Treasurer suggesting state-run flood insurance

BATON ROUGE (AP) — Seeking a way to ease skyrocketing federal flood insurance rates, Treasurer John Kennedy suggested Wednesday

that Louisiana should consider getting in the business of offering flood insurance coverage to its residents.

Kennedy said state officials should look at

creating a state-run flood insurance company, similar to the way

Louisiana years

ago created corporations that offer property insurance and

worker's compensation coverage for those who can't get it on the

private market.

He said those companies helped stabilize the state's markets for both types of insurance.

The rates charged through the National Flood

Insurance Program are slated to rise steeply for many homeowners around

the country,

including Louisiana, as part of a bipartisan overhaul of the

program passed by Congress last year to cut the federal government's

costs.

Members of Louisiana's congressional

delegation are seeking to keep lower rates in place, but that has

stalled in Congress.

Kennedy said the state needs a backup plan, rather than face the

devastating effects that officials worry will come with dramatic

flood insurance increases.

"The only plan we have to deal with this problem seems to be to put ourselves at the mercy of Congress ... It doesn't look

to me like they're able to pass anything up there," Kennedy said.

The treasurer said he wants to start a conversation about the possibility of a state fix, acknowledging he's not sure what

might work.

Gov. Bobby Jindal and Insurance Commissioner Jim Donelon weren't swayed by the idea.

Jindal spokesman Kyle Plotkin said in an email that the governor supports the congressional delegation's efforts "to fix this

at the federal level where the problem started."

Donelon said: "I think it's a very risky and pricey proposition for the state to get involved in the flood insurance business."

Kennedy suggested a structure that could

have people and businesses pay for flood insurance from a state-run

company that

would provide claims coverage up to a certain cap, with federal

flood insurance kicking in to pay claims beyond that cap amount.

Homeowners and businesses would have to pay two sets of flood insurance premiums, to the state-run company and to the National

Flood Insurance Program.

But the treasurer said the two-tiered system could cut the risk to — and therefore, the premium costs charged by — the federal

flood insurance program because it would serve as a sort of catastrophic backup insurance.

He said the state-run company could consider hurricane protection measures and flood risk differently than the federal program

does, taking into account things like locally-built levees that may reduce flooding risk and lower premiums.

People and businesses in Louisiana have 500,000 policies through the National Flood Insurance Program, the third highest number

in the country.

With the current rate hikes, Kennedy said

flood insurance costs could devastate south Louisiana's economy. He said

either

people will spend so much on insurance that they cut spending

everywhere else, or people could get priced out of their homes

entirely.

"Obviously, the preferred remedy here is for Congress to go, 'We didn't mean to do this,'" Kennedy said. "I'm just saying,

what's the plan other than to complain if Congress doesn't come through?"

While he wasn't confident Congress would help lower rates, Donelon also said he thought Kennedy's idea was impractical.

He said it would involve another act of Congress to restructure the federal flood insurance program to work with Louisiana's

approach. He also said he wasn't sure the premium rates would be any cheaper if a state-run insurer got involved, without

the state putting up a sizable amount of money to subsidize coverage.

But the chairman of the Senate Insurance

Committee, Sen. Dan "Blade" Morrish, said Kennedy's concept was a strong

starting

point for discussion. He said such a program could possibly be an

arm of the state-run property insurer of last resort, the

Louisiana Citizens Property Insurance Corp.

"I think that's a really good place to

start. I wish I had thought of that. I'm not sure it would work, but

it's a good conversation,"

said Morrish, R-Jennings.

Morrish said state officials would need to look at whether a state-run flood insurer could keep premiums lower than the federal

flood program while also ensuring the company has enough money to pay the claims.