NEW ORLEANS (WVUE) – Louisiana’s bond commission has authorized a safety net agency to sell millions of bonds so it can continue to pay insurance claims from failed insurance companies. Officials say it’s the high number of defaults that is draining the Louisiana Insurance Guaranty Association’s coffers.
John Wells is the Executive Director of LIGA. He appeared before the bond committee to help justify the bond sale.
“We’re not here to bail out insurance companies, we’re here to bail out homeowners and other people whose insurance companies have gone out of business,” Wells said.
Several insurers either failed or left the state after Hurricane Ida.
“Yes, we’re going to quickly spend the volume of these claims over a hundred million that we had in meltdown before this started,” Wells said.
LIGA is paying back claims from failed insurance companies and has asked the bond commission for permission to sell $600 million in bonds.
Ross Fayard is a longtime insurance agent and owner of Amstate Insurance.
“When they’re doing that, they’re trying to make sure they’re taking care of the customers, doing their job. You know, if somebody else failed them, they’re going to pick up the ball and they’re going to do the right thing,” Fayard said.
LIGA was created by the state legislature in 1970 to serve as a safety net for policyholders.
Lela Folse is the Director of the Bond Commission.
“The law allows LIGA to collect an annual assessment of 1 percent from insurance premiums of member insurers to pay out claims. It brings about a hundred million in income a year. LIGA made the first assessment in 21 and 22,” said Folse.
At the end of the day, what LIGA values insurers may pass on to taxpayers.
Wells said, “The price is paid by the insurance company.”
But Senate President Page Cortez responded, “But it really comes down to the rates. (Wells) It’s either included in their rates, not as a line item on somebody’s bill like citizens might do, but it can be included in their rates or businesses can request the state 10 tax credit during the year.
John Schroder is the state treasurer. He also referred to the burden on taxpayers.
“I talked to a lot of people who didn’t realize that the tax credit is dollar for dollar, dollar for dollar, so the insurance companies lose nothing, absolutely nothing. Louisiana taxpayers are on the hook for every penny of it,” Schroder said.
LIGA covers claims up to $500,000. Fayard thinks most residential buildings are at that level.
“Most houses are not $500,000, you have a handful, a handful, yes, you have some people with $500,000 houses, but the majority of the book is under $500,000, so I think it’s a LEAGUE a very good move by the side,” said Fayard.
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