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Key points
- New research makes the case for a US federal reinsurance programme – dubbed Re US – to alleviate skyrocketing insurance costs for homeowners across the country.
- The proposal suggests the US government, acting as a public reinsurer, would cover only the most extreme catastrophic climate risks, leveraging its lower cost of borrowing capital to help stabilise the housing market.
- While welcomed as a potential solution to the insurance crisis, the proposal faces criticism for not fully incorporating crucial climate adaptation measures and risk prevention strategies.
Insurance prices in the US are skyrocketing. A recent proposal by academics would help lower those costs by having the federal government take on the risks from large catastrophic events caused by climate change.
Called Re US, the researchers propose that the federal government assumes the role of a public reinsurer.
Such a programme, they say, would help lower costs for homeowners, as the US can borrow at a much lower rate than insurance firms, which often pass on their costs to policyholders.
“The challenge that we’re trying to address is that it’s very costly for the global reinsurance community to cover very severe tail risks, and so we think that’s where this entity could add the most value,” said Benjamin Collier, one of the paper’s authors and a risk and insurance professor at the Wisconsin School of Business.
How a US federal reinsurance programme would work
Premiums for US homeowners increased by an average of 28% between 2017 and 2024, when adjusted for inflation. In some riskier areas, insurers have either pulled out or refused to issue new policies, citing costs.
It’s not the first time there have been fluctuations in costs after a large catastrophic event, said Collier. For example, prices increased after Hurricane Andrew in 1992 and after the terrorist attacks in New York on 11 September 2001.
Normally, insurance companies hedge against such large events through reinsurance firms, which are essentially insurance policies for insurers. Homeowners pay for the expected losses on their own house but also the billions set aside in case a large risk event like a hurricane occurs.
But with climate change increasing the likelihood of a huge catastrophic event, experts have warned that the insurance industry is not prepared and homeowners simply can’t afford to pay the risks.
That’s where Re US could help, said Collier.
Under the proposal, a US federal agency would sell reinsurance contracts to insurers to cover only the most extreme weather events.
“The US balance sheet has a capacity to absorb shocks in a broader way than the global reinsurance community can,” said Collier. “The total equity capital in the reinsurance community is around US$600bn, which is a lot of money but small relative to the US federal balance sheet.”
This would help households maintain more consistent and affordable coverage, and help stabilise the housing market as banks require insurance before they will issue mortgage loans.
The authors outline three main principles that can be used to design a federal reinsurance plan, which include pricing risk, targeting market failure and maintaining credibility.
“Our intent is not to propose something that would subsidise risk and reduce its cost. It’s instead trying to leverage [the fact] that the US government has this lower cost of holding those really severe risks and being able to pay billions of dollars at once, if necessary,” said Collier.
Interest in global insurance reform
While Collier acknowledged a federal Re US might not be politically possible right now, there has been broader interest in insurance reforms.
US senator Adam Schiff introduced a bill in 2025 that would have created a federal catastrophic reinsurance programme. Meanwhile, several states have introduced or passed legislation that requires insurers to account for risk-reduction measures in their pricing and underwriting models.
Jerome Crugnola-Humbert, an independent consultant specialising in climate risk and sustainability for the insurance sector and currently collaborating with WWF, said the proposal mirrors discussions happening in other jurisdictions.
“The US Re proposal and discussion mirrors ongoing debates in Germany, the new public-private framework in Italy, and potential reforms to France’s natural catastrophe regime,” he said.
National reinsurance schemes also exist in other countries, according to a detailed analysis on public schemes by Adam Solomon, a professor at New York University’s Stern School of Business.
For example, Australia’s cyclone reinsurance pool is a mandatory homeowners’ insurance that covers storm damage, and Indonesia’s Maipark programme for insurers provides a stop loss for any earthquake, tsunami and volcano risk. Meanwhile, Spain’s natural hazards reinsurance provides policy-level indemnity for extraordinary natural hazards, while the UK offers flood protection with its Flood Re programme.
More climate adaptation measures needed
While several experts welcomed the Re US proposal, they criticised its lack of adaptation measures.
Jordan Haedtler, a climate financial policy consultant, said even those in the insurance industry don’t realise the scale of the issue, and the need for more work around adaptation and resilience. For example, he says insurance commissioners often underestimate the number of homes that need their roofs reinforced against severe convective storms, which is one of the current leading insurance claims in the US and is on the increase due to climate change.
“So long as the climate crisis continues to inflict damage on insurance markets and the fragmented nature of our state-regulated system is probably not sustainable,” he said.
While Re US is a step in the right direction, “any scenario where Congress is functional enough to do something as ambitious as dealing with climate risks’ impact on insurance markets is a scenario where we could potentially do more”.
Haedtler would instead like to see federal support to improve buildings and limit development in vulnerable regions, as well as invest in climate resilience and risk reduction.
Crugnola-Humbert said that while the proposal aims to boost supply by lowering the cost of capital, “the core issue is not merely a lack of private capital, but a diminishing appetite for the growing volume of hard-to-insure risks driven by climate change”.
“While the US Re proposal is a valuable contribution to the debate, it remains largely silent on risk prevention, climate adaptation, nature restoration and emissions reductions,” he added. “These are the only mechanisms capable of curbing climate-related risks, rather than simply transferring them.”
This page was last updated April 14, 2026
Written by
Moriah Costa is the Editor-in-Chief of Green Central Banking and has over a decade of experience writing about banking and finance. She is an award-winning American journalist based in Paris and has written for major international publications, including Reuters, The Guardian, and S&P Global. Having grown up in water-stressed Arizona, she has always had a strong interest in bringing awareness to climate and environmental issues.
