Commissioner’s actions stir controversy

| THURSDAY, APRIL 4, 2013

INSURANCE REGULATION

With more than half of the legislative session in the rearview mirror, Texas’ insurance commissioner isn’t spending much time trying to win over state senators — even though she needs their support to keep her job.

Insurance Commissioner Eleanor Kitzman, who was appointed by Gov. Rick Perry in the interim between legislative sessions, must receive the blessing of two-thirds of the Texas Senate within the next two months. But the commissioner, known for being tough and terse, has taken a couple of controversial stands lately that aren’t winning her any friends.

In recent weeks, she has pursued an investigation of a Texas life insurance company doing business in Brazil, a fight that some Republicans

say she didn’t need to pick. And she has pushed for taking over the state’s insurer of last resort for coastal properties, angering some Democrats who fear that consumers won’t be fairly compensated for hurricane losses.

With Kitzman’s confirmation languishing in the Senate Nominations committee, most senators refused to talk publicly about the commissioner or the process, but interviews with more than a dozen people connected to the process paint a picture of the challenges facing Kitzman.

For her part, Kitzman says she didn’t come home to Texas nearly two years ago from South Carolina, where she had served as insurance director and made a failed run for lieutenant governor, to preside over the status quo.

“I’m more focused on doing this job as long as I have it, than I am on keeping it,” Kitzman said in an interview in her office this week. “I try to be thorough and thoughtful in everything that I do, but I am going to do the job as I think it should be done.”

Both of Kitzman’s confirmation-threatening quarrels involve well-connected, wealthy Texans. The Moody family of Galveston owns much of the life insurance company Kitzman is investigating. And some of the state’s highest-profile trial lawyers are upset about her stance on the windstorm association.

A few weeks ago, Kitzman sent a letter to each senator about what she said was the potential insolvency of Austinbased National Western Life Insurance Co.

The company is in a dispute with regulators in Brazil, who reportedly are seeking a $6 billion fine. Kitzman contends that National Western Life — which has officers and major shareholders from the influential and philanthropic Moody family — might not have enough money in the bank if the fine is collected.

She — along with the Brazilian government — has been trying to get confidential information from National Western Life.

Kitzman’s letter said her attempt was mischaracterized as “acting in the interest of foreign jurisdictions, not Texas citizens.” The information she is seeking, she wrote, “is no different than information requested from and provided by other insurers licensed in Texas.”

Although Kitzman apparently sent the letter in an attempt to head off criticism, it was the first time many senators had heard of the company or its dispute with Brazil.

Kitzman declined to answer questions about specific companies the Texas Department of Insurance regulates.

National Western Life President Ross Moody, whose family has been in Texas since the 1800s, responded with his own letter. “National Western is feeling strong pressure from TDI to comply with the wishes of a foreign government,” Moody wrote.

In a statement, Moody added that the company “already turned huge amounts of financial data over to TDI, and my staff and I are working hard to respond to the questions they continue to pose.”

The company also maintained in its annual report that “Brazilian insurance regulators have no jurisdiction.”

Many Democrats have accused Kitzman of being too pro-industry, and others have criticized her for actions involving the troubled Texas Windstorm Insurance Association, or TWIA, which is already under administrative oversight by Kitzman’s department due to problems processing a deluge of claims stemming from Hurricane Ike in 2008.

Recently, Kitzman took heat for a move to reel in 1,000 to 2,000 outstanding TWIA claims connected with Hurricane Ike by calling for TWIA to be put into a bankruptcylike condition called receivership.

Particularly upset were trial attorneys who say receivership is unpal- atable because it leads to longer delays in settling outstanding claims, especially when compared with agreed-upon settlements. Trial lawyers, many of whom have made contributions to many Democratic state senators, also have criticized Kitzman for pushing receivership after TWIA’s board declined to voluntarily accept it.

Additionally, Democrats, particularly state Sen. John Whitmire of Houston, have criticized Kitzman for her decision to spend nearly $2 million for Alvarez & Marsal, a New York-based consultant, to look into TWIA.

“I just think you’ve kind of, really lost control,” Whitmire told Kitzman at the time. “Or maybe you’re very much in control of the use of consultants.”

With tough talk under fire, Kitzman defended her decision, telling Whitmire that her staff knows about regulation, but not about operating an organization like TWIA.

Democrats have enough votes to torpedo Kitzman’s confirmation. Add in the Republicans upset about governmental overreach, and Kitzman is looking at a tough confirmation.

Gov. Rick Perry still hasn’t reappointed her. And the chairman of the Nominations Committee has said he won’t move on Kitzman’s confirmation until he sees a letter of reappointment.

It’s a far cry from the experience of Kitzman’s last two predecessors, who enjoyed easy confirmations and reappointments.

Still, Kitzman has her supporters.

“She’s, at times, blunt and a bit outspoken,” said state Sen. John Carona, R-Dallas, who counts himself a strong supporter. “It places a target upon her.”

But Carona said she’s also the most wellinformed insurance commissioner he has worked with.

“Eleanor Kitzman will do the right thing as she sees it, regardless of the fallout,” he said.