Socialized risk, private profit in LA property insurance

Socialized risk, private profit in LA property insurance

When a dozen Louisiana property insurers went belly-up after a string of costly hurricanes in 2020 and 2021, the cost of paying claims fell to taxpayers. But the vast majority of the bankrupt insurers had funneled a collective $650 million to less-regulated affiliated entities – a way of pocketing profits for investors at the expense of taxpayers and homeowners seeking claims payments. The Times Picayune | Baton Rouge Advocate’s Sam Karlin scooped: 

Over the same span, the insurance companies themselves posted a net loss of $476 million. Several close observers of the insurance industry said there is a key reason to arrange an insurance company this way: To extract profits with less scrutiny. While insurers must routinely open their books to state regulators, that’s not true of their affiliates. That makes it nearly impossible to tell whether the money paid to them was well-spent — or how much of it went to the company’s principals or its investors.

Karlin explains how companies were able to quickly expand into – and profit from – Louisiana’s risky insurance market in the relatively calm years after Hurricane Katrina, but collapsed when major storms inevitably hit again. 

For instance, many failed insurers had grown at a breakneck pace when they entered the Louisiana market — something auditors repeatedly flagged, according to documents filed with regulators. One reason for that: A surefire way to grow quickly was to take policies from Citizens, which would generally hand them off in huge batches to any qualified company willing to take them. That meant the new firms’ policies were often concentrated in risky areas. And that had devastating long-term consequences.


Special session anxiety
The Legislature convenes Monday for a special session to redraw the district boundaries for Congress and the state Supreme Court, and potentially move the state to a closed primary system. While the session was needed to comply with a federal court order to add a second Black-majority Congressional district, the Louisiana Illuminator’s Greg Larose wonders if Gov. Jeff Landry’s move to include other items will be too much for lawmakers to tackle in an eight-day session. 

There’s certainly no better time for Landry to flex his political muscle than right after his inauguration, but his expansive special session call amounts to juggling chainsaws. His vague directive involving campaign finance laws, for example, presents another opportunity for unforeseen consequences. 

A Times Picayune | Baton Rouge Advocate editorial urges the governor and Legislature to slow down election changes: 

Just what’s going on here? We don’t know, and we doubt anyone outside the governor’s circle does either. These are not issues that Landry talked about in his winning campaign, so there’s no obvious mandate. And as of Wednesday afternoon, no bills had yet been filed, so the public has no way of knowing what specific proposals Landry and the Legislature want to consider. 

Potential legal constraints in allowing unaffiliated or “independent” voters to participate in party primaries could further complicate efforts during the special session. 


Louisiana can still join summer meal program
Recent reporting stated that Republican governors in 15 states, including Louisiana, were rejecting federal funding to provide extra food assistance to children during the summer months. But the Times Picayune’s | Baton Rouge Advocate’s Emily Woodruff reports that Louisiana hasn’t made a final decision on whether to reject $71.5 million that’s available to keep children from low-income families from going hungry during summer vacation.

“We’ve got a lot of kids who go without those meals during the summer.” [said executive director of the Louisiana Partnership for Children and Families Susan East Nelson] The new program loads the funds directly onto a card, which allows families to use it more conveniently. A bill was unanimously passed by the Louisiana Legislature in 2021 to pave the way for such a program, said Nelson. The law allows for information sharing among federal agencies to help distribute funds to students who qualify. 

Providing these meals would help approximately 594,000 children in a state that consistently has one of the highest rates of child poverty in the nation. 


Legislature could undo ‘Raise the Age’ 
State lawmakers will consider undoing a 2016 law that increased the age for which children could be tried as adults. The ‘Raise the Age’ law increased the age from 17 to 18 for all but the most serious cases. The Times Picayune | Baton Rouge Advocate’s Meghan Friedmann reports:

Some Republicans have blamed Raise the Age for what they say was a juvenile violent crime spike during the COVID-19 pandemic, though they have not provided evidence to support that notion. The prospect of undoing the reform worries juvenile justice advocates who say it brought Louisiana in line with other states and was backed by science that suggests youth should be treated differently from adults.


Number of the Day
400,000 – Number of children that would be lifted above the poverty line from a bipartisan Child Tax Credit proposal that’s being negotiated in Congress. An additional 3 million children would face less hardship in the credit’s first year. (Source: Center on Budget and Policy Priorities)