Insurance commissioner wants competition in flood coverage

Despite hurricanes, floods and the treacherous currents of international finance, Louisiana has managed to build a stable property coverage market over the last five years, Insurance Commissioner Jim Donelon told a St. Mary Chamber of Commerce audience Wednesday.

Donelon, speaking at Chamber luncheon at the Petroleum Club of Morgan City, talked about two bills in the current legislative session that he hopes will further improve the state’s insurance market.

One bill, HB 577 by state Rep. Scott McKnight, R-Baton Rouge, would follow Florida’s example and make it easier for insurers to offer private flood insurance as an alternative to the federal coverage offered under the National Flood Insurance Program.

The bill would allow companies offering private insurance to file their premium rates with state authorities and begin writing insurance immediately rather than waiting for state approval of premiums as with other kinds of insurance.

The authority would last until 2027 unless the Legislature extends it.

The idea isn’t to replace NFIP coverage but to give people a competitive alternative, Donelon said.

The second bill, SB29 by state Sen. Mark Abraham, R-Lake Charles, would enact language to clarify a power Donelon has already used five times under three governors. SB29 would give the insurance commissioner emergency power to protect policyholders without a direct delegation of that power by a governor.

The power in question is the ability to suspend insurance cancellations and non-renewals for 90 days during emergencies declared by the governor and in the parishes covered by disaster declarations.

Companies often cancel or decide not to renew policies immediately after disasters because they’ve sustained losses. Donelon said the 90 days can protect property owners and provide stability in the market.

Donelon invoked the power five times: after hurricanes Gustav, Isaac and Laura, and during the 2016 floods and the coronavirus pandemic. His use of the power has twice been challenged legally and has been upheld once in the courts and once in the administrative law system.

The use of the power would be subject to legislative oversight.

“It is, truthfully, very, very important,” Donelon said.

Home insurance premiums have risen an average of only 1% in each of the last five years in Louisiana, he said.

In Lake Charles, which was hammered by hurricanes Laura and Delta last fall, 82% of insurances claims have been closed, and 62% have been closed with a payment, Donelon said. But he believes few of the 82% will actually prove to be settled.

Many will result in secondary claims because of a spike in the cost of lumber and the price of labor needed for repairs, he said.

The first-quarter 2021 increase in homeowner premiums is larger than in recent years, Donelon said. That’s partly because of last year’s record-breaking hurricane season, but also because the international reinsurance market has also been battered by California wildfires, the inland hurricane in the Midwest last year, an earthquake in the Philippines and other disaster.

Reinsurance is a sort of insurance for companies that sell coverage directly to consumers. Reinsurance protects them against losses from unexpectedly large claims, as is often the case after a natural disaster.

“That reinsurance market is vital to us,” Donelon said. “There’s just not enough rest-of-Louisiana to spread the risk.”

Chamber
honorees
The Chamber named Jackie Romero of the Bayou Vista Community Center as the May Administrative Assistant of the Month.
Chairman Raymond Price also recognized Live Saving Equipment Repair Co. of Morgan City, represented at the luncheon by Jerry Gaddis. The company is celebrating 60 years in business in 2021.