Southern discomfort

A leading national independent agency leader urged Southern governors to use their “bully pulpits” to bring together the leaders in the insurance industry to ease the region’s coastal insurance crisis.

“Right now, the prospects for broad legislation in Washington are not great, largely because of a fragmented industry. You have the power to bring those leaders together in your state,” Alex Soto, a Miami agent who is president of the Independent Insurance Agents & Brokers of America, told the Southern Governors Association annual meeting last month in Biloxi.

Soto told the governors of a need to invigorate competition, enforce stronger building codes and fortify homes along the Gulf Coast — goals that make sense in the long run but might not help these politicians or their constituents before the next election.

“The insurance industry is neither monolithic nor monopolistic and the industry, with thousands of different companies, is actively competitive in most parts of the country,” Soto added. “But that’s not the case along the coast, and we need to find ways to restore competition and bring more companies back for our insurance customers.”

The message from the states seems to have been, “We have been trying but not getting much response.”

Southern governors, hardly a group to create government programs where they aren’t needed, are frustrated over what to do.

Louisiana Gov. Kathleen Blanco — a Democrat– is trying to lure insurers with millions of dollars in incentives to get them to start writing policies in her state.

Mississippi has put millions into its wind pool to because private insurers are unwilling to write in some coastal neighborhoods. South Carolina has also shored up its pool.

According to Alabama Gov. Bob Riley, insurers are nowhere to be found in some of the most vulnerable coastal areas of his state. “Now, we’ve got 50, 60 miles of coast. I can’t get insurance,” Riley said. “I can’t imagine what Texas and Florida are going to have to do.”

Well, Florida has taken steps and the insurance industry is none too pleased with what politicians there have done.

William R. Berkley, chief executive officer of W.R. Berkley Corp., said governments might subsidize coverage for property owners, even while acknowledging that it would not make sense for taxpayers to subsidize million-dollar coastal homes.

Brian MacLean, chief operating officer of Travelers insurance company, said a key is a good regulatory climate. “The insurance carriers must be assured that they can over time earn a reasonable return and we believe this can only be done with a stable regulatory environment,” MacLean said.

Politicians want a stable environment as well- one that gets then re-elected.

Alabama’s Riley said he does not believe that government should be in the insurance business — are you listening Fla. Gov. Crist? — but even he acknowledges out of frustration that unless the private market comes up with a solution and starts insuring some of these difficult risks, government will be forced to get involved.

Which is exactly what private insurers keep saying will just make matters even worse for everyone.

Topics Legislation Market