Citizens insurance

BATON ROUGE -- The board that operates the state-run insurer of last resort will seek a 9.2 percent statewide rate increase at its meeting Thursday, but some policyholders may see a decrease in their premiums if those rates are approved, the chief executive officer of the company said today.

John Wortman, who oversees the day-to-day operations of the Louisiana Citizens Property Insurance Corp., said the average policyholder, who now pays about $1,800 a year, will see premiums go to about $1,966 annually if the proposed rates are approved.

Wortman said the increase is expected to generate about $20 million a year in additional revenue for the company, bringing it to about $245 million a year.

By law, Citizens' premiums must be at least 10 percent more than premiums of private insurance companies that write at least 2 percent of the business in a parish. Wortman said the 10 percent mark-up is include in the proposed 9.2 percent rate hike because the new rates are based on existing premiums that have already been marked up.

Citizens insures about 125,000 policies in the state, about 45 percent of that in Orleans and Jefferson parishes -- roughly 56,000 policies.

Wortman said based on preliminary numbers, about two-thirds of Citizens customers may see rate decreases in the two parishes and one-third may see rate increases. Statewide, he said, about 70 percent of the policyholders may see an increase and 30 percent a decrease.

Wortman said Thursday's meeting will break out the increases and decreases by parish. Insurance Commissioner Jim Donelon, whose office must approve or reject the rates of Citizens and other insurance companies, said last-minute surveys and calculations were still being run on the parish rates.

Preliminary data show that the variance in the premiums charged may be 40 percent -- from a decrease of 10 percent in some areas to a 30 percent increase in others, based on location and type of policies written, Wortman said.

Donleon said the new rates "could go either way (higher or lower) but only incrementally" when the board receives the data Thursday.

The board approved a rate increase of 14 percent last year but Donelon's office reduced that to a 7 percent rate hike. The Citizens board last month proposed a 10.1 percent rate increase but postponed action on the request for a month.

In the meantime, Donelon said, a more refined request of 9.2 percent is pending. State law exempts from the mandated 10 percent markup through Aug. 15, 2011, 12 parishes hit hardest by Hurricanes Katrina and Rita in 2005: Calcasieu, Cameron, Vermilion, Iberia, St. Mary, St. Tammany, Orleans, Jefferson, St. Bernard, Plaquemines, Terrebonne and Lafourche.

"I'd like to get the rate (increase) filed (with Donelon) in August and approved in September,'' Wortman said. "We'd like to get it moving.''

The board can approve it, reject it or defer action. After it clears the board, Donelon's office must approve it, reject it or send it back to the board for more work.

Once approved, Wortman said, the new rates would go into effect Dec. 1 for new policies and Feb. 1 for policies that are being renewed.

The board Thursday also is scheduled to take up the imposition of a 5 percent assessment on all property insurance policies in the state to help pay off $1 billion in bonds Citizens issued in the wake of the 2005 hurricanes to keep the company solvent.

The issue came up at the July board meeting but State Treasurer John Kennedy's representative on the board, Jim Napper, questioned the need for 5 percent assessment when all that was needed to help service the bonds this year is a 4.3 percent assessment.

The 5 percent assessment would generate about $100 million and the 4.3 percent would bring in about $86 million to service the bonds this year.

Napper wanted a legal opinion on whether state law allows the board to impose an assessment higher than what is needed for the bonds, essentially generating a surplus of $14 million.

Napper said the $14 million would amount to "an excess surplus'' that state law may not allow.

Ed Anderson can be reached at eanderson@timespicayune.com or 225.342.5810.