I 
112TH CONGRESS 
1ST SESSION H. R. 3125 
To establish a program to provide guarantees for debt issued by or on 
behalf of State catastrophe insurance programs to assist in the financial 
recovery from earthquakes, earthquake-induced landslides, volcanic erup-
tions, and tsunamis. 
IN THE HOUSE OF REPRESENTATIVES 
OCTOBER 6, 2011 
Mr. CAMPBELL (for himself, Mr. LEWIS of California, and Mr. CALVERT) in-
troduced the following bill; which was referred to the Committee on Fi-
nancial Services 
A BILL 
To establish a program to provide guarantees for debt issued 
by or on behalf of State catastrophe insurance programs 
to assist in the financial recovery from earthquakes, 
earthquake-induced landslides, volcanic eruptions, and 
tsunamis. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 
(a) SHORT TITLE.—This Act may be cited as the 
‘‘Earthquake Insurance Affordability Act’’. 
(b) TABLE OF CONTENTS.—The table of contents for 
this Act is as follows: 
VerDate Mar 15 2010 
02:37 Oct 08, 2011
Jkt 019200
PO 00000
Frm 00001
Fmt 6652
Sfmt 6201
E:\BILLS\H3125.IH
H3125
rfrederick on DSK6VPTVN1PROD with BILLS
Sec. 1. Short title; table of contents. 
Sec. 2. Findings and purposes. 
Sec. 3. Definitions. 
Sec. 4. Eligible State programs. 
Sec. 5. Establishment of debt-guarantee program. 
Sec. 6. Effect of guarantee. 
Sec. 7. Assessment at time of guarantee. 
Sec. 8. Payment of losses. 
Sec. 9. Full faith and credit. 
Sec. 10. Budgetary impact; costs. 
Sec. 11. Regulations. 
SEC. 2. FINDINGS AND PURPOSES. 
(a) FINDINGS.—Congress finds the following: 
(1) Major earthquakes are likely in the United 
States. For example, the United States Geological 
Survey predicts that there is a 99.7 percent chance 
that a magnitude 6.7 earthquake will strike in Cali-
fornia in the next 30 years and that there is a 46 
percent chance that a magnitude 7.5 earthquake will 
strike in California in the next 30 years. Earth-
quakes can be caused by volcanic or tectonic events 
and result in destructive shaking of the earth, fires, 
landslides, volcanic eruptions, and tsunamis. 
(2) Despite the known risk of earthquakes, rel-
atively few homeowners have earthquake insurance. 
For example, in California, 88 percent of homes in-
sured for fire do not have earthquake insurance. In 
the event of a catastrophic earthquake, the lack of 
homeowner earthquake-insurance coverage will slow 
recovery, create economic hardship, and increase the 
VerDate Mar 15 2010 
02:37 Oct 08, 2011
Jkt 019200
PO 00000
Frm 00002
Fmt 6652
Sfmt 6201
E:\BILLS\H3125.IH
H3125
rfrederick on DSK6VPTVN1PROD with BILLS
risk of mortgage and other credit defaults and ad-
versely affect the Nation’s banking system. 
(3) It is important that States improve the af-
fordability, availability, and quality of earthquake in-
surance so that more homeowners will purchase cov-
erage. For example, California has created the Cali-
fornia Earthquake Authority to provide earthquake 
insurance to homeowners through private-sector in-
surers. 
(4) It is a proper role of the Federal Govern-
ment to help prepare and protect its citizens from 
catastrophes such as earthquakes and to facilitate 
consumer protection, victim assistance, and indi-
vidual and community recovery, including financial 
recovery. 
(b) PURPOSES.—The purposes of this Act are to es-
tablish a program— 
(1) to promote the availability of private capital 
to provide liquidity and capacity to State earthquake 
insurance programs; and 
(2) to expedite the payment of claims under 
State earthquake insurance programs and better as-
sist the financial recovery from significant earth-
quakes by authorizing the Secretary of the Treasury 
to guarantee debt for such purposes. 
VerDate Mar 15 2010 
02:37 Oct 08, 2011
Jkt 019200
PO 00000
Frm 00003
Fmt 6652
Sfmt 6201
E:\BILLS\H3125.IH
H3125
rfrederick on DSK6VPTVN1PROD with BILLS
SEC. 3. 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 section 5. 
(2) ELIGIBLE STATE PROGRAM.—The term ‘‘eli-
gible State program’’ means a State program that, 
pursuant to section 4, is eligible to receive a debt 
guarantee under this Act. 
(3) INSURED LOSS.—The term ‘‘insured loss’’ 
means any loss resulting from an earthquake, an 
earthquake-related event, or fire following an earth-
quake that is determined by an eligible State pro-
gram as being covered by insurance made available 
under that eligible State program. 
(4) QUALIFYING
ASSETS.—The term ‘‘quali-
fying assets’’ means the policyholder surplus of the 
eligible State program as stated in the most recent 
quarterly financial statement filed by the program 
with the domiciliary regulator of the program in the 
last quarter ending prior to an insured-loss trig-
gering event or events. 
(5) RESIDENTIAL PROPERTY INSURANCE.—The 
term ‘‘residential property insurance’’ means insur-
ance coverage for— 
VerDate Mar 15 2010 
02:37 Oct 08, 2011
Jkt 019200
PO 00000
Frm 00004
Fmt 6652
Sfmt 6201
E:\BILLS\H3125.IH
H3125
rfrederick on DSK6VPTVN1PROD with BILLS
(A) individually owned residential struc-
tures of not more than 4 dwelling units, individ-
ually owned condominium units, or individually 
owned mobile homes, and their contents, located 
in a State and used exclusively for residential 
purposes or a tenant’s policy written to include 
personal contents of a residential unit located in 
the State, but shall not include— 
(i) insurance for real property or its 
contents used for any commercial, indus-
trial, or business purpose, except a struc-
ture of not more than 4 dwelling units 
rented for individual residential purposes; 
or 
(ii) a policy that does not include any 
of the perils insured against in a standard 
fire policy or any earthquake policy; or 
(B) commercial residential property, which 
includes property owned by a condominium as-
sociation or its members, property owned by a 
cooperative association, or an apartment build-
ing. 
(6) SECRETARY.—The term ‘‘Secretary’’ means 
the Secretary of the Treasury. 
VerDate Mar 15 2010 
02:37 Oct 08, 2011
Jkt 019200
PO 00000
Frm 00005
Fmt 6652
Sfmt 6201
E:\BILLS\H3125.IH
H3125
rfrederick on DSK6VPTVN1PROD with BILLS
(7) STATE.—The term ‘‘State’’ means each of 
the several States of the United States, the District 
of Columbia, the Commonwealth of Puerto Rico, the 
Commonwealth of the Northern Mariana Islands, 
Guam, the United States Virgin Islands, American 
Samoa, and any other territory or possession of the 
United States. 
SEC. 4. ELIGIBLE STATE PROGRAMS. 
(a) ELIGIBLE STATE PROGRAMS.—A State program 
shall be considered an eligible State program for purposes 
of this Act if the State program or other State entity au-
thorized to make such determinations certifies to the Sec-
retary, in accordance with the procedures established 
under subsection (b), that the State program complies 
with the following requirements: 
(1) STATE PROGRAM DESIGN.—The State pro-
gram is established and authorized by State law as 
an earthquake insurance program that offers resi-
dential property insurance coverage for insured 
losses to property, contents, and additional living ex-
penses, and which is not a State program that re-
quires insurers to pool resources to provide property 
insurance coverage for earthquakes. 
(2) OPERATION.—The State program shall 
meet the following requirements: 
VerDate Mar 15 2010 
02:37 Oct 08, 2011
Jkt 019200
PO 00000
Frm 00006
Fmt 6652
Sfmt 6201
E:\BILLS\H3125.IH
H3125
rfrederick on DSK6VPTVN1PROD with BILLS
(A) A majority of the members of the gov-
erning body of the State program shall be pub-
lic officials or appointed by public officials. 
(B) The State shall have a financial inter-
est in the State program. 
(C) If the State has at any time appro-
priated amounts from the State program’s 
funds for any purpose other than payments for 
losses insured under the State program, or pay-
ments 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 mean-
ing of section 6110(b) of the Internal Revenue Code 
of 1986, that the State program either— 
(A) constitutes an ‘‘integral part’’ of the 
State that has created it; or 
(B) is otherwise exempt from Federal in-
come taxation. 
(4) EARNINGS.—The State program may not 
provide for any distribution of any part of any net 
VerDate Mar 15 2010 
02:37 Oct 08, 2011
Jkt 019200
PO 00000
Frm 00007
Fmt 6652
Sfmt 6201
E:\BILLS\H3125.IH
H3125
rfrederick on DSK6VPTVN1PROD with BILLS
profits of the State program to any insurer that par-
ticipates in the State program. 
(5) LOSS PREVENTION AND MITIGATION.— 
(A) MITIGATION OF LOSSES.—The State 
program shall include provisions designed to en-
courage and support programs to mitigate 
losses for which the State insurance program 
was established to provide insurance. 
(B) OPERATIONAL
REQUIREMENTS.—The 
State program shall operate in a State that— 
(i) has in effect and enforces, or the 
appropriate local governments within the 
State have in effect and enforce, nationally 
recognized building, seismic-design, and 
safety codes and consensus-based stand-
ards; and 
(ii) has taken actions to establish an 
insurance rate structure that takes into ac-
count measures to mitigate insured losses. 
(6) REQUIREMENTS REGARDING COVERAGE.— 
The State program— 
(A) may not, except for charges or assess-
ments related to post-event financing or bond-
ing, involve cross-subsidization between any 
separate property-and-casualty insurance lines 
VerDate Mar 15 2010 
02:37 Oct 08, 2011
Jkt 019200
PO 00000
Frm 00008
Fmt 6652
Sfmt 6201
E:\BILLS\H3125.IH
H3125
rfrederick on DSK6VPTVN1PROD with BILLS
offered under the State program pursuant to 
paragraph (1); 
(B) shall be subject to a requirement 
under State law that for earthquake insurance 
coverage made available under the State insur-
ance program the premium rates charged on 
such insurance shall be actuarially sound; and 
(C) shall make available to all qualifying 
policyholders insurance coverage and mitigation 
services on a basis that is not unfairly discrimi-
natory. 
(b) ANNUAL CERTIFICATION.—The Secretary shall 
establish procedures for initial certification and annual re-
certification as an eligible State program. 
SEC. 5. ESTABLISHMENT OF DEBT-GUARANTEE PROGRAM. 
(a) AUTHORITY OF SECRETARY.—The Secretary is 
authorized and shall have the powers and authorities nec-
essary— 
(1) to guarantee, and to enter into commit-
ments to guarantee, holders of debt against loss of 
principal or interest, or both, on any debt issued by 
eligible State programs for purposes of this Act; and 
(2) to certify and recertify State catastrophe in-
surance programs that cover earthquake peril to be-
VerDate Mar 15 2010 
02:37 Oct 08, 2011
Jkt 019200
PO 00000
Frm 00009
Fmt 6652
Sfmt 6201
E:\BILLS\H3125.IH
H3125
rfrederick on DSK6VPTVN1PROD with BILLS
come or remain eligible for the benefits of such a 
debt-guarantee program. 
(b) LIMIT ON OUTSTANDING DEBT GUARANTEE.— 
The aggregate amount of debt covered by the Secretary’s 
guarantees and commitments to guarantee for all eligible 
State programs outstanding at any time shall not exceed 
$5,000,000,000, including interest. 
(c) FUNDING.— 
(1) APPROPRIATION OF FEDERAL PAYMENTS.— 
Subject to subsection (b), there are hereby appro-
priated, out of funds in the Treasury not otherwise 
appropriated, such sums as may be necessary to sat-
isfy debt guarantee commitments extended to eligible 
State programs under this Act. 
(2) CERTIFICATION FEE.—Upon certification or 
recertification as an eligible State program under 
section 4(a) or 4(b), a State program shall be 
charged a certification fee sufficient in the judge-
ment of the Secretary at the time of certification to 
cover— 
(A) applicable administrative costs arising 
from each certification or recertification, includ-
ing all pre-certification costs and a proportional 
share of the costs arising from the administra-
tion of the program established under this Act, 
VerDate Mar 15 2010 
02:37 Oct 08, 2011
Jkt 019200
PO 00000
Frm 00010
Fmt 6652
Sfmt 6201
E:\BILLS\H3125.IH
H3125
rfrederick on DSK6VPTVN1PROD with BILLS
but in any event not to exceed one-half of 1 
percent annum of the aggregate principal 
amount of the debt for which the eligible State 
program is issued a guarantee commitment; 
and 
(B) any probable losses on the aggregate 
principal amount of the debt for which the eligi-
ble State program is issued a guarantee com-
mitment. 
(3) RULE OF CONSTRUCTION.—Any funds ex-
pended or obligated by the Secretary for the pay-
ment of administrative expenses for conduct of the 
debt-guarantee program authorized by this Act shall 
be deemed appropriated at the time of such expendi-
ture or obligation from the certification and recer-
tification fees collected pursuant to paragraph (2). 
(d) CONDITIONS FOR GUARANTEE ELIGIBILITY.—A 
debt guarantee under this section may be made only if 
the Secretary has issued a commitment to guarantee to 
a certified, eligible State program. The commitment to 
guarantee shall be in force for a period of 3 years from 
its initial issuance and may be extended by the Secretary 
for 1 year on each annual anniversary of the issuance of 
the commitment to guarantee. The commitment to guar-
antee and each extension of such commitment may be 
VerDate Mar 15 2010 
02:37 Oct 08, 2011
Jkt 019200
PO 00000
Frm 00011
Fmt 6652
Sfmt 6201
E:\BILLS\H3125.IH
H3125
rfrederick on DSK6VPTVN1PROD with BILLS
issued by the Secretary only if the following requirements 
are satisfied: 
(1) The eligible State program submits to the 
Secretary a report setting forth, in such form and 
including such information as the Secretary shall re-
quire, how the eligible State program plans to repay 
guarantee-eligible debt it may incur. 
(2) Based on the eligible State program’s report 
submitted pursuant to paragraph (1), the Secretary 
determines there is reasonable assurance that the el-
igible State program can meet its repayment obliga-
tion under such debt. 
(3) The eligible State program enters into an 
agreement with the Secretary, as the Secretary shall 
require, that the eligible State program will not use 
Federal funds of any kind or from any Federal 
source (including any disaster or other financial as-
sistance, loan proceeds, and any other assistance or 
subsidy) to repay the debt. 
(4) The commitment to guarantee shall specify 
and require the payment of the fees for debt guar-
antee coverage. 
(5) The maximum term of the debt specified in 
a commitment issued under this section may not ex-
ceed 30 years. 
VerDate Mar 15 2010 
02:37 Oct 08, 2011
Jkt 019200
PO 00000
Frm 00012
Fmt 6652
Sfmt 6201
E:\BILLS\H3125.IH
H3125
rfrederick on DSK6VPTVN1PROD with BILLS
(e) MANDATORY ASSISTANCE FOR ELIGIBLE STATE 
PROGRAMS.—The Secretary shall upon the request of an 
eligible State program and pursuant to a commitment to 
guarantee issued under subsection (d), provide a guar-
antee under subsection (f) for such eligible State program 
in the amount requested by such eligible State program, 
subject to the limitation under subsection (f)(2). 
(f) CATASTROPHE DEBT GUARANTEE.—A debt guar-
antee under this subsection for an eligible State program 
shall be subject to the following requirements: 
(1) PRECONDITIONS.—The eligible State pro-
gram shows to the satisfaction of the Secretary that 
insured losses to the eligible State program arising 
from the event or events covered by the commitment 
to guarantee are likely to exceed 80 percent of the 
eligible State program’s qualifying assets available to 
pay claims, as calculated on the date of the event 
and based on the eligible State program’s most re-
cent quarterly financial statement filed with its 
domiciliary regulator. 
(2) USE OF FUNDS.—Proceeds of debt guaran-
teed under this section shall be used only to pay the 
costs of issuing debt and of securing or providing 
claim-payment capacity for paying the insured losses 
and loss adjustment expenses incurred by an eligible 
VerDate Mar 15 2010 
02:37 Oct 08, 2011
Jkt 019200
PO 00000
Frm 00013
Fmt 6652
Sfmt 6201
E:\BILLS\H3125.IH
H3125
rfrederick on DSK6VPTVN1PROD with BILLS
State program. Such amounts shall not be used for 
any other purpose. 
SEC. 6. EFFECT OF GUARANTEE. 
The issuance of any guarantee by the Secretary 
under this Act 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. 
SEC. 7. ASSESSMENT AT TIME OF GUARANTEE. 
To extent not satisfied by the fees collected under sec-
tion 5(c)(2), the Secretary shall charge and collect fees 
for each guarantee issued in amounts sufficient in the 
judgement of the Secretary at the time of issuance of the 
guarantee to cover applicable administrative costs and 
probable losses on the guaranteed obligations. 
SEC. 8. PAYMENT OF LOSSES. 
(a) IN GENERAL.—The Secretary agrees to pay to 
the duly appointed paying agent or trustee (in this section 
referred to as the ‘‘Fiscal Agent’’) for the eligible State 
program that portion of the principal and interest on any 
debt guaranteed under this Act that shall become due to 
payment but shall be unpaid by the eligible State program 
as a result of such program having provided insufficient 
VerDate Mar 15 2010 
02:37 Oct 08, 2011
Jkt 019200
PO 00000
Frm 00014
Fmt 6652
Sfmt 6201
E:\BILLS\H3125.IH
H3125
rfrederick on DSK6VPTVN1PROD with BILLS
funds to the Fiscal Agent to make such payments. The 
Secretary shall make such payments on the date such 
principal or interest becomes due for payment or on the 
business day next following the day on which the Secretary 
shall receive notice of failure on the part of the eligible 
State program to provide sufficient funds to the Fiscal 
Agent to make such payments, whichever is later. 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 pursu-
ant to any guarantee entered into under this Act. 
(b) ROLE OF THE ATTORNEY GENERAL.—The Attor-
ney General shall take such action as may be appropriate 
to enforce any right accruing, and to collect any and all 
sums owing, to the United States as a result of the 
issuance of any guarantee under this Act. 
(c) RULE OF CONSTRUCTION.—Nothing in this sec-
tion shall be construed to preclude any forbearance for the 
benefit of the eligible State program which may be agreed 
upon by the parties to the guaranteed debt and approved 
by the Secretary, provided that budget authority for any 
resulting cost, as such term is defined under the Federal 
Credit Reform Act of 1990, is available. 
VerDate Mar 15 2010 
02:37 Oct 08, 2011
Jkt 019200
PO 00000
Frm 00015
Fmt 6652
Sfmt 6201
E:\BILLS\H3125.IH
H3125
rfrederick on DSK6VPTVN1PROD with BILLS
(d) RIGHT OF THE SECRETARY.—Notwithstanding 
any other provision of law relating to the acquisition, han-
dling, or disposal of property by the United States, the 
Secretary shall have the right in the discretion of the Sec-
retary to complete, recondition, reconstruct, renovate, re-
pair, maintain, operate, or sell any property acquired by 
the Secretary pursuant to the provisions of this Act. 
SEC. 9. FULL FAITH AND CREDIT. 
The full faith and credit of the United States is 
pledged to the payment of all guarantees issued under this 
Act with respect to principal and interest. 
SEC. 10. BUDGETARY IMPACT; COSTS. 
For purposes of section 502(5) of the Federal Credit 
Reform Act of 1990, the cost of guarantees to be issued 
under this Act shall be calculated by adjusting the dis-
count rate in section 502(5)(E) of such Act for market 
risk. 
SEC. 11. REGULATIONS. 
The Secretary shall issue any regulations necessary 
to carry out the debt-guarantee program established under 
this Act. 
Æ 
VerDate Mar 15 2010 
02:37 Oct 08, 2011
Jkt 019200
PO 00000
Frm 00016
Fmt 6652
Sfmt 6301
E:\BILLS\H3125.IH
H3125
rfrederick on DSK6VPTVN1PROD with BILLS