Impact of Insurance Availability on Homeownership in Louisiana

Louisiana often faces natural disasters, impacting homeownership through insurance availability. As severe weather events increase in frequency and intensity, homeowners insurance costs are rising, and options in some regions are dwindling. Junior Betanco Gunera, a doctoral candidate at Louisiana State University's Finance Department, has explored how this insurance dilemma influences mortgage lending practices, potentially affecting homeownership trends.

Gunera recently presented his preliminary findings at the 2026 Eastern Finance Association and the 2025 Financial Management Association annual meetings. His study draws from a 2024 U.S. Senate Budget Committee report that analyzed about 249 million insurance policies nationwide from 2018 to 2023, alongside the Home Mortgage Disclosure Act (HMDA) data.

The study discovered that when insurers decide against renewing policies in high-risk areas, as indicated by the Non-Renewal Rate (NRR), banks adjust their lending patterns. A 1% increase in NRR correlates with a notable 0.392 percentage point decline in mortgage approval rates the following year, while mortgage sizes and interest rates remain stable.

Rather than causing lending to fail altogether, a declining insurance market leads to stricter lending standards. In counties with high NRRs, banks lower their loan approval rates instead of raising interest rates, indicating a rise in application rejections. This trend has significant implications for both consumers and policymakers.

Homeowners' insurance traditionally protects homeowner equity and provides collateral security for lenders. However, if securing private insurance becomes challenging, or if properties are confined to costly government-operated "last resort" markets, home resale values may be affected. Prospective buyers could find it difficult to obtain mortgage approval, impacting property market dynamics and homeowner equity accumulation.

Traditional metrics like average interest rates and total lending volumes may not fully reflect changes in lender behavior, potentially leading to oversight by policymakers and regulators. Betanco Gunera emphasizes the need for better coordination among insurance regulators, housing policy officials, and financial regulators to understand how insurance market conditions affect credit availability.

Gunera's study used a congressional dataset from 2024 to map homeowner insurance non-renewal rates by county across the U.S. Higher risk areas, marked by darker shades of red, prominently appear along the coastal areas of Louisiana, Florida, and North Carolina, as well as parts of California, while lower risk areas are more prevalent in the Midwest and Northeast.