Louisiana lawmakers are banking on insurance incentives for now | news

Insurance Commissioner Jim Donelon’s request to speed up funding for a stimulus program was rejected by state lawmakers this week, leaving efforts in limbo until the start of the next legislative session in April.

Donelon had asked lawmakers to allow him to use $15 million in leftover premium tax revenue the insurance division is collecting to kickstart Insure Louisiana’s incentive program. Efforts were first launched in the years after Hurricane Katrina to lure property insurers into the state and eliminate them from the Louisiana Citizens Property Insurance Co., the state’s insurer of last resort.

Donelon warned earlier this week that if Citizens doesn’t start trimming its swollen list of policyholders – which now stands at 129,000 – it will be forced to spend big on reinsurance in the spring, when those contracts are widely negotiated.

State lawmakers agreed to revive the stimulus program earlier this year but left it unfunded.

Because the Louisiana Department of Insurance collects more than $1 billion each year in premium taxes to fund its operations, Donelon wanted to use the leftover revenue, which would normally go back to the state’s general fund, to pay for the incentives.

But lawmakers at the Revenue Estimating Conference that met Thursday were skeptical of his preferred approach. They suggested that Donelon faced more hurdles to restarting the program beyond funding.

“We’re generally reluctant in government to put the cart before the horse,” said Senate President Page Cortez, R-Lafayette. “It’s always better to make sure everything is prepared and then fund it.”

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Cortez said the state is in a good position to fund the stimulus program, but noted the rules that will govern it have not yet been approved.

“Remember, lawmakers neglect the rulemaking process, which can delay the rules’ enactment,” Cortez said. “I think your end of February was the best case scenario; it could be April or May before the rules make it to final release.”

Donelon, who came up with the idea of ​​calling a special meeting to take up the incentives, was sent back to the drawing board. In a prepared statement, the commissioner said he would consult with Senate Insurance Committee Chairman Kirk Talbot, R-River Ridge, and House Insurance Committee Chairman Mike Huval, R-Breaux Bridge, to discuss whether a special session is the most effective way.

“I understand the Revenue Estimating Conference’s reluctance to facilitate funding for the Insure Louisiana Incentive Program at the (Thursday) meeting, as this would have been a novel approach to mid-year budget changes that could have unintended consequences later in other situations,” said Donelon said.

Donelon has been trying to stem a spreading insurance crisis that is only expected to get worse after nearly a dozen insurers failed last year. He told lawmakers that the disruption in the property insurance market is being driven largely by the cost of reinsurance — insurance purchased by insurers.

There is less interest in insuring the risk of potential global catastrophes on the foreign secondary insurance market. As a result, small insurers have a harder time finding reinsurance to cover their potential losses. And the reinsurers charge them more money.

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This trend is significant for hurricane-prone Louisiana, and even more so for Louisiana citizens. After about two dozen insurers either failed or stopped writing policies in the state, home and business owners were forced to flee to Citizens, which in many cases was the only option left.

The migration to Lighthouse Excalibur Insurance Co. and its subsidiary, Lighthouse Property Insurance Corp. both collapsed. Then Southern Fidelity Insurance Co. was also declared bankrupt. Together they sent more than 60,000 policyholders to Citizens.

Meanwhile, the number of citizen policies has more than tripled since 2020, rising to over 129,000 this year. Donelon said the organization bought enough reinsurance last year to cover about 65,000 policies, but as roles grow, costs will be significantly higher in 2023.

Citizens was granted a rate increase of 63% this year to offset rising reinsurance costs. Donelon has said another sharp rate hike could be on the cards if the state fails to scrap many of these policies.

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