Framing the Issues

The Property Casualty Insurers Association of America (PCI) represents 1,000 insurance companies that write about 40 percent of the business in the United States. They now have a new CEO and president. David Sampson comes to the PCI from the U.S. Commerce Department under the Bush administration, with a background in economic and public policy, including work with the Texas Chamber of Commerce. In late October 2007, Insurance Journal‘s Andrew Simpson interviewed Sampson at PCI’s annual meeting in Boston to discuss how an organization as diverse as PCI forms consensus on challenging industry issues. To watch the complete video interview with Sampson click the video link below.

PCI’s members include insurers as diverse as Geico, Allstate, Church Mutual and Vermont Mutual. How do you get consensus on some of the issues the industry faces with such a diverse group?
David Sampson: Well, clearly one of the characteristics of PCI is the size and breadth of its membership. You have over 1,000 companies who are members. They obviously have different business models. They write different lines of insurance. I think that the way you get there is that you have a very open policy development process. My role is to make sure that there is an open, transparent process where everyone can have a voice, and where it’s very clear how that development process works. You try to create the environment that promotes open and respectful dialogue. … I think one of the great strengths of this organization is that when we do speak, public policymakers recognize that it represents a broad consensus view of the P/C industry in the United States. When you have an organization of a thousand members that can come around to policy, it’s clear that is something that has a very broad buy-in.

Does it mean that some companies might not be totally happy with some of the policies?
Sampson: I’m not aware of any organization in life, much less a trade association, where everyone’s happy all the time. I think what you have to do as the CEO is to make sure that there is a very open, transparent process by which policy is developed. I think the role of the CEO is to scan the horizon and let members know what’s going to be coming up before it arises and hits them in the face. I need to have that kind of radar screen where I’m looking out and seeing what’s happening in state capitols and in Washington.

I think the role of the CEO is to help frame the issues, to help the board think through potential unintended consequences of a particular course of action, to understand what the strategic threats are to the industry, and ultimately keep raising the question of what’s best for our policyholders. I have a strong conviction that if we do what’s best for our policyholders, if we create the fundamental business environment in Washington and in state capitols that promotes competition then ultimately our industry and our individual member companies are going to do quite well.

Coming from Texas and the Washington environment, what was your perception of the property/casualty industry coming into this job?
Sampson: Well it’s a core industry. Nothing moves in the U.S. economy without insurance. You can’t ship goods abroad or domestically, and you can’t invest in plant equipment, unless you can insure the inherent risks that come from business enterprise. And so I feel very fortunate to be a part of this industry at this critical moment in history. I think that this is an industry that has great potential going for it, but clearly it’s an industry that’s facing a lot of political headwinds at the moment. And quite honestly, I think that’s something that I’m well positioned to help the association, as well as our member companies, navigate through.

How about the politics of your job? In a sense, you’re coming from a Republican administration and in many cases having to deal now with Democrats who control Congress. Is that a problem?
Sampson: I don’t think so. Number one, I’m not known as a highly partisan individual. Clearly I have a background in Republican administrations. I had the great fortune of working for this president for six and a half years of his presidential administration. I served in his administration in Austin and two appointed positions prior to that. And so clearly, I have a close and long-time association with President Bush and many other folks within this administration.

But my job now is very different from what my job was over the last six and a half years, as a senior administration official. My job now is to help this industry navigate its way through tumultuous public policy waters in Washington and in state capitols. I speak the language that these policymakers speak. I know that it’s not a linear process to get from where the debate begins to where the debate is ultimately going to end up. And serving as the chief operating officer for the Commerce Department for the last number of years, the reality is that you have to work with people on both sides of the aisle, if you’re going to get anything accomplished. And so, I think that’s something that’s not going to be problematic. As a matter of fact, I think it serves me well for this new role.

One issue the industry faces is renewing the federal terrorism reinsurance act. The House has a version, the Senate has a version, and PCI probably has its ideal version as well. What are the differences there, and what do you think we’re going to end up with?
Sampson: Well, the House bill that has passed out of the House has a longer extension period of 15 years. It removes the distinction between foreign and domestic acts of terrorism. It has a lower trigger level of $50 million. And it included one provision which we had great concern about, and that was the mandate to make available coverage for nuclear, biological, chemical and radiological weapons attacks.

The Senate version that passed out of the Senate Banking Committee, 20-1, very recently, has a shorter extension of seven years as opposed to the House’s 15-year version. It maintains the existing trigger level of $100 million. But most importantly, the version that came out of the Senate Banking Committee does not include the mandatory make-available for NBCR coverage.

We think that all in all — although both bills have positives and negatives — we think that the Senate bill is closer to the bill that’s ultimately going to pass, given the statement of the administration position that the White House issued very recently. So we look forward to working, first of all, to get the full Senate to take up the bill that came out of the Senate Banking Committee, hopefully on a unanimous consent agenda within the next week or so, so that we can begin seeing that process move to either a pre-conference with the House or a formal conference with the House. [Editor’s Note: The U.S. Senate passed its version on Nov. 16, after this interview took place.]

I would expect that we will stay engaged in that process to try to resolve the differences between those two bills. But at the end of the day, what we want to get is reauthorization before it expires [Dec. 31, 2007] and a bill that can pass both Houses and can be signed by the president.

In your opinion if it’s closer to the Senate version and without the NBCR, it’s a bill that the president could probably sign?
Sampson: Well, I think that the statement of administration position that was issued recently indicated that the House bill was not acceptable and that the president’s senior advisors would recommend a veto if that bill reached his desk. And then recently when the Senate Banking Committee took up their version of the bill, Secretary of the Treasury Paulson issued a letter saying that the White House would not oppose a bill that emerged out of the Senate Banking Committee. So I think that all things considered, the final product is likely to be closer to the Senate version than the House version.

PCI has advocated strongly for the modernization of state regulation, as opposed to a big federal bureaucracy or any more federal involvement. Is that correct?
Sampson: Technically speaking, the PCI has historically advocated for good regulation, and have been more engaged in the debate about what good regulation looks like as opposed to where the site of that regulation takes place. Clearly, multiple inconsistent regulatory issues that do not bring benefit to the policyholders and just bring cost to the policy is something that is of concern to our members. I think that it’s probably unlikely that that issue is going to emerge within the remaining days of this legislative calendar this year, and probably not likely next year either.

What’s the appropriate role for the federal government in a catastrophe plan, if any?
Sampson: We believe that when you look at natural disasters of the magnitude that we’ve seen, there clearly needs to be a public/private partnership to address mega-disasters, disasters of historic proportions. The question is: what does that partnership look like? That’s the open question right now.

PCI has adopted a position which calls for a federal liquidity facility that can serve as a financial backstop when there are disasters of a magnitude that local state catastrophe funds could not appropriately back up. But this is an issue that obviously we need to address, that we’re going to be engaged in. We want, at the end of the day, to have a policy that will promote insurance being affordable and available, and something that doesn’t mask the true cost of insuring development. We need to address, more broadly speaking, the issues of where development takes place (such as) building codes and ways to mitigate construction from being terribly impacted by the nation’s storms.

What can we realistically expect Congress to accomplish as far as the insurance issues between now and the end of the year?
Sampson: I predict TRIA will be addressed. I think all indications are that the House and the Senate will come together on a final TRIA reauthorization before the end of this calendar year.