Despite grumbling from some lawmakers, state leaders are confident they can enact a temporary solution to Louisiana’s property insurance crisis in a short special session beginning Monday afternoon.
The plan is for the Legislature to put $45 million into a stimulus fund to help revive the state’s homeowners insurance market before the start of hurricane season June 1. Louisiana.
“Hundreds of thousands of people need this relief,” state Insurance Commissioner Jim Donelon said. “Thousands are at risk of losing their homes and so this is truly a crisis.”
Senate President Page Cortez, R-Lafayette, said that in a best-case scenario, the Legislature would approve the funding and complete business within five days — by Feb. 3. The session must end by 18:00 on 5 February.
“I think everybody understands that we’re putting money into a fund, which just gives the commissioner the tools to go out and encourage companies to come to the state,” Cortez said.
The $45 million would come from $925 million in extra revenue the state is expected to collect this fiscal year.
Donelon said seven insurance firms have said they are interested in the incentive fund. Five are already licensed in Louisiana and two others need to be licensed. Donelon said it could be done in short order.
Under the legislation, businesses would have to pay $1 for every dollar in government aid. They will also have to stay in business for at least five years or return the government money.
Supporters of the push said quick action was needed to allow insurance companies to get reinsurance — insurance bought by insurers as a fallback in the event of a catastrophe in which claims exceed what they can pay.
The special session is also aimed at easing pressure on the Louisiana Citizens Property Insurance Corp., the state-owned insurer of last resort. It issued about 125,000 policies – about double the norm – and policyholders face premium increases on top of already above-average rates.
The grumbling stems from Gov. John Bel Edwards’ special session call that was so carefully drawn that any push for broader insurance changes will have to wait until the regular session, which begins April 10. The only item on the agenda is to appropriate excess government revenue. to a fund to attract insurance companies to the state.
“As I interpret the call, it would not be feasible to propose reform measures,” said Rep. Jack McFarland, R-Winnfield and chairman of the 42-member Louisiana Conservative Caucus. “It’s going to be challenging to get members to vote for $45 million without the assurance that reform measures will also be passed.”
The group said the Legislature should tackle “excessive” regulatory rules on insurance companies and provide changes in how claims are paid and allow more flexibility on insurance rating laws.
The governor and others say allocating money in a special session to attract insurance companies is just a first step.
“It’s not the be-all, end-all,” said Jay Dardenne, commissioner of administration. “It’s not a panacea for the problem.”
Dardenne, like Cortez, is optimistic that lawmakers can quickly address the funding issue.
“I have every reason to believe the Legislature is going to go along with this,” Dardenne said.
The bill will be sponsored by House Appropriations Committee Chairman Jerome “Zee” Zeringue, R-Houma, in the House, and Senate Insurance Committee Chairman Kirk Talbot, R-River Ridge, in the Senate.
The fund is modeled after one created after Hurricanes Katrina and Rita in 2005. Donelon said the original fund had $29 million, and the $45 million represents the same amount adjusted for inflation.
The Conservative Caucus said 40% of insurance companies that got money after the 2005 storms are no longer writing policies in Louisiana.
“We’re being put in a box to allocate money as a Band-Aid instead of passing legislation to address the underlying problems,” McFarland said.
Cortez said that tackling the broader issues would take two or three weeks.
“None of the other things are as time-sensitive as this particular bill because of the reinsurance issue,” he said. “And if the incentive program doesn’t work, the money is still available to be appropriated for other things in the regular session.”
McFarland and 11 other GOP House members met with Florida Gov. Ron DeSantis for 45 minutes on Jan. 17 to discuss insurance changes in that state after a recent special session that focused on some of the same issues being faced in Louisiana. Florida has established a $1 billion state reinsurance fund as a backup for insurance firms, according to news accounts.
The Louisiana Realtors Association said the $45 million is a “good start” but does not address the underlying problem.
The group said the state has tried to over-regulate insurance companies, which has reduced market capacity and caused potential homeowners to back away when they see what homeowners insurance will pay.
“We are in crisis mode in relation to securing good, affordable cover for all property customers,” says Norman Morris, chief executive of the group.