Failure to create mega-state insurance market doomed Jim Donelon

By Christopher Tidmore
Contributing Columnist

It was an eventful week on the political front. Former LAGOP chairman and PSC Commissioner Mike Francis announced that he was going to challenge Secretary of State Kyle Ardoin – joining grocer Brandon Trosclair to unseat the incumbent. Rumors that former 5th District Congressman John Cooksey could jump into the Louisiana Treasurer’s race were abuzz, and quite a few candidates are already lining up to run for the open attorney general’s position. However, nothing proved more surprising to casual political observers than Jim Donelon‘s decision not to seek a fifth term as insurance commissioner of Louisiana.

But not to insiders. By all accounts, he wanted to run. The four term incumbent had been telling his supporters just weeks ago that he planned to qualify once more for election. Just weeks ago, he had succeeded in convincing the legislative special session to empower him with an incentive plan to draw underwriters back to the property market of Louisiana. On the surface, Donelon appeared secure in a position of incumbency. However, his 2019 opponent Tim Temple had recently earned the endorsement of Republican megadonor Joe Cannizzaro – and had pledged millions of dollars of his own money besides to take down Donelon. Four years ago, Temple proved a formidable opponent, earning more than 47 percent of the vote in an all GOP contest. At the time, he warned that Donelon‘s hesitancy to lore more domestic (Louisiana-headquartered) underwriters and to create larger market partnerships with other states could put the local property insurance market in a dangerously exposed position in the wake of a weather event.

Hurricane Ida proved Temple prophetic as property insurance premiums skyrocketed, and many underwriters left the state. Donelon’s political position became more problematic.

His predecessor, former Insu-rance Commissioner Jim Brown, who has been keeping a close eye on the upcoming election, noted that Donelon missed several opportunities to diversify the insurance market by partnering with other states. According to Brown, seeing the danger of losing to Temple, the incumbent “read the writing on the wall” and bowed out.

Donelon might have been saved had he taken pre-emptive action several years ago, allying himself with Governor John Bel Edwards to approach other states to form a mega-insurance market, Jim Brown explained. And Louisianans might be paying much lower insurance rates today as a result.

In an interview with The Louisiana Weekly, Brown elucidated, “The problem is that we’re not a big state. We are a huge insurance state by the way…Most people don’t realize that Louisiana is the second or third largest state in America, in terms of where insurance companies do business because, you know, we got the Port of New Orleans and all the chemical industry — so there’s a lot of things to insure.”

“But also we are so exposed! We are this little state sitting down here at the tip of the country, the deepest of the deep southern states, and there is huge exposure, and we have seen more and more hurricane activity. I think the mistake we made, the legislature and Donelon, not foreseeing the fact that we can’t go it alone!”

“There’s no way that little Louisiana could cover all of the losses we will get unless one of two things happen: either the federal government bales us out after every hurricane, or we are smart and get together with other states who have similar problems. You know, we are not alone with hurricanes. You’ve got Mississippi. You’ve got Alabama. You’ve got Georgia, Florida, all that share some of the same attributes of danger that we have…The governor and the insurance commissioner years ago should’ve started a dialogue with these other states about forming a southern regional pool that could share the risk.”

“We just don’t share the real risk. We just can’t afford to do it alone. We’re not a wealthy state. [Nevertheless], we’re trying to go it alone. The big disappointment to me is that we should’ve got together with these other states – and tried to solve some of these problems.”

Donelon could have worked closely with Governor Edwards, encouraging him to approach other regional governors (who appoint their insurance commissioners), to build a multi-state coalition. Donelon opted not to, Brown maintained. Consequently, this issue of diversifying insurance market beyond Louisiana will likely underpin this autumn’s open Insurance Commissioner’s race. Moreover, Brown observed, Temple will not likely have a coronation. GOP Public Service Commissioner Eric Skrmetta has already seriously began looking at the insurance commissioner’s race. Others are talking about jumping in as well.

This article originally published in the March 20, 2023 print edition of The Louisiana Weekly newspaper.