The Hamilton Project, part of the Brookings Institution, put forward a proposal for a federal reinsurance entity, US Re, aimed at absorbing extreme weather risk in the US homeowners insurance market.
The idea lands as insurers face rising claims tied to climate events, alongside volatile and expensive reinsurance costs that keep pushing pricing higher.
The proposal, authored by Benjamin L. Collier, Benjamin J. Keys, and Philip Mulder, describes a market under strain, where premium increases and insurer withdrawals reshape coverage availability.
Inflation-adjusted premiums rose by 28% nationwide between 2017 and 2024, with sharper increases in high-risk regions, which starts to look less like a pricing cycle and more like structural pressure.
Insurers have responded by pulling back, cancelling policies, exiting certain geographies, and in some cases failing outright.
Those shifts ripple into housing markets and household balance sheets, where access to insurance often determines mortgage viability and property values, or at least heavily influences both.
Catastrophe exposure sits at the centre of the issue. Wildfires, hurricanes, and other extreme events generate concentrated losses that strain insurer portfolios, forcing companies to rely heavily on reinsurance markets.
That protection, though, comes at a cost that remains high and unpredictable, which feeds directly into primary pricing and availability.
US Re would step in as a federal reinsurer, offering coverage for the most severe layers of catastrophe risk.
The proposal argues the federal government’s borrowing capacity allows it to absorb shocks more efficiently than private markets, which rely on capital that tightens quickly after major events.
We think that assumption holds in theory, though execution tends to get messy once pricing and political pressure intersect.
The structure aims to stabilise coverage availability and pricing, helping households maintain protection while supporting disaster recovery and broader housing market stability.
According to Beinsure, affordability and consistency remain the main pressure points for homeowners insurance, especially in regions exposed to repeated climate losses.
The authors draw on existing public insurance frameworks to shape the proposal.
- The National Flood Insurance Program serves as a direct insurer model, while Pool Re in the UK and the US Terrorism Risk Insurance Act offer backstop structures for extreme risks.
- Florida’s Hurricane Catastrophe Fund provides a state-level reinsurance example, built around hurricane exposure.
Each case followed a similar pattern, a shock event triggered a supply crunch, then policymakers stepped in to restore market function. That sequence informs the design of US Re, though scaling it to a national level adds complexity that earlier programmes didn’t face.
The proposal sets out three guiding principles. US Re would price risk based on expected losses and costs rather than subsidising exposure, though its lower cost of capital would still reduce overall pricing pressure.
It would target gaps where private markets struggle to provide capacity, rather than displacing insurers and reinsurers entirely. And it would operate with clear authority to pay claims alongside political independence in setting prices, which, honestly, tends to be the hardest part to maintain over time.
Private insurers and reinsurers would continue to play a central role, providing underwriting discipline and innovation, while US Re absorbs tail risk layers that markets price inefficiently or avoid altogether.
The authors position the proposal as a step toward restoring stability in the homeowners insurance market, though outcomes hinge on governance and coordination between public and private actors.
If structured carefully, the model could ease volatility and improve access to coverage, though the balance between market discipline and federal support won’t stay static for long.
