State lawmakers will convene Monday noon for a seven-day special session devoted solely to one issue: pouring $45 million into a stimulus fund to attract more property insurers into the Louisiana market. The session will not solve our state’s spiraling insurance crisis all at once. However, it could be a crucial first step in reversing what Insurance Commissioner Jim Donelon calls “an existential crisis for Louisiana residents and the economy.”
For a variety of reasons, most of which are beyond human control, property insurers in Louisiana and other coastal states have been dropping out in droves in recent years. The remaining ones have pushed up premiums, especially here in Louisiana.
The three main drivers of this crisis are history, geography and climate. Over the past 100 years, Louisiana has had more land-based hurricanes per capita than any other state. Our state’s location in the center of the northern Gulf of Mexico puts us on or near virtually every storm that enters the Gulf. And since 2017, virtually every corner of the US has experienced a record number of billion-dollar weather disasters – including hurricanes, hailstorms, floods, wildfires, winter storms and droughts.
Additionally, despite legislative attempts at “tort reform,” insurers continue to view Louisiana (and Orleans Parish in particular) as a “judicial hell hole.” All of these negative factors lead to two very predictable consequences: a growing number of insurance companies going out of state or bankruptcy, and skyrocketing premiums being charged by the companies that remain.
Another predictable consequence: more and more homeowners will have to rely on the state-sponsored insurer of last resort, Louisiana Citizens, which by law must charge higher premiums to avoid competing with market-based insurers.
To begin addressing the crisis, Donelon wants the state to put $45 million into a special stimulus fund lawmakers created after Hurricane Katrina to lure insurers back to Louisiana. Crucially, this incentive program worked. Lawmakers poured $29 million into the fund after Katrina, and the market has stabilized in a couple of years. More insurers were taking out policies, fewer homeowners had to rely on Citizens, and premiums were flat for a while anyway.
Another encouraging sign is that Donelon’s motion has bipartisan support. Governor John Bel Edwards, a Democrat, joined Senate President Page Cortez and House Speaker Clay Schexnayder, both Republicans, in calling the special session.
State Senator Kirk Talbot, R-River Ridge, chairman of the Senate Insurance Committee and author of the stimulus fund revitalization bill, says the program now requires insurers to match the state’s commitment (between $2 million and $10 million per company ) top up Write four times the incentive amount in five-year nationwide coverage. If a participating insurer leaves the state, becomes bankrupt, or otherwise fails to meet all program requirements within five years, the company forfeits its share of the state incentive funds and forfeits its remaining unpaid creditor grant, if any.
Some Conservative lawmakers have complained that the scope of the session is too narrow. You want to address a broader range of insurance topics. You’re right that more needs to be done, but the point of the one-on-one session is to focus on attracting more insurers to Louisiana as quickly as possible — and giving them time to get reinsurance in the world market, which is set to begin on June 1 will reopen. Without adequate, timely reinsurance, no insurer can afford to underwrite policies in coastal states. Time is of the essence.
June 1st holds special significance for residents of the Louisiana coast—it marks the start of hurricane season. Hopefully this will also mark the beginning of a turning point in our country’s existential insurance crisis.
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