Insurance companies operating in Louisiana will be charged at least $100 million to pay claims of two failed property insurers who went belly up in Hurricane Ida’s aftermath
BATON ROUGE, La. — Insurance companies operating in Louisiana will be charged at least $100 million to pay the claims of two failed property insurers who went belly up in Hurricane Ida’s aftermath. But the cost of dealing with the insolvent insurers ultimately will fall on the state after companies recoup the dollars through a series of tax credits.
The Advocate reports 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% 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.
Now, when those policyholders file a claim, they’ll deal with LIGA, or one of its contractors. At least 8,000 claims have already been filed so far.
“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. But LIGA could turn to insurers again next year for an additional 1% assessment if it needs funding to cover more insolvencies after two years of devastating storms across Louisiana.
Hurricanes Laura, Delta and Zeta in 2020 cost insurers $10.6 billion. Hurricane Ida, which struck in August, is projected to cost insurers between $20 billion and $40 billion.
Access Home Insurance received claims totaling around $180 million following Ida and had just $115 million in reinsurance and cash available. Meanwhile, State National Fire Insurance 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.
Insurance Commissioner Jim Donelon said that five or six companies have already reached out to express interest in taking on the policies.
7 Wooden Burning Fire Safety Suggestions
Annual Travel Insurance: Why Is It Better?
Can Drug Users Get Life Insurance?