Representative Adam Schiff (D-Calif.) introduced legislation today that would create a federally funded catastrophe reinsurance program that would cover a wide swath of catastrophes in an effort to “insulate consumers from unrestrained cost increases by offering insurers a transparent, fairly priced public reinsurance alternative for the worst climate-driven catastrophes”
The Incorporating National Support for Unprecedented Risks and Emergencies, or INSURE Act, would administered and funded through the US Treasury Department and would reinsurer both residential and commercial “all perils” polices.
According to the legislation, the federally-backed program would:
- Require participating insurers to cover all natural disasters, including wildfires, severe storms, wind, hurricanes, floods, and earthquakes.
- Establish a Federal Catastrophe Reinsurance Program within Treasury that would cap insurers’ liability in the case of a catastrophic event in return for a premium paid by the insures.
- Carrier liability would be capped “above a threshold developed by the Secretary and an advisory committee of experts” but would be no greater than 40% of the probable maximum loss (PML) of an individual insurer for, per peril.
- ”Incentivize” the capital market alternatives, such as catastrophe bonds.
The legislation says the federal reinsurance program would have an initial $50 billion in funding that would increase and cap out at $70 billion in 2030.
“My INSURE Act addresses the urgent crisis in the home insurance market, particularly in California, where the cost of insurance has gone through the roof and insurers have stopped writing new policies. ” Schiff said in a statement. “My bill is a critical step forward in the effort to ensure homeowners and communities have access to affordable and accessible coverage. I’ll keep working to get this across the finish line and bring the cost of insurance down.”
Co-sponsor of the legislation include Representatives Zoe Lofgren (D-Calif.), Rashida Tlaib (D-Mich.), Julia Brownley (D-Calif.), Kevin Mullin (D-Calif.), Andrea Salinas (D-Ore.), Val Hoyle (D-Ore.).
