The Property Casualty Insurers Association of America confronts issues ranging from extending the federal terrorism insurance backstop to dealing with unresolved problems stemming from last year's Superstorm Sandy.
“Our job is to help our members work through legislative, regulatory and legal risks,” said David Sampson, president of Chicago-based PCI, in an interview in which he discussed the trade group's priorities.
In the near term, “clearly we had a number of issues in the aftermath of a very active natural cat year” last year, he said, citing Superstorm Sandy. Then the industry had to deal with “a rising tide of regulatory and legislative proposals that we think would undermine the sanctity of insurance contracts,” Mr. Sampson said. For the most part, he said PCI was successful in halting such proposals.
Still, challenges remain at the state level, he said, such as continuing Sandy-related problems in coastal states, he said.
Otherwise, some states have sought to restrict underwriting tools but there have “been some encouraging signs at the state level that recognize the need for innovation,” he said. He also said some states have been looking to increase insurer liability through bad faith laws.
At the federal level, getting Congress to move on the extension of the federal terrorism insurance backstop program, initially created by the Terrorism Risk Insurance Act of 2002, is a major priority for PCI, Mr. Sampson said. The program was last extended in 2007 and is slated to expire on Dec. 31, 2014.
“We've come a long way this year,” Mr. Sampson said. He noted both the House Financial Services and the Senate Banking, Housing and Urban Affairs committees have both held full committee hearings on the possible terrorism backstop extension, which he called a “pretty significant development.”
One issue thought to be settled has re-emerged for PCI.
“Probably all of us thought with the passage of the Biggert-Waters Flood Insurance Reform Act of 2012, that was an issue that was on a stable footing, but that turned out to be a false assumption in the post-Sandy environment,” he said. The law extended and reformed the debt-ridden National Flood Insurance Program. But Mr. Sampson said policyholders are pushing back on premium increases that stemmed from the reform.
Incoming PCI Chairman Robert Restrepo said both a bipartisan approach to renewing the terrorism insurance program and maintaining the nation's flood insurance program as reformed by Biggert-Waters are top policy goals for his upcoming one-year term.
Among mid-term risks PCI is closely watching are the U.S. Department of Housing and Urban Development's interpretation of “disparate impact,” as it relates to the Fair Housing Act. The case is before the Supreme Court and Mr. Sampson said that decision “could really be a game changer in terms of how the industry uses actuarially sound underwriting practices.”
Among what he called the “unknown unknowns” are developments on “global regulatory convergences that we don't fully understand the implications right now.” There is a “long-time risk of international standard-setting bodies setting rules for the U.S. financial industry,” he said, noting that many of them don't fit the insurance industry.