Homeowners in Louisiana are in ‘crisis’ as more than 20 insurance companies go under or flee the state after string of devastating storms – forcing hundreds of thousands to pay higher premiums or go without coverage
- More than 20 insurance companies have left Louisiana in the past two years
- State has suffered a series of hurricanes and flooding in recent years
- Homeowners are faced with higher premiums or forced to go without coverage
Homeowners in Louisiana are struggling to find affordable property insurance after the virtual collapse of the state’s insurance industry following a series of devastating storms.
It’s a problem on the rise in many southern states, but nowhere is it worse than Louisiana, where in the past two years more than 20 insurance companies have gone under or left the state, according to Fox Business.
Louisiana’s Insurance Commissioner Jim Donelon told the outlet: ‘We are certainly in a crisis.’
In the past several years, Louisiana has been hammered by hurricanes and flooding, including areas that were once deemed to be at lower risk.
A couple go through their destroyed mobile home following Hurricane Laura in Lake Charles, Louisiana, in August 2020
In August 2020, Hurricane Laura caused catastrophic damage and flooding in Lake Charles and inflicted widespread damage across southwestern Louisiana.
It was followed by two more hurricanes in October of that year, Delta and Zeta, which inflicted further damage and hindered recovery efforts from Laura.
Then in August of 2021, Hurricane Ida made landfall as a Category 4, killing 33 people in Louisiana and inflicting $18billion in insured damage across the state.
Last year was a relatively quiet hurricane season, and Louisiana was spared any major coastal storms. However, the state was struck by a tornado outbreak last month, with 21 tornadoes touching down across the state shortly before Christmas.
Many insurers have buckled under the weight of the claims, and are either unable or unwilling to insure homes in Louisiana anymore.
The average annual insurance premium in Louisiana is more than $2,000 for a home worth $250,000, among the highest in the nation and 46 percent higher than the national average, according to Bankrate.
Homeowners who can’t find coverage in the private market are forced to use the state’s ‘insurer of last resort,’ the state-backed Louisiana Citizens Property Insurance.
A resident surveys damage at the Washington Gardens Apartments after it collapsed from the winds brought by Hurricane Zeta in New Orleans in October 2020
But by state law, Citizens charges above-market premiums, so that the state does not compete with private insurance companies. Citizens premiums average more than $5,000 annually in at least seven parishes.
Insurance Commissioner Donelon told Fox Business that the crisis in Louisiana has been exacerbated by the strain on the international reinsurance market, which essentially offers insurance to insurance companies.
‘Our regional industry is backed up by the international reinsurance market and that market has been impacted not just by our horrible hurricane seasons, but also hurricane Ian in south Florida this past year, record wildfires in California and Australia, and record flooding in Germany,’ Donelon said.
‘All of those challenges are making insurance much more difficult to come by and more expensive for policyholders in the coastal parts of our state,’ he said.
Last week, Louisiana Governor John Bel Edwards said it was likely a special session of the state legislature would be held in February to address the homeowners insurance crisis.
Water surrounds houses with tarps in the aftermath of Hurricane Delta in Iowa, Louisiana in October 2020
Donelon, the insurance commissioner, is asking state lawmakers to put at least $45 million in a special fund to attract property insurance providers to the Pelican State, according to the Louisiana Illuminator.
The proposal would offer public grants to insurance companies willing to write policies for higher-risk homes in Louisiana.
Florida, another state that has struggled to keep premiums in check and prevent insurers from leaving the state, last month passed its own sweeping new law on the issue.
The Florida law will create a $1 billion reinsurance fund, put disincentives in place to prevent frivolous lawsuits and force some customers to leave a state-created insurer of last resort, Citizens Property insurance, for a private insurer, even if the policy costs more.
It will also set more stringent deadlines throughout the claims process to try to ensure homeowners don’t face coverage delays.