Impact of Proposed Legislation on Insurers
A leading Colorado insurance trade group is calling for significant changes to proposed legislation aimed at reforming the state’s home insurance market, despite recent amendments that removed some of the industry’s most contentious provisions.
Carole Walker, executive director of the Rocky Mountain Insurance Information Association, stated that while progress has been made, more work is needed before the bill is finalized. “Colorado is just a few bad public policy decisions away from being California because we have a high catastrophe risk for both hail and wildfire,” Walker warned. “Lawmakers and regulators think they’re doing the right thing, but it just signals to insurance companies that it’s a harder place to do business.”
Key Concerns with the Proposed Legislation
The proposed legislation follows a growing national trend of insurance market strain driven by rising catastrophe losses. Colorado is among the hardest-hit states, ranking second nationally in hail-related claims and having numerous homes in wildfire-prone areas.
One provision that drew industry backlash would have required insurers with a loss ratio below 75% over three years to reduce their rates by 5%. Walker argued that this proposal would have forced smaller insurers out of the market and caused larger ones to limit their presence. Although lawmakers removed the loss ratio mandate during the amendment process, other concerns remain.
Walker expressed concern about the reinsurance enterprise, which would be funded by a 1% fee on all property insurance policies. She noted that the law remains unclear on whether the enterprise can sell reinsurance, potentially conflicting with private market operations. Insurers are also seeking an opt-in feature for participation in the reinsurance program, as the current plan requires companies to write coverage in high-risk areas and reduce premiums – conditions some consider burdensome.
Positive Elements and Expected Outcome
Despite these concerns, there is consensus on the importance of the home-hardening program. This initiative would provide grants to homeowners for installing impact-resistant roofs and undertaking wildfire mitigation measures. Homeowners completing such projects could have the enterprise fee waived. “We want to make sure that if you’re putting on that new roof, and if you’re doing wildfire mitigation, that it is meaningful mitigation that meets the science-based standards,” Walker said, referring to guidelines from the Insurance Institute for Business & Home Safety.
Walker also called for changes to Colorado’s regulations on additional living expenses, which currently impose a time limit without a financial cap. With the legislative session set to end on May 7, Walker expects the bill to pass, backed by state leadership including Gov. Jared Polis, House Speaker Julie McCluskie, and Insurance Commissioner Michael Conway.
