Louisiana Insurance Commissioner Jim Donelon

After a couple of years of catastrophic weather losses in Louisiana, Commissioner of Insurance Jim Donelon filed a petition in the 19th Judicial District Court in Baton Rouge on Nov. 10 seeking to put two Louisiana-domiciled homeowners companies in supervision.

A finding by the court in Donelon’s favor would trigger Louisiana Insurance Guaranty Fund coverage of up to $500,000 for the homeowners insured by State National Fire Insurance Company and Access Home Insurance Company. It is reasonable to expect that LIGA will find itself in a position to have to assess member companies for the first time in 17 years.

Donelon indicated early on that the carriers would not immediately be liquidated, but placed in rehabilitation, with LDI seeking insurers that are financially more stable to take over the troubled companies’ policies and with LIGA paying the claims, largely from Hurricane Ida, that the insurers are unable to pay.

“We are taking action to protect policyholders,” Donelon said. “Historic back-to-back storm seasons coupled with the average cost of claims coming in higher than expected because of the pandemic got us to where we are today. The good news is that LIGA can pay up to $500,000 per claim and is ready to handle the influx of claims. We have been actively monitoring market conditions and were prepared to do what needs to be done.”

The combination of hurricanes Laura, Delta and Zeta in 2020 which cost insurers $10.6 billion; Hurricane Ida, which is projected to cost insurers between $20 billion and $40 billion, and increasing labor and materials prices because of supply chain disruptions during the pandemic have put several insurers in danger of exhausting their reinsurance coverage and running out of money, according to an LDI press release issued Nov. 12.

On Nov. 10, Donelon told WVUE-TV in New Orleans that he expects six property insurance carriers to leave Louisiana, and he earlier told news sources that he expects three carriers to have financial trouble. In neither case did Donelon name the homeowners insurers.

GeoVera Insurance Group previously announced that it is pulling out of Louisiana.

Ratings withdrawn

According to Demotech, during late October and early November four homeowners insurers writing in Louisiana had their financial stability ratings withdrawn by Demotech. Access Home’s rating was withdrawn Oct. 19; State National Fire’s and Americas Insurance Company’s ratings were withdrawn Oct. 26, and Maison Insurance Company’s rating was withdrawn Nov. 6 (see related story).

Withdrawal of financial ratings is generally an indication of insurmountable financial difficulties.

Two in rehabilitation

Access Home was admitted to do business in Louisiana Oct. 19, 2011. The Louisiana Department of Insurance summary financial information indicates Access Home wrote $33.4 million in premium in Louisiana last year ($33.6 million countrywide, including Louisiana) and lost $3.6 million. The company had assets of $31.6 million, liabilities of $20.7 million and policyholder’s surplus of $10.9 million.

Currently, Access Home Insurance Co. has about 19,697 policies, or 0.86 percent of the homeowners insurance market, and $17,684,440 in direct written premium, according to LDI.

According to AM Best, Access Home’s assets of $31.6 million are down from $38.2 million in 2019 and $39.5 million in 2018, when the assets reached their peak.

Net income at Access Home Insurance dropped to a loss of $3.58 million for 2020, according to Best’s 2021 Key Rating Guide, and the combined ratio rose to 141.7 percent in 2020 from 103.4 percent in 2019.

State National Fire was admitted to do business in Louisiana Jan. 28, 1981, and was authorized to write homeowners April 23, 2020, according to LDI’s data. The company wrote business only in Louisiana in 2020 and its premium amounted to $14.9 million, with assets of $7.1 million and liabilities of $3.4 million. State National Fire’s surplus was $3.7 million at the end of 2020, and net income for the year amounted to $295,867.

Currently, State National Fire Insurance Co. has about 9,000 policies in Louisiana, according to LDI, or 0.14 percent of the homeowners insurance market, and $2,945,198 in direct written premium.

AM Best shows State National Fire’s total assets were approximately $7.0 million at the end of 2020. State National Fire’s assets trended upward gradually from 2016 when the company’s assets stood at just under $4.0 million.

AM Best’s 2021 Key Rating Guide on State National Fire showed net income stood at  $296,000 for 2020 up from $164,000 in 2019.

Court appoints receivers

According to LDI, court appointed receivers are not in charge of operating Access Home and State National Fire.

The commissioner is the statutory rehabilitator and Billy Bostick is the appointed receiver of Access Home and State National Fire, and Arlene Knighten is the deputy receiver for both companies, according to LDI’s petitions for rehabilitation and the orders of rehabilitation filed in the 19th Judicial District Court in Baton Rouge.

A hearing was set for Nov. 16 for Access Home and Dec. 6 for State National Fire to determine if the preliminary orders for rehabilitation of the companies should continue. The companies and all interested parties were ordered to appear and show cause why the rehabilitation orders should not continue.

Relative to the rehabilitation of Access Home, interested parties who signed waivers of citation and service of process are: Access Home through its attorney, Ronnie Johnson, and secretary, Samuel Moore; Joseph King, director and co-CEO; Enda McDonnell, director and co-CEO; Adrian Ryan, director; Tim Cordier, director and president; Hale Campbell, director, and Trevor Hillier, CFO, treasurer and vice president.

According to the affidavit, in which Stewart Guerin, deputy commissioner for LDI’s Office of Financial Solvency, verifying the hazardous financial condition of State National Fire, the company’s latest financial statement, June 30, 2021, and holding company records show the company’s financial problems were caused by “substantial claims incurred in connection with Hurricane Ida, excess of available reinsurance” leaving State National Fire, Columbus Holdings and Columbus Underwriters in hazardous financial condition.

Relative to the rehabilitation of State National Fire, the people ordered to refrain from disposing or encumbering any property or assets; disposing of any records, or transacting any business of the company include Jay Pellegrini Jr., Michael Louis Toffoli, William Peter Gabel, Michael Alan Culbertson, Warren Jackson Williamson Jr. and Jerry Leigh Wilcoxon. Ronnie Johnson is the agent and attorney in fact for State National Fire, Columbus Underwriters and Columbus Holdings.

Other companies not rated

Maison Insurance Company, domiciled in Baton Rouge, received a certificate of authority in Louisiana Nov. 15, 2012, according to LDI records. During 2020, the company wrote $47.8 million in premium in Louisiana, and countrywide, including Louisiana, premium amounted to $98.3 million. The company lost $14.6 million in 2020. Assets were $99.5 million and liabilities were $60.2 million at the end of 2020. Policyholders’ surplus stood at $39.3 million.

Americas Insurance Company is domiciled in Washington, D.C., but its headquarters is on Poydras Street in New Orleans, and almost all of its premium written was on Louisiana risks. The company was admitted to do business in Louisiana Sept. 25, 1991, according to LDI records. Americas Insurance’s Louisiana premium for 2020 was $33.4 million, and countrywide, including Louisiana, writings were $33.7 million. The company lost $4.1 million in 2020. The policyholders’ surplus was $8.7 million at the end of 2020. Assets amounted to $22.8 million and liabilities were $14.1 million.