Hurricane Regulation

The success or failure of the regulatory approaches utilized in Florida and Louisiana to ease the insurance crisis is critically important to the insurance industry, particularly insurance agents who bear the brunt of communicating the resulting market conditions to clients.

We have followed the varying situations in each of these key states with interest, and have noted that each state has taken quite a different path.

Last week we noted the shift of hurricane exposure to quasi-governmental entities (see here), and in February of this year noted that Louisiana had taken a different approach by encouraging the private market to provide the solution (see here).

An article today in the Shreveport Times (see here) provides a summary and update on the differences. Florida has taken an aggressive regulatory approach, resulting in the State assuming a substantial part of the catastrophic hurricane exposure.

Louisiana has attempted to support the private market and decrease the government’s role.
It is too early to determine which approach is the better one.

And the better one is not necessarily the approach that reduces short term insurance costs. Florida’s approach appears to have produced some price reductions already, or at least reduced increases, but the State has assumed enormous risk in the process and has shifted some of the burden to insureds with little or no hurricane exposure.

It is not clear whether Louisiana’s approach is having much impact yet, but the appearance of a positive approach is not driving away masses of insurers.

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