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The Associated Press reported insurance companies operating in Louisiana will be charged at least $100 million to pay the claims of two failed property insurers who crumbled in Hurricane Ida’s aftermath. The cost of dealing with the insolvent insurers will ultimately fall on the state after the companies reclaim the dollars through a series of tax credits.
The Advocate reported that the board of the Louisiana Insurance Guaranty Association, a state-sponsored safety net for policyholders, voted for the first time since 2004 to charge insurers 1 percent of their net written premiums to help fill its coffers. The guaranty fund, known as LIGA, covers claims for policyholders whose insurers become insolvent.
Its work is being triggered after the state insurance department in mid-November took control of two regional insurers whose finances tanked following Hurricane Ida: Access Home Insurance Co. and State National Fire Insurance Co. The two companies provided coverage for around 28,000 homeowners.
When those policyholders file a claim, they will need to deal with LIGA or one of its contractors. So far, at least 8,000 claims have been filed. “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.”
At a minimum, the guaranty fund will need $100 million to fill the gap between what’s owed to policyholders and what the insurers have on-hand, Wells said. LIGA could turn to insurers again next year for an additional 1 percent assessment if it needs funding to cover more failures after two years of devastating storms across Louisiana.
Hurricanes Laura, Delta, and Zeta in 2020 cost insurers $10.6 billion. Hurricane Ida is projected to cost insurers between $20 billion and $40 billion.
It was reported that Access Home Insurance received claims that total around $180 million following Hurricane Ida and had just $115 million in reinsurance and cash available. Meanwhile, State National Fire Insurance reported more than $70 million in claims with $41 million on hand, Wells said.
Policyholders with the two firms will not lose their coverage and can continue to file claims for any losses that may occur. Policyholders can also choose to renew their policies and officials are hoping to hand the policies off in a bundle to a new carrier. Louisiana Insurance Commissioner Jim Donelon said that five or six companies have already reached out to express interest in taking on the policies.
