Alliance, NAII Boards Approve Merger; New Group to be Called PCI

By | January 12, 2004

The governing boards of two of the nation’s largest property/casualty trade groups have agreed to a merger that would have more than 1,000 members and represent 40 percent of the P/C marketplace.

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 trade groups are closer than ever to becoming one.

The actions taken by the NAII’s board of governors and the Alliance’s board of directors must be approved by a vote of the member companies of the two groups. If approved, a new organization to be known as the Property Casualty Insurers Association of America (PCI) would be formed and begin operations in January. NAII spokesman Joseph J. Annotti told Insurance Journal that a unanimous vote would take place Jan. 7 and the new organization, to be known as the Property Casualty Insurers Association of America (PCI), would open its doors Jan. 8.

“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,” Anotti said.

“The boards of both NAII and the Alliance are strongly urging their members to vote in favor of the merger,” NAII President Jack Ramirez said in a statement. “PCI will create the nation’s premiere trade association representing the property and casualty industry. … PCI will have the resources and staff to provide its members with more and better services than they currently enjoy and with the political strength to have a much more powerful voice in state capitals and in Washington.”

Along with the National Association of Mutual Insurance Cos., PCI would stake its place on the state regulation side of the contentious federalization debate within the industry, with the American Insurance Association and the American Council of Life Insurers on the other side.

“We believe this merger will create a unified organization positioned to operate more effectively and efficiently,” said Alliance President Rodger S. Lawson in a statement. “The new organization’s structure and focus will enhance our ability to attract additional members and become an even stronger voice in the public policy arena.”

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.

Under the merger agreement, PCI would have a total of 140 employees. In addition to an expanded staff in Washington, D.C., the group would have regional offices in Atlanta, Austin, Boston, Pittsburgh, Sacramento, Tallahassee and Trenton, N.J. If the merger is approved, Ramirez would be president and CEO of PCI, while Lawson would be executive vice president. PCI would represent companies that write nearly 50 percent of the market in private passenger auto insurance, nearly 40 percent of the homeowners market, 32 percent of the commercial insurance market, and over 39 percent of the workers’ compensation market.

The Alliance, whose biggest member is the Liberty Mutual Group, has fallen on hard financial times recently. The group laid off about half its staff last August, nearly 40 people.

“Based on the recognition of what’s been going on in the industry,” spokesman Roger Morris told Insurance Journal, the Alliance has done some “restructuring.” Morris conceded that “insolvencies and consolidations have been a major factor.”

“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.

While the merger would implicitly involve an attempt to best synchronize the talents of each group, the NAII’s staff reduction pales in comparison. NAII does not “foresee any layoffs,” Annotti said.

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.”

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.

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.

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Insurance Journal West January 12, 2004
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