Small signs of progress for Louisiana's insurer of last resort, but problems remain

Louisiana's insurer of last resort has seen a staggering increase in rates and policyholders, thanks to the failures of a dozen private insurers after the 2020 and 2021 hurricane seasons and a near-complete collapse of the marketplace.

But there are finally some signs of progress: For the first time in years, Louisiana Citizens Property Insurance Corp. has seen notable decreases in the number of people on its rolls. And after a 64% increase in rates last year, the cost of a Citizens policy will be steadier in 2024, rising by just 4% on average.

The improvements represent a small step toward state officials' goals of shrinking Citizens, which by law must charge more for policies than the private market. That's not to suggest the insurance crisis has abated. People living in south Louisiana are still being squeezed by high costs, and the crunch has cascaded through the region, affecting schools, affordable housing efforts and more.

Data from Citizens shows policyholders are paying unprecedented amounts for insurance, particularly in south Louisiana.

The steep rise in premium costs, which began last year, far outpaces the increases seen after Hurricane Katrina, the last time Citizens saw its rolls swell dramatically. Accounting for inflation, Citizens policies now cost, on average, $2,200 more than they did two years after Katrina, an increase of nearly 100%.

A grab bag of solutions

Officials hope multiple years without big storms will lead to lower premiums. Insurance Commissioner Jim Donelon has also said he thinks one long-term solution is a nascent grant program to help people put stronger roofs on their homes – which in turn lowers premiums.

While that program is too new to have had an impact, Donelon said some of the decrease in Citizens' rolls can be attributed to an incentive program he championed to send tax money to private insurers in exchange for writing policies in hard-hit areas. All told, there were 6,600 fewer people and businesses on Citizens in October than the month before, a drop of about 5%. It was the first decrease of any magnitude since April, and the largest since 2017.

John Ford, Donelon's spokesperson, said the incentive program likely kept about 23,000 people from landing on Citizens' rolls. Many of the policies written by the new companies were for customers who had been insured by United Property & Casualty, which is now in liquidation.

Citizens' CEO Richard Newberry attributes the smaller rate hike this year to a more stable market for reinsurance -- which insurers buy for their own protection in the case of catastrophic events. He added, though, that reinsurers and investors in the industry have "loss fatigue" after big storms in recent years, causing prices to stay high, and he noted inflation has risen dramatically.

Citizens rates may not come down significantly unless reinsurance costs decrease and the private market sees premiums drop. Citizens must write policies that are 10% higher than the market rate.

Ultimately, the state may need to do more to mitigate the underlying risk of living in south Louisiana. Some have pinned their hopes on coastal restoration projects that will take decades to build and sustained subsidized efforts to build stronger homes. Some believe the state will eventually need help from the federal government or a compact of states.

While Citizens rates are not rising dramatically next year, many policyholders will still be paying exorbitant premiums. State law requires those on Citizens to pay 10% more than the highest rate offered by a private insurer. In areas without private insurers offering policies, Citizens does a calculation to come up with that number.

'A complete shock'

Erin Lorio and her husband have lived in the same Mandeville house since just after Katrina, and insurance rates were never a major source of concern.

Then, last year, Maison Insurance Co., which had been providing the Lorios' wind and hail coverage for about $2,600 a year, sent them a letter saying they weren't writing policies in Louisiana. The insurer eventually became one of 12 to go under.

That set off a "mad scramble" to obtain coverage, Lorio said; the family escrows their insurance, meaning spiking insurance rates cause higher mortgage payments. Citizens was the only option.

The price: $4,800. But the next year, Citizens quoted a rate of nearly $8,600 -- more than triple what they had been paying Maison.

"It was a complete shock," said Lorio, an attorney with two kids.

Lorio finally found a policy with USAA, for about $6,800. Still, it's a huge jump from where they were just a few years ago.

The story is not unfamiliar to south Louisiana residents. Orleans Parish residents on Citizens pay an average of $4,884 per policy. That is the highest average rate of any parish, aside from those outside federal levees. Jefferson Parish premiums will rise by about 3% to an average of $4,254.

Orleans and Jefferson have the most Citizens policies by far; Orleans has nearly 30,000, while Jefferson has about 28,000.

And while state officials have been trying to push people off Citizens, the rolls in September swelled to their highest point since 2008. Currently, around 140,000 people are insured by Citizens, giving the insurer of last resort a market share of about 4%.

"I feel very fortunate we can ride this out," Lorio said. "I know a lot of people can't."