The insurers operating within the state will be paying that amount to cover the claims from the hurricane.
Louisiana insurance companies are gong to be charged at least $100 million to make the payments for the claims owed by two insurers in the state that failed in the wake of Hurricane Ida.
Ultimately, the cost of paying off the insolvent insurers’ claims payments will land on the state.
The Louisiana insurance companies that make the payments on behalf of the failed insurers will eventually recover the money they paid out by way of a number of different tax credits. The Louisiana Insurance Guaranty Association (LIGA) board – a policyholder safety net that is state-sponsored – held its first vote since 2004 to charge insurers 1 percent of their net written premiums to help fund it. LIGA covers policyholder claims payments when insurers are insolvent.
The state insurance department triggered LIGA in mid-November when the department took control of two insurers in the state who se finances were overwhelmed by the expenses associated with Hurricane Ida. Those insurers were State National Fire Insurance Co. and Access Home Insurance Co.
The failed Louisiana insurance companies provided homeowners coverage for about 28,000 policyholders.
When affected policyholders file a claim, their cases will be handled by LIGA or one of its contractors. There have already been at least 8,000 claims filed.
“Our whole goal is to pay the people as timely and effectively as possible, but we’re in a bit of a transition period,” said LIGA executive director John Wells. “We’re talking days and weeks, not months and years, to get people paid.”
The Guaranty fund will require at least $100 million to fill the gap between what policyholders are owed and what insurers already have available, said Wells. However, LIGA may find itself turning to insurers once more in 2022 to require an additional 1 percent assessment should it require more funding to cover insolvencies after two consecutive years of catastrophic storms across the state.
Louisiana insurance companies paid for $10.6 billion in damage in 2020 from Hurricanes Laura, Delta and Zeta. This year in August, Hurricane Ida struck, bringing costs to insurers somewhere between $20 billion and $40 billion.