Louisiana Insurance Commissioner Jim Donelon met resistance from legislators Friday Jan. 20) as he pitched them on a February special session to fund an insurance incentive program meant to keep homeowners’ costs under control. 

“People are literally going to lose their houses if we don’t have a special session,” Donelon said during a Joint Legislative Committee on the Budget meeting at the state Capitol. 

But several lawmakers weren’t entirely convinced by Donelon’s urgent appeal. They expressed skepticism that a February special session is necessary. Some also weren’t pleased with the specific program Donelon was pitching.

“I’m not sure,” House Appropriations Committee Chairman Jerome Zeringue, R-Houma, said when asked if he supported the special session yet.

“I don’t want to go through a special session if you all don’t have the numbers to pass it on both sides,” Rep. C. Denise Marcelle, D-Baton Rouge, said, questioning whether Donelon could rally enough lawmakers to vote for his program. 

Louisiana has seen several insurance companies go under or leave Louisiana after the state was walloped during the 2020 and 2021 hurricane seasons. The collapse of the market is dumping more homeowners’ policies on the state’s insurer of last resort, Louisiana Citizens Property Insurance Corp., and driving up housing costs.

As homeowners face astronomical insurance increases, Donelon wants to implement an incentive program similar to one he put in place after hurricanes Katrina and Rita in 2005. Insurance companies willing to write policies for higher-risk properties would receive public grants to help cover their costs. The goal is to divert policies from Louisiana Citizens, which is required by law to price their coverage higher than the private market for competition’s sake.

Lawmakers unanimously approved the framework for Donelon’s insurance incentive program last year, but they didn’t put any money into it. The commissioner now wants legislators to convene a special session to transfer $45 million into the fund

The insurance commissioner said the $45 million transfer can’t wait until the lawmakers’ regularly-scheduled session begins in April. Insurance companies that want to participate in the program are currently negotiating the purchase of reinsurance – essentially insurance for insurance companies. They won’t be able to take on more policies in Louisiana later this year if they haven’t purchased enough reinsurance this spring to cover the extra business.

Donelon told lawmakers that approving the $45 million transfer “sooner rather than later” could also save thousands of households from seeing large jumps in their homeowner premiums over the next three months by bringing insurance companies into the program earlier. But many lawmakers didn’t seem convinced that turning over funding two months earlier would necessarily spare their constituents from those cost increases because no companies have committed to participating in the program yet.

Sen Fred Mills, R-Parks, asked Donelon to provide an estimate of insurance savings individual homeowners could expect as a result of the $45 million allocation. Donelon said he wasn’t sure his staff could calculate such a projection. 

“I don’t know how to do that,” the commissioner responded, later adding, “I’ll give it a shot.” 

Several legislators also wondered whether the program Donelon has proposed would accomplish their main goal – to offload thousands of insurance policies from Louisiana Citizens and put them into the private market.

When legislators approved the insurance program’s framework last year, they took out a requirement that insurance companies who received money from the incentive fund would have to absorb policies from Louisiana Citizens. Donelon had wanted to include a Louisiana Citizens requirement, he said, but Senate Insurance Committee Chairman Kirk Talbot, R-River Bridge, removed it during the legislative process.

From a practical standpoint, Donelon said he expected insurance companies would still go after households with Louisiana Citizens policies – whether it was required or not – because those policies are the most expensive. But the lack of certainty seemed to frustrate legislators.

“There is no guarantee that one Citizens policy will be depopulated if we pass this program,” Senate President Page Cortez, R-Lafayette, said. 

Lawmakers also asked whether Donelon was open to an alternative solution, one that involved putting more money into Louisiana Citizens rather than private insurance companies. Donelon pushed back on this suggestion, which he said would lead to a large, state-run insurance program that the state couldn’t afford. 

“I strongly urge you not to go down that road,” he said.

Some of the private firms who took public funding after hurricanes Katrina and Rita eventually either went belly up or exited Louisiana. Others may have stayed but are no longer willing to cover properties in hurricane-prone areas. Lawmakers don’t want to see a repeat of that scenario, where they invest in companies that eventually abandon their constituents. 

The insurance commissioner seemed to have been caught off guard by the lawmakers’ pushback, particularly after they unanimously voted to set up the framework for the incentive program last year.

“Frankly, I didn’t think there would be any hesitancy on the part of the legislature to fund what they created unanimously,” Donelon said. 

Right now, there isn’t another option to deal with the insurance crisis on the table. Legislators asked Donelon what would happen if they didn’t transfer $45 million into the incentive program as requested. He responded that he wasn’t sure what he would do.

“I don’t have an immediate plan B,” Donelon said.

Gov. John Bel Edwards is expected to make an announcement over the weekend or early next week about whether the special session will be held. He’s required to give lawmakers at least seven days’ notice before they have to convene, meaning the session wouldn’t start until the week of Jan. 30 at the earliest.

Legislative leadership said the session would have to be at least five days because it takes at least that long to move a bill through both the House and Senate.

This article first appeared on Louisiana Illuminator and is republished here under a Creative Commons license.

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Julie O’Donoghue | Louisiana Illuminator

Julie O’Donoghue is a senior reporter for the Louisiana Illuminator and producer of the Louisiana Illuminator podcast. She’s received awards from the Virginia Press Association and Louisiana-Mississippi...