The insurer of last resort seeks a larger line of credit as it inherits more policies; the MP wants more insurance reform

NEW ORLEANS (WVUE) – As the property insurance crisis continues, Louisiana’s insurer of last resort, Louisiana Citizens Property Insurance Corporation, will seek permission from the state bond commission Thursday to raise its line of credit after inheriting more policies due to bankruptcies and leaving insurance companies.

State Rep. Jerome “Zee” Zeringue, who sits on the bond committee, says the Legislature will take action to better protect policyholders from insurers.

“Some of them haven’t made claims, they’ve had insurance for decades and the first claim either falls through or they don’t get paid or the hesitation and delay in getting the refunds they should be able to fix their homes. It’s a problem and I think on several levels we have to deal with it and we will,” Zeringe said.

Citizens Executive Director Richard Newberry did not appear on camera for this story, but did answer questions during a phone call. Newberry said the line of credit has been in place since 2010 and the bond commission approves it every two years, meaning every two years.

Newberry said Citizens wants to increase the line of credit back to the level of 2013. He said it was $125 million that year when Citizens had 108,000 policies. He also said Citizens reduced the credit line to $50 million in 2020 because it had only 35,000 policies at the time.

But Newberry said as of this week, the policies had grown to 103,000.

Zeringue believes some insurers were undercapitalized.

“It speaks to the situation we’re in now, but we’re in this situation unfortunately because of the fact that you know the insurers themselves either weren’t funded properly or they didn’t have enough reinsurance to cover these things,” said he.

Newberry said that when the voluntary or private insurance market returns, citizens “depopulate” policies to the private market. He added that the depopulation of the policies depended on the insurance agents and the insured.

The level of Citizens policies reached nearly 200,000 after the catastrophic Hurricane Katrina, which struck in August 2005 and was followed by another hurricane.

“After Katrina-Rita, we’ve had as many as 175,000 policies. That was our high point,” Newberry said.

And he emphasized that the line of credit had never been used before, but a safety net was needed to bridge the gap between possible future deficits of citizens and the regular assessment placed on property insurers operating in the state.

Insurance Commissioner Jim Donnellan says Citizens’ authority is based on state law.

“They have a duty under the law to provide coverage for anyone who cannot get coverage in the private sector, their board also has a duty to evaluate every property insurance policy holder in the state to meet the shortage of citizens if it is necessary,” Donnellon said.

Newberry said Citizens has increased staff and will continue to do so as needed.

Zeringue is confident the Legislature will act to protect policyholders.

“I know that Commissioner Donnellan and his staff are working on some things, but there are some legislative issues or ways that we can address this to ensure that we have more responsible parties involved in the insurance market and that they don’t to abandon their customers and the citizens of Louisiana left holding the bag,” Zeringue said.

On Tuesday (Aug. 16), Donelon announced that Weston, a Florida-based insurer with about 10,300 policies in Louisiana, had been placed into liquidation, which will result in the cancellation of its Louisiana policies on Sept. 7. United Property & Casualty Insurance Company has had its financial stability rating downgraded and some of Louisiana’s 37,000 mortgage-backed policyholders may be forced to find a new insurer, a news release said.

And there is growing concern about rising insurance premiums, the impact on the real estate market and the economy as a whole.

“There is no question that the insurance market will completely change the complexion and ability of people to live in coastal Louisiana,” Zeringue said.

Property insurance premiums, as well as flood insurance costs, have increased for many residents.

“Flood insurance in many cases will be more than their mortgage payments on their homes, so they won’t be able to afford to build or remodel or even buy a home,” Zeringue said.

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