Insurance companies in Louisiana will be assessed $100 million – and likely more in the future – to pay the claims of two failed property insurers who went belly up in Hurricane Ida’s aftermath.
But the cost of spotting the insolvent insurers will ultimately fall on taxpayers, after insurance companies recoup the dollars from the state through a series of premium tax credits.
The board of the Louisiana Insurance Guaranty Association, a state-sponsored safety net for policyholders, voted Tuesday – for the first time since 2004 – to use its authority to charge admitted insurers 1% of their net written premiums from last year to help fill its coffers.
The guaranty fund, known as LIGA, is responsible for covering claims for policyholders whose insurers go insolvent. It promises up to $500,000 in payments for unpaid claims and $10,000 for premium refunds.
In mid-November, the Louisiana Department of Insurance took control of two regional insurers whose finances tanked following Hurricane Ida: Access Home Insurance Co. and State National Fire Insurance Co.
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Together, the two companies provided coverage for around 28,000 homeowners.
Now, when those policyholders file a claim, they’ll deal with LIGA, or one of its contractors. Between the two insurers, at least 8,000 claims have already been filed, though the hand-off with LIGA is ongoing.
“Our whole goal is to pay the people as timely and effectively as possible, but we’re in a bit of a transition period,” said John Wells, LIGA’s executive director. “We’re talking days and weeks, not months and years, to get people paid.”
LIGA could turn to insurers again next year for an additional 1% assessment if it needs funding to cover more insolvencies. Louisiana’s insurance market is in flux after two years of devastating storms. Hurricanes Laura, Delta and Zeta in 2020 cost insurers $10.6 billion. And Hurricane Ida is projected to cost insurers between $20 and $40 billion.
Insurance Commissioner Jim Donelon said he anticipates taking action “imminently” against another insurer, though he wouldn’t name the carrier. That could include putting them into receivership and liquidating their assets, or it could mean less drastic action, like placing them in a conservatorship, allowing the department to monitor their finances.
At a minimum, LIGA will need $100 million to fill the gap between what’s owed to policyholders and what the insurers have on-hand, Wells said.
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Access Home Insurance Co. received claims totaling around $180 million following Ida and had just $115 million in reinsurance and cash available. Meanwhile, State National Fire Insurance Co. logged more than $70 million in claims with $41 million on-hand, Wells said.
Policyholders with the two firms won’t lose their coverage, and they can continue to file claims for any losses that may arise. They can even choose to renew their policies. Officials are hoping to hand the policies off in a bundle to a new carrier.
Donelon said that five or six companies have already reached out to express interest in taking on the policies. The department is planning on issuing a request for proposal to vet the companies, he added.
LIGA hasn’t assessed fees on insurance companies since 2004. It returned $77 million to insurers in 2009, and $74 million to the state general fund in 2009.
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