Rates Likely to Rise for Citizens’ South Louisiana Policyholders
Louisiana’s “insurer of last resort” is seeking double-digit increases in homeowners rates across several southeast parishes.
The state-backed Louisiana Citizens Property Insurance Corp. would raise rates by a statewide average of 18 percent, a reaction to increases imposed by private firms.
If approved by the Department of Insurance, the hikes will be most dramatic in southeast Louisiana, where Citizens policyholders will see double-digit increases in Jefferson, St. James, St. Charles and St. John the Baptist parishes. An exception is Orleans Parish, because rates were already high before Hurricane Katrina in 2005, so private insurers didn’t raise rates as dramatically after the storm, according to CEO John Wortman.
Previously, Citizens had not taken into account the changes in the private market since the storm. Unless another hurricane hits this year, rates are likely to remain flat, Wortman said.
“This is probably it,” he said. “I think we’re probably reaching the peak of rates now.”
The rate increases would take effect Oct. 1, as policies are renewed.
The rate increase will not alter the special assessments paid by owners of insured property statewide, to pay off the $1 billion in bonds issued to pay Citizens’ claims after Hurricane Katrina. The annual assessment, 5 percent this year, is expected to be slightly lower next year.
The company calculates rates by figuring what it needs to be actuarially sound, then determines what private insurers are charging in each parish, adds 10 percent and charges customers the higher of the two. The 10 percent markup is required by state law, except in coastal parishes where no private firms are writing new policies.
Insurance Commissioner Jim Donelon said the rate hikes will push some homeowners out of Citizens.
He said Citizens customers will be motivated to consider private options that he expects to become available in the coming months. Firms that won incentive grants from the state need to pick up additional customers in the hurricane-vulnerable parishes to fulfill their commitments to the state.
Assuming an uneventful storm season, he said, “I think this will result in another huge exodus of policies from Citizens this fall.”
Information from The Times-Picayune, www.nola.com
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