Florida’s Citizens Property Insurance Corp. can now breath a major sigh of relief, as Tropical Storm Isaac delivered just a glancing blow to South Florida and the Keys before making its way out into the Gulf of Mexico’s warm open waters. Though the state-run insurer said it had received 300 Isaac-related claims through mid-day Aug. 27, most of them in Broward and Palm Beach counties, the storm’s turn westward appears to have spared Citizens a far worse outcome, not to mention disruption to this week’s Republican National Convention in Tampa.

Alas, Citizens’ namesake in the Bayou State may not be quite so fortunate. The latest projections from NOAA’s National Hurricane Center show Isaac strengthening into a hurricane today, and potentially making landfall in Louisiana the morning of Aug. 29, seven years to the day after the devastating strike of Hurricane Katrina. With a hurricane watch in effect from Intracoastal City, La., to Morgan City, Louisiana Gov. Bobby Jindal has declared a state of emergency and is encouraging coastal parish residents to voluntarily evacuate.

Louisiana Citizens, the state-run insurer of last resort, isn’t quite as exposed as its Floridian counterpart. In fact, thanks in part to a grant program spearheaded by Insurance Commissioner Jim Donelon that offered incentives to private insurers to take out policies, Louisiana Citizens is one of relatively few state-run insurers to actually see a notable decline in enrollment in recent years.

According to a recent report by the Insurance Information Institute, Citizens had 105,000 policyholders in 2011, down from 174,000 in 2008.  The state-run insurer had $21.49 billion of total exposure in 2011 and, at 4% market share, ranks as the sixth-largest homeowners insurer in the state. In comparison, Florida Citizens ranks as that state’s largest homeowners insurer, with roughly a quarter of the market. Its $510.7 billion of exposure accounted for 57.7% of the total $884.7 billion of property insured by state-run insurers nationwide.

However, Louisiana Citizens could still face serious problems should a major storm make landfall. An Aug. 26 report from CoreLogic estimated nearly 223,000 New Orleans-area properties worth $30.44 billion were vulnerable to flood damage from a Category 2 hurricane hitting the region (Flood losses themselves would be paid by the National Flood Insurance Program, while Citizens would cover wind-related losses.) Meanwhile, according to the company’s second quarter statutory financial statement, Citizens’ policyholder surplus stood at just $15.6 million on June 30.

As of late July, Citizens Chief Executive Officer Richard Robertson put the company’s cash resources at about $100 million. That disclosure came after Citizens was forced to take a massive hit to its resources by paying out $104 million in damages to individuals who charged the insurer did not adjust their claims in a timely fashion following Hurricanes Katrina and Rita. After seven years of legal wrangling, in June, the U.S. Supreme Court effectively cut off Citizens’ last remaining legal avenue when it refused to hear the company’s appeal. More recently, Citizens has been trying to settle with policyholders.

When Citizens’ claims-paying resources falls short of its obligations, it makes up the difference by borrowing money that it pays off over time by charging assessments on all of the state’s commercial and residential property insurance policies. For example, Louisiana policyholders are still paying assessments on the roughly $1 billion the state-run insurer had to borrow back in 2005 to pay claims from Hurricane Katrina. In July, this year’s annual assessment was set at 3.74%, or an average of $54 per policy.

The assessments, which are being used to retire $85.5 million of debt this year, are deductible from state income taxes, thus effectively making taxpayers the explicit guarantors of Citizens’ debt. The company still has $850 million in bonds outstanding , all of which come mature in 2026.

And while Louisiana Citizens’ policyholders are much more likely to pay actuarially justified rates than their Floridian counterparts, there have been efforts to hold back rate increases for coastal consumers that could make it difficult for the company to finance more borrowing. Back in June, Gov. Bobby Jindal signed legislation that reinstated an exemption for 12 coastal parishes from the requirement that windstorm-only coverage from Louisiana Citizens must be 10% higher than the amounts charged by private insurers for equivalent coverage.

The bill – which took effect Aug. 1 for St. Mary, Calcasieu, Cameron, Vermilion, Iberia, St. Tammany, Orleans, Jefferson, St. Bernard, Plaquemines, Terrebonne and Lafourche parishes, and is scheduled to last through Aug. 15, 2015 – would allow Citizens to set rates that were equal to those in the private market. Citizens had operated under similar rules in the coastal parishes for most of the five years following Hurricane Katrina.

As private insurers largely aren’t offering windstorm-only policies in the affected parishes, the rates are calculated using the windstorm portion of multiperil property insurance policies.

As part of an overall 10.5% rate increase approved by Citizens’ board earlier this year, windstorm-only policies saw an average rate hike of 58%, which some coastal policies seeing hikes of 100% to 200%. For those who were already paying the higher rates, Citizens is required to rebate premiums back to June 1, reflecting a total $16 million rate cut associated with the bill.

Currently, NOAA projects the probability of tropical storm force winds hitting Buras, La., at 98%, with a 48% chance of hurricane-force winds. In New Orleans, the odds are 96% for a tropical storm and 40% for a hurricane; In Baton Rouge, it’s 91% for a tropical storm and 26% for a hurricane; and in New Iberia, it’s 79% for a tropical storm and 14% for a hurricane.

Over in Mississippi, Gulfport faces 91% odds of tropical storm winds and 18% of hurricane-force winds. In Jackson, the odds are 66% of a tropical storm and 4% for a hurricane.

Other areas at risk include Stennis, S.C., with 94% odds of tropical storm winds and 29% of hurricane; Mobile, Ala., with 79% odds of tropical storm winds and 5% of hurricane; and Pensacola, Fla., which still faces a 65% chance of tropical storm winds and 1% chance of a hurricane.

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