History and Background
Prior to 1970, there was no insurance safety net in Louisiana. If an insurance company was declared insolvent, the policyholder or claimant had to file a claim in the liquidation proceeding. Any assets from the insolvent insurer would eventually be divided among hundreds or thousands of creditors and claimants according to rank. These bankruptcy-like proceedings usually took years and rarely resulted in the significant payment of most 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. 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.
Some people compare LIGA to the FDIC, which protects the public when a bank becomes insolvent. 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.
The stabilization created by LIGA also inures to the benefit of all insurers in Louisiana.
There is another guaranty association system, which covers policyholders of life insurance policies, health insurance policies and annuities sold in Louisiana. Information on that protection through that system is available through the Louisiana Life and Health Insurance Guaranty Association (LLHIGA), 620 Florida St, Ste. 210, Baton Rouge, LA 70801, 225-381-0656.
Funding and Operation
LIGA receives no public funding. LIGA is a private association run by and for the insurance industry. LIGA has the authority to assess insurers 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. LIGA levied no assessments from 2005-2020.
The LIGA Board of Directors is comprised of nine members, five 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.