Two of the nation’s largest property/casualty trade groups are in negotiations to merge and hope to finalize the arrangement before the big ball makes its final descent on Times Square this year.
The National Association of Independent Insurers and the Alliance of American Insurers, both headquartered in suburban Chicago, have participated in this dalliance a few times before, but it appears the two lobbying groups are closer than ever before to becoming one.
“The political challenges that the industry faces have kind of reached a critical mass where we’re seeing that clearly a combined organization would better serve the membership in communicating our messages to public policy makers at all levels,” according to Joseph J. Annotti, NAII vice president of public affairs.
“We’re negotiating the same things that any two organizations would discuss before they merge,” Annotti said. “There’s a due diligence process. We’re making sure that at this point that our I’s are dotted and our T’s are crossed and that we have a strong agreement to go forward that benefits members in both organizations.”
Annotti said they hoped to announce a merger agreement at NAII’s annual meeting Nov. 9-12 in Atlanta, but admitted it was unlikely. If the final details of the merger were hammered out before then, the members could vote on the merger in person instead of by proxy.
“We’re still in talks, and we’re still shooting for the first of January,” said Roger Morris, Alliance vice president of public affairs. “We hope to be operating as a new entity at that time if everything goes according to plan. But as of now there’s no definitive agreement on a merger. It would have to be approved by both boards and submitted to both memberships for a vote.
The timeline is still “doable,” Morris added. “We’re still not at a point where it can’t be done by the first of the year. It’s the date that logically would fit, starting off a new year. But if it doesn’t get done, it doesn’t get done.”
NAII, based in Des Plaines, Ill., has 715 member companies, while the Alliance, based in Downers Grove, Ill., has 340 members. NAII was founded in 1945 while the Alliance opened its doors in 1922. There is very little overlap in membership.
If the merger goes through, the Alliance would move into the NAII-owned headquarters in Des Plaines, according to Annotti.
The Alliance, “based on the recognition of what’s been going on in the industry,” has done some “restructuring,” according to Morris. “We’re positioning our organization to go forward and deal with the consolidation effect in our industry, with or without the merger…. Insolvencies and consolidations have been a major factor.”
Morris would not discuss any specific staffing numbers, but did note that two members of group’s public affairs staff have recently been laid off.
“We’re staffed at a level where we can continue to serve our membership in a first class fashion, based on needs of the organization and to service our members,” Morris said.
NAII does not “foresee any layoffs,” Annotti said, “but we have had a number of open positions for the past six or eight months that we have not filled because of the possibility that we may be merging with the Alliance. Ideally in any merger you’re going to get some operational efficiencies.”
Both the NAII and the Alliance stressed that the talks revolved primarily around logistical and organizational factors, rather than policy disagreements or membership clashes.
“While we are significantly larger than the Alliance,” Annotti said, “our member makeup is very, very similar. We both have a broad mix and size of insurers—large national companies, a good segment of mid-size commercial or regional writers and a fair percentage of single-state or niche companies. We both have a diverse membership committed to the goal of a market-driven regulatory system.”
According to the Alliance’s Web site, the group was “organized in 1922 forming an ‘alliance’ of three associations representing companies writing fire, auto and casualty insurance. Later these associations were forged into one organization, the American Mutual Insurance Alliance, which became the Alliance of American Insurers in 1977 when stock and other non-mutual insurers were welcomed to membership.”
Part of the historical distinction between the two organizations was the Alliance’s genesis as an alliance of mutual insurers, Annotti said.
“The lines between different types of insurance companies have blurred,” he added. “Those old differences just don’t hold water anymore.”
There are differences, but they are subtle, Annotti explained.
“We liken it to giving two chefs identical ingredients and telling them to bake a cake. You’re going to get two excellent cakes but they’re not going to be identical. It dilutes your effectiveness in lobbying state legislatures and Congress even when you have these subtle differences. A larger, more unified association would be much more effective politically, which benefits members in both organizations.
Mergers have been commonplace in the history of American insurance trade groups, as the story of the Alliance’s founding shows. The American Insurance Association (AIA), based in Washington, D.C., traces its roots back 130 years to the National Board of Fire Underwriters.
“In 1964, the old AIA merged with the National Board and the Association of Casualty and Surety Companies to become the present-day AIA,” according to the group’s Web site.
It’s unlikely that the new NAII/Alliance group will merge with the AIA, given their strong differences on the issue of federalization. The AIA favors a federal charter option, while the NAII and the Alliance still favor leaving insurance regulation entirely in the hands of the several states.
Another national P/C trade group, the National Association of Mutual Insurance Companies (NAMIC), “fills a different need for a different type of insurer,” according to Annotti. “There’s probably room for three national trades. There certainly are in other industries, like banking, so it’s not unprecedented.”
As of now, however, the insurance industry still has four.
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