State lawmakers agreed Friday to dole out $42 million in incentive payments to eight insurance firms in a bid to draw more competition to Louisiana’s beleaguered property insurance market.
The no-objection vote by the Joint Legislative Committee on the Budget allows a slate of companies to begin writing new policies for Louisianans under the state’s Insure Louisiana Incentive Program within the next month, officials said. As many as 90,000 policyholders could be aided by the funds.
The payouts come from $45 million allocated during a recent special session to ameliorate the plight of Louisiana’s insurance market, after thousands of property owners filed claims in the wake of two destructive hurricane seasons.
“The good news is we offered $45 million in incentive grants to companies to come write more business, new business, and take the pressure off Louisiana Citizens, which has swelled to 135,000 policyholders today,” Insurance Commissioner Jim Donelon told lawmakers, referring to the state-run insurer of last resort.
Companies approved Friday include:
- Allied Trust Insurance Co.
- Cajun Underwriters Reciprocal Exchange (CURE)
- Constitution Insurance Co.
- Elevate Reciprocal Exchange
- Gulf States Insurance Co.
- SafePoint Insurance Co.
- SafePort Insurance Co.
- SureChoice Underwriters Reciprocal Exchange (SURE)
All told, nine firms asked for a total of $62 million from the incentive program, which aims to give insurance companies who agree to do business in the state direct infusions of state cash. Most of the approved companies didn’t get the full quantities they asked for, because the program currently has about $17 million less to spend than the total amount requested in the applications.
Many of those companies already write policies in Louisiana. To receive the grants, they had to commit to writing more.
The single company that applied for a payout but did not earn approval — the New Mexico-based Applied Underwriters — will likely get one in later rounds of grants once the firm completes further licensing requirements, that office said.
Officials launched the incentive program during a marketplace crisis that caused a dozen companies to go belly-up, leaving more than 100,000 Louisiana households with no place to turn for insurance besides Citizens. Since 2020’s Hurricane Laura, as thousands of homeowners in the state’s storm-prone coastal regions have slogged through grinding recoveries, more than a dozen other firms stopped writing policies here.
Louisiana Citizens recently faced the prospect of absorbing another roughly 30,000 policies from a Florida-based company, United Property & Casualty Insurance Co., that also stopped writing policies in Louisiana. But two companies who got approval for incentive payouts on Friday have committed to writing policies for UPC customers before those homeowners have to go to Citizens, Donelon said.
“We didn’t want those folks to go into Citizens, to have to be taken back out of Citizens,” he said.
Home and business owners who switch from Citizens to one of the new firms could see at least a moderate decrease in what they pay because Citizens is required by law to set prices above the private market.
In approving the requests and determining how much cash to hand each company, Donelon’s office weighed factors like the firms’ reinsurance policies, the amounts of money in their coffers and the geographic spread of their business, all to ensure they wouldn’t concentrate their policies in a single parish.
Donelon said he will ask the legislature to approve more cash for a second round of grants during the regular legislative session set to convene on April 10.
Insurance companies who get grant money have to match the value of the grant dollar-for-dollar and write twice the sum of that amount in premium every year. For example, if one company received a $10 million grant, it would contribute an additional $10 million in surplus funds and be responsible for writing $40 million in premiums every year in south Louisiana parishes.
Donelon noted on Friday that the program was all but a “verbatim repeat” of a grant initiative spearheaded after Hurricanes Katrina and Rita wreaked havoc on the state in 2005. This time, though, insurers are not required to take policies directly from Louisiana Citizens.
Donelon — who announced this week that he would not seek re-election as insurance commissioner — has said he expects some companies to do so voluntarily.
The 2023 Atlantic Hurricane Season begins on June 1.
Staff writer Mike Finch contributed to this report.
Leave a Reply