At its Sept. 9 meeting, the Louisiana Citizens Property Insurance Corp.’s (LCPIC) board of directors voted to approve sending the commercial property rate filing, an overall increase, to the Department of Insurance for approval and also to approve sending the second quarter financials to the Department of Insurance. In addition, the board was updated on the financials through July and LCPIC’s response to Hurricane Ida.
The commercial rate filing amounts to an overall average 6.8 percent rate increase. The FAIR Plan’s commercial customers will see an average 6.5 percent rate increase that affects 1,230 policies, and the Coastal Plan’s commercial policyholders will get an average 8.5 percent rate increase, affecting 180 policies.
The 180 commercial policyholders whose properties lie below the Gulf Intracoastal Waterway will see their annual premium increase from a current average of $5,750 to $6,240, according to LCPIC. In addition, the 1,230 commercial policyholders in the FAIR Plan will see annual premium go from a current average of $4,100 to $4,360.
The primary drivers of the indicated rate change are, according to LCPIC CEO Richard Newberry, the increase in catastrophe bond rates, increase in reinsurance rates, and an increase in modeled Property Claim Services event losses.
LCPIC currently has 1,410 commercial policies with a total insured value of $634 million compared to 1,315 commercial policies with a total insured value of $457 million in last year’s commercial rate filing. According to last year’s rate filing, LCPIC had 160 commercial policies in the Coastal plan and 1,150 in the FAIR Plan.
According to Newberry, the increase in the number of policies is due to significant 2020 storm activity leading to a tightening of voluntary insurers’ underwriting and LCPIC’s adoption of the most recent ISO rating.
LCPIC’s commercial rate adjustment last year resulted in an overall rate increase of 2.7 percent with a decrease of 0.2 percent in the FAIR Plan and a 17.7 percent increase in the Coastal Plan.
The board approved unanimously the proposal to send the rate filing to the Louisiana Department of Insurance for approval. The board also voted unanimously that, if the department does not make a change that is plus or minus 0.5 percent, LCPIC can implement the new rates. The new rates will be effective Feb. 1, 2022.
In addition, LCPIC’s board voted unanimously to approve the second quarter 2021 financials presented by LCPIC management and reviewed by members of the audit committee and to ratify filing the financials with the Louisiana Department of Insurance as of the Aug. 15 due date.
During his report, Newberry informed the board that as of the end of July 2021, LCPIC has 37,668 policies in force with a total insured value of $7.45 billion compared to 35,837 policies in force with a total insured value of $6.94 billion as of July 2020. According to Newberry, LCPIC has added 2,641 new policies as of Sept. 1 of this year.
LCPIC’s Vice President of Accounting and Finance Joe Sciortino updated the board on the financials through the end of July 2021.
He told the board that LCPIC’s policyholders’ surplus grew from $161.9 million at the beginning of the year to $167.4 million at the end of July 2021.
LCPIC’s net income at the end of July was $4.7 million, he said, $2.87 million more than the $1.83 million net income that was budgeted for the end of July 2021.
He reported that LCPIC ended July with $189.84 million in total cash and investments, with $114.27 million of that amount in total operating cash.
Sciortino emphasized to the board that these financials are all pre-Hurricane Ida.
Newberry gave the board an update on LCPIC’s response to Hurricane Ida.
Newberry emphasized that the numbers are still preliminary as far as claims from Hurricane Ida.
He told the board that LCPIC had access to 850 adjusters before the storm, but now LCPIC has 200 independent adjusters on the ground handling claims from Hurricane Ida. “We will be watching the numbers to make sure that LCPIC is hitting its targets for average number of days from first notice of loss to inspection, average number of days from inspected to LCPIC receiving the adjuster’s report, average number of days from LCPIC receiving the adjuster’s report to payment, and average number of days from first notice of loss to payment,” Newberry told the board. “This time of need is why we are here,” Newberry added.
Having a $545 million reinsurance structure with a $35 million retention, Newberry opined that, considering its cash reserves and reinsurance structure, LCPIC is well positioned financially to handle a second storm.