A Florida-based property insurer with about 36,000 policies in Louisiana is pulling out of the state, raising concerns about the ability of the Louisiana insurance market to absorb the blow.
The 33,000 United Property & Casualty Insurance Co. (UPC) policyholders in the state whose policy terms are set to end next year will get written notice of non-renewal from the company at least 30 days prior to the end of their coverage date, according to the Louisiana Department of Insurance.
Another 3,000 policyholders whose contracts expire between Nov. 26 and Dec. 31 of this year will be granted extended coverage, and they will receive 30 days notice prior to the end date for their extended coverage.
“I am concerned there will not be sufficient capacity in the private market to assimilate these UPC policies, in which case those folks would need to turn to Louisiana Citizens for coverage,” Louisiana Insurance Commissioner Jim Donelon told the Louisiana Record in an email.
Louisiana Citizens is the property insurer of last resort in the state. By state law, its policies are required to be more expensive than similar policies in the private market.
Donelon is also fighting to jumpstart a state program to lure more property insurance companies back to Louisiana.
“That’s why I’m so anxious to secure funding for the Insure Louisiana Incentive Program, which successfully attracted several insurers to our state in the aftermath of hurricanes Katrina and Rita, as soon as possible,” he said.
A recent Florida Office of Insurance Regulation (FOIR) consent order on UPC’s closeout plans indicates that the company has experienced underwriting losses exceeding $35 million in each of the past five years.
“As a result of its deteriorating financial condition, United took a number of steps to reduce its exposure, including ceasing to write new business, non-renewing large numbers of policies … and renewal rights agreements in various states, and instituting withdrawal plans in Florida and other states in which it does business,” the FOIR report states. “Notwithstanding these measures, the underwriting losses of United have continued to increase to unsustainable levels.”
The exit plan put together by FOIR assumes that UPC will have no active policies in any state by June 1 of next year.