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PIA-Florida Insurance Council Forum Unites Agents, Industry Leaders, Public Officials to Discuss Catastrophe Issues

Marco Island, Fla., July 25, 2007 - Main Street insurance agents, industry leaders, legislators and regulators met to discuss the roles of government...
July 25, 2007

Marco Island, Fla., July 25, 2007  - Main Street insurance agents, industry leaders, legislators and regulators met to discuss the roles of government and insurance markets relating to natural catastrophes during a June 26 forum sponsored jointly by the National Association of Professional Insurance Agents (PIA) and the Florida Insurance Council (FIC).

For the first time since Hurricane Katrina in 2005 and the four hurricanes that struck Florida in 2004, a diverse group of government officials from the Gulf Coast states and insurance industry leaders met to specifically discuss how to handle such natural catastrophes in the future.

Government and Insurance Markets: Achieving the Balance consisted of two panels comprised of leaders in key positions in government at the federal and state level along with insurance industry leaders that focused on insurance, mitigation, planning and related aspects of recovering from natural catastrophes throughout the United States. The forum was held in conjunction with the Florida Insurance Council's 2007 Annual Conference at the Marriott Hotel in Marco Island, Florida.

"Government is seeking practical political solutions, while the insurance industry is seeking practical economic solutions," said PIA National Executive Vice President & CEO Len Brevik, who moderated the panels. "The public is simply seeking practical policy solutions, so they can afford their insurance policies."

"The purpose of our forum is not to agree on any one particular approach," Brevik said, noting that 14 separate bills addressing aspects of natural catastrophe response have been introduced in Congress so far this year, while states such as Louisiana and Florida have adopted widely divergent approaches. "Our purpose is to advance the discussion of possible solutions for the benefit of taxpayers, policyholders and government, as well as being workable for insurers."

"When we talk about what needs to be done from an insurance industry standpoint as well as a government standpoint, we generally focus on mitigation and economic recovery from events when they occur," said Robert Detlefsen, Vice President of Public Policy of the National Association of Mutual Insurance Companies (NAMIC). "We don't talk often enough about what we might do to prevent the occurrence of events whose magnitude and severity might be less if we were to examine some of the assumptions that we have about economic growth and development in hurricane-prone and disaster-prone parts of our country."

"Louisiana has shown amazing restraint in resisting knee-jerk reactions to the storms of 2005 which were horrific," said Chad Brown, Deputy Commissioner of the Louisiana Department of Insurance. "The natural reaction to storms and natural catastrophes is to believe that you can fix everything by passing a bill. We believe the exact opposite. Fortunately, the Louisiana legislature has agreed for the most part with our train of thought in the last couple of years and during this legislative session. Commissioner Donelon believes that letting the market work and promoting and increasing competition is the ultimate solution to achieving long-term market stability." 

Dennis Cook, President of PIA of Louisiana and an agent from the New Orleans area agreed that his state is on the right track. "We have just abolished our Rate Commission in Louisiana. We did pass laws last year for strengthened building codes, but enforcement of the building codes is still a problem."

While insurance reforms in Louisiana have been keyed to expanding the private insurance market, Florida decided to expand the state's insurer, Citizens.

"The Florida Legislature allocated $715 million (out of the general tax fund) to help bail Florida Citizens Insurance Company out of a $1.8 billion deficit," said Brian Marino, national director of PIA of Florida and Chair of the PIA National Natural Catastrophe Working Group. "This was immediately followed by a rate rollback and a rate suppression that the private market now has to compete against. The playing field isn't level. From an agent's standpoint, our biggest need is stability and the assurance that our markets are solvent."

One bright spot in recent legislation passed in Florida is a renewed focus on mitigation, according to Rep. Don Brown (R), Chairman of the Florida House Insurance Committee. "Florida made a significant commitment to mitigation, but there's a point beyond which returns on that investment become very expensive. Building code improvements will pay some dividends, but that's not the real problem. The real problem is that we have chosen to build over two trillion dollars worth of investment on our coastal areas [in Florida]."

Ed Connor, Deputy Assistant Director for Insurance Mitigation with the Federal Emergency Management Agency (FEMA) said that when it comes to mitigation, there is no short-term solution. He said one thing to look at is breaking what he called the "damage-rebuild-damage" cycle in which as events occur, people rebuild, events occur again and people rebuild again.

"We need to protect the integrity of the National Flood Insurance Program (NFIP) to ensure that we meet our obligations and commitments to our 5.4 million policyholders," said Connor. "One of the things that we learned from Katrina, Rita and Wilma was that of the losses that we incurred, only 50% of the folks who needed flood insurance had it. We have to get people to understand that when it comes to flooding, their perception of risk is not what they think it is. It can happen to them."

Moderator Brevik said discussions must continue with a basic fact in mind: in order for insurance to play its role in disaster recovery it must be available, affordable and built on a firm financial footing.

"PIA's President-elect Robert Page, an agent in Louisiana, recently told me he had a young couple come in to buy insurance," Brevik said. "The cost of insurance coverage on their basic starter home was about the same as their mortgage payment. That's an economic condition that will kill the economy and kill the industry, so we really need to take a look at what we can do."
 
PIA of Florida and PIA of Louisiana were also sponsors of the forum. Sponsorship is also being provided by ACORD and IVANS.

Ideas from the PIA-Florida Insurance Council forum will be shared with state and federal legislators, regulators and industry leaders. A white paper along with video excerpts will be made available in September.

Panel participants were:
Brian Marino, PIA National Director from Florida and Chair of the PIA National Natural Catastrophe Task Force; Dennis Cook, President of PIA of Louisiana; Chad Brown, deputy commissioner of the Louisiana Department of Insurance; Ed Connor, deputy assistant insurance director for insurance mitigation with the Federal Emergency Management Agency (FEMA); Pam Pogue, Immediate Past Chair of the Association of State Floodplain Managers.

Panelists also included:
Dennis Burke, Vice President, State Relations for the Reinsurance Association of America (RAA); Robert Detlefsen, Vice President for Public Policy for the National Association of Mutual Insurance Companies (NAMIC); William Riker, President and Chief Underwriting Officer for Renaissance Re Holdings, Ltd.; State Rep. Don Brown (R-Florida), Chairman of the Florida House Insurance Committee; Rep. Ron Reagan (R-Florida), Chair of the Florida House Jobs & Entrepreneurship Council; and Ray Spudeck, senior research economist with the Florida Office of Insurance Regulation.

Founded in 1931, PIA is a national trade association that represents member insurance agents and their employees who sell and service all kinds of insurance, but specialize in coverage of automobiles, homes and businesses. PIA members are Local Agents Serving Main Street America(SM). PIA's web address is www.pianet.com.

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