The state’s top hurricane recovery panel will study whether Louisiana should consider creating a catastrophe fund that would provide financial backup for insurers because of hurricane risks.
The key area for review is whether a “cat fund” in Louisiana could attract more insurers and lower costs, since companies are skittish about offering insurance in Louisiana after hurricanes Katrina and Rita, said Sean Reilly, a member of the board for the Louisiana Recovery Authority.
A cat fund would provide reinsurance, essentially the insurance that insurance companies have to help them cover their costs. Florida created a similar fund in 1993 after Hurricane Andrew. Reilly said the Florida fund has attracted more insurers to the state and helped reduce rates.
A coalition of business groups and Insurance Commissioner Jim Donelon asked the LRA to study the catastrophe fund idea for Louisiana, Reilly said. LRA officials said the study should be done in about two months, financed through private donations to the LRA Support Foundation.
Any catastrophe fund would have to be created and funded by the state Legislature.
Lawmakers are studying whether they want to start a cat fund and how much money they should include in it.
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