Increase Access Homeowner's Insurance Enterprises

The bill creates 2 enterprises in the division of insurance (division) in the department of regulatory agencies.

The bill creates the strengthen Colorado homes enterprise (strengthen homes enterprise), which is a state-owned business that imposes and collects a fee from insurance companies (insurers), including the FAIR plan association, that offer homeowner's insurance policies in Colorado, which fee is equal to 1.5% of the dollar amount of the premiums that the insurer collects from homeowners for issuing homeowner's insurance policies (insurer fee).

With the insurer fee revenue, the strengthen homes enterprise board administers a grant program (grant program) to strengthen homes against the risk of future damage claims caused by high winds, wildfire, hail, and other extreme weather events (extreme weather events) by allowing a homeowner to use grant money to upgrade their roof system with certain resilient roof materials. By paying the insurer fee to support the grant program to retrofit homes with resilient roofs, insurers reduce their overall risk in the market due to hail and other extreme weather events.

The bill also creates the wildfire catastrophe reinsurance enterprise (reinsurance enterprise), which is a state-owned business implementing and administering the wildfire catastrophe reinsurance program (reinsurance program). The reinsurance program makes reinsurance payments to insurers that offer homeowner's insurance on properties located in the state to partially mitigate losses in the event of a state or federally declared wildfire-related disaster (wildfire-related disaster). The purpose of the reinsurance program is to stabilize the homeowner's insurance market in the state and to attract and retain homeowner's insurers. In exchange for access to the reinsurance program, the reinsurance program requires insurers to sell homeowner's insurance in areas of the state that are at high risk for wildfires.

To pay for the reinsurance program, the reinsurance enterprise:

• Issues revenue bonds secured by the reinsurance enterprise;
• Issues a catastrophe bond to a person that purchases the bond but pays the principal to cover costs of a wildfire-related disaster if it occurs;
• May impose and collect an insurer fee on insurers to cover a shortfall if a wildfire-related disaster does not occur during the bond term and the reinsurance enterprise has insufficient money to redeem the bonds at maturity; and
• Invests the revenue from the bonds and insurer fees.

In addition, the bill sets the loss ratio for homeowner's insurance by presuming that the rates charged to purchasers are excessive if the insurer's loss ratio is less than 75% over a 3-year period and, if rates are in excess of the loss ratio, requires insurers to submit rates that are at least 5% less than the previous year.

(Note: This summary applies to this bill as introduced.)