At the Session: $45M funding bill to entice insurers advances
Published 12:44 pm Wednesday, February 1, 2023
As Louisiana lawmakers continue to discuss a proposed bill that would allocate $45 million to an incentive program designed to entice more insurers to the state and hopefully drive down premium costs, state Insurance Commissioner Jim Donelon said he fears that without the funds, thousands of people could lose their homes.
In the midst of an insurance crisis, exacerbated by a series of detrimental hurricanes that resulted in insurers going out of business and fleeing the state, lawmakers convened for the second day of a special session to tackle the issue. And while some legislators view the $45 million funding bill as a Band-Aid solution, Donelon said addressing the dire situation can’t be delayed.
“I do believe it is much more than a Band-Aid, I would call it a tourniquet to stop the bleeding and get us to the hospital emergency room,” Donelon said during a House Committee on Appropriations meeting Tuesday.
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Louisiana Citizens Property Insurance Corporation, the state-run insurer of last resort and the only option for many residents, currently has 120,000 residential policies. In 2021 there were only 41,000 policies. Those using the safety-net insurance company, which by law is the most expensive in the state, are currently facing a 63% rate increase on residential property insurance policies, due in large part to Louisiana’s declining number of insurers.
For some, insurance has simply become unaffordable.
“Everyday someone is telling me … that they are on the verge of not being able to afford their home any longer,” Donelon told lawmakers.
State Rep. Timothy Kerner, of Jefferson Parish, a New Orleans suburb that was affected by Hurricane Katrina, said that his own homeowners’ insurance premium has skyrocketed from $6,000 to $18,000.
“The people of South Louisiana are suffering and it’s going to get worse if we don’t do something,” Kerner, who supports the proposed legislation, said. “Let’s not lose site that people may be in a situation where their premium is larger than their house note.”
Under the incentive program, which lawmakers approved of last year but did not put significant funds behind, qualified companies will be awarded grants between $2 million and $10 million. In return, those insurers must provide 100% matching funds for the grant. In addition, the new premium required to be written by each company is at least two times that total amount.
Denise Gardner, Donelon’s chief of staff, said at least nine companies have expressed interest in participating in the incentive program.
The program is a revival of the Insure Louisiana Incentive Program, which was created in 2006 following hurricanes Katrina and Rita when insurers packed up and left the market in droves. Donelon has touted the program as being successful. At the time, the program was allotted $100 million. Out of that, $29 million was spent, which brought in five new companies, The Times-Picayune/The New Orleans Advocate reported.
Lawmakers pushed back, asking why the state is currently in crisis if the program was “successful.”
“I think we lose site of the purpose of insurance — it’s not to sell policies, it’s not to make people have insurance. The point of insurance is, that in the event that something happens, for protection,” House Speaker Pro Tempore Tanner Magee said. “That’s why we mandate, across the board, insurance. But what’s the point of any of it, if at the end of the day a company is going to leave the state when forced to pay (claims).”
Louisiana’s insurance woes were gravely exacerbated by hurricanes Delta, Laura, Zeta and Ida in 2020 and 2021. The storms’ destruction generated a combined 800,000 insurance claims totaling $22 billion. Since then, at least nine companies that wrote homeowners policies in the state have gone insolvent. A dozen others have withdrawn, canceling or refusing to renew existing policies.
This time around, lawmakers are looking at additional safeguards to assure that companies are financially secure and prepared for widespread disaster, especially in a state where devastating hurricanes have become more frequent. Among the proposed requirements, companies will be subject to stress tests of their reinsurance program, enhanced solvency monitoring and must have a financial stability rating of an “A.”
“I guess my concern is, as a customer, we brought in companies who didn’t do a good job of answering claims after Ida,” Magee said. “They didn’t pay claims really. The tire hit the gravel and they left the state. I don’t want that to happen again.”
The bill, as well as a second bill pertaining to restrictions of the proposed appropriation, advanced out of the House committee without objection Tuesday. The legislation it is expected to be considered on the House floor today.