Text of the Homeowners’ Defense Act of 2013

This bill was introduced on February 14, 2013, in a previous session of Congress, but was not enacted. The text of the bill below is as of Feb 14, 2013 (Introduced).



1st Session

H. R. 737


February 14, 2013

(for herself and Ms. Brown of Florida) introduced the following bill; which was referred to the Committee on Financial Services


To establish a national catastrophic risk consortium to ensure the availability and affordability of homeowners’ insurance coverage for catastrophic events.


Short title; table of contents


Short title

This Act may be cited as the Homeowners’ Defense Act of 2013 .


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.

Sec. 3. Establishment; status; principal office; membership.

Sec. 4. Functions.

Sec. 5. Powers.

Sec. 6. Nonprofit entity; conflicts of interest; audits.

Sec. 7. Management.

Sec. 8. Staff; experts and consultants.

Sec. 9. Federal liability.

Sec. 10. Authorization of appropriations.


Findings and purposes



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, they will continue to occur and are predictable;


such disasters generate large economic losses and a major component of those losses comes from damage and destruction to homes;


for the majority of Americans, their investment in their home represents their single biggest asset and the protection of that investment is paramount to economic and social stability;


the United States needs to take and support State actions to be better prepared for and better protected from catastrophes;


as the risk of catastrophic 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, in an effort 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;


Hurricanes Katrina, Rita, and Wilma struck the United States in 2005, causing over $200,000,000,000 in total economic losses, and insured losses to homeowners in excess of $50,000,000,000;


while the total costs of Hurricane Sandy have not yet been calculated, Fitch Ratings, a global credit ratings agency, has estimated that insured losses will amount to between $20,000,000,000 and $25,000,000,000;


the Federal Government has provided and will continue to provide resources to pay for losses from future catastrophes; and


it is the proper role of the Federal Government to prepare for and protect its citizens from catastrophes and to facilitate consumer protection, victim assistance, and recovery, including financial recovery.



The purpose of this Act is to establish a national catastrophic risk consortium to ensure the availability and affordability of homeowners’ insurance coverage for catastrophic events.


Establishment; status; principal office; membership



There is established an entity to be known as the National Catastrophe Risk Consortium (in this Act referred to as the Consortium).



The Consortium is not a department, agency, or instrumentality of the United States Government.


Principal office

The principal office and place of business of the Consortium shall be such location within the United States determined by the Board of Directors to be the most advantageous for carrying out the purpose and functions of the Consortium.



Any State that has established a reinsurance fund or has authorized the operation of a State residual insurance market entity, or State-sponsored provider of natural catastrophe insurance, shall be eligible to participate in the Consortium.



The Consortium shall—


work with all States, particularly those participating in the Consortium, to gather and maintain an inventory of catastrophe risk obligations held by State reinsurance funds, State residual insurance market entities, and State-sponsored providers of natural catastrophe insurance;


at the discretion of the affected members and on a conduit basis, issue securities and other financial instruments linked to the catastrophe risks insured or reinsured through members of the Consortium in the capital markets;


coordinate reinsurance contracts between participating, qualified reinsurance funds and private parties;


act as a centralized repository of State risk information that can be accessed by private-market participants seeking to participate in the transactions described in paragraphs (2) and (3) of this section;


establish a catastrophe risk database to perform research and analysis that encourages standardization of the risk-linked securities market;


perform any other functions, other than assuming risk or incurring debt, that are deemed necessary to aid in the transfer of catastrophe risk from participating States to private parties; and


submit annual reports to 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 regions associated with catastrophe risk and an analysis of the costs and benefits, for States not participating in the Consortium, of such nonparticipation.



The Consortium—


may make and perform such contracts and other agreements with any individual or other private or public entity however designated and wherever situated, as may be necessary for carrying out the functions of the Consortium; and


shall have such other powers, other than the power to assume risk or incur debt, as may be necessary and incident to carrying out this Act.


Nonprofit entity; conflicts of interest; audits


Nonprofit entity

The Consortium shall be a nonprofit entity and no part of the net earnings of the Consortium shall inure to the benefit of any member, founder, contributor, or individual.


Conflicts of interest

No director, officer, or employee of the Consortium shall in any manner, directly or indirectly, participate in the deliberation upon or the determination of any question affecting his or her personal interests or the interests of any Consortium, partnership, or organization in which he or she is directly or indirectly interested.




Annual audit

The financial statements of the Consortium shall be audited annually in accordance with generally accepted auditing standards by independent certified public accountants.



The report of each annual audit pursuant to paragraph (1) shall be included in the annual report submitted in accordance with section 4(7).


Prohibition on election and lobbying activities



The Consortium may not—


make any contribution to a candidate for election for Federal office or to a political committee;


employ or retain—


a registered lobbyist under the Lobbying Disclosure Act of 1995 (2 U.S.C. 1601 et seq.); or


an organization that employs one or more lobbyists and is registered under section 4(a)(2) of such Act (2 U.S.C. 1603(a)(2)); or


provide any thing of value, other than educational materials or information, to any elected official of the Federal Government.

For purposes of this paragraph, the terms contribution, candidate, Federal office, and political committee have the meanings given such terms in section 301 of the Federal Election Campaign Act of 1971 (2 U.S.C. 431).


The Consortium may not—


make any contribution to a candidate for election for any State or local office or to any committee, club, association, or other group that receives contributions or makes expenditures for the purpose of influencing any such election;


employ or retain any person who engages in influencing legislating (as such term is defined in section 4911(d) of the Internal Revenue Code of 1986 (26 U.S.C. 4911(d))) of any State or local legislative body; or


provide any thing of value, other than educational materials or information, to any elected official of any State or local government.




Board of directors; membership; designation of chairperson


Board of directors

The management of the Consortium shall be vested in a board of directors (referred to in this Act as the Board) composed of not less than 3 members.



The Secretary of the Treasury, or the designee of the Secretary, shall serve as the chairperson of the Board.



The members of the Board shall include—


the Secretary of Homeland Security and the Secretary of Commerce, or the designees of such Secretaries, respectively, but only during such times as there are fewer than two States participating in the Consortium; and


a member from each State participating in the Consortium, who shall be appointed by such State.



The Board may prescribe, amend, and repeal such bylaws as may be necessary for carrying out the functions of the Consortium.


Compensation, actual, necessary, and transportation expenses


Non-Federal employees

A member of the Board who is not otherwise employed by the Federal Government shall be entitled to receive the daily equivalent of the annual rate of basic pay payable for level IV of the Executive Schedule under section 5315 of title 5, United States Code, as in effect from time to time, for each day (including travel time) during which such member is engaged in the actual performance of duties of the Consortium.


Federal employees

A member of the Board who is an officer or employee of the Federal Government shall serve without additional pay (or benefits in the nature of compensation) for service as a member of the Consortium.


Travel expenses

Members of the Consortium shall be entitled to receive travel expenses, including per diem in lieu of subsistence, equivalent to those set forth in subchapter I of chapter 57 of title 5, United States Code.



A majority of the Board shall constitute a quorum.


Executive director

The Board shall appoint an executive director of the Consortium on such terms as the Board may determine.


Staff; experts and consultants





The Board of the Consortium may appoint and terminate such other staff as are necessary to enable the Consortium to perform its duties.



The Board of the Consortium may fix the compensation of the executive director and other staff.


Experts and consultants

The Board shall procure the services of experts and consultants as the Board considers appropriate.


Federal liability

The Federal Government and the Consortium shall not bear any liabilities arising from the actions of the Consortium. Participating States shall retain all catastrophe risk until the completion of a transaction described in paragraphs (2) and (3) of section 4.


Authorization of appropriations

There are authorized to be appropriated to carry out this Act $20,000,000 for each of fiscal years 2014 through 2018.