Federal government takes on catastrophe insurance tail risk for private insurers
S. 2349 — INSURE Act · Filed by Adam Schiff (D-CA) · 1 cosponsor · Introduced Jul 17, 2025 · Referred to committee
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What it does
This bill directs the Treasury Secretary to establish a federal reinsurance program for catastrophic property losses (wind, hurricane, wildfire, severe storms, flood, and potentially earthquake). Participating insurers pay premiums into a federal fund and receive reinsurance payments when losses exceed a threshold. The program phases in over 4–8 years, requires insurers to offer loss-prevention partnerships with policyholders, and includes a pilot program for multi-year property insurance policies. A Treasury-backed fund issues bonds if premiums are insufficient to cover claims.
Why we flagged it
The bill's operative mechanism is a federal backstop for private insurers' catastrophe losses. While framed as a public-interest measure to stabilize insurance markets and promote loss prevention, the primary financial beneficiary is the insurance industry, which offloads tail risk to the federal government and taxpayers.
What the text implies
- The 40% threshold for federal reinsurance means insurers retain 60% of probable maximum loss, but the federal government absorbs losses beyond that threshold indefinitely—a one-way transfer of tail risk to taxpayers.
- Premium minimums (50% of expected losses + admin costs) may be below actuarial cost, effectively subsidizing insurers' catastrophe exposure and reducing market discipline on pricing.
The full analysis lists 5 implications of this text.
Who stands to gain
primary property insurers (admitted and non-admitted); reinsurance companies (global and domestic); mortgage lenders and banks (reduced credit risk from insured properties)