Insurance commissioners in Mississippi and Louisiana warn that buyers of property insurance will have a difficult time for now, but how quickly the market improves depends literally on how the wind blows.

Mississippi Insurance Commissioner George Dale said insurers writing property business have not made money for awhile.

No insurers said they plan to pull out, he noted, but carriers are complaining about the state's wind pool assessments to cover gaping losses. The pool bought $75 million in reinsurance, he said, but paid out over $700 million in claims.

Small companies say the assessments cost more than their premiums collected, leading the commissioner to believe they are thinking twice about staying. However, Mr. Dale argues, if they pull out now, they have no chance of recouping any of that money.

Despite record industry profits, underwriting property insurance has not been profitable in Mississippi, he conceded.

In 2005, State Farm took in over $175 million in premium and paid out $782 million in property claims–in five years, the company took in $726 million and paid out $1.1 billion, he said. The Mississippi Farm Bureau took in $110 million and paid out $476 million in 2005.

Louisiana Commissioner James J. Donelon said insurers are “pulling in their horns.” State Farm and Allstate, writing more than 50 percent of the state's homeowners business, are restricting their writings and doing no new business near the coast. This puts pressure on the state's residual market and other insurers, he added.

For example, Farmers Insurance arrived in the state three years ago and was open to new business until last month, “when the phone fell off the hook,” he said, adding that Farmers now restricts its interest to high-end properties.

Another major state insurer–Louisiana Farm Bureau–received a 49 percent rate increase and is nonrenewing customers after revealing its solvency would be threatened if its exposure wasn't reduced.

Two new companies have expressed interest in setting up shop and a few remain open for business, he said. “There is some availability, but it is a tight market–not unlike the national market following 9/11,” Mr. Donelon noted.

His biggest concern is what happens at the end of the year, when emergency rules maintaining current coverage on homes that are not repaired sunset. By then, the only markets available may be the residual variety–and, he hopes, surplus lines.

“If we have a [quieter hurricane] season like two years ago, before Rita and Katrina, that would give insurers confidence to return to the marketplace,” he added.

Special Reports /

Miss., La. Face Harder Property Markets

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