A new bill introduced in the US House of Representatives seeks to bolster state insurance programs by directing the Treasury Department to guarantee obligations and provide reinsurance for eligible programs addressing natural disaster risks.
House Resolution 827, known as the Homeowners’ Defense Act, was introduced by Rep. Frederica Wilson (pictured above), D-Fla., to address concerns over property insurance costs and market stability.
The legislation aims to support state efforts in managing risks from natural disasters, stabilize insurance markets, and promote mitigation initiatives, according to a statement from Wilson’s office.
“Everywhere I go in Florida, doesn’t matter what parts folks are from, people are concerned about our property insurance crisis,” Wilson said. “And with hurricane season just starting, causing a rush through the hearts of South Florida Families, the fear of the rising costs of homeowner’s insurance is real and tangible for folks.”
In 2024, natural catastrophes globally resulted in over $140 billion in insured losses, with total economic damages surpassing $350 billion, driven significantly by severe convective storms contributing 41% of insured losses, or $64 billion.
In the US, states like Florida and North Carolina have been hit hard, with North Carolina alone facing over 100 billion-dollar disaster events from 1980 to 2024, averaging nearly three per year.
Under House Resolution 827, the Treasury Department would guarantee up to $3.5 billion in debts for state programs covering earthquake risks and up to $17 billion for programs addressing other perils.
Eligible programs must outline debt repayment plans without using federal funds, with terms including fees for coverage and a maximum duration of 30 years. The Treasury would also prohibit coverage for flood losses in properties required to have flood insurance, already covered by it, or located in special flood hazard areas.
Additionally, the legislation allows the Treasury to enter one-year reinsurance contracts with eligible state programs, covering 80% to 90% of insured losses. The Treasury secretary would set attachment points and pricing.
To fund this reinsurance, the bill establishes the Federal Natural Catastrophe Reinsurance Fund, supported by premiums, congressional allocations, and investment earnings.
Recent Senate hearings have shed light on challenges in the insurance industry’s response to natural disasters, with policyholders reporting delays in claims processing and reduced settlements. Adjusters have alleged pressure from insurers like State Farm and Allstate to lower damage estimates, complicating recovery efforts.
State Farm, for instance, paid $1.28 billion for 129,600 claims from Hurricanes Helene and Milton, illustrating the scale of payouts. HR 827’s reinsurance and mitigation provisions could alleviate some of these pressures by ensuring state programs have the financial backing to handle claims efficiently, reducing disputes and delays.
State programs seeking eligibility must enhance private insurance markets, offer residential property coverage through personal lines as defined by the National Association of Insurance Commissioners, and meet criteria such as being nonprofit, exempt from federal income taxes, or integral to the state. Programs must also support loss mitigation efforts for natural catastrophes.
The bill introduces a national mitigation grant program, funded by at least 35% of the net investment income from the reinsurance fund, to support government and nonprofit initiatives that strengthen homes against natural disasters.
It also directs the Treasury to establish the National Catastrophe Risk Consortium to catalog insurance providers’ risk obligations, identify coverage gaps, assess potential disruptions in private insurance, and recommend strategies to mitigate financial risks.
The American Property Casualty Insurance Association (APCIA) expressed support for the bill’s approach to addressing rising home insurance costs and broader housing challenges.
“The growing demographic shifts and property values to high-climate-risk areas, inflation in the cost to repair and replace property, climate change, legal system abuse, delayed regulatory approval of rate filings and mandated coverages have collectively resulted in escalating insurance losses. Insurance is a passthrough of those costs,” said Robert Gordon, the association’s senior vice president of policy, research, and international.
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