Citizens insurance rates to rise 7 percent
Print
Email
Save
Twitter
Social Media
Del.icio.us
Digg
Facebook
Reddit
Homeowners who buy coverage through Louisiana Citizens Property Insurance Corp. will see their rates rise an average of 7 percent statewide beginning in April, when policies begin renewing.
The Citizens board had approved a rate increase of double that size in October. However, Chief Executive Officer John Wortman said those rates were based on unaudited financial data.
“There was some historical data that was somewhat questionable,” Wortman said.
The Louisiana Insurance Department thought it would be better to base the rate increase on what private insurance companies were charging, plus 10 percent, Wortman said. The board voted 5-1 to accept the 7 percent rate approved by Insurance Commissioner Jim Donelon.
The lone no vote belonged to board member James Napper II, executive counsel of the state Treasury Department. Napper had originally asked the board to delay the rate increase request because of the unaudited financial records but was rebuffed.
Citizens has around 125,000 policyholders.
In other action, the board voted to let Citizens staff present a plan in February to the state Bond Commission to retire $300 million in variable rate bonds.
The variable-rate bonds are sold at auction on a roughly monthly basis. Since the credit market meltdown, Citizens, and other issuers of variable-rate bonds, have had a hard time finding buyers. When the auctions fail, as they did for the first time this fall, the interest rate on Citizens’ bonds automatically jumps to 14 percent.
Wortman said Citizens hopes to replace the auction-rate bonds with a combination of $50 million to $75 million in cash; as much as $150 million in variable-rate bonds backed by a large bank’s letter of credit; and the remainder in fixed-rate bonds.
Retiring the auction-rate bonds could save Citizens $2 million a month in interest payments, Wortman said.
The Citizens board had approved a rate increase of double that size in October. However, Chief Executive Officer John Wortman said those rates were based on unaudited financial data.
“There was some historical data that was somewhat questionable,” Wortman said.
The Louisiana Insurance Department thought it would be better to base the rate increase on what private insurance companies were charging, plus 10 percent, Wortman said. The board voted 5-1 to accept the 7 percent rate approved by Insurance Commissioner Jim Donelon.
The lone no vote belonged to board member James Napper II, executive counsel of the state Treasury Department. Napper had originally asked the board to delay the rate increase request because of the unaudited financial records but was rebuffed.
Citizens has around 125,000 policyholders.
In other action, the board voted to let Citizens staff present a plan in February to the state Bond Commission to retire $300 million in variable rate bonds.
The variable-rate bonds are sold at auction on a roughly monthly basis. Since the credit market meltdown, Citizens, and other issuers of variable-rate bonds, have had a hard time finding buyers. When the auctions fail, as they did for the first time this fall, the interest rate on Citizens’ bonds automatically jumps to 14 percent.
Wortman said Citizens hopes to replace the auction-rate bonds with a combination of $50 million to $75 million in cash; as much as $150 million in variable-rate bonds backed by a large bank’s letter of credit; and the remainder in fixed-rate bonds.
Retiring the auction-rate bonds could save Citizens $2 million a month in interest payments, Wortman said.
 | ||||
| Most Popular | Most Emailed | Hot Topics | ||
