The board for Louisiana Citizens Property Insurance Corp. voted Thursday to borrow $100 million through bonds to cover a cash shortfall of $70 million, despite the objections of the state's Treasurer.
The Times-Picayune says the move by the state's insurer of last resort avoids passing a new regular assessment onto taxpayers. However, Treasurer John Kennedy criticized the company's insolvency and asked that the state's legislature review the company's operations during this year's session that begins next month.
By law, Louisiana Citizens has to keep $125 million in cash on hand, or enough to cover one hurricane season. That is in addition to $75 million for reinsurance.
The company borrowed $1 billion for Hurricane Katrina and Rita claims in 2006, paying down that borrowing through assessments on insurers operating in the state.
Thursday's decision would mean the assessment would rise in the short term to 3.92 percent of insureds' policy premiums from 3.74 next year. The rate drops to 3.77 percent in 2015 and would fall more slowly over the next 13 years than if the bonds were not in place.
On Thursday, Kennedy said the legislature needs to review the concept of Louisiana Citizens and determine if there is a better way insurance program to cover losses.
The State Bond Commission must still approve the bond, which Kennedy said it would closely scrutinize at an upcoming hearing.
The board also announced that Citizens CEO Richard Robertson would retire on June 1.
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