2006-03-24 / Editorial/Opinion

It's My Turn

By Brian Pozzi

Brian Pozzi
Brian Pozzi Regional Counsel, NY Region Allstate Insurance Company

The following op-ed piece was submitted in response to an editorial in last week's Wave taking the company to task for removing itself from the home insurance market in Rockaway.

Allstate is a responsible, accountable, and trustworthy company that's taking difficult but measured actions to manage its high concentration of risk in downstate New York.

These actions, while not easy to do and maybe not easy to understand, are being taken for the benefit of the majority of the company's customers.

Like any company, it must balance the interests of its customers, employees, agents, shareholders, and the community-at-large.

During a recent hearing held by the State Insurance Department, insurers statewide testified they have the capacity to meet the area's homeowner needs and that Allstate's decision is not disruptive to the marketplace. This means a healthy and competitive industry environment - good news for us all.

It's time, however, that we in coastal and densely populated areas of New York face the fact that we will be struck by a major natural catastrophe. ealizing this today makes a tremendous difference in preparing for tomorrow.

This is a lesson that, I believe, our country has learned the hard way.

Seven of the nation's 10 worst hurricanes have occurred in the last 15 months. Still, we manage catastrophes by looking through the rear-view mirror, preparing for them after they've happened. We must look through the front windshield and accept the possibility of a damaging natural disaster striking our area.

The research is clear about the risk.

The National Oceanic and Atmospheric Administration says the frequency rate of a category one storm in the New York Metro area is every 17 years, a category two storm every 39 years, a category three storm (same as Hurricane Katrina) every 68 years.

Most New Yorkers remember the significant damage created from Hurricane Gloria in 1985, a category one storm by the time it touched ground. In 1938 (68 years ago this year), the category three storm known as the Long Island Express left 63,000 people homeless, created what we now know as the Shinnecock Inlet, and cost more than 300 million in 1938 dollars. Today, that storm would cost tens of billions of dollars.

The data does not end there. Scientists tell us that we have entered into a 10- to 15-year cycle of increased storm activity and intensity called Atlantic Multi-Decadal Oscillation.

Allstate Insurance Company has been dedicated to the downstate homeowner insurance market for decades. In fact, the company has served the market and the customers when other companies have not. And, even with these actions, Allstate remains a leader in our area.

As a leader, the company is doing what it can do to help the small percentage of impacted customers with other homeowner insurance products.

Allstate is also strongly supporting long-term solutions that will better prepare and protect us in the event of a catastrophe.

The company supports the establishment of a properly constructed Catastrophe Fund.

This would be a public/private partnership where private money, in the form of a portion of customer's premiums, is put in a fund administered by the state. That money grows on a tax-free basis and would be used to pay losses above a designated level in the event of a mega-catastrophe. Additionally, it supports strengthening first responders, enhancing the recovery and rebuilding processes, and improving consumer education. There is no burden to taxpayers!

At the time, the September 11 terrorist attack on the World Trade Center was the most expensive catastrophe in history, costing an estimated $30 billion. (Reports say that the estimated cost of Hurricane Katrina exceeds $50 billion.) What if the attack on the World Trade Center had been followed by a major hurricane? Or, what if a devastating earthquake struck California one week later? We do not want to think about back-to-back mega disasters, but they can and do happen.

The cost of any single catastrophic event (let alone multiple events) is enough cause for consideration of a Catastrophe Fund.

Our regulators and legislators are to be commended for joining together on the issue and encouraging important and pertinent dialogue. Allstate will surely be a participant in these discussions and actively involved in the establishment of any solutions.

Bidding farewell to winter and giving a warm welcome to spring are our reminders of the coming hurricane season. We have learned a great deal from the last two seasons, but most of all, I think we've learned to never say never. No matter what happens in the coming season, we should be grateful that light has been shed on this important issue.

Thank you to our United States and New York representatives as well as to our New York State Insurance Department Superintendent Howard Mills for raising awareness and ensuring the proper preparation and protection of New Yorkers and Americans. It seems we all agree that the worst thing we can do, as a state and as a country, is nothing.

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