Community Disaster Protection Act
- Sponsor
- Rep. Min, Dave [D-CA-47]
- Committees
- Financial Services Committee (primary)
- Last action
- Oct 1, 2026
Bottom line
The Community Disaster Protection Act seeks to enhance community resilience and fill gaps in traditional insurance markets by fostering innovative, localized catastrophe insurance solutions through a federal grant pilot program.
What it actually does
This bill establishes a five-year pilot program within the Federal Emergency Management Agency (FEMA) to award grants to eligible entities, such as states, tribal governments, and nonprofits, for the development and implementation of community-based catastrophe insurance programs. These programs are designed to cover losses from natural hazards not typically addressed by traditional insurance, stabilize the private insurance market, and encourage community-wide resilience measures. The bill outlines specific requirements for these insurance products and programs, including consumer disclosures, actuarial soundness, and compliance with state insurance laws.
Proponents argue
Supporters argue this bill addresses critical gaps in disaster preparedness and recovery, particularly in communities highly vulnerable to natural hazards where traditional insurance is insufficient or unavailable. They contend that community-based insurance can provide faster payouts, incentivize local mitigation efforts, and reduce reliance on federal disaster aid, ultimately stabilizing the broader property insurance market and promoting long-term resilience.
Opponents contend
Critics might argue that establishing a federal grant program for insurance could create moral hazard, distort private insurance markets, or lead to inefficient allocation of resources. Concerns could also be raised about the administrative complexity for FEMA and covered entities, potential for basis risk in parametric models, and the challenge of ensuring long-term financial sustainability without ongoing federal support.
The bill is moderately detailed but well-structured, allowing a diligent reader to understand its core mechanisms within a reasonable timeframe, especially given the importance of disaster preparedness.
Section 2(a)
Pilot Program Establishment
This section directs the Secretary of Homeland Security, acting through the Administrator of FEMA, to establish a pilot program within one year of the bill's enactment. The program will award grants to eligible 'covered entities' to design, develop, or implement community-based catastrophe insurance programs. The primary goals are to address natural hazard losses not covered by traditional insurance, stabilize the private property insurance market through innovative risk transfer, and promote community-wide or individual measures to reduce losses and increase resilience.
Supporters argue
Supporters argue this pilot program is a crucial step to innovate disaster risk management, providing tailored solutions for communities struggling with climate change impacts and inadequate insurance coverage. It allows for testing new models before broader implementation.
Critics contend
Some might argue that a pilot program could be a precursor to a larger, potentially costly federal intervention in insurance markets, which should primarily remain private. They might also question the efficacy of a limited-duration pilot in addressing systemic issues.
Tradeoffs
The tension lies between the need for innovative solutions to growing disaster risks and concerns about federal overreach into private insurance markets or the potential for creating new dependencies.
Section 2(b)
Eligible Uses of Grant Funds
This section details the specific activities for which grant funds can be used. These include conducting consumer research and outreach, utilizing catastrophe risk models, designing program features (especially for parametric programs), developing regulatory and operational frameworks, establishing claims payment systems, and conducting program evaluations. Significantly, funds can also be used to secure non-Federal financial support, such as identifying and soliciting risk capital or premium assistance from state, local, philanthropic, or private sources, and developing long-term financial sustainability plans.
Section 2(c)
Mandated Product and Program Characteristics
This section sets out detailed requirements for both the community-based catastrophe insurance products and the programs administering them. Products must supplement existing insurance, cover specific hazards, provide clear, plain-language consumer disclosures (including on perils, limits, interaction with other insurance/aid, and financial sustainability), have actuarially sound premiums, and incentivize risk reduction. Programs must facilitate resilience investments, communicate risk changes, and comply with all applicable State insurance laws and regulatory requirements, including seeking state regulator determinations and ensuring licensed producers. Programs can utilize various frameworks, from facilitating purchases to establishing risk-bearing entities.
This section explicitly states that nothing in the Act shall preempt, supersede, impair, or otherwise affect the application of State insurance laws or the authority of a State insurance regulator. It also clarifies that the McCarran-Ferguson Act applies and that no federal entity is authorized to approve insurance products, set rates, or license insurers, functions reserved to states.
Section 2(j)
Why it matters:This is standard legislative practice to clarify the relationship between federal and state authority, especially in areas traditionally regulated by states like insurance. It is not necessarily evasive but can be missed.
Case for: Proponents argue this provision is crucial for maintaining the integrity of state-based insurance regulation, ensuring that new federal programs do not inadvertently undermine existing consumer protections or regulatory frameworks.
Case against: Critics might argue that while important for state authority, it could also create friction or delays if state regulators are slow to adapt to or approve these innovative community-based insurance models, potentially hindering the pilot's effectiveness.
Estimated impact: Ensures state insurance regulators retain full authority over insurance products and entities operating within their borders, impacting the speed and manner of program implementation.
This subsection mandates that covered entities receiving grant funding must provide 'appropriate and reasonable data' to the Comptroller General (GAO) on the performance of their community-based catastrophe insurance products to support reporting requirements. It also includes a carve-out for proprietary, trade secret, or confidential insurer, reinsurer, or catastrophe-modeling information.
Section 2(h)(5)
Why it matters:This is standard practice for federal programs to ensure accountability and evaluation. The proprietary data carve-out is also standard to protect business interests. Not evasive.
Case for: Proponents argue this data sharing is essential for robust program evaluation, allowing Congress and the public to understand the pilot's effectiveness, identify best practices, and inform future policy decisions.
Case against: Some covered entities or private partners might express concerns about the administrative burden of data collection and reporting, even with the proprietary data protection, potentially deterring participation from smaller organizations.
Estimated impact: Critical for the accountability and future policy implications of the pilot program, influencing whether it is expanded or made permanent.
These clauses require clear consumer disclosures regarding the effect of receiving a payout on eligibility for federal, state, or local disaster assistance (including under Section 312 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act) and whether the product satisfies any federal or state insurance requirements (including under Section 311 of the Stafford Act or the Flood Disaster Protection Act of 1973).
Section 2(c)(1)(iii) and (iv)
Why it matters:These are technical compliance and disclosure details, crucial for consumer understanding and legal clarity, but not the main programmatic thrust. Not evasive.
Case for: Proponents argue these disclosures are vital for consumer protection, ensuring participants understand how community-based insurance interacts with existing federal disaster aid and mandatory insurance requirements, preventing unintended negative consequences.
Case against: No specific opposition, but some might argue that the complexity of these interactions could make disclosures difficult to fully grasp for average consumers, regardless of clarity.
Estimated impact: Prevents confusion and potential financial penalties for individuals who might inadvertently jeopardize federal aid eligibility or fail to meet mandatory insurance requirements.