The INSURE Act directs the Treasury to set up a federal catastrophic property loss reinsurance program and a Federal Catastrophe Reinsurance Fund to backstop qualifying primary insurers. The Program is designed to encourage insurers to offer all-perils property policies by covering part of insurers’ extreme losses and by promoting loss-prevention partnerships with policyholders.
The bill matters because it creates a permanent federal backstop for private property insurers, layers explicit conditions on premiums and insurer retention, mandates quarterly policy- and claim-level data collection, and authorizes Treasury to issue government-guaranteed notes and bonds if the Fund is insufficient. Those design choices create new obligations for insurers, new data flows for regulators, and a contingent fiscal exposure for taxpayers.
At a Glance
What It Does
The bill requires the Secretary of the Treasury to establish, within four years, a catastrophic property loss reinsurance Program and a Federal Catastrophe Reinsurance Fund to receive premiums from participating insurers and pay reinsurance claims. It phases in covered perils (wind/hurricane first, then severe convective storm and wildfire, then flood, and conditionally earthquake) and sets rules for premiums, insurer eligibility, and loss-prevention partnerships.
Who It Affects
The Program targets primary property insurers licensed by states that offer an all-perils property policy and that implement loss-prevention partnerships; reinsurers and capital-market investors are affected indirectly by market signal changes. Federal agencies, state insurance regulators, mortgage lenders, and homeowners in catastrophe-prone areas will see new data and program effects.
Why It Matters
This is a federal intervention into catastrophe risk transfer intended to stabilize markets where private reinsurance is costly or thin, while collecting granular exposure and claims data for systemic-risk monitoring. The bill balances market incentives (premium floors, insurer retention limits) with a fiscal backstop (Treasury-guaranteed debt) and a push toward mitigation investments.
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What This Bill Actually Does
The INSURE Act creates a federal reinsurance mechanism that participating primary insurers can access when losses from specified catastrophe perils exceed a Treasury-set threshold. Participation requires insurers to offer an all-perils property policy (as perils are phased in) and to run a loss-prevention partnership program with policyholders.
Treasury will collect quarterly premiums from participating insurers and invest them in a Federal Catastrophe Reinsurance Fund; if the Fund cannot meet obligations, Treasury may issue government-guaranteed notes and bonds to cover payments.
The bill sets several program design guardrails. Treasury must set the payment trigger so that it is no greater than 40 percent of an insurer’s probable maximum loss for each covered peril, a cap intended to ensure significant insurer retention and continued private reinsurance engagement.
Treasury also sets premiums to cover expected average annual losses, administrative costs, and a trend factor; it may not set premiums below 50 percent of expected average annual losses plus administrative costs and may limit non-exposure-driven premium increases to 7 percent per year.To support oversight and market monitoring, the Act requires quarterly reporting of policy-level claim transaction data under a statistical plan. Treasury will contract with a statistical agent to validate data, share de-identified data with the Office of Financial Research, the Federal Insurance Office, state insurance departments, and other agencies, and make aggregate data publicly available without revealing personally identifiable information.
The bill also establishes an advisory committee with representatives from consumer groups, insurers of varying sizes, reinsurers, state regulators and legislators, agents serving underserved areas, financial institutions, and multiple federal agencies.The Act contains two complementary tracks: feasibility reporting and pilots. Treasury must report to Congress on a potential relocation fund for homes and businesses that become uninsurable, and on whether to add earthquake coverage.
Separately, Treasury must run a pilot allowing multi-year (at least five-year) all-perils policies with restrictions on premium adjustments, conditions on maintenance and mitigation investments, and rules for policy continuation or transfer during the term. Those elements aim to encourage longer-term coverage and investment in resilience while testing contract features that limit risk-based premium volatility.
The Five Things You Need to Know
Treasury must stand up the Program within four years and phase in perils: wind/hurricane in year 4, severe convective storm and wildfire in year 5, flood in year 6, and earthquake no later than year 8 (subject to a feasibility report).
Treasury must set the program payment threshold at no more than 40% of an individual participating insurer’s probable maximum loss for each included peril.
Participating insurers pay quarterly premiums; Treasury cannot set a premium below 50% of the sum of expected average annual losses plus administrative costs, and non-exposure premium increases are capped at 7% annually.
If the Fund lacks sufficient cash, Treasury may issue notes and bonds fully guaranteed by the United States to meet participating insurers’ claims, with interest at market-comparable rates.
The bill requires quarterly, policy-level claim reporting under a statistical plan, a competitive contract for a statistical agent (or OFR fallback), and public release of aggregated, de-identified data for systemic-risk monitoring.
Section-by-Section Breakdown
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Establishes the catastrophic property loss reinsurance Program
This subsection is the Program’s founding clause: Treasury must create a federal reinsurance program that provides reinsurance to qualifying primary insurers. Practically, this turns Treasury into a backstop reinsurer for certain extreme property losses, but the Program is designed to operate in concert with private retention and reinsurance rather than as a first-loss provider.
Peril phase-in schedule
The bill phases in covered perils over multiple years—wind/hurricane first, then severe convective storm and wildfire, then flood, with earthquake conditional on an approved feasibility report. That staggered approach permits actuarial work, data collection, and market adjustments before adding more complex perils like flood and earthquake.
Payment threshold tied to probable maximum loss
Treasury must set the trigger for Fund payments at an amount not greater than 40% of an insurer’s probable maximum loss (PML) per peril. That constraint is intended to preserve material insurer retention, make the federal backstop a tail risk layer, and encourage private-sponsor solutions (reinsurance, catastrophe bonds). It also requires Treasury to develop or rely on robust PML estimation methods.
Premium-setting rules and limits
Participating insurers pay quarterly premiums to the Fund. Treasury’s premium calculus is limited to expected average annual losses, administrative costs, and a trend factor; premiums cannot be set below 50% of expected annual loss plus admin costs. Premiums are adjustable each quarter for exposure changes and generally capped at 7% annual non-exposure-related increases, constraining abrupt price shocks but preserving some revenue for the Fund.
Loss prevention partnerships
Participation requires insurers to offer loss-prevention partnerships that go beyond information campaigns—examples include making coverage contingent on mitigation actions or defining insurer-funded incentives that pair with policyholder investments. The statute explicitly forbids counting simple premium discounts or generic information as qualifying partnerships, pushing towards meaningful, documented mitigation activities.
Advisory committee composition and role
Treasury must convene an advisory committee with consumer advocates, a mix of insurers by size, reinsurers, state regulators and legislators, agents serving underserved areas, financial-sector reps, and multiple federal agency representatives. The committee advises on thresholds, premium setting, statistical plan content, and operational design, bringing multi-stakeholder input into program governance.
Federal Catastrophe Reinsurance Fund and authorized borrowing
Treasury establishes a Fund to receive premiums and pay claims; if the Fund is short, Treasury can issue notes and bonds guaranteed by the United States to satisfy obligations. The statute sets market-based interest treatment and exempts those instruments from state and local taxation, making them standard federal obligations and imposing an explicit contingent liability on federal finances.
Quarterly data collection and statistical agent
Treasury must implement a statistical plan and require quarterly, policy-level claim transaction reporting from participating insurers. A competitively procured statistical agent will validate submissions; the Office of Financial Research acts as fallback. De-identified data will be shared with federal and state authorities and published in aggregate, creating a new, consistent dataset for systemic-risk and market-structure analysis.
Feasibility reports and long-term policy pilot
Treasury must report to Congress on the feasibility of (1) a relocation fund for homes/businesses rendered uninsurable and (2) adding earthquake coverage. Separately, Treasury will run a pilot for multi-year (≥5-year) all-perils policies with rules limiting premium adjustments tied to peril reassessments, allowing limited premium indexing for construction costs and home value, and requiring mitigation commitments as a condition of coverage.
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Explore Finance in Codify Search →Who Benefits and Who Bears the Cost
Every bill creates winners and losers. Here's who stands to gain and who bears the cost.
Who Benefits
- Homeowners and commercial property owners in high-risk areas — to the extent insurers participate, they are more likely to retain coverage capacity and policy continuity after large catastrophes because the federal Program absorbs tail losses.
- Participating primary insurers — gain access to a backstop that can reduce volatility from extreme events and may lower reinsurance procurement costs or permit them to offer broader all-perils products.
- State and federal regulators and financial stability monitors — receive standardized, quarterly, policy-level exposure and claims data to better track under-insurance, concentration risk, and systemic vulnerabilities.
- Capital markets and alternative-risk sponsors — the Program’s explicit insurer retention requirements and emphasis on private market capacity incentivize development of catastrophe bonds and other risk-transfer instruments by clarifying the tail-layer role of the federal backstop.
Who Bears the Cost
- Participating insurers — must pay quarterly premiums (subject to a statutory floor), establish loss-prevention partnerships, and submit detailed quarterly data, increasing operating costs and compliance workload.
- Federal government / taxpayers — bear contingent fiscal exposure because Treasury can issue fully guaranteed bonds to pay claims if Fund assets are insufficient, creating a potential taxpayer liability in extreme scenarios.
- State insurance departments and legislatures — face coordination and oversight burdens as the Program interfaces with state regulatory approvals for policy forms and with required state-level participation in loss-prevention definitions.
- Policyholders — may face higher premiums over time because premium-setting includes an explicit minimum and non-exposure increases up to 7% annually, and insurers may condition coverage on costly mitigation measures.
Key Issues
The Core Tension
The bill balances market stability and insurance availability against moral hazard and federal fiscal exposure: it aims to preserve private market discipline by requiring insurer retention and limiting Treasury’s layer, while also creating a government-guaranteed backstop that, if used, shifts catastrophic risk to taxpayers—an unavoidable trade-off between affordable, widely available coverage and the risk of crowding out private markets or imposing large contingent liabilities.
The bill’s central design choices create several implementation and policy trade-offs. First, by capping the Treasury payment trigger at no greater than 40% of an insurer’s PML, the statute seeks to preserve private retention and market incentives—but that requires robust, transparent PML methodologies.
If PMLs are misestimated, the Fund may either be an insufficient backstop (if PMLs are undercounted) or unnecessarily large (if PMLs are overstated), with opposite implications for insurer behavior and taxpayer exposure. Second, the premium floor (50% of expected losses plus admin) and the 7% annual cap on non-exposure increases are blunt instruments: they limit Treasury’s ability to price risk fully and could lead to cross-subsidization across insurers or perils, or to insufficient premium accrual in areas with rapidly increasing risk.
Operationally, the Act creates substantial data and governance tasks. Quarterly policy-level reporting at scale will require a capable statistical agent, standardization across states, and tight protections for PII; the fallback to the Office of Financial Research signals concern that market providers may be inadequate.
The loss-prevention partnership requirement pushes insurers toward conditional underwriting and insurer-funded mitigation, but the bill’s explicit prohibition on counting simple premium discounts risks undercounting some legitimate incentives. Finally, authorizing Treasury to issue fully guaranteed bonds creates a clear, explicit federal contingent liability; policymakers will need to decide how to manage that exposure politically and fiscally, particularly following a sequence of near-term large losses.
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