Louisiana Insurers Face $100 Million Fee after Ida-Related Insolvencies

Louisiana property and casualty insurers will be assessed $100 million to cover the cost of two regional insurance companies facing insolvency due to losses from Hurricane Ida.

The Louisiana Insurance Guaranty Association board voted Nov. 30 to assess admitted insurers 1% of 2020 net written premiums, weeks after Insurance Commissioner Jim Donelon filed injunctions seeking a government takeover of Access Home Insurance Co. and State National Fire Insurance Co.

Insurance guaranty funds are non-profit, member-funded associations responsible for paying claims when insurers go insolvent.

LIGA said insurers will be able to recuperate the assessments over 10 years in the form of tax credits.

“They don’t get the value of their interest income that they lost, but they do get their principal back,” said John Wells, executive director of LIGA.

LIGA, which last assessed fees on insurers in 2004, usually pays between $4 million to $8 million a year on claims.

The association had approximately $148 million in net assets at the end of 2020.

The combination of 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, according to the state department of insurance.

The two carriers that went under account for 1% of Louisiana’s property insurance market.

Access has about 20,000 policies and more than $17,500,000 in direct written premium, while State National Fire has about 9,000 policies and $3,000,000 in direct written premium.

LIGA can pay up to $500,000 per claim and $10,000 for premium refunds. Louisiana is one of only nine states that have guaranty fund coverage of $500,000 per policyholder.

“On one hand these are some extraordinary times, following the hurricane a couple of insurance companies, but this is stuff that we do whenever insurance companies go out of business across the country,” Wells said.