Report: La. exception to state-run insurer growth

State-backed insurance companies have experienced exponential growth over the last two decades, with Louisiana standing out as a notable exception to a trend that the Insurance Information Institute says threatens some states’ finances.

State-run property insurance companies covered a record 3.3 million residential and commercial properties in 2011, 17 percent more than in 2010, according to a report from the institute.

From 1990 to 2007, commercial and residential properties covered by state-run insurers grew an average of nearly 18 percent a year, it said.

“As long as the plans continue to grow, state finances will remain under threat and ultimately taxpayers, many of whom live nowhere near the coast, will continue to face the prospect of increased assessments in the years ahead,” the report says.

Those assessments can be levied when state-backed insurers run out of money to pay claims. The assessment on private insurers is typically based on market share and passed along to policyholders throughout a state.

In Louisiana, policyholders’ assessments are tax-deductible, which means all taxpayers end up footing the bill.

Louisiana Citizens Property Insurance Corp. was an exception to the growth trend in policies issued by state-run insurers, according to the insurance industry-funded nonprofit. Citizens had 105,000 policyholders in 2011, compared to 174,000 in 2008.

The report says Citizens’ lower policy numbers are the result of an incentive program passed by the state Legislature in 2007. The program gave private insurers grants to take on Citizens policies.

Nationwide, state-run insurers covered $884.7 billion worth of property in 2011, more than double the $419.5 billion covered in 2005.

Florida Citizens Property Insurance Co. is the largest property insurer in that state and one of the largest in the country. Florida Citizens had 1.7 million policyholders in 2011 and covered property worth $510.7 billion.

Louisiana Citizens covered $21.49 billion worth of property.

The report says a variety of factors played a role in boosting the portfolios of state-run property insurers, including:

• Population growth doubling or even tripling in some coastal areas since 1960.
• Residents of those areas’ support for subsidized insurance.
• Private insurers’ pulling back from writing business in coastal areas.

Robert Hunter, insurance director for the Consumer Federation of America, said the reason a lot of people are in state-run plans is that insurance companies abandoned the coast.

“Good grief, after (Hurricane) Andrew they dumped hundreds of thousands. Then they did it again after Katrina,” Hunter said.

Hunter cited Florida is the only state that really took care of its people, through competitive pricing and providing some of the reinsurance, after private insurers pulled back from the coast.

The state’s efforts have saved property owners more than $20 billion in premium and a reserve of $10 billion, Hunter said.