Louisiana Insurance Commissioner, Lawmakers Introduce Catastrophe Reform Legislative Package
Louisiana Insurance Commissioner Jim Donelon, Senate Insurance Committee Chair Kirk Talbot, and House Insurance Committee Chair Mike Huval introduced six bills on March 10 that form a catastrophe reform legislative package for the 2022 legislative session.
Donelon said the bills were designed to address future challenges in the aftermath of Hurricanes Laura, Delta, Zeta and Ida.
SB 264 would increase minimum capital and surplus requirements for all insurers licensed to write fire and allied and/or homeowners’ insurance lines of business. The bill, sponsored by Sen. Joseph Bouie, proposes raising the minimum capital and surplus requirement for existing companies from $3 million to $5 million by end-of-year 2026 and to $10 million by end-of-year 2031.
The legislation was written in response to three regional insurers going insolvent in the aftermath of 2020 and 2021 hurricanes, Donelon said.
Insurers applying for fire and allies and/or homeowners’ insurance lines after September 1, 2022, would be required to possess minimum capital & surplus of $10 million upon application for a Certificate of Authority.
“What this bill will do with those small regional carriers is it will require them to have more ‘skin in the game,'” Donelon said. “Therefore with $10 million on the table instead of $3 million, they’ll be making much more conservative purchases of reinsurance for their risk than they are with less assets involved in making that decision.”
Two bills sponsored by Sen. Talbot address policyholder non-renewal protections and adjuster turnover.
SB 162 states:
- When the governor declares a state of emergency for a named storm or windstorm, the insurer cannot cancel or nonrenew an insurance policy providing coverage for property located in this state, subject to the declaration of the state of emergency, and the property was damaged as a result of the named storm or hurricane until 90 days after the property has been repaired
- Requires insurers to send at least a 90-day written notice of the intent to cancel or nonrenew
- Allows insurers to cancel or nonrenew based on one of the following:
- Upon 10 days’ written notice for nonpayment of premium
- Upon 30 days’ written notice based on one of the following: For material misrepresentations or fraud related to the claim; When an insurer determines an insured has unreasonably caused a delay in the repair of the dwelling; When an insurer has paid the policy limits.
- Upon written request from the insured
SB 198 would require that after a third adjuster is assigned during a catastrophe, the insurer must provide:
- A summary report of the claim disposition up to that point including information such as the undisputed amount to be covered and a list of issues that remain in dispute
- A new primary contact that is directly employed by the insurer who will remain on the case until the claim is closed, and two methods of communication for contacting the primary contact
Talbot said the bill, known as the Three Adjuster Rule, address the adjuster turnover issue exacerbated by previous hurricanes and COVID-19.
A third bill brought forth by Talbot, SB 134, clarifies that prohibited use coverage shall be triggered when a civil authority issues either a formal evacuation order or other public safety announcement that the area should be evacuated as a result of a covered peril.
A bill introduced by Rep. Huval would require stronger materials and construction methods when building building or modifying homes.
HB 612 would establish the Louisiana Fortify Homes Program within the LDI. The program would create an incentive for Louisiana homeowners to retrofit their roofs to meet the Institute for Business and Home Safety (IBHS) “Fortified Roof” standard. The Commissioner of Insurance would issue rules for eligibility requirements and administration of the program.
Only owner-occupied residential property with a homestead exemption would be eligible. The program would be held in the state treasury as a dedicated fund.
APCIA warned that such a bill could “lead to unintended consequences” by limiting product choices for policyholders to rebuild their homes.
“APCIA respectfully urges policymakers to use caution as they look to reform the state’s homeowners insurance laws,” said Lee Ann Alexander, vice president of APCIA. “To ensure the widest range of affordable products and services are available to Louisiana consumers, insurers must have the ability to manage their risks and be able to operate in a reasonable environment. Countrywide, consumers, businesses, and insurers alike are experiencing challenges from increased natural catastrophe claims, COVID supply chain issues, and the fastest rise in inflation in 40 years. These events are straining both insurers’ and consumers’ resources both nationally and in Louisiana.”
HB 280 would require the written catastrophe response plans created by Louisiana insurers to include the following minimum requirements:
- Emergency contact information of key or essential personnel
- Appropriate contact information of claims personnel
- Alternative office locations and work sites likely to be used in the event of a catastrophe
- Procedures to address storage and security of data necessary toadjust claims, the processing of claims, relevant training of staff, maintaining communication with policyholders and agents in the event of mail or other communication system disruption, and a plan for distributing catastrophe claims information to policyholders
- The methodology for determining the approximate number of adjusters and other administrative personnel necessary to respond to the catastrophe, the process through which the insurer will provide services to policyholders, and the process through which insurers will provide logistical support to claims personnel in the affected area
The bill would also requires insurers to submit a written catastrophe response plan that conforms to these standards with the Department of Insurance no later than June 1, 2023.
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