California Rep. Schiff's bill aims to help home insurance crisis

As the Bay Area deals with shrinking home insurance options and rising costs, California Rep. Adam Schiff introduced federal legislation Wednesday in an effort to stabilize the insurance market.

The act proposed by Schiff, D-Burbank, titled Incorporating National Support for Unprecedented Risks and Emergencies, or INSURE, aims to help through the creation of federal reinsurance.

When major home insurers State Farm and Allstate announced last year they would stop writing new policies in California, both cited the cost of reinsurance — which acts as insurance for insurance companies, allowing them to shift some liability — as a reason for their exit.     

Schiff’s legislation would create a federal catastrophic reinsurance program within the Treasury Department, giving insurers a public alternative to traditional private reinsurance and reducing the cost through lower rates. The federal reinsurance program would cap insurers’ liability by setting a threshold developed by the secretary of the treasury and an advisory committee. 

“My INSURE Act addresses the urgent crisis in the home insurance market, particularly in California, where the cost of insurance has gone through the roof and insurers have stopped writing new policies,” Schiff said in a news release. 

With lower reinsurance rates, the goal is to in turn provide lower rates for consumers. 

The INSURE Act would also require insurers participating in the federal reinsurance program to offer coverage for all natural disasters and invest in loss prevention and risk mitigation strategies with customers to help them with disaster preparation.

In addition, it would establish improved market monitoring through the Office of Financial Research and the Federal Insurance Office, which would work with state insurance regulators.

Within the state, politicians have been at work to address the insurance crisis. California Department of Insurance Commissioner Ricardo Lara introduced the Sustainable Insurance Strategy in September, aiming to bring insurers back to communities with high wildfire risk. The strategy includes exploring California-only reinsurance regulations. 

After the 9/11 attacks, the federal government created a system for losses resulting from terrorism through the Terrorism Risk Insurance Act. Schiff’s office says a similar step to address climate risks is needed to account for where the insurance market has failed. 

“My bill is a critical step forward in the effort to ensure homeowners and communities have access to affordable and accessible coverage,” Schiff said. “I’ll keep working to get this across the finish line and bring the cost of insurance down.”

Reach Clare Fonstein: clare.fonstein@sfchronicle.com