It's not just repeated hurricanes that are causing problems with home owners insurance in Louisiana. According to Louisiana's insurance commissioner, disasters around the world can cause problems right here at home.
Smaller insurance companies purchase reinsurance to keep from tapping out their reserves in the event they have to cover a large amount of claims at one time. But reinsurance is a global product, and Louisiana Commissioner of Insurance Jim Donelon points out it can get expensive depending on world events.
"Wildfires in California and wildfires in Australia, I think bigger than California. Floods in Germany and eastern Europe An earthquake in Indonesia. Something in the midwest of the U.S. that I'd never heard of called a derecho," said Donelon. "It's been described as a 'land hurricane.'"
Donelon says reinsurance companies have told him that the 2020 and 2021 hurricane seasons were part of the problem, but were by no means all of the problem.
"All of it together hardened and made more expensive the reinsurance market for these small companies trying to get coverage for themselves."
Donelon says his department now requires insurers to hold a certain amount of capital in reserve, to hedge against insolvency.
