HR4504-119

What This Bill Does

The INSURE Act creates a Treasury-run catastrophic property loss reinsurance program for qualifying primary property insurers. Participating insurers must offer all-perils residential or commercial property policies as perils are phased in and must offer loss-prevention partnerships with policyholders. Treasury may use reinsurance brokers and consultants and must phase in wind and hurricane by January 1 of the year beginning four years after enactment, severe convective storm and wildfire by the fifth year, flood by the sixth year, and earthquake by the earlier of the eighth year or submission of the earthquake feasibility report. Treasury must set a participating-insurer threshold for payments from a Federal Catastrophe Reinsurance Fund, with the threshold not greater than 40 percent of an insurer's probable maximum loss for each included peril. Treasury must also report within two years on a relocation fund for homes and businesses that become uninsurable and within three years on earthquake coverage feasibility. A separate pilot program, developed with states and the National Association of Insurance Commissioners, tests all-perils policies with terms of at least five years, limits catastrophe-risk repricing during the term, allows certain premium adjustments, permits property transfers to continue the policy, and requires pro rata return of loss-prevention improvement funds if policyholders cancel early.

Who Benefits and How

Homeowners in catastrophe-prone areas benefit if reinsurance and multi-year policies make all-perils coverage more available. Commercial property owners benefit from potential access to all-perils policies covering phased-in catastrophe risks. Participating insurers benefit from federal reinsurance above a Treasury-set threshold tied to probable maximum loss. State insurance regulators benefit from consultation on a long-term all-perils policy pilot.

Who Bears the Burden and How

The Treasury Secretary must design and operate the reinsurance program, Federal Catastrophe Reinsurance Fund, feasibility reports, and policy pilot. Participating insurers must offer loss-prevention partnerships and meet all-perils policy requirements. Policyholders receiving loss-prevention improvement funds may owe pro rata repayment if they cancel before the policy term ends. Federal taxpayers bear financial exposure from the federal catastrophe reinsurance backstop.

Key Provisions

• Establishes a Treasury catastrophic property loss reinsurance program within four years.
• Requires phased coverage for wind, hurricane, severe convective storm, wildfire, flood, and potentially earthquake.
• Limits insurer payment thresholds to no more than 40 percent of probable maximum loss for each covered peril.
• Requires relocation-fund and earthquake-coverage feasibility reports within two and three years.
• Creates a multi-year all-perils policy pilot with at least five-year terms and loss-mitigation partnership rules.