THE CENTER SQUARE – Louisiana Insurance Commissioner Jim Donelon has announced that a private insurance company will acquire about 30,000 home insurance policies from two insolvent carriers, state officials in receivership last month.
Donelon had filed injunctions against the State National Fire Insurance Company of Baton Rouge and Access Home Insurance Company of New Orleans for unpaid insured claims resulting from Hurricane Ida, a Category 4 storm that made landfall on August 29. .
Court administrators have tried to “rehabilitate” ailing companies rather than liquidate them. Donelon, however, recently agreed to a private sector acquisition of State National Fire and Access Home insurance policies.
“The buyout means that approximately 30,000 customers of Access Home and State National Fire will be able to avoid the task of finding other suitable insurance and possibly turning to Louisiana Citizens Property Insurance Corp., the state-sponsored insurer of last resort, to find coverage, ”a statement from the Insurance Department said.
The acquisition company has not been identified as certain terms and conditions are still being negotiated, the statement said. The 19th Judicial District Court will either approve or reject the final deal, which could happen before the end of the year.
Donelon said seven private insurers have expressed interest in the policies and three companies have formally submitted bids. The new insurer acquires unearned premiums – or the remaining period on each existing policy – with an effective date of December 1.
“Most policyholders won’t have to worry about finding new coverage. Their policies will automatically transfer to the new insurer at the same rates and terms offered by Access Home and State National Fire, ”Donelon said.
The Louisiana Insurance Guaranty Association will be responsible for insurance claims related to Hurricane Ida and other events that occurred before December 1.
LIGA is a non-profit safety net that can access up to 1% of the annual funds of all insurance companies in member states to pay the financial obligations of a defaulting member. Member insurers also benefit from tax credits that apply over a 10-year period.
The LIGA covers up to $ 500,000 per claim and has a limit of $ 10,000 for unearned premiums, according to its website.
A key distinction in the arrangement, however, applies to the length of time each policyholder has been insured with the two missing companies.
Louisiana also has a consumer protection law that requires the new insurer to maintain the existing level of coverage and premium rates for Access Home and State National Fire policyholders if they have been customers for more than three years.
If policyholders had been customers for less than three years, the new insurer could choose not to renew their home insurance policies and either offer new rates and terms of coverage or refuse them altogether.
“These customers may need to find new coverage,” the insurance department said.
While no other insurance company is willing to take on high-risk clients within the former Access Home and State National Fire client group, Donelon said Louisiana Citizens Property Insurance Corp. would serve as the insurer of last resort.
The state-backed nonprofit is required to offer coverage at higher prices than private property insurance companies to avoid competing with private companies, according to the entity’s website.
“The Louisiana Citizens Property Insurance Corporation is required to ensure that its rates are at least 10% above voluntary market rates,” said a statement.
According to the Department of Insurance, State National Fire has issued approximately 9,000 policies, or 0.14% of Louisiana’s homeowners’ home insurance market, and $ 2,945,198 in direct premiums.
Access Home held approximately 19,697 policies, or 0.86% of the home insurance market, and $ 17,684,440 in direct premiums.