California Sen. Adam Schiff has announced the introduction of the Incorporating National Support for Unprecedented Risks and Emergencies (INSURE) Act, a bill aimed at stabilizing the home insurance market by creating a federal catastrophic reinsurance program.
“Too many families and small businesses are struggling to keep up with the rising costs of insurance, and steep year-after-year price increases are simply unsustainable,” said Sen. Schiff. “Significant steps must be taken to address this crisis, and the INSURE Act is one of them. This bill would create a federal risk reinsurance pool to bring down costs and make policies more affordable. All across America, in fire zones and flood plains and well beyond, the most valuable property a family may own is becoming uninsurable. This must be addressed with urgency.”
The occurrence of natural disasters as a direct result of climate change has dramatically increased in frequency and severity over the last several decades. Reinsurers and insurance companies alike, have responded with massive price increases that lead to higher premiums or insurers exiting the market entirely, as has been the case in states like California, Florida, Texas, and Louisiana, leaving many in high-risk areas underinsured.
Some insurance companies have pulled back coverage from fire- and flood-prone areas, leaving homeowners with limited affordable options. State Farm, for example, has stopped accepting new applications for policies on property in California, and Allstate announced in November 2022 that it would “pause new homeowners, condo and commercial insurance policies in California to protect current customers.”
By creating a public reinsurance program, the federal government will give insurance companies a fairly priced alternative to the private reinsurance market.
“As the frequency of climate-related disasters increases, this legislation is a crucial step toward ensuring that more Americans are covered when natural disasters occur,” said Sen. Mazie Hirono, co-sponsor of the bill in the Senate. “People deserve to able to access to affordable insurance coverage to ensure their property is protected, and this bill would be an important step in the right direction.”
Specifically, the INSURE Act would:
- Establish a Federal Catastrophe Reinsurance Program within the Department of the Treasury to cap the liability of insurance companies in the case of a catastrophic event above a threshold developed by the Secretary and an advisory committee of experts.
- Require participating insurers to cover all natural disasters, including wildfires, severe storms, wind, hurricanes, flood, and earthquakes.
- Require significant investments from insurance companies in loss prevention and risk mitigation partnerships with policyholders.
- Improve market monitoring through the Office of Financial Research and the Federal Insurance Office in collaboration with state insurance regulators.
U.S. Reps. Sydney Kamlager-Dove, Salud Carbajal, and Doris Matsui are introducing companion legislation in the U.S. House of Representatives.
“As natural disasters become more frequent and severe, families should not be punished with skyrocketing insurance costs or losing their coverage altogether,” said Rep. Carbajal. “This bill will ensure homeowners—regardless of their zip code—can access affordable and comprehensive insurance coverage.”
Talks of an overhaul of the Federal Emergency Management Agency (FEMA) and the National Flood Insurance Program (NFIP) have been met with criticism ever since Department of Homeland Security Secretary Kristi Noem announced in a cabinet meeting “we’re going to eliminate FEMA.”
With FEMA’s role in emergency management, flood mapping, and flood insurance under pressure from the Trump administration, an escalation in climate-related events has homeowners, lenders, and local governments exposed and ill-prepared to deal with any potential climate-related events.
While a national issue, California’s homeowner’s insurance market specifically is under growing financial pressure following January’s catastrophic Eaton and Palisades wildfires, which caused an estimated $52.5 billion in economic losses and affected approximately 18,000 structures, among which included 11,300 homes, (90% of which were absolutely destroyed). The fires also claimed 29 lives, making them among the costliest wildfires in U.S. history.
“As climate change drives more intense and more frequent floods and wildfires, Californians are increasingly unable to find affordable insurance coverage,” said Rep. Matsui. “The insurance industry is on an unsustainable path—climate-fueled disasters are causing ever larger losses and American families are left holding the bag. The INSURE Act will bring stability to the American insurance market, reducing premiums and ensuring families are protected by creating a federal reinsurance program to help insurers cover catastrophic losses.”
According to a study by Harvard’s Joint Center for Housing Studies, signs of a deteriorating private insurance market preceded the fires. According to a Federal Insurance Office (FIO) report, private homeowner’s insurance nonrenewal rates between 2018 and 2022 in fire-hit ZIP codes like Altadena (91001) and Pacific Palisades (90272) surpassed both California’s statewide average (1.3%) and the national average (1.2%), reaching 1.7% and 1.8%, respectively, in 2022.
Premiums in these high-risk areas also rose well above inflation during the same period. In Pacific Palisades, average annual homeowner’s insurance premiums climbed 33% above inflation, from $5,025 to $6,689. In Altadena, they increased 26% above inflation, from $1,485 to $1,873.
“Households across the United States are being dropped by their home insurance companies and struggling to find replacement protection at a price they can afford,” added Amy Bach, Co-Founder and Executive Director of United Policyholders. “We are in the grip of an unprecedented national insurance crisis. The marketplace has changed dramatically for the worse, and the INSURE ACT can be the national solution we need. State insurers of last resort were not built to handle this crisis. As extreme weather events grow more frequent and severe, insurance companies are cutting back on where and what they will cover, leaving millions of Americans vulnerable to disasters and financially strapped. This bill offers the innovation we need to keep families and communities resilient to disasters.”
Sen. Schiff, lead sponsor of the bill, has come under criticism from William J. Pulte, Director of the Federal Housing Finance Agency (FHFA), citing allegations of mortgage fraud. According to a letter sent to U.S. Attorney General Pam Bondi and Deputy Attorney General Todd Blanche, Pulte claims “Mr. Adam B. Schiff has, in multiple instances, falsified bank documents and property records to acquire more favorable loan terms, impacting payments from 2003-2019 for a Potomac, Maryland-based property.”
Sen. Schiff owns homes in both California and Maryland.
Click here to read the Incorporating National Support for Unprecedented Risks and Emergencies (INSURE) Act in its entirety.
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