Courtesy: FEMA

Since that storm in 2005, the costliest and fifth deadliest in U.S. history, property-casualty insurers have been collecting increased premiums during four calm hurricane seasons.

The calm could be ending this year, as forecasters say this hurricane season, which runs from June 1 through Nov. 30, could be among the worst in recent years.

Three forecasters predict four intense hurricanes in the Atlantic Basin, well above the long-term average of two to three intense storms. Warmer sea surface temperatures and a transition to neutral El Niño conditions are expected to enhance hurricane activity.

The National Oceanic and Atmospheric Administration (NOAA) predicts in its Atlantic Hurricane Season Outlook an 85% chance of an above normal season for the North Atlantic Ocean, Caribbean Sea and Gulf of Mexico, where hurricane activity could hamper recovery efforts in the Deepwater Horizon oil rig disaster.

NOAA predicts a 70% probability of between 14 and 23 named storms and eight to 14 hurricanes, with three to seven of them being major.

Forecasters say the conditions expected this year have historically produced some very active Atlantic hurricane seasons.

Industry bracing for impact

After significant catastrophe losses in first quarter, U.S. property-casualty insurers and global reinsurers are hoping their balance sheets don’t face further financial risks, according to A.M. Best, an insurance industry ratings service.

The industry enters the season on the strength of underwriting and financial results that rebounded in 2009 after deteriorating in 2008, a year marked by catastrophe losses from hurricanes Ike and Gustav and poor investment returns associated with the global financial turmoil, the ratings service said.

It added that state wind and beach plans, and last-resort insurers saw in-force liabilities grow by double and even triple-digit percentages from 2005 to 2009 in states such as North Carolina, Florida and Texas.

Insurance companies have reacted in the wake of the destruction left by Hurricane Katrina, which caused 1,836 confirmed deaths and more than $81.2 billion in losses.

The ratings service’s data indicates insurers’ efforts to exit hurricane prone states accelerated from 2005 to 2009, compared with homeowners’ multi-peril business written earlier in the decade.

Major writers of homeowners’ multiperil, Citizens Property Insurance Corporation in Florida and Louisiana Citizens Property Insurance Corp., have shifted market share to other carriers through takeout programs, the service reported.

The top 10 A.M. Best rated writers’ market share fell more than eight percentage points from 2005 to 2009 in Louisiana; about three percentage points in Mississippi; and more than nine percentage points in Texas.

Forecasts for hurricane season rivaling 2005 put insurers on edge via IFAwebnews.

Terry Lisotta pleaded guilty to one count of theft from Citizens and related insurance companies from 2003 to 2006, according to The Times-Picayune.

The plea came as Lisotta was about to go on trial for 14 counts of theft by fraud for personal uses, including use of money for a prom party for his daughter, spa treatments, and vacations.

Lisotta admitted to using money from Citizens, a property insurer; the Louisiana Automobile Insurance Program, a state program for high-risk drivers; and the Property Insurance Association of Louisiana, which previously operated the prior two insurance firms, according to the report. Lisotta served as CEO of all three at various times and had access to credit cards and expense accounts at each position, the report said.

He is scheduled for sentencing April 23 and Lisotta was told he will be spending 2 ½ years in state prison.

Lisotta was charged after a legislative audit found he accumulated more than $285,000 in questionable expenses between 2003 and 2006. Fourteen theft charges were rolled into one theft charge by prosecutors as part of the plea deal.

Former Louisiana Citizens executive pleads guilty to theft charge via IFAwebnews.

James Donelon

Louisiana Insurance Commissioner Jim Donelon announced Feb. 19 that he has approved a proposal made by Massachusetts-based Hanover to continue homeowner’s coverage for 14,000 existing policyholders in the state. Through the deal, Hanover will partner with Sarasota, Fla.-based Gulfstream Property and Casualty Co. to provide coverage to affected policyholders.

The move comes as Hanover proposed to withdraw Massachusetts Bay Insurance Co. and The Hanover Insurance Co. from Louisiana and have Gulfstream assume all the coverage from those two companies. Donelon said he initially objected to that move out of concern over setting a precedent that other insurers could emulate in violating Louisiana’s statute protecting homeowners policyholders who have maintained coverage for three years.

The other result, Donelon noted in a statement, could have been companies “dumping” large numbers of policyholders, resulting in a huge flow of policies to the Louisiana Citizens Property Insurance Corp., a non-profit insurer created by the state to provide coverage for those who are entitled, but unable, to secure insurance through the voluntary insurance market.

Donelon’s office anticipates that ultimately half of the 14,000 policyholders affected by the departure of Massachusetts Bay Insurance Co. and The Hanover Insurance Co. will be covered by Gulfstream and the other half by Hanover American Insurance Co., another subsidiary of The Hanover Insurance Group. All of these policyholders will be offered coverage by the companies and none will have to acquire coverage through Citizens.

“This action will guarantee uninterrupted coverage for 14,000 homeowners in our state who may have otherwise lost their insurance and prevent other companies from dumping tens of thousands of policies into the Citizens book of business,” Donelon said in a statement. “Additionally, I am very pleased to welcome Gulfstream into Louisiana as it is a well established company that has been in business for over five years in the Florida market and meets much higher standards than the statutory requirements for writing business in Louisiana.”

All of the new policies will grandfathered with the protection they have acquired under the unique Louisiana homeowners consumer protection law that prevents insurers from canceling or altering coverage for homeowner’s policies that have been in place for three consecutive years, except in rare circumstances, Donelon’s office said.

Hanover reaches deal with Louisiana to reduce its homeowners’ policies via IFAwebnews.

James Donelon

The state’s commissioner of insurance, Jim Donelon, announced a series of steps Nov. 23 to help homeowners with properties contaminated with the defective drywall.

Donelon said many Louisiana residents, like others across the nation, are vacating their homes after reporting foul smells, health problems and the corrosion of wiring and appliances due to the imported drywall. The Chinese product contains higher-than-normal levels of the hazardous chemicals strontium and sulfur, according to several studies.

The Consumer Product Safety Commission recently linked those higher amounts to health conditions experienced by homeowners, indicating a “strong association” between homes featuring Chinese drywall and levels of hydrogen sulfide in the air inside, as well as corrosion of electrical wiring, according to the federal agency.

In Louisiana, some insurers are canceling policies, citing vacancy of homes or failure to maintain the home in insurable condition, once policyholders leave the properties.

Donelon reminded consumers that they are protected under state law, through a unique statute that states any policyholder covered for more than three years by their homeowners’ insurer has the right to continue coverage while vacating and remediating his or her home of the defective drywall. This applies even if the defective drywall constitutes a “material change in the risk,” Donelon said, as long as the homeowner reports the issue to their insurer.

“Notification to your insurance company cannot be used against you and your premiums cannot and will not be raised by your insurer for such a report,” Donelon said in a statement. “I am here to make sure that insurance companies do the right thing and abide by our state’s three-year protection rule and all other consumer protection laws on our books.”

Donelon added that the Louisiana Citizens Property Insurance Corporation will now offer coverage for unoccupied homes with its Builders Risk Renovation policy. Homeowners who purchase this type of insurance from Citizens may pay less because it should be cheaper than the cost of a full homeowners policy, he said.

“Following Hurricanes Katrina and Rita, it’s believed that thousands of homes were rebuilt using drywall manufactured in China,” Donelon said. “The number of new or renovated homes containing defective Chinese drywall is unknown. It’s a tragedy that many of our citizens who were forced to rebuild their lives and their homes after the hurricanes of 2005 have become victims of circumstance yet again.”

Donelon has also established a Drywall Task Force within the Louisiana Department of Insurance to monitor the issue, appointed an investigator in the department to follow consumer allegations of unfair insurance policy cancellations due to the drywall and asked state lawmakers and Congress to aid homeowners in need.

Louisiana aiding homeowners affected by defective Chinese drywall via IFAwebnews.

Courtesy: FEMA

Earlier this year, a Louisiana judge ordered Citizens to pay $95 million to 18,573 policyholders in the state whose claims from damage by Hurricane Katrina and Rita were not adjusted in accordance with a statutory deadline. Citizens had until Aug. 25 to pay the $95 million judgment or post a $95 million bond to preserve the company’s right to appeal the judgment, according to the Louisiana Department of Insurance.

Either action would have depleted the state-sponsored insurer of last resort’s cash on hand, the department said, leading to a suspension of paying claims and commissions, just as the state reaches the peak of hurricane season. Either course of action also would have necessitated a $95 million assessment to be paid by all property insurers doing business in the state, the department said.

Insurers could then recoup the full amount of that assessment from their policyholders.

Louisiana Commissioner of Insurance Jim Donelon said that a judge has allowed Citizens to pay $6 million to a group of class action attorneys while the insurer appeals the judgment.

The decision, by Judge Henry Sullivan of the 24th Judicial District Court in Gretna, La., lets Citizens move forward with its appeal with no assessment to insurance companies or policyholders.

The insurance department said Citizens will get the $6 million credited against any judgment or settlement eventually reached in the case and would have had to pay that amount or more to purchase a commercial appeal bond.

Deal in Hurricane Katrina, Rita case spares homeowners’ assessment via IFAwebnews.

Courtesy: FEMA

A Louisiana judge has ordered Louisiana Citizens Property Insurance Corp. to pay $92.8 million to 18,573 policyholders in the state whose claims from damage caused by Hurricane Katrina were not adjusted on time.

The state-sponsored insurer of last resort is expected to appeal the judgment by Jefferson Parish Judge Henry Sullivan, according to the Times-Picayune newspaper.

A company official said that if the judgment stands, it would probably not necessitate a special assessment to pay for it, but would probably require increasing the size of the emergency assessment issued after the hurricane to pay off the bond used to pay claims.

If Citizens dos not have the cash available to meet its needs, the report said, it can levy special assessments on all owners of insured property in Louisiana to raise money.

Plaintiffs in the case, Geraldine R. Oubre et al v. Louisiana Citizens, have also filed an appeal of a settlement in another class action suite against Citizens. The attorneys intervened in that case as they felt it improperly infringed on their case in Jefferson Parish, which was certified as a class action suit first, according to the Times-Picayune.

Both suits involve anyone in the state who had trouble getting Citizens to handle their 2005 storm claims in a timely manner.

The appeal means that $13 million to be distributed to around 13,000 plaintiffs will likely not be distributed until the dispute is resolved.

The report said there are still 44,000 people who filed Katrina-related claims with Citizens who did not opt out of the suit and could have valid complaints over late adjustment of claims.

Insurer to pay $92.8 million for Katrina claims via IFAwebnews.