Homeowners’ Defense Act of 2025

[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[H.R. 827 Introduced in House (IH)]

<DOC>

119th CONGRESS
  1st Session
                                H. R. 827

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

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                            January 28, 2025

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 Representatives of the
United States of America in Congress assembled,

SECTION 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.--The table of contents for this Act is as
follows:

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.
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 insurance.
Sec. 503. Study of risk-based pricing and State program rates.
Sec. 504. Definitions.
Sec. 505. Regulations.

SEC. 2. FINDINGS AND PURPOSES.

    (a) Findings.--The Congress finds that--
            (1) the United States has a history of catastrophic natural
        disasters, including hurricanes, tornadoes, flood, fire,
        earthquakes, and volcanic eruptions;
            (2) 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;
            (3) such disasters present physical risk to assets,
        publicly traded securities, private investments, and companies;
            (4) 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;
            (5) 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
            (6) 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 ``National Catastrophe Risk Consortium'' (in this title referred to
as the ``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--
            (1) select members who have a background and expertise
        relevant to the functions of the Consortium; and
            (2) 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--
            (1) work with States to gather and maintain an inventory of
        catastrophe risk obligations held by providers of natural
        catastrophe insurance;
            (2) assess issues or gaps in the insurance sector of the
        United States financial system and any related effects on
        insurance affordability for policyholders;
            (3) advance consistent, clear, intelligible, comparable,
        and accurate disclosure of catastrophic risk;
            (4) 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;
            (5) assess the potential for major disruptions of private
        insurance coverage in United States markets particularly
        vulnerable to catastrophes;
            (6) make such other recommendations on how identified
        financial risk can be mitigated, including through new or
        revised regulatory standards, as appropriate; and
            (7) 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--
            (1) to promote the availability of private capital to
        provide liquidity and capacity to State catastrophe insurance
        programs; and
            (2) 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--
            (1) for eligible State programs that cover earthquake peril
        shall not exceed $3,500,000,000; and
            (2) 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:
            (1) 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.
            (2) 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.
            (3) 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.
            (4) The commitment to guarantee shall specify the fees for
        debt guarantee coverage.
            (5) The maximum term of the debt that shall be specified in
        a commitment issued under this section may not exceed 30 years.
            (6) 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--
            (1) the guarantee has been properly obtained;
            (2) the underlying debt qualified for such guarantee; and
            (3) 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 ``Fiscal
Agent'') 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--
            (1) shall be priced on an actuarially sound basis;
            (2) shall minimize the administrative costs of the Federal
        Government; and
            (3) 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--
            (1) the coverage available through eligible State programs;
            (2) the availability and accessibility of reinsurance in
        the private market; and
            (3) 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 ``Fund'').
    (b) Credits.--The Fund shall be credited with--
            (1) amounts received annually from the sale of contracts
        for reinsurance coverage under this title;
            (2) any amounts appropriated for the aggregate potential
        liability for payment of claims under all contracts for
        reinsurance coverage under this title; and
            (3) 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--
            (1) 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;
            (2) assisting in the determination of the location of risk
        by giving careful consideration to the natural risks for the
        location of a property;
            (3) providing inspections of homes to identify areas to
        strengthen such homes and reduce exposure to natural
        catastrophes;
            (4) providing financial assistance to homeowners to
        retrofit homes to reduce exposure to natural catastrophes; or
            (5) 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--
            (1) disaster preparedness and response organizations;
            (2) homebuilders;
            (3) real estate professionals;
            (4) building code enforcement agencies; and
            (5) any other person that the Secretary considers
        appropriate.
    (e) Eligible Entity Defined.--In this section, the term ``eligible
entity'' 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.
    (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 ``eligible State program'' 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:
            (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) A majority of the members of the governing body
                of the State program shall be public officials or
                appointed by public officials.
                    (B) The State shall have a financial interest in
                the State program.
                    (C) 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 section 6110(b) of the
        Internal Revenue Code of 1986, that the program either--
                    (A) constitutes an ``integral part'' of the State
                that has created it; or
                    (B) 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--
                    (A) 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);
                    (B) 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);
                    (C) 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
                    (D) 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--
                    (A) 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
                    (B) 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--
            (1) 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;
            (2) 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
            (3) 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:
            (1) Commitment to guarantee.--The term ``commitment to
        guarantee'' means a commitment to make debt guarantees to an
        eligible State program pursuant to section 202(c).
            (2) Eligible state program.--The term ``eligible State
        program'' means a State program that the Secretary certifies as
        an eligible State program under section 501.
            (3) Insured loss.--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.
            (4) Qualifying assets.--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.
            (5) Secretary.--The term ``Secretary'' means the Secretary
        of the Treasury.
            (6) State.--The term ``State'' 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.
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