October 2024
To provide insurance to homeowners where private insurers decline to write insurance, 33 states have enacted laws creating Fair Access to Insurance Requirements (FAIR) plans which write insurance for homeowners otherwise unable to obtain private insurance. This policy brief proposes that the federal government establish a federal reinsurance program for state-level FAIR Plans to reduce the cost of purchasing private reinsurance for these plans. This reduction would help lower the cost of providing FAIR Plan insurance and enable FAIR Plans to access more reinsurance. As a result, the likelihood that FAIR Plans would need to assess private insurers if claims exceed reserves would decrease, addressing a factor contributing to private insurers reducing or declining to write insurance. A federal program of reinsurance that does not seek to make profits and whose reserves are funded by US taxpayers would be able to offer reinsurance at a lower premium price than private reinsurers and provide better terms such as lower attachment points and more coverage than private reinsurers are willing to take on. It would also avoid the potential negative consequences of creating a broader taxpayer-subsidized scheme of insurance, like that of the National Flood Insurance Program (NFIP).