NEW ORLEANS (WVUE) – Insurance Commissioner Jim Donelon went before the Legislature’s Joint Budget Committee on Friday (Jan. 20) to request a special session on the insurance crisis.
Donelon wants the Legislature to put $45 million into a fund to encourage insurers to write policies in the state.
“We are experiencing the worst homeowner’s market since Hurricanes Katrina and Rita hit our state in 2005, with eight insurers failing, three of them domiciled in Louisiana,” Donelon said on the floor.
After hurricanes Laura and Ida devastated various parts of the state, some insurers have failed financially and some have left the state. And Donelon says that could hurt people with mortgages.
“People are literally losing their houses if we don’t have a special session, literally. They’re turning in the keys because they have to have insurance on their mortgage and they can’t afford it, they can’t pay it,” he said.
The decline in the number of insurers in the state has caused Louisiana Citizens, the state’s insurer of last resort, to inherit 125,000 policyholders who had nowhere else to look for coverage. This month saw a 63% increase in interest rates for Citizens customers.
Donelon said seven insurers, most of them in the state, have approached the Department of Insurance expressing interest in writing new policies because of the expected incentives, and he said three others want to take some of Citizens’ policies away immediately.
But lawmakers, including legislative leaders, when questioning Donelon demanded assurances that the financial incentives would actually benefit policyholders and taxpayers.
Rep. Clay Schexnayder, R-Gonzales, is the House speaker.
“You don’t have a letter that says yes, we’ll come in and do 50 policies or we’ll come in and do a hundred policies, that’s maybe?” Schexnayder asked.
Donelon replied, “I would probably say and point out that we don’t spend money unless they do; I’m very confident that we will.”
“Well, if we come into special session, we’ll spend money,” Schexnayder said.
Houma Republican Jerome “Zee” Zeringue chairs the committee, made up of members of the House and Senate. He too asked Donelon.
“Mr. Commissioner, obviously we took it on the chin in our area and we’re still dealing with a lot of insurance issues, as are a lot of people. One of the benefits you’ve proposed is taking citizens out of citizens, which is insurance of last resort, is there a specific provision in the plan that requires these companies if they participating, removing insurance policies from citizens?said Zeringue.
Donelon said in response, “No, sir, and that was my original desire to get the stimulus program legislation passed last year, I think in the process unanimously, that it would be aimed solely at taking out citizen policy.”
Some lawmakers are wondering whether it would be better to use the money meant for the stimulus package instead of La. To help Citizens.
“Is it possible that we can support citizens, maybe make it more conducive to working with people, making it less expensive, like taking $45 million and investing in or reinsurance for citizens, getting buildings, building codes, working on things that we can work on here in Louisiana , with citizens on an insured construction program or something like that?” asked Zeringue.
Making Citizens a traditional insurer would be a disaster waiting to happen, Donelon said.
“Number one is to direct citizens to the reinsurance business. It’s a huge, huge risk that citizens can’t afford, Louisiana can’t afford,” he said.
He could not say when rates for those paying high premiums through Citizens would drop as new insurers enter the market.
“I can’t give you a date when the rates will change, one thing is that it will change for everyone on their individual renewal date after approval,” he said.
However, Donelon said if the stimulus funding is approved soon, he expects insurers to remove 40,000 to 50,000 policies from Citizens.
“Finally, Plan B, if that doesn’t work, what’s Plan B? (Donelon) Plan B is to do it in a regular session and we’re not going to accommodate the companies equally because they don’t have the ability to further insure themselves to significantly increase their coastal Louisiana business.”
“Finally, Plan B, if it doesn’t work, what’s Plan B? Zeringue asked.
Donelon responded, “Plan B is to do it in the regular session and we’re not going to take the companies the same way because they don’t have the ability to further insure themselves to significantly increase their balance sheet for their coastal Louisiana business.”
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