Homeowners’ Defense Act of 2025

Bill Number

H.R. 827

Origin Chamber

House

Congress

119th Congress, Session 1

Policy Area

Finance and Financial Sector

Status

Introduced

Latest Action

2025-01-28: Referred to the House Committee on Financial Services.

Last Updated

2025-06-07T08:06:30Z

AI-Generated Summary

Purpose of the Legislation

The Homeowners' Defense Act of 2025 aims to improve the availability and affordability of homeowners' insurance for natural catastrophes like hurricanes, earthquakes, and wildfires. It establishes federal support for state-run insurance programs to help homeowners recover from disasters, encourages measures to reduce risks (mitigation), promotes private investment in insurance, and speeds up claim payments. The act addresses rising disaster costs due to climate change, population growth in risky areas, and insurance market challenges, reducing the burden on federal taxpayers for post-disaster aid.

Key Provisions

• National Catastrophe Risk Consortium (Title I): Creates a federal-state group led by the Treasury Secretary to collect data on catastrophe risks, evaluate insurance market gaps, improve risk disclosures, and report annually to Congress on costs, disruptions, and impacts on vulnerable communities (including low-income and minority groups). Funding is authorized for fiscal years 2026–2029.

• Catastrophe Obligation Guarantees (Title II): Authorizes the Treasury Secretary to guarantee debt issued by eligible state insurance programs to cover claims after disasters. Guarantees are limited to $3.5 billion for earthquake coverage and $17 billion for other perils. Debt can last up to 30 years, with fees up to 0.5% annually. Guarantees activate only if a program's losses exceed 80% of its assets, and funds cannot repay using federal aid. The U.S. pledges full faith and credit to back these guarantees.

• Reinsurance Coverage for Eligible State Programs (Title III): Allows the Treasury to sell reinsurance contracts (insurance for insurers) to state programs, covering 80–90% of losses above a set threshold (attachment point). Contracts are priced actuarially sound (based on expected risks and costs) and last up to one year. A Federal Natural Catastrophe Reinsurance Fund is created in the Treasury, funded by premiums, appropriations, and investments, to pay claims and administrative costs. Coverage excludes flood-damaged properties required to have separate flood insurance.

• Mitigation Grant Program (Title IV): Directs the Department of Housing and Urban Development (HUD) to award grants to states, local governments, or nonprofits for efforts to reduce disaster risks, such as public education, home inspections, retrofits (upgrades to make homes safer), and emergency preparedness. Priority goes to low-income areas. At least 35% of the reinsurance fund's annual investment income funds these grants.

• General Provisions (Title V): Defines "eligible state programs" as state-authorized insurance or reinsurance entities that meet criteria like public oversight, no profit distribution to private insurers, risk-based pricing, mitigation support, and non-discriminatory access. Includes transitional rules for existing state programs. Requires studies on expanding to commercial rental properties and on risk-based pricing in state programs. Authorizes regulations and definitions (e.g., "insured loss" means covered damages under state programs).

Significant Changes to Existing Law

This act introduces new federal mechanisms not previously available at this scale for non-flood catastrophes. It expands beyond the National Flood Insurance Program by creating debt guarantees, reinsurance, and a dedicated fund for state programs. It mandates actuarial soundness in pricing (ensuring premiums cover expected costs, including capital), prohibits cross-subsidies between insurance types, and requires transparency on potential assessments for disasters. It also ties federal support to state mitigation efforts and building code enforcement, shifting some focus from post-disaster aid to prevention.

Potential Impacts

• Government Agencies: The Treasury gains authority to manage guarantees, reinsurance, and a new fund, requiring new administrative structures and regulations. HUD must run a grant program, consulting experts like builders and code enforcers. Appropriations are needed for startup and operations, potentially increasing federal spending but aiming to reduce long-term disaster aid costs.

• Citizens: Homeowners in high-risk states (e.g., coastal or seismic areas) may see more stable insurance availability, lower premiums through reinsurance savings, and faster claim payouts. Mitigation grants could make homes safer and reduce future losses, benefiting low- and moderate-income communities. However, fees and assessments might indirectly affect policy costs.

• International Relations: No direct impacts; the act focuses on domestic insurance markets.

Main Stakeholders Affected

• States and Eligible Programs: States with catastrophe funds (e.g., Florida's Citizens Property Insurance) gain access to federal tools but must meet certification standards like public governance and mitigation requirements.
• Homeowners and Renters: Primary beneficiaries through affordable coverage and recovery support, especially in disaster-prone regions; disadvantaged and minority communities get explicit consideration in risk assessments.
• Insurance Industry: Private insurers benefit from stabilized markets and reinsurance options, encouraging participation without federal competition.
• Federal Taxpayers: Potential shift from ad-hoc disaster relief to structured insurance support, possibly lowering overall costs but involving upfront guarantees backed by public funds.
• Nonprofits and Local Governments: Eligible for mitigation grants to build resilience.

Notable Legal, Constitutional, or Political Implications

• Legal: Guarantees are enforceable with U.S. full faith and credit, giving Treasury subrogation rights (ability to recover payments from states). Contracts must comply with tax-exempt status rules and exclude federal fund use for debt repayment, preventing double-dipping on aid. Regulations ensure program integrity, with studies promoting evidence-based expansions.

• Constitutional: Involves federal spending power and commerce clause authority to regulate interstate insurance markets, potentially preempting some state practices. No explicit challenges noted, but mandates on state programs could raise federalism concerns.

• Political: Addresses climate-driven risks without mandating emissions reductions, focusing on adaptation. It balances private market reliance with federal backstops, potentially sparking debate on taxpayer exposure versus economic stability in vulnerable states. Annual reporting and equity focus for underserved communities add accountability layers.

This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.

Sponsor

Rep. Wilson, Frederica S. [D-FL-24]

Cosponsors (2)

Rep. Johnson, Henry C. "Hank" [D-GA-4], Rep. Mfume, Kweisi [D-MD-7]

Recent Actions

• 2025-01-28: Referred to the House Committee on Financial Services.
• 2025-01-28: Introduced in House
• 2025-01-28: Introduced in House

Bill Versions

• Homeowners’ Defense Act of 2025 — issued 2025-01-28 — PDF (30 pages)