Non-Profit Insurance Associations In FL, LA Borrow $1.5 Billion To Cover Claims From Failed Firms

[hatrack]

The Gulf Coast insurance crisis has hit a new low as two state-chartered insurance associations are being forced to borrow hundreds of millions of dollars for the first time in three decades to pay the hurricane claims of insolvent insurers. Borrowing in Florida and Louisiana could reach a combined $1.35 billion and will be repaid largely by insurance policyholders across each state through premium increases or surcharges that will last for years. The emergency financial maneuver is the latest illustration of the collapsing property insurance market along the Gulf Coast following a series of destructive storms and a torrent of lawsuits. More than a dozen insurers have become insolvent, leading to soaring premiums and the cancellation of hundreds of thousands of homeowners’ policies.

“We’re currently in the midst of an insurance crisis,” Louisiana Insurance Commissioner Jim Donelon said at a recent news briefing. The crisis is “largely as a result of hurricane activity in our state the last couple of years,” he said. The most recent financial blow was triggered by Hurricane Ian. Damages from the Category 4 storm plunged a large regional insurance company into failure, leading it to cancel tens of thousands of homeowners’ policies as hurricane season approaches and leaving millions of dollars in unpaid claims.

The emergency borrowing in Florida and Louisiana has drawn attention to little-known nonprofit insurance associations that are created by states to pay claims of insolvent insurers. The associations are authorized to collect money by assessing insurance companies in their state a payment that is usually limited to 1 percent of the total premiums they collect.

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The Louisiana association borrowed $600 million to pay hurricane claims — the first time it has borrowed money since 1989. The Florida Insurance Guaranty Association announced plans in April to borrow up to $750 million to pay claims from Hurricane Ian. The association last borrowed money in 1992 after Hurricane Andrew demolished large parts of South Florida. The borrowing will cost hundreds of millions of dollars in interest payments and will be repaid by assessments that last a decade or longer. Insurance companies generally recoup assessments through increased premiums, surcharges or state tax credits. “One way to look at it is, the system is working like it’s supposed to,” Wells said, noting that the Louisiana Legislature had authorized the association to borrow money to pay claims. Louisiana will pay $275 million in interest until the money is repaid in 2038, financial records show.

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https://www.eenews.net/articles/fla-and-la-must-borrow-millions-to-pay-insurance-claims/

[dutch777]

1. Insurance companies are getting skittish everywhere. My bldg code inspector in PA said that he ...

...is now getting calls from insurance companies where there are fire, water damage or other claims on a property. The insurer is looking at if work was done on the property that was not under city review and permit. I didn't realize but newer electrical and plumbing components have product numbers or other ID that allows one to determine when it was manufactured and therefore a rough idea of when it was installed. If insurance adjustors have reason to believe that substantive work was done that should have been under city code and permit review but was not, they are denying the claims. DIYers beware.