Natural Disaster Risk Reinsurance Program Act

Bill Number

H.R. 6274

Origin Chamber

House

Congress

119th Congress, Session 1

Policy Area

Finance and Financial Sector

Status

Introduced

Latest Action

2025-11-21: Referred to the House Committee on Financial Services.

Last Updated

2025-12-18T16:26:23Z

AI-Generated Summary

Purpose of the Legislation

The Natural Disaster Risk Reinsurance Program Act (H.R. 6274) aims to create a federal program that protects insurance companies from financial collapse due to massive losses from natural disasters. By providing reinsurance (a form of backup insurance for insurers), it seeks to keep property insurance affordable for homeowners and residents in high-risk areas, without directly replacing existing state or federal disaster programs.

Key Provisions

• Program Establishment: A new Natural Disaster Risk Reinsurance Program is created within the U.S. Department of the Treasury, effective for events starting January 1, 2026. The Secretary of the Treasury administers it in consultation with the Federal Insurance Office. Participation is voluntary for states, which can join or leave with 180 days' notice.

• State Requirements: Participating states must submit an approved plan to the Secretary, including:
• Assurances that insurers will cover losses up to a "trigger amount" (a predefined threshold based on the state's risk).
• Requirements for insurers and state regulators to report data on premiums (fees paid for insurance) and losses.
• A pledge of the state's full credit to repay federal funds over 10 years.
• Fair distribution of federal payments to insurers based on their market share and actual losses.
• Special handling for state "residual market" insurers (entities that cover high-risk properties others avoid).

• Federal Payments for Losses: After a "covered event" (e.g., hurricanes, earthquakes, wildfires, or severe storms—but not floods covered by the National Flood Insurance Program), the federal government pays states for insured losses exceeding the state's trigger amount. Payments are made in installments (about 25% each) based on loss assessments.

• Trigger Amounts and Assessments: The National Academy of Sciences proposes trigger amounts for each state and event type, approved by the Secretary. These are the lower of:
• Total premiums collected for relevant insurance in the state, or
• An amount ensuring insurer solvency (ability to pay claims) for events with a 2% annual chance of occurring.

Triggers are reviewed every 24 months. The Academy also assesses losses post-event and can hire experts for modeling.

• Funding Mechanism: The Secretary issues U.S. government-backed bonds to cover payments, with interest rates tied to market rates. Bonds are tax-exempt at the state/local level. States repay the full amount plus interest over 10 years, which goes back to the U.S. Treasury's general fund.

• Reporting and Oversight: States submit annual reports on losses and repayment progress during the 10-year period, plus a final report upon full repayment. The Secretary can audit claims, issue regulations, consult with insurance regulators, and compile annual premium data (made available to Congress).

• General Powers and Funding: The Secretary has broad authority to implement the program, including hiring staff or contractors. Administrative costs are funded from Treasury funds.

• Definitions: Key terms include:
• Covered event: Natural disasters like hurricanes or earthquakes, certified by the Secretary (non-delegable).
• Covered insurance: Homeowners, condo, or rental property policies (excludes flood, mortgage, or title insurance).
• Insured loss: Claims from covered events, including investigation and legal costs.
• Insurer: Licensed companies providing relevant coverage, including surplus lines or residual market entities.

Existing policies are unaffected, but the program applies to renewals after a state joins.

Significant Changes to Existing Law

This bill introduces a entirely new federal reinsurance mechanism for non-flood natural disasters, which does not currently exist at the federal level. It overrides some state and federal laws to allow Treasury administration and bond issuance. Unlike direct disaster aid (e.g., FEMA grants), it focuses on insurer stability through repayable loans to states, shifting some financial risk back to states via repayment pledges. It also mandates data sharing from insurers, potentially expanding federal oversight of state-regulated insurance markets.

Potential Impacts

• Government Agencies: The Treasury gains new responsibilities for bond issuance, payments, audits, and data collection, potentially increasing short-term borrowing (offset by state repayments). The National Academy of Sciences takes on expert assessments, with funding authorized for consultants. State insurance regulators must handle reporting and distributions, adding administrative burdens.

• Citizens: Residents in participating states, especially in disaster-prone areas (e.g., coastal or seismic zones), may benefit from more stable insurance availability and potentially lower premiums due to reduced insurer risk. However, non-participating states see no change, and repayment obligations could indirectly affect state budgets and taxes.

• International Relations: No direct impacts; the program is domestic and focused on U.S. territories and states.

Main Stakeholders Affected

• States: Especially those with high disaster risk (e.g., Florida for hurricanes, California for earthquakes), as they decide participation and bear repayment duties.
• Insurers: Property and casualty companies gain protection from catastrophic losses, encouraging them to offer coverage in risky areas; includes affiliates and residual market entities.
• Homeowners and Renters: Primary beneficiaries through affordable, reliable insurance for residences.
• Federal Government: Treasury manages the program; Congress oversees via data access.
• National Academy of Sciences and Regulators: Involved in assessments and consultations (e.g., National Association of Insurance Commissioners).

Notable Legal, Constitutional, or Political Implications

• Legal: Grants the Secretary non-delegable certification authority for events and broad investigative powers, potentially conflicting with state insurance regulation primacy. Repayment pledges bind states' "full faith and credit," resembling borrowing but without voter approval requirements.

• Constitutional: Relies on Congress's spending and commerce powers to regulate interstate insurance markets and issue debt. The bond guarantee by the U.S. could raise debt ceiling debates, though repayments mitigate long-term fiscal impact.

• Political: Represents expanded federal role in a traditionally state-dominated field (insurance), which may spark debates on federal overreach versus disaster preparedness. Voluntary state participation balances this, but trigger revisions require 180-day notices, allowing political scrutiny. Tax-exempt bonds could influence state fiscal policies.

This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.

Sponsor

Rep. Moskowitz, Jared [D-FL-23]

Recent Actions

• 2025-11-21: Referred to the House Committee on Financial Services.
• 2025-11-21: Introduced in House
• 2025-11-21: Introduced in House

Bill Versions

• Natural Disaster Risk Reinsurance Program Act — issued 2025-11-21 — PDF (17 pages)