Louisiana insurance companies will need to cough up a combined $100 million to help cover the claims of two regional property insurers that have gone into insolvency due to losses from Hurricane Ida.
The Louisiana Insurance Guaranty Association (LIGA), a state-sponsored entity that serves as a safety net for policyholders of failed insurers, has voted to charge state-based insurers 1% of their net written premiums to assist with the funding, according to The Associated Press.
This comes after the Louisiana Department of Insurance placed financially troubled Access Home Insurance Co. and State National Fire Insurance Co. into receivership in mid-November. The two insurers provided coverage for about 28,000 homeowners.
LIGA said that it has already received at least 8,000 claims from the insolvent insurers’ policyholders.
“Our whole goal is to pay the people as timely and effectively as possible, but we’re in a bit of a transition period,” John Wells, LIGA’s executive director told AP. “We’re talking days and weeks, not months and years, to get people paid.”
Wells said that the guaranty fund will need at least $100 million to fill the gap between what was owed to the policyholders and what the insurers have on-hand, adding that if LIGA will need additional funding to cover more insolvencies, it could turn to the state’s insurers again next year.
Louisiana has been struck with devastating storms in the past two years, costing tens of billions in losses. Hurricane Ida, which ravaged the state in August, is projected to cost insurers between $20 billion and $40 billion. Prior to this, 2020’s Hurricanes Laura, Delta, and Zeta cost a combined $10.6 billion in insured losses.
Access Home Insurance received around $180 million in claims following Hurricane Ida but only has $115 million in reinsurance and cash available. State National Fire Insurance, meanwhile, had more than $70 million in claims but only $41 million on-hand, according to Wells.
Policyholders will retain the coverage and can continue to file claims and even renew their policies as the state insurance department is hoping to transfer the policies to a new carrier, AP reported.
Insurance Commissioner Jim Donelon also told the news outlet that five or six companies have already reached out to express interest in taking on the policies.