Rep. Clay Higgins proposes tax breaks to keep insurance companies in Louisiana

With property insurance underwriters fleeing Louisiana, Congressman Clay Higgins has filed legislation that would offer generous tax breaks to insurance companies as a means of enticing them to remain in the state. Some question whether the tactic will be effective and if it’s politically motivated.

House Resolution 9057 proposes to give insurance companies five years of tax deductions on income derived from homeowner premiums written in areas that experienced a federally-declared disaster.

Because insurance is regulated mostly at the state level, Higgins’ resolution would serve as a model for state legislatures to use.  

“After recent disasters, we’ve witnessed insurers abandon the state and terminate policies,” Higgins tweeted Wednesday. “This has left Louisiana families with limited insurance options, driving up costs and destroying financial security for scores of thousands of Louisiana citizens.”

Eight insurance companies have gone insolvent in Louisiana this year due largely to property claims filed after four hurricanes struck the state in 2020. 

Louisiana Citizens Property Insurance Corp., a nonprofit insurer that the state created for property owners who cannot obtain policies otherwise, has proposed a 63% rate hike on new and renewed policies starting Jan. 1. Its leaders have said the increase is necessary because of the growing number of policies it has had to take on when other companies leave the state. 

Citizens has taken on roughly 77,000 policies since 2021, Insurance Commissioner Jim Donelon said at a Jefferson Parish town hall meeting earlier this month. One solution to the crisis Donelon has offered is to work with state lawmakers on implementing a “depopulation” program that incentivizes private insurers to take on Citizens’ policies, which is what the state did after Hurricane Katrina.

In a tweet, Higgins said his resolution, if “enhanced by companion legislation out of Baton Rouge,” would address the “property insurance nightmare” in Louisiana.

Some are skeptical of Higgins’ intentions.

Rep. Edmond Jordan, D-Baton Rouge, who sits on the Louisiana House Committee on Insurance, said the resolution doesn’t do anything to ensure that homeowners’ policies remain affordable.

“While I assume that his intent is to create competition in the marketplace, people need insurance before a disaster,” Jordan said. “And while there is a five-year exemption, there is no way to know if the insurance would be affordable.” 

Depending on the nature of destruction, Jordan said, a homeowner might be rebuilding for a couple years and only end up benefiting from three years of coverage.

Lady Carlson with Together Louisiana, an umbrella group that has called for close scrutiny of corporate tax credits, questioned if the resolution is a “knee-jerk” attempt by Higgins to bolster his reelection campaign. Carlson said Higgins has done little over the last two years for the storm victims in his southwest Louisiana district.

“This seems to be a bill being proposed 50 days from the election,” Carlson said. “Now Congressman Higgins is proposing a bill when all along those parishes have been devastated.”

Still, others remain open at this point to any ideas to address the insurance crisis. 

The Louisiana Budget Project’s Jan Moller said he hadn’t yet reviewed the legislation, but added that “it’s a critical problem and everything should be on the table.”