Legislature starts debate on crafting property insurance lifelines

The state Legislature began a special session Monday aimed at ensuring people will still have access to affordable property insurance after a string of hurricanes damaged and destroyed homes and businesses across Louisiana, upending the market.

The gathering, which must end by Feb. 5, was limited to ceremonial, opening-day duties ahead of the first substantive debate on Tuesday.

Teed up for consideration Tuesday by the House Appropriations Committee is a key measure that would allocate $45 million to a state incentive fund to entice insurance companies to write policies in Louisiana.

Committee Chairman Rep. Jerome "Zee" Zeringue, R-Houma, is the sponsor of the three-page proposal — House Bill 1.

Zeringue's House district was among areas heavily damaged when Hurricane Ida roared ashore, one in a series of storms in 2020 and 2021.

Under the plan, firms would have to put up $1 for each dollar of state aid.

Backers say the move is a short-term fix until bigger changes can be debated during the 2023 regular session, which begins in April.

State Insurance Commissioner Jim Donelon has been calling for the special session for months amid what he calls a crisis for homeowners unable to afford insurance.

Gov. John Bel Edwards and legislative leaders were initially reluctant to meet before the regular session.

What changed, officials said, is the need for insurance firms to get reinsurance of their own before the regular session and ahead of the start of hurricane season on June 1. Insurance companies buy reinsurance to lessen the risk to their own finances from the deluge of claims made against them during disasters.

Donelon said seven insurance companies have indicated interest in the incentive program.

Legislative leaders hope to finish the special session on Friday. The gathering costs taxpayers about $60,000 per day.

The Senate met for about 30 minutes Monday and adjourned until Wednesday while it waits on House action, where the bill has to begin.

Senate President Page Cortez, R-Lafayette, said the hope is to wrap up the gathering late Friday morning or early afternoon.

"That is the tentative plan," Cotez told senators. "Things can change. As we like to say, stay tuned."

The session is aimed in part at easing pressure on Citizens Property Insurance Corp., the state insurer of last resort.

Policyholders who rely on Citizens pay more than the market rate for coverage, by design to keep it from competing with the private sector. Rates for Citizens shot up 63% on Jan. 1, according to a report released Monday by Legislative Auditor Mike Waguespack.

Waguespack said the hike would have been 31% if not for reinsurance costs.

The report said insurance companies saw big profits for 14 of 18 years starting in 2004 — 32.5 cents in losses for every $1 of premiums before reinsurance.

But the auditor said four of those years — 2005, 2008, 2020 and 2021 — showed losses of $4.40 for each $1 dollar of premiums for firms.

"The two-year period of 2020 and 2021, with consecutive years of significant disasters in different parts of the state, has placed an exceptional burden on the property insurance market," Waguespack said.

The legislative auditor's review is meant to aid lawmakers as they begin the special session.

The review notes that if the Legislature allocated $50 million to Citizens, it could boost its reinsurance by up to $204 million or provide relief to policyholders.

Citizens has about 125,000 policyholders now, which is roughly double the enrollment during normal times, experts say.