggering the Holocaust-era insurance claims issue involved threats of an insurance consumer boycott in Israel, and an appeal to the Israeli government to delay the acquisition of Migdal Insurance Group by Assicurazioni Generali di Trieste Venezia until Generali had resolved unpaid Holocaust-era life insurance claims. This acquisition, for the sum of $320 million, would have been the largest financial merger in the history of the Israeli insurance industry. Under pressure from members of Israel’s Knesset who threatened to introduce legislation that would have blocked the Generali-Migdal merger, Generali opened its archives.3
According to media reports, the record found in Generali's archives showed that the insurer failed to honor Holocaust-era claims because its Hungarian operation, Der Ankar Insurance Company, was nationalized after the war and its assets shifted to Hungarian authorities. It was later revealed, however, that Der Ankar was reimbursed by the Hungarian government, but the company did not pay any benefits. The company failed to honor claims, insisting on receiving death certificates to prove the deaths of Holocaust victims, but had to abandon this requirement when international agreements annulled the need to prove the death of Holocaust victims.4
European insurer's main legal defense in the class action lawsuits — the so-called "nationalization defense" — is that individual Holocaust victims and their heirs were paid billions of dollars by the Federal Republic of Germany, which assumed legal responsibility for bodily injury, property damage, and lost assets, including insurance policies, as part of the country’s postwar restitution program.
It is important to note that most European insurers were bankrupt or near bankrupt at the end of the war because either they had been forced to invest in Nazi War Bonds that became worthless, or they held properties that were destroyed during the war. To prevent the collapse of the insurance industry, the post-war German government provided state guarantees, similar to those currently provided by state guaranty associations in the United States when an insurer becomes insolvent, that could be drawn upon by insurers to pay individual claims. Further, insurers maintain that while they might have colluded with the Nazis, they were not enriched from unpaid or unclaimed policies and that they will pay any claim, provided there is reasonable evidence that the beneficiaries were not paid by or received indemnification from the German government under its post-war restitution programs.
Nazi Confiscation of Insurance Assets
This overview of the mechanics of German-Jewish insurance asset confiscation is based on the work of Dr. Gerald D. Feldman, Professor of History, University of California, Berkeley. He presented much of that work at the Washington Conference on Holocaust-Era Assets, November 30 to December 3, 1998.
Professor Feldman made a distinction between direct and indirect efforts to confiscate the insurance assets of German Jews. Prior to World War II, the insurance assets of Jews were indirectly confiscated. Indirect expropriation took the form of economic deprivation — i.e., loss of livelihood and the ability to pay premiums, the financial needs arising from decisions to emigrate to Switzerland, Palestine, or elsewhere, and other financial imposition. The financial needs arising from emigrating during the period 1933-1939 forced Jews to cancel, surrender (cash-in), or convert to paid-up (which meant incurring a significant financial loss) their life insurance policies in order to satisfy tax and other currency and financial obligations imposed on them by the Nazi regime.
According to Professor Feldman, Jews who planned to emigrate had to notify German authorities of their intention and, in certain instances, transform their bank accounts into blocked emigrant accounts from which they could only withdraw funds with the permission of the tax authorities upon certification that they had paid an onerous Flight Tax and Asset Tax. Insurance proceeds were paid either into these emigrant accounts or directly to German authorities.
After 1939, the confiscation of insurance assets of Jews became more direct, with expropriation often following deprivation of citizenship. Once a German citizen was deprived of citizenship — usually arbitrarily — the Nazi regime could then "legally" seize that person's bank accounts and insurance policy proceeds. According to Feldman, German Jews who held insurance were forced to cash in their policies by 1940. The confiscation of these assets was fully systematized with the enactment of the 11th Decree of the Reich Citizenship Law of November 25, 1941, which mandated the reporting and confiscation of all bank accounts and the face value of all insurance policies of Jews remaining in Germany. Insurance companies, banks, and other institutions holding Jewish assets were required under the Decree to report all Jewish assets to German financial authorities. The confiscation of Jewish insurance assets spread as Germany occupied more and more territory across Europe.
State Legislative Activities
Several states — California, Florida, New York, and Washington State — have passed insurance-related legislation to restrict the ability of European insurers to engage in business transactions in that state if they have not paid outstanding Holocaust-era insurance claims.5
The California legislature approved two Holocaust-related insurance laws. The first law, which gave Holocaust victims and heirs in California the right to sue to collect Holocaust-related claims, extends the statute of limitations for these claims until 2010. On April 6, 1999, the 2nd District California Court of Appeals upheld this law.6 The second law compels insurers doing business in California to disclose information about policies sold in Europe from 1929 tho 1945. The Department of Insurance is to use the data to create a comprehensive Holocaust insurance data base. Under this law, the Commissioner has the authority to revoke the license of any insurers who fails to file information on the policies and their policyholders. The companies must demonstrate that they have either paid all valid claims, or have been unable to locate the beneficiaries despite diligent searches. Should no beneficiaries be found, the companies would be required to contribute the proceeds to a non-governmental organization which would distribute the funds to Holocaust survivors and heirs.7
On July 1, 1998, Florida’s governor Lawton Chiles signed the Holocaust Victims Insurance Act, which requires insurance companies that do business in Florida, and which sold policies to Jews in Europe, to pay the claims of the victims and their heirs. The bill waives the 10-year statute of limitations on insurance claims for life, property or education policies that were issued or in effect from 1920 to 1945, allowing Holocaust victims until 2008 to submit claims.8
On July 8, 1998, the New York state legislature passed the Holocaust Victims Insurance Act, which subjected all insurers licenced in New York to strict requirements for investigating and resolving claims on property/casualty and life policies that may have been purchased by Holocaust victims. The law encourages insurers to comply with the ICHEIC to resolve unpaid claims. Failure to comply would result in the insurers being subject to reporting requirements and civil fines of $1,000 per day. 9
In May 1999, the Washington state legislature passed the Holocaust Insurance Act of 1999 to create a Holocaust Survivor Assistance Office to assist the state's Holocaust survivors and heirs recover proceeds from insurance policies that were improperly processed or denied. The law would waive the statute of limitations for unpaid insurance policies, allow survivors and heirs of victims to file lawsuits against insurance companies that failed to recognize those claims, and require that European insurers that conduct business in Washington open their books and records to Holocaust survivors.10
State Insurance Regulatory Action
U.S. insurance regulators and the NAIC,11 are uniquely positioned to assist Holocaust survivors and their heirs in resolving unpaid Holocaust-related insurance claims. The NAIC was created in 1871 to establish a coordinated and consistent system of regulation of multi-state insurers. To achieve this objective, the NAIC developed uniform standards for financial reporting by insurance companies. It meets several times each year to investigate emerging issues and to develop “model” legislation for introduction in state legislatures.
U.S. insurance regulators have undertaken several specific steps to resolve unpaid claims on behalf of Holocaust survivors and victims’ heirs. In September 1997, the NAIC established a Working Group to determine the scope of legitimate, unpaid insurance claims arising from the Nazi era in Germany and other European nations, and to recommend ways that the NAIC and insurance regulators in each state could help Holocaust survivors and their heirs recover the benefits they had been denied or have not yet sought. The Working Group held several informational meeting across the United states to collect testimony from Holocaust survivors and their heirs, as well as to hear from representatives of several of the largest European insurers that have been identified in this matter.
The Working Group made four recommendations:
develop a model claims process for individual U.S. states;
assist the state insurance departments in responding to legal jurisdictional questions;
provide assistance to researchers and insurance archeologists in developing a national database to record and track insurance claims and potential claimants; and
create an International Commission on Holocaust Era Insurance Claims (ICHEIC) to "establish a just process that will expeditiously address the issue of unpaid insurance policies issued to victims of the Holocaust."
In October 1998, the ICHEIC was established by the NAIC in conjunction with several European insurance companies,12 European regulators, representatives of several Jewish organizations, and the State of Israel. European insurers agreed to provide the ICHEIC with full access to all of their relevant files and records, and to contribute to the establishment of a humanitarian fund to pay Holocaust survivors who have policies that cannot be traced to an existing insurance company.
State insurance regulators have several tools to address the failure of European insurers to pay Holocaust-era insurance claims:
undertake market-conduct audits to examine the books and records of European holding companies on behalf of claimants in the various states;
use the unfair trade practices statutes to investigate a “bad-faith-claims practice” charge; or
utilize the Form A acquisition process, which enables a state to consider foreign and alien ownership interest in insurers transacting business in that state.
The issue of unpaid Holocaust-era insurance claims was a central topic at the Washington Conference on Holocaust Era Assets, November 30-December 3, 1999. During the conference, a rift developed among members on the ICHEIC regarding the use of sanctions to force European insurers to join the Commission. Chairman Lawrence Eagleburger stated his opposition to sanctions against insurers that have failed to join the settlement process: he supports an approach that emphasizes “moral persuasion.”13 On the other hand, several U.S. insurance commissioners have stated their willingness to use newly enacted laws that allow them to prohibit uncooperative insurers from selling insurance in their state. State banking regulators in New York, Florida, and California have also shown a willingness to impose sanctions in response to Holocaust-era issues. State officials (i.e. controllers, treasurers, and other financial managers) could delay mergers and other financial transactions that require their approval if European insurers fail to resolve unpaid claims.
Most legal experts agree that economic sanctions against European insurers for non-payment of Holocaust-era insurance claims would not violate international trade agreements in service trade under the World Trade Organization. However, the U.S. State Department has urged insurance commissioners, especially those in California, Florida, and New York, not to impose sanctions against European insurers that are part of the ICHEIC.14 Stuart Eizenstat, then Undersecretary of State, argued that sanctions would "gravely undermine the commission's work, to the ultimate disadvantage of Holocaust survivors."15 He suggested that U.S. insurance commissioners recognize the importance of a "safe harbor" for the European insurers that are actively working with the ICHEIC, and that the Commission is a better alternative than litigation (class-action lawsuits), which typically takes years, if not decades, to be completed. Los Angeles Superior Court Judge Florence-Marie Cooper has set February 9, 2000 as the first trial date assigned in the United States or Europe to any Holocaust-related litigation involving any individual family.16
On June 23-24, 1999, the ICHEIC, meeting in Jerusalem, adopted a very aggressive timetable to resolve remaining issues.17 On August 6, 1999, Chairman Lawrence Eagleburger signed an executive decision on policy valuation that would be used to calculate the value of Holocaust-era policies. European insurers immediately sought to change the valuation methodology, claiming that it would allow for relaxed standards of proof and unfairly favored insurance regulators and Jewish groups.18 They argued that policies should be valued at what they would have been worth in the 1930s. At a meeting in London on May 5, 1999, the ICHEIC agreed that policies would be valued at present-day value.
While many believe that the ICHEIC is the most appropriate mechanism for resolving issues of unpaid Holocaust-era insurance claims, litigation and regulation have also emerged as tools to resolve unpaid Holocaust-era insurance claims.
On March 31, 1997, a group of Holocaust survivors and heirs of victims filed a class-action lawsuit in U.S. Federal District Court of New York against seven named European insurers and up to 100 more unidentified firms. The lawsuit seeks to recover the proceeds of insurance policies bought by Jews and other victims of Nazi persecution from 1920 through 1945. Neither the attorneys for the class-action lawsuit nor U.S. insurance regulators have officially determined the number of claimants or the number of policies sold, but based on available documentation and inquiries received by state insurance departments, the lawsuit could ultimately involve thousands of claimants and an average claim in excess of $100,000.19
Two central questions have emerged in the class-action lawsuit: did European insurers collude with German officials (and their local collaborators) to withhold insurance proceeds from Jewish policyholders; did the European insurers violate the terms of the policies and their obligations as trustees to the insured parties and the beneficiaries. The class-action attorneys detail how the Nazi regime converted the cash value of proceeds of policies, how they transferred the money to the Deutsche Bank, Dresdner Bank, and to other banks, and how, after the war, European governments made payments to European insurers which the insurers kept without telling policyholders.20
One of the European insurers, Assicurazioni Generali di Trieste Venezia, Italy’s oldest and largest international multiple-line insurance organization with branches or affiliates serving 70 countries, offered to settle its part in the class-action suit by paying $100 million to Holocaust survivors and heirs, but the move was not matched by the other insurers in the case. These other insurers wanted to resolve the dispute through the ICHEIC. Attorneys for the class-action lawsuit insisted the monetary settlement offer was only the beginning, that the amount was the minimum amount Generali had to pay whatever happened. For these reasons, in September 1998, Generali announced that it was withdrawing the monetary settlement offer and that the company would only comply with the ICHEIC.
Generali’s attempt to negotiate a separate settlement in the class-action lawsuit was contingent on the court’s approval, which, in turn, required input from other groups of claimants against Generali who were not parties to the class-action lawsuit, and who were not represented in the negotiation that produced the Generali settlement offer. One such group, the Committee for Justice for Holocaust Victims, based in Florida, had objected to the dollar amount of the Generali offer.
Four major conclusions emerge from this review of Holocaust-era insurance claims issues, some of which have significant policy implications.
First, Holocaust victims were mainly European residents, many of whom purchased insurance coverage from European insurers who did not at that time have U.S. subsidiaries, and, therefore, did not do business in the U.S. insurance market.
Second, although European insurers may have reinsured portions of their risk with an American insurer or reinsurance company, the financial responsibility for paying claims remained with the European insurer who underwrote the coverage.
U.S. insurance regulators, who exercise regulatory jurisdiction over European insurers operating in the United States, have stated their intention to revoke the license of any European insurer that fails to honor unpaid Holocaust-era insurance claims. Commissioners have also filed motions to intervene in federal class-action lawsuits in order to protect the interests of residents in their state -- i.e. to ensure the integrity of the records of insurance policies yet unpaid, records which are housed in archives under the control of European insurers.
Third, German insurers claim that after World War II, victims of Nazi persecution were compensated by the German government and that a lump sum payment was made to Israel.21 Several European court decisions have, in fact, rejected Jewish claims based on a finding that the European insurers had fulfilled their contractual obligations when they were forced to make payments to the Nazi government or deposit a policy’s cash surrender value in a court after German occupation and the assets were nationalized.
It is important to note that insurers generally collect a premium in advance for which it must deliver an intangible -- indemnification or protection -- in the future. Thus, in insurance accounting and insurance terminology, European life insurers were required to maintain policy reserves on outstanding policies and to reflect those reserves as liabilities in their financial statements. While there is general agreement that European insurers created reserves for potential losses, there is disagreement over whether they all remain liable, since in many cases their assets supporting the “accounting” reserves were nationalized by post-war Communist regimes.
Should the successor companies that received payment after the war be held liable for the payment of Holocaust claims? Holocaust survivors say that European insurers did not search for surviving beneficiaries of their policies; that any payments due the claimants must be paid by insurers who assumed the assets and liabilities of the old companies; that East European countries signed treaties which led to the return of nationalized assets to the insurance companies, and that European insurers enriched themselves by the non-payment of Holocaust-era insurance claims.
Finally, there are several international issues involved in resolving the unpaid insurance claims issue. Congress and the federal government have considerable leverage to address the international issues. Federal legislative efforts are under way to pressure European insurers and governments to participate in the international efforts to reconstruct the insurance coverage for the era, the disposition of the assets behind the coverage, and to determine the scope of unpaid claims.
1National Association of Insurance Commissioners. The Holocaust and Insurance Claims: Preliminary Report of the NAIC Working Group Investigating Claims Against European Insures by Holocaust Survivors and Heirs. New York, December 9, 1997.
12The ICHEIC is composed of thirteen members: three representatives from European insurance companies and regulators; three observer from Jewish groups; an observer from the State Department; and an observer from the European Economic Commission.U.S. House International Relations Committee.