Citizens rate increase will be less than expected

BATON ROUGE -- A projected 10 percent increase in rates for clients of the Louisiana Citizens Property Insurance Corp. will "probably be less than that," the chief executive officer of the state's insurer of last resort said Wednesday.

John Wortman said the average statewide increase will likely come in between 5 percent and 7 percent, if Department of Insurance officials approve the rate structure.

The Citizens board sent two rate increases to Insurance Commissioner Jim Donelon more than month ago. One is for 9.8 percent with the filing of unaudited 2008 financial statements as well as audited ones for 2005, 2006 and 2007. The other is a 10 percent increase without the unaudited 2008 figures.

Other factors would also be included in the review of the rate increases by the department, including whether they are actuarially justified and fair.

The average policyholder now pays about $1,800, so under that scenario, the average premium for next year would be $1,980 for a 10 percent increase and $1,976.40 for an increase of 9.8 percent.

Donelon's staff has the rates under review now and should resolve any questions it has with Citizens' proposed rate increases in time for the next Citizens board meeting Nov. 12.

But Wortman said that because Citizens' reinsurers -- the companies that insure the state-run insurer -- have either agreed to reimburse Citizens for claims more than originally thought or are lowering their premiums to Citizens, the annual rate increase to policyholders will not be as high.

"There may be some reinsurance adjustments," Wortman said. "We don't have the final numbers." The bottom line, he said, is that the rates will be in the 5 to 7 percent range.

Based on the average $1,800 premium, a 5 percent rate adjustment will increase the premium by $90; a 7 percent rate increase will mean a premium increase of $126....