The Reinsurance Association of America (RAA) has rejected the Hamilton Project’s proposal for US Re, a federal reinsurance entity for homeowners insurance, arguing that it fails to address the underlying drivers of insurance costs.
The proposal was outlined in a paper presented at a Brookings Institution event, authored by Benjamin L. Collier, Benjamin J. Keys, and Philip Mulder.
US Re would sell reinsurance contracts to providers of U.S. homeowners insurance and reinsurance to cover the most extreme weather events.
The RAA said the paper misdiagnoses the problem and therefore puts forward a flawed solution, failing to address the true drivers of rising homeowners insurance costs.
Tracey Laws, President and CEO of the RAA, said, “Rising homeowners insurance costs are hitting families across America. The facts demonstrate that reinsurance costs are not a driver of homeowners insurance premium increases nationwide. Actual losses are the primary driver of homeowners insurance costs, so a federal reinsurance program won’t solve this problem. In fact, it would only disproportionately shift the cost to taxpayers living in low-risk areas.
“If we are serious about helping American families, we must confront what’s really behind these rising costs: more frequent and severe disasters, higher rebuilding costs, building in risky areas, fraud, and rising legal costs driven by excessive lawsuits and large payouts that benefit very few—primarily entities and individuals who are secretly investing in others’ lawsuits. We must work together on meaningful solutions that will actually improve affordability and availability.”
