Louisiana Property and Casualty Insurers Must Submit All-Peril, Wind-Only Deductible, Wind Exclusion, Wind Mitigation Credit Analysis with 2014 Rate Filing
Dec 13, 2013
Louisiana Insurance Commissioner Jim Donelon issued Bulletin No. 2013-08 on December 12, 2013, advising that all authorized property and casualty insurers writing residential property insurance in the state must include an analysis to determine the actuarial adequacy and appropriateness of approved all-peril deductible credits, wind-only deductible credits, wind exclusion credits and wind mitigation credits in their first rate filing submitted to the Louisiana Department of Insurance after January 1, 2014.
If an insurer does not anticipate making a rate filing between January 1 and December 31, 2014, the insurer must make an informational filing addressing the requirements.
The Bulletin does not apply to commercial properties or approved unauthorized insurers, such as surplus lines.
Commissioner Donelon issued the Bulletin to address the diversity and complexity of wind-related credits currently being utilized by insurers and the increased importance of these credits to policyholders, who have experienced sharp increases in property insurance rates since the 2005 hurricane season. Marked increases in the use of hurricane deductibles, named storm deductibles, wind/hail deductibles and wind exclusion credits are also occurring.
Included in insurers’ informational filing or rate filing must be an analysis to determine the actuarial adequacy and appropriateness of approved all-peril deductible credits, wind-only deductible credits, wind exclusion credits and wind mitigation credits. The analysis should consider catastrophe modeling, geographic variations within the state, logical consistency across the spectrum of approved deductible credits, differences in indicated credits by amount of insurance, along with other relevant considerations.
Specifically, the filing shall include:
- A detailed description of currently approved all-peril deductible credits, wind-only deductible credits, wind exclusion credits and wind mitigation credits with the respective percentage or dollar impact on premium approved for each wind-related credit
- The rule/formula by which credits are applied to calculate the change in premium due to application of an all-peril deductible credit, a wind deductible credit, a wind exclusion credit, a wind mitigation credit, or a combination of these credits
- An analysis of the adequacy of currently approved all-peril deductible credits, wind-only deductible credits, wind exclusion credits and wind mitigation credits, including:
- A descriptive actuarial analysis of all wind-related credits including detailed quantitative exhibits
- Detailed identification of all models used in the actuarial analysis
- Detailed consideration of the current reinsurance costs underlying the residential property program and a detailed allocation of these costs to Louisiana and sub-Louisiana geography
- Appropriate cost of capital considerations
- A comparison of current wind-related premium credits with the actuarially indicated and proposed credits for all wind-related deductibles, exclusions and mitigation measures currently approved in Louisiana. (Note: The comparison needs to include “proposed credits” only if a filing intends to recise the currently approved credits)
To view the Bulletin, click here.
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