Lawmakers call insurance incentive fund a ‘gamble,’ but advance funding anyway
Debris sits outside of Chauvin homes after Hurricane Ida. (Photo by Rachel Mipro/Louisiana Illuminator)
The Louisiana House of Representatives gave final passage Wednesday to a bill to transfer millions of dollars to an incentive fund to lure new property insurers to the state, but some lawmakers are saying it’s a risky move.
House Bill 1, sponsored by Rep. Jerome “Zee” Zerinue, R-Houma, would transfer $45 million to the Insure Louisiana Incentive Program. The program, established but left unfunded during the 2022 regular session, would offer grants to incentivize new insurers to do business in Louisiana. It’s modeled after a similar program established following hurricanes Katrina and Rita in 2005.
The bill passed on a 90-8 vote.
Several lawmakers who voted for the bill spoke on the floor to express their frustration with the fund, which many have described as a Band-Aid on a large wound.
“So is this incentive program a gamble?” Rep. Beryl Amedee, R-Schreiver, asked. “It is. It may not work. But what we do know is with no incentive program, it’s not gonna work.”
“I haven’t heard any guarantees,” Rep. Mike Johnson, R-Pineville, said. “People that know me know I don’t believe in gambling. So although I’m told we should vote for it, but it’s a gamble.”
The bill was subject to several amendments on the house floor.
One amendment, proposed by Rep. Polly Thomas, R-Metairie, would require Insurance Commissioner Jim Donelon to prioritize insurers that would also offer hail and wind coverage. Another, proposed by Rep. Phillip Tarver, R-Lake Charles, would require any insurer that benefits from the fund to write 25% of its policies for properties currently covered by Louisiana Citizens Property Insurance Corp., the state’s insurer of last resort.
Both amendments were approved without objection.
Following a string of home insurers going broke or leaving the state, thousands of property owners in Louisiana have been forced into Citizens, which must charge higher premiums than private insurers by law.
In nearly four hours of discussion on the incentive fund and the bills, Donelon and legislators drove home that one of the two main goals of the fund is to move property owners out of Citizens.
Donelon told lawmakers he expects it will depopulate about a third of Citizens’ policies within the first year.
There is no guarantee that insurers that take advantage of the incentives and set up shop in Louisiana will write new policies. Offloading policy holders from Citizens and into the private market would reduce the risk for the state and offer lower premiums for those offloaded, but many in Louisiana could still be left without affordable property insurance.
In an interview with the Illuminator, Donelon said he was optimistic the fund would also result in new policies being issued and that bringing in new insurers to the state would result in lower premiums for those customers.
Zeringue’s bill would prohibit money in the new insurance incentive fund from going to firms that don’t meet minimum financial strength ratings, a potential safeguard against a future rash of insolvencies.
Donelon said nine insurers so far have expressed an interest in participating in the program.
House Bill 2, introduced by Rep. John Stefanski, R-Crowley, passed on a 99-0 vote. It would forbid insurance companies with an executive or controlling shareholder who held the same position in a failed insurance company from taking part in the incentive program. The same prohibition would apply to insurers whose parent companies failed in Louisiana.
The two bills will be heard in the Senate Committee on Finance Thursday afternoon. The session must adjourn by 6 p.m Sunday, but lawmakers are optimistic they can wrap up work Friday.
Our stories may be republished online or in print under Creative Commons license CC BY-NC-ND 4.0. We ask that you edit only for style or to shorten, provide proper attribution and link to our web site. Please see our republishing guidelines for use of photos and graphics.