A shift in Colorado’s approach to funding wildfire insurance may bring new costs to policyholders, as lawmakers consider a fee-based model in revised legislation that also discards earlier efforts to impose strict loss ratio requirements on home insurers.
Recent amendments to House Bill 1302, detailed in an AM Best report, would authorize a 0.5% fee on every homeowners insurance policy issued in the admitted market. Funds collected through this mechanism would support a proposed state wildfire reinsurance enterprise.
The fee could be waived for homeowners who complete qualified property mitigation projects. Collected amounts would not be treated as premium for regulatory or tax purposes.
In a related move, the bill proposes the creation of a state-run business entity tasked with administering a grant program aimed at reducing wildfire exposure.
All carriers offering home insurance in Colorado—including those under the new Fair Plan—would contribute 1.5% of their direct written premium to the fund.
The proposed fee structure replaces an earlier financing plan that relied on the issuance of revenue and catastrophe bonds.
AM Best had previously reported that the bond-based funding model was part of the bill’s original design before lawmakers introduced the fee-based approach during committee revisions on April 7.
Also removed from the bill was a provision that would have subjected home insurers to regulatory penalties if their loss ratios fell below 75% over a three-year period.
Under that version, companies failing to meet the threshold would have been required to file rates at least 5% lower than the prior year.
Industry representatives questioned the relevance of health insurance-style metrics in property insurance markets, citing variability in weather-related losses.
Alongside HB 1302, lawmakers are also reviewing a separate proposal—House Bill 1182—which would impose new disclosure and notification requirements on insurers using wildfire risk models in underwriting. If passed, HB 1182 would mandate greater transparency from insurers about their use of catastrophe models, risk scores, and other tools used to assess wildfire exposure when determining coverage eligibility and premiums.
The Rocky Mountain Insurance Information Association has expressed continued interest in working with state officials to address industry concerns.
Executive director Carole Walker said that while revisions have improved the proposal, discussions with Colorado Insurance Commissioner Michael Conway and the bill’s sponsors are ongoing.
Attempts to reach the lawmakers sponsoring HB 1302 were not successful.
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