At the March 11 meeting, of the Louisiana Citizens Property Insurance Corp. (LCPIC) board of directors, the board voted on the CAT Vendor RFP, the renewal of the $50 million line of credit, the 2020 year-end financials, and the filing of those financials with the Louisiana Department of Insurance.
LCPIC’s Request for Proposal for vendor services included a primary catastrophe claims administrator, a secondary (back-up) catastrophe claims administrator, catastrophe independent adjusting services, a catastrophe first-notice-of-loss call center, and a new item in this year’s RFP was for catastrophe desk adjusting services. After the historic 2020 storm season, LCPIC management decided there was a need for an outside company to provide 35 catastrophe desk adjusters.
MD Claims Group in Covington, was selected to handle primary catastrophe third-party administrative services, while IAS Claim Services in Baton Rouge was selected to provide backup catastrophe third-party administrative services. In a catastrophe, both companies collectively will provide 275 adjusters to LCPIC.
Five companies were chosen to provide catastrophe adjusting services by providing LCPIC access to a combined total of 385 catastrophe adjusters. The five companies selected are: BSA Claim Service, headquartered in Fort Lauderdale, Florida, with three Louisiana offices located in Baton Rouge, New Orleans and Monroe; Eberl Claim Services, headquartered in Lakewood, Colorado, with an office in Dallas, Texas; Inspection Depot, Jacksonville, Florida; Legion Claim Service, Baton Rouge, and Team One, Irving, Texas.
Eberl Claim Services was also the choice to provide the catastrophe first-notice-of-loss call center services.
Creative Adjusting in Dallas, Texas, was selected to provide the 35 catastrophe desk adjusters.
LCPIC CEO Richard Newberry told the board that a total of 835 adjusters would be available to Louisiana Citizens in the event of a catastrophe, with 660 being field adjusters and 175 being desk adjusters. With approximately 36,000 policies in force, LCPIC would average 55 claims per field adjuster if every policy in-force filed a claim, Newberry added.
The current contract ends March 2021.
The board voted unanimously to approve the provider selections.
In other business, Vice President of Accounting and Finance Joseph Sciortino discussed the proposed renewal of LCPIC’s $50 million line of credit with Regions Bank for the June 1, 2021, through June 1, 2023, period. The terms of the new line of credit are the same as the current line of credit, with closing fees of $132,500, and an interest rate of a flat 30 day LIBOR plus 200 basis points (2 percent) if the line of credit is used.
“The line of credit provides us with liquidity to pay claims between the declaration of a deficit and the 30-day collection of regular assessment funds,” Sciortino told the board.
The board approved the line of credit renewal, which will be forwarded to the bond commission for approval, effective June 1.
2020 year-end financials
In reporting on the 2020 year-end financials, Sciortino indicated that Louisiana Citizens ended 2020 with a surplus of $161.9 million compared to a surplus of $186.5 million at the end of 2019.
Sciortino reported that LCPIC had a net loss of $24.6 million for 2020, a total that is $26.5 million less than the budgeted income of $1.8 million. Sciortino attributed the loss to the 2020 storm season and the $49.3 million in net losses and loss adjustment expenses from the storm season. The net losses and loss adjustment expenses were $30.8 million more than the budgeted amount of $18.5 million.
He also reported that LCPIC ended 2020 with $178.1 million in operating cash and cash investments compared to $220.9 million in operating cash and cash investments at the end of 2019.
After Sciortino’s report, the board voted unanimously to submit LCPIC’s 2020 Yellow Book financials to the Louisiana Department of Insurance.
Reinsurance structure update
Newberry updated the board on the renewal strategies for the 2021-2022 LCPIC Reinsurance Structure. The reinsurance structure for 2020 had a $560 million cap that provides coverage for a 303-year probable maximum loss. The 2021 reinsurance structure is proposed to have a $545 million cap that provides coverage for a 302-year probable maximum loss. In 2019, the reinsurance structure had a $610 million cap that provided coverage for a 302-year probable maximum loss.
Newberry explained to the board that the drop in the residual insurer’s total insured value is the reason that the 2021 reinsurance structure will provide similar protection as 2020 even though there is a $15 million drop in the reinsurance cap. At the end of 2020, LCPIC had $6.185 billion in total insured value compared to $6.297 billion at the end of 2019, a drop of 1.8 percent. LCPIC had $58.2 million in premium at the end of 2020 compared to $60.8 million at the end of 2019, a drop of 4.4 percent. At the end of 2019, LCPIC had 33,943 total risks with 31,788 in the FAIR Plan and 2,155 in the Coastal plan. The number of risks at the end of 2020 was 33,119, with 31,077 in the FAIR Plan and 2,042 in the Coastal Plan, an overall reduction of 2.4 percent in total policies with a reduction of 2.2 percent in the number of policies in the FAIR Plan and 5.2 percent in the number of policies in the Coastal Plan.
The parishes with the largest year-over-year decline in total insured value are: Jefferson, down $49.8 million, or 3.9 percent; Orleans, down $18.4 million, or 1.1 percent, and Terrebonne, down $34.9 million, or 11.8 percent.
The lines of business that had the greatest decline in total insured value are: Dwelling, down $55.7 million, or 1.1 percent; Homeowners, down $48.2 million, or 7.3 percent, and Commercial, down $8.3 million, or 1.8 percent.
Personal lines rate filing
Newberry reported that the Louisiana Department of Insurance approved LCPIC’s 2021 personal lines rate filing.
In January, LCPIC’s board voted to send its 2021 Personal Lines Rate Filing to the department. The rate filing, as passed by the board, was a 2.3 percent proposed overall average rate increase with a 2.0 percent rate increase in the FAIR Plan and a 4.9 percent rate increase in the Coastal Plan. Also part of that vote was the stipulation that if the Department approved the rate filing without a change greater than plus or minus 0.5 percent, LCPIC’s management could implement the rate change without further board action.
The new rates are effective June 1.
2020-21 storms update
In Newberry’s report to the board, he updated board members on the 2020-21 storm season. The storms that affected LCPIC’s insureds were Tropical Storm Cristobal; hurricanes Laura, Sally, Delta and Zeta, and the winter storm that struck Louisiana on Feb. 16, 2021.
The claims data detailed is as of Feb. 21: Cristobal, 31 claims reported, 31 expected total claims, 100 percent contacted, inspected and closed; Laura, 2,676 claims reported, 2,709 expected total claims, 100 percent contacted and inspected and 91 percent closed; Sally, five claims reported, five expected total claims, 100 percent contacted, inspected, and closed; Delta, 2,012 claims reported, 2,037 expected total claims, 100 percent contacted, 99 percent inspected and 96 percent closed, and Zeta, 2,551 claims reported, 2,546 expected total claims, 99 percent contacted, 95 percent inspected and closed, and the Feb. 16 winter storm, 65 claims reported, 92 expected total claims, 71 percent contacted, 28 percent inspected, and 17 percent closed
Newberry described LCPIC’s response time for handling claims by reporting the average number of days from the first notice of loss to payment of the claim for hurricanes Laura, Delta and Zeta. The average number of days for Laura was 25.64 days, Delta was 18.19 days, and Zeta was 18.70 days.