State lawmakers will convene Monday afternoon for a seven-day special session devoted solely to one item: putting $45 million into an incentive fund to attract more property insurers to the Louisiana market. The session won’t solve our state’s spiraling insurance crisis all at once. However, it could be a critical first step in averting what Insurance Commissioner Jim Donelon called “an existential crisis for Louisiana’s residents and economy.”
For a variety of reasons, most of which are beyond human control, Louisiana and other coastal states have seen property insurers break loose in droves in recent years. Those that remain have raised premiums through the roof, especially here in Louisiana.
The three main drivers of this crisis are history, geography and climate. Over the past 100 years, Louisiana has experienced more hurricane landfalls per capita than any other state. Our state’s location in the middle of the northern Gulf of Mexico puts us in or near the path of 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.
On top of all this, and despite legislative efforts at “tort reform”, insurers continue to view Louisiana (and Orleans Parish in particular) as a “judicial hellhole”. All these negative factors lead to two very predictable consequences: a growing number of insurance companies that fail or leave the state, and rising premiums demanded by those that remain.
Another predictable consequence: more and more property owners must 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 dedicated stimulus fund, which lawmakers created after Hurricane Katrina to lure insurers back to Louisiana. Critically important: That incentive program worked. Lawmakers put $29 million into the fund after Katrina, and the market stabilized within a few years. More insurers wrote policies, fewer homeowners had to rely on Citizens, and premiums leveled off for a while anyway.
Another encouraging sign: Donelon’s request has bipartisan support. Governor John Bel Edwards, a Democrat, called the special session along with Senate President Page Cortez and House Speaker Clay Schexnayder, both Republicans.
State Sen. Kirk Talbot, R-River Ridge, who is the chairman of the Senate Insurance Committee and authored the law reviving the stimulus fund, says the program now requires insurers to match the state’s ante (between $2 million and $10 million per company) to match and to write four times the incentive amount in statewide coverage for five years. If a participating insurer leaves the state, becomes insolvent or otherwise fails to meet all program requirements within five years, the company will lose its share of the state’s incentive money and forfeit its remaining match to unpaid creditors, if any.
Some conservative lawmakers have complained that the session’s scope is too narrow. They want to address a broader range of insurance issues. They are correct that more needs to be done, but the goal of the single-issue session is to focus on attracting more insurers to Louisiana as soon as possible — and to give them time to obtain reinsurance on the global market, which reopens June 1 . Without adequate, timely reinsurance, no insurer can afford to write policies in coastal states. Time is of the essence.
June 1 holds special meaning for Louisiana coastal residents — it’s the start of hurricane season. Hopefully, it will also see the beginning of a turnaround in our state’s existential insurance crisis.