They Survived the Hurricane. Their Insurance Company Didn’t.

This story is part of The Disaster Economy, a Grist series exploring the often chaotic, lucrative world of disaster response and recovery. It was produced by Grist and co-published with Verite News, and is published with support from the CO2 Foundation. 

Jennifer and Dean Bye were just getting by before Hurricane Ida slammed into southern Louisiana in 2021. The couple own a house in a comfortable subdivision in Paulina, a town about an hour west of New Orleans, that they share with their three kids. They had their challenges before the storm—Jennifer had recently been diagnosed with uterine cancer around the same time that one of their children was diagnosed with nonverbal autism—but the Byes were making it work. Then Ida turned everything upside down.   

“The living room fell in and everything had to be gutted,” Jennifer, a nursing assistant, said. “We lost everything we owned.”

After pummeling the Caribbean, Hurricane Ida made its U.S. landfall on August 29. The storm had evolved from a Category 1 into a Category 4 in the span of just 24 hours, a rapid intensification powered in part by unusually hot seawater in the Gulf of Mexico. It dumped a foot of rain on Louisiana and meandered north, blowing through 17 states before it reentered the Atlantic Ocean north of Maine. The storm, one of the strongest to hit Louisiana on record, left a trail of devastation in its wake: More than 100 people died and economic losses totalled US$75 billion.

Four years later, the Byes are still living in a damaged house. Patches of tattered plywood siding are exposed to the elements. Inside, the windowsills are blackened with mildew. The kids play in a stripped living room, bare cement and grout underfoot. Fast-food wrappers and trash mingle with packing boxes and pulled-up carpet. The other houses in the neighbourhood are neatly manicured, but the Byes’ house is still a wreck. 

On paper, the family did everything right. They had homeowners insurance through an A+ rated, Better Business Bureau-accredited insurer called FedNat Insurance Company and kept up with their payments — some of the highest in the country.

What they didn’t account for was what might happen if their insurance company couldn’t make its payments.

In recent years, extreme weather events supercharged by climate change have revealed how fragile the country’s property insurance landscape is — and how quickly insurance companies can go from profitable to nonexistent. In the five years between 2018 and 2023, more than 1.9 million home insurance policies were dropped in disaster-prone states like Florida, Louisiana, California, and Texas by insurance companies that either voluntarily withdrew from those states or went bankrupt. FedNat was one of seven Florida-based property insurers to go bankrupt during 2021 and 2022 due to insurmountable financial troubles. In Louisiana, 11 insurance companies were declared insolvent between 2021 and 2022. 

The resulting scramble to secure insurance in high-risk areas often means homeowners face a daunting choice: high premiums in a private market that is loath to insure them, or limited coverage through state-mandated insurance programs that can cost just as much or more.

“How do you do that to people?” Bye asked. “How do you insure people in the South, take all of these premiums, and then just belly-up?”

The insurance business has always been cyclical, rocking between boom periods of profitability and bust periods of huge losses driven by disasters and homeowner lawsuits. But as the planet heats up, the business of risk is undergoing a period of rapid evolution. FedNat’s quick demise is emblematic not just of an industry ill-prepared for the consequences of climate change, but also of a new era for the country’s insurance markets — one where state systems designed to keep companies in the black and shield homeowners from catastrophe are failing cyclically in both regards. 

“We are in the era of polycrisis,” said Daniel Aldrich, director of the Resilience Studies Program at Northeastern University, “which is a fancy way of saying the number of disasters and their impact are both increasing and the time between shocks is decreasing, therefore government institutions, insurance companies, and homeowners can’t keep up.” 

In 2019, FedNat acquired Maison Insurance, a company with operations in Louisiana and Texas. It proceeded to become one of the biggest property insurers in Louisiana. But its fortunes took a turn less than a year later, when four hurricanes hit the South in the span of about two months, followed by a deadly winter storm that burst pipes and flooded homes in early 2021. 

Later that year, as FedNat faced more than $100 million in net losses, a figure that included the claim filed by the Byes, the company abruptly announced it was dropping all of its policies outside of its home base of Florida. Some 13,500 homeowners in Louisiana were suddenly forced to scramble for insurance. Reorienting to focus exclusively on Florida, FedNat’s CEO said, would result “in a financially stronger company.” 

Those assurances proved premature.

Six months later, in the spring of 2022, FedNat, hat in its hands, asked Florida insurance regulators to allow it to cancel more than 56,000 in-state policies. It’s unlikely that state regulators would have permitted such a move in normal times, but their hands were tied: Three Florida-based insurers had already folded in the first half of that year, and the state couldn’t afford another insurance bankruptcy. So the Florida Office of Insurance Regulation let FedNat cancel thousands of policies, an “extraordinary statutory remedy,” in a desperate bid to stabilize its market. The state’s gamble didn’t pay off.

Even though FedNat had raised its rates by 70 percent over the preceding five years, the company admitted it had “overstated its cash positions” in the fall of 2022 and was placed into liquidation by the state.

Before it went bankrupt, FedNat transferred tens of thousands of policies to one of its Florida affiliates, Monarch Insurance, and closed on a $15 million investment deal with a company called Hale Partnership Capital Management, a move that made Hale the majority owner in Monarch. “[We’re] hungry,” Hale’s CEO said in 2023, eyeing an expansion.

FedNat’s evolution between 2021 and 2022 mirrors a pattern that outside experts have seen repeated in recent years — one that results in new mergers and lucrative payouts for executives, and spells disaster for homeowners.

“By declaring bankruptcy, [insurance companies] can force policyowners and reinsurance companies to take a ‘haircut’ — meaning take less money than they were promised initially,” said Aldrich. “Some of those assets then are reabsorbed into a new company, some can be sold off, and some of the policies that are still productive, maybe they’ll keep those, like if they’re in very low-risk areas.”

People like the Byes, forced to navigate the legal process of fighting for an insurance payout while simultaneously trying to find another company willing to insure them, end up getting caught in the crosshairs.

In 2022, the Byes hired lawyers to fight for what they were owed from FedNat. When FedNat officially entered into bankruptcy, their litigation, alongside approximately 1,500 other open claims, was inherited by the Louisiana Insurance Guaranty Association, or LIGA, a state-backed corporation that assumes outstanding claims from failed insurance companies licensed in Louisiana. But the pace of climate-intensified disasters has also overwhelmed LIGA, which is meant to serve as a safety net for people left in the lurch like the Byes. 

While waiting on LIGA to settle their claim, Dean called 68 insurance companies before one, Allstate, agreed to write him a homeowner’s policy for $3,900. That annual premium payment is now closer to $5,000, Dean, who recently retired from working as an emergency medical technician, said. He’s tried to switch to a cheaper plan since. “Nobody is writing,” he said. “Still, to this day, nobody is writing.” 

The Byes received some money from FedNat before the company went bankrupt, checks that totaled less than $90,000, Dean said, barely enough to make a dent in the damage. As of this month — more than four years after the hurricane that nearly destroyed their home — the couple said they are still waiting on $450,000 from LIGA. LIGA’s latest annual report shows more than 500 FedNat claims are still pending. The guaranty association is managing a backlog of leftover claims — not just from FedNat, but also the many other insurance companies that have gone bankrupt in recent years. LIGA did not reply to Grist’s request for comment, nor did Hale Partnership Capital Management.

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