Overview
Title
To require the Secretary of the Treasury to establish a catastrophic property loss reinsurance program, and for other purposes.
ELI5 AI
The INSURE Act is a plan to help protect people’s homes from really big disasters like floods and wildfires by having the government help insurance companies cover these events and also assist people who can’t afford the insurance.
Summary AI
H.R. 6944, also known as the "INSURE Act," requires the Secretary of the Treasury to establish a reinsurance program for catastrophic property losses. This program will provide reinsurance to insurance companies offering all-perils property insurance policies, including for damages caused by floods, hurricanes, wildfires, and other catastrophic events. As part of the program, the Federal Emergency Management Agency will phase out the National Flood Insurance Program once coverage for floods begins under the new arrangement. Additionally, the bill mandates a grant program to support loss prevention investments and financial assistance for low-income consumers who need residential property insurance.
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AnalysisAI
General Summary of the Bill
The proposed legislation, known as the Incorporating National Support for Unprecedented Risks and Emergencies Act (INSURE Act), aims to establish a catastrophic property loss reinsurance program managed by the Secretary of the Treasury. This program is designed to provide financial support to primary insurance companies for damages resulting from large-scale natural disasters, referred to as "catastrophe perils." These include floods, hurricanes, wildfires, and potentially earthquakes, among other risks. The bill outlines a structured timeline for phasing in coverage for these perils, replacing existing national insurance programs like the National Flood Insurance Program with more comprehensive reinsurance options. Additionally, the Act proposes grant programs to promote loss prevention initiatives and offers financial assistance to low-income consumers for insurance costs.
Summary of Significant Issues
One of the main concerns with this legislation is the potential for disruptions in coverage as the program transitions from the existing National Flood Insurance Program to the new reinsurance framework. The bill's phased approach might leave some property owners temporarily unprotected against certain risks. Additionally, the bill proposes significant spending, particularly $50 billion annually for consumer assistance, without detailed plans on how these funds will be utilized, leading to concerns about potential waste and lack of accountability.
The advisory committee overseeing the program includes representatives from various sectors, which presents potential conflicts of interest and challenges in reaching consensus. The discretion for the Secretary to adjust premiums quarterly might cause financial instability for insurers. Furthermore, the bill's criteria for adding new catastrophe perils are broad, which could introduce unpredictability in insurance coverage.
Potential Public Impact
For the broader public, the INSURE Act aims to provide better protection against catastrophic events, potentially leading to more stable insurance markets and improved disaster resilience. However, the transition from existing programs may cause temporary gaps for current policyholders.
Specific stakeholders such as low-income individuals and small businesses may benefit from grant programs aimed at reducing insurance costs and promoting loss prevention activities. However, residents of states with historically weaker building codes may be overlooked under the current grant allocation system, potentially exacerbating inequalities.
Impact on Specific Stakeholders
Insurance Companies: These entities may find the new program beneficial as it offers additional reinsurance options for catastrophic perils. However, the frequent premium adjustments could disrupt financial planning and pricing strategies.
State Governments: States with stringent building codes might gain more from the grant allocation, while those with fewer resources to develop such codes could be at a disadvantage, missing out on vital funding.
Low-Income Consumers: This group could see direct positive impacts through financial assistance, making property insurance more accessible and affordable. Nonetheless, the lack of clarity on expenditure could limit the overall effectiveness of the assistance provided.
Advisory Committee Members: With representation from diverse interests, achieving consensus might be challenging, potentially slowing decision-making processes and affecting the program's implementation efficiency.
Overall, while the INSURE Act presents a comprehensive approach to enhancing the resilience of insurance markets against catastrophic events, its execution presents challenges that could impact both the public and specific groups differently. Stakeholders should consider these potential outcomes in their discussions and deliberations on the bill.
Financial Assessment
The INSURE Act involves significant financial commitments across various sections of the bill, primarily focusing on insurance, loss prevention, and assistance for low-income consumers.
Financial Allocations and Spending
The bill makes substantial appropriations for grants and assistance. Section 3 authorizes appropriations for a grant program aimed at promoting loss prevention investments. The funding is set to escalate annually, commencing with $50 billion in 2026, increasing by $5 billion each year, and reaching $70 billion by 2030. This funding is intended to incentivize states and insurers to support loss prevention measures and require all-perils property insurance. Such large financial allocations underscore the act’s ambition to enhance insurance coverage and risk mitigation nationwide.
Section 5 addresses financial assistance for low-income consumers by authorizing $50 billion annually to help those for whom property insurance is both mandatory and a significant financial burden. This section aims to alleviate the financial strain on low-income households needing residential property insurance.
Relation to Identified Issues
These financial allocations are central to a few of the issues identified. The substantial funds directed towards grant programs and assistance raise concerns about potential wasteful spending and lack of accountability, as there is no detailed plan on how exactly these funds will be managed and distributed. This might lead to inefficiencies and financial mismanagement in the programs.
The grant program's criteria for prioritizing states with strong building codes (Section 3) could disadvantage states that arguably might require the most help but lack resources to develop such codes. This may create or deepen inequalities between states, where funds intended to support loss prevention investment do not reach those who might need them most.
Moreover, while the allocations in these sections are clear, the lack of a detailed framework for spending and management can impede the effectiveness of the programs, leading to delays that might leave areas vulnerable to catastrophic events.
Privacy and Data Concerns
Additionally, Section 2 mentions data collection responsibilities related to the reinsurance program. Though not directly tied to appropriations, this involves potentially sensitive data handling that could incur unforeseen costs and risks, particularly concerning compliance with privacy laws and personal data protection.
In summary, while substantial funding is allocated through this bill to support insurance measures and consumer assistance, the mechanisms for efficient and equitable distribution and management of these funds are critical and remain a potential area of concern. Without clear guidelines and accountability measures, there's a risk of financial mismanagement and missed opportunities in achieving the bill's intended goals.
Issues
The provision in Section 2 to phase out the National Flood Insurance Program when the reinsurance program for floods begins could potentially lead to gaps in coverage if not executed smoothly, affecting many who currently rely on this coverage.
The bill allocates a substantial annual amount of $50,000,000,000 for assistance in Section 5 without a detailed plan for spending, raising concerns over potential wasteful spending and lack of accountability.
In Section 3, the allocation criteria for grants to prioritize states with strong building codes may unintentionally disadvantage states needing assistance that lack resources to develop such codes, potentially exacerbating inequalities.
The timeline for the program phase-in in Section 2 could lead to delays in providing coverage for high-risk perils like flood and earthquake, potentially leaving property owners unprotected in the interim.
The calculation method for 'probable maximum loss' in Section 2(f)(2) is complex and may require clarification to ensure consistency in how thresholds for payments are determined.
The discretion given to the Secretary in Section 2(g)(5) to adjust premiums quarterly may lead to instability for insurers, affecting their financial planning and pricing strategies.
There are potential conflicts of interest in the advisory committee in Section 2(i) given its diverse and large membership, which may create challenges in achieving consensus and informed decision-making.
In Section 4, the vague criteria for determining the feasibility of establishing a relocation fund and expanding earthquake coverage could result in delays or ineffective implementation of these measures.
The definition of 'catastrophe peril' in Section 7(2) is broad and open-ended, allowing the Secretary to add perils without specific criteria, potentially leading to unpredictable insurance coverage changes.
Privacy concerns might arise from the data collection process outlined in Section 2(k), as the bill does not thoroughly detail how personal data will be protected in compliance with privacy laws.
Sections
Sections are presented as they are annotated in the original legislative text. Any missing headers, numbers, or non-consecutive order is due to the original text.
1. Short title Read Opens in new tab
Summary AI
This section provides the title of the Act, officially named the "Incorporating National Support for Unprecedented Risks and Emergencies Act" and abbreviated as the "INSURE Act."
2. Catastrophic property loss reinsurance program Read Opens in new tab
Summary AI
The section establishes a catastrophic property loss reinsurance program managed by the Secretary of the Treasury to help primary insurance companies by providing reinsurance for various catastrophe risks like floods, hurricanes, and wildfires. The program includes specifics on how insurers can qualify, premium structures, thresholds for payouts, partnerships for loss prevention, and establishes a fund to manage premiums and issue bonds if needed, ensuring continuous support even if funds fall short.
3. Grant program to promote loss prevention investments Read Opens in new tab
Summary AI
The bill establishes a grant program run by the Secretary to help states fund activities that reduce losses from insurance claims, encouraging insurers to offer policies covering all types of damage. The grants focus on proposals that improve availability and affordability of these insurance policies, particularly benefiting low and moderate income consumers and small businesses, with specific funding amounts authorized for the years 2026 to 2030.
Money References
- (d) Authorization of appropriations.—There is authorized to be appropriated to the Secretary to carry out this section— (1) $50,000,000,000 in 2026; (2) $55,000,000,000 in 2027; (3) $60,000,000,000 in 2028; (4) $65,000,000,000 in 2029; and (5) $70,000,000,000 in 2030. ---
4. Reports on relocation fund and earthquake coverage Read Opens in new tab
Summary AI
The Secretary is required to submit two reports to Congress: one within two years about the possibility of creating a fund to relocate homes and businesses that can no longer be insured because of disasters, and another within three years on the possibility of adding earthquake coverage to all-perils property insurance policies.
5. Assistance for low-income consumers Read Opens in new tab
Summary AI
The section establishes a grant program to help low-income consumers with the cost of required residential property insurance. Priorities for using the grants include reducing insurance premiums through risk reduction, relocating homeowners from uninsurable properties, and providing cash assistance for paying insurance premiums.
Money References
- (f) Authorization of appropriations.—There is authorized to be appropriated to the Secretary $50,000,000,000 annually to carry out this section.
6. Long-term policy pilot program Read Opens in new tab
Summary AI
The text outlines a pilot program for long-term property insurance policies, allowing insurers to adjust premiums based on construction costs, home value changes, and optional coverages chosen by the policyholder, but not on changes in catastrophe risk assessments. It also details conditions for policyholders, including continuing a policy with a new homebuyer, transferring to a new insurer, and requirements if they cancel a policy after receiving loss prevention funds.
7. Definitions Read Opens in new tab
Summary AI
This section defines key terms related to the insurance industry, including what qualifies as a property insurance policy, the definition of catastrophe perils, and what it means to be engaged in the business of insurance. It also specifies who or what an insurer, a participating insurer, and the Secretary of the Treasury are in the context of this Act, as well as what a statistical plan involves.