The insurance industry is over-reacting to Hurricanes Katrina and Rita, threatening the region’s recovery by withdrawing coverage and charging exorbitant rates, Gov. Kathleen Blanco told a gathering of insurance professionals Feb. 14.
“There are tens of thousands who are repairing and rebuilding their homes only to be assaulted by insurance rates that they cannot afford to pay,” she said. “If this does not change quickly, Louisiana will have no recovery and you will have lost a great portfolio of business.”
Blanco tried to assure more than 100 members of the Reinsurance Association of America that the state is on the right track, making Louisiana better protected against future storms.
The federal government has invested more than $1 billion to strengthen more than 100 miles of levees and floodwalls, she said. And homes are more storm-resistant because the state has adopted its first statewide building code and the federal government has created new flood elevation maps, she said.
“We want you to be a part of this, not an obstacle to our recovery,” Blanco said.
The governor said she has met many residents, including some hit by tornadoes on Feb. 13, who just cannot pay the new high rates.
“There are many citizens in Louisiana who have been forced to let their insurance policies lapse,” she said, “and it’s strictly because the rates have risen so dramatically.”
If private insurance continue to underpay claims, gouge prices and pull out of the market, the state is left with no choice but to compete with the private sector, she said.
However, Blanco stopped short of endorsing a state-funded system like one in Florida, which has taken on more of the responsibility to pay for damages from any large storms, thus reducing insurers’ ultimate risk.
“There are big challenges when the state itself takes on the risk. I don’t know if Louisiana can afford to carry as much risk as Florida has identified for itself,” she said in an interview after the speech.
Blanco said she wants to identify at least 12 companies that can each take on at least 1 percent of Louisiana’s market.
“We don’t think that Louisiana should try to carry the burden of the risk. Our first goal is to get more insurers to Louisiana to share our risk,” she said.
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