La. Lawmakers See Little Hope for Insurance Reform

Louisiana lawmakers will debate changes to state insurance laws beginning Dec. 8, but several said there’s little chance of passing major initiatives to address the problems homeowners face in finding and affording policies after last year’s hurricanes.

Gov. Kathleen Blanco’s plan for a special legislative session includes three insurance-related points, including a one-time financial help for homeowners – reimbursement of fees they paid this year stemming from the post-hurricane financial trouble of the state-run “insurer of last resort.”

But several lawmakers said the 10-day session is too short to handle the complexities of the other items on Blanco’s agenda, including the idea of creating of a state-run “catastrophe fund” that would make it easier for insurance firms to do business in Louisiana.

Sen. Julie Quinn, a member of the Senate Insurance Committee, complained that lawmakers hadn’t had enough time to research such a plan, adding that she only found out this week that creation of such a fund would be included in the session. Sen. James David Cain, chairman of the Senate’s insurance panel, said the governor’s staff did not discuss insurance issues with him before Blanco released her agenda last weekend.

“We’re in the complete dark,” said Quinn, R-Metairie.

A catastrophe fund, or “cat fund,” would address the rising cost of reinsurance, a major reason that homeowners’ insurance rates are rising. Insurance companies take out reinsurance policies to cover themselves in case a major disaster forces them to pay out thousands of claims. The firms say their reinsurance rates have skyrocketed since hurricanes Katrina and Rita, an indication that issuing new homeowners policies in Louisiana might not be worth the risk anymore.

Florida created a state-run catastrophe fund in 1993 after Hurricane Andrew. That state’s cat fund has sold billions of dollars in bonds to create a pool to pay claims filed by insurance companies after a hurricane, to offset the money the companies must pay out in customer claims.

Louisiana Insurance Commissioner Jim Donelon said the growing number of insurance companies that are scaling back or dropping their policies might leave the state with no choice but to create a cat fund to back up the private companies.

“If the private sector is not willing to do business in our state … it may be necessary,” Donelon said.

Blanco said that a 10-day session is long enough to set up “the rudiments” of a catastrophe fund. Lawmakers can come back in the regular session, in the spring, to expand the fund and determine how it will be funded.

Cain, R-Dry Creek, plans to file a bill that would create such a fund, one of his staffers said.

In a special session, legislators are barred from introducing bills on topics not included in the governor’s plan.

The other items on Blanco’s agenda involve the Citizens Property Insurance Corp., the state-run firm that insures homeowners who can’t find a policy on the open market.

One proposal is to pay down the $1 billion in bonds Citizens issued this year with the roughly $160 million in tax money the state general fund gets annually from insurance companies.

Blanco also wants to use state money to reimburse homeowners for fees they paid this year to rescue Citizens from financial trouble.

Few lawmakers would fight such an idea, but Rep. Shirley Bowler said the plan was flawed and fueled by the governor’s intention of winning points with voters – by sending them money – less than a year before she’s up for re-election.

Bowler, a member of the House Insurance Committee, called Blanco’s plan “a check-writing scheme” that will cost the state money and create opportunities for errors, such as sending out checks for improper amounts.

“It seems to be motivated only by politics,” said Bowler, R-Harahan.

Instead, Bowler said she favored a reimbursement system in which insurance companies are paid to credit policyholders on their bills for the amount they paid for the Citizens fees.

Rep. Troy Hebert, also a member of the House’s insurance panel, said money concerns and the relatively brief legislative session meant that lawmakers will probably have to choose between a Citizens rebate and creation of a catastrophe fund.

“We might not be able to do both,” said Hebert, D-Jeanerette.