You remember Citizens Insurance, don’t you? So how fares the state’s property insurer of last resort?
"We’re projected to be about 39,900 policies at the end of 2018; $7.5 billion in exposure," Citizens' CEO Richard Newberry told the legislature's Joint Insurance Committee on Tuesday.
That's a dramatic drop from the corporation's high point of 175-thousand policies, thanks to an aggressive campaign to de-populate Citizens' book of business, i.e., getting other insurers to take over some of the policies. Newberry says Citizens has also reduced its costs commensurately.
"But to be able to stay viable and be there for the state in future storms, we can't cut our way any further," he said. "We have fixed costs that do not change whether we have 5,000 policies or 205,000 policies."
One of those costs is purchasing reinsurance — basically, insurance for the insurance company. Newberry says that will undoubtedly go up this year.
"With four Cat-4 hurricanes, the wildfires, all of those things — it's a global reinsurance economy," he explained. "And with $130-billion in losses last year, we're looking at quite a bit of percentage raise — even though Louisiana was not hit."
Franklin Senator Bret Allain asked if that would require another statewide assessment from all property owners, and Newberry said no.
“Citizens has only assessed once in its history, and that was when it was only 18 months old – after the two biggest catastrophes in the United States.” Jennings Senator Blade Morrish remarked.
Newberry provided the committee with documents showing the company is currently in good shape, although it’s a fine balancing point as to what are ample reserves.
“We can take a storm – a pretty good storm – and there will be no assessments,” Morrish said, as he examined the documents. “Actually, you could take two pretty good storms and there would be no assessments. Is that not correct?”
“Correct,” Newberry replied, but he also reminded the committee, “The wind will blow. It’s not if, it’s when.”