Debate Arises Over Proposed Federal Catastrophe Reinsurance Program

A recent legislative proposal, the Incorporating National Support for Unprecedented Risks and Emergencies (INSURE) Act, introduced by California Representative Adam Schiff, has sparked debate among stakeholders in the insurance industry. The bill aims to establish a federal catastrophe reinsurance program within the Department of Treasury, setting a cap on insurers’ liability in catastrophic events. While Schiff regards this as a crucial step in making insurance more affordable and accessible for homeowners, the American Property Casualty Insurance Association (APCIA) voices concerns.

APCIA argues that the bill could inadvertently raise insurance costs for vulnerable policyholders and risk homeowners losing insurance access. This skepticism is rooted in a variety of factors, including climate change, the concentration of homes in high-risk areas, rising labor and material costs, legal system issues, and outdated regulations. The association, represented by Nat Wienecke, APCIA’s senior vice president, emphasizes the need for cautious consideration of federal solutions in state-regulated industries, citing the National Flood Insurance Program’s significant debt as a cautionary example.

Apart from capping liability, the INSURE Act mandates participating insurers to cover all natural disasters and invest in loss prevention and risk mitigation strategies. The bill also proposes enhanced market monitoring through the Office of Financial Research and the Federal Insurance Office, in collaboration with state insurance regulators.

Despite APCIA’s reservations, the bill has garnered support from various consumer groups, including the Consumer Federation of America and United Policyholders. It is co-sponsored by several representatives, indicating a diverse backing within the legislative framework. This divergence of opinions highlights the complex interplay between federal initiatives and state-regulated insurance industries, especially in the context of increasing environmental risks and market challenges.