Louisiana Citizens Property Insurance Corporation

Louisiana has seen applications from nine property insurers for its incentive program, with the added funding they may receive likely to serve as a lever to help with the reinsurance cost burdens they face at the upcoming mid-year renewals.

The Louisiana state legislature is holding its property insurance focused Special Session this week, but the proposal is seen as a stopgap rather than a long-term fix, with reinsurance issues likely to persist in the current hard market.

Louisiana’s Governor has now called a special session of the states legislature to address property insurance issues in the state, with the goal of creating the Insure Louisiana Incentive Fund to encourage more companies to underwrite business there.

The US state of Louisiana looks set to follow in the footsteps of Florida, by holding a Special Session of the Legislature to address property insurance concerns, with the affordability of reinsurance a key driver.

Louisiana Citizens Property Insurance Corporation, the non-profit residential and commercial property insurer for those who cannot access private market insurance in the state, has had a steep 63% residential property insurance rate increase approved by the regulator.

Additional loss creep from 2021’s hurricane Ida has now eroded another layer of Louisiana Citizens’ catastrophe bond backed reinsurance protection, with the $50 million Class B notes of the residual market insurers’ Pelican IV Re Ltd. (Series 2021-1) cat bond set to pay out all of their principal in a reinsurance recovery.

The fall-out from downgrades and insolvencies of property insurers that have been largely triggered by conditions in the Florida marketplace continues to spread to other states.

The state of Louisiana is concerned the reinsurance market could begin to reject its property risks, with the Insurance Commissioner saying he feared a “redlining” after consecutive major hurricane loss years and other market challenges.

Louisiana Citizens Property Insurance Corporation has reported an estimated loss from hurricane Ida of around $461 million, but thanks to its low retention on its reinsurance tower and its catastrophe bonds, the residual market insurer will only retain $35 million.

Two outstanding per-occurrence catastrophe bond tranches sponsored by Louisiana Citizens Property Insurance Corporation have been marked down much further on some broker pricing sheets in the last week, with secondary market bid pricing now implying a market expectation of a significant loss of principal.