A Colorado bill aims to shore up the state's homeowners insurance market with a bond-financed reinsurance program tied to providing coverage in wildfire-prone areas of the state.
Democratic State Rep. Kyle Brown, one of the bill's sponsors, said
"This reinsurance wildfire enterprise that we're setting up will be pretty unique among states … especially because it's purchasing a reinsurance product on the private market," Brown told The Bond Buyer.
The measure would create a state-owned entity that would issue revenue bonds to purchase a $300 million to $500 million reinsurance policy to act as a kind of backstop for excessive insurance losses, he said.
As for revenue to pay off the debt, Brown said several sources are being contemplated, including a combination of fees on the insurance industry. He added, the state lost some smaller insurance carriers over the last several years.
"Fortunately, many of the larger companies have been able to pick up some of the slack, but it's a real challenge for a lot of people and so we're trying to stabilize our market," Brown said. "A little bit of investment here and there that helps to mitigate risk and smooth out some of these excessive loss events that we get through wildfires in particular, are going to lead to long-term stability in the market and help to make sure that we don't have even more losses of insurance companies and skyrocketing premiums."
In exchange for access to the program, insurers would be required to sell homeowners insurance in areas of the state that are at high risk for wildfires, according to the bill's summary.
Since 2000, the number of large wildfires in the state has increased, driven in part by rising temperatures, according to the Colorado Climate Center.
The
A 2023 Colorado law established a
Brown's bill also includes a grant program funded by a fee collected from insurance companies that would pay for upgrades to homes' roofs to prevent damage from high winds, hail, and wildfires.
