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Americans with homes that are repeatedly flooded by extreme weather events could soon have the federal government buy their houses under a new bill introduced Thursday by Rep. Sean Casten (D-Ill.), The Hill reported. The bill would allow the National Flood Insurance Program (NFIP), the federal flood insurer of last resort, to buy houses and zones deemed indefensible in lieu of continually paying to repair them. “You’re not obligating people to move, but you’re saying like, you know … if you want to avail yourself with the NFIP program, we’re going to structure it toward a buyout rather than rebuilding,” Casten said. Casten, who worked on the bill with Rep. Earl Blumenauer (D-Ore.), says it aims to solve two problems: one serious, the other potentially catastrophic. More immediately, there’s looming the risk of bankruptcy of the NFIP, which is straining under the weight of ever more frequent and severe flood events. Congress paid $16 billion to bail the program out in 2018, and Congress proposed another $20 billion in 2021. That problem is only growing. Flood damage could rise more than 25 percent by 2050, putting an additional $8 billion at risk. And 14.6 million homes are at “substantial” risk of flooding, according to data from nonprofit First Street. Large investors like Blackstone and Bank of America and reinsurers like Swiss Re carry out their own quiet retreat from endangered lowland and coastal properties, while selling off those properties to less savvy investors — and counting on the NFIP to serve as a free backstop, Casten added. That creates the potential for a domino cascade of bankruptcies analogous to the Savings and Loan Crisis of the 1980s, which saw community banks and pension funds wiped out across the country. “You’re not seeing the Blackstones come in and buy,” Casten said. Flood-prone properties are instead getting spun off to groups like “you know, the local Cleveland, Ohio, firefighters pension fund.”

Insurers protecting Florida’s homeowners are going under. And it’s not the state’s infamous storms dragging the firms down — it’s a deluge of lawsuits and fraud, Bloomberg News reported. More companies may follow the two insurers declared insolvent in recent weeks, Tampa, Florida-based Avatar Property & Casualty Insurance Co. and St. Johns Insurance Co., based in Orlando, Florida. And lawmakers failed to pass a bill that could offer a potential remedy before the state’s legislative session wrapped up earlier this month. Insurers, meanwhile, are opting not to renew certain policies, refraining from writing new business and increasing premiums. The pullback offers homeowners few choices: pay up, take the risk of forgoing coverage or throw in their lot with the state’s insurer of last resort, which is already facing an influx of new customers as hurricane season looms. “There are going to be other insolvencies,” said Bruce Lucas, chief executive officer of Tampa-based insurance-technology firm Slide Insurance Holdings Inc. and a veteran of the state’s underwriting industry. “There are just other companies that are too thinly capitalized.” The largest U.S. insurers have spent years shrinking their footprint in Florida to reduce their exposure to violent Atlantic hurricanes. As of the third quarter of last year, companies that primarily write policies in the state control more than three-quarters of the homeowners’ insurance market, according to Kyle Ulrich, president of the Florida Association of Insurance Agents.

The Archdiocese of Santa Fe, N.M., which is in the throes of chapter 11 bankruptcy, sued four insurance companies this week, claiming they haven't fulfilled their contracts, the Santa Fe New Mexican reported. The archdiocese is trying to raise enough money to settle the bankruptcy case with more than 400 victims of clergy sexual abuse. The complaint accuses the insurers of "failure to honor contractual commitments to provide liability coverage to the Archdiocese for claims alleging decades-old sexual abuse." It "seeks to resolve the sexual abuse claims with proceeds from its liability insurance," the lawsuit says. The archdiocese filed for chapter 11 bankruptcy more than three years ago. It wants to raise an amount of money not publicly specified in order to settle with the victims. The archdiocese has used property sales and auctions and contributions to generate money. But insurance payouts are expected by the archdiocese and others to fund a large chunk of the settlement. Defendants named are Great American Insurance Co., Arrowood Indemnity Co., St. Paul Fire and Marine Insurance Co. and United States Fire Insurance Co.

Washington state Insurance Commissioner Mike Kreidler’s adoption this week of a rule prohibiting insurers from using credit scoring to set rates for auto, homeowner and renter insurance has already drawn a legal challenge from insurer groups, the Associated Press reported. The American Property Casualty Insurance Association, the Professional Insurance Agents of Washington, and the Independent Insurance Agents and Brokers of Washington on Wednesday jointly filed two legal actions — an administrative challenge and a superior court lawsuit — seeking to stop the rule, which is set to take effect March 4 and last for three years after the end of pandemic-related federal and state emergency financial protections, whichever is longer. Kreidler’s office started the process of implementing the permanent rule — announced Tuesday — after an emergency rule the commissioner issued last year was struck down by a court, which found there was no justification to bypass normal rulemaking procedures. Kreidler said he’s also proposing a new rule that would require insurers to provide policyholders with a written explanation for any premium change. He said that once federal pandemic protections end, people who have struggled financially over the past two years are at risk of have delinquencies show up on their credit reports, and noted that insurers charge good drivers with low credit scores nearly 80% more for mandatory auto insurance.

GWG Holdings Inc., a company known for selling life-insurance bonds, is seeking rescue financing in an effort to avoid bankruptcy after accounting issues and the resignation of its auditor prevented it from selling its products, WSJ Pro Bankruptcy reported. Dallas-based GWG created financial instruments called L Bonds, which pooled money from bond investors to purchase life insurance policies on the secondary market, and then used payouts from the policies when people died to repay the investors. The company sold the bonds through a network of regional broker-dealers, who pitched the products to individual investors, also known as retail investors. GWG’s financial position worsened after the company stopped selling additional L Bonds due to accounting issues that delayed the filing of its 2020 annual report and the resignation of its auditor, according to the people familiar with the matter and disclosures to investors. The company said it missed the Jan. 15 deadline for making $15.6 million in interest and principal payments due to holders of L Bonds. “GWGH relies to a significant extent on L Bond sales to meet our ongoing financial obligations,” the company said in a disclosure to investors on Monday.