After Florida insurance market failures, will Louisiana be next to fall?

After a series of hurricanes wreaked havoc on the financials of several insurers and drove some to insolvency, a special session of the Louisiana Legislature passed and funded a plan to discourage Florida insurance companies from leaving the Pelican State.

This particular occurrence brings to mind, Florida, which in 2022 held two separate special sessions to address a dysfunctional insurance market. This raises two concerns: Are the two states’ insurance problems related, and can Louisiana learn anything from Florida?

The crises in Louisiana and Florida can be learned from one another, as our analysis reveals similarities and differences. Comparing Louisiana and Florida The Insure Louisiana Incentive Program, a law passed in Louisiana, aims to make homeowner’s insurance available and affordable in the state.

The Sunshine State’s insurance reform bill, Senate Bill 2A, which was passed in December 2022, has the same objective. The similarity ends there. The Florida Optional Reinsurance Assistance Program is a bill with two primary goals: It targets the epidemic of frivolous, unjustified litigation that drives up insurance premiums in Florida; Additionally, it provides additional reinsurance at a time when it is difficult to find and expensive. In contrast, the measure in Louisiana provides matching grants to prevent insurers from leaving the state.

The state of Louisiana has been battered by four devastating hurricanes since 2020: Ida, Laura, Delta, and Zeta. This is the root of the insurance crisis in the state. An estimated $17 billion to $25 billion in insured losses were Ida’s alone. In contrast, Florida had not experienced a land falling hurricane since Michael in 2018 prior to Hurricane Ian in 2022. Several Floridian insurance companies failed during the hurricane-free 2019 to pre-Ian 2022 period. This demonstrates that hurricanes were not the case of Florida’s insurance market collapse. Louisiana was affected by some of the recent failures of insurance companies in Florida.

The insurers that went out of business in Florida included Fed Nat, Gulf stream, Southern Fidelity, Weston, and Lighthouse, among others. Americas Insurance Company, Access Home Insurance Company, and State National Fire Insurance Company were all Louisiana-only insurers that ultimately failed. Law and Louisiana Both Louisiana and Florida are burdened by excesses in the courtroom.

In Florida, billboard lawyers and contractors engage in frivolous, without merit, litigation to pressure insurance companies into paying for roof replacements that are not covered by homeowner insurance policies. Insurance fraud is frequently linked to the excesses in Louisiana’s legal system that affect insurers.

Louisiana is well-known for its ring of staged accidents, which contribute to the high insurance rates paid by truck and auto insurers. Confederates from organized crime gangs intentionally collide with trucks or other vehicles in a staged accident, faking injuries to get large settlements from insurance companies.

In one such egregious ring in the New Orleans area, 40 fraudsters were involved, and the attorney who was in charge of the scheme agreed to a guilty plea. The massive fraud investigation continues to uncover additional participants and may involve additional attorneys.

Florida insurance
Florida insurance

Louisiana‘s tort (civil litigation) climate is problematic in addition to being the location of insurance-affecting criminal fraud. In the Judicial Hellholes ranking of states with the worst insurance climates, Louisiana ranks seventh, close to the top. In addition, the 2022 Insurance Regulation Report Card study conducted by R Street gave it a grade of D-. Advantages of Louisiana and a Responsible Citizen In some ways, the insurance market in Louisiana is stronger than the one in Florida.

Louisiana’s insurance market largely consists of strong national insurers, whereas Florida’s response to previous periods of heavy catastrophe losses was to welcome thinly capitalized, highly leveraged start-up insurers to the peninsula. Louisiana’s market is dominated by national insurers (italicized), whereas only a few large nationals feature among the top players in Florida’s market.

The table below organizes the largest insurers in the two states in decreasing order (by premium).

Top 10 Louisiana Homeowners’ Insurers Top 10 Florida Homeowners’ Insurers
State Farm Universal
Allstate Citizens Property Ins. Corp.
USAA State Farm
Liberty Mutual Tower Hill
Progressive Progressive
Louisiana Farm Bureau Mutual USAA
UPC First Protective
Farmers HCI
IAT Florida Peninsula
Allied Trust Heritage
Source: Standard & Poor’s Capital IQ Pro

While Florida Citizens writes close to $1 billion in premium, Louisiana Citizens writes $35 million in premium and charges more than the private market. In the same way that we supported the most recent legislation in Florida, where we testified in both special legislative sessions, R Street commends Louisiana for taking a bold step to address its insurance crisis. The hurricane season is about to begin in less than four months. We might avoid another insurance crisis this year if effective measures are implemented in both states.

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