Nine insurers have applied for grants totaling $62 million from a revived program that will allow insurance companies that agree to do business in Louisiana to receive direct subsidies from the state, Insurance Commissioner Jim Donelon said Tuesday .
It’s unclear how many of the companies will be allowed, but interest exceeds the $45 million lawmakers allotted during the special session.
Donelon on Tuesday that he plans to ask the state legislature for an additional $17 million during the regular session that begins in April.
Eight of the nine applicants are already doing business in the state, Donelon said, but in order to receive grant funds, they need to expand their business books.
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“The first round application phase was more (successful) than I had hoped for,” Donelon said. He later added, “If all goes well, they should be able to start writing new policies as early as next month.”
The Louisiana Department of Insurance is expected to conduct rigorous reviews of every company’s financial condition. Donelon said if the insurers pass the department’s review, the auditors will recommend them for approval by the joint Budget Legislative Committee, which could happen as early as this Friday.
Donelon pushed for the revived program amid a market crisis that has caused a dozen businesses to collapse and well over 100,000 Louisiana homes to be without a place to turn to alongside Louisiana Citizens Property Insurance Corp., the state insurers of last resort, can contact .
“The program is critical to our state because the sooner we can distribute the fund, the sooner policyholders can opt out of Citizens,” said State Assemblyman Mike Huval, R-Breaux Bridge, who chairs the Home Insurance Committee.
The incentive program is almost identical to that after Hurricane Katrina. This time, however, insurers are not required to accept policies from Louisiana residents.
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Despite this, Donelon has said he expects some companies to do so voluntarily.
Insurers receiving grants must match the value of the grant dollar for dollar and write double that amount as a premium each year. So, for example, if a company receives a $10 million grant, it contributes another $10 million in excess funds and is responsible for writing $40 million in awards to communities in southern Louisiana each year.
The nine companies seeking grants ranging from $2 million to $10 million are expected to meet these benchmarks for five years.
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If successful, the program will help some consumers find moderately cheaper coverage at a time when rates have risen significantly.
If history is any indication, there is no guarantee that all insurers will meet all requirements. A review of The Times-Picayune | The Katrina-era grants advocate noted that nearly a quarter of the funds spent in Louisiana were returned to the state because insurers didn’t keep their end of the bargain.
One of the companies that participated in the first grant program, Southern Fidelity, was declared bankrupt in 2022, several years after the grant program ended.
Donelon said the department plans to closely monitor each insurer’s solvency, which requires them to hold more capital and surpluses. The state will also cap the amount of premium a single company can write in each municipality to avoid heavy concentration in a single area, he said.
But there is no guarantee of significantly lower prices. Home and business owners could see at least a modest drop in their payments, as Citizens is required by law to set prices above the private market.
“The incentive program is not designed as a long-term solution,” said Huval. “Although attracting some home insurance businesses to our market will benefit us greatly in the long term.”
Here are the companies that applied and the grant amounts requested for each:
- Allied Trust Insurance Co., $6.5 million
- Applied Underwriters, $10 million
- Cajun Underwriters Reciprocal Exchange (CURE), $5 million
- Constitution Insurance Co., $10 million
- Elevate Reciprocal Exchange, $5 million
- Gulf States Insurance Co., $3.6 million
- SafePoint Insurance Co., $10 million
- SafePort Insurance Co., $2 million
- SureChoice Underwriters Reciprocal Exchange (SURE), $10 million
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