State money to lure property insurers to Louisiana won’t come until spring
Gov. John Bel Edwards and lawmakers intend to wait until April to fund an incentive program meant to attract more property insurance companies back to Louisiana. Insurance Commissioner Jim Donelon, R-Metairie, said Monday he expects the program to cost the state at least $45 million.
Donelon had originally pushed lawmakers to give him at least $15 million this week to get the program off the ground, but legislators weren’t convinced he needed the money that quickly.
They also weren’t sure they have the legal authority to transfer the money outside of a legislative session. Donelon also suggested the state convene a special session focused on the property insurance crisis to speed up the timeline of the program’s launch, though neither the governor nor the legislators appear interested in that proposal.
Edwards’ Commissioner of Administration Jay Dardenne and Senate President Page Cortez, R-Lafayette, suggested the matter could wait until the regular legislative session in April. They said the program couldn’t get underway for a few months anyway.
“I see no reason for the governor to call a special session if the legislators aren’t interested,” Dardenne said in an interview Thursday.
Louisiana has seen several insurance companies go under or pull out of the state after being walloped by back-to-back major hurricane seasons in 2020 and 2021. The collapse of the market is dumping more homeowners’ policies into the state’s insurer of last resort, Louisiana Citizens Property Insurance Corp., and driving up housing costs.
To address the crisis, Donelon has proposed resurrecting an insurance company incentive program originally put in place after hurricanes Katrina and Rita. Companies willing to write policies for high-risk properties would receive public grants to help cover their costs. The goal is to divert policies from Louisiana Citizens, which offers more expensive plans than the private insurance market. Cortez, the most powerful member of the Legislature, said he will support Donelon’s incentive program but wants more information about what the commissioner’s expectations are. He hasn’t heard projections regarding how many new insurers might enter the market or how many policies might be moved out of Louisiana Citizens as a result of the incentives. “What is our bang for that buck?” Cortez asked Donelon during a legislative hearing Thursday. Cortez said he also wants Donelon to nail down more the regulations for the program before handing over the funds.
“Why would we tie up money in a program where you haven’t decided what the program ramifications are?” Cortez said during the hearing. Legislators may also have questions about what guardrails will be in place to make sure the companies receiving state support remain financially solvent. Many of the smaller firms that went belly up recently were given financial incentives after Hurricanes Katrina, according to The Times-Picayune.
House Appropriations Chairman Jerome Zeringue, R-Houma, oversees the state’s financial matters and represents Lafourche and Terrebonne parishes, which are among the hardest hit by the insurance crisis. He believes “something has to be done” about the sky-high insurance rates. He wants to consider giving grants not only to insurers new to the market, but also those who have “stuck it out” through recent hurricanes.
The initial $15 million Donelon had requested for his incentive program would have come from insurance premium taxes that his department wasn’t using, but that money is typically used to pay for other government services such as higher education, health care and prisons.
Lawmakers didn’t want to set a precedent of transferring millions of dollars from one state program to another through its smaller budget committee meetings this week, where only a handful of legislators get to vote. All lawmakers are supposed to be involved in deciding the state’s budget priorities, which is why those matters should be handled during a full legislative session, they said.
If necessary, the governor and lawmakers could quickly approve a funding package for the incentive program at the very beginning of the session that starts April 10, so that Donelon wouldn’t have to wait until June – when the session ends – to start the program.
“The appropriations process can be done relatively quickly if it’s a small, streamlined bill,” Cortez told Donelon. “It could be filed April 10, and could probably be on the governor’s desk within a week.”
Legislators should have plenty of money to meet Donelon’s $45 million request if they want to do so. On Thursday, the state’s financial forecast was raised to account for $1.5 billion in new revenue over the next 18 months, meaning lawmakers have an enormous amount of extra money to spend.