Representatives from the state-established Louisiana Citizens Property Insurance Corporation told the State Bond Commission on Thursday that if they operated like a regular insurance company and another storm hit, they’ll be insolvent.
Citizens asked the commission to borrow $100 million dollars to help close an anticipated budget gap. The Bond Commission elected not to take action.
Gov. Bobby Jindal's top financial adviser Kristy Nichols and Insurance Commissioner Jim Donelon disagree with the plan to meet the gap by borrowing. They say Citizens has the money available to cover its immediate costs.
The borrowing would be done by selling bonds to investors for upfront cash, but the debt would be paid off through assessments on anyone with property insurance on the private market. It also could cost the state, because the assessment can be claimed as a tax rebate.
Executive Counsel to the Treasurer and a member of the Citizens Insurance board Jim Napper doesn’t like the plan either.
“Citizens is set up to be a deficit corporation. It’s not going to develop and run large pools. We have a cash management situation here," said Napper.
Napper said Citizens should wait until it needs the money, then tap its line of credit or take out a loan like it did after Hurricane Katrina. But three months after they took out that loan, Citizens had to issue assessments to the private market.