PCI: Mum's the Word on Spitzer

"Oh breathe not his name," wrote an Irish poet, and that spirit descended mightily on the first annual meeting of the newly formed Property Insurers Association of America in November.

By Thomas J. Slattery

The name in question, of course, was that of Eliot Spitzer, the crusading attorney general of New York in connection with his probe of price fixing in the insurance brokerage community.

Spitzer was the uninvited guest. He was conspicuous not so much by his physical absence as by his near-total absence from conversation both public and private, on record and off.

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Asked for their opinions on the matter, executives shifted nervously while citing advice of counsel for their reluctance to answer. Their public relations handlers alternately blanched or reddened and were quick to intervene to ensure that their wards zippered up.

Only Ernie Csiszar, the new president of the PCI, raised the matter from the dais. "Allegations that incentive compensation agreements negatively impact every insurance consumer in the United States make great headlines, but just don't hold water," said Csiszar. "The Spitzer investigation will cloud the debate over regulatory reform going on in Congress, at the NAIC, and in individual states."

Snapshots from the meeting, gleaned from interviews, include the following:

-Benfield Inc. CEO Paul Karon says the Marsh affair signals "a sad day" but one that may vindicate firms that have prided themselves on their independence and client advocacy.

-Pat Mailloux, CEO of Swiss Re America Corp., says the property-and-casualty industry is in for a "relatively good year" in 2005. "We shouldn't confuse the idea of a soft market with slight declines in some lines," says Mailloux. "In some of those cases, business can be written profitably even with lower rates. To me, that's still a hard market."

-Bill Adamson, CEO of Carvill America Inc., the Norwalk, Conn.-based reinsurance intermediary, says the Florida market will come under closer scrutiny following four hurricanes in one season. Close attention will also be paid to retentions and the whole issue of frequency versus severity.The industry, says Adamson, will be struggling with a decision on "what's the right rate." As ever, property-catastrophe is a supply-and-demand business. Until the first year-end renewals it will be guesswork.What seems clear is that insurers may have been taking more of the risk than in the past and may feel that is worth something.

February 1, 2005

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