Homeowners’ Defense Act of 2023

I 118TH CONGRESS 1ST SESSION H. R. 3997 To ensure the availability and affordability of homeowners’ insurance coverage for catastrophic events. IN THE HOUSE OF REPRESENTATIVES JUNE 9, 2023 Ms. WILSON of Florida introduced the following bill; which was referred to the Committee on Financial Services A BILL To ensure the availability and affordability of homeowners’ insurance coverage for catastrophic events. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 3 (a) SHORT TITLE.—This Act may be cited as the 4 ‘‘Homeowners’ Defense Act of 2023’’. 5 (b) TABLE OF CONTENTS.—The table of contents for 6 this Act is as follows: 7 Sec. 1. Short title; table of contents. Sec. 2. Findings and purposes. TITLE I—NATIONAL CATASTROPHE RISK CONSORTIUM Sec. 101. Establishment; chairperson; membership; bylaws. Sec. 102. Functions. VerDate Sep 11 2014 02:31 Jul 09, 2023 Jkt 039200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6211 E:\BILLS\H3997.IH H3997 kjohnson on DSK79L0C42PROD with BILLS 2 •HR 3997 IH Sec. 103. Authorization of appropriations. TITLE II—CATASTROPHE OBLIGATION GUARANTEES Sec. 201. Purposes. Sec. 202. Establishment of debt guarantee program. Sec. 203. Effect of guarantee. Sec. 204. Full faith and credit. Sec. 205. Fees for guarantees; amount; collection. Sec. 206. Payment of losses. Sec. 207. Regulations. TITLE III—REINSURANCE COVERAGE FOR ELIGIBLE STATE PROGRAMS Sec. 301. Program authority. Sec. 302. Contract principles. Sec. 303. Terms of reinsurance contracts. Sec. 304. Maximum Federal liability. Sec. 305. Federal Natural Catastrophe Reinsurance Fund. Sec. 306. Consideration of rebuilding. Sec. 307. Regulations. TITLE IV—MITIGATION GRANT PROGRAM Sec. 401. Mitigation grant program. TITLE V—GENERAL PROVISIONS Sec. 501. Eligible State programs. Sec. 502. Study and conditional coverage of commercial residential lines of in- surance. Sec. 503. Study of risk-based pricing and State program rates. Sec. 504. Definitions. Sec. 505. Regulations. SEC. 2. FINDINGS AND PURPOSES. 1 (a) FINDINGS.—The Congress finds that— 2 (1) the United States has a history of cata- 3 strophic natural disasters, including hurricanes, tor- 4 nadoes, flood, fire, earthquakes, and volcanic erup- 5 tions; 6 (2) although catastrophic natural disasters 7 occur infrequently, their costs are likely to escalate 8 in the coming years, in part because of the inten- 9 sifying impacts of climate change, coastal develop- 10 VerDate Sep 11 2014 02:31 Jul 09, 2023 Jkt 039200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H3997.IH H3997 kjohnson on DSK79L0C42PROD with BILLS 3 •HR 3997 IH ment patterns, and increasing property values along 1 the hurricane-prone or earthquake-vulnerable coast- 2 lines of the United States; 3 (3) such disasters present physical risk to as- 4 sets, publicly traded securities, private investments, 5 and companies; 6 (4) as the risk of catastrophe losses grows, so 7 do the risks that any premiums collected by private 8 insurers for extending coverage will be insufficient to 9 cover future catastrophes, and private insurers, to 10 protect their shareholders and policyholders (in the 11 case of mutually owned companies), have thus sig- 12 nificantly raised premiums and curtailed insurance 13 coverage in States exposed to major catastrophes; 14 (5) such effects on the insurance industry have 15 been harmful to economic activity in States exposed 16 to major catastrophes and have placed significant 17 burdens on residents of such States and the Federal 18 Government; and 19 (6) under the current disaster risk management 20 system, the Federal Government and, hence, tax- 21 payers pay for rebuilding through government 22 grants and low-interest loans. 23 (b) PURPOSES.—The purposes of this Act are to es- 24 tablish a program to provide Federal support for State- 25 VerDate Sep 11 2014 02:31 Jul 09, 2023 Jkt 039200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H3997.IH H3997 kjohnson on DSK79L0C42PROD with BILLS 4 •HR 3997 IH sponsored insurance programs to help homeowners pre- 1 pare for and recover from the damages caused by natural 2 catastrophes, to encourage mitigation and prevention for 3 such catastrophes, to promote the use of private market 4 capital as a means to insure against such catastrophes, 5 to expedite the payment of claims and better assist in the 6 financial recovery from such catastrophes. 7 TITLE I—NATIONAL CATAS- 8 TROPHE RISK CONSORTIUM 9 SEC. 101. ESTABLISHMENT; CHAIRPERSON; MEMBERSHIP; 10 BYLAWS. 11 (a) ESTABLISHMENT.—There is established an entity 12 to be known as the ‘‘National Catastrophe Risk Consor- 13 tium’’ (in this title referred to as the ‘‘Consortium’’). 14 (b) CHAIRPERSON.—The Secretary of the Treasury, 15 or the designee of the Secretary, shall serve as the chair- 16 person of the Consortium. 17 (c) MEMBERSHIP.—Any State shall be eligible to par- 18 ticipate in the Consortium. 19 (d) CONSIDERATIONS.—In selecting members of the 20 Consortium, the States shall— 21 (1) select members who have a background and 22 expertise relevant to the functions of the Consor- 23 tium; and 24 VerDate Sep 11 2014 02:31 Jul 09, 2023 Jkt 039200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H3997.IH H3997 kjohnson on DSK79L0C42PROD with BILLS 5 •HR 3997 IH (2) ensure the participation of one individual or 1 representative of an organization that represents 2 consumers, minorities, and low- and moderate-in- 3 come housing persons by reflecting the communities 4 that are being affected by catastrophic natural disas- 5 ters. 6 (e) BYLAWS.—The Consortium may prescribe, 7 amend, and repeal such bylaws as necessary to carry out 8 the functions of the Consortium. 9 SEC. 102. FUNCTIONS. 10 The Consortium shall— 11 (1) work with States to gather and maintain an 12 inventory of catastrophe risk obligations held by pro- 13 viders of natural catastrophe insurance; 14 (2) assess issues or gaps in the insurance sector 15 of the United States financial system and any re- 16 lated effects on insurance affordability for policy- 17 holders; 18 (3) advance consistent, clear, intelligible, com- 19 parable, and accurate disclosure of catastrophic risk; 20 (4) submit annual reports to the Congress de- 21 scribing the activities of the Consortium for the pre- 22 ceding year, and the first such annual report shall 23 include an assessment of the costs to States and the 24 regions associated with catastrophe risk; 25 VerDate Sep 11 2014 02:31 Jul 09, 2023 Jkt 039200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H3997.IH H3997 kjohnson on DSK79L0C42PROD with BILLS 6 •HR 3997 IH (5) assess the potential for major disruptions of 1 private insurance coverage in United States markets 2 particularly vulnerable to catastrophes; 3 (6) make such other recommendations on how 4 identified financial risk can be mitigated, including 5 through new or revised regulatory standards, as ap- 6 propriate; and 7 (7) account for and identify disparate impacts 8 of catastrophic risks on disadvantaged communities 9 and communities of color. 10 SEC. 103. AUTHORIZATION OF APPROPRIATIONS. 11 There are authorized to be appropriated to carry out 12 this title such sums as may be necessary for each of fiscal 13 years 2024 through 2027. 14 TITLE II—CATASTROPHE 15 OBLIGATION GUARANTEES 16 SEC. 201. PURPOSES. 17 The purposes of this title are to establish a pro- 18 gram— 19 (1) to promote the availability of private capital 20 to provide liquidity and capacity to State catas- 21 trophe insurance programs; and 22 (2) to expedite the payment of claims under 23 State catastrophe insurance programs and better as- 24 sist the financial recovery from significant natural 25 VerDate Sep 11 2014 02:31 Jul 09, 2023 Jkt 039200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H3997.IH H3997 kjohnson on DSK79L0C42PROD with BILLS 7 •HR 3997 IH catastrophes by authorizing the Secretary of the 1 Treasury to guarantee debt for such purposes. 2 SEC. 202. ESTABLISHMENT OF DEBT GUARANTEE PRO- 3 GRAM. 4 (a) AUTHORITY OF SECRETARY.—The Secretary of 5 the Treasury is authorized and shall have the powers and 6 authorities necessary to guarantee, and to enter into com- 7 mitments to guarantee, holders of debt against loss of 8 principal or interest, or both, on any such debt issued by 9 eligible State programs for purposes of this title, provided 10 that the total principal amount of debt obligations guaran- 11 teed by the Secretary— 12 (1) for eligible State programs that cover earth- 13 quake peril shall not exceed $3,500,000,000; and 14 (2) for eligible State programs that cover all 15 other perils shall not exceed $17,000,000,000. 16 (b) CONDITIONS FOR GUARANTEE ELIGIBILITY.—A 17 debt guarantee under this section may be made only if 18 the Secretary has issued a commitment to guarantee to 19 an eligible State program. The commitment to guarantee 20 shall be for a period of 3 years and may be extended by 21 the Secretary for a period of 1 year on each annual anni- 22 versary of the issuance of the commitment to guarantee. 23 The commitment to guarantee and each extension of such 24 VerDate Sep 11 2014 02:31 Jul 09, 2023 Jkt 039200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H3997.IH H3997 kjohnson on DSK79L0C42PROD with BILLS 8 •HR 3997 IH commitment may be issued by the Secretary only if the 1 following requirements are satisfied: 2 (1) The eligible State program submits to the 3 Secretary a report setting forth, in such form and 4 including such information as the Secretary shall re- 5 quire, how the eligible State program plans to repay 6 the debt. 7 (2) Based upon the eligible State program’s re- 8 port submitted pursuant to paragraph (1), the Sec- 9 retary determines there is reasonable assurance that 10 the eligible State program can meet its repayment 11 obligation under the debt. 12 (3) The eligible State program enters into an 13 agreement with the Secretary, as the Secretary shall 14 require, that the eligible State program will not use 15 Federal funds of any kind or from any Federal 16 source (including any disaster or other financial as- 17 sistance, loan proceeds, and any other assistance or 18 subsidy) to repay the debt. 19 (4) The commitment to guarantee shall specify 20 the fees for debt guarantee coverage. 21 (5) The maximum term of the debt that shall 22 be specified in a commitment issued under this sec- 23 tion may not exceed 30 years. 24 VerDate Sep 11 2014 02:31 Jul 09, 2023 Jkt 039200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H3997.IH H3997 kjohnson on DSK79L0C42PROD with BILLS 9 •HR 3997 IH (6) The Secretary determines that the eligible 1 State program does not cover losses arising from 2 floods to properties that are required to be covered 3 by flood insurance, covered by flood insurance, or lo- 4 cated in areas having special flood hazards (as such 5 term is defined for purposes of the National Flood 6 Insurance Act of 1968 and the Flood Disaster Pro- 7 tection Act of 1973). 8 (c) MANDATORY ASSISTANCE FOR ELIGIBLE STATE 9 PROGRAMS.—The Secretary shall upon the request of an 10 eligible State program and pursuant to a commitment to 11 guarantee issued under subsection (b), provide a guar- 12 antee under subsection (d) for such eligible State program 13 in the amount requested by such eligible State program, 14 subject to the limitation under subsection (d)(2). 15 (d) CATASTROPHIC DEBT GUARANTEE.—A debt 16 guarantee under this subsection for an eligible State pro- 17 gram shall be subject to the following requirements: 18 (1) PRECONDITIONS.—The eligible State pro- 19 gram shows to the satisfaction of the Secretary that 20 insured losses in the State to the eligible State pro- 21 gram arising from the event or events covered by the 22 commitment to guarantee are likely to exceed the eli- 23 gible State program’s available cash resources, as of 24 immediately before the date of the event. 25 VerDate Sep 11 2014 02:31 Jul 09, 2023 Jkt 039200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H3997.IH H3997 kjohnson on DSK79L0C42PROD with BILLS 10 •HR 3997 IH (2) AMOUNT.—The aggregate principal amount 1 of the debt guaranteed following an event or events 2 referred to in paragraph (1) may not exceed the 3 amount by which the insured losses expected to be 4 sustained by the State program as a result of such 5 event or events exceed 80 percent of the qualifying 6 assets of the eligible State program as stated in the 7 most recent quarterly financial statement filed with 8 the domiciliary regulator of the program prior to the 9 event or events, except that, for eligible State pro- 10 grams that are not required to file such quarterly fi- 11 nancial statements, the aggregate principal amount 12 of the debt guaranteed may not exceed the amount 13 by which insured losses sustained by the State pro- 14 gram as a result of such event or events exceed 80 15 percent of the unrestricted net assets as stated in 16 the annual financial statement for the program’s fis- 17 cal year ending immediately prior to the event or 18 events. 19 (3) USE OF FUNDS.—Amounts of debt guaran- 20 teed under this section shall be used only to pay the 21 costs of issuing debt and to pay the insured losses 22 and loss adjustment expenses incurred by an eligible 23 State program. Such amounts shall not be used for 24 any other purpose. 25 VerDate Sep 11 2014 02:31 Jul 09, 2023 Jkt 039200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H3997.IH H3997 kjohnson on DSK79L0C42PROD with BILLS 11 •HR 3997 IH (e) FUNDING.—There are authorized to be appro- 1 priated such sums as may be necessary to carry out this 2 section. 3 SEC. 203. EFFECT OF GUARANTEE. 4 The issuance of any guarantee by the Secretary 5 under this title shall be conclusive evidence that— 6 (1) the guarantee has been properly obtained; 7 (2) the underlying debt qualified for such guar- 8 antee; and 9 (3) the guarantee is valid, legal, and enforce- 10 able. 11 SEC. 204. FULL FAITH AND CREDIT. 12 The full faith and credit of the United States is 13 pledged to the payment of all guarantees issued under this 14 title with respect to principal and interest. 15 SEC. 205. FEES FOR GUARANTEES; AMOUNT; COLLECTION. 16 The Secretary shall charge and collect fees for each 17 guarantee in amounts specified in the commitment to 18 guarantee, which shall be in amounts sufficient in the 19 judgment of the Secretary at the time of issuance of the 20 commitment to guarantee to cover applicable administra- 21 tive costs and probable losses on the guaranteed obliga- 22 tions covered by the commitment to guarantee, but in any 23 event not to exceed one-half of 1 percent per annum of 24 the outstanding indebtedness covered by each gua [Text truncated for display. Full text available on Congress.gov.]