Louisiana officials tried to ease Wall Street worries on Mar. 8 about the state-run insurer of last resort, whose financial records are in disarray and possibly lost for the last year and a half.
State Treasurer John Kennedy, Insurance Commissioner Jim Donelon and other top state officials spoke with representatives of the nation’s three top credit rating agencies about the woes of the Louisiana Citizens Property Insurance Corp.
Kennedy said they explained Citizens’ record problems, the state’s plans to try to recapture the financial records, and the management shake-up intended to bolster the financial planning and record keeping of the state-run insurer.
“Everybody’s moving with all deliberate speed,” said Kennedy, a member of the Citizens board.
The rating agencies said they would continue to check in on the progress to recreate or retrieve the records, Kennedy said.
Citizens – which has become the state’s third largest property insurer since hurricanes Katrina and Rita struck the state in 2005 – can’t produce reliable financial data or determine the costs of its own operations for the last 18 months. Though the mess was discovered months ago, Citizens board members only learned of the problems this week.
The rating agency representatives “expressed some concern that they hadn’t been told about the problem and that they had to find out in press reports,” Kennedy said.
After news broke of the lost financial records, Standard & Poor’s Ratings Service placed $1 billion of Citizens’ revenue bonds – sold to pay off claims from Katrina and Rita – on credit watch with negative implications. The next step would be a downgrade in credit rating, which would mean it would cost more to borrow money.
Donelon said he intends to hire a new chief administrator for Citizens and add a chief financial officer and internal auditor to the insurer’s staff. The Citizens’ board also moved to hire a lawyer to sue the software purchaser it blames for the computer glitches. Donelon said any Citizens claims would be covered and bond debts would be paid.
Officials say an array of accountants and technical specialists will be needed to piece together the records lost amid computer software problems, and they don’t know how long it will take or how much it will cost.
Citizens was created in 2003 as a state-sanctioned “insurer of last resort” to provide homeowners insurance to those who couldn’t get it on the open market.
Gov. Kathleen Blanco wasn’t on the conference call with the rating agencies, but Kennedy said Blanco’s top financial adviser, Commissioner of Administration Jerry Luke LeBlanc, participated. Blanco’s spokeswoman said the governor was briefed on the matter.
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