Louisiana Citizens Property Insurance Corp.’s board voted Thursday to raise Chief Executive Officer David Thomas’ salary by 5 percent to $288,750.
Insurance Commissioner Jim Donelon recommended the raise, which amounts to $13,750.
“If we don’t adjust his salary … his senior staff will make more money than he does in some cases,” Donelon said.
In other action, Citizens set the rate for a continuing assessment that is used to help pay off the roughly $1 billion the state-backed insurer of last resort borrowed to pay Hurricane Katrina claims.
The assessment, which has been declining, was set at 3.42 percent for 2015. It will be applied to the premiums collected by all the state’s private property-and-casualty insurers. The fee is passed along to each companies’ customers, but taxpayers can reclaim the payment through a tax credit on their Louisiana income tax forms.
The assessment will generate an estimated $85.5 million in 2015.
The average Louisiana homeowner probably pays between $1,500 to $2,000 per year for coverage, Citizens Chief Financial Officer Steve Cottrell said. The assessment will add about $51 to $68 to a homeowner’s annual cost.
The 2014 assessment is 3.54 percent. Citizens will retire the bond debt in 2024. Citizens originally borrowed $953 million but the cost to settle Katrina claims exceeded that, mainly because of legal costs, Cottrell said.
Donelon said Citizens will ultimately pay about $200 million to settle class-action lawsuits related to claims from hurricanes Katrina and Rita.
Citizens is scheduled to make $84 million in payments this year to settle those lawsuits.
Cottrell said the state-backed insurer has a $23.8 million surplus now, but the class-action payments could mean the company will end the year $30 million in the red.
Thomas, the insurer’s CEO, was hired a year ago. Under his direction, Citizens began issuing its own policies and handling non-catastrophe claims, rather than paying private companies for that work. The moves are expected to save Citizens between $7 million and $10 million per year.
Salaries for Citizens’ senior management are based on the recommendations of a consultant, similar to the system for state employees, said Denise Brignac, the Insurance Department’s chief deputy commissioner. Thomas’ pay is below the minimum level recommended.