Federal backstop for state insurance programs could cost taxpayers billions
H.R. 827 — Homeowners’ Defense Act of 2025 · Filed by Frederica Wilson (D-FL) · 2 cosponsors · Introduced Jan 28, 2025 · Referred to committee
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What it does
This bill creates a federal backstop for state catastrophe insurance programs (like Florida's Citizens Property Insurance Corp.) by authorizing the Treasury Secretary to guarantee debt issued by these programs, provide reinsurance coverage, and fund mitigation grants. It establishes a Federal Natural Catastrophe Reinsurance Fund and requires state programs to meet strict financial and operational standards. The goal is to stabilize private insurance markets and help states pay claims after major hurricanes, earthquakes, or other disasters without using federal disaster aid.
Why we flagged it
The bill's core function is to create federal debt guarantees and reinsurance mechanisms for state-run catastrophe insurance programs, with secondary mitigation and grant provisions. It is fundamentally a financial risk-transfer instrument, not a consumer protection or rate-regulation bill.
What the text implies
- Federal liability is capped at $20.5B in guarantees but unlimited for reinsurance claims, creating potential for open-ended taxpayer exposure if multiple catastrophic events occur in a single year.
- The bill requires state programs to use 'actuarially sound' pricing but does not mandate rate caps or affordability standards, meaning premiums can still rise sharply even with federal backing.
The full analysis lists 5 implications of this text.
Who stands to gain
state catastrophe insurance programs; property insurers writing residential coverage; reinsurance companies (through federal reinsurance contracts)