Federal insurance developments: Recent activity and key issues to watch

I. Recent Federal Developments

a. Treasury Convenes State Insurance Regulators on Private Credit and Offshore Reinsurance

On May 7, US Treasury Secretary Scott Bessent met with over 20 state insurance commissioners to discuss developments in private credit markets, the US life insurance sector and the movement of US life and annuity reserves to offshore jurisdictions, along with state and NAIC regulatory responses. The meeting occurred amid increased media attention that calls into question US insurers’ exposure to private credit, the growth of offshore reinsurance structures and the adequacy of state insurance regulators’ responses. Treasury’s press release indicates the parties agreed to continue staff‑ and senior‑level engagement on topics including the NAIC’s work on risk‑based capital, private letter ratings, offshore reinsurance jurisdictions and oversight of evolving insurer business models. 

As additional context, the Financial Stability Oversight Council (FSOC) – which is chaired by Secretary Bessent and includes among its members ten voting and five nonvoting members an independent member with insurance expertise (voting), the Federal Insurance Office (FIO) Director (nonvoting) and a state insurance commissioner (nonvoting) – noted in its 2025 Annual Report that structural changes in the life insurance sector, including increased exposure to nontraditional asset classes and growth in offshore reinsurance, warrant close monitoring by state regulators. For more information on steps the states are taking to address these concerns, see our Legal Bulletin recapping the highlights from the NAIC Spring 2026 National Meeting. 

b. FEMA Review Council Issues Final Report; Recommendations Include Expansion of Private Flood Insurance Market 

Also on May 7, the President’s Federal Emergency Management Agency (FEMA) Review Council announced its long-anticipated Final Report with ten key recommendations, including recommendations to realign aspects of federal disaster assistance and to reform the National Flood Insurance Program (NFIP) for financial stability and risk resilience. The Council’s recommendations include continuing the move toward risk‑based pricing (Risk Rating 2.0), evaluating the development of a centralized clearinghouse to transfer NFIP policies to private insurers, and requiring policyholders to obtain coverage from the private market where private coverage is less than ten percent more expensive than comparable NFIP coverage. 

Congress continues to evaluate NFIP mitigation and multiple‑loss property issues in advance of the current authorization deadline. For example, the House Financial Services Committee’s Housing and Insurance Subcommittee held a hearing on March 26 focused on mitigation and multiple loss properties as key drivers of NFIP costs. Current NFIP authority is set to expire on September 30, 2026.

c. Treasury Reconstitutes FIO’s Federal Advisory Committee on Insurance as NAIC Renews Its Call for FIO to be Eliminated

On March 10, 2026, Treasury published a Federal Register notice reconstituting the Federal Advisory Committee on Insurance (FACI) under the Federal Advisory Committee Act. The FACI provides advice and recommendations to the FIO regarding FIO’s statutory duties, including monitoring the insurance sector and advising on matters of national importance.

Secretary Bessent’s decision to reconstitute the FACI could be interpreted as support for maintaining an active federal insurance policy function within Treasury (through FIO) and comes against an ongoing effort to eliminate the office. On January 16, former Montana Insurance Commissioner Rep. Troy Downing (MT), along with Reps. Scott Fitzgerald (WI) and Andy Ogles (TN), introduced H.R.7130, the “McCarran‑Ferguson Restoration Act,” which would eliminate FIO and establish a US Insurance Representative within Treasury to perform certain functions, including international engagement and assisting in administering TRIA. The NAIC publicly welcomed the bill and reiterated its position favoring FIO’s elimination.

d. DOJ Files Statement of Interest in California Fire Insurance Antitrust Case

On May 4, 2026, the Department of Justice (DOJ) announced that it filed a Statement of Interest in Ferrier v. State Farm Fire and Casualty Company, a California state antitrust action pending in the Los Angeles County Superior Court. The case is brought by homeowners who allege that a group of insurers coordinated cancellations or nonrenewals of wildfire‑related coverage, forcing policyholders into California’s FAIR Plan (a residual market mechanism) on less favorable terms.

In its Statement of Interest, DOJ argued that the Noerr‑Pennington doctrine, which generally shields companies from antitrust liability for petitioning government officials, should not bar the homeowners’ claims where the alleged group boycott was “separate and distinct” from petitioning activity. The DOJ statement also acknowledged that “although federal antitrust law contains a limited antitrust exemption created by the McCarran-Ferguson Act for certain agreements in the insurance industry…” it “excludes boycotts from its exception to antitrust scrutiny.” Shortly thereafter, on May 14, a Los Angeles County Superior Court judge denied the insurers’ motion to dismiss, allowing the core antitrust claims to proceed against more than a dozen insurers. The court dismissed certain narrower claims but concluded that the plaintiffs’ allegations were sufficient at this stage, permitting the litigation to move into discovery and further proceedings.

The DOJ filing follows a March 31 statement by President Trump criticizing insurers’ handling of the wildfire claims and directing Environmental Protection Agency (EPA) to generate a list of insurers that “were particularly bad.” The EPA is reportedly working to produce the list “as quickly as possible."

e. FSOC Proposes Revised Interpretive Guidance on Nonbank SIFI Designations

On March 25, FSOC voted unanimously to issue proposed interpretative guidance regarding the designation of certain nonbank financial companies for Federal Reserve supervision. If adopted, the proposal would reinstitute key elements of FSOC’s 2019 guidance – an approach that was implemented under the Trump Administration and rescinded under the Biden Administration – by prioritizing a so-called “activities based approach” and treating entity specific designations as a measure of last resort. The proposed guidance is relevant principally to large nonbank financial companies that could be candidates for designation as systemically important financial institutions (SIFIs), including certain insurers and asset managers. In practical terms, the “activities based approach” would require FSOC to address risks through broader market or industry wide regulatory measures before pursuing firm specific designation.

Comments to the proposed guidance were due by May 14, 2026. As of the date of this Legal Bulletin, FSOC has not publicly announced a schedule for finalizing the guidance. Treasury’s press release announcing the development is available here. 

II. Emerging Issues and Areas to Watch 

a. The Impact of the National AI Policy Framework on the Business of Insurance

On December 11, 2025, the White House issued Executive Order 14365, “Ensuring a National Policy Framework for Artificial Intelligence,” articulating a federal policy favoring a minimally burdensome national AI framework and expressing concern about a patchwork of state AI laws. The Executive Order directs, among other actions, that the Attorney General establish an AI Litigation Task Force within 30 days and that the Secretary of Commerce publish an evaluation within 90 days identifying “onerous” state AI laws to be referred for potential challenge. It also directs several agencies (including the Federal Communications Commission and Federal Trade Commission) to take additional actions on accelerated timelines.

The Executive Order further directs the Federal Communications Commission (FCC) and Federal Trade Commission (FTC) to identify and, as appropriate, take action against practices involving artificial intelligence that may constitute unfair or deceptive acts or practices under their respective statutory authorities, including in areas such as algorithmic decision making, consumer disclosures and data usage. The Order also contemplates coordination across agencies to promote consistent federal oversight while reducing reliance on divergent state requirements. 

On January 9, the DOJ issued a simple memorandum establishing the AI Litigation Task Force to challenge certain state AI laws on grounds including unconstitutional regulation of interstate commerce or preemption in accordance with the Executive Order. There have been no subsequent public developments. A key open consideration is whether the federal government will extend to insurance laws and regulations that regulate AI and, if so, whether such challenges are prohibited by the McCarran-Ferguson Act. For additional background, see our prior Legal Briefings: Trump Executive Order targets “Excessive” state AI laws and calls for a national standard for AI regulation; and Trump’s AI Order and McCarran‑Ferguson: Is the insurance industry fully insulated? Not quite.

b. Whether the US Development Finance Corporation’s Maritime Reinsurance Facility Will Commence Operations 

In March 2026, the US International Development Finance Corporation (DFC), together with Treasury, announced a federal government backed maritime reinsurance initiative intended to help restore commercial shipping through the Strait of Hormuz during the conflict with Iran. The program is described by DFC as a rolling reinsurance facility providing up to $40 billion of coverage, with a focus on war risk coverage on hull and machinery, and cargo risks. The facility will be underwritten and administered by Chubb with an additional six US reinsurance partners (Travelers, Liberty Mutual, Berkshire Hathaway, AIG, Starr and CNA) which will provide additional capacity. A May 6, 2026 Congressional Research Service publication summarizes the program, noting that it is “unclear if DFC has provided any coverage yet,” and it outlines several potential issues and options for Congress, including questions about DFC’s statutory mandate and potential reporting and transparency requirements. 

c. HUD’s Potential Rescission of its Disparate Impact Liability Rule

On April 23, 2025, President Trump issued Executive Order 14281, “Restoring Equality of Opportunity and Meritocracy,” which directs federal agencies to deprioritize enforcement of statutes and regulations to the extent they include disparate impact liability and to evaluate related rules and proceedings. The disparate impact standard has been a central feature of fair housing enforcement since HUD’s 2013 rule, which formalized a burden shifting framework for claims alleging that neutral policies have discriminatory effects. Although the US Supreme Court recognized the viability of disparate impact claims under the Fair Housing Act in Inclusive Communities (2015), the scope and application of the doctrine have remained contested, with subsequent regulatory revisions and litigation creating a shifting compliance landscape. 

The standard has particular relevance for insurers to the extent underwriting, pricing and claims practices may be challenged based on differential outcomes across protected classes, even in the absence of discriminatory intent. In that context, on January 14, HUD published a Proposed Rule to remove its Fair Housing Act “discriminatory effects” (disparate impact) regulations and leave questions related to disparate impact standards to the courts. Comments were due February 13, 2026. To date, HUD has not publicly announced a schedule for finalizing the guidance. 

d. Potential TRIA Reauthorization 

H.R. 7128, the “TRIA Program Reauthorization Act of 2026,” sponsored by House Housing & Insurance Subcommittee Chairman Mike Flood (NE), is the principal House of Representatives vehicle to reauthorize the Terrorism Risk Insurance Program (Program) ahead of its scheduled December 31, 2027 expiration. The bill was introduced on January 16, 2026, advanced by the House Financial Services Committee with strong bipartisan support. If enacted, H.R. 7128 would extend TRIA through 2034, providing a seven-year reauthorization that preserves the program’s core public–private risk-sharing framework and is intended to provide long-term continuity for insurers, reinsurers, lenders and policyholders that rely on the federal backstop.

Although the bill is generally viewed as a continuity-focused reauthorization that does not alter core Program mechanics, it does propose targeted refinements to Treasury’s terrorism certification process by requiring Treasury to publish a notice within 30 days of initiating a certification review and requiring that Treasury certification occur within 90 days following publication of that notice. The legislation would also increase the minimum aggregate loss threshold from $5 million to $10 million beginning in 2029. FIO is also required to submit a related Program Effectiveness Report to Congress by June 30. 

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