BATON ROUGE, La. (BRPROUD) — In June, nearly 90,000 policyholders were left with no home insurance after multiple home insurance companies canceled policies in Louisiana because they couldn’t afford to reinsure.
According to Louisiana Insurance Commissioner Jim Donelon, to prevent this from happening again, the state is asking property insurance companies to increase the amount of money they have on hand starting in August.
Insurance companies are now required to put up to five million dollars by 2026 and 10 million by 2031. Before, they were required to put up three million dollars. Commissioner Donelon said companies in Louisiana already meet the five million dollar phase-in requirement, which means there should be no burden to them.
“The reason we’re increasing that minimum capital surplus is so the owners of those companies have more as I referred to it ‘skin in the game,’ more of their own money on the table,” said Donelon.
Some Baton Rouge area independent agents said the increased surplus will deter companies from coming to Louisiana because they can’t afford it. But Donelon said this law will allow companies to be able to afford reinsurance.
“By having 10 million of their own money, the expectation is that those owners will be more prudent, conservative and less trying to maximize their profit opportunities as they head into another hurricane season by spending their money on reinsurance,” said Donelon.
The House Committee on Insurance explained new laws that they say will strengthen the state’s insurance regulations. The Catastrophe Reform Package of the 2022 Legislative Session focuses on:
- Improving coverage for evacuation expenses
- Addressing the adjuster turnover issue followed by previous hurricanes
- Damage prevention
- Surplus requirements
All new legislation can be found here.
“We learned an awful lot and we have improved. I do believe the system can better handle what we [have] been through the last two hurricane seasons,” said Donelon.
Donelon said thousands of homeowners still need insurance. He said the last resort state-run program, Louisiana Citizens, is seeing a surplus of demand and its website is experiencing technical issues.
In the meantime, he said to check with your agent to verify that you’re still insured.