Another insurer with policies in Louisiana recommended for receivership by Florida regulators

NEW ORLEANS (WVUE) - Yet another insurance company writing a small number of homeowner policies in Louisiana appears on the verge of collapse.

Florida insurance regulators on Monday (Sept. 26) asked a judge in that state to place FedNat into receivership over financial weakness. The property insurance company is estimated to have 1,500 open claims in Louisiana in danger of being unpaid.

FedNat provided that figure to John Wells, executive director of the Louisiana Insurance Guaranty Association (LIGA). Wells said LIGA expects that number could grow as homeowners file to reopen their cases.

However, a spokeswoman for the Florida Office of Insurance Regulation said, “It’s important to note, FedNat had zero policies in force in Florida at the time of the referral. In June 2022, FedNat early canceled approximately 56,000 of the 140,000 policies in force in Florida.

“The remaining policies were assumed by Monarch National Insurance Company. All outstanding claims will become the obligation of FIGA (Florida Insurance Guaranty Association).”

Louisiana Insurance Commissioner Jim Donelon said in a statement to Fox 8, “I am reaching out to Florida to get a clearer understanding of this development from a Louisiana point of view. My preliminary understanding is that it will have no effect on any Louisiana policyholder, but may have LIGA implications relative to claims pending at the time of Florida’s action.”

Meanwhile, in Louisiana, homeowners’ premiums already are increasing post-Hurricane Ida.

A Jefferson Parish homeowner, who did not want his name used, said he ended up dropping his insurance coverage.

“They jacked up my insurance from about $3,500 a year to $6,000 a year. So, of course I dropped them. What am I going to do? I can’t afford that,” he said.

The resident said he got coverage with a new company, but his wind and hail damage is covered through Louisiana Citizens, the state’s insurer of last resort.

Donelon said he would meet with his actuarial team this week to discuss Louisiana Citizens’ proposed 63 percent rate hike, which would take effect on policies purchased on or after Jan. 1, 2023.

“Any policy that is purchased before Jan. 1 won’t see that increase until a year from now,” Donelon said.

State Rep. Kyle Green (D-Marrero), who sits on the Louisiana House Insurance Committee, said he would like to see more transparency in the process.

“I think (insurers) should make their case to the public,” Green said. “The power rests with the insurance commissioner to make that ultimate determination. But I’d like to see their rationale for wanting to know why they want a 63 percent rate increase from last year.”

Because of other insurance companies failing or pulling out of the state, Louisiana Citizens said it has absorbed more than 100,000 new homeowner policies. Donelon has said he is hopeful those can eventually be off-loaded to the private market.

“I’m optimistic that between now and a year from now, we’ll be able to get companies through this incentive program to take the bulk of those policies at Citizens,” Donelon said.

Green said he would like tougher bad-faith penalties, to hold bad actors in the insurance industry accountable.

“I’m a personal injury attorney,” he said. “And I can tell you it’s very hard to prosecute a claim against insurance companies when you felt as though they haven’t timely paid the claims. Because there’s nothing really in statute that will hold their feet to the fire.”

But Green said insurers push back against that idea.

“What has been the case in committee is that insurance companies have always said, ‘Well, if you strengthen the bad-faith laws to make it more penal, it’s going to drive insurance companies out of the state,’” he said.

“Well, we’ve seen that already happen. Insurance companies are already leaving. I think it’s just more so an attempt from them not wanting to be held accountable.”

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