Louisiana attracts 9 property insurers with incentive program

Nine insurers are interested in writing property insurance in Louisiana after the first round of an incentive program ended Friday.

The nine insurers applied for $62 million from a program fund of just $45 million. The Louisiana Legislature will be asked to approve another $17 million, said Insurance Commissioner Jim Donelon.

If all applications are eventually approved for the full $62 million, the end result will be roughly 55,000 policies written in Louisiana, Donelon said.

"If all goes well, they should be able to begin writing new policies as soon as next month," he said. "I want to express my appreciation to these insurers for their willingness to enter our market at a time when our residents need their support the most. We look forward to working together in our efforts to make insurance available and affordable to homeowners across the state."

Ongoing crisis

Louisiana is wracked by an insurance crisis that much resembles the crisis that followed Hurricane Katrina and Hurricane Rita in 2005: insurers are leaving the state rather than risk huge losses that accompany major storm and hurricane events.

So far, 11 insurers have gone broke and another dozen or more stopped selling policies, leaving desperate homeowners to rely on the state-run insurer of last resort, Louisiana Citizens Property Insurance Corp. As the insurer of last resort, Citizens is required by law to charged 10% higher than the highest private insurer in each parish.

The incentive program is simple. Insurers that agree to do business in the state are eligible for matching grants between $2 million and $10 million. The insurers must then match that amount and write $2 in premium for every dollar accepted.

The insurers, and their requests, applying for the program are:

• Safe Point Insurance Co.,  $10 million
• Constitution Insurance Co., $10 million
• Applied Underwriters, $10 million
• Sure Choice Underwriters Reciprocal Exchange, $10 million
• Cajun Underwriters Reciprocal Exchange, $5 million
• Elevate Reciprocal Exchange, $5 million
• Allied Trust Insurance Co., $6.5 million
• Gulf States Insurance Co., $3.6 million
• Safe Port Insurance Co., $2 million

The incentive program is not a long-term fix, said Rep. Mike Huval, an insurance agent who chairs the Louisiana House Insurance Committee.

"Attracting several new companies to write homeowners insurance in our market will greatly benefit us in the long term," Huval said. "The problem is critical to our state because the sooner we can distribute funds, the sooner policyholders can get out of Citizens. About 10,000 Citizens' policyholders per month are experiencing premium increases required by law."

Louisiana policyholders still have three years of payments remaining on a billion-dollar bond issue that helped pay for Katrina damages, Huval noted.

Fortifying roofs next up

The second significant piece of Donelon's plan calls for residents to "hurricane-proof" their roofs. Support is growing among Louisiana legislators to fund grants up to $10,000 for homeowners to fortify their roofs, which experts say can withstand winds up to 150 mph.

Forty percent of Louisiana's population resides along or near the Gulf Coast and are particularly vulnerable, Donelon said. Fortifying roofs is an idea that is proving successful in other hurricane-prone states.

Huval backs a bill to provide grants to Louisiana homeowners to strengthen their properties.

"One of the best ways we can prepare for hurricanes is to use stronger materials and construction methods when building or modifying our homes," he said. "We are looking at other paths towards getting stronger roofs in as many schools as possible, including legislation that would create premium discounts and policy endorsements that encourage building to the fortified roof standard."

While waiting for the incentive program to be approved, Huval encourage Louisianans to shop around with as many insurance agents as possible to save money on premiums.

InsuranceNewsNet Senior Editor John Hilton covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.

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InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.