In The News › Recovery czar speaks with insurer

Dec 7, 2007

Source: Times-Picayune

Recovery czar speaks with insurer

Recovery czar speaks with insurer
By Coleman Warner
and Rebecca Mowbray
Staff writers

In a speech Wednesday, President Bush’s recovery czar Donald Powell said he spoke at
length with executives from St. Paul Travelers, an insurance carrier poised to cancel New
Orleans area coverage, but Powell persisted in his opposition to federal intervention in
what he called a “state” and “free-market” issue.

As thousands of homeowners and businesses face dramatic rate hikes and cancellations,
Powell expressed a vague optimism the situation would be resolved. “I’m convinced that
a solution is forthcoming; I’m not sure what that is,” Powell told a Bureau of
Governmental Research luncheon at the Sheraton Hotel.

Powell said he talked for 45 minutes Tuesday with Jay Fishman, chief executive officer
and president of Minnesota-based St. Paul Travelers, the largest commercial insurer in
Louisiana. While the company reported last week that it is not confident in the levee
system, Powell said in an interview that Fishman told him levees are not the central issue,
that Travelers’ plans reflect a risk assessment.

“He’s a standup guy,” Powell said of Fishman. “I asked him to think about ways that they
could enter this market.”

He said the executive promised to mull over the suggestion. Many business advocates
believe Travelers’ plan to cancel virtually all commercial property policies in the area will
undermine recovery efforts.

Notices out in January

St. Paul Travelers spokeswoman Jennifer Wislocki confirmed that Fishman and Powell
spoke by phone Tuesday.

“What they talked about were the reasons behind our decision to non-renew certain
small- to mid-sized commercial policies in Louisiana,” she said, noting the plan’s details
have not been finalized. “We understand the concerns that are being expressed, and we
will be mindful of these issues as we determine the important details of our next steps.”
St. Paul Travelers expects to complete its plans this month.

“We’ll be starting to send out notices in January for policies that are coming up for
renewal in March,” Wislocki said.

Powell said he met several months ago in Washington with top executives of 15 major
carriers to discuss insurance coverage issues, touching on lessons from previous disasters.
He called the meeting a “dialogue” and said he didn’t seek a specific response.

Bush’s recovery chief said he understands that the availability of affordable insurance is
one of the top issues affecting Louisiana’s recovery from last year’s storms, but said the
state isn’t unique in its struggle with insurance problems after a disaster. While there has
been discussion of using federally backed catastrophic insurance or tax incentives for
insurance companies, Powell said at this point he doesn’t favor the idea of stronger
federal intervention.

“I think our role is simply to identify that it is an issue,” he said. “Historically, it’s always
been a state issue, it’s always been the marketplace.”

Powell voices concerns

The talks with insurance executives could reflect a more assertive role taken by Powell,
especially privately, in dealing with the insurance question.

As a former banker and chairman of the Federal Deposit Insurance Corp., Powell is wellversed
in the link between insurance and the flow of capital. And his adviser on housing,
education and economic development issues in New Orleans, Taylor Beery, is the son of
a longtime insurance broker with Eustis Insurance & Benefits.

Business people around New Orleans say Powell frequently expresses concern about
insurance when they meet with him in private.

John Manard, an attorney with Phelps Dunbar LLP who chairs Greater New Orleans
Inc.‘s newly formed insurance task force, went with a delegation of the group’s members
to Washington in July to meet with the Louisiana congressional delegation and insurance
trade groups. When they arrived, they were surprised to find Powell already at work on
insurance matters.

“It was clear to me that he understood the issues and was smart about them,” Manard
said. “His office has been very open with us ever since.”

Publicly, Powell has repeatedly expressed sympathy for policy-holders but maintained
there’s little he can do because insurance is regulated at the state level.

Donelon, insurer also meet

Amy Whittington, a spokeswoman for the Louisiana Department of Insurance, said
Insurance Commissioner Jim Donelon did not ask Powell to intervene on the state’s
behalf. In fact, Whittington said that Donelon and Powell have never spoken.

While Powell spoke with Fishman by phone Tuesday, Donelon met with the company’s
regional president and vice president.

“We asked them to look at alternatives,” Whittington said, such as limiting the company’s
exposure in Louisiana by limiting the levels of commercial property coverage that it
offered, putting higher deductibles on policies, or working in tandem with Louisiana
Citizens Property Insurance Corp. to share the commercial coverage.

“The commissioner gave them a lot of different options, and they said they were going to
take it back to the company,” Whittington said.

Dec 7, 2007

Source: Times-Picayune

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