Property insurance market could face more issues thanks to Hurricane Francine

By Nolan Mckendry | The Center Square

Hurricane Francine made landfall in Louisiana on Wednesday, leaving many people at risk of storm damage.

Also at risk is the state's insurance market, which has been dealing with its own storm of scarcity, risk, and cost in recent years.

While Francine is a not the strongest storm as a Category 2 hurricane with maximum winds of 100 miles per hour, it's still strong enough to do extensive damage, especially to properties in low-income or otherwise vulnerable areas.

"The property premiums in Louisiana are the highest they've ever been," Louisiana Insurance Commissioner Tim Temple told The Center Square. "Homeowners' insurance is very unaffordable and, for many, unavailable."

The cost of that damage may not be exclusive to specific areas. Louisiana's vulnerable property insurance market means that damage inflicted by Francine could impact policyholders across the board, leading to further increases in already high premiums.

According to LSU's 2023 Louisiana Survey, 17% of homeowners had their insurance policies canceled in 2022. Additionally, 55% of those who sought new coverage faced challenges, while 63% experienced higher premiums.

Insurance companies writing policies in Louisiana face costly liabilities due to the state's vulnerability to hurricanes. Many insurers have gone bankrupt or left the state, creating a particularly uncompetitive market.

"My office has been in conversations with the insurance industry, making sure they're staging assets and prepared to respond to events like Hurricane Francine," Temple said. "While this is a lower-end hurricane in terms of potential damage, if it's your home, it's a catastrophe to you. We're making sure adjusters are ready to be deployed as soon as people are allowed to return to their property."

With fewer companies willing to write policies in the state, many Louisianans have turned to Louisiana Citizens Property Insurance Corporation, the state's insurer of last resort. Citizens is currently the fourth-largest insurer in Louisiana, with $103 million in written premiums. In 2023, it raised its rates by 63%, driven by rising reinsurance costs.

Temple acknowledged that the state's insurance market remains challenging but expressed optimism due to recent legislative efforts. "We've made substantial property reform with the support of the governor and legislature," Temple said. "The steps we've taken are restoring confidence in the Louisiana marketplace. I've had conversations with companies that intend to start writing business here as early as next year."

In April, Rep. Matthew Willard, D-New Orleans, proposed House Bill 524 to remove a 10% surcharge on policies from Louisiana Citizens, arguing that the lack of competition was forcing homeowners into higher costs. Meanwhile, Rep. Joseph Stagni, R-Kenner, introduced House Bill 513, which would have required a financial review and public hearing for insurance rate filings with profit expectations above 10%. Both bills failed to pass.

Temple explained that despite setbacks, the state is on the right path, and he anticipates more insurers will enter the market in the near future. "Competition equals downward pressure on premiums," Temple said. "When you only have one or two companies quoting your homeowners' insurance, you won't get competitive pricing. But when you have five or ten, they know you'll go with the best price."

In the recent legislative session, several reform bills were signed into law. These measures are intended to align Louisiana's insurance practices more closely with neighboring states, stabilizing the market and encouraging new carriers to write policies.

"A common theme across Louisiana's new insurance laws is an effort to bring the state more in line with neighboring states' practices in the insurance space and make Louisiana less of an outlier," said Baton Rouge law firm Adams & Reese in a recent statement.

Temple shared a similar sentiment, stating, "We are focused on making insurance more available and affordable by creating a marketplace that insurance companies want to enter. Barring any major storms this hurricane season, I anticipate seeing more companies filing applications to write property insurance in Louisiana."

Despite the reforms, much uncertainty remains. "If we sustain any damage, policyholders should document it thoroughly, mitigate further damage, and file a claim as quickly as possible," Temple advised. "We're focused on ensuring the best claims outcomes, so people can repair and rebuild as fast as possible."