2018-23: 1.9 Million Home Insurance Policies Went Away; In 2021 & 2022, 18 LA & FL Insurance Companies Insolvent

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In recent years, extreme weather events supercharged by climate change have revealed how fragile the country’s property insurance landscape is — and how quickly insurance companies can go from profitable to nonexistent. In the five years between 2018 and 2023, more than 1.9 million home insurance policies were dropped in disaster-prone states like Florida, Louisiana, California, and Texas by insurance companies that either voluntarily withdrew from those states or went bankrupt. FedNat was one of seven Florida-based property insurers to go bankrupt during 2021 and 2022 due to insurmountable financial troubles. In Louisiana, 11 insurance companies were declared insolvent between 2021 and 2022.

The resulting scramble to secure insurance in high-risk areas often means homeowners face a daunting choice: high premiums in a private market that is loath to insure them, or limited coverage through state-mandated insurance programs that can cost just as much or more. “How do you do that to people?” Bye asked. “How do you insure people in the South, take all of these premiums, and then just belly-up?”

The insurance business has always been cyclical, rocking between boom periods of profitability and bust periods of huge losses driven by disasters and homeowner lawsuits. But as the planet heats up, the business of risk is undergoing a period of rapid evolution. FedNat’s quick demise is emblematic not just of an industry ill-prepared for the consequences of climate change, but also of a new era for the country’s insurance markets — one where state systems designed to keep companies in the black and shield homeowners from catastrophe are failing cyclically in both regards.

“We are in the era of polycrisis,” said Daniel Aldrich, director of the Resilience Studies Program at Northeastern University, “which is a fancy way of saying the number of disasters and their impact are both increasing and the time between shocks is decreasing, therefore government institutions, insurance companies, and homeowners can’t keep up.” In 2019, FedNat acquired Maison Insurance, a company with operations in Louisiana and Texas. It proceeded to become one of the biggest property insurers in Louisiana. But its fortunes took a turn less than a year later, when four hurricanes hit the South in the span of about two months, followed by a deadly winter storm that burst pipes and flooded homes in early 2021. Later that year, as FedNat faced more than $100 million in net losses, a figure that included the claim filed by the Byes, the company abruptly announced it was dropping all of its policies outside of its home base of Florida. Some 13,500 homeowners in Louisiana were suddenly forced to scramble for insurance. Reorienting to focus exclusively on Florida, FedNat’s CEO said, would result “in a financially stronger company.” Those assurances proved premature.

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https://grist.org/economics/insurance-company-bankrupt-hurricane-ida-louisiana/