No New Plan for Dealing With Citizens’ Budget Gap

April 5, 2013

The governing board for Louisiana’s property insurer of last resort didn’t choose an alternate approach Wednesday to balance the company’s books after a $100 million borrowing plan stalled at the state capitol.

Instead, Steve Cottrell, chief financial officer for the Louisiana Citizens Property Insurance Corp., said he’ll be tracking the company’s cash flow and keeping board members updated if Citizens becomes unable to cover its costs.

“We’ll closely monitor the cash with the board,” he said.

Last month, the Citizens board supported the $100 million borrowing plan. But the idea ran into problems with the State Bond Commission, which refused to vote on the proposal.

Gov. Bobby Jindal and Insurance Commissioner Jim Donelon were opposed to the borrowing plan, saying Citizens has money available to pay immediate costs and can use a line of credit from the bank if needed.

Citizens provides property insurance mostly to coastal Louisiana homeowners and businesses that can’t get insurance through the private market.

Cottrell said he expects to have $180 million in revenue for the next year, but $250 million in expenses – and that’s without any hurricanes or other weather disasters that require hefty claims payments.

Critics of the borrowing, which would be done by selling bonds to investors for upfront cash, objected because the debt would be paid off through assessments on anyone with property insurance on the private market. It also could cost the state, because the assessment can be claimed as a state tax rebate.

Citizens’ shortfall stems from covering claims for Hurricane Isaac and a hail storm earlier this year and for settling class-action lawsuits for improper handling of past claims from hurricanes Katrina and Rita in 2005.

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