Louisiana Citizens Property Insurance Corp., the state-sponsored insurer of last resort, now in its 14th round of depopulation, continues to shed policies, according to the Louisiana Department of Insurance.
The drop in policy count has occurred even during the most active hurricane season on record, Insurance Commissioner Jim Donelon announced.
Citizens covers properties that the private insurance industry won’t; its depopulation is an organized process through which selected policies are made available to regular insurance companies. Meanwhile, despite three hurricanes and two tropical storms hitting Louisiana during the 2020 season, Citizens reports no uptick in home or business owners seeking coverage, a sign of health in the local insurance market.
During the annual depopulation process, Citizens opens its book of business and offers to transfer policies to the private market. Moving policies to private insurers results in lower premiums for policyholders and reduces the chances that all property insurance consumers across the state could face assessments if Citizens exceeds its ability to pay claims in a future storm.
This year one company, SafePoint Insurance Co., requested 2,171 residential policies and was authorized by Citizens to receive 76 residential policies.
Property owners whose policies were selected for depopulation received a letter from Citizens notifying them of the option. Consumers have the final say on whether to move to SafePoint, and have until Feb. 28 to opt out if they wish to remain with Citizens. So far seven policyholders declined to leave Citizens, leaving 69 residential policies still pending.
Citizens has about 35,000 residential policies, or approximately 0.3% of the Louisiana homeowners market. In 2008, Citizens was the third largest writer of homeowners insurance in the state, with about 174,000 policies that comprised 9.8% of the market.
The size of Citizens has shrunk dramatically as the Louisiana Department of Insurance has attracted new insurers to the state and promoted competition.
Meanwhile, Citizens has improved its operations and financial strength in an effort to avoid repeating the situation after hurricanes Katrina and Rita in 2005, when Citizens was plagued by complaints about its claims handling and couldn’t afford to pay its bills. The situation resulted in a $193.5 million assessment on all Louisiana insurance policies followed by a $978 million bond issue that continues to cause assessments on all property insurance policies through 2026.
These efforts have paid off in the 2020 hurricane season. As announced last fall, Citizens will take only a $35 million financial hit from last year’s storms because of a strong reinsurance program.
In this record storm season, Citizens has received over 7,174 claims from Cristobal, Laura, Sally, Delta and Zeta totaling $86.7 million in claims payments through Jan. 15, 2021. Citizens estimates that it will ultimately receive 8,000 claims with losses totaling $97 million for the 2020 storm season. Damage claims from Hurricane Laura alone will reach $65 million. But Citizens will only have to pay for $35 million of those claims as reinsurance, or insurance for insurance companies, will cover the rest.
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