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.

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:

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 California 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. Earthquakes 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, relatively few 
        homeowners have earthquake insurance. For example, in 
        California, 88 percent of homes insured 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 
        risk of mortgage and other credit defaults and adversely affect 
        the Nation's banking system.
            (3) It is important that States improve the affordability, 
        availability, and quality of earthquake insurance so that more 
        homeowners will purchase coverage. For example, California has 
        created the California Earthquake Authority to provide 
        earthquake insurance to homeowners through private-sector 
        insurers.
            (4) It is a proper role of the Federal Government to help 
        prepare and protect its citizens from catastrophes such as 
        earthquakes and to facilitate consumer protection, victim 
        assistance, and individual and community recovery, including 
        financial recovery.
    (b) Purposes.--The purposes of this Act are to establish 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 assist the financial 
        recovery from significant earthquakes by authorizing the 
        Secretary of the Treasury to guarantee debt for such purposes.

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 ``eligible 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 earthquake that is determined by an eligible 
        State program as being covered by insurance made available 
        under that eligible State program.
            (4) Qualifying assets.--The term ``qualifying 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 triggering 
        event or events.
            (5) Residential property insurance.--The term ``residential 
        property insurance'' means insurance coverage for--
                    (A) individually owned residential structures of 
                not more than 4 dwelling units, individually 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, industrial, 
                        or business purpose, except a structure 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 association or its 
                members, property owned by a cooperative association, 
                or an apartment building.
            (6) Secretary.--The term ``Secretary'' means the Secretary 
        of the Treasury.
            (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 authorized to make such determinations certifies 
to the Secretary, in accordance with the procedures established under 
subsection (b), that the State program complies with the following 
requirements:
            (1) State program design.--The State program is established 
        and authorized by State law as an earthquake insurance program 
        that offers residential property insurance coverage for insured 
        losses to property, contents, and additional living expenses, 
        and which is not a State program that requires insurers to pool 
        resources to provide property insurance coverage for 
        earthquakes.
            (2) Operation.--The State program shall meet the following 
        requirements:
                    (A) A majority of the members of the governing body 
                of the State program shall be public officials or 
                appointed by public officials.
                    (B) The State shall have a financial interest in 
                the State program.
                    (C) 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 either--
                    (A) constitutes an ``integral part'' of the State 
                that has created it; or
                    (B) is otherwise exempt from Federal income 
                taxation.
            (4) Earnings.--The State program may not provide for any 
        distribution of any part of any net profits of the State 
        program to any insurer that participates in the State program.
            (5) Loss prevention and mitigation.--
                    (A) Mitigation of losses.--The State program shall 
                include provisions designed to encourage 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 standards; and
                            (ii) has taken actions to establish an 
                        insurance rate structure that takes into 
                        account measures to mitigate insured losses.
            (6) Requirements regarding coverage.--The State program--
                    (A) may not, except for charges or assessments 
                related to post-event financing or bonding, involve 
                cross-subsidization between any separate property-and-
                casualty insurance lines 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 insurance 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 
                discriminatory.
    (b) Annual Certification.--The Secretary shall establish procedures 
for initial certification and annual recertification 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 necessary--
            (1) to guarantee, and to enter into commitments 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 insurance 
        programs that cover earthquake peril to become 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 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.
            (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 judgement of the Secretary at the time of 
        certification to cover--
                    (A) applicable administrative costs arising from 
                each certification or recertification, including all 
                pre-certification costs and a proportional share of the 
                costs arising from the administration of the program 
                established under this Act, 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 eligible State program 
                is issued a guarantee commitment.
            (3) Rule of construction.--Any funds expended or obligated 
        by the Secretary for the payment of administrative expenses for 
        conduct of the debt-guarantee program authorized by this Act 
        shall be deemed appropriated at the time of such expenditure or 
        obligation from the certification and recertification 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 guarantee and each extension of such commitment may be 
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 require, 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 eligible State program can meet 
        its repayment obligation 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 assistance, 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 guarantee coverage.
            (5) The maximum term of the debt specified in a commitment 
        issued under this section may not exceed 30 years.
    (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 guarantee 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 guarantee under this 
subsection for an eligible State program shall be subject to the 
following requirements:
            (1) Preconditions.--The eligible State program 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 recent quarterly financial 
        statement filed with its domiciliary regulator.
            (2) Use of funds.--Proceeds of debt guaranteed 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 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 guarantee; and
            (3) the guarantee is valid, legal, and enforceable.

SEC. 7. ASSESSMENT AT TIME OF GUARANTEE.

    To extent not satisfied by the fees collected under section 
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 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 pursuant to any guarantee 
entered into under this Act.
    (b) Role of the Attorney General.--The Attorney 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 section 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.
    (d) Right of the Secretary.--Notwithstanding any other provision of 
law relating to the acquisition, handling, or disposal of property by 
the United States, the Secretary shall have the right in the discretion 
of the Secretary to complete, recondition, reconstruct, renovate, 
repair, 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 discount 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.

Summary: Earthquake Insurance Affordability Act - Authorizes the Secretary of the Treasury to guarantee holders of debt against loss of principal or interest, or both, on debt issued by eligible state programs designed to: (1) promote the availability of private capital to provide liquidity and capacity to state earthquake (specifically, residential property) insurance programs, and (2) expedite the payment of claims under such programs and better assist financial recovery from significant earthquakes.

Prescribes operational requirements for eligible state programs which include an established earthquake insurance program that: (1) offers residential property insurance coverage for insured losses to property, contents, and additional living expenses; and (2) does not require insurers to pool resources to provide property insurance coverage for earthquakes.

Includes among such operational requirements that the state: (1) 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 standards; and (2) has taken actions to establish an insurance rate structure that takes into account measures to mitigate insured losses.

Directs the Secretary to establish procedures for certification of an eligible state program.

Limits to $5 billion, including interest, the aggregate principal amount of outstanding debt obligations guaranteed by the Secretary.

Makes appropriations to satisfy debt guarantee commitments.

Requires the Secretary, upon request of an eligible state program, to provide such debt guarantees.

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