The Louisiana Citizens Property Insurance Corp. (LCPIC) board of directors voted at its Jan. 14 meeting to send the proposed 2021 personal lines rate filing to the Louisiana Department of Insurance, seeking the department’s approval. In addition, for the third year in a row, the board voted to approve a proposed RFP and corresponding processes to determine vendors for catastrophe claims administration and to provide adjusters in the event of a catastrophe.
The proposed rate change is an overall average increase of 2.3 percent, expected to be implemented June 1. LCPIC is required by law to charge rates that are at least 10 percent above the voluntary market rates.
According to LCPIC CEO Richard Newberry, the market analysis rate was arrived at by surveying more than 100 companies for premium and policy count by parish for five different products: dwelling, homeowners, renters/condo unit-owners, mobile home, and wind-only.
The surveyed data is aggregated by product and parish to determine which companies qualify for market rate comparison. Only the rates for admitted companies that qualified were considered in the rate-making calculation. A company qualifies when its policy counts have increased by 25 or its premium makes up two percent of the market.
The residual property writer uses its own historical non-storm losses, along with modeled storm losses, loss adjustment expenses, reinsurance expenses and operational expenses to calculate an actuarially sound rate by parish and product.
LCPIC compares the actuarial rates with market rates, takes the larger of the two and adds 10 percent to arrive at the rate to charge.
In breaking out the 2.3 percent proposed overall average rate increase, the FAIR Plan indication is a 2.0 percent rate increase and affects about 91 percent of LCPIC’s personal lines premium, or about 32,000 policies. The Coastal Plan rate indication is an overall average 4.9 percent rate increase and affects about nine percent of the residual market insurer’s personal lines premium, or approximately 3,000 policies.
By category, the proposed overall rate change for homeowners is a decrease of 3.1 percent; dwelling fire will increase 1.8 percent; renter/condominium unit-owners will increase 8.7 percent; mobile home coverage will not have an overall rate change, and wind-only rates will increase 6.1 percent, according to documents provided by LCPIC.
The proposed rate changes differ between the two plans. In the FAIR Plan, the residual property insurer proposes to decrease homeowners rates by an overall average 3.1 percent; increase dwelling fire rates by 1.2 percent; increase renter/condominium unit-owners by 8.7 percent; decrease mobile home rates by 0.1 percent, and increase wind-only rates by 6.1 percent.
In the Coastal Plan, LCPIC proposes an overall average rate decrease for homeowners of 3.1 percent; increase dwelling fire by 5.8 percent; increase renter/condominium unit-owners rates by 9.0 percent; increase mobile home rates by 0.5 percent, and wind-only rates will increase by 5.6 percent.
The percentage of rate change driven by market analysis versus actuarial review is: homeowners, 98.6 percent by market analysis and 1.4 percent by actuarial review; dwelling fire, 97.2 percent market analysis and 2.8 percent actuarial review; renter/condominium unit-owner, 97.1 percent market analysis and 2.9 percent actuarial review; mobile home, 86.2 percent market analysis and 13.8 percent actuarial review, and wind only, 13.9 percent market analysis and 86.1 percent actuarial review.
When the proposed rate change is implemented, policyholders in Orleans Parish will pay less for their personal lines homeowners insurance in the FAIR Plan. According to LCPIC, the proposed rate change in Orleans will be a 4.7 percent decrease on $2,519,421 in premium. According to LCPIC, the rate change is market analysis driven.
For LCPIC homeowners policyholders in the FAIR Plan, the rate changes for the other parishes in the top five largest parishes by premium volume are: Jefferson will see a market analysis driven rate decrease of 0.2 percent on $634,158 in premium; St. Tammany will see a market driven rate decrease of 1.3 percent on $308,645 in premium; East Baton Rouge will see a market driven rate decrease of 0.8 percent on $249,069 in premium, and Terrebonne will see a market driven rate decrease of 1.0 percent on $247,783 in premium.
In the personal lines filing, no parish in the top 10 by premium volume will have an increase for homeowners in the FAIR Plan.
For dwelling policyholders in the FAIR Plan, the rate changes for the five largest parishes by premium volume are: Orleans with a market analysis driven rate increase of 4.9 percent on $8,864,524 in premium; Jefferson with a market analysis driven rate decrease of 4.3 percent on $5,750,763 in premium; Lafayette with a market analysis driven rate decrease of 0.6 percent on $1,178,270 in premium; Terrebonne with a market analysis driven rate increase of 0.7 percent on $1,109,796 in premium, and Calcasieu with a market analysis driven rate increase of 2.2 percent on $1,101,189 in premium.
The parish that will have the largest premium change for dwelling policyholders in the FAIR Plan, while having more than $100,000 in premium, is St. Martin, and according to LCPIC, the increase is a market driven rate increase of 13.2 percent on $387,521 in premium.
The two parishes that will have the largest premium change in renter/condominium unit-owners coverage in the FAIR Plan are Orleans and Jefferson. Renter/condominium unit-owners in Orleans will see a market analysis driven 11.4 percent rate increase on $133,573 in premium, and those in Jefferson will see a market analysis driven 15.7 percent rate increase on $108,211 in premium.
The two parishes that have the largest premium volume in mobile home coverage in the FAIR Plan are Calcasieu and Vermilion. Mobile home policies in Calcasieu will see a market analysis driven 0.1 percent rate increase on $268,475 in premium, and Vermilion will see a market analysis driven 0.1 percent rate increase on $276,017 in premium.
For wind-only policyholders in the FAIR Plan, the rate changes for the five largest parishes by premium volume are: Jefferson with an actuarial driven rate increase of 4.7 percent on $4,804,628 in premium; Orleans with an actuarial driven rate increase of 12.2 percent on $2,852,178 in premium; St. Tammany with a market driven rate increase of 4.1 percent on $1,026,803 in premium; Terrebonne with an actuarial driven rate increase of 4.8 percent on $610,940 in premium, and Vermilion with a market driven rate increase of 5.0 percent on $591,331 in premium.
The board voted unanimously to implement the new rates if the department approves rates that are within 0.5 percent of the proposed rates, up or down.
Newberry updated the board on Round 14 of depopulation, informing board members that, even though two companies expressed interest in this round, SafePoint Insurance Company was the only company that requested policies.
SafePoint requested 2,171 of the 4,089 policies offered for take-out by LCPIC. Of the 2,171 requested by SafePoint, 76 were authorized for takeout by agents. The ceded policies represent an annualized premium of $143,000 with an insured value of $14.0 million. Allstate agents authorized 43 of the policies, State Farm six policies, Farm Bureau seven, and independent agents 20.
Newberry reported that policyholders had until Feb. 28, 2021, to opt-out and choose to stay with LCPIC. During the meeting, Newberry reported that seven policyholders had already opted to stay with LCPIC.
LCPIC’s Request for Proposal for services includes a primary catastrophe claims administrator, a back-up catastrophe claims administrator, catastrophe adjusting services, a CAT first notice of loss call center, and a new item in this year’s RFP is catastrophe desk adjusting services. The current contract ends March 2021. All current vendors were provided notice of termination of the contract in December and informed that a new RFP would be released.
LCPIC’s internal RFP Committeee will make its selections by March 12.
The board voted to adopt the proposed procedures that LCPIC will employ with regard to any regular assessment and any emergency assessment levied in the Coastal FAIR plans pursuant to LSA R.S. 22:2307 and LCPIC’s plan of operations. The procedures were originally set forth in the Louisiana Department of Insurance’s Directive 198 from 2007. There was no change to the rules for levying the assessments; the language in LCPIC’s plan of operation was cleaned up.
In Newberry’s report, he updated board members on the 2020 storm season. The storms that affected LCPIC’s insureds were Tropical Storm Cristobal, and hurricanes Laura, Sally, Delta and Zeta.
The claims data reported to the board were as of Dec. 22, 2020, and are as follows: Cristobal, 31 claims reported with 31 expected total claims, with 100 percent contacted, 100 percent inspected and 100 percent closed; Laura, 2,670 claims reported with 2,738 expected total claims, with 99 percent contacted, 98 percent inspected and 99 percent closed; Sally, five claims reported with five expected total claims, with 100 percent contacted, 100 percent inspected and 100 percent closed; Delta, 1,966 claims reported with 2,019 expected total claims, with 99 percent contacted, 98 percent inspected and 99 percent closed, and Zeta, 2,415 claims reported with 3,207 expected total claims, with 96 percent contacted, 96 percent inspected and 99 percent closed. The overall totals are 7,087 claims reported with 8,000 claims expected from the 2020 storm season.
LCPIC’s Vice President of Accounting and Finance Joe Sciortino reported to the board that on Nov. 30, LCPIC had $94.58 million in operating cash and $77.72 million in cash investments, for a total of $172.3 million in cash and investments, compared to the beginning of 2020 when LCPIC had $142.5 million in operating cash and $78.3 million in cash investments, for a total of $220.8 million in cash and investments.
When the December numbers are included, Sciortino expects to end 2020 with $105.15 million in operating cash and $77.04 million in investments for a total of $182.19 million in cash and investments.
Sciortino also reported that LCPIC’s policyholder surplus at the end of November was $158.9 million compared to $186.5 million at the beginning of 2020.
He reported that LCPIC’s net income at the end of November was a loss of $29.5 million, $32.9 million less than the expected income of $3.4 million budgeted for the end of November. The loss was driven by a $31.5 million net underwriting loss from the 2020 storms.