Four things to know about Louisiana insurance crisis, Special Session to fix it

  • Oops!
    Something went wrong.
    Please try again later.

Louisiana homeowners from Lake Charles to Houma to New Orleans have seen their property insurance rates skyrocket since 2020 with a growing number forced onto the rolls of the state-sponsored insurer Citizens and many finding their insurance bills higher than their mortgage payments.

The growing crisis, sparked by two devastating hurricanes, prompted Democratic Gov. John Bel Edwards to call the Legislature into a Special Session following the pleas of Republican Insurance Commissioner Jim Donelon, who said: "People are literally going to lose their houses" without one.

But as lawmakers convened to kick off the week-long Special Session Monday, their options for relief are limited to a single, stop-gap measure designed to attract more insurers to write new policies until the Legislature can formulate more long-term solutions during the Regular Session that begins April 10.

Here are four things to know about the Special Session and Louisiana's insurance crisis:

How we got here

Louisiana homeowners have faced dramatic insurance cost increases triggered by the vast damage caused by Hurricane Laura in 2020 and Hurricane Ida in 2021 if they're able to find coverage at all on the private market.

The reduced availability has driven tens of thousands of customers to the state-sponsored insurer of last resort, Citizens, which last year increased rates by more than 60%.

Hurricanes Laura and Ida generated a combined 800,000 insurance claims totaling $22 billion, causing eight insurance companies to fail and other companies to stop writing new business below Interstate 10.

The number of customers in Citizens has quadrupled during the past two years. By law, Citizens' prices must be 10% above the highest market rate in each parish or the actuarial rate, whichever is higher.

The Special Session plan

Edwards drew very narrow parameters of what can be considered during the Special Session.

It's limited to a single bill that would implement a $45 million incentive fund using budget surplus money to attract companies to write new policies and begin to depopulate Citizens.

Donelon told lawmakers and Edwards, who had preferred to wait until the regular session beginning April 10 to address the crisis, that a delay would limit the effectiveness of the program because insurance companies need to plan for buying their own insurance to match new business before hurricane season begins in June.

"Insurance Commissioner Jim Donelon has stressed that funding the Insure Louisiana Incentive Fund cannot wait until the Regular Session in April," Edwards said in a statement.

Donelon has conceded the incentive program is a short-term solution to the immediate crisis, but more must be done during the Regular Session when there is more flexibility and time.

Louisiana Capitol, spring 2022.
Louisiana Capitol, spring 2022.

Will it work?

Donelon said at least seven new insurers have told him they are interested in entering the market through the incentive program if it is funded and implemented, though he was unable to offer any guarantees.

An almost identical program implemented after Hurricane Katrina did attract new companies, but some wary lawmakers noted some of those insurers had a shaky foundation and eventually went belly up.

“We’re being put into a box to allocate money as a Band-Aide instead of being able to pass legislation to address the underlying problems,” said House Conservative Caucus Chair Jack McFarland, a Winnfield Republican. "This idea of an incentive has been done before, such as after Hurricane Katrina. However, 40% of the insurance companies that took the Katrina money no longer write policies in Louisiana."

Will it pass?

With Republican Senate President Page Cortez of Lafayette and Republican House Speaker Clay Schexnayder of Gonzales on board with Edwards to call the Special Session, the bill to fund the incentive program will likely pass.

But it's not a slam dunk, especially in the House where some leaders, including some below I-10, said they must be convinced.

"As of now I'm a no," said Republican Crowley Rep. John Stefanski, chairman of the House and Governmental Affairs Committee. "I'm against just handing out taxpayer money to fly-by-night companies who will leave after the next hurricane."

That's why lawmakers like Republican Abita Springs Rep. Larry Frieman, a member of the House Insurance Committee, said they will work to add what they see as important protections to the bill.

"I'm not happy the (parameters) are written so narrowly," Frieman said. "I want to see some requirements added for companies that take the money."

Greg Hilburn covers state politics for the USA TODAY Network of Louisiana. Follow him on Twitter @GregHilburn1 

This article originally appeared on Lafayette Daily Advertiser: Four things to know about Louisiana insurance crisis, plan to fix it