When the Louisiana Insurance Guaranty Association (LIGA) board of directors met on Nov. 30, the board voted to use LIGA’s one percent assessment authority in 2021 to assess insurance companies in Louisiana. In addition, the board voted to authorize the full assessment for 2022 with the provision that LIGA management will not bill and collect the assessments until such a time as LIGA management is able to confirm that new insolvencies will require the additional capital.

LIGA’s one percent assessment authority can raise approximately $100 million per year. The assessment is needed because State National Fire Insurance Company and Access Home Insurance Company were placed into rehabilitation by the Louisiana Department of Insurance. LIGA management and Louisiana Insurance Commissioner Jim Donelon agreed that it was in the best interest of LIGA and the policyholders that LIGA not wait until the liquidation order to engage in claims administration and claims payments.

State National Fire Insurance Company had Hurricane Ida claims estimated at $65 million to $85 million while only having access to approximately $45 million in reinsurance and surplus. State National has approximately 9,000 active policies and $5 million in unearned premium liabilities.

Access Home Insurance Company had Hurricane Ida claims estimated at $180 million while only having access to approximately $121 million in reinsurance and surplus. Access Home has approximately 20,000 active policies and $18.5 million in unearned premium liabilities.

According to LIGA Executive Director John Wells, in the cases of both companies, the commissioner has acknowledged that the companies are insolvent and should soon be placed in liquidation. Wells added that the commissioner filed for and received a rehabilitation order in hopes that a solvent carrier might be able to assume the policies on a prospective basis in the hopes that it will provide a smooth transition for the 29,000 policyholders during the rehabilitation period.

LIGA intervened in the rehabilitation proceeding, and with the commissioner filed a joint motion permitting LIGA to assist the receiver with the claims administration and payments.

According to Wells, the receiver found that between the two companies there was $67 million in outstanding checks. While each estate had some other assets, and the companies were expecting reinsurance receipts, there was insufficient funds in the respective accounts to fund the total outstanding amount. Wells told the board that he quickly recognized the perils of the payments defaulting, from the homeowner or their contractor that relied on such payment, or to the receiver who would have to void all of those payments just to have LIGA reissue the payments. LIGA has begun moving $50 million from its investments, and, according to Wells, has already sent funds to the receiver to cover the outstanding check shortfall.

Prior to the agreement to cover the outstanding checks, LIGA reviewed the claims procedures and sampled the claims to ensure the proper handling of the claims by the companies.

In addition, LIGA provided to the receiver and the staff of the two companies the required data specifications. LIGA and the receiver have contracted with Guaranty Support Inc. (GSI) to assist with the transfer of data. GSI is a subsidiary of the National Conference of Insurance Guaranty Funds and has participated in numerous insolvencies in the years since GSI was formed. LIGA has received the first set of data, and GSI and LIGA are currently formatting and testing the data.

To help with the two current property insurance insolvencies and the expectation of more property insurance company insolvencies, LIGA has engaged Legion Claims to be LIGA’s claim service coordinator. Legion Claims will provide call support, administrative support and a review team. According to Wells, Legion is already fielding hundreds of calls per day, and Legion is ramping up for when the data is uploaded to LIGA’s systems.

LIGA has also contracted with independent adjusting firms to provide desk and field adjusters as needed. LIGA Claims Manager Deidre Arceneaux is still in discussions with additional independent adjusting firms in case LIGA receives more claims or insolvencies than expected.

LIGA, according to Wells, has contracted with Xactware for the use of Xactware’s XactAnalysis software. Wells told the board that the software will allow LIGA to have better visibility in the claims process, regardless of which adjuster or adjusting firm is involved downstream. The system is more familiar to the independent adjusters and will not require training on LIGA’s platform.

According to Wells, certain insolvency scenarios have the potential to present more claims than the two assessments can fund. LIGA General Counsel Stephanie Laborde has been in contact with a bond attorney and began drafting the necessary documentation to issue revenue bonds. The one time in the past that LIGA was required to issue bonds, the legislature increased LIGA’s assessment capacity to two percent.

Arceneaux reported to the board that as of Oct. 31, LIGA’s current reserves were $145,565,381 excluding the State National Fire and Access Home rehabilitations. The investment account, according to Wells, had a cost basis value of $137,264,946 and a market value of $141,072,048 as of Sept. 30. Wells told the board that the investment account will be undergoing some ebb and flow changes as claim payments and assessments affect LIGA’s cash flow.

Wells reminded the board that even though the current discussions revolved around the two new property insurance rehabilitations, LIGA is still actively working claims from recent insolvencies, Gulfstream Property and Casualty Insurance Company, American Capital Assurance Corporation, Bedivere Insurance Company, ACCC Insurance Company, Gateway Insurance Company/American Service Insurance Company and Capson Physicians Insurance Company, as well as not-so-recent insolvencies, American Mutual Insurance Company, Reliance Insurance Company and Employers Casualty Insurance Company.