2 Louisiana insurance companies fail after Hurricane Ida

[Sherman A1]

BATON ROUGE, La. (AP) — 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.

https://krcgtv.com/news/nation-world/2-louisiana-insurance-companies-fail-after-hurricane-ida

[TexasTowelie]

1. Louisiana has a number of regional property insurers

because State Farm and Allstate withdrew from the market about 15 years ago. These smaller companies are quite vulnerable to liquidation when a catastrophe strikes in a limited area which is why A.M. Best usually gives a "B" rating to those companies.

The two companies being liquidated comprise about 1% of market share so it shouldn't create an insurance availability problem for Louisiana residents. The guaranty fund limits claims to $500,000 which is actually quite generous compared to other states. I recall that in Texas some policyholders were left holding the bag because the insurance guaranty fund covered a much smaller amount ($300,000 or the policy limit if lower) for claims.

It will cause some headaches to the policyholders that will have to find new insurers, but the private market appears to have sufficient capacity to underwrite the new customers and it doesn't look like the insurance market in Louisiana is going to collapse. It would be far more traumatic if the reinsurance companies decided to exit the Louisiana market.