As Louisiana continues to experience severe weather events, the state’s insurance market faces increasing pressure.
The Louisiana Citizens Property Insurance Corporation (Louisiana Citizens) serves as the state’s FAIR Plan, and plays a crucial role in providing last-resort coverage to homeowners unable to secure private insurance. However, to alleviate financial strain and encourage private market participation, Louisiana Citizens actively engages in takeout programs, offering opportunities for insurers to assume policies.
Here at WaterStreet Company, we routinely support Property and Casualty Insurers through takeout programs.
What Is the Louisiana FAIR Plan?
Louisiana Citizens was established to provide insurance coverage to homeowners who cannot obtain policies through the private market. Like other FAIR Plans across the country, it serves as a temporary solution, ensuring residents in high-risk areas have access to insurance despite the growing challenges of the property insurance sector.
With increasing storm-related losses and rising reinsurance costs, Louisiana Citizens has experienced a surge in policyholders, placing a greater burden on the state-backed program. In response, the state has implemented takeout initiatives to transition policies to private insurers and reduce the number of policies held by Louisiana Citizens.
Takeout Programs in Louisiana
Takeouts, also known as depopulation programs, allow private insurers to acquire policies from Louisiana Citizens, moving policyholders back into the private market.
Louisiana Citizens offers resources for each Depopulation Round, including timelines, the participating companies in each round, and resources for insurers to participate.
While Louisiana Citizens previously had a mandatory requirement to offer its in-force policies to the voluntary market annually, Act 131 passed during the 2018 Regular Legislative Session, changing this from a mandatory annual offering to an optional process. This change provides Louisiana Citizens with flexibility in managing its exposure while still encouraging private insurers to participate.
Participation in the takeout process is voluntary for policyholders. If a private insurer selects a policy for assumption, the homeowner is notified and given the choice to remain with Louisiana Citizens or transition to the private market. This structure ensures that policyholders maintain control over their insurance decisions while fostering growth in the private sector.
Recent Depopulations Through Takeouts
Following changes to the takeout process in 2018, the number of policies offered for takeout has varied based on market conditions. In the depopulation round in 2019, five companies requested to assume 633 residential policies from a pool of approximately 2,000 policies made available. These efforts demonstrate a continued commitment to reducing the policy burden on Louisiana Citizens while strengthening the private insurance market.
Benefits of Takeouts for Private Insurers
For insurers looking to expand their market presence, Louisiana’s takeout program presents several advantages:
- Immediate Market Entry – Acquiring policies through takeouts allows insurers to grow their customer base quickly without incurring high marketing costs.
- Stable Premium Revenue – Policies assumed from Louisiana Citizens provide a steady stream of premium income, contributing to financial stability.
- Regulatory Support – Participating in takeouts demonstrates an insurer’s commitment to serving high-risk areas, fostering goodwill with regulators and policymakers.
Challenges of Takeouts in Louisiana
While takeouts offer opportunities, insurers must carefully evaluate the risks involved:
- High Exposure to Catastrophic Events – Louisiana’s vulnerability to hurricanes and severe storms presents a significant risk for insurers assuming policies from Louisiana Citizens.
- Rising Reinsurance Costs – The increasing cost of reinsurance affects insurers’ profitability, particularly for those with large concentrations of high-risk policies.
- Regulatory Considerations – Insurers participating in takeouts must comply with Louisiana’s insurance regulations, including maintaining adequate financial reserves and meeting policyholder service requirements.
Louisiana Takeouts in 2025
As Louisiana Citizens continues to navigate financial pressures and market challenges, takeouts will remain a key strategy for reducing its policy count. Insurers evaluating takeout opportunities must balance the potential for market expansion against the inherent risks of writing policies in a state prone to natural disasters.
For insurers considering entry into Louisiana’s takeout program, now is the time to explore the potential benefits and challenges. Whether you’re just getting started or preparing for a takeout, WaterStreet has you covered with nearly 20 years of experience supporting our clients through takeouts.
Reach out to WaterStreet Company today to request a consultation and demo.
