State insurance department representatives responded to fast balls, curves and sliders thrown at them by Ernie Csiszar, president and chief executive officer of the Property Casualty Insurers Association of America, during an April 18 panel session by slamming the pitches out of the stadium as the audience hung onto every word.
PCI’s Joint Marketing and Underwriting Seminar in St. Petersburg, Fla. had a baseball motif, “Hitting a Grand Slam with Marketing and Underwriting Tools and Tips.” The general session was a “Play-by-Play Commentary: The Latest Dialogue Between Regulators and Industry.”
Csiszar didn’t mince words, throwing rapid-fire questions at John W. Oxendine, Georgia Commissioner of Insurance; L. Tim Wagner, director, Nebraska Department of Insurance; and Dr. Ray Spudeck, senior research economist with the Florida Department of Insurance.
Instead of having participants present prepared statements, Csiszar opened the session to questions from the audience and lobbed a number of his own.
Csiszar said that at the PCI board meeting in Atlanta the number one topic of interest was without question was the Sarbanes Oxley Act of 2002; the entire issue of corporate governance and the impact not only of Sarbanes Oxley but the work being done by the National Association of Insurance Commissioners.
Csiszar began by asking Oxendine what should be done about Sarbanes Oxley.
“Sarbanes Oxley is a great piece of legislation, the problem was that it was passed in a record time,” Oxendine explained. “I don’t know if Congress has ever passed a piece of legislation that fast.
“I sometimes wonder if they really had time to think through the details,” Oxendine added. “I think Sarbanes Oxley is a situation where maybe a few details were not thought out.”
Oxendine voiced reluctance to see Sarbanes Oxley applied across the board to the entire insurance industry. “It is unfortunate that it is applied to some insurance companies and not others,” he said, “but I don’t think you address that problem by applying it to every single insurance company.
“Maybe what you should do is look and see if there are ways that Sarbanes should be made a little more realistic,” Oxendine commented, adding that he supports the goal of it 100 percent.
What to do about TRIA?
Csiszar asked Nebraska’s Wagner about the Terrorism Risk Insurance Act and its renewal, which is still being debated in Congress.
“There are those that feel as a matter of public policy that the act should simply be renewed; there are those that feel that as a matter of public policy the act should be renewed, but only on condition that the private sector provide the ultimate solution to the terrorism risk issue; and there are those that feel that nothing should be done it should be allowed to expire and just simply go away,” noted Csiszar.
“Nebraska is not New York. New York and five or six other cities seem to be always mentioned as the perennial target, how do Nebraskans feel about this?”
Wagner commented that Nebraskans are team players. “As such both of our U.S. senators have been sponsors and are introducing legislation to continue TRIA,” he said. “It is inconceivable to me that we can develop a short-term scenario, a system whereby we can handle risks and demands of the magnitude that will be presented within the private sector.
“And yet we Nebraskans don’t have a lot of exposure to terrorism, but we have some.”
Wagner took issue with some who have been critical of TRIA. “I have been concerned and confused by the positions taken by some consumer activists that there should be no subsidy of TRIA when in fact there are social issues out there,” Wagner said.
Csiszar turned next to Florida, a state that does not allow for a terrorist exclusion. “Given your new job of attracting new companies to Florida, how do you reconcile that with market development? It would seem the natural reaction would be not to write the insurance,” he asked Spudeck.
“It is a little hard for me to be objective about this issue, having been in New York when this happened,” Spudeck commented. “When these events happen, you get a real sense of what it is the government can do, what insurance companies can do and the plight that individuals are in that are in those areas.”
He said that the average person on the street has a reasonable expectation that when something bad like that happens, insurance is there to cover.
“Granted, it is hard to find a sufficient sample to give empirically credible evidence to the actuary for rate making purposes and everybody hopes we never get that kind of quantity of data,” Spudeck said. “But other than that there has to be a reasonable split between requiring that or not being able to exclude that type of insurance and yet being able to earn a rate on it. We are working to find that balance, that solution,” Spudeck said.
Wagner endorsed renewal of TRIA at least for the short-term “TRIA should be extended because we don’t have a better alternative,” Wagner said. “Is TRIA what we need long term? I do not think it is. I think the industry needs to pick up a larger share of it, although it isn’t prepared to do that yet.
Change traditional rules
“I think we do need to look at if there are terrorist issues, should some of the traditional rules be changed,” he said. “That’s probably something we need to look at, but then again you have to make sure you don’t go too far and leave American citizens inadequately compensated. So, how do you alter the traditional rules and still compensate?”
Wagner said there are a lot of issues that need to be resolved, but that TRIA doesn’t answer them all. The mistake would be to do nothing, to sit and try to figure out all these big issues.
“We should simply renew TRIA, and then roll up our sleeves to work out these issues,” Wagner suggested. “Find ways for more industry involvement and then do that as TRIA is due for its next renewal and have a much better thought out variation.”
Other topics discussed included tax issues, solvency, oversight and asbestos. A mid-afternoon session focused on “Building an All-Star Team: Bridging the Gap Between Home and Office Agents,” moderated by Al Dees, MetLife Auto & Home Group national sales and marketing manager.
Underwriting sessions discussed: “After the “Black Sox” Scandal: The Challenges of the Sarbanes-Oxley “SOX” Act, moderated by Stephen Broadie, PCI’s vice president of financial legislation and regulation and Gerald I. Lenrow, RLI Corp., director. Also discussed was “Baseball by the Numbers: Leveraging Predictive Underwriting Technology in the Property/Casualty Industry,” moderated by Dax Craig, Valen Technologies founder and CEO.