Louisiana Homeowners Insurance Market Crashes Under the Weight of 600,000 Claims | News

Failed insurance companies. Multi-million dollar losses. Consumers on the edge.

Sounds familiar?

The past two years have dealt a serious blow to the Louisiana homeowners insurance market, much like the wave of hurricanes that hit the Gulf Coast more than a decade ago. Hurricanes Laura, Delta, Zeta and Ida generated hundreds of thousands of claims. Hit by heavy losses, some companies in the already fragile insurance market are now in retreat.


Mackie Dickens spreads a wet American flag beach towel on the front steps of his daughter’s Lake Charles home after Hurricane Laura destroyed the home Thursday, Aug. 27, 2020. The area just behind Dickens it is where the living room once stood. (Photo by Chris Granger, nola.com, The Times-Picayune | The New Orleans Advocate) ORG XMIT: BAT2008271805450670 ORG XMIT: BAT2102171458502359

It’s the latest sign of a deepening crisis taking shape once again in Louisiana, where the legacy of Hurricane Katrina and other storms still looms. As large national insurers withdrew from the coastal areas of the Southeast, homeowners increasingly relied on less regulated regional insurance providers to recover in the event of a catastrophe. Now even some of those companies, once willing to take a long shot, are leaving.

Katrina remains easily the largest storm-related insurance event in state history. It caused some 725,000 claims and $25.5 billion in losses, according to the Louisiana Department of Insurance.

But the four storms that have made landfall since August 2020, taken together, have generated damage on a similar, if smaller, scale: only about 600,000 residential property claims and respective losses of $9.4 billion so far, according to the most recent data collected by the LDI. from insurance companies. The data only captures wind, hail and fire policies and does not include flood insurance claims.

040322 Hurricane Claims by Parish 2020-2021

The figures show a surprisingly wide swath of damage over the past 20 months, spanning almost the entire Louisiana coast, from the Mississippi line to Texas.

In Calcasieu Parish, nearly three out of four occupied households filed an insurance claim after Hurricane Laura, according to a Times-Picayune analysis of state and census data. One in four filed claims again less than two months after Delta made landfall about 10 miles to the west from where Laura disembarked.

The active storm season culminated with Zeta rolling over the New Orleans metropolitan arealeaving behind more than 45,000 claims, largely in the region’s seven districts.


Roofers with Jireh Remodeling LLC work on a roof in Metairie weeks after Hurricane Ida on Monday, Oct. 4, 2021. (Photo by Chris Granger | The Times-Picayune | The New Orleans Advocate) XMIT ORG: BAT2110051646410122

In 2021, Ida took the biggest hit of all: a total of 339,000 claims and $4.6 billion in insured losses, state data shows.

Bugs, not ‘anomalies’

The flurry of storms was too much for some insurance companies. The Department of Insurance has already took control of three companies because they couldn’t pay to pay claims.

“I wish I could say I thought they were anomalies, but they’re not,” said Insurance Commissioner Jim Donelon. He said a fourth insurer that is in dire financial straits will likely be placed under the care of the Louisiana Insurance Guaranty Association.

In the years since the catastrophic storms of 2005, the homeowners insurance market in coastal Louisiana has been buoyed by a number of companies that were attracted to the state.

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These companies are a fraction of the size of a company like State Farm and live or die by the amount of reinsurance (insurance for insurers) they have to back the policies they write in areas of risk. They are also known as non-admitted companies, which means that their rates are not regulated by the state and they can charge as much as they want.

Donelon said attracting these companies, mostly from Florida, has been the best way to ensure homeowners have options to purchase coverage outside of Louisiana Citizens, the state’s insurer of last resort.

“Those companies are small, they’re regional, and the only way they can take on that exposure that mainly national companies don’t want is to re-insure up to their chins,” Donelon said.

“We were successful (in attracting them), but some of those companies miscalculated their risk. All four (companies) would have been fine if it was just Laura, Delta and Zeta. But Ida, in addition to those three, broke their backs, because they weren’t properly reinsured.”

And the shaking is not over yet.

Demotech, an insurance company rating agency, withdrew “A” level rating for two Louisiana insurers on March 29. Lighthouse Property Insurance Corporation and Lighthouse Excalibur Insurance Company had about 1% and 3% of the market, respectively, according to state data.

The ratings agency said in a brief statement that although the companies received an injection of cash late last year, it was not enough to maintain the top rating the industry uses to measure a company’s financial stability. Without him, the company would be a pariah in the eyes of banks and other lenders.

Market ‘in crisis’

An LDI spokesman declined to comment on Friday whether the companies would be added to the growing list of insolvent insurance companies in receivership. The landscape does not inspire confidence among some connoisseurs.

“I would say our property insurance market is in crisis,” said Jeff Albright, CEO of Independent Insurance Agents and Brokers of Louisiana. “The sad part of it is that we rely on these small, small-cap companies instead of having large national carriers that have a lot of assets and can weather the big storms.”

Donelon said five companies have pulled out of the state entirely and another five or six have stopped writing policies. As a result, Donelon said he expects the number of Louisiana Citizens policies to double this year as the state heads headlong into another hurricane season.

louisiana hurricane season 2020.0006.jpg

Halyn Bailees, 20, reaches for the heirloom cross that was among the only things left in place on a wall of her Lake Charles home after Hurricane Laura tore the roof off her home on Thursday, August 27. 2020. (Photo by Chris Granger, nola.com, The Times-Picayune | The New Orleans Advocate) ORG XMIT: BAT2008271805550672

In the years before Katrina, Louisiana Citizens grew to become the third largest insurance provider in the state, overseeing some 173,000 policies and about 10% of the market. By the time Laura hit in 2020, that number had shrunk to 35,000 by comparison, about 0.5% of the total market, Donelon said.

The answer, at least in the short term, has been to force insurers to buy more reinsurance in the future. Bills in the state Legislature would increase the amount of cash insurance companies must keep on hand to up to $5 million by 2026; and up to $10 million by 2031.

Even though the industry is taking a beating right now, Donelon said he’s optimistic things will change. He is nothing like what the state faced, and eventually emerged from, after Katrina, he said.

“Because of our success then, I am totally confident that we will be able to rebuild our market and do so with the lessons learned from the last two hurricane seasons,” he said. “(It starts) with the effort to increase the capital requirements for these smaller companies that will be eager to fill the gap.”

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