H.R. 827

119th CONGRESS 1st Session

To ensure the availability and affordability of homeowners’ insurance coverage for catastrophic events.

IN THE HOUSE OF REPRESENTATIVES · January 28, 2025 · Sponsor: Ms. Wilson of Florida · Committee: Committee on Financial Services

Sec. 1. Short title; table of contents.

(a) Short title
- This Act may be cited as the Homeowners’ Defense Act of 2025.
(b) Table of contents

Sec. 2. Findings and purposes.

(a) Findings
- The Congress finds that—
  - the United States has a history of catastrophic natural disasters, including hurricanes, tornadoes, flood, fire, earthquakes, and volcanic eruptions;
  - although catastrophic natural disasters occur infrequently, their costs are likely to escalate in the coming years, in part because of the intensifying impacts of climate change, coastal development patterns, and increasing property values along the hurricane-prone or earthquake-vulnerable coastlines of the United States;
  - such disasters present physical risk to assets, publicly traded securities, private investments, and companies;
  - as the risk of catastrophe losses grows, so do the risks that any premiums collected by private insurers for extending coverage will be insufficient to cover future catastrophes, and private insurers, to protect their shareholders and policyholders (in the case of mutually owned companies), have thus significantly raised premiums and curtailed insurance coverage in States exposed to major catastrophes;
  - such effects on the insurance industry have been harmful to economic activity in States exposed to major catastrophes and have placed significant burdens on residents of such States and the Federal Government; and
  - under the current disaster risk management system, the Federal Government and, hence, taxpayers pay for rebuilding through government grants and low-interest loans.
(b) Purposes
- The purposes of this Act are to establish a program to provide Federal support for State-sponsored insurance programs to help homeowners prepare for and recover from the damages caused by natural catastrophes, to encourage mitigation and prevention for such catastrophes, to promote the use of private market capital as a means to insure against such catastrophes, to expedite the payment of claims and better assist in the financial recovery from such catastrophes.

Title I—National Catastrophe Risk Consortium

Sec. 101. Establishment; chairperson; membership; bylaws.

(a) Establishment
- There is established an entity to be known as the (in this title referred to as the ). National Catastrophe Risk Consortium,Consortium
(b) Chairperson
- The Secretary of the Treasury, or the designee of the Secretary, shall serve as the chairperson of the Consortium.
(c) Membership
- Any State shall be eligible to participate in the Consortium.
(d) Considerations
- In selecting members of the Consortium, the States shall—
  - select members who have a background and expertise relevant to the functions of the Consortium; and
  - ensure the participation of one individual or representative of an organization that represents consumers, minorities, and low- and moderate-income housing persons by reflecting the communities that are being affected by catastrophic natural disasters.
(e) Bylaws
- The Consortium may prescribe, amend, and repeal such bylaws as necessary to carry out the functions of the Consortium.

Sec. 102. Functions.

The Consortium shall—

work with States to gather and maintain an inventory of catastrophe risk obligations held by providers of natural catastrophe insurance;
assess issues or gaps in the insurance sector of the United States financial system and any related effects on insurance affordability for policyholders;
advance consistent, clear, intelligible, comparable, and accurate disclosure of catastrophic risk;
submit annual reports to the Congress describing the activities of the Consortium for the preceding year, and the first such annual report shall include an assessment of the costs to States and the regions associated with catastrophe risk;
assess the potential for major disruptions of private insurance coverage in United States markets particularly vulnerable to catastrophes;
make such other recommendations on how identified financial risk can be mitigated, including through new or revised regulatory standards, as appropriate; and
account for and identify disparate impacts of catastrophic risks on disadvantaged communities and communities of color.

Sec. 103. Authorization of appropriations.

There are authorized to be appropriated to carry out this title such sums as may be necessary for each of fiscal years 2026 through 2029.

Title II—Catastrophe Obligation Guarantees

Sec. 201. Purposes.

The purposes of this title are to establish a program—

to promote the availability of private capital to provide liquidity and capacity to State catastrophe insurance programs; and
to expedite the payment of claims under State catastrophe insurance programs and better assist the financial recovery from significant natural catastrophes by authorizing the Secretary of the Treasury to guarantee debt for such purposes.

Sec. 202. Establishment of debt guarantee program.

(a) Authority of Secretary
- The Secretary of the Treasury is authorized and shall have the powers and authorities necessary to guarantee, and to enter into commitments to guarantee, holders of debt against loss of principal or interest, or both, on any such debt issued by eligible State programs for purposes of this title, provided that the total principal amount of debt obligations guaranteed by the Secretary—
  - for eligible State programs that cover earthquake peril shall not exceed $3,500,000,000; and
  - for eligible State programs that cover all other perils shall not exceed $17,000,000,000.
(b) Conditions for guarantee eligibility
- A debt guarantee under this section may be made only if the Secretary has issued a commitment to guarantee to an eligible State program. The commitment to guarantee shall be for a period of 3 years and may be extended by the Secretary for a period of 1 year on each annual anniversary of the issuance of the commitment to guarantee. The commitment to guarantee and each extension of such commitment may be issued by the Secretary only if the following requirements are satisfied:
  - The eligible State program submits to the Secretary a report setting forth, in such form and including such information as the Secretary shall require, how the eligible State program plans to repay the debt.
  - Based upon the eligible State program's report submitted pursuant to paragraph (1), the Secretary determines there is reasonable assurance that the eligible State program can meet its repayment obligation under the debt.
  - The eligible State program enters into an agreement with the Secretary, as the Secretary shall require, that the eligible State program will not use Federal funds of any kind or from any Federal source (including any disaster or other financial assistance, loan proceeds, and any other assistance or subsidy) to repay the debt.
  - The commitment to guarantee shall specify the fees for debt guarantee coverage.
  - The maximum term of the debt that shall be specified in a commitment issued under this section may not exceed 30 years.
  - The Secretary determines that the eligible State program does not cover losses arising from floods to properties that are required to be covered by flood insurance, covered by flood insurance, or located in areas having special flood hazards (as such term is defined for purposes of the National Flood Insurance Act of 1968 and the Flood Disaster Protection Act of 1973).
(c) Mandatory assistance for eligible State programs
- The Secretary shall upon the request of an eligible State program and pursuant to a commitment to guarantee issued under subsection (b), provide a guarantee under subsection (d) for such eligible State program in the amount requested by such eligible State program, subject to the limitation under subsection (d)(2).
(d) Catastrophic debt guarantee
- A debt guarantee under this subsection for an eligible State program shall be subject to the following requirements:
- (1) Preconditions
  - The eligible State program shows to the satisfaction of the Secretary that insured losses in the State to the eligible State program arising from the event or events covered by the commitment to guarantee are likely to exceed the eligible State program’s available cash resources, as of immediately before the date of the event.
- (2) Amount
  - The aggregate principal amount of the debt guaranteed following an event or events referred to in paragraph (1) may not exceed the amount by which the insured losses expected to be sustained by the State program as a result of such event or events exceed 80 percent of the qualifying assets of the eligible State program as stated in the most recent quarterly financial statement filed with the domiciliary regulator of the program prior to the event or events, except that, for eligible State programs that are not required to file such quarterly financial statements, the aggregate principal amount of the debt guaranteed may not exceed the amount by which insured losses sustained by the State program as a result of such event or events exceed 80 percent of the unrestricted net assets as stated in the annual financial statement for the program’s fiscal year ending immediately prior to the event or events.
- (3) Use of funds
  - Amounts of debt guaranteed under this section shall be used only to pay the costs of issuing debt and to pay the insured losses and loss adjustment expenses incurred by an eligible State program. Such amounts shall not be used for any other purpose.
(e) Funding
- There are authorized to be appropriated such sums as may be necessary to carry out this section.

Sec. 203. Effect of guarantee.

The issuance of any guarantee by the Secretary under this title shall be conclusive evidence that—

the guarantee has been properly obtained;
the underlying debt qualified for such guarantee; and
the guarantee is valid, legal, and enforceable.

Sec. 204. Full faith and credit.

The full faith and credit of the United States is pledged to the payment of all guarantees issued under this title with respect to principal and interest.

Sec. 205. Fees for guarantees; amount; collection.

The Secretary shall charge and collect fees for each guarantee in amounts specified in the commitment to guarantee, which shall be in amounts sufficient in the judgment of the Secretary at the time of issuance of the commitment to guarantee to cover applicable administrative costs and probable losses on the guaranteed obligations covered by the commitment to guarantee, but in any event not to exceed one-half of 1 percent per annum of the outstanding indebtedness covered by each guarantee.

Sec. 206. Payment of losses.

(a) In general
- The Secretary agrees to pay to the duly appointed paying agent or trustee (in this section referred to as the ) for the eligible State program that portion of the principal and interest on any debt guaranteed under this title that shall become due for payment but shall be unpaid by the eligible State program as a result of such program having provided insufficient funds to the Fiscal Agent to make such payments. The Secretary shall make such payments on the date such principal or interest becomes due for payment or on the business day next following the day on which the Secretary shall receive notice of failure on the part of the eligible State program to provide sufficient funds to the Fiscal Agent to make such payments, whichever is later. Upon making such payment, the Secretary shall be subrogated to all the rights of the ultimate recipient of the payment. The Secretary shall be entitled to recover from the eligible State program the amount of any payments made pursuant to any guarantee entered into under this title.
(b) Role of the Attorney General
- The Attorney General shall take such action as may be appropriate to enforce any right accruing to the United States as a result of the issuance of any guarantee under this title.
(c) Right of the Secretary
- Notwithstanding any other provision of law relating to the acquisition, handling, or disposal of property by the United States, the Secretary shall have the right in the discretion of the Secretary to complete, recondition, reconstruct, renovate, repair, maintain, operate, or sell any property acquired by the Secretary pursuant to the provisions of this title.

Sec. 207. Regulations.

The Secretary shall issue any regulations necessary to carry out the debt-guarantee program established under this title.

Title III—Reinsurance coverage for eligible State programs

Sec. 301. Program authority.

The Secretary of the Treasury, shall make available for purchase, only by eligible State programs, contracts for reinsurance coverage under this title.

Sec. 302. Contract principles.

Contracts for reinsurance coverage made available under this title—

shall be priced on an actuarially sound basis;
shall minimize the administrative costs of the Federal Government; and
shall provide coverage based solely on insured losses covered by the eligible State program purchasing the contract.

Sec. 303. Terms of reinsurance contracts.

(a) Minimum attachment point and levels of coverage
- The Secretary shall establish attachment points at which reinsurance coverage under this title is provided to eligible State programs. In setting attachment points and in determining the levels of reinsurance coverage provided, the Secretary shall take into consideration—
  - the coverage available through eligible State programs;
  - the availability and accessibility of reinsurance in the private market; and
  - other factors as deemed appropriate by the Secretary.
(b) Eighty to ninety percent coverage of insured losses in excess of retained losses
- Each contract for reinsurance coverage under this title shall provide that the amount paid out under the contract shall be equal to at least 80 percent, but not more than 90 percent, of the amount of insured losses of the eligible State program in excess of the amount of retained losses that the contract requires, pursuant to subsection (a), to be incurred by such program.
(c) Maturity
- The term of each contract for reinsurance coverage under this title shall not exceed 1 year or such other term as the Secretary may determine.
(d) Payment condition
- Each contract for reinsurance coverage under this title shall authorize claims payments to the eligible State program purchasing the coverage only for insured losses provided under the contract.
(e) Multiple events
- The contract shall cover any insured losses from one or more events that may occur during the term of the contract and shall provide that if multiple events occur, the retained losses requirement under subsection (a) shall apply on a calendar year basis, in the aggregate and not separately to each individual event.
(f) Timing of claims
- Claims under a contract for reinsurance coverage under this title shall include only insurance claims that are reported to the eligible State program within the 3-year period beginning upon the event or events for which payment under the contract is provided.
(g) Actuarial pricing
- The price of coverage under a reinsurance contract under this title shall be an amount, established by the Secretary at a level that annually produces expected premiums that shall be sufficient to pay the reasonably anticipated cost of all claims (which may not be equal only to average annual costs), loss adjustment expenses, all administrative costs of reinsurance coverage offered under this title, and any such outwards reinsurance, as described in section 305(c)(3), as the Secretary considers prudent taking into consideration the demand for reinsurance coverage under this title. The anticipated cost of all claims shall be comparable to amounts being included in the price for similar layers of coverage in the private sector, taking into account the savings associated with non-profit and tax-exempt status of the Fund established under section 305.
(h) Information
- Each contract for reinsurance coverage under this title shall contain a condition providing that the Secretary may require the eligible State program that is covered under the contract to submit to the Secretary all information on the eligible State program relevant to the duties of the Secretary under this title.
(i) Others
- Contracts for reinsurance coverage under this title shall contain such other terms as the Secretary considers necessary to carry out this title and to ensure the long-term financial integrity of the program under this title.

Sec. 304. Maximum Federal liability.

(a) In general
- Subject to subsection (b) and notwithstanding any other provision of law, the aggregate potential liability for payment of claims under all contracts for reinsurance coverage under this title sold in any single year shall be determined by the Secretary based on review of the market for reinsurance coverage under this title.
(b) Limitation
- The authority of the Secretary to enter into contracts for reinsurance coverage under this title shall be effective for any fiscal year only to such extent or in such amounts as are or have been provided in appropriation Acts for such fiscal year for the aggregate potential liability for payment of claims under all contracts for reinsurance coverage under this title.

Sec. 305. Federal Natural Catastrophe Reinsurance Fund.

(a) Establishment
- There is established within the Treasury of the United States a fund to be known as the Federal Natural Catastrophe Reinsurance Fund (in this section referred to as the ).
(b) Credits
- The Fund shall be credited with—
  - amounts received annually from the sale of contracts for reinsurance coverage under this title;
  - any amounts appropriated for the aggregate potential liability for payment of claims under all contracts for reinsurance coverage under this title; and
  - any amounts earned on investments of the Fund pursuant to subsection (d).
(c) Uses
- Amounts in the Fund shall be available to the Secretary only for the following purposes:
- (1) Contract payments
  - For payments to purchasers covered under contracts for reinsurance coverage for eligible losses under such contracts.
- (2) Administrative expenses
  - To pay for the administrative expenses incurred by the Secretary in carrying out the reinsurance program under this title.
- (3) Outwards reinsurance
  - To obtain retrocessional or other reinsurance coverage of any kind to cover risk reinsured under contracts for reinsurance coverage made available under this title.
(d) Investment
- The Secretary shall invest such amounts in the Fund as the Secretary considers advisable in obligations issued or guaranteed by the United States. For purposes of the grant mandate in section 401(f) for a fiscal year, the Secretary shall disclose the annual net investment income available not later than 60 days after the conclusion of such fiscal year and disperse appropriate funds not later than 90 days after the conclusion of such fiscal year.

Sec. 306. Consideration of rebuilding.

Nothing in this title may be construed to prevent counties, municipalities, and other localities from undertaking land and environmental assessments to determine the efficacy of rebuilding.

Sec. 307. Regulations.

The Secretary shall issue any regulations necessary to carry out the program for reinsurance coverage under this title.

Title IV—Mitigation grant program

Sec. 401. Mitigation grant program.

(a) Establishment
- The Secretary of Housing and Urban Development shall establish and carry out a program to provide grants to eligible entities to develop, enhance, or maintain programs to prevent and mitigate losses from natural catastrophes.
(b) Grants
- A grant provided under subsection (a) shall be used to reduce loss of life and property by—
  - encouraging awareness of risk factors and what steps can be taken to eliminate or reduce them, including public education campaigns to promote citizen and community preparedness;
  - assisting in the determination of the location of risk by giving careful consideration to the natural risks for the location of a property;
  - providing inspections of homes to identify areas to strengthen such homes and reduce exposure to natural catastrophes;
  - providing financial assistance to homeowners to retrofit homes to reduce exposure to natural catastrophes; or
  - supporting disaster response readiness programs, including initiatives that develop, enhance ,or maintain the capacity of a public safety organization to be better prepared, equipped, and trained to respond to natural catastrophes.
(c) Priority
- In making grants under the program under subsection (a), the Secretary shall give priority to applicants demonstrating greater financial need, including applicants serving lower income individuals and areas.
(d) Consultation with experts
- In carrying out the program established under subsection (a), the Secretary of Housing and Urban Development shall consult with—
  - disaster preparedness and response organizations;
  - homebuilders;
  - real estate professionals;
  - building code enforcement agencies; and
  - any other person that the Secretary considers appropriate.
(e) Eligible entity defined
- In this section, the term means a State or local government, a part or program of a State or local government, or a nationally recognized, congressionally chartered disaster response non-profit organization. eligible entity
(f) Grant mandate
- The Secretary shall, to the extent provided in advance in appropriation Acts, use not less than 35 percent of the net investment income from the Federal Natural Catastrophe Reinsurance Fund earned in each fiscal year pursuant to section 305(d) for grants under this section.

Title V—General provisions

Sec. 501. Eligible State programs.

(a) Eligible State programs
- A State program shall be considered an for purposes of this Act if the Secretary certifies, in accordance with the procedures established under subsection (c), that the State program complies with the following requirements: eligible State program
- (1) State program design
  - The State program is established and authorized by State law as an insurance program or a reinsurance program that is designed to improve private insurance markets and that offers residential property insurance coverage for losses arising from any personal residential line of insurance, as defined in the Uniform Property and Casualty Product Coding Matrix of the National Association of Insurance Commissioners.
- (2) Operation
  - The State program shall meet the following requirements:
    - A majority of the members of the governing body of the State program shall be public officials or appointed by public officials.
    - The State shall have a financial interest in the State program.
    - If the State has at any time appropriated amounts from the State program's funds for any purpose other than payments for losses insured under the State program, or payments made in connection with any of the State program's authorized activities, the State shall have returned such amounts to the State fund, together with interest as determined by the individual State on such amounts.
- (3) Tax status
  - The State program shall have received from the Secretary (or the Secretary’s designee) a written determination, within the meaning of of the Internal Revenue Code of 1986, that the program either— section 6110(b)
    - constitutes an of the State that has created it; or integral part
    - is otherwise exempt from Federal income taxation.
- (4) Earnings
  - The State program may not provide for any distribution of any part of any net profits of the State program to any insurer that participates in the State program.
- (5) Prevention and mitigation
  - (A) Mitigation of losses
    - The State program shall include provisions designed to encourage and support programs to mitigate losses from natural catastrophes for which the State insurance or reinsurance program was established to provide insurance coverage.
  - (B) Operational requirements
    - The State program shall operate in a State that—
      - (i) requires that an appropriate public body within the State shall have adopted adequate mitigation measures with effective enforcement provisions which the Secretary finds are consistent with the criteria for construction described in the International Code Council building codes;
      - (ii) has taken actions to establish an insurance rate structure that takes into account measures to mitigate insured losses; and
      - (iii) ensures, to the extent that reinsurance coverage made available under the eligible State program results in any cost savings in providing insurance coverage for risks in such State, such cost savings are reflected in premium rates charged to consumers for such coverage.
- (6) Requirements regarding coverage
  - The State program—
    - may not, except for charges or assessments related to post-event financing or bonding, involve cross-subsidization between any separate property and casualty insurance lines covered under the State program pursuant to paragraph (1);
    - shall be subject to a requirement under State law that for any insurance coverage made available under the State insurance program or for any reinsurance coverage for such insurance coverage made available under the State reinsurance program, the premium rates charged shall cover the expected value of all future costs associated with insurance policies or reinsurance contracts written by such program, in accordance with the principles under section 303(g);
    - shall make available to all qualifying policyholders insurance or reinsurance coverage, as applicable, and mitigation services on a basis that is not unfairly discriminatory; and
    - publishes, and displays in a prominent location on a website for the State insurance program, information for the State insurance program of estimated assessments and surcharges on policyholders, in accordance with State laws, regulations, or other requirements, for a range of natural disaster or catastrophic events having a varying magnitude of losses, including an event projected to result in losses of such magnitude that they have a 1 percent chance of being equaled or exceeded in any single year, based on the current year estimated aggregate funding capacity of the State insurance program and State reinsurance program.
- (7) Land use and zoning
  - The State program, to the extent possible, seeks to encourage appropriate State and local government units to develop comprehensive land use and zoning plans that include natural hazard mitigation.
- (8) Risk-based capital requirements
  - The State program—
    - complies with such risk-based capital requirements as applicable State law may impose and shall take into consideration asset risk, credit risk, underwriting risk, and such other relevant risk as determined by the Secretary; and
    - for each calendar year, prepares and submits to the Secretary a report identifying its claim-paying capacity at such time after the conclusion of such year, and containing such information and in such form, as the Secretary shall require.
- (9) Other requirements
  - The State program complies with such additional organizational, underwriting, and financial requirements as the Secretary shall, by regulation, provide to carry out the purposes of this Act.
(b) Certification
- The Secretary shall establish procedures for initial certification and recertification as an eligible State program.
(c) Transitional Mechanisms
- For the 5-year period beginning on the date of the enactment of this Act, in the case of a State that does not have an eligible State program for the State, a State residual insurance market entity, or State-sponsored provider of natural catastrophe insurance, for such State shall be considered to be an eligible State program, but only if such State residual insurance market entity, or State-sponsored provider of natural catastrophe insurance, was in existence before such date of enactment.
(d) Reinsurance To cover exposure
- This section may not be construed to limit or prevent any eligible State program from obtaining reinsurance coverage for insured losses retained by insurers pursuant to this section.

Sec. 502. Study and conditional coverage of commercial residential lines of insurance.

The Secretary shall study, on an expedited basis, the need for and impact of expanding the programs established by this Act to apply to insured losses of eligible State programs for losses arising from all commercial insurance policies which provide coverage for properties that are composed predominantly of residential rental units. The Secretary shall consider the catastrophic insurance and reinsurance market for commercial residential properties, and specifically the availability of adequate private insurance coverage when an insured event occurs, the impact any such capacity restrictions have on housing affordability for renters, and the likelihood that such an expansion of the program would increase insurance capacity for this market segment.

Sec. 503. Study of risk-based pricing and State program rates.

The Comptroller General of the United States shall conduct a study to analyze—

risk-based rate pricing, to determine the use of actuarially sound pricing for State insurance, reinsurance, or residual market programs, including what measures States are taking to implement actuarially sound rates;
rates for State insurance, reinsurance, or residual market programs that fail to cover the expected value of all future costs, including the cost of capital, associated with insurance policies or reinsurance contracts written by such programs or fail to have sufficient assets above their indebtedness to meet their obligations; and
any financial complications arising for policyholders resulting from increased policy costs.
Not later than 6 months after the date of the enactment of this Act, the Comptroller General shall submit a report to the Congress on the results of the study under this section.

Sec. 504. Definitions.

In this Act:

The term means a commitment to make debt guarantees to an eligible State program pursuant to section 202(c). commitment to guarantee
The term eligible State program means a State program that the Secretary certifies as an eligible State program under section 501.
The term insured loss means any loss that is determined by an eligible State program as being covered by insurance or reinsurance made available under that eligible State program.
The term qualifying assets means the policyholder surplus of the eligible State program as stated in the most recent quarterly financial statement filed by the program with the domiciliary regulator of the program in the last quarter ending prior to the event or events.
The term means the Secretary of the Treasury.
The term includes the several States, the District of Columbia, the Commonwealth of Puerto Rico, Guam, the Commonwealth of the Northern Mariana Islands, the United States Virgin Islands, and American Samoa, and any other territory or possession of the United States.

Sec. 505. Regulations.

The Secretary shall issue such regulations as may be necessary to carry out this Act.