Our History and Our Background
Prior to 1970, there was no insurance guaranty fund in Louisiana. If an insurance company (“insurer”) was declared insolvent, the policyholder (“claimant”) had to file a claim in the liquidation proceeding. Any assets from the insolvent insurer would eventually be divided among hundreds of creditors and claimants according to rank, which took years and rarely resulted in the actual payment of many claims.

In 1970, the Legislature created the Louisiana Insurance Guaranty Association (“LIGA”) as a private, non-profit entity designed to create a safety net for insurance consumers if their insurer becomes insolvent during the period of their policy coverage. LIGA steps in to pay certain statutorily defined claims and claims for unearned premiums. The payment of claims by LIGA has been a continuing source of reliability and relief to thousands of families and companies whose loss would have otherwise gone unpaid. LIGA covers property and casualty insureds only.

The “guaranty fund” as LIGA is sometimes called, also serves the insurance industry well. When you buy your insurance from a licensed company in Louisiana you have the peace of mind as a consumer, knowing that your claim will be addressed, even if something unfortunate and unexpected happens to your insurance company. Some people look at LIGA as a form of “reinsurance” or a “back up policy” or an extra “umbrella.” Others compare LIGA to the FDIC, who protects the public when a bank goes under. The stabilization created by LIGA inures to the benefit of all insurers in Louisiana, as well as their insureds.

Our Governing Board
The LIGA Board of Directors is comprised of 9 members, 5 of whom are elected from Louisiana insurance companies or “member insurers” of LIGA. The other four Board members are appointed by the Legislature and the Commissioner of Insurance from the general public. The nine members of the Board collectively form a body with decades of insurance, legal, and business experience. Because of our Board composition and their intricate knowledge of the insurance industry, LIGA remains a very fair system for the insurance companies in Louisiana and continues to work well to protect the policyholder and claimants.

Our Funding and Operation
LIGA receives no public funding and never has. LIGA is a private association run by and for the insurance industry. LIGA has the authority to assess 1% annually, based upon the premium of all property and casualty insurance policies written in Louisiana the previous year.

The Board of Directors of LIGA annually decide whether or not an assessment upon member insurers is necessary to handle the anticipated volume of claims befalling to LIGA. When times are bad (multiple insolvencies and thousands of claims) the Board has assessed annually. But when times are less critical, LIGA can and has, scaled down to a skeleton staff and has levied no assessments. LIGA levied no assessments from 1997-2002.

The decision to assess each year is one of the toughest decisions made by the Board. The Board relies on information from the Department of Insurance and our own staff to study actuarial reports and industry trends and to warn us of potential insolvencies that are looming, as well as how many claims and the nature and size of those claims that are about to become the responsibility of LIGA. LIGA’s Reserve amount is maintained daily and represents the best attempt at declaring our total financial risk of loss, which also determines the need for an assessment of companies.

Some of the most complicated claims handled by LIGA is when a workers’ compensation insurance carrier goes under. These types of insolvencies are much more difficult to calculate, assess, and plan for. It is more difficult to know how much can be owed on a claim for long term medical care or disability. In some workers’ comp instances, we discover that “one claim file” may actually turn out to be a class action asbestos lawsuit or a claim for a group of claimants, with hundreds of claimants in one file.

Environmental Issues/Reserves Currently
If there is one crisis LIGA faces right now, it is the large number of environmental claims, and more specifically, the asbestos unknown. Based on a report from actuarial experts, reserves for our asbestos claims are estimated to be $1.1 billion. To better understand the enormity of this figure, our reserves for non-asbestos claims is currently estimated at $100 million. (As of July 1, 2005)

Accomplishing Our Mission
LIGA is very proud of its accomplishments. LIGA has successfully paid and closed 138,075 claims from 149 insolvent companies totaling $823,757,234.71. (As of July 1, 2005)

Public Input
Even though LIGA is a private association, all LIGA Board meetings are publicly announced and held open to the public. The Commissioner of Insurance, House of Representatives and the Senate attend every LIGA meeting through their designated representative. Therefore, any actions by LIGA in any meeting are publicly accessible through these three public offices as well. LIGA also undergoes comprehensive audits annually, which are made accessible to the interested public, and shared with the Legislative Auditor and all member insurance companies. The Commissioner of Insurance conducted a comprehensive examination of LIGA in 2005.

Unfortunately, some of the issues discussed by the LIGA Board involve potential insolvencies. LIGA makes an effort to guard any sensitive information and/or documents of this nature from the public. The Board in Executive Session must discuss these matters, outside of the public for obvious reasons. The Board never votes on any matter, nor takes any actions while in Executive Session.

Our Future
Future insolvencies are quite difficult to predict. The impact of soaring reinsurance rates and the fluctuation in the national economy make such an endeavor even more problematic. However, LIGA’s goal has been to create and maintain a flexible and professional organization that can adapt to any situation or volume of claims, and utilize its’ funding source (assessment) only when necessary. A greater emphasis on fiscal management, improved industry regulation, and recovering more assets from insolvencies, create a hopeful future with less need for assessing our member insurers while serving the public’s need.