Includes ending federal flood insurance
© Can Stock Photo / radiantskies
Although we are seeing a leveling off of reinsurance costs as of the January 2024 renewals, Congress has initiated legislation to stem reinsurance prices. A bill introduced in Congress last week would establish a federal catastrophe property loss reinsurance program for insurance companies offering residential and commercial all-perils policies.
The Incorporating National Support for Unprecedented Risks and Emergencies Act (INSURE Act) by Representative Adam Schiff (D-California) would put development and administration of the program under the Secretary of the Treasury and a newly created 28-member advisory committee. As such, it continues efforts to slowly federalize our country’s state-based insurance regulation system.
In his press release, Rep. Schiff said the bill “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. Climate change has significantly increased the risk of natural disasters and insurance companies are shifting the costs to consumers who struggle to purchase disaster coverage.”
The INSURE Act would require participating insurance companies to cover all natural disasters, including wildfires, severe storms, wind, hurricanes, floods, and earthquakes. But it also goes beyond establishing a federal reinsurance program to cap insurance companies’ liabilities. The INSURE ACT would:
- Direct significant investments from insurance companies in loss prevention and risk mitigation partnerships with policyholders and create a $70 billion annual program with states to invest likewise.
- Eliminate National Flood Insurance Program (NFIP) coverage and migrate it to the private market under the new reinsurance program.
- Appropriate $50 billion annually to help low-income households purchase insurance.
- Produce reports on the feasibility of including earthquake coverage in all-perils policies and on the feasibility of relocating uninsurable properties.
- Authorize the Treasury Secretary to add additional perils to the program in the future.
- Pursue a pilot program for insurance companies to offer multiyear property insurance policies.
Program details, such as the liability threshold, are not specified in the bill and would be developed by the Treasury Secretary and the advisory committee. There has also been talk in Congress for years about developing a federal catastrophe pool or backstop, to cover insurance claims from a catastrophic event. Here in Florida, State Rep. Kelly Skidmore (D-Boca Raton) has filed HM 371, which would encourage Congress to establish a federal catastrophe pool.
LMA Newsletter of 1-15-24
