Big business not keen to help depopulate Louisiana’s insurer of last resort

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NEW ORLEANS (WVUE) — Stephen Lovecchio, branch owner of TWFG Insurance, is working to transfer customers from Louisiana Citizens, the state’s insurer of last resort.

“The Louisiana Citizens’ Hike in Orleans Parish is very, very important,” he said. “Not as bad in Jefferson Parish, but it’s very, very big in New Orleans. We just got the rates for Orleans Parish: our premiums of $7,000 will be $13,000, so we are actively trying to move our employees. »

Citizens inherited over 100,000 policies after insurance company bankruptcies. In January, a 63% rate increase comes into effect for residents’ residential policyholders.

Louisiana Insurance Commissioner Jim Donelon said the number of insurers that have pulled out of the state is not known.

“A total of eight companies that failed,” he said. “How many retired? We don’t know, because most of those who retire just stop writing and don’t start writing again.

A report by NOLA.com said state insurance regulators were desperate to get people out of citizens and “were lenient in how they interpreted” a rule created by state lawmakers that says insurers need a rating of B+ or better from rating firm AM Best, or its equivalent, to take over Citizens’ policies.

“I don’t agree with that,” Donelon said.

He says he attends meetings held by the citizens’ board.

“All of this is reviewed by the Citizens Board and by myself, giving my input and advice,” Donelon said. “We have been in complete agreement throughout the process that, yes, it is not high-end giant national companies that want to remove these policies. These are usually small regional companies that expose themselves to coastal states.

He said none of the companies had a rating lower than “C”.

“All had an ‘A-Exceptional’ Demotech rating at the time they entered the program,” Donelon said.

Demotech is a financial analysis and rating firm. Donelon said it’s often difficult for smaller insurers to be rated by AM Best, which is considered the gold standard in terms of ratings.

“We would like all of these participating companies to have the highest rating available, an AM Best A+ rating,” Donelon said. “There are very few, and none of them are interested in taking policies away from citizens. And the rating assigned to a company is only one of the criteria used to determine the health of a company.

“They have to meet a risk-based capital requirement, minimum capital and excess, they have to review their reinsurance purchase to ensure it is adequate for the risk they are taking. It’s all part of the credit check, not just that one-letter rating by those few rating agencies.

Lovecchio agrees that an AM Best rating is hard to come by for smaller insurers.

“Yes, AM Best is really no good with our state-specific carriers and smaller regional carriers,” he said. “Somebody just does automobiles or somebody just does owners in Mississippi, they’re not going to get an AM Best rating because it’s costing them too much to get it. And AM Best likes to deal with national carriers anyway.

Donelon said new businesses also face challenges.

“It’s easy for State Farm and Allstate to get an AM Best rating. Not so easy for a company that only does business in Louisiana or Florida,” he said.

Insurance companies also buy insurance, this is called reinsurance, but this market has problems.

“The reinsurance market comes from Europe, and more specifically from England,” Lovecchio said. “The problem with England is that the pound is now dollar for dollar, where it was $2.20. The investments that everybody has made are down 20-30%, and they suffered heavy losses in the United States.

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