Louisiana Gov. Kathleen Blanco said Sept. 12 that she’ll consider a partial state bailout for Louisiana’s insurer of last resort, which borrowed $1 billion to pay off claims after hurricanes Katrina and Rita.
Several lawmakers and state officials have been floating the idea to pour much of an expected state budget surplus into the Louisiana Citizens Property Insurance Corp., saying it would spare homeowners from paying larger insurance bills because of Citizens.
The company, established by the state to offer homeowners insurance to those who can’t get it on the open market, is assessing private insurance companies a regular fee they can pass onto all their Louisiana customers to pay off Citizens’ borrowing to cover hurricane claims.
Blanco, who met privately at the Capitol with representatives of the state-run insurance company, said Citizens officials didn’t ask for state financial help and believe they are stable with the borrowing that’s been done through bond sales.
But the governor said she was looking at what it would mean to “contribute something” to help the company pay off its bond debt, which is expected to be paid in about seven years, to stall some rate hikes for homeowners. Blanco did not say when she would make a decision on whether the state should help Citizens.
“It gets to be expensive if we do it for the life of the bonds,” she said. But she added, “We can perhaps do something in the near term to mitigate costs.”
Without any assistance, insurance premiums statewide for homeowners will increase an estimated 3.6 percent on average beginning in January to help pay off Citizens’ debt, according to state officials. More increases are expected until that borrowing is paid.
Any money used to pay down some of Citizens’ borrowing would lower the assessment on insurers and people who carry private or Citizens insurance.
Louisiana’s sales, income and gambling tax revenue is coming in higher than expected, and booming oil and gas prices are further boosting the budget. Early estimates are that the state may have as much as $700 million in unspent dollars, though an official number isn’t expected until December when the four-member estimating panel is scheduled to meet.
Citizens has about 114,000 policyholders in Louisiana, according to company CEO Terry Lisotta. Of the 63,815 claims filed after Katrina, 2,895 are still open, he said. Another 12,792 claims were filed after Rita, and 280 are still pending, Lisotta said.
The average payout in Katrina was $15,476 and $9,035 for Rita, and Lisotta said homeowners still are filing new claims each week.
Blanco’s meeting with Citizens’ officials was her second meeting with insurance companies in Louisiana to talk about the effects of Katrina and Rita. She met last month with representatives of private insurers to explore ways to keep them writing insurance in Louisiana. The governor said she intends to meet with members of the reinsurance industry – essentially the companies that sell insurance to insurance companies – at the end of the month.
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