A group of academics is proposing that the US federal government step in as a public reinsurer to help address worsening climate-related insurance pressures, arguing that such a program could reduce costs for homeowners and support housing market stability as catastrophic weather risks grow.
The proposal, referred to as “Re US,” would create a federal reinsurance program designed to cover only the most extreme catastrophic climate risks. Its backers say the idea is rooted in the federal government’s much greater capacity to absorb large-scale shocks and borrow at lower cost than private reinsurers, whose capital costs are ultimately passed on to policyholders.
“The challenge that we’re trying to address is that it’s very costly for the global reinsurance community to cover very severe tail risks, and so we think that’s where this entity could add the most value,” said Benjamin Collier, one of the paper’s authors and a risk and insurance professor at the Wisconsin School of Business, as reported at GreenCentralBanking.com.
The proposal comes as insurance affordability becomes a growing concern across the United States. Homeowners’ insurance premiums rose by an average of 28% between 2017 and 2024, adjusted for inflation, while in some high-risk areas insurers have pulled back or stopped writing new policies altogether. Researchers say this reflects mounting strain on the insurance system as climate change increases the likelihood and severity of large catastrophe losses.
Under the proposed model, a federal agency would sell reinsurance contracts to insurers, but only for the most severe weather events. The goal, according to the authors, is not to subsidize risky behavior, but to address a part of the market where private reinsurance may be too costly or too limited.
“The US balance sheet has a capacity to absorb shocks in a broader way than the global reinsurance community can,” Collier said. “The total equity capital in the reinsurance community is around US$600bn, which is a lot of money but small relative to the US federal balance sheet.”
The authors argue that a federal backstop could help households maintain more stable and affordable insurance coverage, while also supporting mortgage lending and the housing market, since lenders typically require insurance before issuing home loans. They say any such program should rest on three principles: pricing risk appropriately, targeting genuine market failure, and maintaining credibility.
“Our intent is not to propose something that would subsidize risk and reduce its cost,” Collier said. “It’s instead trying to leverage [the fact] that the US government has this lower cost of holding those really severe risks and being able to pay billions of dollars at once, if necessary.”
The proposal also reflects a broader international debate over public-private insurance reform. Its supporters note that similar schemes already exist elsewhere, including Australia’s cyclone reinsurance pool, Indonesia’s Maipark disaster program, Spain’s natural hazards reinsurance framework, and the UK’s Flood Re.
Even so, the proposal has drawn criticism from experts who say it focuses too heavily on transferring risk and not enough on reducing it. Jordan Haedtler, a climate financial policy consultant, said the scale of the insurance challenge is still underestimated and argued that resilience measures should be more central to reform efforts. He said stronger federal support for building upgrades, limits on development in vulnerable areas, and broader climate adaptation measures are also needed.
Jerome Crugnola-Humbert, an independent consultant specializing in climate risk and sustainability, made a similar point, saying the problem is not simply a shortage of capital but a shrinking willingness to insure increasingly severe climate risks. “While the US Re proposal is a valuable contribution to the debate, it remains largely silent on risk prevention, climate adaptation, nature restoration and emissions reductions,” he said. “These are the only mechanisms capable of curbing climate-related risks, rather than simply transferring them.”
Still, the proposal has added momentum to a growing discussion about whether the federal government should play a larger role in helping stabilize insurance markets under mounting climate pressure.
