Insurer Group Says Push to Abolish Louisiana Citizens Is Misguided

A representative from the insurer trade group, the American Insurance Association (AIA), testified before a Louisiana legislative panel that efforts to abolish Louisiana Citizens Property Insurance Corporation (Citizens) are misguided. A commission on streamlining state government in late December 2009 recommended shuttering the state-run property insurer of last resort.

Dissolving Citizens, which also serves as the state’s windstorm insurance residual market, and reconstituting it as a FAIR and Coastal Plan could only have a negative impact on insurance availability and costs, the AIA said.

“The formation of Citizens has provided stability and promoted competition in the property insurance market in Louisiana,” said John Marlow, AIA assistant vice president for state affairs. “A return to the failed FAIR and Coastal Plans could have a serious, detrimental impact on the state’s private insurance market and leave thousands of properties at risk.”

The FAIR and Coastal Plans were created by statute but operated and funded by private insurers.

Following Hurricane Andrew, the Plans assessed insurers $100 million, which was in addition to the companies’ own losses resulting from the storm. The potential risk of future storms and ensuing large assessments led insurers to pull back on the number of policies they wrote in Louisiana.

The Louisiana Citizens Property Insurance Corporation was subsequently created in 2003 by the Legislature as a non-profit entity to provide coverage to higher risk properties and attract private insurers back to the marketplace.

Citizens is funded by premiums from Louisiana policyholders, and shortfalls are financed through surcharges on Louisiana policyholders. Major deficits are financed by Citizens-issued revenue bonds, and paid back over time.

“The Plans did not meet the state’s needs as the insurers of last resort,” Marlow said. “It has taken years to recover and bring private insurers back into the market. The Legislature should recognize the successful recovery of the market following Katrina and Rita and maintain Citizens.”

AIA’s Louisiana counsel, Kevin Cunningham, testified in favor of preserving the Citizens program. In addition, representatives from the Coalition to Insure Louisiana, a broad-based group of 40 professional and trade organizations, testified against abolishing the program.

Source: AIA

Topics Carriers Louisiana