Summary: H.R.3355 — 110th Congress (2007-2008)All Information (Except Text)

Bill summaries are authored by CRS.

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Passed House amended (11/08/2007)

Homeowners' Defense Act of 2007 - Declares that the purpose of this Act is to provide federal support for state-sponsored insurance programs to: (1) help homeowners prepare for and recover from damages caused by natural catastrophes; and (2) promote the use of private market capital as a means to insure against such catastrophes.

Title I: National Catastrophe Risk Consortium - (Sec. 101) Establishes the National Catastrophe Risk Consortium as a nonprofit, nonfederal entity to: (1) inventory catastrophe risk obligations held by state reinsurance funds, and state residual insurance market entities; (2) issue, on a conduit basis, securities and other financial instruments linked to catastrophe risks insured or reinsured through Consortium members; (3) act as a centralized repository of state risk information accessible by private-market participants seeking to participate in either such financial instruments or certain reinsurance contracts; and (4) perform research and analysis that encourages standardization of the risk-linked securities market.

Makes eligible to join the Consortium any: (1) state that has established a reinsurance fund or has authorized operation of a state residual insurance market entity; or (2) state-sponsored provider of natural catastrophe insurance.

(Sec. 107) Shields the federal government and the Consortium from liability arising from Consortium actions. Requires participating states to retain all catastrophe risk until completion of specified transactions.

(Sec. 108) Authorizes appropriations for FY2008-FY2013.

Title II: National Homeowners' Insurance Stabilization Program - (Sec. 201) Instructs the Secretary of the Treasury to implement a program to make liquidity loans and catastrophic loans to qualified reinsurance programs to: (1) ensure their solvency; (2) improve the availability and affordability of homeowners' insurance; (3) encourage risk transfer to the private capital and reinsurance markets; and (4) spread the risk of catastrophic financial loss resulting from natural disasters and catastrophic events.

(Sec. 202) Prescribes terms and conditions for liquidity loans and catastrophic loans for qualified reinsurance programs. Authorizes the Secretary to enter into loan contracts.

Requires as one prerequisite for such a loan to a qualified reinsurance program that before the loan is made the state or regional reinsurance program enter into an agreement with the Secretary that the state 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 loan.

Cites circumstances under which the Secretary is required to make loans upon request of a qualified reinsurance program.

Limits the use of such loans solely to providing reinsurance or retrocessional coverage to underlying primary insurers or reinsurers for losses arising from specified personal residential lines of insurance.

(Sec. 204) Authorizes the Secretary to establish a fee collection program to implement this Act.

Instructs the Secretary to require full repayment of all loans made under this Act.

Title III: Reinsurance Coverage for Qualified Reinsurance Programs - (Sec. 301) Authorizes the Secretary to make contracts for reinsurance coverage under this title available for purchase only by qualified reinsurance programs.

(Sec. 302) Declares that contracts for reinsurance coverage made available under this title: (1) shall not displace or compete with the private insurance or reinsurance markets or the capital market; (2) shall minimize the administrative costs of the federal government; and (3) shall provide coverage based solely on insured losses covered by the qualified reinsurance program purchasing the contract.

(Sec. 303) Specifies terms and conditions of qualified reinsurance programs, including: (1) a minimum attachment point; and (2) 90% coverage of insured losses in excess of retained losses.

(Sec. 304) Sets the maximum aggregate potential federal liability for payment of claims under all reinsurance contracts sold in any single year at $200 billion, or such lesser amount as the Secretary determines based on review of the reinsurance market.

Limits the authority of the Secretary to enter into reinsurance contracts for any fiscal year to the extent or in such amounts as are or have been provided in appropriation Acts for that fiscal year.

(Sec. 305) Establishes in the Treasury the Federal Natural Catastrophe Reinsurance Fund, to be credited with amounts received annually from the sale of reinsurance contracts, appropriations, and any amounts earned on investments.

Authorizes the Secretary to invest in U.S. bonds any amounts in the Fund in excess of current needs.

Title IV: General Provisions - (Sec. 401) Prescribes criteria for a qualified reinsurance program under this Act.

Directs the Secretary to establish procedures for state and regional reinsurance programs and certain state residual insurance market entities to apply for certification (and recertification) as qualified reinsurance programs.

Requires each qualified reinsurance program (except any existing state residual insurance market entity, or state-sponsored provider of natural catastrophe insurance, deemed to be a qualified reinsurance program during an initial five-year transition period) to: (1) maintain risk-based capital in accordance with requirements established by the Secretary, in consultation with the National Association of Insurance Commissioners (NAIC) and consistent with the NAIC Risk-Based Capital Model Act; and (2) take into consideration asset risk, credit risk, underwriting risk, and other relevant risks.

Directs the Secretary to recognize and give credit for the ability of any qualified reinsurance program to access capital through the liquidity loan program (established under title II of this Act) to the extent that such program is deficient in complying with any aspect of risk-based capital requirements.

Requires the Secretary to increase the credit recognized and given for a qualified reinsurance program by an amount equal to the losses paid by the program as a result of a catastrophe.

(Sec. 402) Directs the Secretary to study, on an expedited basis, the need for and impact of expanding the programs established by this Act to apply to insured losses of qualified reinsurance programs for losses arising from all commercial insurance policies covering properties composed predominantly of residential rental units (commercial residential lines of insurance).

Requires the Secretary, to the extent a need to expand is determined, and that such expansion will be effective in increasing insurance capacity for the commercial residential insurance market, to: (1) apply the provisions of this Act, as appropriate, to any such insured losses of a qualified reinsurance program; and (2) provide restrictions, limitations, or conditions with respect to the programs under this Act that the Secretary deems appropriate, based on the study.