An unresolved problem
As the bill advanced, some legislators wanted to use some of the fund to offset homeowners' insurance premium increases. The final version of the legislation says premium offsets cannot be considered until after hurricane season is over.
It will be interesting to see exactly how that large appropriation will be spent during the next budget year, and what constitutes "mergencies"that are addressed with the money. If the fund simply becomes another "slush fund," insurance policyholders in Louisiana - whose assessments could have been reduced by the amendments offered during the session - are not going to be happy.
The future of property and casualty insurance, as a whole in Louisiana, was not addressed very competently in the recently completed legislative session. Too many legislators appeared to be covering their rears with legislation of questionable constitutionality, instead of coming to grips with some of the grim realities regarding the future availability and affordability of insurance in Louisiana. The marketplace for property and casualty insurance was under considerable stress before Katrina and Rita, and now those markets are likely to dry up even more.
Two years ago, the state created the Louisiana Citizens Property and Casualty Insurance Corporation in response to the growing difficulty homeowners had in finding an insurance company to write a policy for them. Citizens had not built up a significant surplus in its short existence, so when Katrina and Rita came calling, our homeowners' insurer of last resort got slammed with a billion dollars of exposure. Approximately $250 million will have to be paid by Louisiana policyholders just to pay off the losses Citizens was hit with by the storms. One shudders to think where the market will be if another hurricane finds its way to our shores anytime soon.
Recently, eight hurricanes in succession slammed Florida's Citizens program for $1.7 billion in losses. The Florida Legislature appropriated $715 million to offset the majority of the losses so homeowners would not be hit too hard to pay for them. In Mississippi, the wind damage high-risk pool was nailed by Katrina for $745 million, and the fund had only $175 million in assets. State officials never thought the fund would be hit for more than the $175 million. They were wrong. Now Mississippi is using $100 million in federal block grant money to offset some of the losses, but homeowners there are still going to face a 100 percent increase in their premiums.
Like a tin can, our state officials have just kicked the insurance crisis facing Louisiana homeowners down the road to be dealt with at a later time. The problem hasn't gone away. Insurance companies shied away from writing storm-related policies long before Katrina and Rita hit, and nothing the Legislature did this year is making them more inclined to take more of those risks. Simply filing anti-industry legislation will only hasten a market collapse. It is going to take creative thinking at the state and federal levels to fashion policies that will encourage the re-emergence of an insurance market in our coastal regions. Leadership is needed to solve the problem, and that leadership was sorely missing in Baton Rouge this year.
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