I 
111TH CONGRESS 
1ST SESSION H. R. 4014 
To establish a program to provide guarantees for debt issued by State catas-
trophe insurance programs to assist in financial recovery from natural 
catastrophes. 
IN THE HOUSE OF REPRESENTATIVES 
NOVEMBER 4, 2009 
Ms. LORETTA SANCHEZ of California introduced the following bill; which was 
referred to the Committee on Financial Services 
A BILL 
To establish a program to provide guarantees for debt issued 
by State catastrophe insurance programs to assist in 
financial recovery from natural catastrophes. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
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. 
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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 pre-
pared for and better protected from natural catas-
trophes; 
(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 in-
sured 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 hurri-
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cane 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 econ-
omy; 
(7) the inability of private insurers to build ade-
quate capital in a short amount of time and the re-
sulting 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 in-
surance 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 con-
tinued availability or affordability, or both, of resi-
dential property insurance for their residents; 
(10) while State catastrophe insurance pro-
grams 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 
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such State programs and the local insurance mar-
kets; 
(11) the Government Accountability Office has 
found that, of the approximately $90 billion in Fed-
eral 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 pay-
ments to homeowners or renters who lacked ade-
quate insurance; and 
(12) the recent and historic turmoil in the fi-
nancial markets calls into question the ability of 
even the most creditworthy State catastrophe insur-
ance programs to secure adequate financing fol-
lowing a catastrophic event. 
SEC. 3. ESTABLISHMENT OF DEBT GUARANTEE PROGRAM. 
The Secretary of the Treasury shall carry out a pro-
gram under this Act to guarantee, and to enter into com-
mitments to guarantee, holders of debt obligations issued 
by eligible State programs against loss of principal or in-
terest on such obligations, or both. 
SEC. 4. ELIGIBLE STATE PROGRAMS. 
(a) REQUIREMENTS.—A State program shall be con-
sidered an ‘‘eligible State program’’ for purposes of this 
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tion that such State program is necessary 
in order to provide for the continued avail-
ability 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 pro-
gram. 
(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 activi-
ties, the State shall have returned such 
amounts to the State fund, together with inter-
est 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 mean-
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ing 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 in-
come taxation. 
(4) COVERED PERILS.— 
(A) IN
GENERAL.—The State program 
shall insure or reinsure losses that are proxi-
mately caused by any of the following perils: 
(i) Earthquakes. 
(ii) Perils ensuing from earthquakes, 
including fire and tsunamis. 
(iii) Tropical cyclones having max-
imum sustained winds of at least 74 miles 
per hour, including hurricanes and ty-
phoons. 
(iv) Tornadoes. 
(v) Volcanic eruptions. 
(vi) Catastrophic winter storms. 
(vii) Hail. 
(viii) Any other natural catastrophe 
(not including any flood) insured or rein-
sured under the State program. 
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(B) AUTHORITY
OF
SECRETARY
TO
DE-
FINE.—The Secretary shall, by regulation, de-
fine the natural catastrophe perils under this 
subsection. 
(5) PREVENTION AND MITIGATION.—The State 
program shall include provisions designed to encour-
age 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 cov-
erage made available under the State reinsurance 
program, the premium rates charged shall be actu-
arially 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 
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State program may be issued only if the Secretary has 
issued a commitment to guarantee such debt to such eligi-
ble 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 an-
niversary 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 com-
mitment to guarantee are likely to exceed the cash re-
sources of the eligible State program available on the date 
of the occurrence of the event. 
(c) LIMITATION ON AMOUNT OF GUARANTEES.— 
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(1) IN GENERAL.—Except as provided in para-
graph (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 ex-
pected to be sustained by the State program as a re-
sult 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 state-
ment 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 pro-
gram that is not required to file quarterly financial 
statements with its domiciliary regulator, the aggre-
gate 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 as-
sets 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 
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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 guar-
antee; and 
(3) the guarantee is valid, legal, and enforce-
able. 
(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 guaran-
teed. 
SEC. 7. MAXIMUM LIMITATION ON OUTSTANDING GUARAN-
TEES 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. 
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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 ap-
pointed 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 pay-
ments 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 ulti-
mate recipient of the payment. The Secretary shall be en-
titled to recover from the eligible State program the 
amount of any payments made pursuant to any guarantee 
entered into under this Act. 
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(d) ROLE OF THE ATTORNEY GENERAL.—The Attor-
ney 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, han-
dling, or disposal of property by the United States, the 
Secretary may, in the discretion of the Secretary, com-
plete, 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 appro-
priated, out of funds in the Treasury not otherwise appro-
priated, such sums as may be necessary to satisfy debt 
guarantee commitments extended to eligible State pro-
grams under this Act and for the payment of administra-
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tive expenses for conduct of the guarantee program au-
thorized 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 ‘‘quali-
fying assets’’ means, with respect to an eligible State 
program, the policyholder surplus of the State pro-
gram as stated in the most recent quarterly financial 
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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 cov-
erage 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 res-
idential purposes; or 
(II) a tenant’s policy written to in-
clude personal contents of a residential 
unit located in the State. 
(ii) EXCLUSIONS.—Such term shall 
not include— 
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(I) insurance for real property or 
its contents used for any commercial, 
industrial, or business purpose, except 
a structure of not more than 4 dwell-
ing units rented for individual resi-
dential purposes; and 
(II) a policy that does not include 
any of the perils insured against in a 
standard fire policy or any of the per-
ils enumerated in section 4(a)(4). 
(B) COMMERCIAL
RESIDENTIAL
PROP-
ERTIES.—Insurance coverage for commercial 
residential 
properties, 
including 
properties 
owned by a condominium association or its 
members, properties owned by a cooperative as-
sociation, and apartment buildings. 
(6) SECRETARY.—The term ‘‘Secretary’’ means 
the Secretary of the Treasury. 
Æ 
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