2 Louisiana insurance companies go bankrupt after Hurricane Ida
Insurance companies operating in Louisiana will have to pay at least $100 million to pay claims from two bankrupt property insurers that went bankrupt in the aftermath of Hurricane Ida
The Advocate reports that the board of directors 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 to fill their coffers.
The guarantee fund, known as LIGA, covers claims from policyholders whose insurers become insolvent.
Its work is sparked after the state Insurance Department took control in mid-November of two regional insurers whose finances collapsed in the wake of Hurricane Ida: Access Home Insurance Co. and State National Fire Insurance Co.
The two companies covered approximately 28,000 homeowners.
Now, when these policyholders file a claim, they are dealing with LIGA or one of its sub-contractors. At least 8,000 applications have already been filed to date.
“Our goal is to pay people as quickly and efficiently as possible, but we are in a period of transition,” said John Wells, executive director of LIGA. “We’re talking days and weeks, not months and years, for people to get paid.”
At a minimum, the Guarantee Fund will need $100 million to bridge the gap between what policyholders are owed and what 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 expected to cost insurers between $20 billion and $40 billion.
Access Home Insurance received claims totaling about $180 million after Ida and had only $115 million in reinsurance and cash. Meanwhile, State National Fire Insurance has recorded more than $70 million in claims with $41 million on hand, Wells said.
Policyholders of both companies will not lose their coverage and will be able to continue to file claims for any losses that may arise. They can even choose to renew their policies. Officials hope to deliver the policies in a package to a new carrier.
Insurance Commissioner Jim Donelon said five or six companies have already reached out to express interest in taking on the policies.