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 $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 neighborhood 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.

The Byes were fortunate to find at least one private insurance company that would write them a policy. But for many others in a similar position, the only viable alternative is what’s known as an “insurance plan of last resort” — that is, state-mandated programs that insure people and businesses that can’t get policies through the private market. 

Fair Access to Insurance Requirements Plans, or FAIR plans, operate in 36 states and typically have high premiums, strict requirements, and offer limited coverage. That’s by design: Authorized by states in the 1960s and funded by private insurance companies as a prerequisite for doing business, the plans are supposed to serve as a backstop for Americans in the riskiest parts of the country. 

But as more of the nation becomes high-risk and private insurance companies pull back, waves of people are being forced on and off these state-sponsored plans. 

“I just got an email from my homeowners insurance broker that the only thing I can do is go with Citizens which is the state run insurance which is very expensive and not particularly good insurance,” someone in Florida posted on Facebook in 2022. 

Another person posted, “Anyone who has had [United Property & Casualty] or another insurance company that … went bankrupt after Ian had any luck obtaining a new policy with another company? As of right now heading into hurricane season, I was informed by [an] insurance brokerage that no company will insure me.”

The question of what to do with the growing number of people who have been shunted onto their state FAIR plans by insurance companies that have gone bankrupt or withdrawn from states in recent years is becoming a major headache for public officials across the U.S. In California, there are 625,000 residential dwellings on the state’s last-resort plan as of this September — a 167 percent increase since 2021. In Louisiana, the number of residential properties on the state plan nearly tripled between 2021 and 2023. In Florida, the state-backed insurance plan of last resort took on around 800,000 new policies between 2019 and 2023.

Alfonso Pating, a global financial regulation analyst at the Natural Resources Defense Council and the author of a recent report on state FAIR plans, calls this the “cycle of doom.”

Here’s how it works: Private insurers go bankrupt or withdraw from risky areas, and dropped property owners are shunted onto their state FAIR plans. Those properties flood or burn down, depleting the FAIR plan’s coffers, and then the program imposes fresh charges on private insurers or homeowners, or both, to replenish its reserves. Insurance companies try to pass some of those costs onto all policyholders in that state, driving up the cost of insurance for everyone. Overall, the insurance business consequently becomes less profitable for private insurers, resulting in more of them leaving the state and more people ending up on FAIR. 

That’s the problem in a nutshell, said Pating. “FAIR programs aren’t meant to be a long-term solution,” he said. 

There are ways to exit the doom vortex. One is to reform FAIR. When these state programs have a surplus, meaning they earn more money than they pay out in a given year, they typically disburse those funds back to the private insurance companies that pay into the plan. Instead, Pating said, FAIR plans could use that money to provide subsidies for low-income homeowners in high-risk areas who want to make their homes more resilient but can’t afford to. They could offer voluntary relocation assistance to move people out of areas that are guaranteed to keep flooding and burning. The plans could even offer group insurance to communities that want to take on big climate adaptation projects, such as prescribed burns to reduce the risk of wildfire, to help protect an entire neighborhood or cul-de-sac. 

The most effective offramp, said Aldrich, from Northeastern, is building disaster preparedness into zoning from the ground up, which would require state legislators to pass laws banning new development in high-risk areas and mandate that homeowners take steps to protect their homes from wildfires, floods, and other hazards. But real estate lobbies in many states have stifled that kind of legislation, making it politically risky for politicians to support laws constricting new development. 

As a result, counties at high risk of extreme weather across the United States have seen an influx of new residents in recent years, while low-risk counties have seen an exodus. It’s clear to researchers like Pating and Aldrich, and indeed to many insurers, that that trend is moving in the wrong direction and that politicians will need to step in to both harden existing housing stock against climate change and to prevent the pool of high-risk homes from getting larger. 

In Louisiana and Florida, however, state lawmakers have taken a different approach to reform — one that critics say is more focused on insurance companies than homeowners. In Florida, new legislation that requires companies to pay out insurance claims faster also shields those companies from expensive lawsuits (though the state did resurrect a home-hardening policy this year to help homeowners protect their properties from wind damage). In Louisiana, policymakers repealed a “three-year rule” implemented after Hurricane Katrina that prevented insurers from canceling or not renewing policies that have been in effect for more than three years, and they greenlit a $45 million incentive program to encourage companies to write property insurance policies in the state. 

The reforms have succeeded in attracting new insurers to both states. Louisiana has licensed 15 new insurance companies since 2024. In Florida, 17 new insurers have entered the market — including Viceroy Preferred Insurance, a company started by Hale Partnership Capital Management, the firm that bought Monarch from FedNat. Louisiana and Florida have begun “depopulating” their state insurance plans of last resort in response to the influx of new private insurers, forcing tens of thousands of homeowners back off the state-backed plans into a market regulators say is now stable. 

“Since the passage of historic reforms, Florida’s property insurance market has experienced record growth and stability,” Florida’s Office of Insurance Regulation wrote last month, celebrating its success and noting that the state had the “lowest average homeowners rate increase in the nation in 2024” — a year when two back-to-back hurricanes hit the state. 

Then again, 2025 has been an unusually quiet Atlantic hurricane season for the U.S. — the first time in 10 years that no hurricane has hit the country. The real test of resiliency for the Southeast’s insurance market won’t come down to how many new insurers states have attracted, it will be how many of those insurers will stay standing after repeat hits. Perhaps just as importantly, it will hinge on what percentage of homeowners in those states have been incentivized to adapt to bigger storms or encouraged to move out of harm’s way. 

And that, Aldrich said, comes down to lawmakers’ willingness to take steps that may be politically painful in the short run. “This is not a new story for civilization,” he said. “We do not want to start imposing costs that would actually make society more effective and more resilient to these kinds of disasters.” The end result, however, is more expensive insurance for everyone. 

This story was originally published by Grist with the headline They survived the hurricane. Their insurance company didn’t. on Nov 4, 2025.