Insurance premium hikes cause concern more Louisiana homes will become unaffordable
NEW ORLEANS (WVUE) - As Louisiana Citizens, the state’s insurer of last resort, prepares to impose a 63 percent increase on homeowners premiums Jan. 1, lawmakers are trying to entice more private companies to increase competition in the state.
Until that happens, however, concerns are mounting that soaring insurance costs will make more homes in Louisiana unaffordable.
“We still don’t have solid solutions going forward,” said realtor Cody Caudill of Keller Williams New Orleans. “What do we do? How do we help people afford homes?”
Caudill said prospective homebuyers are being pushed out of the market by a combination of soaring insurance costs and rising interest rates. Realtors say that puts home values at risk.
“We need some time for private companies to come back into the marketplace, or some sort of incentive for them to come back in,” Caudill said.
State lawmakers said they hope an incentive program can be launched before the Citizens rate increase takes effect.
“If they don’t come back in a session until April 2023, we have no guarantee of $100 million potentially will be put into to a fund to incentivize companies to come back in,” Caudill said. “That’s too long, right? Citizens’ rate increase goes into effect Jan. 1.”
In 2007, after several insurers left or failed after hurricanes Katrina and Rita, the state doled out $29 million to incentivize five companies. One of those was the now-bankrupt Southern Fidelity.
“It provided more market participation and more competition in the state, but it came at a significant limitation, which is that many of these companies that came in and purchased these policies ended up either going under or were not fully capitalized,” said Jesse Keenan, an associate professor of sustainable real estate at Tulane University. “That created a structural risk problem for the state. So, this is really a short-term solution to a long-term problem.”
Keenan said the best way to attract companies long term is for Louisiana homeowners and municipalities to reduce risk across the board.
“We can incentivize local governments to build in the right places,” Keenan said. “We can incentivize and subsidize homeowners to retrofit their properties. We can raise the elevation of where properties are being built. We can work with utilities to de-risk some of the aspects of physical exposure and our utilities and our infrastructure.”
But if the state pushes ahead, seeking immediate relief through an incentive program, Keenan said it is critical that the state work to attrack fiscally sound companies that are adequately covered themselves in terms of re-insurance.
“I think one of the problems that we’ve run into is that we have not had adequate oversight and making sure that many of the 10 companies that have failed this year had, among other things, adequate access and participation in the reinsurance market,” Keenan said.
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