Only steps remain on a lot where a home once stood prior to Hurricane Katrina in 2005 in the Lower Ninth Ward of New Orleans. Photo taken March 26, 2015.
Only steps remain on a lot where a home once stood prior to Hurricane Katrina in 2005 in the Lower Ninth Ward of New Orleans. Photo taken March 26, 2015. Bloomberg News

Nearly a decade ago, on Aug. 29, 2005, New Orleans and the southeastern part of Louisiana were hit by Hurricane Katrina. The following month, southwestern Louisiana was hit by Hurricane Rita. Together the storms swamped the state and put families and communities in peril.

Getting back to normal and rebuilding required the availability and affordability of property insurance in those communities. Katrina caused more than $25 billion in insured losses from about 750,000 claims. Hurricane Rita had about $3.4 billion in insured losses from more than 200,000 claims. Property insurance companies reacted quickly to reduce their exposure in Louisiana. You can't really blame them, but it put great strain on local bankers' to make home lending work with the new reality of insurance.

Louisiana faced the immediate challenge of keeping existing insurance companies here and recruiting new companies to write policies. In any crisis it's how you respond that matters, and Louisiana has shown itself to be up to the task. We were fortunate to have stellar political leadership in the legislature and with Louisiana Commissioner of Insurance Jim Donelon, who remains commissioner today.

We also created an organization called the Coalition to Insure Louisiana. This broad array of interests, which included homebuilders, real estate agents and the Louisiana Bankers Association, banded together to advocate for common-sense, market-driven solutions that would promote competition and stabilize prices. Insurance companies were out of favor during these critical days due to claims issues. The companies were part of the coalition but the homebuilders, realty agents and bankers were the face of the coalition to project the broader economic concerns that called out for a strong response. These factors resulted in legislative actions that have provided in a very healthy property insurance market today.

This was accomplished by enacting a statewide building code in 2005 and in 2007 with an incentive program that encouraged homeowners to strengthen homes against hurricanes. This was a huge undertaking, involving building inspectors at the local level, with many political and practical challenges.

In 2008, the Insurance Rating Commission was abolished. This political body passed judgment on rate increases and was generally thought to be the No. 1 impediment for insurance companies doing business in Louisiana. The commission's duties were transferred to the Insurance Commissioner, resulting in a modernization of the rating process. A property insurance incentive program was established to attract more insurers, resulting in five new companies writing policies.

Four of those companies write homeowners insurance with the other writing commercial insurance. Part of this incentive program required insurance companies to take policies from the Louisiana Citizens Property Insurance Corporation, a state-owned carrier of last resort. Citizens had been in place when the hurricanes hit and was critical in our recovery. At its peak in 2008, 9.8% of the property insurance market was written through Citizens, with much of coastal Louisiana having nowhere else to get insurance. These policies were above market rate so as not to interfere with the private market.

The Citizens Depopulation Program was created in 2007 to reduce the Citizens market share and transfer polices to private carriers. It has been very successful and today only 1.8% of the market is written through Citizens. In 2014 Louisiana homeowners insurance rates increased by an average of 2.8%, the lowest average rate increase since 2005.

Together these actions have created market-driven reforms and incentives that have worked. I have read many retrospectives about Hurricane Katrina and how well or poorly New Orleans has recovered. But no recovery, no neighborhood, no community or family can do anything without available and affordable insurance. Louisiana did good providing a solid foundation from which these efforts by local communities can succeed.

There is great temptation in moments of crisis to do things that feel good but are contrary to constructive long-term public policy. All of us, when we find ourselves at a similar crossroads, whether elected officials or industry representatives, need to look past the immediate and focus on what works and provides long-term viability for the issues at hand.

Robert T. Taylor is the chief executive of the Louisiana Bankers Association.