The insurer of last resort will be charging substantially more for coverage in a challenging market.
Louisiana Citizens, the home insurer of last resort in the state, is setting up for substantial cost hikes that will be notably harder for many homeowners to afford, according to officials.
The state’s home insurance market has been deeply struggling to the point of a rising crisis.
“Some people’s insurance payments are going to be larger than their mortgage payments,” said a Louisiana Citizens official quoted by a recent report in The Advisor. In fact, next year, some of the homeowners with coverage through the insurer could face a rate increase by as much as 63 percent in 2023. Coverage that expensive is expected to only worsen the property insurance crisis faced by the state.
Though it was the insurer’s board that recommended the substantial increases, it will be Jim Donelon (R), the state’s Insurance Commissioner, who will make the final decision. According to Donelon in a recent television interview, it will likely take about six weeks for him to make that call. Last November, Donelon already gave his approval to a 73 percent rate hike for Citizens’ commercial property insurance. That will become effective in a couple of months.
By law, Louisiana Citizens must sell coverage at rates 10 percent higher than the highest rates.
Coverage must be 10 percent more expensive than the highest market rate in each parish or the actuarial rate, whichever of the two is the highest. The homeowners insurance rates, combined with substantial hikes in federal flood rates have meant that many residents of the state could get priced out of owning a home, said one of the insurer’s board members.
“Some people’s insurance payments are going to be larger than their mortgage payments,” said Eugene Montgomery, board member as well as the private Baton Rouge- and Monroe-based Community Financial Insurance Center’s president. “I’ve been in the insurance business 44 years and have never seen such a challenging market.”
The current homeowners insurance market in the state is forcing more property owners to have to turn to Louisiana Citizens after several private insurers have failed and in the midst of a moratorium by the companies left on writing new policies in coastal regions destroyed by hurricanes.