Louisiana Judge Orders Liquidation of Lighthouse

A Louisiana district court judge last week ordered the liquidation of Lighthouse Property Insurance Co., the troubled homeowners insurer who held policies in Louisiana, Florida, Texas, North Carolina and South Carolina.

Judge Richard “Chip” Moore, III of the 19th Judicial District Court in East Baton Rouge delivered the liquidation order less than a month after the Louisiana Department of Insurance placed Lighthouse into receivership. Moore wrote that further efforts to rehabilitate the insurer and its sister companies would be “futile.”

The order named Billy Bostick as appointed receiver and Frank W. McNabb as deputy receiver. Texas-based Bostick is partner at Bostick/Crawford Consulting Group, which performs financial and market conduct examinations for insurance regulators and consulting services on insurance receiverships.

Founded in 2008, Lighthouse Property Insurance Co. was inundated with approximately 16,000 Hurricane Ida claims, which followed three major hurricanes in 2020. The carrier possessed $204 million in assets, $160 million in liabilities, and $44 million in capital and surplus in 2020 but reported three straight years of net losses.

Lighthouse and its subsidiary Lighthouse Excalibur had approximately 30,000 policies in Louisiana, covering 3.27% of the state’s homeowners insurance market. Lighthouse held over 13,000 policies in Florida at the end of 2021, the Florida Office of Insurance Regulation has reported. Lighthouse had 170,000 homes insured in all five states it was admitted in 2020.

The liquidation order authorizes Louisiana Insurance Commissioner Jim Donelon to coordinate operation of the receivership with the guaranty associations of the five states where Lighthouse holds policies. Insurance guaranty funds are non-profit, member-funded associations responsible for paying claims when insurers go insolvent. The Louisiana Insurance Guaranty Association (LIGA) will pay up to $500,000 per pending claim.

Lighthouse is the fourth Louisiana insurer to go insolvent in the wake of the 2020-21 hurricane seasons. Last December LIGA assessed a $100 million fee on Property & Casualty insurers after the insolvency of Access Home Insurance Co. and State National Fire Insurance Co.

It is the third property insurer serving the Florida market to be deemed insolvent so far this year. The Florida Insurance Guaranty Association announced on its website that the association has been activated to help pay outstanding Florida claims owed by Lighthouse. Corey Neal, executive director of FIGA, said in April that it was too soon to know how much of an assessment FIGA might place on carrier’s in response to Lighthouse’s liquidation.

“There’s no good indication of what liabilities FIGA might have,” Neal told Insurance Journal. “We’re working through all of that.”

In most cases, FIGA is limited to paying no more than $300,000 per claim but an additional $200,000 may be available for structures and contents. Unearned premiums will be returned to policyholders about 45 to 60 days after the liquidation date, FIGA said.

The FIGA board of directors voted last week to borrow $250 million to help the association pay claims left behind by insolvent insurers in the last six months, the News Service of Florida reported. The debt will likely have to be paid by further assessments on insurers.

A Frequently Asked Questions page on Lighthouse’s website says the insurer’s receiver, Bostick, has sent out 360+ requests for proposals to homeowner insurance companies who are licensed in the states of Louisiana, North Carolina, South Carolina, Florida and Texas for the acquisition of the policies of Lighthouse and/or Lighthouse Excalibur.

Lighthouse’s liquidation followed a series of announcements that indicated the company was running out of time to regain financial footing.

In mid-February, the insurer Lighthouse announced it had stopped writing new policies in Florida. Demotech withdrew its Financial Stability Rating on March 29.

Topics Legislation Louisiana