Before the Flood: Reducing Louisiana’s vulnerability to severe weather through market-based insurance reforms

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This paper will examine Louisiana’s vulnerability to severe weather and suggest market-based reforms to adapt to extreme inherent risks, which could be exacerbated by a changing climate.

It is undeniable that Louisiana is particularly vulnerable to catastrophes driven by extreme weather. Even worse, these catastrophic risks could increase in a changing climate. In a state facing such dangers, a robust and functioning insurance market is critical. To attain this kind of market, Louisiana policymakers should implement free-market reforms. Insurers must be free to charge adequate rates for the products and coverages they offer and the risks they take on. Regulators must move quickly and efficiently to approve or reject rates and forms. Finally, lawmakers should consider policies that encourage property owners to reduce risk, for instance, through tax incentives or changes to building codes.

The paper also will discuss the risks faced by Louisiana, obstacles to reform and potential solutions to these obstacles, some viable and some apparent dead ends.

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