Premiums would drop 4% on average
The state-run property insurer of last resort plans to lower commercial rates an average of 4 percent.
The bulk of those cuts would benefit the 352 commercial policyholders Louisiana Citizens Property Insurance Corp. covers in coastal areas. Those policyholders would see rates drop an average of 23.8 percent. The average annual premium would fall from $7,789 to $5,935.
The rest of Citizens’ commercial customers — almost all of whom are in the New Orleans area — will see rates lowered an average of 0.3 percent. The average premium would be $4,295 — $13 less than the current cost.
The rate cuts were made possible by a 20 percent reduction in the cost of reinsurance, the insurance that insurance companies buy to protect themselves against excessive claims, said Steve Cottrell, Citizens chief financial officer.
“Reinsurance is by far our largest expense … We spend about 40 percent of our premium on reinsurance,” Cottrell said. “That’s about eight times our labor costs.”
Coastal businesses will see a bigger benefit because their storm risk is greater and so is the reinsurance cost to cover that added risk, he said.
The new rates would go into effect in February. Citizens’ board of directors unanimously approved the rate filing. The state Department of Insurance must still approve the rates.