Insurance Commissioner Jim Donelon has asked Louisiana’s insurer of last resort to reconsider plans for a $100 million bond issue.
Trustees of Louisiana Citizens Property Insurance Corp. voted March 13 to ask the State Bond Commission for permission to issue the revenue bonds supported by a statewide assessment on property owners. Proceeds would be used to complete payment of outstanding claims from two hurricanes in 2005 and a $42 million final payment from a class-action lawsuit.
However, Donelon said Citizens has sufficient resources to continue operating, including $75 million in accounts and a $50 million line of credit.
In a letter to Commissioner of Administrator Kristy Nichols, Donelon said he agreed with Gov. Bobby Jindal’s position that the $100 million of “Katrina” bonds are not needed.
“We do not have a cash-flow problem and are likely to be able to meet all our obligations for the foreseeable future,” Donelon said.
Nichols said the proposed bond issue was a bad idea. “By increasing their debt, Citizens would impose additional fee assessments on every property owner,” she said. “And because of the tax credit involved, the state would be put on the hook for partially subsidizing Citizens’ debt payments by more than $5 million per year.”
Citizens has $890 million of outstanding debt from $978 million of assessment revenue bonds issued in 2006 to meet claims from hurricanes Katrina and Rita in 2005. The bonds are rated A3 by Moody’s Investors Service and A-minus by Fitch and Standard & Poor’s.