After a year of preaching under a tent in the parking lot after Hurricane Ida destroyed parts of Tulane Memorial Baptist Church, the Rev. Ross Johnson had a moment of respite when he moved the congregation back into the repaired sanctuary where he has been preaching for more than 30 years.

Then a new crisis hit.

Johnson faced a difficult math problem. The church’s insurer, which had battled in court for a year over damages before settling, dropped them. The $40,000-a-year insurance premium Johnson was quoted for the building nearly doubled. And the deductible roughly tripled to $90,000 a year, about 40% of the church’s annual budget.

He was wary about losing coverage after Ida destroyed most of the church’s archival material — old pictures, obituaries and baptismal records — in a second-floor storage room. Eventually, its insurer, Lloyd’s of London, paid to renovate the church, which was originally established on Tulane Avenue in the 1860s and moved to Gentilly in the 1960s.

But the costs of fully insuring the renovated church were too high, and Johnson chose to drop wind and hail coverage. Now, when it’s hurricane season, he sometimes drives to the church and prays that the building will stay safe.

“My faith is strong,” Johnson said. “But psychologically, there’s a lot of anxiety.”

All across Louisiana, churches are being uniquely squeezed by the insurance crisis that has gripped the state, causing turmoil in the housing market and threatening the most at-risk communities.

In response, a group of church leaders are working to set up a self-insurance fund. If successful, it could provide a lifeboat for churches who have been dropped by their insurer or who face staggering costs to insure their buildings. Still, challenges remain like getting enough protection from the global reinsurance market to backstop hurricane risk.

Churches are generally seen as hard to insure, in part because they often have old and valuable buildings. High-profile sexual abuse scandals have created liability issues for some as well.

Church Mutual, a Wisconsin company that specializes in covering religious organizations, was the main insurer for Louisiana churches for years. In 2019, before the recent spate of storms hit, it was the fifth largest commercial property insurer in the state.

Then, after devastating hurricanes in 2020 and 2021, Church Mutual faced huge losses, as well as a rash of lawsuits from churches who claimed it delayed or denied the payments it owed to them. Some of those lawsuits resulted in multi-million dollar verdicts against the company. Church Mutual pulled out of writing property insurance in Louisiana.

Since then, hundreds of churches have been left in the lurch. The number of churches getting insurance from Citizens, the insurer of last resort which charges higher premiums, exploded with a fivefold increase since 2019. The number has fallen by 115 since a peak in September, though it’s not clear how many of them are going without insurance.

“Churches are the hub of many of the communities they serve,” said the Rev. Shelton Charles Dixon, head of the Louisiana Home and Foreign Missions Baptist Convention. “Unfortunately, many of them are existing without coverage.”

For Johnson, the insurance crisis is yet another hardship that he and other pastors in south Louisiana face. Hurricane Katrina knocked his congregation down from more than 700 to 300 members. Then the COVID-19 virus and Ida hit back to back, whittling membership to around 100, about half of whom attend service regularly.

Walking along the pews of the sanctuary, Johnson said he’s been going without pay at the church, taking on a day job as a re-entry support specialist for the Juvenile Justice Intervention Center down the street. And he sometimes tells members who relocated to Houston that they’re better off staying there.

“Why would you come back?” he said.

‘Cease to exist’

In response to the turmoil that began hitting the insurance market in 2022, a group of church leaders set out to create a radical solution.

The Louisiana Baptist Convention convinced the Legislature to pass a bill in 2023 allowing them to set up a self-insurance fund. The plan would allow any nonprofit religious organization to buy insurance from the nonprofit fund, which would act as an insurer. It would take in premiums, buy reinsurance in case a catastrophe struck and pay claims if members suffer damages.

Unlike a for-profit insurer, which has pressure from shareholders to deliver profits, the church fund would keep its money in reserves, invest it and give some of it back to members when the reserve gets big enough.

Steve Horn, the president of the newfound Fellowship of Louisiana Churches and Non-Profit Religious Organizations, said the group has a board of directors and an adviser with Arthur J. Gallagher, the brokerage giant, and hopes to start accepting members later this year.

It’s not clear how many churches are going without insurance. Horn, who also serves as executive director of the Louisiana Baptist Convention, said he believes hundreds are going without wind and hail coverage. Some pastors have told him they are weighing tough decisions, like deciding whether to lay off associate pastors or keep their insurance premiums.

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“We believe there’s a huge future crisis on the horizon,” Horn said. “It’s not if but when the next catastrophic storm happens. There could be dozens, I don’t think it’s an exaggeration to say hundreds of churches … that cease to exist.”

The loss of churches would not only affect the congregations, Horn said, but would also affect a host of social services that happen in church buildings: AA meetings, disaster relief, food banks and more.

The group is still trying to put together enough initial funding to build up a reserve to allow it to start taking on members. Horn and others have spent months pulling together detailed information from potential members about their buildings and risk exposure.

Insurance Department spokesperson John Ford said that Insurance Commissioner Tim Temple is confident a series of laws passed last year will work by making it easier for insurance companies to do business, but “it’s going to take time.” He said a lack of affordable property insurance is a “major, and sometimes existential, issue for churches and other religious organizations.”

“While self-insurance funds require significant funding and can be complex to set up, the LDI is here to help organizations that are interested in exploring that possibility,” he said.

While the fund would be the first of its kind for property insurance in Louisiana, according to the Department of Insurance, it has precedent. Terry Duke, a broker with Arthur J. Gallagher who is helping the churches set up the fund, said it’s the same idea as similar funds for loggers, affordable housing and the Catholic church. While the idea was pushed by Baptists, any religious organization can join, and the group has Pentecostal leaders on its board.

The New Orleans Catholic Church didn’t respond to queries about its insurance issues, but bankruptcy documents indicate the Archdiocese is part of a national self-insurance fund of the Roman Catholic Church in the U.S. and Canada. The self-insurance organization covers losses directly and acts as a broker to get insurance from other companies.

The self-insurance fund that churches are trying to create would not be taking on all the risk. They would instead would buy reinsurance, a global network of companies that underpin the cost of property insurance. Insurers pay a portion of the premiums they collect to reinsurers in London, Bermuda and elsewhere, and the reinsurers promise to pay certain claims, often when a major disaster strikes.

The reinsurance industry has been upended by climate change, inflation and high interest rates that caused an exodus of capital from the market. As a result, the rising cost of reinsurance coverage is a key driver of Louisiana’s insurance crisis.

Still, Duke said the fund would mean churches are “controlling their own destiny,” offering better rates for buildings with more fortification and delivering savings to members instead of shareholders. And he said reinsurers have given the group promising signals on rates that could work.

“We don’t have stockholders looking to us for money,” he said. “Right off the bat, our costs should be lower than a traditional insurance policy.”

One challenge with these types of funds is that all the members will have the same type of hurricane risk, requiring a backstop like reinsurance, said Carolyn Kousky, head of the nonprofit Insurance for Good and a longtime researcher on insurance and climate.

But she noted that mutuals can encourage building stronger by delivering “resilience dividends” to members to help build stronger roofs and the like.

Insurer pulls out

The turmoil for churches followed a similar path to the crisis facing homeowners.

After a devastating hurricanes hit in 2020 and 2021, many churches reported delays, denials and underpayments from their insurers. And a host of them took to the courts.

Dozens of churches sued Church Mutual after the storms, court records show. In one case brought by the First Baptist Church of Iowa over Hurricane Laura damages, U.S. District Judge James Cain of the Western District of Louisiana wrote that Church Mutual settles far fewer cases before getting deeply tangled in court than other insurers. He said the company established a “pattern of systemic failure to resolve insurance claims.” The case went to trial, and the jury awarded the church $1.9 million.

In another case, a church in Leesville won a $9.8 million verdict over unpaid Laura claims.

Hurricane Laura appeared to hit Church Mutual particularly hard, financial records show. The company took in $13 million in property insurance premiums in Louisiana that year while losing $82 million, according to Department of Insurance records. That loss rate was more than double the statewide average for commercial property insurers.

Church Mutual Chief Underwriting Officer Pam Rushing said in a statement that the company no longer provides property insurance coverage in Louisiana because “shifts in severe weather have moved Louisiana into an area now considered high risk,” though it does still write professional liability coverage.

“We do not make these types of decisions lightly,” Rushing said. “However, for us to remain financially strong, viable and best able to serve our mission, we need to mitigate the severe impact catastrophic weather has had — and will continue to have — on our bottom line and our ability to serve customers nationwide.”