Louisiana wants $50 million for fortified roofs. Here’s how it could help insurance rates.

Louisiana may soon get a massive influx of money for a widely touted solution to ever-rising home insurance rates: Fortified roofs.

State lawmakers appear poised to pass a bill that would add significantly more money to the grant program that gives Louisiana homeowners $10,000 each toward a new fortified roof. The cash would come from excess funds collected by Citizens, the state-created insurer of last resort, and is expected to net an extra $50 million for the program, enough for 5,000 additional roofs — on top of the $30 million the program gets annually.

In all, the program would have enough money for 8,000 new fortified roofs this year, nearly double the number completed so far through the grant. To date, the Louisiana Department of Insurance has certified 4,800 roofs through the program.

The plan would provide a long-sought boost to a strategy that leaders hope will pull the state out of a yearslong crisis that has pushed homeowners to the brink and threatened their ability to afford their homes. With climate change making hurricane risk worse, stronger roofs have proved to be an antidote by lowering the risk of storm winds tearing off a roof, making it less likely insurers will have to pay out claims. As a result, most companies are offering significant premium discounts to homeowners with fortified roofs.

The bill, by Rep. Paul Sawyer, R-Baton Rouge, has advanced with little opposition as legislative leaders and Gov. Jeff Landry have for months looked for ways to put more money toward the grants. In February, Landry asked the Louisiana Workers' Compensation Corporation, a state-created nonprofit similar to Citizens, to send some of its excess funds to the program, though it doesn't appear likely to happen. Senate President Cameron Henry said earlier this year he expected lawmakers to find more money for fortified roofs.

Sawyer said the move will transfer funds from prior natural disasters to help solve the "financial disaster" of skyrocketing homeowners' insurance rates.

"Being able to take something from the Katrina experience and apply it to the real world, present-day insurance crisis that is affecting all of Louisiana, but especially the coast, this is a silver lining," Sawyer said.

The funding should help ease a glaring mismatch between supply and demand: Only about 20% of people who registered for lotteries to get the grants so far have won them, according to state data.

"We can effectively double what we have now," said Insurance Commissioner Tim Temple in an interview. "It will continue to keep Louisiana on the forefront of insurance company conversations. When they talk about wanting to write more fortified homes, Louisiana is the fastest-growing state for fortified roofs."

Still, nonprofit leaders who help low-income homeowners put new roofs on their homes say the program will need to adapt, especially given that homeowners are expected to pay any expenses over $10,000 on their own dime.

"I want them to spend more money," said William Stoudt, head of Rebuilding Together New Orleans, which helps low-income homeowners put fortified roofs on their homes. "There's definitely a case for needing $80 million. But the program needs to continue to evolve to account for its changes over the past few years."

Those who have gone through with the grant program so far are "low-hanging fruit," who can afford to participate, Stoudt said. Increasingly, the people still clamoring for a new roof will need more assistance, like gap funding to cover the costs above $10,000. The out-of-pocket costs can add up to thousands of dollars that many homeowners don't have.

Still, fortified roofs are easing the insurance crisis, Stoudt said. And demand remains: His waitlist of clients seeking services has grown to more than 1,000, with half saying they want roofs.

"If you're going to truly redeploy $50 million in overpayments from Citizens, you need to be cognizant that a lot of people who have Citizens are not currently able to access these grants," he said.

$1 billion problem

After hurricanes Katrina and Rita in 2005, Citizens faced a glaring problem. It couldn't afford to pay all its claims.

Created by the Legislature in 2003 as an insurer of last resort, Citizens' nonprofit board decided to issue bonds worth nearly $1 billion to raise the money it needed to pay for hurricane-damaged homes.

To pay off the bonds in the ensuing two decades, Citizens levied a surcharge on Louisiana policyholders. And over time, the insurer reworked its bond deals to save money and reduced the amount of the surcharge from 5% to 1.4%, said Richard Newberry, Citizens' CEO.

Last year, Citizens decided to stop levying the fee because it had raised enough money. But it took up to a year for insurers to catch up and stop charging it on homeowners' bills. The lag led to the fee raising $64 million more than was needed to pay the bonds, according to Temple.

John Ford, spokesperson for the Insurance Department, said a judge has ordered Citizens to use $14 million of the extra funds to pay for costs associated with a lawsuit alleging they mishandled claims. That leaves $50 million for fortified roofs.

If Citizens tried to return the money to policyholders, each would get $20 to $30, Temple said. But Temple and legislative leaders instead agreed to allow Citizens to use the extra money to send $50 million to fortified roofs. Citizens' board is expected to vote to send the money this summer.

Louisiana modeled its fortified roof program after Alabama, which has led the country in adoption of stronger roofs.

Travis Taylor, director of risk and resilience at the Alabama Department of Insurance, said the state has completed 10,500 roofs through the grant program. But the state has 60,000 fortified roofs in total, meaning the vast majority have paid for them on their own dime.

Still, Alabama dedicates funding each year to nonprofit groups, which help cover the gap between the $10,000 grant and the cost of a new roof. Taylor said the agency usually spends about $3 million to $4 million of its roughly $13 million in fortified grant funds each year on those nonprofit partnerships.

"This is not an intended solution to put fortified roofs on every house," Taylor said. "This is an education program."

A study commissioned by the Alabama Department of Insurance after Hurricane Sally in 2020 found that houses with fortified roofs sustained significantly less damage than those without.

"There are more and more insurance companies that are writing policies down on our coastline because of fortified (roofs)," Taylor said. "That's because of the risk they're not having to take, and the proof that fortified works."

Oversubscribed

Despite the tens of millions of dollars Louisiana has put toward the fortified roof program, not everyone is benefiting.

The program is oversubscribed, with far more people signing up for lotteries than winning grants. And when people do win grants, about 40% of them drop out, many because they can't afford out-of-pocket costs.

Some officials have tried to offer additional support.

In Jefferson Parish, for example, council members each received $500,000 from COVID relief funds to spend on their districts. Council member Jennifer Van Vrancken decided to create her own roof program.

Under the pilot, homeowners in Jefferson Parish who won the state lottery would get up to $5,000 in additional money — above the $10,000 the grant provided — to pay any overages.

The result, Van Vrancken said, is that the number of people who went on to build fortified roofs soared to more than 80%.

"We thought the easiest way to start making a difference was to piggyback on the state's program," she said.

Van Vrancken's office is finishing the last four grants and then will finalize the data, with hopes of securing a more permanent funding source to continue the program. And Temple has encouraged other parishes to follow Jefferson's lead. New Orleans officials are discussing an initiative similar to Jefferson Parish with the Insurance Department, LDI spokesperson John Ford said.

Ford said the state agency is also discussing changes to the program, but is not pushing to increase the grant amount above $10,000.

"While the dropout rate is higher than we'd like, there is a high level of interest in the program, and many people are waiting for the opportunity to receive a grant," he said. "Increasing the grant amount might help lower the dropout rate, but it would also reduce the total number of fortified roofs we can put on."

Stoudt, of Rebuilding Together New Orleans, said the state should consider other tweaks. If lower-income homeowners got enough funds directly from the grant to cover the full cost of the roof, it would improve the program's effectiveness, he said.

One of his clients won a grant and got 20 quotes from contractors, searching for a bid she could afford, Stoudt said, but ultimately dropped out.

"More people are being fortified, which is great," he said. "But inherently it will become more and more difficult to fortify roofs over time because the easiest ones get done first."