Insurance Commissioner hopeful the state’s insurance crisis will subside by end of year
“We are confident that when the dust settles, say by the end of this year, we’ll have companies wanting to come back and write business and take policies out of the Citizens book of business,” said Louisiana Insurance Commissioner Jim Donelon.
NEW ORLEANS (WVUE) - As Louisiana’s insurance crisis deepens and residents search for answers in the face of rising premiums, the state is putting the blame squarely on the companies that have become insolvent and forced to leave the state.
Jim Donelon, Louisiana Insurance Commissioner, said in an interview with FOX 8 that Weston Insurance, the seventh company to pull out of state since the crisis began, left 10,300 Louisiana policyholders without insurance in the middle of hurricane season.
Weston, along with six other now insolvent insurance companies, didn’t have enough to reinsure the risks and pay out claims, Donelon said.
“There’s no question but that the failure to adequately reinsure those risks is what led to the crisis we’re experiencing this year,” he added.
Citizens, Louisiana’s insurer of last resort, is up to 95,000 policies as of Friday, whereas it had written 50,000 policies at the start of the year. Go back a decade and a half, to Louisiana post-Katrina, and Citizens had 173,000 policies on its books.
Donelon said, on average, Citizens is writing 500 policies per day.
“Their board has the duty and the power to impose assessments on every policyholder in the state if Citizens needs more cash than they have access to finish paying their claims,” Donelon said, adding that the insurer of last resort is still a ways away from hitting that mark.
What will make the difference, Donelon added, is whether the state can make it through this year’s hurricane season without experiencing another hurricane as powerful as Ida or Laura.
“We’re keeping our fingers crossed, saying our prayers that we’ll get through this hurricane season without another Ida, because that would strain the available reinsurance that Citizens has,” he said.
Citizens issued bonds after Katrina that are still being paid off, with another five years to go.
Donelon said his goal is to try and attract new insurance companies to the state, to hopefully decrease the amount of policies on Citizens’ books.
“We are confident that when the dust settles, say by the end of this year, we’ll have companies wanting to come back and write business and take policies out of the Citizens book of business,” he said.
One company he is watching closely is United Property and Casualty, or UPC, based out of Florida.
Recently, UPC went through a credit downgrade, temporarily ending its ability to provide insurance for federally-backed mortgages. But the State of Florida disagreed with the downgrade, and believes UPC can be acquired by a larger, more solvent company.
Donelon said customers of UPC, which handles around 35,000 policies in Louisiana, are being supported by Citizens, which has stepped in to fill the gap of those with federally-backed mortgages.
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