Donelon: $45 million plan will expand home insurance coverage in Louisiana

The Insure Louisiana Incentive Program will be funded at $45 million after being approved by lawmakers last week during an extraordinary special session called by Gov. John Bel Edwards.

The Louisiana House of Representatives approved the funding with a vote of 90-8; the Senate passed the bill 37-1.

The program will financially incentivize insurance companies to write new business in Louisiana, according to state Insurance Commissioner Jim Donelon, who said the legislation is in response to the state insurance crisis that has affected policyholder since the 2020 Hurricanes Laura and Delta. The statewide damages accrued during those storms have caused property insurance rates to continue to rise, forced many to depend on the state-sponsored last-resort insurer Louisiana Citizens, and ultimately led to 11 residential property insurance companies doing business in Louisiana to be declared financially insolvent, leaving 184,000 policy holders without insurance.

Donelon said the Insure Louisiana Incentive Program has been directly modeled after what the state did after Hurricanes Katrina and Rita landed in 2005. In a similar fashion, a $29 million incentive fund was created to incentivize five insurers to write new business in the state.

This program was successful. "In the first years of its implementation, 40,000 policies were removed from Citizens to private companies," Donelon said.

This time around, Louisiana will be granting up to $45 million. This amount is Consumer Price Index-adjusted from the $29 million that was granted to companies over 15 years ago.

Donelon said there are already private insurers interested in the program.

"We have been approached by 10 companies who are expressing interest in our program and indicating that they are going to ask for $41 million of the $45 million."

Within the week, a public invitation to participate will be sent out.

"Companies all across America, those doing business in our state already and those not actively writing in our state can submit a proposal," Donelon said.

The proposals will name an amount between $2 million and $10 million in grant funding, in addition to indicating their strategy and emphasizing what their participation in the program will be if selected, Donelon explained.

After the 30-day submission period, 15 days will be taken to make selections. These selections will then be presented to the Joint Legislative Committee on the Budget — a combination of the Appropriations Committee in the House and the Finance Committee in the Senate.

Stipulations have been put in place to ensure that participating companies benefit Louisiana.

Companies that are accepted will be required to match the grant with an additional capital infusion. The accumulated funds will be put into an escrow account.

The participating companies will be required to write double what is in the escrow account in new premiums in Louisiana, Donelon said.

Additionally, businesses must write at least 50 percent of their premiums in the "37 go-zones states … which is basically the bottom half of the state of Louisiana," said Donelon. This includes 20 parishes in the lower half of the state.

Participating companies will also be required to stay on the coverage for a minimum of five years.

Some public concern over the program has been voiced, such as the risk of companies "cherry-picking" policy-holders from Citizens and the chance of policyholders seeing no significant change in insurance costs.

Donelon said while nothing is certain, the program is projected to work.

"The early indications are that we'll have a lot of interest in participation in this program that will prevent, I do believe, thousands of property owners in Louisiana from losing their homes from the unaffordability of insurance."

He said the severity of the state's insurance crisis warrants — if not requires — a big move. "I would rather do something that has worked in the past than do something completely new," he said.

While some long-term plans were discussed at the special session, Donelon said there were not many options for immediate relief. "To be frank, I didn't hear, in last week's week-long special session, any suggestions or recommendations that would have put more emphasis on an immediate fix."

For Louisiana legislators, it is better to do something than nothing. "There are very few guarantees in life, but we are extremely confident."

The efforts to alleviate insurance woes will not stop with the institution of the Insure Louisiana Incentive Program. In the regular session, Donelon aims to allocate monies from Louisiana's budget surplus to fund the Fortify Homes program.

This program would provide state residents with grants to fortify and protect their homes, leading to decreased insurance premiums.