driving a hurricane

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Louisiana Insured Losses and Insolvencies of the Insurers

 

Recent severe hurricane damage resulted in significant losses for Louisiana homeowners’ insurance writers and the collapse of eight insurance companies.

 

In 2021, Louisiana home insurance companies had a combined ratio of 461.9.

The combined ratio is the difference between the number of premiums that insurers collect and the number of claims and expenses that are paid.

 

An underwriting profit is shown by a combined ratio that is less than 100, while an underwriting loss is indicated by a ratio that is higher.

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With an earned premium of around $2 billion, the 461.9 combined ratio indicates that the industry had an underwriting loss of $7.2 billion in 2021.

It would take 24 years to reach a combined ratio of 85 for homeowners’ insurance writers in Louisiana to return to positive profitability, according to Triple-I Chief Insurance Officer Dale Porfilio.

 

Hurricanes Zeta, Laura, and Delta all left behind significant damage in 2020, which led to numerous insurance claims.

There were 323,727 insurance claims of all stripes for these storms through September 30, 2021.

$9.1 billion was paid or set aside by insurers for just Laura.

In addition, through June 30, 2022, there were 460,709 insurance claims of all kinds related to Hurricane Ida, which happened in 2021. In total, insurers paid or set aside $13.1 billion for the disaster.

 

At least 12 businesses have sent withdrawal notifications to Louisiana’s Department of Insurance, which is a prerequisite for leaving the state, and eight Louisiana homeowner insurers have already declared insolvency.

As a result, tens of thousands of homeowners are now reliant on Louisiana Citizens Property Insurance Corp., the state’s last resort insurer.

 

Market conditions are so dire that Louisiana’s insurance commissioner, Jim Donelon, has dubbed the situation a “crisis.”

 

Next actions

 

In response, the Louisiana Insurance Guaranty Association (LIGA), a global provider of data analytics, has started to revamp its administration of claims for policyholders of insolvent insurers using property estimate technology from Verisk.

 

According to John Wells, executive director of LIGA, “smooth communication with independent adjusting firms has become crucial as we try to help hurricane victims throughout Louisiana restore their homes and back to normal.”

 

There is much to do.

 

According to a 2020 Triple-I Consumer survey, a record-high 27 percent of homes reported having flood insurance.

However, this amount exceeds predictions made by the National Flood Insurance Program (NFIP).

Specifically, because flood damage is not covered under typical homeowners’ and renters’ insurance plans, the Triple-I cautions that homeowners may not understand what flood coverage is and how it functions.

The National Flood Insurance Program (NFIP), run by the Federal Emergency Management Agency (FEMA), and numerous commercial insurers both offer flood insurance as a distinct policy.

 

The need for flood insurance and homeowner’s insurance is greater than ever as storms continue to cause significant damage in disadvantaged communities.

But risk transfer by itself is insufficient.

 

According to Triple-I CEO Sean Kevelighan, “Risk transfer is simply one element in the resilience toolkit.”

“Technology, government policy, money, and research must be connected at the hip with our awareness of loss trends and competence in assessing and measuring risk.

To encourage a broad resilience attitude centered on proactive mitigation and quick recovery, we need to work in partnership with communities and businesses at every level.

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