Allstate's Liddy brings good hands back to D.C.

Edward Liddy is no stranger to the nation's capital. Decades before he took the reins at the largest publicly traded personal-lines insurer, Allstate Corp.'s chairman and chief executive officer was knocking down jumpers as a star on the Catholic University of America's basketball team.

But with insurance issues increasingly popping up on the congressional radar, Liddy has taken that competitive streak to a new arena, looking to position his company as the industry's go-to voice on matters ranging from flood insurance reform to regulatory modernization and solutions to the asbestos litigation crisis.

Best's Review sat down with Liddy in its Washington office ahead of his participation in a forum hosted by the Independent Insurance Agents & Brokers of America, whose support is considered crucial to Allstate's current top legislative priority,--creation of a federal backstop to protect against catastrophic natural disasters.

What is the state of your efforts to push H.R. 4366, the natural catastrophe backstop bill?

State Farm is with us, and we think a couple of the other insurers are getting there. We'd like to expand the coalition, and of course, it's not just an insurance issue. It benefits anyone who benefits from a robust real estate market--real estate agencies, banks and mortgage lenders--so, it should be a broader coalition. You see what's happening in New Orleans and the Gulf Coast, where people had 80% mortgages and lost all of their equity. The homes are not worth anything. So where is the money going to come from? The (insurance) agents have moved slowly toward our position, we think. But basically, it's us and State Farm out there to drive the message that what we have doesn't protect consumers.

In your mind, is there a way to structure this that would bring the reinsurers into the fold and drop their opposition?

It's tough. It is possible for reinsurers to be providing reinsurance to state pools, even to the federal pool. For us, there is such an emotional attachment to one's home that that is the issue, as much as dollars and cents. The reinsurers look at it as, they've got this slice of risk and the economics of it. They don't have to worry about going out and settling claims and everything else. I'd like to see them mellow a little, but it might take a while for that to happen.

Is there a way to tie this to the flood insurance debate and use that as a vehicle for passage?

A: I don't think so. The flood program is very well-established, but it's a system very much in need of repair. It also is under-priced, and why you allow people to rebuild in the same areas always seemed an odd thing to me. We need to fix the flood program, but I wouldn't necessarily meld the two ... And obviously, you don't want to see it, but the thing that might end up being the driver is just if we see another storm year this year like the last couple.

How do you see the optional federal charter debate moving forward?

In an election year, anything you come up with will be tough. But we are big believers in an optional federal charter. We think national companies that play on a national stage can benefit, and we think consumers will benefit. One of the things that happens with the insurance industry is that there's no repository in Washington of knowledge and history about insurance. No one here knows much about it. We saw that when Congress wanted to pass TRIA, and there was no one here with any expertise.