10X Insurance Series: Louisiana Grapples with Growing Natural and Financial Risk

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…It’s a huge experiment. He might be right. He may be onto something to the extent that if you just open it up, the market may try to sort itself out … But those rules were put in place for a reason. They came through trial and error. They came through experience…. And the people of Louisiana are going to be the guinea pigs, whether they want to or not.

Jesse Keenan on proposed regulatory changes made by the new Louisiana State Insurance Commissioner, Tim Temple.

A drought on the Mississippi River has pushed a massive saltwater wedge from the Gulf of Mexico toward New Orleans, contaminating clean water supplies for several Louisiana river communities. Aside from the obvious public health concerns, this salty water is highly destructive to pipes and appliances within residents’ homes.

Unfortunately, this risk comes at a time when local insurance industry services have never been more constrained or inaccessible. At least twelve insurers have been declared insolvent since the record-breaking 2020 and 2021 Atlantic hurricane seasons. Many of these insurers were regional and halted operations in Florida as well.

Increased tropical cyclone risk and property value concentrations within high-risk areas, as well as an uptick in fraudulent or standard consumer claims, have all been linked to the shrinking availability of home policies in the Gulf. Though it can be hard to pinpoint exactly where the Louisiana market crisis begins or will end, the impacts to consumers are undeniable. According to the nonprofit risk analysis firm First Street Foundation, insurance rates for residents have seen a 90% increase over the last year, while the quality of coverage has steeply declined.

James Donelon, the Louisiana state insurance commissioner since 2006, has attempted several reforms to bring premiums down while increasing insurer diversity, but they haven’t always proven fruitful. Tim Temple, who will succeed Donelon after an uncontested commissioner race, has advertised broad market deregulation as a way of enticing insurers back into the state. Some experts are skeptical.

In this episode, Ten Across founder Duke Reiter and climate adaptation expert Dr. Jesse Keenan delve into the current limitations of insurance and community resilience as climate risk increases in Louisiana and why massive improvements in state policy and infrastructure are still needed to achieve greater safety and success within its coastal communities.  

Guest Speaker