Members Approve Trade Assoc. Merger; New Group Opens Doors as PCI

By | January 26, 2004

Members of the Alliance of American Insurers and the National Association of Independent Insurers (NAII) finalized the merger of the trade groups forming a new association to be known as Property Casualty Insurers Association of America (PCI). The creation of the new group ends almost 20 years of on-again, off-again discussions between both associations to merge. The combined group, representing more than 1,000 members, should have more influence when sending its message to policymakers nationwide.

“Times have changed and the need for two organizations has lessened,” Jack Ramirez, president and chief executive officer of PCI, said. Ramirez, who served as NAII’s former president, takes the helm of PCI, while Rodger Lawson, former president of the Alliance, will serve as executive vice president. “Consolidation in the industry has left everybody concerned about the importance of having a very strong voice,” Lawson said. “The size of that voice is going to be increased.”

According to Lawson and Ramirez, all of the division heads from both the Alliance and NAII will remain division heads in the combined organization. Restructuring narrowed the scope of PCI’s new divisions, creating greater focus and concentration on more specific industry issues, Ramirez said. “For example, we created an insurance regulatory division that will deal with industry relations and regulatory matters. Before, we had that combined in other divisions.”

As with any merger, operational efficiencies are weighed heavily in negotiations. For the Alliance, consolidation efforts began well before the merger was finalized. Lawson stated that the Alliance had about 75 to 80 employees, but only 35 to 40 will transition into the com-bined company. Under the merger, PCI will have a total of 140 employees.

“The Alliance certainly did some restructuring over the course of the past year, because of the need to achieve the economies of scale and because you don’t need two sets of administrative people to take care of the new organization,” Lawson explained. “As with anything, these are items that are negotiated; the strengths that we could build upon were those that dealt with the public policy issues. So, our regional network and what we call our policy managers are employed by PCI.”

Ramirez noted that while the number of staff is less than the two separate organizations had in total, there remains a need for a staff of that size to serve the combined organization’s large membership.

With more than 1,000 members, PCI carriers write $154 million in annual premium, or 37 percent of the property/casualty industry in the U.S. Broken down, PCI carriers write 47.1 percent of the U.S. auto market, 37 percent of the homeowners market, 31.1 percent of the commercial property and liability market and approximately 38.8 percent of the private workers’ comp market. Workers’ compensation represents the greatest jump in market share for the combined organization.

PCI will be headquartered in Des Plaines, Ill., the former home office of the NAII. In addition, PCI will maintain offices in Washington, D.C., and regional offices in Atlanta, Ga.; Austin, Texas; Boston, Mass.; Pittsburgh, Penn.; Sacramento, Calif.; Tallahassee, Fla.; and Trenton, N.J.

One down, two to go?
The merger eliminates one of four insurance company trade associations in the property/casualty sector. The National Association of Mutual Insurance Companies (NAMIC) has been invited to join forces with NAII and the Alliance on more than one occasion, but declined.

“We have been approached twice in the last few years, and both times we’ve declined through a board decision,” Chuck Chamness, president of NAMIC, said. “Basically, I’d say the bottom line in both cases was that we are better able to serve our members by remaining independent.”

While NAMIC experienced a slight growth in its membership, the Alliance has dealt with some hardships brought about by industry insolvencies and consolidations.

NAMIC, on the other hand, has been able to grow its membership the last few years. “In the last 12 months we’ve added about 20 new member companies, about $5 billion in premium,” Chamness reported. According to Chamness, NAMIC will still be the largest property/casualty insurance trade with more than 40 percent of the market share, which he defines as direct written premium. “Plus we have 1,300+ member companies,” he said.

Regardless of the decision to remain independent, NAMIC members are aligned on most issues that PCI supports, including the issue of insurance regulation. “We support one prominent issue these days, the future insurance regulation,” Chamness added. “[The PCI] and NAMIC are in favor of a reform system of state insurance regulation, and our oppositions are consistent on most issues.”

Nevertheless, a merger between NAMIC and PCI is not on the horizon anytime soon. The same could be said for the industry’s third P/C insurer association, the American Insurance Association (AIA), although strong differences on the issue of federalization might be a factor.

Despite differing political agendas, an AIA spokesperson said the merger is probably good for the industry. “It eliminates some of the fragmentation and redundancy in the industry and sort of streamlines
it a bit,” said Gary Carr, spokesperson for the AIA in Washington, D.C. The AIA strongly favors a federal optional charter, while PCI and the NAMIC support reforming the current system of state-based regulation. “We do have some common interests,” Carr added. “Investing, terrorism insurance, asbestos litigation reform … but we are solid in favor of an optional federal charter,”
he said.

As for the countdown towards one association, “It took 80 years to go from four to three [associations],” Ramirez said. “I don’t know what will happen as far as further consolidation, but the industry needs to speak with one voice and this is a very significant step towards that.”

About Andrea Wells

Andrea Wells is a veteran insurance editor and Editor-in-Chef of Insurance Journal Magazine. More from Andrea Wells

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