Louisiana Seeks Takeover of Pair of Regional Insurance Companies Facing Insolvency

The Louisiana insurance commissioner is seeking a government takeover of Access Home Insurance Co. and State National Fire Insurance Co., two regional insurance companies that are facing insolvency due to losses from Hurricane Ida to ensure the company’s policyholders are paid what they are owed, officials said.

The insolvency could cause thousands of Louisiana residents to get kicked off their insurance policies. However, policyholders whose insurers go out of business are guaranteed up to $500,000 in payments through a state program.

Insurance Commissioner Jim Donelon filed injunctions in Baton Rouge’s 19th Judicial District Court on Nov. 10 against the two carriers who had their financial stability ratings withdrawn by industry watchdog Demotech in October. The carriers, State National Fire Insurance Company of Baton Rouge and Access Home Insurance Company of New Orleans, are responsible for 1% of the state’s property insurance market. They take in a combined $20.5 million in direct premiums, according to state data.

Once he receives approval from the courts, he can sell off the insurer’s assets to pay down claims.

“We are taking action to protect policyholders,” Donelon said. “Historic back-to- back storm seasons coupled with the average cost of claims coming in higher than expected because of the pandemic got us to where we are today. The good news is that LIGA can pay up to $500,000 per claim and is ready to handle the influx of claims. We have been actively monitoring market conditions and were prepared to do what needs to be done.”

The commissioners lawsuit comes days after the state’s fourth largest homeowners’ insurer, FedNat Holding Company, announced it would stop renewing Louisiana policies in January. Another insurer, America’s Insurance Company, which receives nearly $27 million in direct premiums, lost its accreditation in October. Donelon cannot sue to take it over however, because the firm is not based in Louisiana.

Ratings agencies review insurers’ financial information on a quarterly basis after major disasters to determine whether they have the resources to pay out claims to policyholders.

“If a company does not meet our financial metrics, and it doesn’t look like they’re going to be able to raise additional capital, we’ll downgrade or withdraw their rating,” President and founder of Demotech Joe Petrelli told The Advocate. “These insurers are headed in the wrong direction financially.”

Once the liquidation order is issued by the court, the Louisiana Insurance Guaranty Association will begin paying the policyholders where the companies cannot. The non-profit was created by the state to act as a safety net for consumers, providing up to $500,000 in payments for unpaid claims and $10,000 for premium refunds.

According to The Advocate, Louisiana has not liquidated a property insurer in more than two decades.