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Underwriting in an Underfunded Municipality
Two insurers based in the distressed city of Harrisburg, Pa., open up about their experiences.
By JOEL BERG, a freelance journalist and college professor The risks of doing business in a distressed city represent a mix of reality and perception, according to two insurance executives who work in one: Harrisburg, Pa.
"The community is still very much a vibrant community, but it has this weight around its neck," said Robert Lyon, chairman, president and CEO of Millers Mutual Group, a commercial insurer based in downtown Harrisburg. Harrisburg's financial woes mostly have been a matter of perception, Lyon said. But perception can have concrete effects if, for example, it leads to a decline in private investment in the city, which underwent a downtown renaissance in the 1990s and early 2000s. There are some signs of a decline, Lyon said. Restaurants that closed used to be replaced quickly by newcomers. Now, vacant storefronts sit empty longer. Of course, blame may fall equally on the drooping economy. "This is just one thing more that gets layered on top of that," Lyon said of the city's precarious finances. The effect also may be felt during interviews with job recruits who hail from outside the region. They have likely heard about Harrisburg's problems and might need some reassurance, Lyon said. Current employees, meanwhile, might take a dim view of any additional taxes, whether levied on income or commuting, Lyon added. "That absolutely would be viewed as a negative if they can go across the municipal border and not pay that," he said, noting that the local unemployment rate for financial services is relatively low. Financial distress would loom larger, he said, if it led to cuts in fire and police services, which so far appear to be weathering the storm. In other cities, shrinking fire departments have led to downgrades in ISO safety ratings, according to ISO. Lower ratings can boost premiums. In Harrisburg, crime appears to be on the upswing outside the city center, said Christopher Markley, a spokesman for Harrisburg-based Penn National Insurance. If it spiked in the downtown, some employees potentially could leave for areas with less crime. Still, for all its troubles, the city remains something of a regional magnet, Markley wrote in an email. "Research among our employees shows consistently high satisfaction with working in the downtown," he said. May 1, 2011 Copyright 2011© LRP Publications |
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