HR 827119th CongressIn Committee

Homeowners’ Defense Act of 2025

Introduced: Jan 28, 2025

Standard Summary

Comprehensive overview in 1-2 paragraphs

The Homeowners’ Defense Act of 2025 would create a comprehensive federal framework intended to maintain and improve the availability and affordability of homeowners’ insurance for natural catastrophes. It establishes a National Catastrophe Risk Consortium to study and disclose catastrophe risk, backs state catastrophe insurance programs with a federal debt-guarantee option, offers federal reinsurance coverage for eligible state programs, and creates a Mitigation Grant Program to reduce losses. The act envisions leveraging private capital and state programs to speed claim payments and support financial recovery after major disasters, with funding mechanisms that include Treasury-backed guarantees, a dedicated Federal Natural Catastrophe Reinsurance Fund, and annual appropriations. In short, the bill expands federal involvement in supporting state-run homeowners’ insurance programs, while seeking to incentivize risk reduction and increase market capacity through guarantees, reinsurance, and targeted mitigation funding. It also lays out eligibility standards for state programs, requires reporting and analysis, and directs studies on pricing and coverage in related markets.

Key Points

1National Catastrophe Risk Consortium: Establishes the National Catastrophe Risk Consortium, chaired by the Secretary of the Treasury, with participation open to all States. It will inventory catastrophe risk obligations, assess insurance market gaps, promote clear disclosure of catastrophe risk, produce annual reports for Congress, examine potential disruptions to private coverage, and consider disparate impacts on disadvantaged communities.
2Debt Guarantee Program (Title II): The Treasury may guarantee debt issued by eligible State catastrophe programs to provide liquidity for such programs after a disaster. Caps: up to $3.5 billion for earthquake perils and $17 billion for all other perils, with total potential guaranteed debt subject to these limits. Commitments last 3 years and can be extended by 1 year; guarantees require a repayment plan, proof of repayment ability, and an agreement that federal funds won’t be used to repay the debt. Fees for guarantees are set by the Secretary, not to exceed 0.5% per year of outstanding guaranteed debt. The U.S. government’s full faith and credit backs these guarantees.
3Reinsurance Coverage (Title III): The Treasury offers reinsurance contracts to eligible State programs to cover insured losses above retained losses, with 80% to 90% coverage. Contracts can be up to 1 year (or as determined by the Secretary) and cover losses from one or more events within the contract term. Pricing must be actuarial and reflect anticipated costs, loss adjustment expenses, and program administration. The Federal Natural Catastrophe Reinsurance Fund backs these contracts and related payments, with limitations based on appropriations and market conditions.
4Federal Natural Catastrophe Reinsurance Fund (Title III): A dedicated Treasury fund financed by sale of reinsurance contracts, appropriations for aggregate liability, and investment income. It funds contract payments, administrative costs, and outward reinsurance. Investments are in U.S. Treasury obligations, with annual investment income disclosed and used to support program operations.
5Mitigation Grant Program (Title IV): HUD would run a program providing grants to entities (states, local entities, or disaster-response nonprofits) to reduce catastrophe losses through risk awareness campaigns, risk-location analysis, home inspections, retrofit funding, and disaster-response readiness. Grants prioritize applicants with greater financial need, including low-income areas. At least 35% of net investment income from the Federal Fund (the reinsurance fund) would be dedicated to these grants, subject to Congressional appropriation.
6Eligible State Programs and Transitional Provisions (Title V): Sets criteria for State programs to be eligible, including design to improve private markets, governance structure, tax status, earnings and profit restrictions, and mandatory mitigation and risk-based capital requirements. It provides procedures for federal certification and transition measures, including a 5-year period during which certain states without eligible programs could rely on existing residual market entities if they existed before enactment.
7Studies on Pricing and Commercial Lines (Sections 502 and 503): The Act directs expedited study on (a) expansion to commercial residential lines and private-market impact, and (b) risk-based pricing and state program rates, with a GAO report due within 6 months on pricing adequacy, cost coverage, and any resulting policyholder impacts.

Impact Areas

Primary group/area affected- Homeowners and property owners in catastrophe-prone states, and the state catastrophe insurance programs that insure residential properties.- State insurance regulators and state governments implementing eligible State programs.Secondary group/area affected- Private insurers and the broader homeowners’ insurance market, which may see changes in capital availability, pricing, and capacity.- Taxpayers and the federal budget, due to potential appropriations and the U.S. government’s full faith and credit backing guarantees.Additional impacts- Potential improvement in disaster insurance capacity and faster, more predictable claim payments after events.- Increased focus on mitigation, resilience-building, and disclosure of catastrophe risk to consumers.- Possible effects on insurance premiums and affordability, depending on how pricing, guarantees, and subsidies interact with market rates.- Regulatory and reporting requirements for state programs, the Consortium, and the federal reinsurance fund, plus ongoing studies on pricing and market effects.

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