Homeowners' Defense Act of 2015

To establish a State-sponsored national catastrophic risk consortium to ensure the availability and affordability of homeowners’ insurance coverage for catastrophic events. 1. Short title; table of contents (a) Short title This Act may be cited as the Homeowners’ Defense Act of 2015 (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 purpose. 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. 2. Findings and purpose (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 weather-related exposure, coastal development patterns, and increasing property values along the hurricane-prone or earthquake-vulnerable coastlines of the United States; (3) such disasters generate large economic losses and a major component of those losses comes from damage and destruction to homes; (4) 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; (5) the United States needs to take and support State actions to be better prepared for and better protected from catastrophes; (6) 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; (7) 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; (8) 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; (9) Hurricane Sandy struck in 2012 along the Northeastern region of the United States, causing over $40,000,000,000 in property damages over a wide area; (10) under the current disaster risk management system, the Federal Government and, hence, taxpayers pay for rebuilding through government grants and low-interest loans, and the Federal Government will likely continue to provide significant levels of financial resources to pay for recovery from future catastrophes; (11) an alternative catastrophe risk-management approach, one that has continued to grow and is now perceived in the marketplace as a viable method of financing mega-catastrophes, would have the Federal Government support State-based efforts aimed at combining disaster risks into diversified portfolios, and developing a common documentation, legal, and operational framework for issuing catastrophe bonds that are transferred to the private sector; and (12) a number of entities in the public sector have already sought protection through catastrophe bonds, and other alternative risk transfer instruments, which package catastrophe risk as securities that are actively bought and sold in the capital markets. (b) Purpose The purpose of this Act is to establish a State-sponsored national catastrophic risk consortium to ensure the availability and affordability of homeowners’ insurance coverage for catastrophic events. 3. Establishment; status; principal office; membership (a) Establishment There is established an entity to be known as the National Catastrophe Risk Consortium Consortium (b) Status The Consortium is not a department, agency, or instrumentality of the United States Government. (c) 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. (d) Membership 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. 4. Functions The Consortium shall— (1) 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; (2) 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; (3) coordinate reinsurance contracts between participating, qualified reinsurance funds and private parties; (4) 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; (5) establish a catastrophe risk database to perform research and analysis that encourages standardization of the risk-linked securities market; (6) 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 (7) 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. 5. Powers The Consortium— (1) 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 (2) 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. 6. Nonprofit entity; conflicts of interest; audits (a) 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. (b) 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. (c) Audits (1) Annual audit The financial statements of the Consortium shall be audited annually in accordance with generally accepted auditing standards by independent certified public accountants. (2) Reports The report of each annual audit pursuant to paragraph (1) shall be included in the annual report submitted in accordance with section 4(7). (d) Prohibition on election and lobbying activities (1) Federal The Consortium may not— (A) make any contribution to a candidate for election for Federal office or to a political committee; (B) employ or retain— (i) a registered lobbyist under the Lobbying Disclosure Act of 1995 ( 2 U.S.C. 1601 et seq. (ii) 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) (C) 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 political committee 2 U.S.C. 431 (2) Consortium The Consortium may not— (A) 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; (B) employ or retain any person who engages in influencing legislating (as such term is defined in section 4911(d) 26 U.S.C. 4911(d) (C) provide any thing of value, other than educational materials or information, to any elected official of any State or local government. 7. Management (a) Board of directors; membership; designation of chairperson (1) Board of directors The management of the Consortium shall be vested in a board of directors (referred to in this Act as the Board (2) Chairperson The Secretary of the Treasury, or the designee of the Secretary, shall serve as the chairperson of the Board. (3) Membership The members of the Board shall include— (A) 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 (B) a member from each State participating in the Consortium, who shall be appointed by such State. (b) Bylaws The Board may prescribe, amend, and repeal such bylaws as may be necessary for carrying out the functions of the Consortium. (c) Compensation, actual, necessary, and transportation expenses (1) 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. (2) 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. (3) 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 (d) Quorum A majority of the Board shall constitute a quorum. (e) Executive director The Board shall appoint an executive director of the Consortium on such terms as the Board may determine. 8. Staff; experts and consultants (a) Staff (1) Appointment The Board of the Consortium may appoint and terminate such other staff as are necessary to enable the Consortium to perform its duties. (2) Compensation The Board of the Consortium may fix the compensation of the executive director and other staff. (b) Experts and consultants The Board shall procure the services of experts and consultants as the Board considers appropriate. 9. 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. 10. Authorization of appropriations There are authorized to be appropriated to carry out this Act $20,000,000 for each of fiscal years 2016 through 2020.

Summary: Homeowners' Defense Act of 2015 Establishes the National Catastrophe Risk Consortium, as a non-federal, non-profit entity, to ensure the availability and affordability of homeowners' insurance coverage for catastrophic events. Directs the Consortium to: (1) 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; (2) issue, on a conduit basis, securities and other financial instruments linked to catastrophe risks insured or reinsured through Consortium members; (3) coordinate reinsurance contracts; (4) act as a centralized repository of state risk information accessible by certain private-market participants; and (5) establish a database to perform research and analysis that encourages standardization of the risk-linked securities market. Shields the federal government and the Consortium from liability for Consortium actions.