This document provides a summary of the Incorporating National Support for Unprecedented Risks and Emergencies Act (INSURE Act) (H.R. 6944) introduced by Rep. Adam Schiff on January 10, 2024. The program would create a would create a catastrophic property loss reinsurance program.

1. INSURE Act (HR 6944)
Natural Catastrophe Risk
Jason Schupp
Centers for Better Insurance, LLC
February 2024

2. 2
INSURE Act
Overview of the Program
Catastrophic Property
Loss Reinsurance
Program
Treasury would have 4 years to establish the program
including a plan to collect data from insurers.
Participating Insurers
State licensed property insurers (excluding captive insurers and
reinsurers) that offer both:
• Residential or commercial property insurance on policy forms
approved by a state insurance department that cover physical
damage caused by the catastrophe perils included in the
program; and
• A loss prevention partnership encouraging the policyholder to
make investments and undertake actions to reduced insured
and economic loss from a catastrophe peril.
The program must cover the following catastrophe
perils:
• Flood (by year 4 after enactment)
• Wind and hurricane (by year 5)
• Severe convective storm and wildfire (by year 6)
• Earthquake (by year 8 unless a feasibility report
permits an earlier date)
The NFIP would go into run-off once
the program comes into operation.
Federal Catastrophe
Reinsurance Fund
Quarterly Premium
Payments for Loss
Losses: Treasury sets a threshold for each program
peril which is not greater than 40% of a participating
insurer’s probable maximum loss from that peril.
Premium: Treasury sets the premium for each
participating insurer which must be at least 50% of
the insurer’s expected annual average loss plus the
administrative costs of the program (subject to a 7%
cap on annual premium increases).
Treasury will define activities that qualify as a loss prevention partnership such as:
• An insurer covering some or all of the policyholder’s cost in implementing
loss mitigations; and
• An insurer making coverage contingent on the policyholder’s implementation
of loss prevention steps.
However, these activities may not include:
• Premium discounts for an investment or activity designed to reduced the
insurance company’s losses without an investment by the insurance company;
or
• The provision of general information about loss prevention.
Treasury may issue U.S.-backed bonds to support its
payment obligations to insurers. The bonds will be
repaid through the Fund’s future investment income.
Loss Prevention Partnerships

3. 3
INSURE Act
Grants and Pilot Program
Treasury would establish a program to make
grants to the states designed to incentivize:
• States, insurers, and policyholders to make
investments intended to reduce insured
losses; and
• States to compel insurers to offer property
insurance covering all of the perils included
in the Catastrophic Property Loss
Reinsurance Program.
The program would be appropriated $300 billion
over five years.
Loss Prevention Investment Grants
Treasury would establish a program to make
grants to the states designed to provide financial
assistance to low-income consumers if those
consumers are required to purchase residential
property insurance which makes up a significant
portion of their household income.
The grants may be used to:
• Fund risk reduction that would result in
lower premium costs to the consumer;
• Relocate homeowners from uninhabitable
property; and
• Pay a portion of insurance premium.
The program would be appropriated $50 billion
annually.
Low Income Consumers Grants
Treasury would establish a pilot program for insurers to offer property policies covering the program perils with a duration of at least 5 years.
Multi-Year Policy Pilot Program
Insurer’s Obligations
An insurer issuing a policy under the
program may not increase premium based
on the insurer’s changed assessment of a
catastrophe risk exposure of the property.
Insurer’s Rights
An insurer issuing a policy under the program
may increase premium based on a change in an
index of construction costs, home values, or the
optional coverages selected by the insured.
Policyholder’s Right to Terminate
A policyholder may terminate the policy but is
responsible to repay a pro-rated amount of any
funds received for loss prevention property
improvements.

4. 4
INSURE Act
Top Three Risks to Success
The INSURE Act is intended to stabilize residential and commercial property insurance markets against a wide range of catastrophe perils
while encouraging states, insurance companies, and property owners to invest in catastrophe loss prevention and mitigation. In order to
achieve these objectives, the proposed program must address at least the following key risks.
1. Financial Integrity of the Program. While the program is intended to be self-funding, it is not at all clear that the program is
financially sustainable. Specifically, the program would receive at least 50% of a participating insurer’s expected average annual loss
in premium and would pay that participating insurer’s losses when that insurer’s loss exceeds some percentage (not more than 40%)
of its probable maximum loss. Nothing suggests that over time and in the aggregate the premium inflows to the program would equal
or exceed the loss payment outflows. In fact, it appears Treasury would be prohibited from considering the financial viability of the
program in setting either the premium charged or the terms of loss payment. Program deficits are initially funded through bond
offerings guaranteed by the United States. Those bonds would be repaid (including interest) through the investment returns on the
program’s accumulated funds. Given that the program’s accumulated funds must be depleted before Treasury can issue bonds, it
seems unlikely these investment returns would be adequate to pay off the bonds in the short or intermediate terms.
2. State Legislative and Regulatory Cooperation and Consistency. The program largely relies on cooperation by the individual
state insurance departments (or as they may act collectively through the NAIC). Regulation of property insurance contract terms and
rates would remain solely within the remit of state lawmakers and regulators while Treasury is asked to incentivize and encourage the
state-by-state legislative and regulatory actions necessary to make the program successful. Moreover, many of the functions of the
current National Flood Insurance Program would become the responsibilities of the individual states. Given the de minimis
cooperation between the states and Treasury with respect to the Terrorism Risk Insurance Act and Treasury’s assessment of climate-
related financial risk to consumers, effective federal-state cooperation and state-by-state consistency appears in grave doubtful.
3. Insurer Participation. The proposal would allow insurers to select whether to participate in the program (and perhaps even to
allow an insurer to chose to participate only with respect to select portfolios of its business). With insurers empowered to participate
only to the extent they are able to transfer unacceptable or unprofitable risks into the program (while retaining profitable and higher-
quality risks for themselves and their reinsurers), the program will be necessarily be selected against much as is the case today with
the federal Crop Insurance Program. Fortunately, the program does exclude captive insurance companies from participation. Captive
insurance companies are special purpose subsidiaries of non-insurance groups which have been used to unfairly exploit other federal
programs such as the Terrorism Risk Insurance Program and the Federal Home Loan Bank program.