Análisis de la aplicación del modelo

Prospective investors in the Series 2006C Bonds should consider all the information contained in this Reoffering Circular, including the risk factors described in this section. The risk factors described herein are for illustrative purposes only and are not meant to be an exhaustive list of the risk factors associated with the purchase of the Series 2006C Bonds.

Security Interest Limited to Pledged Revenues

The Series 2006C Bonds are secured, to the extent and as provided in the Indenture, by a pledge of the Pledged Revenues, which consist solely of the 2005 Emergency Assessments, the money and securities held in the Debt Service Reserve Fund, the Emergency Assessment Stabilization Fund, and other funds established under the Indenture (other than the Rebate Fund), and the interest earnings accruing to those funds (other than the interest earnings accruing to the Rebate Fund). The Corporation expects to make payments of the principal and interest on the Series 2006C Bonds from the 2005 Emergency Assessments that it levies and collects and has not pledged any collateral or security other than the Pledged Revenues to payment of the principal or interest on the Series 2006C Bonds. The Series 2006C Bonds are not secured by Regular Assessments, Market Equalization Charges, or any Emergency Assessments other than the 2005 Emergency Assessments.

The Series 2006C Bonds are obligations of the Corporation payable out of any of its assets that are legally available for such payment, subject to any agreements that the Corporation has or may hereafter have with other creditors. Since the Corporation may pledge all of its assets (other than the Pledged Revenues) to other creditors, no assurance is given that any of the Corporation’s assets (other than the Pledged Revenues) would be available to pay the principal or interest on the Series 2006C Bonds.

The beneficial owners of the Series 2006C Bonds could suffer a loss or fail to obtain payment on a timely basis if the 2005 Emergency Assessments are not levied and collected in amounts sufficient to make timely payments on the Series 2006C Bonds.

The Corporation has agreed that, if an event of default occurs and is continuing under the Indenture, it will levy the 2005 Emergency Assessments for each year in the maximum amount permitted under the Citizens Act and the Plan of Operation. If an event of default occurs and is continuing, the Series 2006C Bonds are subject to acceleration, but no assurance is given that Pledged Revenues or other assets of the Corporation would be available to pay principal of and interest on the Series 2006C Bonds in full upon acceleration.

Timely Remittance of Emergency Assessments

A business failure or other event causing a disruption in the collection and remittance, or a failure to collect or to remit, the 2005 Emergency Assessments by one or more Affected Insurance Companies could adversely affect the payment of the Series 2006C Bonds on a timely basis. It is expected that amounts in the Emergency Assessment Stabilization Fund and the Debt Service Reserve Fund would be available in case of such disruption, and any amounts expended from that fund in a given year are required to be included in the 2005 Emergency Assessment Minimum Levy Requirement for the following year, to the extent required to satisfy the

However, the amounts in the Emergency Assessment Stabilization Fund and the Debt Service Reserve Fund could be insufficient, particularly during any period when either of those funds is not fully funded.

Possible Changes in the Market for Property Insurance

In general, the demand for property insurance in the State may be affected by changes in premiums charged, risks covered or deductibles imposed. The levy of the Regular Assessment in 2006 and the Emergency Assessment (3.6% in 2007 and 5.0% in 2008 and 2009) increased the cost of property insurance to all policyholders in the State. Additional storms, Gustav and Ike in 2008, have not caused the Corporation to impose additional Regular or Emergency Assessments.

Due to the efforts of the Department of Insurance and the Louisiana Legislature, additional insurance companies have been attracted to the property insurance market in the State. As a result of new competition entering the market, the outlook for the near future is stable.

Resources Available for Future Deficits

As a provider of residual market plans, the Corporation is required to offer insurance to applicants "who are in good faith entitled, but are unable, to procure insurance through the voluntary market." The Insurance Plans may be unable to refuse an applicant for reasons available to a voluntary market insurance company, for example, to avoid a concentration risk or other actuarially significant risks. The maximum amount that the Corporation will insure under any single policy is currently $500,000.

The procedures used to calculate the rates charged by the Corporation for its property coverage are required by the Citizens Act to be actuarially justified and shall exceed by at least 10% the rates charged among the ten insurance companies with the greatest total Direct Written Premium in each parish for that line of business in the preceding year. The rates charged in a particular parish in the State must also exceed by at least 10% the rates of any insurance company that has a minimum of 3% of the total premium for the parish Notwithstanding the previous sentence, until August 15, 2010, the Corporation may charge the higher of actuarially justified rates or rates equal to the highest of the top ten (10) insurers with the greatest total direct written premiums for residential property insurance policies in any non-competitive market unless competition resumes. In addition, the procedures for determining the rates must be approved by the Department of Insurance. However, the Corporation may experience future deficits. For example, it may experience larger-than-expected losses, or the rates it charges may be inadequate for various reasons, including the difficulty of making actuarial determinations on a residual class.

As of the date of this Reoffering Circular, the Corporation maintains a reinsurance policy with AON Benfield in the amount of $500,000,000. The Corporation is in the initial stages of designing its financial plan for the 2009 storm season and has yet to determine the appropriate levels of reinsurance for 2009. In the event storm losses exceed the Corporation's claims paying resources (including reinsurance) it may incur a deficit in the future. See discussion under "RISK FACTORS - Possible Changes in the Market for Property Insurance" herein.

Assessments, which would be applied to pay that subsequent deficit and not to pay the Series 2006C Bonds.

Though the Indenture allows Additional Bonds to be issued, it limits the amount of such Additional Bonds to the amount needed to finance the 2005 Plan Year Deficit, as it may be redetermined in the future. Any such Additional Bonds and the Series 2006C Bonds would have an equal claim on the 2005 Emergency Assessments. Any borrowing arising from a future Plan Year Deficit would have no claim on the 2005 Emergency Assessments but could be secured by Emergency Assessments levied with respect to that future Plan Year Deficit. No assurance can be given that the Corporation would be able to successfully complete any future borrowing. Furthermore, Emergency Assessments levied by the Corporation with respect to future Plan Year Deficits, if any, would be payable by Affected Policyholders on the same basis with and collected by Affected Insurance Companies and the Corporation at the same time as the 2005 Emergency Assessments.

Future Legislative and Regulatory Changes

The Corporation is an entity created by the State legislature and governed by a board that is appointed by elected officials of the State. There can be no assurance that the State Legislature will not attempt to amend the Citizens Act, the insurance laws or regulations, or other laws of the State in a manner that would adversely affect the financial condition or operations of the Corporation. Also, an interpretation of, or a change in the interpretation of, any law or regulation binding upon the Corporation by the Department of Insurance could adversely affect the financial condition or operations of the Corporation. However, the Citizens Act provides that the State Legislature covenants and agrees with the Corporation and the owners of its bonds that, as long as bonds of the Corporation remain outstanding, the State and any public instrumentality thereof and the State Legislature will not in any way impair the rights and remedies of such owner or the security for such bonds, until all such bonds are fully paid and discharged. In the opinion of Bond Counsel, any attempt by the State, any public instrumentality thereof, or the State Legislature to impair the rights and remedies of the owners of the Series 2006C Bonds or the security for the Series 2006C Bonds would be contrary to the express provisions of the Citizens Act described above and is likely to be subject to a successful constitutional challenge as violations of the "Contract Clause" of the State and United States Constitutions. In rendering this opinion, Bond Counsel assumed that proper legal arguments will be presented before the court and the courts at all levels will give appropriate weight to the legal theories and arguments presented by and on behalf of the Corporation, and proper deference to the language of the Citizens Act, and therefore there can be no assurance that a court of last resort will concur with this legal conclusion.

Municipal Bankruptcy Proceedings

The Corporation, under future circumstances, may be eligible for insolvency proceedings. The Corporation is a "municipality" as defined in the United States Bankruptcy Code and therefore would be eligible to be a debtor only in a voluntary case under Chapter 9 of the United States Bankruptcy Code ("Municipal Bankruptcy").

A Municipal Bankruptcy proceeding could prevent the holders of the Series 2006C Bonds from pursuing their remedies for any defaults under the Series 2006C Bonds, and could

result in the modification of other material terms of the Series 2006C Bonds. Section 552 of the United States Bankruptcy Code provides that property acquired by the debtor after commencement of a bankruptcy case (which presumably would include 2005 Emergency Assessments) will not be subject to the lien of a security agreement entered into by the debtor prior to the commencement of the bankruptcy proceeding. Notwithstanding Section 552, however, in a Municipal Bankruptcy proceeding, "special revenues" acquired by the debtor after commencement of such proceeding remain subject to a lien resulting from a pre-petition security agreement. The 2005 Emergency Assessments should constitute "special revenues", and the security interest in the 2005 Emergency Assessments should be enforceable after the filing of a Chapter 9 petition.

Investment Risk

Money credited to the funds established under the Indenture is required to be invested in Permitted Investments. Because Permitted Investments are exposed to changes in market value as well as price and yield volatility, the value of the investments in the funds could decline below their purchase price and the investment earnings of those investments could be lower than anticipated, thereby not providing sufficient funds, when needed, to pay policy claims and other liabilities and expenses, including interest on the Series 2006C Bonds. For a definition of "Permitted Investments", see "APPENDIX A – SUMMARY OF THE INDENTURE" attached hereto.

Enforceability of Remedies

The remedies available to the beneficial owners of the Series 2006C Bonds upon an Event of Default under the Indenture depend in many respects upon judicial actions that are often subject to discretion and delay. Under existing constitutional and statutory law and judicial decisions, the remedies specified by the Indenture may not be readily available or may be limited. The various legal opinions to be delivered concurrently with the delivery of the Series 2006C Bonds (including approving opinions of Bond Counsel) will be qualified, as to the enforceability of the various legal instruments, by limitations imposed by bankruptcy, reorganization, insolvency, or other similar laws affecting the rights of creditors enacted before or after such delivery.

Litigation

The Corporation is currently defending a number of lawsuits relating to the payment of claims resulting from Hurricanes Katrina and Rita that, if decided adversely, could result in substantial judgments against the Corporation. An adverse determination in pending litigation may increase the amount of the 2005 Plan Year Deficit. See "PENDING LITIGATION" herein.

Exclusion of Interest from Gross Income

In the opinion of Special Tax Counsel, the conversion of the interest rate on the Series 2006C Bonds from the Auction Mode Rate to the Long Term Interest Rate will not in and of itself cause interest on the Series 2006C Bonds to be included in gross income of the owners thereof for federal income tax purposes.