Faith groups explore insurance risk pooling

By Erik J. Alsgaard*

LAKELAND, Fla. (UMNS) - In a state where homeowners and churches have seen property insurance rates skyrocket, the governor and legislature are not the only ones trying to do something about it.

Led by representatives of the United Methodist Property and Casualty Trust (PACT) and the Florida Annual (regional) Conference, among others, several national faith groups have come together in recent months to explore catastrophic property insurance possibilities that would spread the risk and save money.

"The recent abnormal hurricane activity has changed the insurance environment, not only in Florida, but in every state with hurricane exposure," said Mickey Wilson, Florida Conference treasurer.

"The insurance industry is rethinking its prediction models and appetite for offering wind-storm coverage," he said. "This year there were fewer companies offering coverage in Florida and the Gulf states, and those still offering coverage were greatly refining and reducing the types of coverage offered. In short, we are in a seller's market and will be in one for an extended period of time."

Irene Howard, PACT's chief executive officer and former general counsel for the General Council on Finance and Administration of The United Methodist Church, said the interfaith effort is important, especially now.

"More than 10 percent of the local churches in the United Methodist community have coastal exposure," she said. "If we don't find a way to provide property insurance for that part of our connection, we won't be in ministry there in the future. That's not acceptable."

Nineteen United Methodist conferences are participating in PACT.

When Hurricane Katrina struck in August 2005, the insurance ministry proved to be a vital resource for the Mississippi Conference. "If it had not been for PACT, there would have been no way to work with the churches to handle their claims," said David Stotts, director of financial administration for the Mississippi Conference, in a 2006 interview with United Methodist News Service.

Spreading risk
Florida's new governor, Charlie Crist, signed a bill Jan. 25 that many expect will lower property insurance costs. The measure, passed by lawmakers in a special session, forces an immediate rate decrease for Florida's largest insurance company, Citizens Property Insurance Corp., which was created by the state. The new law also cancelled a future rate increase.

The bill also seeks to lower rates by making more state backup insurance available to private insurance companies - in effect, having the state and its residents assume that risk.

Spreading risk is not just for homeowners. The Florida Conference in late December hosted a meeting with insurance and faith group representatives, seeking ways people of faith can work together to make insurance affordable.

"What we want to do is bring people together and simply ask the question, 'Is there a way for us to collaborate and spread the risk?'" said Peter Persuitti, a managing director of Arthur J. Gallagher's Religious Practice Group. Arthur J. Gallagher, according to its Web site, is the fourth largest insurance brokerage and risk management services firm in the world.

The idea is simple. When churches from disparate areas share the risk, insurance premiums go down. For example, churches in the Florida Conference do not share risks with churches in Okalahoma or Texas when it comes to tornadoes, or churches in California when it comes to earthquakes, and vice versa. By spreading the risk over more churches and more geography, the likelihood of a catastrophic disaster happening across a widespread area is minimized and premiums go down on a broader base of exposure.

In a 'crisis market'
The collaborative effort is in its early stages, according to Persuitti. Participants include national insurance programs of the Episcopalian and Presbyterian faith traditions, as well as Roman Catholic dioceses and archdioceses and the national United Methodist PACT, including the Florida Conference. If a feasibility study is approved, Persuitti said a next step would include gathering data to draw up a property location map and to run insurance models.

"When insurance is cheap, no one talks about pooling your resources," Persuitti said. "In a crisis market, it's different, and we're in a crisis market now. People are thirsting for alternatives."

Even though pooling resources sounds easy, it's not. During the Lakeland meeting in December, participants looked at such issues as who would pay what premiums, how much risk of potential loss is acceptable, how the structure would be organized to handle governance and administrative functions, and when coverage would become effective. Among the experts supporting this initiative are staff from the Insurance Services Office and its actuarial and catastrophic modeling divisions.

"Coming together around this issue just makes sense," Wilson said. He noted that Florida Conference churches are required to participate in the conference's insurance program, a measure approved by the annual conference itself. "The members of the Florida Conference are unique in their understanding of connectionalism and their commitment to each other."

For Wilson and others, the insurance issue strikes at the core of being a disciple of Jesus Christ: stewardship.

"We need a commitment from United Methodists and others," Howard said, "because it's not about today; it's about good stewardship and making sure we enable ministry in all parts of this connection now and in the future.

"It may take time to accumulate funds for this project, but if we are to protect our ministries long term, we must start now, working in collaboration with other denominations facing similar challenges. This is our common ground. Plus, we just think there's a more efficient way for nonprofits to finance risk."

*Alsgaard is director of communications for the Florida Conference. This story originally appeared in the conference's e-Review Florida United Methodist News Service. Some information for this story came from Associated Press news reports.