Louisiana’s Governor has now called a special session of the states legislature to address property insurance issues in the state, with the goal of creating the Insure Louisiana Incentive Fund to encourage more companies to underwrite business there.
In a similar move to Florida, the state’s lawmakers have recognised that Louisiana faces considerably property insurance challenges in 2023, not least due to the much higher price of reinsurance coverage.
Property insurers based and operating in the state of Louisiana have paid out more than $13.9 billion in claims for 2021’s hurricane Ida, while hurricanes Delta, Laura, Zeta drove minimum another $10.5 billion in claims between them, all data as of September 30th.
As we reported one week ago, Louisiana looked set to follow in the footsteps of Florida, by holding a Special Session of the Legislature to address property insurance concerns, with the affordability of reinsurance a key driver.
That has now been confirmed, with the Governor calling the “Extraordinary” session on Friday.
The aim is to gain lawmaker approval to appropriate funds to the Insure Louisiana Incentive Fund, which had been created in the 2022 legislative session with the goal of attracting more insurance companies to Louisiana.
The special session will convene at midday on Monday, January 30th and run until no later than 6 p.m. on Sunday, February 5th.
Governor John Bel Edwards explained that, “Insurance Commissioner Jim Donelon has stressed that funding the Insure Louisiana Incentive Fund cannot wait until the regular session in April. I am grateful for the cooperation of the Senate President and House Speaker and the legislature in calling this special session focused on this Fund.
“While Commissioner Donelon says we must do this now, this is just a first step in addressing Louisiana’s ongoing insurance issues after the devastating hurricane seasons of 2020 and 2021, a crisis worsened by hurricanes and wildfires in other states in 2022. We will continue to work on this issue during the regular session beginning in April.”
Senate President Page Cortez added, “Commissioner Donolen has stated that time is of the essence with regard to the legislature’s funding of the incentive program and thus the need to go into a special session. While we understand this will not completely solve the crisis we recognize the urgency.”
House Speaker Clay Schexnayder also said, “While a special session to fund the Louisiana Incentive Fund is not going to solve the issue of availability and affordability of property insurance for our citizens, it is a short term band-aid that can be a first step toward a more long term solution. The House will continue to work for a more permanent fix to this situation so that our businesses and property owners don’t have to go through this continuous cycle. We have to attract more companies to write policies in our state. We expect that Commissioner Donelon will make the incentive program work as a temporary fix, but we need to do more to solve the problem.”
At least $45 million in funds is being sought for the Insure Louisiana Incentive Fund.
Louisiana saw 11 insurers becoming insolvent in the wake of the recent major hurricane activity that affected the state, which has also driven policies towards the state’s insurer of last resort, Louisiana Citizens Property Insurance Corporation.
However, just incentivising insurers with breaks of some kind is not going to remove the burden of reinsurance affordability and it’s possible lawmakers need to look seriously at some type of state-backed or supported reinsurance layer, for lower down in insurers towers (as Florida has).
Now, with reinsurance rates far higher and reinsurer appetite for coastal and hurricane exposed US property reduced, it remains to be seen how successful a relatively small fund to attract insurers to operate in Louisiana could be.
But it is a positive and essential step, as without property insurers operating in the state, Louisiana can’t even begin to think about how else to help them, such as with a reinsurance fund and the burden on Louisiana Citizens would just continue to grow.
In the end, it seems likely Louisiana will need to enact broader property insurance reforms, to help any carriers that do enter the state to navigate the challenging hard reinsurance market, while also increasing re/insurer appetite for writing risks there.
Also read: Reinsurance affordability to prompt Louisiana special session.