LA Legislature Passes Insurance "Tourniquet" to Stop Bleeding of State's Insurers
Louisiana's legislature has taken a decisive step towards addressing the growing insurance crisis in the state. The state's lawmakers passed a bill on Friday, injecting $45 million into an incentive fund for property insurers. The fund is designed to stabilize the rising insurance rates that threaten long-term home ownership in the coastal areas that have been ravaged by hurricanes in recent years.
Hurricane Laura and Hurricane Ida, for example, generated a combined 800,000 insurance claims totaling $22 billion, causing eight insurance companies to fail and leaving other companies to stop writing new business below the Interstate 10. The shortage of private insurance options has forced many homeowners to seek help from Louisiana's state-sponsored insurer, known as the citizens insurer. However, the situation only got worse as homeowners faced a 63% increase in insurance rates starting January 1st.
Republican Louisiana Insurance Commissioner Jim Donelon played a critical role in securing the support of the bill. He convinced Democratic Governor John Bel Edwards to call a special session and secured the support of Republican Senate President Page Cortez of Lafayette and Republican House Speaker Clay Schexnayder of Gonzales. Donelon warned that if the bill was not passed, thousands of homeowners would lose their homes, and he stressed that the bill was an emergency measure needed to prevent this outcome.
"Every day someone is telling me they're on the verge of losing their homes," Donelon said during a committee hearing. "I truly believe that if we don't pass this bill, thousands of homeowners will lose their homes, and we don't want that to happen."
Donelon emphasized that the bill is a "tourniquet" until long-term solutions can be found to fix the state's insurance crisis. The commissioner said that at least seven companies have expressed interest in the program, and he is confident that they will be able to begin depopulating citizens, where the number of policies has quadrupled in just two years.
Republican River Ridge Senator Kirk Talbot, who chairs the Senate Insurance Committee, echoed Donelon's views, stating that the private companies' rates may be expensive, but they will still be more affordable than citizens. By law, citizens' prices must be 10% above the highest market rate in each parish or the actuarial rate, whichever is higher. "They will pay less than what they're paying with citizens," Talbot said.
Despite the overwhelming support from both the House and Senate with bipartisan margins, some lawmakers expressed reservations about the bill. They questioned whether the bill would work as advertised by Donelon and whether the companies would come in for a fast money grab of taxpayer money without any assurance that they wouldn't fail after another major storm. Democratic Baton Rouge Senator Regina Barrow said, "I'm really struggling with this."
In response to these concerns, Donelon said that the program is a replica of the incentive fund that worked following Hurricanes Katrina and Rita, but with stronger safeguards for the state. The commissioner is confident that the bill will provide the much-needed support to stabilize the rising insurance rates and prevent homeowners from losing their homes in the hurricane-hit coastal areas of Louisiana.