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June 25, 2007

New PIAL board will help fix Citizens mess

Recent articles suggested staff of the Property Insurance Association of Louisiana, the organization that services the state’s insurer of last resort, was not cooperating with the legislative auditor on its audit of PIAL performance.

I’d like to clear up that misconception.

Since the last few weeks of April, the entire board of PIAL, the executive management staff and the legal counsel for PIAL changed.

On May 7, I became the president and chairman of the board of PIAL. Since then, the board has met once or twice a week to work toward a resolution of some identified problems.

PIAL, as well as Citizens, was full of them.

Some were obvious; others were veiled.

While some problems were clearly attributable to a disaster the size no one has ever encountered in Hurricanes Katrina and Rita, some appear to be a result of poor organizational structure.

The executive management team, the board and legal counsel for Citizens were essentially the same as the management, board and legal counsel for PIAL.

From what we’ve been able to ascertain, this led to poor management, lack of accountability and weak financial controls.

Contrary to what was suggested by the legislative auditor, we’re eager for his office to do its job and to do it with vigor. We appreciate and support the efforts of the legislative auditor’s office and know that its audit can help us identify additional operational problems that can be addressed by our new executive management team.

Additionally, if any improprieties existed prior to the new executive management team, board and attorneys, it’s imperative that those items are uncovered as part of the audit.

At the end of the day, it must be decided whether PIAL should continue to service Citizens. In early May, we informed the Citizens board of our intention to explore discontinuing PIAL’s relationship with Citizens if it is determined that the relationship isn’t in the best interests of Citizens’ policy holders or the state.

My greatest concern about Citizens being on its own is that an insurance company must be positioned to respond quickly to the changing needs of its policy holders, particularly one that is the insurer of last resort.

Anyone who has ever worked for the state understands why this is an issue. If we can actually find a private, for-profit insurer that is willing to take on all of the policies that are now in Citizens, maybe that is the way we should go.

But it’s a complicated issue and one I plan to explore from an academic standpoint over the next few months, just as I explored whether the state’s Insurance Rating Commission should exist and concluded it should not.

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