Florida Could Make Other States Pay for Its Insurance Crisis

A Florida Congressman is advocating for the creation of a “national catastrophic insurance fund” to spread the high cost of home insurance claims caused by major storms.
Representative Jared Moskowitz, a Democrat, has filed legislation that would “spread the risk around” using federal bonds to mitigate the insurance burden.
“It would add no money to the deficit. It would allow states to buy bonds, that—when we have these one in 1,000-year events—would take that off of the plate of the insurance companies, which is driving up 25 percent of the cost on reinsurance,” Moskowitz said while appearing on Fox News on Saturday.
“Even if my bill doesn’t move or go anywhere, I think the United States government and Congress [have] to start realizing that we have to amortize the risk, we have to spread this risk around. It can’t just be on one state or two states to deal with this.”
Homeowners in Florida paid an average annual premium of $10,996 in 2023—the highest in the country, according to a recent study by virtual insurance company Insurify. The national average premium in the same year was $2,377 per year.
These premiums have skyrocketed, partly because of Florida’s increased risk of natural disasters. The Sunshine State was struck by Hurricane Helene just last Thursday.
Moskowitz’s proposal includes introducing a cap on reinsurance requirements, with the federal government issuing post-event bonds to insurance companies to fund the difference between the reinsurance cap and homeowner damages.
The bill, HR 3525: Natural Disaster Reinsurance Program Act, has not yet been picked up by Congress.
Analysis by the South Florida Regional Planning Council said that Moskowitz’s bill would cut annual premium growth in Florida by 25 percent and 12 percent in the U.S. The group says that under this program, Americans would pay less in insurance rates.
While it is unclear how the bonds would be repaid, it could be through federal revenue or indirect tax contributions. This could mean residents in states far from storm-prone areas like Florida might indirectly contribute to covering these costs.
“HR 3525 would make natural catastrophe-prone states more attractive to insurance companies, which could mean fewer insurers dropping out of high-risk states,” Cassie Sheets, a data journalist from Insurify, told Newsweek.
“It’s unclear what would happen if the states don’t pay back the money they receive within 10 years. Some of the highest risk states are already receiving the most federal aid funding. This includes California, Florida, and Texas.”
Sheets said that while the legislation would help alleviate rising home insurance costs in high-risk areas, it doesn’t solve the root issue. “There’s nothing in the bill about climate damage mitigation,” she said.
However, the National Association of Mutual Insurance Companies writes on its website that it opposes the idea of transferring risk to the federal government.
“This model, which essentially forces the federal government to act as a reinsurer for states, would only be a further drain on taxpayers already subsidizing a rapidly increasing amount of post-disaster costs,” NAMIC said.
“The Florida Hurricane Catastrophe Fund, an example of how a federal catastrophe backstop works on the state level, imposes a liability on the states’ taxpayers of over $30 billion but has no evident funding mechanism that would allow it to pay anywhere near that amount in claims.”
NAMIC said that a model like the Florida Hurricane Catastrophe Fund would continue to reduce the incentive to require homes and businesses to be built resiliently.
Moskowitz said that his proposal to create a national catastrophic insurance fund would be similar to how the Federal Emergency Management Agency works during a disaster response, by using federal resources to support affected local communities.
“I think we’re going to have to do the same thing in the insurance market, otherwise some of these places are going to become too expensive for the people who already live there,” Moskowitz said.