Commissioner Jim Donelon said the Louisiana Citizens Property Insurance Corp. has received 26,000 Gustav claims so far and the company estimates the storm will cost it $150 million – an amount Donelon said Citizens can handle with the cash it has on hand.
As for Ike, Donelon said he expects far fewer claims because the storm damage in Louisiana was largely from flooding, and Citizens doesn’t cover flood damages, only wind damage. The commissioner said he expects Citizens, Louisiana’s third-largest homeowners insurance company, to have estimates soon on how much Ike claims will cost.
If Citizens can handle the hit from Gustav and Ike on its own, that would be far different from the situation three years ago when the company was rocked by claims from hurricanes Katrina and Rita and borrowed money to pay for them.
“Our situation at Citizens is so much improved that we will be able to handle it efficiently without borrowing or assessing policyholders,” Donelon said.
Citizens borrowed $1 billion to cover claims after the storms of 2005 and is repaying that debt by passing on fees to private insurers, who in turn have charged their customers rate hikes to cover those fees.
Over the entire insurance industry in the state, Donelon said Gustav likely will become the second largest hurricane for claims in Louisiana history, surpassed only by Katrina.
After the storm struck Labor Day, Donelon initially estimated Louisiana’s insured losses from Gustav would be $1.7 billion, but he said that he now expects the losses to top $3 billion. He said he didn’t have a precise estimate yet.
There were $500 million in insured losses in Louisiana after Hurricane Andrew in 1992, $3 billion after Rita and $19 billion from Katrina, Donelon said.
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