Colorado lawmakers have reshaped a key piece of wildfire insurance legislation, House Bill 1302, shifting the financial burden for reinsurance funding from utility companies to homeowners. The move marks a significant policy pivot and raises new questions about who should pay to protect the state’s growing number of properties at risk from wildfires.
From Utilities to Homeowners: The New Funding Plan
The bill originally aimed to collect up to $100 million every five years from utility companies to fund reinsurance — coverage for insurers that activates in the wake of catastrophic events like wildfires. In exchange, utilities would have faced reduced liability when their equipment caused a fire.
That concept — the first of its kind in the nation — met with strong resistance from utility companies. Lawmakers have since amended the bill to impose a 0.5% fee on every homeowners insurance policy in Colorado, capped at $100 million every five years. The fee would be collected by insurers and directed to a state-managed enterprise to purchase the reinsurance.
Exemptions would apply for properties that meet wildfire mitigation standards set by the Insurance Institute for Business and Home Safety (IBHS), or an equivalent level of protection.
Legislative Goals and Policy Impact
Supporters of the bill, including House Speaker Julie McCluskie and Rep. Kyle Brown, argue that the shift is fair and necessary. The intent is to lower private insurers’ exposure and thereby stabilize or reduce insurance premiums in Colorado — a state that has seen double-digit increases in homeowners insurance rates in recent years.
Brown pointed to a 16% jump in insurance premiums in the Denver area over the past year as a warning sign. He emphasized that spreading risk through modest, broad-based contributions could help prevent more dramatic rate hikes in the future.
Broader Changes and Risk Pool Considerations
The updated bill also modifies a separate hail mitigation program. A previously proposed 1.5% fee on homeowners without impact-resistant roofs has been reduced to 0.5%, with the fund also capped at $100 million every five years. The money will support grants for property owners looking to upgrade their roofs.
These changes mean that policyholders in lower-risk areas — where wildfire or hail is less common — may end up subsidizing mitigation efforts for those in high-risk zones. However, proponents maintain that pooling risk across geographic regions strengthens the insurance system overall.
“Insurance works better when everybody is involved,” Brown said.
Industry Response and Legislative Outlook
Insurers were initially skeptical of House Bill 1302, but recent changes have softened their stance. Carole Walker, executive director of the Rocky Mountain Insurance Information Association, called the revised proposal “a huge improvement.”
The bill now heads to the House Appropriations Committee for further consideration. As one of Governor Jared Polis’ major legislative priorities, the outcome of House Bill 1302 could set a precedent for how states balance private and public responsibilities in addressing climate-driven insurance challenges.
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