To establish a program to provide guarantees for debt issued by State catastrophe insurance programs to assist in financial recovery from natural catastrophes.

Summary: Catastrophe Obligation Guarantee Act of 2009 - Directs the Secretary of the Treasury to guarantee holders against loss of principal, interest, or both, on obligations issued by eligible state programs that are established to provide insurance and reinsurance coverage for residential property in the case of catastrophic events.

Prescribes standards for eligible state programs, and for catastrophic debt guarantees.

Limits the aggregate principal amount of guaranteed debt following a catastrophic event to the amount by which the insured losses expected to be sustained by the state program as a result of the events exceed 80% of: (1) the qualifying assets of an eligible state program as stated in its most recent quarterly financial statement filed with the domiciliary regulator; or (2) a state's unrestricted net assets as stated in its annual financial statement.

Pledges the full faith and credit of the United States to the payment of all guarantees issued under the program.

Limits the aggregate total principal amount of guaranteed debt obligations to: (1) $5 billion for earthquake peril; and (2) $20 billion for all other perils.

Makes appropriations to satisfy debt guarantee commitments and attendant administrative expenses.

SECTION 1. SHORT TITLE.

    (a) Short Title.--This Act may be cited as the ``Catastrophe 
Obligation Guarantee Act of 2009''.
    (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title.
Sec. 2. Congressional findings.
Sec. 3. Establishment of debt guarantee program.
Sec. 4. Eligible State programs.
Sec. 5. Catastrophic debt guarantees.
Sec. 6. Effect of guarantee.
Sec. 7. Maximum limitation on outstanding guarantees under program.
Sec. 8. Payment of losses.
Sec. 9. Funding for payments of guarantees.
Sec. 10. Definitions.

SEC. 2. CONGRESSIONAL FINDINGS.

    The Congress finds that--
            (1) the United States needs to take action, and support 
        actions taken by States, to be better prepared for and better 
        protected from natural catastrophes;
            (2) the hurricane seasons of 2004, 2005, and 2008 were 
        startling reminders of both the human and economic devastation 
        that natural catastrophes can cause;
            (3) if the deadly 1900 Galveston hurricane were to occur 
        again, it could cause over $36,000,000,000 in insured losses;
            (4) if the 1906 San Francisco earthquake and fire were to 
        occur again, it could cause over $400,000,000,000 in insured 
        losses;
            (5) if a Category 5 hurricane were to hit Miami, it could 
        cause over $50,000,000,000 in insured loss;
            (6) if the 1938 Long Island Express Hurricane were to occur 
        again, it could cause over $30,000,000,000 in insured losses, 
        and if a hurricane that powerful were to hit Manhattan directly 
        it could cause over $150,000,000,000 in insured losses and 
        cause irreparable harm to our Nation's economy;
            (7) the inability of private insurers to build adequate 
        capital in a short amount of time and the resulting lack of 
        sufficient insurance capacity threaten to increase the number 
        of uninsured residential properties, which, in turn, will 
        increase the risk of mortgage and other credit defaults and 
        increase the strain on the Nation's banking system;
            (8) it is appropriate that efforts to improve insurance 
        availability be designed and implemented at the State level, 
        but even active and experienced State catastrophe insurance 
        programs struggle with issues of capital adequacy and financial 
        strength;
            (9) some States have acted to ensure the continued 
        availability or affordability, or both, of residential property 
        insurance for their residents;
            (10) while State catastrophe insurance programs may be well 
        designed and adequate to cover insured losses from most natural 
        disasters, a small but significant number of catastrophic 
        events are likely to exceed the combined financial capacity of 
        such State programs and the local insurance markets;
            (11) the Government Accountability Office has found that, 
        of the approximately $90 billion in Federal emergency 
        appropriations in the wake of the 2005 hurricanes, 
        approximately $26 billion was used by the Federal Emergency 
        Management Agency, the Small Business Administration, and the 
        Department of Housing and Urban Development to make payments to 
        homeowners or renters who lacked adequate insurance; and
            (12) the recent and historic turmoil in the financial 
        markets calls into question the ability of even the most 
        creditworthy State catastrophe insurance programs to secure 
        adequate financing following a catastrophic event.

SEC. 3. ESTABLISHMENT OF DEBT GUARANTEE PROGRAM.

    The Secretary of the Treasury shall carry out a program under this 
Act to guarantee, and to enter into commitments to guarantee, holders 
of debt obligations issued by eligible State programs against loss of 
principal or interest on such obligations, or both.

SEC. 4. ELIGIBLE STATE PROGRAMS.

    (a) Requirements.--A State program shall be considered an 
``eligible State program'' for purposes of this Act only if the State 
program, or other State entity authorized to make such determinations, 
certifies to the Secretary, in accordance with the procedures 
established pursuant to subsection (b), that the State program complies 
with the following requirements:
            (1) Program design.--The State program shall be established 
        and authorized by State law--
                    (A) as an insurance program that--
                            (i) offers residential property insurance 
                        coverage for insured losses to property, 
                        contents, and additional living expenses; and
                            (ii) is not a State program that requires 
                        insurers to pool resources to provide property 
                        insurance coverage for covered perils; or
                    (B) as a reinsurance program that--
                            (i) is designed to improve private 
                        insurance markets; and
                            (ii) offers residential property insurance 
                        coverage for insured losses to property, 
                        contents, and additional living expenses 
                        because of a finding by the State insurance 
                        commissioner or other State entity authorized 
                        to make such a determination that such State 
                        program is necessary in order to provide for 
                        the continued availability of such insurance 
                        coverage for all residents of the State.
            (2) Program operation.--The State program shall meet the 
        following requirements:
                    (A) Governing body.--A majority of the members of 
                the governing body of the State program shall be public 
                officials or appointed by public officials.
                    (B) Financial interest.--The State shall have a 
                financial interest in the State program.
                    (C) Program funds.--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 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 State program--
                    (A) constitutes an integral part of the State that 
                has created it; or
                    (B) is otherwise exempt from Federal income 
                taxation.
            (4) Covered perils.--
                    (A) In general.--The State program shall insure or 
                reinsure losses that are proximately caused by any of 
                the following perils:
                            (i) Earthquakes.
                            (ii) Perils ensuing from earthquakes, 
                        including fire and tsunamis.
                            (iii) Tropical cyclones having maximum 
                        sustained winds of at least 74 miles per hour, 
                        including hurricanes and typhoons.
                            (iv) Tornadoes.
                            (v) Volcanic eruptions.
                            (vi) Catastrophic winter storms.
                            (vii) Hail.
                            (viii) Any other natural catastrophe (not 
                        including any flood) insured or reinsured under 
                        the State program.
                    (B) Authority of secretary to define.--The 
                Secretary shall, by regulation, define the natural 
                catastrophe perils under this subsection.
            (5) Prevention and mitigation.--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.
            (6) Actuarial premium rates.--The State program 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 be actuarially sound or 
        actuarially indicated.
    (b) Certification and Recertification.--The Secretary shall 
establish procedures for initial certification and annual 
recertification of State programs as eligible State programs.

SEC. 5. CATASTROPHIC DEBT GUARANTEES.

    (a) Eligibility for Guarantee.--A guarantee under the program under 
this Act of the debt of an eligible State program may be issued only if 
the Secretary has issued a commitment to guarantee such debt to such 
eligible State program. The commitment to guarantee shall have a 
duration of three years and may be extended by the Secretary for a 
period of one 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 Secretary 
determines, based on information provided by the eligible State program 
that the Secretary shall require, that there is reasonable assurance 
that the eligible State program can meet its repayment obligation under 
the debt.
    (b) Required Amount of Insured Losses.--The Secretary may not issue 
a guarantee under the program under this Act for any debt obligations 
of an eligible State program unless the eligible State program 
demonstrates to the satisfaction of the Secretary that insured losses 
to the eligible State program that arise from the event or events of 
covered perils and that are covered by the commitment to guarantee are 
likely to exceed the cash resources of the eligible State program 
available on the date of the occurrence of the event.
    (c) Limitation on Amount of Guarantees.--
            (1) In general.--Except as provided in paragraph (2), the 
        aggregate principal amount of debt of an eligible State program 
        guaranteed following an event or events referred to in 
        subsection (a) 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 its 
        domiciliary regulator before the occurrence of event or events.
            (2) State programs not filing quarterly statements.--In the 
        case of any eligible State program that is not required to file 
        quarterly financial statements with its domiciliary regulator, 
        the aggregate principal amount of 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.
    (d) Use of Funds.--Amounts of debt of an eligible State program 
that are guaranteed under this section shall be used only to pay the 
insured losses and loss adjustment expenses incurred by the eligible 
State program. Such amounts shall not be used for any other purpose.

SEC. 6. EFFECT OF GUARANTEE.

    (a) In General.--The issuance of any guarantee under the program 
under this Act by the Secretary 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.
    (b) Full Faith and Credit.--The full faith and credit of the United 
States is pledged to the payment of all guarantees issued under the 
program under this Act with respect to principal and interest of the 
debt guaranteed.

SEC. 7. MAXIMUM LIMITATION ON OUTSTANDING GUARANTEES UNDER PROGRAM.

    The aggregate principal amount of debt obligations for which 
guarantees under the program under this Act are outstanding may not at 
any time exceed--
            (1) with respect to eligible State programs that cover 
        earthquake perils, $5,000,000,000; and
            (2) with respect to eligible State programs that cover all 
        other perils, $20,000,000,000.

SEC. 8. PAYMENT OF LOSSES.

    (a) In General.--If any portion of the principal of or interest on 
any debt obligation guaranteed under this Act becomes due for payment 
but is unpaid by the eligible State program issuing such obligation as 
a result of such program having provided insufficient funds to the duly 
appointed paying agent or trustee (in this section referred to as the 
``fiscal agent'') for the eligible State program, the Secretary shall 
pay to the fiscal agent an amount equal to such portion.
    (b) Timing.--The Secretary shall make such payments on the later 
of--
            (1) the date such principal or interest becomes due for 
        payment; or
            (2) the first business day after the day on which the 
        Secretary receives notice, in such form and manner as the 
        Secretary may require, of failure by the eligible State program 
        to provide sufficient funds to the fiscal agent to make such 
        payments.
    (c) Subrogation.--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 Act.
    (d) Role of the Attorney General.--The Attorney General will 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 
Act.
    (e) Forbearance.--Nothing in this section may be construed to 
preclude any forbearance for the benefit of the eligible State program 
that is agreed to by the parties to any debt obligation guaranteed 
under this Act and is approved by the Secretary, subject to the 
availability of budget authority for any resulting costs (as such term 
is defined in section 502 of the Federal Credit Reform Act of 1990 (2 
U.S.C. 661a)).
    (f) Authority of Secretary.--Notwithstanding any other provision of 
law relating to the acquisition, handling, or disposal of property by 
the United States, the Secretary may, in the discretion of the 
Secretary, complete, recondition, reconstruct, renovate, repair, 
maintain, operate, or sell any property acquired by the Secretary 
pursuant to the provisions of this Act.

SEC. 9. FUNDING FOR PAYMENTS OF GUARANTEES.

    (a) Appropriations.--There are hereby appropriated, out of funds in 
the Treasury not otherwise appropriated, such sums as may be necessary 
to satisfy debt guarantee commitments extended to eligible State 
programs under this Act and for the payment of administrative expenses 
for conduct of the guarantee program authorized by this Act.
    (b) Budgetary Impact.--For purposes of section 502(5) of the 
Federal Credit Reform Act of 1990 (2 U.S.C. 661a(5)), the cost of 
guarantees issued under this Act shall be calculated by adjusting the 
discount rate in section 502(5)(E) of such Act for government risk.

SEC. 10. DEFINITIONS.

    In this Act, the following definitions shall apply:
            (1) Commitment to guarantee.--The term ``commitment to 
        guarantee'' means a commitment to make debt guarantees to an 
        eligible State program, pursuant to subsection 5(a).
            (2) Covered perils.--The term ``covered peril'' means a 
        natural catastrophe peril specified in section 4(a)(4).
            (3) Insured loss.--The term ``insured loss'' means any loss 
        resulting from a covered peril 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, with respect to an eligible State program, the 
        policyholder surplus of the State program as stated in the most 
        recent quarterly financial statement filed by the program with 
        the domiciliary regulator of the program for the last quarter 
        ending before the event or events.
            (5) Residential property insurance.--The term ``residential 
        property insurance'' means, with respect to an eligible State 
        program, the following types of insurance coverage:
                    (A) Individually owned residential structures.--
                            (i) In general.--(I) Insurance coverage for 
                        individually owned residential structures of 
                        not more than 4 dwelling units, individually 
                        owned condominium units, or individually owned 
                        mobile homes, and the contents of any such 
                        units or homes, that are--
                                            (aa) located in the State; 
                                        and
                                            (bb) used exclusively for 
                                        residential purposes; or
                            (II) a tenant's policy written to include 
                        personal contents of a residential unit located 
                        in the State.
                            (ii) Exclusions.--Such term shall not 
                        include--
                                    (I) insurance for real property or 
                                its contents used for any commercial, 
                                industrial, or business purpose, except 
                                a structure of not more than 4 dwelling 
                                units rented for individual residential 
                                purposes; and
                                    (II) a policy that does not include 
                                any of the perils insured against in a 
                                standard fire policy or any of the 
                                perils enumerated in section 4(a)(4).
                    (B) Commercial residential properties.--Insurance 
                coverage for commercial residential properties, 
                including properties owned by a condominium association 
                or its members, properties owned by a cooperative 
                association, and apartment buildings.
            (6) Secretary.--The term ``Secretary'' means the Secretary 
        of the Treasury.