Louisiana’s Homeowners Market Stronger 9 Years after Katrina

Louisiana’s property insurance market is vastly improved nine years after Hurricane Katrina devastated the state on Aug. 29, 2005, largely due to the implementation of statewide building codes and strategies that have helped create a more competitive marketplace, according to the state’s insurance commissioner.

“Following Hurricanes Katrina and Rita we developed a combination of strategies including the Louisiana Citizens Depopulation Program to improve Louisiana’s property insurance market,” said Commissioner Jim Donelon. “Our market is actually more competitive and more diverse than it was prior to 2005 and we now have 21 new insurance groups writing in Louisiana who were not here pre-Katrina. While larger companies have downsized their exposure along the coast, we’ve been successful in filling that vacuum with smaller, regional and financially stable companies that I believe represent the future of coastal property insurance markets.”

Donelon says the state’s implementation of a statewide building code, enacted in 2005, has also been instrumental in improving the property insurance market.

“Our statewide building code has been helpful on several fronts — enhancing the safety of Louisiana residents, improving the resiliency of Louisiana communities, and boosting confidence among insurers interested in offering coverage in Louisiana,” Donelon said.

The Louisiana Department of Insurance offered the following statistics on the Louisiana marketplace following Hurricanes Katrina and Rita:

• Hurricane Katrina resulted in more than $25.4 billion in insured losses in Louisiana.
• Three weeks later Hurricane Rita caused $3.4 billion in additional insured losses in Louisiana. These estimates do not include insured flood losses, which totaled $15 billion of payments from the National Flood Insurance Program for the two storms in the state.
• Louisiana property owners pay $2.6 billion per year in premiums for all property insurance purchased (commercial and residential).
• As the state’s insurer of last resort, Louisiana Citizens Property Insurance Corp. offers homeowners and commercial policies to those unable to secure coverage through private insurers. In 2008, Citizens’ market share spiked to 9.8 percent, making it the third largest insurer in the state. By 2013, its homeowners market share had dropped to 2.3 percent, making it the ninth largest insurer in Louisiana.
• Insurance premium discounts offered to those who comply with the Louisiana State Uniform Construction Code apply to new and retrofitted, one or two-family, owner-occupied and modular homes and are generally up to 20 percent.
• Louisiana tax deductions are provided to those who voluntarily retrofit an owner/occupied residential property to comply with the Louisiana State Uniform Construction Code. The construction code retrofitting tax deduction is 50 percent of the cost up to $5,000.