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Amid an insurance crisis, here's a look ahead at Louisiana's special session to address it

houma-ida.jpg
Courtesy of NOAA
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NGS emergency response imagery shows damage to buildings and homes in Houma, Louisiana, following Hurricane Ida.

Louisiana lawmakers are headed back to the capitol months ahead of schedule. On Monday they will gavel in a seven-day special session with one agenda item – to set aside $45 million for cash incentives to lure insurance companies back to the state. Insurance Commissioner Jim Donelon says it’s an essential step in addressing the state’s soaring premiums for homeowners, but lawmakers aren’t so sure.

Capitol Access reporter Paul Braun and WRKF Host Adam Vos talked through the insurance crisis and looked ahead to next week’s special session.

Adam Vos: Paul, what’s the goal here?

Paul Braun: The main goal is to get customers out of Louisiana Citizens Property Insurance Corporation — the state’s insurer of last resort.

Citizens is the landing place for the riskiest insurance policies in the state, and the state doesn’t want policyholders to linger there. There are huge, legally-mandated rate hikes for policyholders who stay with the company for more than a year. Those rate hikes are starting to kick in for many customers, but there aren’t enough private insurers willing to take on those policies.

Donelon told lawmakers last week that about 10,000 residential and commercial customers per month are now subject to 63% and 76% respectively.

AV: What are they planning to address that? How will that lure companies?

So, the $45 million dollars Jim Donelon is requesting would go to the Insure Louisiana Incentive Program. Lawmakers set up the program last spring but didn’t appropriate any money for its operation, so it’s just sitting idle for now.

The program would provide grants in the $2 million to $10 million range for companies willing to write policies in the state. There are strings attached. For example, if a company receives $5 million from the state, it will eventually have to write at least $20 million dollars worth of policies in the state. At least half of those have to be in specific parishes that have been deemed high-risk. And they have to stick around for at least five years.

There are additional requirements that Donelon hopes will prevent those companies from getting into the same financial troubles that sunk eight insurance companies since the devastating 2020 and 2021 hurricane seasons.

AV: Lawmakers are due back at the capitol in April for their regular session. What’s the urgency?

PB: Aside from those rate hikes, insurance companies have to buy reinsurance, which is just what it sounds like: insurance policies companies take out to protect their policyholders and their business against catastrophic losses from hurricanes or other natural disasters.

The companies need to purchase those policies now if they want to set up shop and start writing insurance policies in the state before this year’s hurricane season. Many wouldn’t be able to afford, or would be unwilling to take on, these policies without the state incentives.

State auditors found inadequate reinsurance levels to be largely responsible for the eight insolvencies that precipitated this crisis.

Reinsurance is much more expensive for companies when a large portion of their policies cover areas that are particularly prone to hurricane damage.

Donelon says that seven companies have already expressed interest in the program. But we have not yet heard from those companies directly. That’s something some lawmakers have requested for this session.

AV: There is some precedent for this. The state took a similar approach after Hurricanes Katrina and Rita. How did that work out?

PB: After those storms, the insurance market in the state was is similarly dire straits. Back then Donelon pushed for a $100 million incentive program that ultimately doled out $29 million. In 2008, the state started up a program focused on getting homeowners' policies out of the state safety net and covered by private insurers. And it worked.

The depopulation program, as it was called, offloaded 129,000 Citizens policies over the last decade, but many of those homeowners ended up with fledgling and fly-by-night insurance companies.

More than half were either declared insolvent, were absorbed by another company, or just stopped writing policies in the state, leaving many policyholders to scramble for a new insurer or worse — left with unfilled claims after a major storm.

AV: Read the tea leaves a bit for us. What are we likely to see in the session? 

PB: Legislative leaders’ support for this is pretty tepid. State House Speaker Clay Schexnayder (R-Gonzales) likened this incentive program to a band-aid covering a much larger wound. He and State Senate President Page Cortez (R-Lafayette) both said they’d like to see broader action during the regular session to address the insurance crisis.

But because the scope of this session is so narrow, we aren’t likely to see the debate this session veer off into those other areas. There are a few factors that play to Donelon’s advantage.

First, this measure only needs a simple majority to pass, instead of the two-thirds we typically see on spending and tax bills. And second, the state is once again flush with cash. Lawmakers have about $1.5 billion more to appropriate in the upcoming budget cycle than they initially thought.

Whatever happens with this session, it’s likely to happen quickly. The session will begin Monday, Jan. 30 and will end no later than Feb. 5.

The transcript above was edited for clarity.

Paul Braun is WRKF's Capitol Access reporter.

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