HR6274-119

What This Bill Does:
This bill creates a Natural Disaster Risk Reinsurance Program within the Department of the Treasury to provide backup insurance coverage to property insurers when catastrophic natural disasters occur. When a major disaster (such as hurricanes, earthquakes, wildfires, or tornadoes) causes insurance claims to exceed a calculated threshold, the federal government will pay the excess to participating states, which then distribute funds to insurers. States must repay these federal loans within 10 years with interest.

Who Benefits and How:
- Insurance companies benefit most directly, as they are protected from insolvency when catastrophic natural disasters generate claims beyond what they can pay. This acts as a safety net preventing insurance company failures.
- Homeowners and property owners benefit indirectly because the program aims to keep property insurance affordable and available in disaster-prone areas by reducing insurers' risk exposure.
- State governments gain access to federal emergency financing to stabilize their insurance markets after major disasters.

Who Bears the Burden and How:
- Participating states must pledge their "full faith and credit" to repay federal payments within 10 years with interest, creating a long-term debt obligation that ultimately falls on state taxpayers.
- State insurance regulators face new administrative burdens, including annual reporting requirements on insured losses, claims data collection, and coordination with the Treasury Department.
- Federal taxpayers bear the initial financial risk, as Treasury issues bonds guaranteed by the U.S. government to fund disaster payments.

Key Provisions:
- Creates a voluntary state participation program beginning January 1, 2026, where states can opt-in by submitting plans approved by the Secretary
- Federal payments are triggered when aggregate insured losses from a covered event exceed a state's trigger amount, calculated by the National Academy of Sciences based on a 2% annual probability threshold
- States must repay all federal payments within 10 years with interest, pledging their full faith and credit as collateral
- Covers residential property insurance (homeowners, condos, rentals) for natural disasters including volcanic eruptions, hurricanes, earthquakes, wildfires, tornadoes, and severe storms (but excludes flood insurance covered separately under NFIP)
- Secretary of Treasury certifies covered events and administers the program with consultation from the Federal Insurance Office and the National Association of Insurance Commissioners