Louisiana’s insurance crisis puts pressure on brokers, has LIGA needing more money

Published: Jul. 19, 2022 at 7:21 PM CDT
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NEW ORLEANS (WVUE) - As Louisiana insurance agents race to find new coverage for thousands of customers who recently had their policies canceled, the state’s safety net organization for policyholders says it needs more money to keep up with demand.

Insurance agents have been working longer hours than normal for weeks.

“Last Monday, I think we received over 900 calls within an eight-hour period,” said agent Jennifer Clements of Dan Burghardt Insurance. “As of yesterday, they are down to about 350. But yes, it is crazy busy still.”

But agents are not the only ones strained by the insurance climate in Louisiana, post-Hurricane Ida.

The Louisiana Insurance Guaranty Association (LIGA) is the agency that pays claims left behind when insurers become insolvent, and it is feeling the weight of growing demand.

“The Hurricane Ida payments are a game-changer for us,” said LIGA’s executive director John Wells. “We’re not out of money yet. But if we don’t get the financing, we will not be able to pay all the claims as they come due.”

Clements is not shocked that LIGA needs financial help.

“Given the situation between last year when a lot of the storms (hit) and then this year, I’m not surprised,” she said. “I am confident that they will get what they need.”

Wells said LIGA has spent about $265 million in the past seven months paying claims for insolvent companies. He said this week the non-profit will seek permission from a state commission to sell $600 million in bonds. Wells said he is confident LIGA will get the approval necessary for the bond sale.

“It’s very uncommon that this situation has happened the way that it has played out,” Clements said.

LIGA was created by the Louisiana legislature and the law says the state “may not budget for, or provide general fund appropriations to LIGA.

However, LIGA can assess insurance companies up to 1 percent annually for funds needed to pay its obligations, subsequent to an insolvency.

As we move deeper into hurricane season, some people searching for new insurance are nervous.

Louisiana Insurance Commissioner Jim Donelon said, “Typically, insurance companies will stop writing new business when a hurricane enters the Gulf. The National Flood Insurance Program, to prevent adverse selection, they have a 30-day wait between the time you pay your first premium and submit your application to the policy coverage taking effect.”

Clements agrees that people seeking coverage are anxious because there is no guarantee another hurricane won’t hit Louisiana this year.

“It’s very nerve-wracking, not knowing,” she said. “It’s very scary. All we can do is just hope for the best but prepare for the worst.”

Clements said the recent extension of time for agents to enroll displaced customers of Lighthouse Excalibur, Maison and Southern Fidelity with Citizens (the state’s insurer of last resort) is a big help.

“The fact that Citizens is giving us an additional 60 days to get the policies rewritten and give the insured the coverages that they need while we are being able to do this makes a huge difference,” she said. “It’s helpful to the insured and the agent that’s trying to help.”

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