Louisiana Citizens Board Delays Policyholder Assessment Decision

The governing board of Louisiana’s state-backed property insurance firm has postponed for one month a decision on whether to change the fee paid by policyholders to pay off debt incurred because of claims from Hurricane Katrina.

All property insurance policyholders in Louisiana pay a 5 percent fee – called an “assessment” – to pay off $1 billion in Katrina debt incurred by the state-backed Louisiana Citizens Property Insurance Corp. in 2006, the year after the storm. The fee is paid by homeowners and commercial insurance policyholders, whether they’re with Citizens or private firms.

Citizens’ board at its July meeting put off a decision on whether to keep the assessment at 5 percent or lower it to 4.3 percent. The board voted for the delay after member Jim Napper, representing the state Department of the Treasury, questioned whether state law allowed Citizens to keep the assessment level higher than needed to keep up with scheduled bond payments.

Steve Cottrell, Citizens’ chief financial officer, said projections showed that 4.3 percent would be enough to keep up with the payment schedule. But Cottrell and chief executive John Wortman want to keep it at its current level to pay off the debt quicker. The insurance industry also supports keeping the fee at 5 percent because lowering it would force firms to change their billing systems.

The board voted to consider the assessment level at its August meeting after Wortman said he’d get a legal opinion on whether the company can assess policyholders at a level beyond what’s required to pay off debt.

On average, Cottrell said, a policyholder would save $14 if the rate was lowered to 4.3 percent.

All money raised with the assessment must be used to pay off the bonds, not to fund operating expenses or pay off premiums.