Despite grumbling from some lawmakers, state leaders are confident they can enact a temporary fix for Louisiana’s property insurance crisis in a short special session that begins at noon Monday.
The plan is for the Legislature to put $45 million into an incentive fund to help revive the state’s homeowners insurance market ahead of the start of hurricane season June 1. Eleven insurance firms have gone out of business in recent months and others have quit writing policies in Louisiana.
“Hundreds of thousands of people are in need of this relief,” said state Insurance Commissioner Jim Donelon. “Thousands are in danger 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 will approve the funding and finish business in five days — by Feb. 3. The session has to end by 6 p.m. Feb. 5.
“I think everybody understands that we are putting money into a fund, which is just giving the commissioner the tools to go out and incentivize 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 become licensed. Donelon said that could be done in short order.
Under the legislation, firms would have to put up $1 for each dollar in state aid. They also would have to remain in business for at least five years or return the state money.
Backers of the push said fast action is needed to allow insurance companies to get reinsurance — insurance purchased by insurers as a backstop 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-run insurer of last resort. It has issued about 125,000 policies — roughly 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 being drawn so narrowly that any push for broader insurance changes will have to wait until the regular session, which begins April 10. The lone item on the agenda is to appropriate excess state revenue to a fund to attract insurance companies to the state.
“As I interpret the call, it would not be feasible to be able to present reform measures,” said Rep. Jack McFarland, R-Winnfield and chair of the 42-member Louisiana Conservative Caucus. “It is going to be challenging to get members to vote for $45 million without the assurance that there will be reform measures passed as well.”
The group said the Legislature needs to tackle “excessive” regulatory rules over insurance firms and to 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.
“This is not the be-all, end-all,” Commissioner of Administration Jay Dardenne said. “It is not a panacea to the problem.”
Dardenne, like Cortez, is optimistic that lawmakers can address the funding issue quickly.
“I have every reason to believe the Legislature is going to go along with this,” Dardenne said.
The bill is set to be sponsored by House Appropriations Committee Chair Jerome “Zee” Zeringue, R-Houma, in the House, and Senate Insurance Committee Chair Kirk Talbot, R-River Ridge, in the Senate.
The fund is modeled after one set up after hurricanes Katrina and Rita struck 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 no longer write policies in Louisiana.
“We’re being put in a box to allocate money as a Band-Aid instead of being able to pass legislation to address the underlying problems,” McFarland said.
Cortez said tackling the broader issues would require 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 faced in Louisiana. Florida set up a $1 billion state reinsurance fund as a backup to 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 overregulate insurance companies, which has reduced market capacity and causes potential homeowners to back out when they see what will pay for homeowners insurance.
“We are in crisis mode as it relates to getting good, affordable coverage for all real estate customers,” said Norman Morris, CEO of the group.