,,ii #aacth ,,congress #ast ,session ,s4 #ahac ,,in ,,the ,,senate ,,of ,,the ,,united ,,states ,december #ab 7legislative day1 ,december #aa71 #bjac,mrs4 ,feinstein 7for herself and ,mrs4 ,boxer7 introduced the following bill2 which was read twice and referred to the ,committee on ,banking1 ,housing1 and ,urban ,affairs ,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 and earthquake-related events4 #a4 ,short title2 table of contents 7a7 ,short title ,this ,act may be cited as the ,earthquake ,insurance ,affordability ,act of #bjac4 7b7 ,table of contents ,the table of contents for this ,act is as follows3 ,sec4 #a4 ,short title2 table of contents4,sec4 #b4 ,findings and purposes4,sec4 #c4 ,definitions4,sec4 #d4 ,eligible ,state programs4,sec4 #e4 ,establishment of debt-guarantee program4,sec4 #f4 ,effect of guarantee4,sec4 #g4 ,assessment at time of guarantee4,sec4 #h4 ,payment of losses4,sec4 #i4 ,full faith and credit4,sec4 #aj4 ,budgetary impact2 costs4,sec4 #aa4 ,regulations4,sec4 #ab4 ,reports4 #b4 ,findings and purposes 7a7 ,findings ,congress finds the following3 7#a7 ,major earthquakes are likely in the ,united ,states4 ,for example1 the ,united ,states ,geological ,survey predicts that there is a #ii4g percent chance that a magnitude #f4g earthquake will strike in ,california in the next #cj years and that there is a #df percent chance that a magnitude #g4e earthquake will strike in ,california in the next #cj years4 ,earthquakes can be caused by volcanic or tectonic events and result in destructive shaking of the earth1 fires1 landslides1 volcanic eruptions1 and tsunamis4 7#b7 ,despite the known risk of earthquakes1 relatively few homeowners have earthquake insurance4 ,for example1 in ,california1 #hh percent of homes insured for fire do not have earthquake insurance4 ,in the event of a catastrophic earthquake1 the lack of homeowner earthquake-insurance coverage will slow recovery1 create economic hardship1 and increase the risk of mortgage and other credit defaults and adversely affect the banking system of the ,united ,states4 7#c7 ,it is important that ,states improve the affordability1 availability1 and quality of earthquake insurance so that more homeowners will purchase coverage4 ,for example1 ,california has created the ,california ,earthquake ,authority to provide earthquake insurance to homeowners through private-sector insurers4 7#d7 ,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 protection1 victim assistance1 and individual and community recovery1 including financial recovery4 7b7 ,purposes ,the purposes of this ,act are to establish a program-- 7#a7 to promote the availability of private capital to provide liquidity and capacity to ,state earthquake insurance programs2 and 7#b7 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 purposes4 #c4 ,definitions ,in this ,act1 the following definitions shall apply3 7#a7 ,commitment to guarantee ,the term commitment to guarantee means a commitment to make debt guarantees to an eligible ,state program pursuant to section #e4 7#b7 ,eligible ,state program ,the term eligible ,state program means a ,state program that1 pursuant to section #d1 is eligible to receive a debt guarantee under this ,act4 7#c7 ,insured loss ,the term insured loss means any loss resulting from an earthquake or earthquake-related event that is determined by an eligible ,state program to be covered by insurance made available under that eligible ,state program4 7#d7 ,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 events4 7#e7 ,residential property insurance ,the term residential property insurance means insurance coverage for-- 7,a7 individually owned residential structures of not more than #d dwelling units1 individually owned condominium units1 or individually owned mobile homes1 and their contents1 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 ,state1 but shall not include-- 7i7 insurance for real property or its contents used for any commercial1 industrial1 or business purpose1 except a structure of not more than #d dwelling units rented for individual residential purposes2 or 7ii7 a policy that does not include any of the perils insured against in a standard fire policy or any earthquake policy2 or 7,b7 commercial residential property1 which includes property owned by a condominium association or its members1 property owned by a cooperative association1 or an apartment building4 7#f7 ,secretary ,the term ,secretary means the ,secretary of the ,treasury4 7#g7 ,state ,the term ,state means each of the several ,states of the ,united ,states1 the ,district of ,columbia1 the ,commonwealth of ,puerto ,rico1 the ,commonwealth of the ,northern ,mariana ,islands1 ,guam1 the ,united ,states ,virgin ,islands1 ,american ,samoa1 and any other territory or possession of the ,united ,states4 #d4 ,eligible ,state programs 7a7 ,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 ,secretary1 in accordance with the procedures established under subsection 7b71 that the ,state program complies with the following requirements3 7#a7 ,state program design ,the ,state program-- 7,a7 shall be established and authorized by ,state law as an earthquake insurance program that offers residential property insurance coverage for insured losses to property1 contents1 and additional living expenses2 and 7,b7 may not require insurers to pool resources to provide property insurance coverage for earthquakes4 7#b7 ,operation 7,a7 ,public officials ,a majority of the members of the governing body of the ,state program shall be public officials or appointed by public officials4 7,b7 ,state financial interest ,the ,state shall have a financial interest in the ,state program4 7,c7 ,repayment of appropriated amounts ,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 program1 or payments made in connection with any of the ,state program's authorized activities1 the ,state shall have returned such amounts to the ,state fund1 together with interest on such amounts4 7#c7 ,tax status ,the ,state program shall have received from the ,secretary 7or the ,secretary's designee7 a written determination1 within the meaning of section #faaj7;b7 of the ,internal ,revenue ,code of #aihf1 that the ,state program either-- 7,a7 constitutes an integral part of the ,state that has created it2 or 7,b7 is otherwise exempt from ,federal income taxation4 7#d7 ,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 program4 7#e7 ,loss prevention and mitigation 7,a7 ,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 insurance4 7,b7 ,operational requirements ,the ,state program shall operate in a ,state-- 7i7 that has in effect and enforces1 or within which the appropriate local governments have in effect and enforce1 nationally recognized building1 seismic-design1 and safety codes and consensus-based standards2 and 7ii7 that has taken actions to establish an insurance rate structure that takes into account measures to mitigate insured losses4 7#f7 ,requirements regarding coverage ,the ,state program-- 7,a7 may not1 except for charges or assessments related to post-event financing or bonding1 involve cross-subsidization between any separate property-and-casualty insurance lines offered under the ,state program pursuant to paragraph 7#a72 7,b7 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-- 7i7 shall be actuarially sound2 7ii7 may not be excessive1 inadequate1 or unfairly discriminatory2 7iii7 shall be established based on the best available scientific information for assessing the risk of earthquake frequency1 severity1 and loss2 and 7iv7 shall incorporate1 and may not in the aggregate be less than1 the sum of the modeled expected loss1 risk financing costs1 loss adjustment expense1 and any other expenses necessary to operate the ,state program2 and 7,c7 shall make available to all qualifying policyholders insurance coverage and mitigation services on a basis that is not unfairly discriminatory4 7b7 ,annual certification ,the ,secretary shall establish procedures for initial certification and annual recertification of a ,state program as an eligible ,state program4 #e4 ,establishment of debt-guarantee program 7a7 ,authority of ,secretary ,the ,secretary is authorized and shall have the powers and authorities necessary-- 7#a7 to guarantee1 and to enter into commitments to guarantee1 holders of debt against loss of principal or interest1 or both1 on any debt issued by eligible ,state programs for purposes of this ,act2 and 7#b7 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 program4 7b7 ,limit on outstanding debt guarantees ,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 #c1jjj1jjj1jjj1 including interest4 7c7 ,funding 7#a7 ,appropriation of ,federal payments ,subject to subsection 7b71 there are hereby appropriated1 out of funds in the ,treasury not otherwise appropriated1 such sums as may be necessary to satisfy debt guarantee commitments extended to eligible ,state programs under this ,act4 7#b7 ,certification fee ,upon certification or recertification as an eligible ,state program under section #d1 a ,state program shall be charged a certification fee that the ,secretary determines1 at the time of certification or recertification1 is sufficient to cover-- 7,a7 applicable administrative costs arising from the certification or recertification1 including all pre-certification costs and a proportional share of the costs arising from the administration of the program established under this ,act1 but in any event not to exceed one-half of #a percent per annum of the aggregate principal amount of the debt for which the eligible ,state program is issued a guarantee commitment2 and 7,b7 any probable losses on the aggregate principal amount of the debt for which the eligible ,state program is issued a guarantee commitment4 7#c7 ,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 7#b74 7d7 ,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 certified1 eligible ,state program4 ,the commitment to guarantee shall be in force for a period of #c years from its initial issuance and may be extended by the ,secretary for #a year on each annual anniversary of the issuance of the commitment to guarantee4 ,the commitment to guarantee and each extension of such commitment may be issued by the ,secretary only if-- 7#a7 the eligible ,state program submits to the ,secretary a report setting forth1 in such form and including such information as the ,secretary shall require1 how the eligible ,state program plans to repay guarantee-eligible debt it may incur2 7#b7 based on the eligible ,state program's report submitted pursuant to paragraph 7#a71 the ,secretary determines there is reasonable assurance that the eligible ,state program can meet its repayment obligation under such debt1 by considering relevant criteria including-- 7,a7 par amount of debt to be issued2 7,b7 use of debt proceeds2 7,c7 proposed debt structure2 7,d7 term of debt outstanding2 7,e7 ratio of premium income to expected debt service2 7,f7 review of recent quarterly financial statements2 and 7,g7 review of any recent credit rating provided by a nationally recognized statistical rating organization1 as defined in section #c7;a7 of the ,securities ,exchange ,act of #aicd 7#ae ,u4,s4,c4 #gh;c7a772 7#c7 the eligible ,state program enters into an agreement with the ,secretary1 as the ,secretary shall require1 that the eligible ,state program-- 7,a7 will not use ,federal funds of any kind or from any ,federal source 7including any disaster or other financial assistance1 loan proceeds1 and any other assistance or subsidy7 to repay the debt2 7,b7 will1 to the extent prudent1 use any authority or capacity to surcharge policyholders or policies of coverage to contribute to repaying the debt guaranteed under this subsection2 and 7,c7 will apply annually1 except in years in which the debt is being repaid1 an amount not less than #b percent of the debt subject to the agreement toward a combination of-- 7i7 mitigation initiatives2 and 7ii7 public education regarding the risks of earthquakes and earthquake-related events2 7#d7 the commitment to guarantee specifies and requires the payment of the fees for debt guarantee coverage2 and 7#e7 the maximum term of the debt specified in the commitment to guarantee does not exceed #cj years4 7e7 ,mandatory assistance for eligible ,state programs ,the ,secretary shall1 upon the request of an eligible ,state program and pursuant to a commitment to guarantee issued under subsection 7d71 provide a guarantee under subsection 7f7 for the eligible ,state program in the amount requested by the eligible ,state program4 7f7 ,catastrophe debt guarantee ,a debt guarantee under this subsection for an eligible ,state program shall be subject to the following requirements3 7#a7 ,preconditions ,the eligible ,state program shall demonstrate 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 #hj percent of the eligible ,state program's qualifying assets available to pay claims1 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 regulator4 7#b7 ,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 program4 ,such amounts shall not be used for any other purpose4 7#c7 ,limit on guarantee for events relating to a single earthquake ,the amount of a debt guarantee that an eligible ,state program receives to secure or provide claim-payment capacity for paying the insured losses and loss adjustment expenses from all events relating to a single earthquake may not be greater than #a1ejj1jjj1jjj4 #f4 ,effect of guarantee ,the issuance of any guarantee by the ,secretary under this ,act shall be conclusive evidence that-- 7#a7 the guarantee has been properly obtained2 7#b7 the underlying debt qualified for such guarantee2 and 7#c7 the guarantee is valid1 legal1 and enforceable4 #g4 ,assessment at time of guarantee ,if the ,secretary determines that the fees collected under section #e7;c77#b7 will not cover applicable administrative costs for1 and probable losses on1 a guaranteed obligation1 the ,secretary shall charge and collect a fee for each guarantee issued in an amount that the ,secretary determines1 at the time of issuance of the guarantee1 is sufficient to cover such costs and probable losses4 #h4 ,payment of losses 7a7 ,payment by ,secretary 7#a7 ,in general ,the ,secretary shall pay to the duly appointed paying agent or trustee 7in this section referred to as the ,fiscal ,agent7 for an eligible ,state program that portion of the principal and interest on any debt guaranteed under this ,act that becomes due for payment but is unpaid by the eligible ,state program as a result of the eligible ,state program having provided insufficient funds to the ,fiscal ,agent to make the payment4 7#b7 ,time of payment ,the ,secretary shall make a payment described in paragraph 7#a7 on the later of-- 7,a7 the date on which the principal or interest becomes due for payment2 or 7,b7 the first business day after the date on which the ,secretary receives notice that the eligible ,state program has failed to provide sufficient funds to the ,fiscal ,agent to make the payment4 7#c7 ,subrogation of rights ,upon making a payment under this subsection1 the ,secretary shall be subrogated to all the rights of the ultimate recipient of the payment4 7#d7 ,recovery from eligible ,state program ,the ,secretary shall be entitled to recover from an eligible ,state program the amount of any payments made by the ,secretary pursuant to any guarantee entered into under this ,act4 7b7 ,role of the ,attorney ,general ,the ,attorney ,general shall take such action as may be appropriate to enforce any right accruing1 and to collect any and all sums owing1 to the ,united ,states as a result of the issuance of any guarantee under this ,act4 7c7 ,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 ,secretary1 provided that budget authority for any resulting cost1 as such term is defined under the ,federal ,credit ,reform ,act of #aiij 7#b ,u4,s4,c4 #ffa et seq471 is available4 7d7 ,right of the ,secretary ,notwithstanding any other provision of law relating to the acquisition1 handling1 or disposal of property by the ,united ,states1 the ,secretary shall have the right in the discretion of the ,secretary to complete1 recondition1 reconstruct1 renovate1 repair1 maintain1 operate1 or sell any property acquired by the ,secretary pursuant to the provisions of this ,act4 #i4 ,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 interest4 #aj4 ,budgetary impact2 costs ,for purposes of section #ejb7e7 of the ,federal ,credit ,reform ,act of #aiij 7#b ,u4,s4,c4 #ffa;a7#e771 the cost of guarantees to be issued under this ,act shall be calculated by adjusting the discount rate in section #ejb7e77;,e7 of such ,act for market risk4 #aa4 ,regulations ,the ,secretary shall issue any regulations necessary to carry out the debt-guarantee program established under this ,act4 #ab4 ,reports 7a7 ,in general ,not later than #ab months after the date on which the ,secretary issues a guarantee under section #e for debt issued by an eligible ,state program1 and annually thereafter1 the eligible ,state program shall submit to the ,secretary and to ,congress a report1 in a form prescribed by the ,secretary1 that contains the information required under subsection 7b74 7b7 ,contents ,a report under this section shall describe1 with respect to the reporting year-- 7#a7 the benefits that the eligible ,state program derived from the debt-guarantee2 and 7#b7 the manner in which the eligible ,state program applied #b percent of the guarantee amount for the purposes described in section #e7;d77#c77;,c74 7c7 ,limitation ,to the extent practicable1 the ,secretary shall limit the information required to be included in a report under this section to information that is otherwise publicly available4