In addition to Lighthouse Property and Lighthouse Excalibur, named in the court order, signed by 19th Judicial District Judge Richard “Chip” Moore III, are Lighthouse Holdings Group LLC, Lighthouse Management LLC, Lighthouse Managers Group LLC, Lighthouse Managing Agent Services LLC, Prepared Managers LLC and Lighthouse Gulfcoast Management LLC.
Lighthouse became the fourth insurer placed into receivership in Louisiana, having exhausted its reinsurance tower largely due to losses from the 2020 and 2021 hurricane seasons. The Louisiana Insurance Guaranty Association (LIGA) is set to take over claim payments, ensuring most policyholders with pending hurricane claims will get paid.
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 $10 billion and $15 billion, and increasing labor and materials prices partially due to the hurricanes as well as high inflation, has caused four insurers to exhaust their reinsurance coverage and run out of money, the LDI news release stated.
Lighthouse’s reinsurance was provided by 16 reinsurers, 13 of which are rated A+ by AM Best; two are rated A++ and one A, according to Lighthouse’s website.
Lighthouse merged with Prepared Insurance Company June 16, 2020, which allowed Lighthouse to assume Prepared’s portfolio and write direct business in Florida, according to a Lighthouse press release at the time of the merger. The merger resulted in a unified carrier with over $200 million of gross written premium, over $50 million in policyholders surplus and 170,000 homes insured across the Southeast. Prior to the merger, Lighthouse wrote in Louisiana, Texas, North Carolina and South Carolina.
Established in 2008, Lighthouse acquired Excalibur National Insurance Company, a Louisiana domiciled carrier, in 2019 and relaunched it as Lighthouse Excalibur Insurance Company, a wholly owned subsidiary of Lighthouse. At the time of the merger, Lighthouse and Excalibur combined wrote about $75 million of homeowners premium in Louisiana, part of a $265 million consolidated book, including Prepared Insurance Company, across Florida, Louisiana, North Carolina, South Carolina and Texas.
Lighthouse Excalibur sought approval for rate increases from LDI in 2021 and 2022, according to LDI rate fillings. On April 15, 2021, LDI approved a 43.2 percent rate increase for the company’s voluntary homeowners HO3 business, effective immediately, with an expected impact of $8.7 million. On July 21, 2021, LDI approved a 35.9 percent ($7.2 million) increase in the company’s Dwelling Fire Program, voluntary and take out, effective Aug. 15, 2021, for new business and Oct. 1, for renewal business. On June 10, 2021, LDI approved a 4.4 percent (requested 11.4 percent) increase on the company’s Homeowners Program, voluntary and take-out, with an impact of $368,805. The rate increase was effective July 15, 2021, on new business and Aug. 14, on renewal business. On June 21, 2021, Lighthouse Excalibur got approval for an 8.7 percent (requested 11.5 percent) rate increase in its Deluxe Homeowners Program, effective Aug. 1, 2021, on new business and Sept. 1 on renewal business, with an expected impact of $540,262.
On Jan. 12, 2022, Lighthouse Excalibur got approval from LDI to raise rates 15.2 percent in its Voluntary Homeowners HO3 Program with an estimated impact of $4.4 million. No effective date is listed in LDI records. On April 8, 2022, LDI approved a 32.5 percent increase in the company’s Voluntary Homeowners Program, amounting to $6.7 million, effective April 8, 2022, for new and renewal business. Still pending when the company was declared insolvent was a request for a 23.9 percent increase in Lighthouse Excalibur’s Dwelling Fire Program, voluntary and takeout business, to be effective June 1, 2022, for new and renewal business.
“Losing a fourth insurer to the unprecedented 2020 and 2021 hurricane seasons is unfortunate, but I’m proud of how effectively we have managed the insolvencies so far,” Commissioner Donelon said. “For the first three failed insurers, we were able to quickly find an insurer to take over their policies on the same terms and conditions policyholders had under the failed companies, and I’m hopeful we will do the same for Lighthouse policyholders.”
As major companies retreated from coastal exposure after the 2005 storms, the LDI worked to keep insurance available and affordable by recruiting over 30 new insurers to Louisiana, giving property owners more options in the private market resulting in stable prices through greater competition, the LDI news release stated.
Lighthouse had approximately 30,000 policies in Louisiana and 16,000 Ida-related claims, as of Dec. 31, 2021, covering 3.27 percent of the Louisiana homeowners insurance market.
When Lighthouse announced Dec. 28, 2021, a $65 million infusion of capital, LDI’s website indicated that Lighthouse Property had assets of $204.0 million, liabilities of $160.3 million, surplus of $43.7 million and lost $71.6 million dollars in 2020. The company wrote $20.3 million in total Louisiana premium and $214.0 million in total premium nationwide. Lighthouse property had authority to write homeowners and fire and allied lines in Louisiana beginning in 2008. On Sept. 23, 2015, the company received authority to write burglary and forgery, liability, marine and transportation, steam
Lighthouse Excalibur got its certificate of authority on March 31, 2016, and is licensed to write fire and allied lines, homeowners and liability, according to LDI’s website.
As of 2020, Lighthouse Excalibur had assets of $16.6 million, liabilities of $2.7 million, surplus of $13.9 million and negative net income amounting to $668,883. The company wrote $56.3 million of total premium, all homeowners and all in Louisiana.
Neither Lighthouse Property nor Lighthouse Excalibur has turned a profit in the past three years 2018, 2019 or 2020, according to financial overview reports.
What Florida will do with the company is unclear. As of April 12 Florida regulators had not indicated whether or not they would file with the circuit court to take over Lighthouse Property, which is headquartered in Tampa. A Lighthouse failure would be the seventh Florida-based property insurer declared insolvent in the last two and one-half years and the third this year, according to news sources.
In withdrawing Lighthouse’s financial security rating in March, Joseph Petrelli, president of Demotech commented in a statement, “Despite a substantial capital contribution in the fourth quarter 2021, the operating loss in 2021, which reflected the evaluation of losses and loss adjustment expenses associated with Hurricane Ida, resulted in a level of capitalization below what was needed to sustain FSRs at the A level.”
A Louisiana court-appointed receiver is now in charge of operating the company. Policyholders will be contacted by the court-appointed receiver or their insurance agent about claims and whether in-force policies will be transferred to another insurer.
A hearing is scheduled for April 25 at 9:30 a.m. at district court in Baton Rouge for interested persons to show cause why the court should not order permanent rehabilitation of the companies.
Policyholders with questions about their insurance coverage or the status of their policies should contact their insurer or insurance agent. Policyholders with questions about claims should contact LIGA at 225-277-7151 or www.laiga.org. Policyholders may also contact LDI at 800-259-5300 or www.ldi.la.gov for assistance.