Louisiana’s property insurer of last resort will repeat its 2014/2015 reinsurance program with some tweaks, including replacing its maturing Pelican Ltd. catastrophe bond.
“We have two things in our favor: price and risk are down,” says Steve Cottrell, CFO of Louisiana Citizens Property Insurance Corp. “We will replicate the same program with some small changes.”
Louisiana Citizens purchased $650 million in reinsurance coverage during the prior year’s renewal, a record for the program. It provided 1 in 110 year coverage for windstorm and allowed for $50 million retention following a first event and zero second event retention for a second event, according state documents.
Cottrell says that the state is planning to use the recent double digit decreases in reinsurance prices to shore the program’s risk profile rather than seek a straight savings. He added that that the state’s depopulation programs — which has nearly 10 percent of policies to the private market since it was implemented — presents its own challenges.
“As we depopulate policies we remove risk, but we also remove premium,” he explained.
Initial plans also include replacing the capacity provided by Louisiana Citizen’s Pelican Re Ltd. (Series 2012-1) $125 million catastrophe bond which matures in 2015, Cottrell adds.
“We will hopefully get some price changes on that,” Cottrell says of the Pelican renewal, adding that Louisiana plans some tweaks compared its $140 million Pelican Re Ltd. (Series 2013-1) that was issued a year later. “For second one we had a dropdown feature, I’m not sure we will need that. Also, it won’t be less $100 million, but not sure it will be as much as $125 million.”
Cottrell says that he plans to brief Louisiana Citizen’s board of directors with a brief overview reinsurance program at today’s board meeting. More detailed plans for its reinsurance renewals will presented a meeting in March.