Back-to-Back Years of Major Hurricanes Quickly Changed Louisiana’s Property Insurance Marketplace

The Louisiana Property and Casualty Insurance Commission is a panel created by statute and made up of members from various backgrounds representing government, consumers, and members of the insurance industry. The panel exists to suggest changes and improve the State’s insurance market. To that end, the Commission reviews and examines issues affecting the availability and affordability of property and casualty insurance and creates a report covering its findings. I was reviewing the most recent report, which covers 2019 and 2020, and I thought it was interesting just how much has changed since the last report was released.

The bullet points regarding homeowner’s insurance noted the state of the market as of December 2019. The points were as follows:

The voluntary market remains competitive after its re-establishment after 2005.
The market is stable with 28 new insurers writing in Louisiana since 2005.
Citizens’ residual market share for the homeowners’ market decreased from 9.8% to 0.4% since 2008—a 95% decrease in the homeowners’ market share since 2008.
Statewide average market-wide homeowner insurance premium increase of only 1.6% in 2019, following 0.7% in 2018.
Louisiana ranked first in the average cost of homeowners’ insurance in 2017 at $1,968; Florida ranked second at $1,951; Texas ranked third at $1,893, according to the most recent NAIC data.
Homeowners’ rate increases from 2008-2017 were at a slightly lower rate (40.1%) than the national average (45.9%) during that period.

Obviously, we are sitting in a very different place today. December 2019 was before Hurricanes Laura, Delta, Zeta, and Ida, and the devastating losses they created had not yet occurred. A new report covering 2021 and 2022 has not been released, but we can anticipate some of the fairly drastic changes that it will show.

First, there is currently a paucity of insurers writing policies in Louisiana. Louisiana lost nine insurers to insolvency and many more decided to stop writing new policies in the State or pull out altogether. That means Louisiana Citizen’s market share will certainly have gone up. The statewide average premium increase will no doubt have gone up as well. We know that LA Citizen’s has already been approved to increase their homeowner’s property insurance rates by 63% beginning January 1, 2023. As for where Louisiana ranks nationally in terms of average cost, it’s hard to imagine why we would have dropped out of first place in 2021 and 2022, even with the storms this year in Florida.

So, what’s the point of this exercise? 2019 was a different time for the Louisiana property insurance market. Plenty of people are using the word ‘crisis’ to describe the current state of property insurance in Louisiana. Personally, I find it useful to be reminded that things were not always the way they are now. Circumstances change, new opportunities are created, and the market will look different again.

The Louisiana Department of Insurance issued Regulation 125, the Insure Louisiana Incentive Program, on November 9th. The program offers incentives in the form of cash grants to qualified property insurers with the goal of encouraging additional insurers to write in the State, increase competition, and take some of the pressure off Louisiana Citizens. The program is not perfect, but it is a step in the right direction, and Commissioner Donelon should be applauded for his efforts.