The signs of a spiraling property insurance crisis keep piling up.

A seventh insurance company with homeowners policies in Louisiana was declared insolvent Thursday, sending another shock to customers, regulators and agents who face a tightening market at the dawn of hurricane season.

Southern Fidelity, which has some 42,000 policies in Louisiana, was ordered into liquidation by a Florida judge. Its policyholders will be thrown to the mercy of an industry bailout program run by the state.

Louisiana Insurance Commissioner Jim Donelon delivered a grim report on the same day about the status of the insolvent Lighthouse Property Insurance Corp. and its subsidiary Lighthouse Excalibur Insurance Co.

A number of insurers who had previously expressed interest in assuming customers from the failed Lighthouse companies backed out at the last minute, Donelon said, leaving 22,000 consumers to fend for themselves.

In coastal areas like south Louisiana, property insurance is a key piece of the invisible safety net that underpins the real estate market. But after two years of powerful hurricanes making landfall, producing more than a half-million claims and billions of dollars in payouts, industry insiders and consumers say the market is in meltdown.

The landscape is getting “significantly worse,” with few options to make it better, said Jeff Albright, chief executive for the Independent Insurance Agents & Brokers of Louisiana.

“What we need is to attract some new homeowners insurance companies to come write business in the market,” Albright said. “It’s tough to do that after four hurricanes in two years. It would help if we went a year or two without storms, but obviously we have no control over that.”

At least a dozen companies since June 2020 have decided they can no longer withstand the risk, moving to cancel thousands of policies en masse, records show. Most of the firms are relatively small, but their collective exit from the state carries some real impact.

Consumers, as a result, have fewer options. More people are flocking to the state-sponsored insurer of last resort, which has added more than 13,000 new policies since Hurricane Laura struck in August 2020. Between Laura’s landfall and March 2022, Louisiana Citizens Property Insurance Corp. saw its rolls grow by 37%.

Donelon urged homeowners facing cancellation to reach out to their insurance agents to get help finding coverage.

The market shakeout is perhaps the greatest challenge facing Donelon since after Hurricane Katrina, when then newly formed Louisiana Citizens nearly folded. In the years since, he has made it a priority to attract more insurance companies to the state in order to reduce the burden on Citizens.

The results have been mixed. Some regional companies, operating largely in the Southeast, answered his call. But most were not on solid financial footing as the legacy firms that have largely abandoned the Gulf Coast.

Donelon said he was not aware of any other insurers operating in Louisiana that could be veering on the edge of financial failure.

The collapse of Southern Fidelity was not a surprise, as the company’s stability rating was withdrawn this month by the rating firm Demotech. The firm had also pleaded with regulators in Florida, where the bulk of its customers reside, to grant it a hefty 85% rate increase on new and existing policies.

“Let me assure you, our predicament and challenge at this point is much less than it was 15 years ago in the aftermath of Katrina and Rita,” Donelon said this week. “There are still (companies) out there to write policies in the private sector.”

The tumult has thrust the Louisiana Insurance Guaranty Association, or LIGA, into the spotlight, swamping it with complaints from aggrieved consumers. Created as a financial backstop for insurance companies, LIGA is now charged with adjudicating the failed insurers’ claims.

John Wells, the association’s executive director, said LIGA has has to hire a number of public adjusting companies to assist them and another firm to operate a call center.

“We’ve hired independent adjusting firms to reach out to everyone that we know has an open issue and make contact with those folks and help walk them through the process,” Wells said. “Those desk adjusters report back up to us what is owed for the particular homeowner, and we issue those checks out of our office.”

Payments through LIGA are capped at $500,000 per person per occurrence, according to its website. If a claim exceeds that amount, Wells said, a court-appointed receiver would be on the hook for paying the rest.

Homeowners who have lost their insurance carrier and are able to find new coverage may discover other challenges as the recovery from multiple recent hurricanes drags on.

Once a customer of Lighthouse Excalibur, Mallory Seal said she’s still owed money for repairs on her Springfield home. The claim is in the hands of LIGA now, but the delayed payment could hurt her in other ways.

“We’ve been through hell with them (Lighthouse). Six adjusters and one engineer,” Seal said. “They still owe us $233,000.”

After she was dropped by Lighthouse Excalibur, Seal said her insurance agent found her a policy in the private market with Safeco Insurance.

“The problem is if Safeco (Insurance) comes to our residence and sees the blue tarp hanging around, they’re going to drop us, too,” Seal said. “We’re just praying to God that they don’t come and inspect the house, because after that, they drop us and we have to go to (Louisiana) Citizens.”

With companies failing and consumers scrambling for coverage, elected officials outside of Donelon’s office have begun to sound the alarm about what appears to be a growing crisis.

St. Tammany Parish President Mike Cooper said in a statement Friday that the insurance crunch is impacting families in his waterfront parish, who are already facing the national headwinds of inflation and increased utility and gasoline prices.

“The heat of summer and the onset of hurricane season aren’t making it any better,” Cooper said. “Although insurance rates are not within my control, I will pursue every available option as parish president to advocate for the citizens I serve.”