BATON ROUGE, La. (AP) — Louisiana’s state-run property insurer of last resort is $56 million in the red, after it covers claims for Hurricane Isaac and settles class-action lawsuits for improper handling of past storm claims.
Steve Cottrell, chief financial officer for the Louisiana Citizens Property Insurance Corp., delivered the news Thursday to the board that governs the insurer.
“Our liabilities are $56 million more than our assets,” he told the board of directors, which approved the latest financial reports.
Also Thursday, the Citizens board agreed to raise its commercial coverage rates by more than 45 percent across-the-board statewide. Nearly all of the 5,700 commercial property policies are in the New Orleans area and coastal parishes.
The new rates will take effect Feb. 1, Cottrell said.
The company provides property insurance mostly to coastal Louisiana homeowners and businesses that can’t get insurance through the private market.
Cottrell said the company has enough cash to pay Isaac claims and has a bank line of credit available if Citizens runs into cash-flow problems.
“We’re not going to run out of money,” he said.
No decision was made Thursday about how to close the deficit. Cottrell said Citizens officials will present options at the next board meeting.
Among the options available to Citizens: charging an assessment on private insurance companies around the state for each property policy. The private insurers would pass that cost on to customers. Another possibility could involve borrowing money through a bond sale.
Cottrell said the costs of several legal settlements, along with Hurricane Isaac’s blow to southeastern Louisiana in August, will drain all the company’s reserves.
“This company’s just not big enough to absorb these kinds of expenses,” Cottrell said.
Isaac’s costs to Citizens have reached $89 million and are expected to hit $100 million, said Quin Netzel, vice president and chief claims officer for the company. While reinsurance will cover a slice of those costs, Citizens must pay for the first $75 million, Cottrell said.
In addition, the company paid a $104 million judgment in July to thousands of policyholders who sued over the slow adjustment of claims after hurricanes Katrina and Rita in 2005. Cottrell said another $60 million will be paid to settle two remaining class action lawsuits tied to the company’s handling of claims after those storms.
“How are we ever going to catch up?” asked Treasurer John Kennedy.
“That is the dilemma,” Cottrell replied.
He said the company continues to try to beef up its own insurance to cover larger shares of the costs after a storm, and he said Citizens could build up reserves if the state can go several years without a major event.
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MAY 17 Blogger Tom Aswell continues delivering bombshells about the state education department and Gov. Jindal's education "reform" efforts. In this post, he reports that students in the Shreveport area have been signed up for a charter school without their knowledge or consent. Most interesting to Aswell is how this Texas-based charter (with ties to GOP types) got the personal student information it has, if the students didn't give it.
MAY 17 This post by JR Ball in the Baton Rouge Business Report is an interesting tongue-in-cheek look at recent Baton Rouge economic development efforts. Among the items he examines is the idea that gaining a Costco makes BR a "world-class city." (Really? All you need is a different brand of Sam's? MK!) This effort, and other recent ones, are all built on the taxpayer's back, with tax zones, tax incentives and tax rebates, Ball writes.
MAY 17 Blogger CB Forgotston is critical of the legislature's reliance on a revenue-estimating committee's decision to include projected tax amnesty income in this year's forecast. That's a problem, CB posts, because the deadline for these people to pay their taxes is June 30, 2014. So when do you think these people who haven't paid taxes in years are going to pay their taxes? Surely not before June 30, and that means the money won't be there for this year's budget, he argues.
MAY 17 Here's an interesting blog out of California by a Hollywood writer, attorney and academic named Brian Alan Lane. He blogs about higher ed, and was a whistle-blower in a scandal over false credentials. In this post, he takes aim at LSU's new top dog, King Alexander. It's convoluted and a little confusing, but it sure makes Alexander a lot more interesting than he was yesterday.
MAY 17 Blogger Robert Mann writes about the LSU Board's refusal to allow Dr. Fred Cerise to testify before the legislature about Gov. Jindal's plan to close down all the state's charity hospitals and dump the poor on the private system. It's hard to imagine anyone more qualified than Cerise to testify about that, so why would anyone try to prevent him doing so? Mann thinks it is because the powers that be aren't interested in hearing any truth about the plan.
MAY 17 This post on the Louisiana Sinkhole Bugle, a blog that notes developments in the Bayou Corne and Jefferson Island salt domes, talks about a proposed expansion of the salt dome storage under Lake Peigneur in Iberia Parish. Residents are working against it for several reasons, including two biggies: the sinkhole disaster in Bayou Corne and the continuing, unexplained bubbling on the surface of the Lake.
MAY 17 NOLA police arrested more people Thursday accused of either being involved in the Mother's Day shooting or hiding the suspect afterward, this Gambit story reports. The NOLA police chief said he suspects the whole thing was gang-related and throws out a challenge to the gangs: he's got informants now, he says, and he knows a lot more than the gangs want him to know. The people who live in the neighborhoods terrorized by gangs are ready to talk, he says.
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