BATON ROUGE, La. (AP) — Insurance Commissioner Jim Donelon said it's premature for the state property insurer of last resort to borrow $100 million to help close a budget gap, according to a letter released Tuesday.
Donelon's assessment came after the board for the Louisiana Citizens Property Insurance Corp. approved the borrowing idea, which would be done by selling bonds to investors for upfront cash.
Citizens provides property insurance mostly to coastal Louisiana homeowners and businesses that can't get insurance through the private market. But the borrowing would drive up the costs to anyone with property insurance on the private market and create new costs for the state's budget.
Gov. Bobby Jindal's administration, which opposes the borrowing, released a letter from Donelon in which the insurance commissioner says he also disagrees with the need for a bond sale.
The borrowing "is premature as we do not have a cash flow problem and are likely to be able to meet all of our obligations for the foreseeable future," Donelon wrote to Jindal's commissioner of administration, Kristy Nichols.
Any plan for Citizens to sell $100 million in bonds needs approval from the state Bond Commission.
Citizens' officials say the company will be millions of dollars in the red after covering claims for Hurricane Isaac and settling class-action lawsuits for improper handling of past storm claims.
If Citizens borrows money, those costs would be passed on to insurance customers covered by private companies through an assessment on all commercial and personal policyholders statewide.
The state's budget would be on the hook for some of the cost, because the assessment can be claimed by policyholders as a state income tax credit.
Nichols said the bond sale would be bad for property owners and would divert tax dollars from critical needs like education and health care.