INSURE Act Creates Federal Disaster Reinsurance Backstop, Taxpayers Guarantee the Bill

The new Incorporating National Support for Unprecedented Risks and Emergencies Act (INSURE Act) aims to stabilize the shaky property insurance market in areas slammed by natural disasters. Think of it as a federal reinsurance safety net—insurance for insurance companies—designed to keep coverage available and affordable in high-risk zones. The Secretary of the Treasury will run this new Catastrophic Property Loss Reinsurance Program.

The Federal Safety Net: What It Covers and When

This isn't an overnight fix; the coverage rolls out in phases over several years, focusing on the biggest risks. Coverage for wind and hurricanes must be available within four years of enactment, followed by severe storms and wildfires in five years, and finally flood coverage in six years (Sec. 3(d)). For an insurer to join this program, they must agree to offer an “all-perils” property insurance policy, meaning your standard home insurance policy would cover all these major disasters, not just a few. This is a huge shift, as currently, you often need separate policies for things like flood or earthquake damage.

The Cost and the Catch for Taxpayers

Here’s where the fine print hits the wallet. The program is funded by premiums paid by the participating insurers, which go into the Federal Catastrophe Reinsurance Fund. However, if a massive disaster—say, a Category 5 hurricane—wipes out the fund, the Secretary is authorized to issue bonds to cover the payout (Sec. 3(i)). These bonds are fully guaranteed by the U.S. government, meaning the principal and interest are backed by the full faith and credit of the United States. In plain English: if the program runs a deficit, the U.S. taxpayer is the ultimate backstop. This is a significant contingent liability for the federal budget, a risk we all collectively assume to stabilize the private insurance market.

Mitigation Partnerships: What You’ll Have to Do

To join the federal program, insurers must partner with policyholders to encourage activities that reduce damage and economic loss (Sec. 3(c)). This isn't just handing out brochures; the bill specifies that the Secretary must define what counts as a qualifying “loss prevention partnership.” This could mean that to get an all-perils policy, your insurer might require you to make certain home improvements—like installing hurricane shutters or retrofitting your roof—as a condition of coverage. This shifts some of the responsibility and cost of risk reduction directly onto the homeowner, but it’s intended to make properties safer and reduce long-term claims.

The Five-Year Policy Lock-In

The bill also sets up a pilot program for long-term, five-year property insurance policies (Sec. 5). This is designed to give homeowners stability. If you buy one of these policies, your premium can’t be raised during the five years just because the insurance company reassesses the disaster risk of your specific location. That’s good news if you live in an area where risk models keep changing.

However, there are two big catches. First, the insurer can still raise your premium if construction costs go up or if you add coverage (Sec. 5(b)). Second, if you receive government or insurer funds to make loss mitigation improvements—like getting a grant to elevate your home—and you cancel the long-term policy early (maybe you need to move for a job), you have to pay back a proportional share of those improvement funds (Sec. 5(d)). For busy people trying to manage life changes, this repayment clause could create a financial trap, discouraging mobility if you’ve invested heavily in mitigation.