BATON ROUGE–The Legislature approved bills on Friday to spend up to $45 million to lure home insurers back to the state.
The next stop is Gov. John Bel Edwards’ desk. The governor called the special session at the heeding of the state insurance commissioner and is expected to sign both bills into law—one to appropriate the funds for the Insure Louisiana Incentive Program and the other to prevent insolvent or bankrupt companies from receiving any of the money.
House Bill 1 to appropriate the funds passed the Senate 37-1 and the House 91-8. House Bill 2 to allow only solvent companies to receive the funds passed the Senate unanimously Friday after passing the House on Thursday.
Insurance companies will apply for grants, which will range from $2 million to $10 million. The companies will be required to match the state funds dollar for dollar, and they will have to remain in the state for at least five years or to return the money.
The plan is modeled after an incentive fund created in the wake of Hurricanes Katrina and Rita in 2005.
The urgency of the insurance crisis drove legislators to address the issue this week instead of waiting until the regular legislative session begins on April 10.
One reason for that urgency is the 125,000 policyholders who have had to turn to the state insurer of last resort, the Louisiana Citizens Property Insurance Corp., because they were unable to find insurance in the private market.
By law, Citizens insurance is more expensive than any policy in the private market. Policyholders will see a 63% increase in rates on average when they renew this year.
Another reason lawmakers met early was to give insurance companies more time to buy reinsurance overseas, which minimizes financial risk in case of a major claims event.
Though legislators approved the bills, not all did so enthusiastically. State Insurance Commissioner Jim Donelon faced heavy questioning throughout the week, with some lawmakers questioning his leadership.
“The number one fundamental responsibility of the Commissioner of Insurance as the state regulator of insurance is to make sure insurance companies are solid and financially able to deliver on their responsibilities,” said Sen. Jeremy Stine, R-Lake Charles. “As you know, just recently, six companies have gone insolvent, and Insurance Commissioner Donelon’s recent admitted in a joint Insurance committee that he failed at his number one core responsibility.”
Stine said these companies went insolvent because they were not stress-tested, which is a requirement of this legislation.
Legislators approved the bills with a call to take up longer-term solutions in the regular session.
“Our work is definitely not done,” said Sen. Sharon Hewitt, R-Slidell, who recently announced a bid for governor. “And we have to commit, I think, to coming back and making sure that we address some of these issues that are within our control in the next legislative session so that Louisiana is a place where insurance companies want to work and where our families and businesses can afford the insurance that they need to be successful.”
