H.R. 827 — Homeowners’ Defense Act of 2025

This section establishes the National Catastrophe Risk Consortium, chaired by the Secretary of the Treasury (or designee). Any state is eligible to participate, with states required, in selecting members, to (1) choose individuals with relevant background and expertise and (2) ensure participation by one individual or representative of an organization representing consumers, minorities, and low- and moderate-income housing persons from communities affected by catastrophic natural disasters. The Consortium may prescribe, amend, and repeal bylaws as necessary to carry out its functions.

This section establishes the functions of the Consortium, requiring it to (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 U.S. insurance sector and related effects on policyholder affordability; (3) advance consistent, clear, comparable, and accurate disclosure of catastrophic risk; (4) submit annual reports to Congress on its activities, with the first including an assessment of catastrophe risk costs to states and regions; (5) assess potential major disruptions of private insurance coverage in catastrophe-vulnerable markets; (6) make recommendations on mitigating identified financial risks, including through new or revised regulatory standards; and (7) account for disparate impacts of catastrophic risks on disadvantaged communities and communities of color.

This section states the purposes of this title, which 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 such programs and better assist financial recovery from significant natural catastrophes by authorizing the Secretary of the Treasury to guarantee debt for such purposes.

This section establishes a debt guarantee program authorizing the Secretary of the Treasury to guarantee holders of debt against principal or interest losses on debt issued by eligible State programs (i.e., state-sponsored insurance programs covering catastrophe perils such as earthquakes or other non-flood risks), with aggregate principal limits of $3.5 billion for earthquake programs and $17 billion for other perils. Commitments to guarantee, initially for three years and extendable annually by one year, require a repayment plan with reasonable assurance of repayment without federal funds, specified guarantee fees, a maximum debt term of 30 years, and exclusion of flood losses in designated hazard areas. Upon request after a catastrophic event where insured losses exceed available cash resources, the Secretary must provide guarantees up to the amount by which expected losses exceed 80% of qualifying assets (or unrestricted net assets for non-quarterly filers), usable only for debt issuance costs and insured losses; necessary sums are authorized to be appropriated.

This section establishes that the issuance of any guarantee by the Secretary under this title constitutes conclusive evidence that (1) the guarantee was properly obtained, (2) the underlying debt qualified for such guarantee, and (3) the guarantee is valid, legal, and enforceable.

This section requires the Secretary to charge and collect fees for each guarantee, in amounts specified in the commitment to guarantee and sufficient to cover applicable administrative costs and probable losses as determined by the Secretary, not to exceed one-half of 1 percent per annum of the outstanding indebtedness covered by the guarantee.

This section requires the Secretary to pay any unpaid principal or interest due on debt guaranteed under this title if the eligible state program fails to provide sufficient funds to its fiscal agent, with payments due on the payment date or the next business day after notice (whichever is later). Upon payment, the Secretary is subrogated to the recipient's rights and entitled to recover the amount from the state program; it further directs the Attorney General to enforce U.S. rights arising from the guarantees and authorizes the Secretary to complete, operate, or sell any acquired property.

This section establishes principles for contracts for reinsurance coverage made available under this title, requiring that such contracts (1) be priced on an actuarially sound basis, (2) minimize the administrative costs of the Federal Government, and (3) provide coverage based solely on insured losses covered by the eligible State program purchasing the contract.

This section establishes terms for reinsurance contracts between the Secretary and eligible State programs. Such contracts must (1) provide coverage at attachment points and levels set by the Secretary, considering state program coverage, private reinsurance availability, and other factors; (2) reimburse 80 to 90 percent of insured losses exceeding the program's retained losses; (3) have a term not exceeding one year or as determined by the Secretary; (4) authorize payments only for covered insured losses; (5) cover losses from multiple events during the term, with retained losses calculated in the aggregate on a calendar-year basis; (6) include only claims reported to the state program within three years of the event; (7) be priced actuarially to cover anticipated claims costs (not limited to average annual costs), loss adjustment and administrative expenses, and prudent outwards reinsurance, at levels comparable to private-sector equivalents adjusted for the reinsurance fund's nonprofit status; (8) require the state program to submit relevant information to the Secretary; and (9) include other terms necessary for program implementation and financial integrity.

This section requires the Secretary to determine the aggregate potential liability for claims under all reinsurance contracts sold in a single year under this title based on a review of the reinsurance market, notwithstanding other law. The section limits the Secretary's authority to enter into such contracts in any fiscal year to amounts provided in appropriation acts for that purpose.

This section establishes the Federal Natural Catastrophe Reinsurance Fund (Fund) within the U.S. Treasury to support a federal reinsurance program for natural catastrophes. The Fund is credited with (1) premiums from reinsurance contracts sold under this title, (2) appropriations covering aggregate potential liability for claims under those contracts, and (3) earnings from investments; and amounts in the Fund are available to the Secretary for (1) payments on covered losses, (2) administrative expenses of the program, and (3) obtaining outwards reinsurance. The section further requires the Secretary to invest Fund amounts in U.S. obligations or guarantees and, for purposes of grant mandates under section 401(f), to disclose annual net investment income within 60 days after a fiscal year ends and disburse appropriate funds within 90 days after the fiscal year ends.

This section establishes a grant program administered by the Secretary of Housing and Urban Development to provide grants to eligible entities—defined as state or local governments (or parts or programs thereof) or nationally recognized, congressionally chartered disaster response nonprofits—for developing, enhancing, or maintaining programs to prevent and mitigate losses from natural catastrophes. Grants must be used to (1) promote risk awareness and citizen/community preparedness through public education campaigns; (2) assist in determining property risk locations; (3) provide home inspections to identify strengthening opportunities; (4) offer financial assistance to homeowners for retrofitting homes; or (5) support disaster response readiness programs for public safety organizations. In awarding grants, the Secretary must prioritize applicants demonstrating greater financial need, including those serving lower-income individuals and areas; must consult with disaster preparedness organizations, homebuilders, real estate professionals, building code enforcement agencies, and other appropriate persons; and must use not less than 35% of net investment income from the Federal Natural Catastrophe Reinsurance Fund earned each fiscal year (to the extent provided in advance in appropriations acts).

This section establishes criteria for the Secretary to certify a state insurance or reinsurance program—designed to improve private insurance markets by offering residential property coverage for natural catastrophe losses—as an "eligible State program" under the Act. To qualify, the program must (1) have a majority-public governing body with a state financial interest and repay any prior non-loss appropriations with interest; (2) receive a determination that it is an integral part of the state or exempt from federal income tax; (3) prohibit profit distributions to participating insurers; (4) include loss mitigation provisions, enforce building codes consistent with International Code Council standards, reflect mitigation in rates, and pass reinsurance savings to consumer premiums; (5) avoid cross-subsidization between insurance lines (except post-event financing), charge actuarially sound premiums per section 303(g) principles, offer nondiscriminatory coverage, and publish estimated policyholder assessments for events up to a 1-in-100-year loss; (6) encourage land-use and zoning plans with hazard mitigation; (7) comply with state risk-based capital standards and annually report claim-paying capacity to the Secretary; and (8) meet additional Secretary requirements. The section further directs the Secretary to establish initial certification and recertification procedures and provides that, for five years after enactment, a state residual market entity or state-sponsored natural catastrophe insurer qualifies as eligible if the state lacks such a program.

This section directs the Secretary to conduct an expedited study on the need for and impact of expanding the programs established by this Act to cover insured losses of eligible state programs arising from commercial insurance policies for properties composed predominantly of residential rental units. The study must assess the catastrophic insurance and reinsurance market for such properties, including the availability of adequate private insurance coverage, any capacity restrictions' effects on renters' housing affordability, and the potential for program expansion to increase insurance capacity in this market segment.

This section directs the Comptroller General to conduct a study analyzing (1) the use of actuarially sound, risk-based pricing in state insurance, reinsurance, or residual market programs (i.e., insurers of last resort for high-risk properties) and measures states are taking to implement such rates; (2) rates in those programs that fail to cover expected future costs, including cost of capital, or lack sufficient assets to meet obligations; and (3) financial complications for policyholders from increased policy costs. The Comptroller General must submit a report to Congress on the study results within six months of enactment.

This section defines six terms for purposes of the Act: (1) commitment to guarantee, as a commitment by the Secretary of the Treasury to make debt guarantees to an eligible State program under section 202(c); (2) eligible State program, as a State program certified as eligible by the Secretary under section 501; (3) insured loss, as any loss determined by an eligible State program to be covered by insurance or reinsurance available under that program; (4) qualifying assets, as the policyholder surplus of an eligible State program per its most recent quarterly financial statement filed with its domiciliary regulator prior to the relevant event(s); (5) Secretary, as the Secretary of the Treasury; and (6) State, to include the states, the District of Columbia, Puerto Rico, Guam, the Northern Mariana Islands, the U.S. Virgin Islands, American Samoa, and other U.S. territories or possessions.