When Kay Vincent's mother passed away in early 2022, the house that they had been living in had been left to her. While going through the paperwork, however, she discovered a letter from their property insurers saying that their coverage was being dropped. Kay picked up the phone and started calling around, trying one company after another hoping to find someone who would write her a policy.
"I called everywhere," Kay said. "I called every company I could think of, they would give me some suggestion and I called them up and they said 'they were covering Louisiana but they stopped sixth months ago'. I've tried everywhere."
Kay's story isn't a unique one; in reporting for this story we heard from dozens of people who had a similar experience. Policies were either not being written, or the costs were becoming too expensive. This shock to the insurance market comes on the heels of two historic hurricane seasons in Louisiana, and a time when globally, extreme weather events are causing billions of dollars worth of claims.
There's not much, if any, precedent for what happened to Louisiana during the 2020 and 2021 hurricane season.
Four different storms (Laura, Delta, Zeta, and Ida) made landfall in Louisiana, all as a Category 2 or higher leaving blue tarps and damage from one border to the other. Those four storms alone were responsible for a combined $22 billion in insurance claims.
Since Ida made landfall in August 2021, 11 different insurance companies have become insolvent, and more have decided that they will no longer write policies for coastal Louisiana. This exodus of companies have left thousands of people with either much higher costs, or if they own the house with no insurance all together.
Instead of being able to shop around for a new policy, Louisiana residents are having to turn to what is known as the insurer of last resort: Louisiana Citizens.
In the last few years Citizens has seen a more than 200% increase in their policy holders, as more and more residents are being left without other options. Such a large increase in policy holder though means that their risk exposure has also increased.
A report to the state legislature raised concerns that in the event of another major storm, similar to Ida, they wouldn't have enough money to cover the cost. Since Louisiana Citizens is a private-public partnership that could mean that tax payers could be left footing the bill.
A professor of Finance, Risk and Insurance at the University of Louisiana, William Ferguson, explained that while there are other avenues to finance those losses if everything failed it would fall on the state.
"If the assessment is not enough to cover the Citizens because it's a state thing, well then the state's going to have to pay, finance, it with bonds. And if that's not enough then they're going to have to fund it with taxes," he said.
This realization has forced Citizens to raise their rates, which already are above market value, another 63% to help reduce risk.
The impacts from Louisiana's current insurance landscape is having effects beyond just the pocketbook.
"Affordable home ownership is going to be harder to sustain because of this," said Melinda Taylor the executive director at Habitat for Humanity, "Somebody going after a mortgage for the first time on the commercial market if their escrow payments are going to knock them over the top it may disqualify them."
Almost all lenders require some form of property insurance before they'll issue a mortgage, which means as prices rise it will be harder for people who are low to moderate income to get into an already tough housing market. The rising prices have also forced organizations such as Habitat for Humanity to rethink some of the help they're able to offer, something Taylor acknowledged.
"For Habitat we're really having to scrutinize how low can we go to keep ownership sustainable," she said.
Yet while these impacts are being acutely felt in Louisiana and other Gulf Coastal communities, some of the reasons for the problem stretch beyond the borders of the state.
"All these companies have to go out and buy reinsurance, which is a global business," Ferguson said. "And the reinsurance companies they are not incombered to rate regulation."
All insurance companies purchase what is known as reinsurance, which essentially is a way to help spread the risk and help cover major losses. These insurance companies operate on a global level, helping to pay out for other disasters across the globe. As those disaster grow in number, and the cost of rebuilding grows the cost of reinsurance is going up, forcing local insurance companies to pay larger and larger amounts to help reduce their risk.
This isn't the first time the state has seen a cut in the number of insurance companies offering policies.
Ferguson told me that after Hurricane Andrew in 1992 the number of companies went from around 160 to 16 by the time Katrina hit. And the cost has always been expensive, but for residents like Kay that offers little comfort.
"You work your tail off to get what you need in life and when you finally get it and get it paid, and it's yours you can't protect it," she said.
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