Citizens Property Insurance aims to raise rates to cover reinsurance costs
Louisiana’s Citizens Property Insurance, a state-run insurance organization that accounts for the majority of the state’s homeowners insurance policies, has announced that it is raising rates statewide this year. Citizens officials note that raising rates for coverage is a last resort option and that the many challenges currently facing the organization have sparked the need for higher rates. Higher reinsurance costs are being cited as one of the primary contributors to the organization’s need for higher rates.
Insurers eyes 7.7% rate hike
In the wake of natural disasters, reinsurance costs typically rise. Apart from some sporadic flooding throughout 2012, however, the state has not seen a major natural disaster recently. Nonetheless, reinsurance rates for Louisiana’s Citizens Property Insurance continue to grow. According to Citizens Property Insurance, rates will be increased by an overall average of 7.7%.
Majority of consumers likely to see rates increase by 5.3%
Though the 7.7% rate whole is an average estimate, Citizens officials expect that 93% of the insurer’s policyholders will see rate increases of approximately 5.3%. The rate hike will affect all policyholders throughout the state, so those in what could be considered “low risk” areas are likely to see lower rate increases, while those in high risk zones may see rates increase higher than the projected average.
Citizens encouraged to purchase more reinsurance protection
Citizens Property Insurance must still receive approval for its new rates from the state’s Department of Insurance. If regulators approve the rate increase, new rates for all Citizens Property Insurance policies will take effect on June 1 of this year. Insurance Commissioner Jim Donelon recently advised Citizens Property Insurance to purchase more reinsurance coverage in order to prepare for storms that occure once every 100 years. This recommendation was spurred by the increasing frequency of powerful hurricanes and other natural disasters that has put the insurance industry on edge. This is also likely one of the reasons behind the rate hike.