Skip to contents
Politics and Government

Could a new insurance-premium fee prevent Colorado’s next big natural disaster? Some lawmakers say yes.

House Bill 1208 would impose a fee on certain insurance premiums and then distribute the money generated to communities looking to do disaster mitigation projects

The Cameron Peak fire burned structures between Rustic and the Poudre River Fish Hatchery in Larimer County. Photographed on Sunday, Jan. 17, 2021. (Valerie Mosley, Special to the Colorado Sun)
  • Credibility:

When the Camp fire ripped through Paradise, California, in 2018, killing dozens of people and destroying hundreds of structures, Lisa Cutter knew her Colorado community could be next.

The Democratic state representative’s district includes Evergreen and Conifer, two towns at risk of experiencing a devastating wildfire. “People in the wildlife urban interface are scared,” Cutter said. “They’re terrified.”

Rather than wait for a disaster to hit, Cutter wants to spend more money up front to prevent one from happening in the first place. Enter House Bill 1208, which seeks to create a state-run natural disaster mitigation enterprise fund that would help communities finance necessary work to lessen or prevent future catastrophes. 

Money for the initiative would come from a fee paid by insurance companies on natural disaster policy premiums, such as those fire and crop failure. Cutter said charging insurance companies — $1.25 per every $1,000 in premiums, with an annual increase based on U.S. Department of Labor indexes — is an “elegant” approach, since it’s in the best interest of companies, not just the interest of those who are insured, to mitigate disaster. 

Unlike funding allocated through the state legislature or Congress, the enterprise would have a consistent, predictable amount of money filling up its coffers, proponents say. The bill’s fiscal note estimates it would bring in roughly $7.6 million in its first year, $7 million of which would go directly to grants, after deducting administrative costs. 

Premiums would likely go up as insurance companies pass the new costs on to consumers, but Cutter estimates it would be less than $5 more a year for the average homeowner. 

TODAY’S UNDERWRITER

“The more thoughtful we are on the front end in terms of mitigating against these kinds of issues, the greater savings we’ll have,” said Cutter, who is leading the bipartisan legislation.

But there are opponents to the measure, including Republicans and the insurance industry, who say that companies shouldn’t have to calculate and manage fees for grants that don’t come back to them.

“There is no nexus between what is being paid by insurers and the services being provided by the enterprise,” said Kelly Campbell, vice president of the American Property Casualty Insurance Association, at a hearing for the bill last week in the House Energy and Environment Committee.

A version of the bill was introduced last legislative session, but then cut from the agenda due to coronavirus. It’s become all the more important now, Cutter says, after the record-breaking fires the state saw in 2020. Democratic Rep. Matt Gray, of Broomfield, and Sen. Faith Winter, of Westminster, are also prime sponsors of the bill. Sen. Kevin Priola, R-Henderson, is also championing the legislation.

House Bill 1208 comes as state lawmakers this year are passing a slate of legislation aimed at beefing up Colorado’s ability to respond to wildfires and to prevent them. Investing in disaster mitigation projects and making infrastructure resilient is far cheaper than paying to repair it after a disaster occurs, according to a 2019 report from the National Institute of Building Sciences. The report, also cited in the House bill, found communities saved up to $11 for every dollar spent in mitigating catastrophic impacts.

The enterprise created by Cutter’s legislation also would aim to help communities attract more money from the Federal Emergency Management Agency. FEMA dollars usually require local matching funds at a 3 to 1 rate. The enterprise could provide money to make that possible. And since the fund is an enterprise with a specific purpose, the money collected does not qualify as a tax and thus bypasses Taxpayer’s Bill of Rights restrictions and voter approval. 

During last week’s committee hearing, some legislators questioned if a fee-based enterprise would be the right way to fund mitigation work. 

Rep. Matt Soper, a Delta Republican, said more work is needed to mitigate disasters like the Pine Gulch fire, which partly burned in Soper’s district last summer. But he said he’s against asking people, including farmers — whose industry is already financially risky and who already pay for crop insurance — to foot the bill for projects that won’t affect them.

“We’re going to be having people who aren’t in the impacted areas paying for other individuals who may be in mountain communities, resort communities, to try to mitigate the potential risk to them,” Soper said at the hearing.

TODAY’S UNDERWRITER

Grants under the legislation would be intended for mitigation and prevention projects, not responding to active disasters or recovering from previous ones. But the line between these categories can easily blur, said Jacob Smith, executive director of Colorado Communities for Climate Action, which has worked closely with the bill’s prime sponsors. 

In the case of wildfires, for instance, scorched soils can lose their stability, setting up prime conditions for a mudslide later on.

“It just amplifies,” Smith said. “Those challenges get more intense and more damaging every year, and they completely build on each other.”

While the projects must be mitigation-oriented, the bill’s text is left intentionally vague, according to Cutter, so that communities can figure out how best to go about the work. One example: She’s been asked if a grant could fund youth corps groups that do forestry work to mitigate wildfires. She thinks  that’s a reasonable option.

“We want to see local communities going, ‘what’s the best way, who can I work with, who can I partner with, what can I do to leverage these funds to the best of our ability and get the most out of this opportunity for additional funding?’” Cutter said.

The legislation would create a board to dole out grants, with representatives from a variety of interests and geography, including state agencies, environmental justice advocates, local governments, scientists and the insurance industry. The Colorado Department of Public Safety’s executive director would appoint each of the eleven board positions.

The $7 million generated by the legislation may seem like lot of money, but it’s a fraction of the $285 million cost to suppress wildfires in 2020, as estimated at a recent Joint Budget Committee hearing. And that figure doesn’t include insured losses, recovery costs and other general economic impacts. 

Glenwood Springs alone is spending $10 million to repair and upgrade its water infrastructure after last year’s Grizzly Creek fire, and other communities are also looking at high price tags.

“[The bill is] certainly not enough to solve the problem, but it is another chunk of funding that becomes available,” Smith said. “It’s really enabling local communities to do what they feel the most important projects are.”

As climate change exacerbates natural disasters, Cutter said it’s too easy to get caught in the cycle of responding as they happen, rather than trying to prevent them altogether, or at least lessen their severity. And while it would be easier to have one single source of money to address these issues, that doesn’t exist, so she’ll take what she can get.

“I think we need to have every tool in the box,” Cutter said, “and this is just another option.”

House Bill 1208 passed the House Energy and Environment Committee by an 8-4, party-line vote. It now heads to the House Finance Committee for another hearing.


We believe vital information needs to be seen by the people impacted, whether it’s a public health crisis, investigative reporting or keeping lawmakers accountable. This reporting depends on support from readers like you.