A 'Federal Property Reinsurer' Would Benefit State and Local Governments

Why It Matters

A federal reinsurer could curb soaring homeowners‑insurance costs and protect municipal revenues tied to property taxes, while enhancing national resilience to climate‑driven disasters.

Key Takeaways

• US Re would reinsure extreme weather losses for insurers
• Premiums rose 28% inflation‑adjusted between 2017‑2024
• Federal borrowing lowers reinsurance cost volatility
• Affordable coverage supports state and local tax bases

Pulse Analysis

The U.S. homeowners‑insurance market is under unprecedented strain as climate‑driven catastrophes become more frequent and severe. Between 2017 and 2024, inflation‑adjusted premiums surged 28%, with some high‑risk states seeing double‑digit jumps. Insurers are responding by raising rates, trimming coverage, or exiting entire markets, leaving homeowners vulnerable and municipal budgets exposed to declining property tax revenues. This destabilization threatens not only household finances but also the broader housing market, where mortgage lenders rely on consistent insurance to protect collateral.

Brookings scholars propose a federal property reinsurer, tentatively named US Re, to act as a backstop for the most costly natural‑catastrophe losses. By leveraging the Treasury’s ability to borrow at low rates, US Re could offer reinsurance contracts to primary insurers at prices insulated from the volatile private‑reinsurance market. The agency would assume the tail risk of extreme events, allowing insurers to retain more predictable loss portfolios and keep premiums affordable. This public‑sector capacity could also smooth claim payments, reducing the likelihood of insurer insolvencies during mega‑storms.

State and local governments stand to gain directly from a federal reinsurer. More affordable homeowners insurance translates into steadier property‑tax collections, supporting municipal services and infrastructure projects in disaster‑prone regions. Additionally, stable insurance coverage bolsters mortgage lending, curbing foreclosure spikes after disasters. Policymakers, however, must weigh fiscal exposure, governance structures, and potential market distortions. If designed with transparent oversight and clear risk limits, a federal reinsurer could become a cornerstone of U.S. climate‑resilience strategy, aligning public resources with private risk‑transfer mechanisms.