Did state budget forget insurance crisis?

On February 3rd the State Legislature ended its Special Session to address the state’s homeowner’s insurance crisis by directing only a “$45 million band-aid” to a Louisiana Insurance Incentive Program to lure more insurance companies back to Louisiana. State Insurance Commissioner Jim Donelon has said that “property insurance is now an EXISTENTIAL CRISIS for Louisiana as Insurers doing business in the state are now facing a costly, high-risk gamble” as they have lost <$25 billion> during the last two years, forcing 22+ insurers into insolvency or to leave the state. Senator Sharon Hewitt, R-Slidell, stated “our work is definitely not done, and we have to commit to coming back and addressing these insurance issues within our control in the next legislative session (starting April 10th) so Louisiana is a place WHERE INSURANCE COMPANIES WANT TO WORK!!”
However, two short weeks later Governor Edwards unveiled his proposed state budget that disclosed a $1.6 billion glut of excess cash that he proposed to spend a substantial portion on teacher pay raises, coastal work, and repaying federal hurricane debt.
Jeff Albright, CEO of the Independent Agents and Brokers of Louisiana, has had numerous discussions with Property Insurance Industry leaders and noted that they only charge premiums of $2 billion per year, and have lost <$13 billion> since 2005. He listed several main problems discouraging Insurance Companies from doing business in Louisiana as follows:
1) RE-INSURANCE is CRITICAL – Insurance Companies must be able to “lay-off most of their risk” with re-insurance, and Louisiana’s re-insurance market has also collapsed. Louisiana may need to set up its own state re-insurance fund to backstop insurers like Florida, who just set up a $1b state re-insurance fund.
2) Loss Problems - state building code reforms can reduce the cost of future claims by building better houses, starting with “Fortified Roofs” that cost about $2,500/roof. For example: state wants Insurance Companies to pick up 40,000 policies from Louisiana Citizens Property Insurance Corp., and if those 40,000 homes had “Fortified Roofs” (that could cost homeowners $100m) they would qualify for cheaper policies. Should the Legislature consider establishing “incentives” to assist homeowners fortify their roofs?
3) Tort Reform – Louisiana is a litigation “hell hole”, both from property and liability side. Bodily Injury Claims in Louisiana are twice the national average. Insurance Companies want to write the entire insurance package (home, auto, liability, etc.). Florida just passed major Tort Reform—Louisiana should do the same even though Trial Attorneys make substantial political contributions.
4) De-regulation Needed - Louisiana taxpayers have much of their wealth tied up in their homes—and properly insuring those homes with quality insurance companies MUST BE THE TOP PRIORITY of the next legislative session—or face an EXODUS!!

Steve Gardes is a Certified Public Accountant (CPA) and Certified Valuation Analyst (CVA) with over 40 years of public accounting experience.