Utility companies in Colorado may be less financially liable for causing wildfires if they’re willing to pay for a bold new reinsurance plan, proposed by state lawmakers to bring down the cost of soaring home insurance premiums.
The new program, proposed in House Bill 1302, would require utilities to invest up to $100 million every five years in bonds to be used by the state to buy reinsurance for home insurers. This policy would help cover the costs of damage from natural disasters or other losses under extraordinary circumstances.
Backers of the bill say the drastic measure is needed to keep home insurance companies in Colorado and reduce the cost premiums for homeowners. But insurance companies aren’t so convinced.
“It’s complex. It’s confusing,” shared Carole Walker, who leads the Rocky Mountain Insurance Information Association, in an interview with the Colorado Sun. “We have major concerns.”
If successful, the first-of-its-kind program could set the stage for other states, like California, that are struggling with home insurance premiums to adopt similar measures.
To understand why lawmakers are turning to such dramatic measures, it helps to look at how Colorado got here.
Colorado’s home insurance problem
Colorado is facing some of the steepest home insurance premium hikes in the country, with rates rising by an average of 57.9% from 2018 to 2023, according to analysis from the Rocky Mountain Insurance Association. Three major factors are driving this surge.
First, the state has seen a sharp increase in extreme weather events alongside rapid population growth—together compounding the scale and frequency of catastrophic losses.
From 1980 to 2009, Colorado experienced 24 weather disasters causing at least $1 billion in damage (adjusted for inflation). Between 2010 and 2024, that number more than doubled to 52, according to data from the National Centers for Environmental Information.
Second, inflation has driven up the cost of construction and building materials, making it more expensive to repair or rebuild homes after disasters.
Finally, these rising costs have pushed insurer losses beyond what they collect in premiums, forcing many companies to either raise rates or withdraw from the Colorado market entirely.
What HB 1302 would do
Colorado’s bold attempt to stabilize the home insurance market is modeled after the state’s successful 2019 effort to reduce health insurance premiums. That bill drove down costs by offering health insurance companies protection for bigger, pricier claims.
The home insurance version would establish two state-run programs designed to reduce risk and relieve financial pressure on insurers, hopefully enough that they would be able to pass those savings on to homeowners.
The first program would offer grants to help homeowners upgrade to weather-resistant roofs. Funding for this program would come from a 1.5% fee insurers would have to pay for policies they issue to homes without a hail resistant roof.
The second program would provide financial support to insurers after major wildfires, helping keep insurance available and affordable in high-risk areas. Funding for this program would come from bonds bought by utility companies. In exchange, insurers would not be able to hold utility companies financially liable for starting wildfires, like the Marshall wildfire that caused more than $2 billion in damage.
Lastly, the bill would also require insurers to lower rates when no more than 75% of their revenue goes toward payouts over a three-year period. This clause has invited the most criticism from insurers, as many fear the window isn’t long enough to see the impact of extreme weather events.
Insurers worry that this would cause a “death spiral” of losses, potentially causing some to lose the cash reserves required to stay solvent. This could create an environment so risky for insurers that it actually has the opposite intended effect of the bill and drives them out of the state.
Why focus on hail?
While wildfires are more likely to steal headlines, hail presents a more consistent danger to homes in the Rocky Mountain State.
“Hailstorms are a regular threat in Colorado,” says Constantine Anest, owner of Ethos General Contractors in Denver and Fort Collins, CO. “Colorado consistently ranks among the top five states for hail damage claims.”
Some damage can be fixed by replacing a few shingles or resealing flashing, while others require a full roof replacement, according to Anest.
Those fixes can mean a big bill for insurers. Anest estimates that a hail-resistant roof replacement can cost between $12,000 and $25,000 more than a standard roof, depending on the size of the home and the type of material used.
But the payoff can be just as big.
“While these upgraded materials typically cost about 10% to 20% more upfront than standard roofing, they can save you money in the long run,” Anest says. “You’ll likely deal with fewer repairs after storms, extend the life of your roof, and may even qualify for insurance discounts.”
Colorado lawmakers are betting big that these interventions will be enough to keep insurers in the market and premiums in check. But whether HB 1302 becomes a model for other states or a cautionary tale may come down to one thing: how well it balances risk, responsibility, and reward for homeowners, insurers, and utilities alike.
