Louisiana’s state-backed property insurance company will probably seek another rate hike for next year, roughly a 10 percent statewide average increase, on top of this year’s 7 percent increase, the firm’s chief executive said.
Louisiana Citizens Property Insurance Corporation CEO John Wortman told the Associated Press that he would brief Citizens’ board members at a July 10 meeting on a likely 2010 rate increase, though he won’t yet ask them to approve it. He said he’ll come back at a later meeting to ask for their approval, which is required.
The percentage increases cited by the firm are averaged throughout the state, meaning properties farther from the coast might see rate decreases and those farther south would see increases higher than 10 percent.
Wortman said there are several factors causing the firm to seek to raise rates, including the $330 million the firm paid out last year for claims after Hurricane Gustav. The company is also paying more for reinsurance, the insurance that Citizens buys to cover the risk of a large number of claims caused by a storm or other disaster.
The state government strategy of “shrinking” Citizens is also causing rates to rise, Wortman said, because the company tends to insure homes that are the most prone to be damaged.
Louisiana lawmakers approved paying private firms to take over Citizens policies, and state law also requires the company to keep its rates above the private market’s rates. Those factors cause policyholders to leave Citizens in favor of a private insurer: about 40,000 of 170,000 policyholders have left the firm since 2007.
Wortman said the policies that remain are the riskiest to insure – closest to areas prone to hurricane damage – so the statewide average policy rises as a result.
Wortman said he’ll ask the board to approve keeping the company’s “assessment” at its current 5 percent level. The assessment is a fee imposed on all Louisiana homeowners who carry insurance, whether privately or with Citizens. The fee is assessed to pay off the debt Citizens incurred by paying off claims from hurricanes Katrina and Rita in 2005.
For example, a homeowner with a $1,000 premium pays a $50 assessment, which goes to pay off Citizens’ bonds.
On the Net: Louisiana Citizens Property Insurance Corp.: www.lacitizens.com/Default.aspx
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