Cost-Sharing Bill Would Spread Natural Disaster Losses Across Unaffected States

The Natural Disaster Risk Reinsurance Program proposes states voluntarily purchase bonds to support insurers after disasters.

Sara Getman
Written bySara Getman
Sara Getman
Sara GetmanAssociate Editor

Sara Getman is an Associate Editor at Insurify and has been with the company since 2022. Prior to joining Insurify, Sara completed her undergraduate degree in English Literature at Simmons University in Boston. At Simmons, she was the Editor-in-Chief for Sidelines Magazine (a literary and art publication), and wrote creative non-fiction.

Outside of work, Sara is an avid reader, and loves rock climbing, yoga and crocheting.

Evelyn Pimplaskar
Evelyn PimplaskarEditor-in-Chief, Director of Content
  • 10+ years in insurance and personal finance content

  • 30+ years in media, PR, and content creation

Evelyn leads Insurify’s content team. She’s passionate about creating empowering content to help people transform their financial lives and make sound insurance-buying decisions.

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MacKenzie Korris
Reviewed byMacKenzie Korris
MacKenzie Korris
MacKenzie KorrisInsurance Copy Editor

MacKenzie Korris is an insurance copy editor with years of experience in print and digital media. He strives to craft actionable, inclusive copy that fosters smart decision-making through reader autonomy. He has a journalism degree from Saint Louis University.

Published October 30, 2024 at 12:00 PM PDT | Reading time: 2 minutes

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U.S. states could soon share in the cost of keeping insurers afloat after catastrophic natural disasters anywhere in the country, under a new bill put forth by a Florida congressman.

Rep. Jared Moskowitz’s bill would create a “national catastrophic insurance fund” to help prevent insurers from going bankrupt after paying for catastrophic disaster claims. The fund would cover insurer losses for any catastrophe the National Flood Insurance Program doesn’t cover, including tornadoes, volcanoes, earthquakes, hurricanes, tropical storms, tsunamis, and hail. The bill could also help insurers repay debt and encourage them to stay in high-risk states.

Catastrophic disasters are becoming more common across the U.S., especially in vulnerable states like California and Florida, both of which are facing insurance crises.

How the fund works

After a disaster, unaffected U.S. states would be able to voluntarily purchase U.S. Treasury-issued bonds. Disaster-affected states would distribute the funds to insurance companies based on the number of claims each has. The bill requires insurers to use the funds to cover claims.

The affected state, not the insurance companies, would have to repay the bonds, plus interest, within 10 years.

The effect on insurance and taxpayers

Severe claims losses have affected insurers across the country, pushing some into insolvency and others to withdraw from writing policies in high-risk areas. As homeowners in troubled areas have fewer options for home insurance, remaining insurers typically raise rates to balance their higher risks.

In 2022, 16 insurance companies left Florida, and at least seven left California’s market in late 2023. Insurify’s home report predicts homeowners insurance rates will increase by 6% in 2024. California and Florida should expect an 8% and a 7% increase, respectively.

By helping insurers avoid insolvency, the bill aims to encourage more insurance companies to continue doing business in high-risk states. A South Florida Regional Planning Council study found the bill could stem rate increases by 12% nationally.

But the National Association of Mutual Insurance Companies (NAMIC) opposes the bill.

“This model, which essentially forces the federal government to act as a reinsurer for states, would only be a further drain on taxpayers already subsidizing a rapidly increasing amount of post-disaster costs,” the organization said.

What’s next

While proponents say the bill could help the insurance market, it doesn’t address the root of the problem: climate change. Devastating storms will continue to happen with expensive and deadly consequences, according to the Center for Climate and Energy Solutions.

The NAMIC also has concerns that a national catastrophe fund would reduce the incentive to build resilient communities and homes. But many states and organizations offer discounts for building resilient communities. FEMA offers discounts of up to 45% for flood mitigation efforts. States with high wildfire risk, such as California, Colorado, and Texas, are encouraging communities to build fire-resilient properties.

The bill is currently with the House Financial Services Committee for review.

Sara Getman
Sara GetmanAssociate Editor

Sara Getman is an Associate Editor at Insurify and has been with the company since 2022. Prior to joining Insurify, Sara completed her undergraduate degree in English Literature at Simmons University in Boston. At Simmons, she was the Editor-in-Chief for Sidelines Magazine (a literary and art publication), and wrote creative non-fiction.

Outside of work, Sara is an avid reader, and loves rock climbing, yoga and crocheting.

Evelyn Pimplaskar
Edited byEvelyn PimplaskarEditor-in-Chief, Director of Content
Evelyn Pimplaskar
Evelyn PimplaskarEditor-in-Chief, Director of Content
  • 10+ years in insurance and personal finance content

  • 30+ years in media, PR, and content creation

Evelyn leads Insurify’s content team. She’s passionate about creating empowering content to help people transform their financial lives and make sound insurance-buying decisions.

Featured in

media logomedia logomedia logo
MacKenzie Korris
Reviewed byMacKenzie KorrisInsurance Copy Editor
MacKenzie Korris
MacKenzie KorrisInsurance Copy Editor

MacKenzie Korris is an insurance copy editor with years of experience in print and digital media. He strives to craft actionable, inclusive copy that fosters smart decision-making through reader autonomy. He has a journalism degree from Saint Louis University.