Insurance Crisis Takes Center Stage at Jefferson Chamber Annual Meeting

WESTWEGO, La. — In a sign of the times, the 2023 Jefferson Chamber Annual Meeting began and ended with discussions related to the state’s ongoing insurance crisis. The breakfast event took place Feb. 16 at the Alario Center in Westwego.

In his opening remarks, U.S. House Majority Leader Steve Scalise (R-La.), whose district includes eight south Louisiana parishes, talked about the importance of re-examining the Federal Emergency Management Agency’s methods of determining new rates for the National Flood Insurance Program.

Scalise credited FEMA for its important work during disasters but he said figuring out the agency’s new Risk Rating 2.0 system is a challenge even for people in the business of fighting floodwaters. The end result is clear, though: skyrocketing rates for many south Louisiana homeowners.

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U.S. House Majority Leader Steve Scalise (R-La.)

“Risk Rating 2.0, which was rolled out a few years ago, just makes absolutely no sense,” Scalise told the event’s 600 attendees. “We’ve been trying to get them to explain it to the people who actually build levees, whether it’s in Jefferson, Terrebonne, Lafourche or other parts of my district, and if the hydrologists and engineers can’t make sense out of it, then there’s a serious problem. … We’re going to continue to push to get answers and then ultimately get reforms to the way that the flood insurance program works.”

At the end of the chamber meeting, Ryan Daul of USI Insurance Services led a discussion that approached the insurance crisis from another angle: the skyrocketing cost of homeowner’s premiums in the wake of Hurricanes Laura, Delta, Zeta and Ida. After billions of dollars in damage and claims,  a dozen companies have stopped doing business in the state and at least nine others have gone out of business altogether. The result is many homeowners have turned to the state’s insurer of last resort, Louisiana Citizens, which is raising rates by more than 60%.

Louisiana Insurance Commissioner Jim Donelon and Jeff Albright, CEO of the Independent Insurance Agents & Brokers of Louisiana, tackled the topic. 

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Albright described the problem in basic business terms: he said the state’s $2 billion annual homeowner’s insurance market (the amount spent on policies each year) just isn’t big enough to cover the costs of damage incurred.

“After Katrina and Rita, the industry had an $8 billion dollar underwriting loss,” he said. “If you track that from 2005 to 2021, they started $8 billion in the hole. The wind didn’t blow too much [for several years] so they started to make a little bit of money and, in 2019, they were only negative $3 billion.”

Then, because of Laura, Delta, Zeta and Ida, the companies went another $10 billion in the red.

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“So the $2 billion-a-year homeowners market has lost $13 billion dollars,” said Albright. “Y’all are business people so you know that’s a hard sell.”

Albright said a chart from the National Oceanic and Atmospheric Administration showing which states are most vulnerable to catastrophes illustrates the problem another way.

“There are three states that stand out — four if you count California with the wildfires,” he said. “It won’t surprise you that the states are Florida, Louisiana and Texas. But there was a footnote on the chart that says Louisiana is particularly exposed, because the size of its market is not equal to the size of the catastrophe.”

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L to R: Ryan Daul, Jeff Albright and Insurance Commissioner Jim Donelon

Both panelists endorsed the Louisiana Legislature’s $45 million funding bill for an incentive program designed to entice more insurers to the state. But Donelon and Albright agreed that the long-term solution to reducing risk for insurance companies is to “build stronger and build higher.” They both suggest that Louisiana takes a cue from nearby Alabama and ratify more stringent building codes that mean roofs in the state will be able to withstand 150-mile-per-hour winds.

“The long-term solution is to learn to adapt to living in coastal Louisiana,” said Donelon. “We took a major first step in the last legislative session by enabling legislation for the Fortified Homes program, copied from what’s been very successful in Alabama over the past three to four years. They have roughly 30,000 homes built or retrofitted to Fortified standards. That’s the long-term answer: If we build high and build strong, we can survive 150-mile-an-hour winds on Grand Isle. It’s been proven over and over again.”

As explained by the Insurance Institute for Business and Home Safety, Fortified standards go beyond typical building codes to deliver superior performance during severe weather. Of particular relevance to south Louisiana, the codes requires building techniques that will prevent roof shingle loss during high winds and create a waterproof layer beneath the shingles in case they do fail. Albright said this change could reduce storm-related damage and claims by 70%.

Extreme weather, and expensive repairs, aren’t the only reasons insurers are leery of Louisiana, though. According to Albright and Donelon, another reason is the state’s reputation for being overly litigious. 

“There was a report released this year called ‘It’s Not Just the Weather’ by the three major insurance company trade associations,” said Albright. “And they said, ‘Look, the climate is getting worse. We’re having more natural disasters, hurricanes, wildfires, all those different things.’ But the insurance industry can handle that. What they can’t handle is a hostile legal environment. And they identified three states: Florida, California, and unfortunately, Louisiana. In our view, the Louisiana Legislature has got to change some of the laws to make this an environment where insurance companies want to do business.”

Albright and Donelon hope the state legislature will pass tort reform legislation designed to curtail the number of insurance-related lawsuits, although they think little will happen during an election year and expect to see more progress on that front in 2024.

Donelon, meanwhile, gave an impassioned explanation for why south Louisiana is worth protecting.

“A significant portion of our state’s economy and population [is in south Louisiana] out of necessity, not for retirement purposes on pristine white beaches,” he said. “This is a working coast that is serving the nation with energy, oil and gas, port activity, refineries, chemical plants and more. This requires school teachers, restaurants, firefighters and police officers all across [the region]. We can live there. We know how to do it and it’s a question of doing.”

Annual Awards

Also at the chamber’s annual meeting, Jefferson Chamber President Ruth Lawson led the presentation of several awards. Board member John Roberts was named ambassador of the year. Dominique Becnel won the emerging leader award. Tim Coulon was named community leader of the year. And Al Galindo won the chairman’s award for his service as a chamber board member. 

During the meeting, 2022 Board Chair Donna Austin handed the gavel to Galindo, who takes over the role for 2023.

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