A package of reforms passed by the state Legislature should help property insurers in Louisiana to stay afloat during future hurricane seasons and provide greater peace of mind to policyholders, the state’s insurance commissioner said.
Commissioner Jim Donelon said the Catastrophe Reform Package of 2022 will strengthen the health of the property insurance market in the wake of destructive hurricanes, including Laura, Delta, Zeta and Ida, and the collapse of six insurers that wrote Louisiana policies. Donelon discussed the reforms in a July 5 press conference in Baton Rouge with Sen. Kirk Talbot (R- River Ridge), who chairs the state Senate’s Insurance Committee, and Rep. Mike Huval (R-Breaux Bridge), who chairs the House Insurance Committee.
The insolvencies of insurers such as Lighthouse Excalibur, Maison and Southern Fidelity prompted the passage of legislation to increase the initial capital that insurers operating in Louisiana must put up from the current $3 million to $10 million.
“The reason we’re increasing that minimum capital and surplus requirement is for the owners of those companies to have, as I call it, more ‘more skin in the game’ – more of their own money on the table when they go to the reinsurance marketplace each year as we approach the next hurricane season to buy reinsurance,” Donelon said.
Other approved legislation will remove the requirement that a formal parish evacuation order be issued before insurance coverage for relocation costs can kick in. House Bill 83 will require insurers to examine the totality of safety issues as a hurricane approaches when making decisions on reimbursing relocation costs, Donelon said.
During past storms, “many parish officials made conscious decisions not to issue evacuation orders due to the threat of gridlock on highways, which would have put people at greater risk than staying in their homes,” the commissioner said.
Jeff Albright, CEO of the Independent Insurance Agents & Brokers of Louisiana, expressed satisfaction with the insurance reforms passed by the Legislature.
“Increased capital requirements should reduce or prevent insolvencies,” Albright said in an email to the Louisiana Record. “Increased requirements for insurers to have detailed catastrophe claims-response plans and increased penalties for failure to pay claims properly should ensure that policyholders have better claims experiences in the future.”
The reform package will also encourage Louisiana homeowners to fortify the construction of their homes by providing grants to retrofit roofs, potentially reducing future insurance policy costs, complaints to the state Department of Insurance and damage claims filed against insurers.