Colorado lawmakers are making strides toward stabilizing the state's homeowner insurance market by introducing a groundbreaking reinsurance initiative. The proposed legislation seeks to establish a state-run facility that leverages catastrophe bonds to manage climate-driven risks, ensuring coverage remains accessible in wildfire-prone areas. This measure aims to stabilize premiums and introduce consumer protection measures while promoting proactive risk reduction.
A State-Run Reinsurance Facility for Wildfire Risks
Lawmakers aim to create a state-owned entity designed to offer reinsurance support following declared wildfire disasters. By partnering with insurers, this program intends to make coverage more affordable and available in high-risk zones.
The proposed Wildfire Catastrophe Reinsurance Enterprise would provide financial backing to insurance companies operating in wildfire-prone regions. Through revenue and catastrophe bonds, the enterprise plans to secure funds necessary for reinsurance payouts. If no qualifying disaster occurs within the bond term, insurers may contribute fees to redeem the bond. Additionally, the proposal allows the enterprise to invest collected funds and establishes mechanisms for additional insurer contributions when needed. Proponents argue this approach will stabilize the insurance market, reducing costs for Colorado homeowners.
Promoting Transparency and Consumer Protection in Insurance Pricing
Beyond the reinsurance initiative, legislators are advancing another bill aimed at enhancing transparency in how insurers assess wildfire risks. This complementary measure focuses on empowering homeowners through clear communication about their risk scores and mitigation options.
The second initiative, the Strengthen Colorado Homes Enterprise, imposes a 1.5% fee on insurers offering homeowner policies in Colorado. These funds will support programs encouraging property protection against wildfires. Furthermore, House Bill 25-1182 mandates insurers consider homeowner mitigation efforts when calculating premiums, incentivizing proactive risk management. Carriers must disclose details of their risk models to both the state insurance division and policyholders, enabling appeals based on improved property safety measures. Together, these bills represent a comprehensive strategy blending market stability, transparency, and collaboration to address escalating wildfire risks effectively.