April 22, 2025
Chairman Mike Flood
Ranking Member Emanuel Cleaver
Subcommittee on Housing and Insurance
U.S. House Committee on Financial Services
2129 Rayburn House Office Building
Washington, DC 20515
Dear Chairman Flood, Ranking Member Cleaver, and Members of the Committee:
On behalf of National Taxpayers Union, the nation’s oldest taxpayer advocacy organization, we thank you for holding this important hearing on risk diversification. By helping shift risk away from primary insurers and government-supported organizations, reinsurance and credit risk transfers (CRT) reduce loss exposure for taxpayers across the country. We encourage the Subcommittee to explore ways to broaden these markets, while ensuring that the government does not erect barriers or limit private sector innovations in these areas.
Described by some as a “shock absorber” for insurance companies, reinsurance allows for the transfer of some risk to capital markets, allowing for losses from natural disasters and downturns in the housing market to be spread to a broader capital base than just the government. The global reinsurance market is healthy, with ample capital available investment. This lowers costs over time for insurance companies and policyholders, eliminating the need for the government to invent expensive new, unaffordable alternatives. CRT programs provide a similar function for government‑sponsored enterprises (GSEs) like Fannie Mae and Freddie Mac by using a range of transaction structures to shift portions of mortgage credit risk to private investors, transferring almost $7 billion in risk away from taxpayers.
We oppose any attempt to create a direct federal reinsurance program to address perceived capacity constraints in homeowners insurance markets. This unwise action would cause current private reinsurance providers to leave the market, increase catastrophic risk for taxpayers, and further distort insurance pricing away from true market risk levels. Those who disagree should look no further than the National Flood Insurance Program (NFIP), a failed federal program that has built a total debt to taxpayers of over $22 billion.
Private sector market innovations show that significant risk can be absorbed by markets when the government stays out of the way. They can improve market efficiency while increasing affordability, stabilizing insurance costs for consumers. We are happy to see such success by the private sector in delivering these products to insurers and consumers and believe that small changes like improving transparency and streamlining regulations could help ensure further growth in these markets.
Thank you for taking the time to discuss these important market innovations at today’s hearing. We stand ready to help answer questions, and to support your work as needed.
Sincerely,
David Timmons
Senior Policy Manager