My blog entry on Friday morning, offering my own speculation on why Ernie Csiszar so abruptly resigned last week as president of the Property Casualty Insurers Association of America, prompted some buzz from others in the market with personal knowledge of how the split actually went down.
In my earlier entry, I noted that Ernie had stepped down days after PCI defected from ProtectingAmerica.org, shortly after announcing with much fanfare that PCI would join the Allstate-backed group that aims to create a national catastrophe fund. Since the principals have clammed up on what the heck happened here, I suggested that Ernie was probably caught in the crossfire between two big members--Allstate and Liberty Mutual, with the latter adamantly opposed to a cat fund.
However, others in the know suggest that I missed the mark...That it was actually the smaller members (in relative size, but the majority in total numbers at PCI) that pressured Ernie to take a hike because of the way the decision to join ProtectingAmerica.org was made.
What I heard Friday afternoon is that this was not so much a showdown at the OK Corral between two behemoths--Liberty and Allstate--as it was a death by a thousand cuts. My understanding now is that Ernie talked with both carriers and worked out a truce of sorts, based on the fact that the political reasons for joining PA.org were more compelling than the ones that would have kept PCI on the sidelines. Apparently, many board members didn't feel the same way. Thus the rift and the hasty exit. Bottom line, this may have just come down to an internal governance dispute.
Whatever happened, the one thing for certain is there had to be a better way to handle this debacle without forcing a quick resignation by your CEO that would inevitably be linked to the Hokey-Pokey dance PCI did--sticking one foot into PA.org, then taking that foot right back out, leaving both organizations lurching all about.
Both organizations really took a hit here. PA.org's cause was bolstered by PCI's arrival, and is likely to be devastated by its stunning departure. PCI, meanwhile, looks like a group in chaos, and it loses a very potent personality in Ernie Csiszar, who knew how to get things done. It's really a shame it came to this.
I'm all ears if anyone else wants to offer more inside dope by e-mailing me at sfriedman@nuco.com, or feels like offering their own observations about the repercussions on this blog. I'd especially like to hear more from the man himself, Ernie Csiszar, who had nothing of substance to say in the statement PCI released.
Comments (5)
I don't think the checks and balances needed for a national catastrophe fund would be incorporated by Congress. Maybe the thousand cuts Ernie suffered was because of this.
With the National Flood Program, all taxpayers take a hit, because when it runs out of money, taxpayers foot the difference in losses and premiums received.
How could it be any different with cat insurance? With all of the good intentions, once a catastrophe hit and the losses exceeded the premiums (which would be the first multi-billion cat; remember Katrina's multi-billion loss?), what legislation would ever be written to prevent taxpayers from bailing out the National Cat Fund?
Posted by Dave Cowan | September 18, 2006 11:02 AM
Posted on September 18, 2006 11:02
I thought insurance was about spreading risk.
It amazes me when people say they do not want the government to bail out the propesed national cat fund. When the next mega-cat hits, who do they think is going to pay when any of these companies go bankrupt?
The taxpayers pay whenever any type of major loss occurs. FEMA gives out a lot of money, and they are funded from taxpayers.
Posted by David Voteau | September 18, 2006 12:22 PM
Posted on September 18, 2006 12:22
Sam, I'm enjoying your blog and think you have found a topic that is ripe for some heated discussion.
The way I hear it, in his short (less than two years) time at PCI, Ernie Csiszer has done his best to shake up the inner workings of the organization and put PCI in the limelight--not only on this occasion, but notably over how SOX should be applied to insurance companies.
I, for one, am going to sit back and watch to see where this guy pops up next. He should have lots of career options just about now.
Posted by Jennifer Overhulse-King | September 18, 2006 2:59 PM
Posted on September 18, 2006 14:59
I actually think the industry is more in agreement than not with most of the issues here, but regardless, the important thing here is not to lose sight of the issue at hand.
Hurricanes seem to be more frequent and more intense. We know that California is at risk for earthquakes, as is Middle America with the New Madrid fault. And with the recent 6.0 earthquake in Florida, the fact is we really don't know when or where the next major catastrophe will strike.
Let's also remember that the entire industry supports prevention and mitigation efforts like stronger building codes, public education and better land use planning to minimize damage in the event of a mega-cat. We need to keep a productive dialogue going so that we can move beyond the status quo and find a solution to this problem.
State and regional catastrophe funds with the national backstop, as designed in HR 4366 and S 3117, set aside investment earnings to fund these prevention and mitigation programs. Identifying this source of funding should not be minimized or overlooked.
Posted by Judy Anderson | September 18, 2006 5:10 PM
Posted on September 18, 2006 17:10
The National Flood Insurance Program is a failure because not everyone has to have coverage, even in the most likely places.
If we start with that, maybe we can add a surcharge to every property policy for those uninsured floods, earth movements, etc. We might have something good to sell the cost to the public--call it a tax, whatever. Base it on some minimum fee for those least likely to have a claim, and increase it as the risk increases.
Seems like a no-brainer, but the devil is in the details of who runs it and how. The key is to keeping it simple.
How do you price it if there is no way to stop building in harm's way, on coastlines and other areas that are increasingly at risk?
The federal government would have to set building standards and do assessments for all housing, which it does not do now.
The needed work would require years of planning to it make work, unless insurance companies give their loss histories to use as a starting point.
Now we are back to politics!
Posted by joe | September 21, 2006 5:26 PM
Posted on September 21, 2006 17:26