The board of the Louisiana Insurance Guaranty Association, a state-sponsored safety net for policyholders, voted for the first time since 2004 to charge insurers 1% of their net written premiums to help fill its coffers.
The guaranty fund, known as LIGA, pays out claims for policyholders whose insurers go bankrupt.
Its work was prompted by the state insurance department's mid-November takeover of two regional insurers whose finances had collapsed as a result of Hurricane Ida: Access Home Insurance Co. and State National Fire Insurance Co.
Around 28,000 homeowners were covered by the two companies.
When those policyholders file a claim, they will now do so through LIGA or one of its contractors. So far, at least 8,000 claims have been filed.
"Our entire goal is to pay the people as quickly and effectively as possible, but we're in a bit of a transition period," said LIGA executive director John Wells. "We're talking about getting people paid in days and weeks, not months and years."
According to Wells, the guaranty fund will require at least $100 million to bridge the gap between what is owed to policyholders and what insurers have on hand. However, if LIGA requires additional funding to cover more insolvencies following two years of devastating storms in Louisiana, it may turn to insurers again next year for an additional 1% assessment.
Hurricanes Laura, Delta, and Zeta cost insurers $10.6 billion in 2020. Hurricane Ida, which hit in August, is expected to cost insurers between $20 and $40 billion.
Following Ida, Access Home Insurance received claims totaling around $180 million, but only had $115 million in reinsurance and cash on hand. Meanwhile, State National Fire Insurance has received more than $70 million in claims, with $41 million on hand, according to Wells.
Policyholders with the two firms will not lose coverage, and they will be able to file claims for any losses that may occur. They can even choose to renew their insurance policies. Officials hope to sell the policies as a package to a new carrier.
According to Insurance Commissioner Jim Donelon, five or six companies have already expressed interest in taking on the policies.