AM Best

Best’s Commentary: Louisiana’s Proposed Property Market Fix a Stopgap Given Underlying Reinsurance Issues


David Blades
Associate Director,
Industry Research and Analytics
+1 908 439 2200, ext. 5422

Christopher Graham
Senior Industry Analyst,
Industry Research and Analytics
+1 908 439 2200, ext. 5743
Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159

Al Slavin
Senior Public Relations Specialist
+1 908 439 2200, ext. 5098


OLDWICK - JANUARY 27, 2023 03:39 PM (EST)
AM Best is of the view that Louisiana’s plan to appropriate $45 million in funds to attract insurance companies to take on more property risk and reduce the burden on the state-run insurer of last resort is likely to be a short-term stopgap as opposed to an effective long-term fix given ongoing reinsurance issues.

Ahead of a special legislative session in Louisiana to address its property insurance crisis, a new Best’s Commentary looks at ongoing challenges in the state’s property insurance market that are impacting availability and affordability of homeowners and commercial property coverage. According to the commentary, “Louisiana’s Proposed Property Market Fix a Stopgap Given Underlying Reinsurance Issues,” the $45 million expected to be allocated to the Insure Louisiana Incentive Fund may provide a short term benefit. However, accelerating reinsurance rates and declining reinsurance capacity, along with capital shortfalls and inadequate coverage, has translated to unaffordable prices for consumers and created availability challenges. Consequently, Louisiana Citizens Property Insurance Corporation, the state’s insurer of last resort, has grown at a dangerous pace – policies increased by more than 200% from January 2021 to August 2022.

“Although Louisiana’s incentive program represents a step in the right direction, it does not solve the reinsurance issue, because companies that choose to participate in this program also may be dependent on reinsurance, and reinsurance capacity in high-risk zones has been constrained because of increased natural catastrophe activity and outsized losses in recent years,” said David Blades, associate director, industry research and analytics, AM Best. As noted in the commentary, if Louisiana Citizens can depopulate its policies, it can reduce its reinsurance burden; its reinsurance is up for renewal on June 1, 2023.

The commentary also states that the market issues in Louisiana differ from those in Florida, which passed reform measures last year to stabilize its troubled property insurance market. Insurance availability in Florida has become limited in large part by a lack of willingness by insurers to write within in the state due to its legal environment, whereas in Louisiana, affordability issues are due to poor results over the past two years from hurricanes, other weather-related events and the rising reinsurance costs.

To access the full copy of this commentary, please visit .

A video discussion on this commentary also is available at .

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.