Louisiana Homeowners Insurance

Citizens prepares to shift more insurance clients to private firms

Vijay Ramachandran, the Citizens vice president who oversees the process of reducing the company's volume of business, said the three companies are: Lighthouse Property Insurance Co., which is based in Louisiana and has administrative offices in Orlando, Fla.; Occidental Fire and Casualty Co. of Raleigh, N.C.; and Capitol Preferred Insurance Co. of Tampa, Fla.

Ramachandran said Occidental and Lighthouse have been involved in taking over some of Citizens' polices in the past. Capitol's sister company, Southern Fidelity Insurance Co., also has experience in assuming some Citizens homeowner policies, he said.

Ramachandran said this is the fifth time the state-run insurance company of last resort has gone through the process of transferring some of its business to private companies.

He estimated that as many as 10,000 existing policies could be placed with one of the three companies. He said 13,466 policies were taken out of Citizens and placed with private companies last year.

Since 2008, when the first round of reductions began, Ramachandran said 56,770 policies have been assumed by private companies. That leaves about 115,000 homeowners and other "personal lines" of property policies in place for Citizens and another 5,500 commercial policies.

In the days after Hurricanes Katrina and Rita, more than 170,000 policies were written by Citizens. By law, Citizens must charge 10 percent above the highest premium in an area to keep it from being competitive with private companies.

Insurance Commissioner Jim Donelon said that when a policyholder's insurance is taken over by a private company, "the policyholder saves money."

The companies must review the Citizens insurance book and apply for the policies they want. They must decide by Dec. 1 which policies they want.

Policyholders have 60 days to decide whether to stay with Citizens or go with the new insurer.

Donelon said that besides the policies taken away from Citizens last year, another 19,000 were selected but agents handling the policies rejected those plans. The agents have to agree to the takeover of the policies.

Donelon said he expects some of those rejected policies to be up for grabs this year.

He said he does not see Citizens' volume of homeowners insurance ever dipping below 95,000 to 100,000.

"There will always be a need for a residual market" like Citizens, Donelon said. "If we succeed in getting the 19,000 policies asked for (by private insurers) and not approved ... that will get us close to the bottom of Citizens' ability to move policies off their books and into the private sector.

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