UNDERSTANDING YOUR INSURANCE ASSESSMENTS
By Victor J. Lefeve

In 2003, the Louisiana Legislature created Citizens Property Insurance Corporation to offer property insurance to homeowners and businesses unable to get coverage through the private insurance market. In creating this insurance company the state requires all authorized private property and casualty insurance companies doing business in Louisiana to collect any and all assessments required by Citizens Property Insurance Corporation to meet their financial obligations.

Citizens Property Insurance Corporation only accepts property insurance from two insurance programs initiated by the State Legislature. The two programs are called the FAIR and Coastal plans. These plans, as stated previously, can only be used when insurance is not available through the private insurance markets. Both of these insurance plans have played a vital role in perpetuating our Louisiana economy.

As a result of Hurricanes Katrina and Rita, the State of Louisiana, through Citizens Property Insurance Corporation, has levied a regular assessment to pay the excessive claims from these hurricanes. This assessment was initiated in 2005, and your private insurance company began collecting the assessment for Citizens in 2006. Unfortunately, due to the catastrophic nature of these hurricanes, this regular assessment was not adequate to cover all of the claims presented to Citizens. In January 2007 Citizens levied an additional emergency assessment on all Louisiana property insurance policyholders.

It should be noted that an emergency assessment is subject to verification by the Louisiana Department of Insurance, but these assessments can only be done annually, if necessary. It was determined that this emergency assessment was necessary for Citizens to meet its statutory and financial obligations.

In an effort to mitigate the catastrophic exposures to Citizens Property Insurance Corporation your State Legislature is currently trying to enact legislation to improve building codes in Louisiana, and to offer private insurance companies incentives to help reduce the number of insurance policies which are placed with Citizens.

Normally, the insurance premiums collected by the Citizens Property Insurance Corporation are adequate to pay their claims, and hopefully, with positive legislation, and barring another major hurricane in Louisiana, you should see assessments disappear.

Victor J. Lefeve, CPCU, CIC, CPIA is president of Employees Insurance, a local independent insurance agency.