During the meeting, LCPIC CEO Richard Newberry presented LCPIC’s 2021 depopulation plan to the board. During an earlier meeting, May 13, the board approved offering 8,000 policies for the Dec. 1, 2021, assumption by take-out companies. Only one company signed up for the 2021 depopulation process, SafePoint Insurance Company.
After Newberry presented the plan, chairman of the LCPIC board, Nicholas Lorusso, asked for a motion to approve LCPIC’s 2021 depopulation plan. Sen. Kirk Talbot, R-River Ridge, made the motion to approve the plan, and LCPIC Board Vice Chairman Eugene Montgomery seconded the motion.
Lorusso then asked if anyone was opposed to the motion, and LCPIC Board-member Brian Van Dreumel said he was not comfortable with the A.M. Best rating of SafePoint.
Board-member Brian Chambley also said he was uncomfortable with the A.M. Best rating especially with the outlook-negative part of the rating. Chambley questioned what the “take-out statute” said about a company’s rating.
Board-member Kevin Reinke added that most agents’ E&O carriers would not let the agent write with a B- rated company.
LCPIC General Counsel and Corporate Secretary/Chief Administrative Officer Paige Harper read Revised Statute § 22:2314:(1) to the board: “The capacity of the insurer to absorb the policies proposed to be taken out of the corporation and the concentration of risks of those policies. Such capacity may be evidenced by providing to the Louisiana Citizens Property Insurance Corporation a copy of a valid certificate of authority issued by the Louisiana Department of Insurance to the insurer. An insurer shall not be qualified to participate in the take-out program unless that insurer has at least a B+ rating with A.M. Best, or its equivalent.”
Newberry told the board that LCPIC complies with all aspects of the revised statute and that former Chairman of the Board Denise Gardner in the past made a determination that a Demotech A rating was the equivalent to an A.M. Best B+ rating.
Montgomery then asked to remove his second to Talbot’s motion to approve the 2021 depopulation plan.
Van Dreumel then moved to disapprove LCPIC’s 2021 depopulation plan, and that motion was seconded by Chambley. The board voted unanimously to disapprove the 2021 depopulation plan.
Vice President of Accounting and Finance Joseph Sciortino reviewed LCPIC’s 2022 emergency assessment rate calculations. Sciortino indicated that LCPIC’s 2022 assessment rate will go down to 2.40 percent for 2022 from 2.49 percent in 2021.
In making the calculations for the assessment rate, LCPIC uses the previous year’s assessable property insurance written premium and the expected debt service costs for the assessment year. The assessable written premium for 2020 was $2.8 billion, an increase of $144 million, according to Sciortino. The estimated debt service costs for Citizens for 2022 will be $67.4 million, according to the Regions Bank bond trustee.
The board voted unanimously to approve the 2022 assessment rate. The new rate will be effective Jan. 1, 2022.
Sciortino presented LCPIC’s financials through the end of May 2021 to the board.
He reported that LCPIC had a surplus of $163.46 million at the end of May compared to $161.94 million at the beginning of 2021.
For the first five months of 2021, LCPIC’s net income amounted to $3.83 million, which is $1.66 million more than the budgeted income of $2.17 million.
In addition, Sciortino reported that as of May 31 LCPIC had $57.02 million in operating cash, $53.64 million in invested cash/cash equivalents, and $76.14 million in investments for a total of $186.80 million in total cash and investments, compared to $48.62 in operating cash, $52.08 million in invested cash/cash equivalents, and $77.42 million in investments for a total of $178.12 million in total cash and investments at the beginning of 2021.
Sciortino also reported to the board that LCPIC had 36,591 policies in-force at the end of May 2021 with a total insured value of approximately $7.2 billion, compared to 35,805 policies in-force at the end of May 2020 with a total insured value of $6.9 billion.