H.R. 550: Wildfire Insurance Coverage Study Act of 2025

This bill, known as the Wildfire Insurance Coverage Study Act of 2025, is focused on conducting a comprehensive study about insurance coverage related to damages caused by wildfires in the United States. The study will be overseen by the Government Accountability Office (GAO) and involve collaboration with the Federal Insurance Office and state insurance regulators. The key components of the bill are outlined as follows:

Study Objectives

The study aims to achieve several objectives related to understanding and improving wildfire insurance coverage:

• Risk Assessment:
  • Determine the extent and nature of wildfire risk in the U.S., including trends in wildfire declarations, costs, probabilities, and frequency of disasters.
  • Identify effective mitigation practices to help reduce costs and risks associated with wildfire insurance policies.
  • Assess existing federal and state government programs that measure wildfire risk and their effectiveness in forecasting and responding to wildfires.
  • Explore the need for a national map to quantify wildfire risk.
• Existing Coverage Analysis:
  • Investigate how private insurers have adjusted rates or policyholder costs over the past decade in relation to wildfire coverage.
  • Examine the decline in policy renewals by insurers and identify the areas affected.
  • Address economic factors contributing to rate increases and renewals declines.
  • Evaluate the extent to which insurers have reduced wildfire coverage or excluded it altogether.
  • Analyze the circumstances under which coverage is still being offered and any conditions required for such coverage.
• Regulatory Responses:
  • Review state actions regarding rate increases, policy exclusions, and coverage requirements.
  • Investigate any moratoria enacted by states on rate increases or coverage exclusions.
  • Assess whether states require homeowners insurance to include wildfire damage coverage.
  • Explore the establishment of state residual insurance markets or programs for wildfire coverage.
  • Study how state actions affect the availability and affordability of homeowners insurance.
• Challenges in Underwriting Wildfire Risk:
  • Identify the correlated risks faced by private insurers in underwriting wildfire coverage.
  • Analyze factors that influence insurers' estimates of future wildfire likelihood and expected damages.
  • Consider how increased demand for housing in higher-risk areas affects wildfire insurance underwriting.
  • Evaluate the risk of significant losses jeopardizing insurers' solvency.
  • Assess how market premiums limit the affordability or availability of wildfire coverage.

Reporting Requirements

Within 12 months of the bill's enactment, the GAO is required to submit a report to Congress summarizing the study's findings and conclusions. This report is expected to provide insights into the current state of wildfire insurance and potential areas for improvement and reform.

Implications

The bill does not impose direct regulatory changes or mandates. Instead, its goal is to gather data and insights that could inform future policies or adjustments to wildfire insurance practices and regulations.

Relevant Companies

• ALL (Allstate Corporation) - May be impacted concerning its underwriting practices and strategy for managing wildfire risks.
• PRU (Prudential Financial, Inc.) - Could face challenges in adapting to new data and insights regarding wildfire insurance coverage.
• UNM (Unum Group) - May need to adjust its risk assessment methodologies based on study findings.