Louisiana Insurance Commissioner James Donelon said today he will propose a matching grant system for insurance companies willing to write new property policies in the state.
Mr. Donelon said the bill he proposes for the Louisiana Legislature will require an appropriation of $100 million.
If a qualified insurer promises to take policies out of the state's residual market insurer, Citizens Insurance Company, that company would qualify for a matching grant.
Insurance companies would also have to meet certain capital and reinsurance requirements and have experience in writing property insurance.
Mr. Donelon told a press conference this morning that the minimum capital commitment for an insurance company is $2 million. The maximum matching fund is not to exceed $10 million per public offering.
Participating companies must use the capital and surplus and the state matching grant to write new property insurance policies in Louisiana for a minimum period of five years.
If an insurer fails to comply with the requirements of the program, the insurer must repay the remaining state matching funds on a pro rata basis.
The proposal drew praise from ProtectingAmerica.org, a group which advocates action to create government-backed insurance catastrophe programs.
James M. Loy, co-chair of the organization, who is a retired Coast Guard admiral and former deputy secretary of the U.S. Department of Homeland Security, said Louisiana faces a two-pronged problem with respect to providing its families with the resources to rebuild and recover following the onslaught of hurricanes or other natural catastrophes.
He said the state needs stability in the marketplace so that insurance is available and affordable for the predictable storms that hit the Gulf states, and a mechanism in place "to assure loss coverage from mega-catastrophes like Hurricane Katrina."
"The program Commissioner Donelon announced could help expand coverage for people in Louisiana who live in high-risk areas," he said.
Meanwhile, Associated Industries of Florida, a statewide employers group, said it was urging Citizens and state budget leaders to proceed cautiously as they work at overhauling the insurer.
Before expanding Citizens' coverage, AIF said it recommends Citizens first determine the liability Florida will face and whether the state can cover future losses under existing coverages.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.