HR 2582 IHCommentsClose CommentsPermalink

112th CONGRESSCommentsClose CommentsPermalink

1st SessionCommentsClose CommentsPermalink

H. R. 2582CommentsClose CommentsPermalink

To ensure the availability and affordability of homeowners’ insurance coverage for catastrophic events.CommentsClose CommentsPermalink

IN THE HOUSE OF REPRESENTATIVESCommentsClose CommentsPermalink

July 19, 2011CommentsClose CommentsPermalink

Ms. WILSON of Florida introduced the following bill; which was referred to the Committee on Financial ServicesCommentsClose CommentsPermalink

A BILLCommentsClose CommentsPermalink

To ensure the availability and affordability of homeowners’ insurance coverage for catastrophic events.CommentsClose CommentsPermalink

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,CommentsClose CommentsPermalink

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

(a) Short Title- This Act may be cited as the ‘Homeowners’ Defense Act of 2011’.CommentsClose CommentsPermalink





(b) Table of Contents- The table of contents for this Act is as follows:CommentsClose CommentsPermalink





Sec. 1. Short title; table of contents.CommentsClose CommentsPermalink





Sec. 2. Findings and purposes.CommentsClose CommentsPermalink

TITLE I--NATIONAL CATASTROPHE RISK CONSORTIUM

Sec. 101. Establishment; status; principal office; membership.CommentsClose CommentsPermalink





Sec. 102. Functions.CommentsClose CommentsPermalink





Sec. 103. Powers.CommentsClose CommentsPermalink





Sec. 104. Nonprofit entity; conflicts of interest; audits.CommentsClose CommentsPermalink





Sec. 105. Management.CommentsClose CommentsPermalink





Sec. 106. Staff; experts and consultants.CommentsClose CommentsPermalink





Sec. 107. Federal liability.CommentsClose CommentsPermalink





Sec. 108. Authorization of appropriations.CommentsClose CommentsPermalink

TITLE II--CATASTROPHE OBLIGATION GUARANTEES

Sec. 201. Purposes.CommentsClose CommentsPermalink





Sec. 202. Establishment of debt guarantee program.CommentsClose CommentsPermalink





Sec. 203. Effect of guarantee.CommentsClose CommentsPermalink





Sec. 204. Full faith and credit.CommentsClose CommentsPermalink





Sec. 205. Fees for guarantees; amount; collection.CommentsClose CommentsPermalink





Sec. 206. Payment of losses.CommentsClose CommentsPermalink





Sec. 207. Regulations.CommentsClose CommentsPermalink

TITLE III--REINSURANCE COVERAGE FOR ELIGIBLE STATE PROGRAMS

Sec. 301. Program authority.CommentsClose CommentsPermalink





Sec. 302. Contract principles.CommentsClose CommentsPermalink





Sec. 303. Terms of reinsurance contracts.CommentsClose CommentsPermalink





Sec. 304. Maximum Federal liability.CommentsClose CommentsPermalink





Sec. 305. Federal Natural Catastrophe Reinsurance Fund.CommentsClose CommentsPermalink





Sec. 306. Regulations.CommentsClose CommentsPermalink

TITLE IV--MITIGATION GRANT PROGRAM

Sec. 401. Mitigation grant program.CommentsClose CommentsPermalink

TITLE V--GENERAL PROVISIONS

Sec. 501. Eligible State programs.CommentsClose CommentsPermalink





Sec. 502. Study and conditional coverage of commercial residential lines of insurance.CommentsClose CommentsPermalink





Sec. 503. Study of risk-based pricing and State program rates.CommentsClose CommentsPermalink





Sec. 504. Definitions.CommentsClose CommentsPermalink





Sec. 505. Regulations.CommentsClose CommentsPermalink

SEC. 2. FINDINGS AND PURPOSES.

(a) Findings- The Congress finds that--CommentsClose CommentsPermalink





(1) the United States has a history of catastrophic natural disasters, including hurricanes, tornadoes, flood, fire, earthquakes, and volcanic eruptions;CommentsClose CommentsPermalink





(2) although catastrophic natural disasters occur infrequently, they will continue to occur and are predictable;CommentsClose CommentsPermalink





(3) such disasters generate large economic losses and a major component of those losses comes from damage and destruction to homes;CommentsClose CommentsPermalink





(4) for the majority of Americans, their investment in their home represents their single biggest asset and the protection of that investment is paramount to economic and social stability;CommentsClose CommentsPermalink





(5) the United States needs to take and support State actions to be better prepared for and better protected from catastrophes;CommentsClose CommentsPermalink





(6) as the risk of catastrophic losses grows, so do the risks that any premiums collected by private insurers for extending coverage will be insufficient to cover future catastrophes, and private insurers, in an effort to protect their shareholders and policyholders (in the case of mutually owned companies), have thus significantly raised premiums and curtailed insurance coverage in States exposed to major catastrophes;CommentsClose CommentsPermalink





(7) such effects on the insurance industry have been harmful to economic activity in States exposed to major catastrophes and have placed significant burdens on residents of such States;CommentsClose CommentsPermalink





(8) Hurricanes Katrina, Rita, and Wilma struck the United States in 2005, causing over $200,000,000,000 in total economic losses, and insured losses to homeowners in excess of $50,000,000,000;CommentsClose CommentsPermalink





(9) the Federal Government has provided and will continue to provide resources to pay for losses from future catastrophes;CommentsClose CommentsPermalink





(10) when Federal assistance is provided to the States, accountability for Federal funds disbursed is paramount;CommentsClose CommentsPermalink





(11) the Government Accountability Office or other appropriate agencies must have the means in place to confirm that Federal funds for catastrophe relief have reached the appropriate victims and have contributed to the recovery effort as efficiently as possible so that taxpayer funds are not misspent and citizens are enabled to rebuild and resume productive activities as quickly as possible;CommentsClose CommentsPermalink





(12) States that are recipients of Federal funds must be responsible to account for and provide an efficient means for distribution of funds to homeowners to enable the rapid rebuilding of local economies after a catastrophic event without unduly burdening taxpayers who live in areas seldom affected by natural disasters;CommentsClose CommentsPermalink





(13) State insurance and reinsurance programs can provide a mechanism for States to exercise that responsibility if they appropriately underwrite and price risk, and if they pay claims quickly and within established contractual terms;CommentsClose CommentsPermalink





(14) making available Federal guarantees to enhance the capability of eligible State programs to issue debt will minimize the exposure of State and Federal taxpayers who otherwise may bear the consequences of underfunded programs or under-insured communities following catastrophic events, especially during today’s historic market turmoil; andCommentsClose CommentsPermalink





(15) it is the proper role of the Federal Government to prepare for and protect its citizens from catastrophes and to facilitate consumer protection, victim assistance, and recovery, including financial recovery.CommentsClose CommentsPermalink





(b) Purposes- The purposes of this Act are to establish a program to provide Federal support for State-sponsored insurance programs to help homeowners prepare for and recover from the damages caused by natural catastrophes, to encourage mitigation and prevention for such catastrophes, to promote the use of private market capital as a means to insure against such catastrophes, to expedite the payment of claims and better assist in the financial recovery from such catastrophes.CommentsClose CommentsPermalink

TITLE I--NATIONAL CATASTROPHE RISK CONSORTIUMCommentsClose CommentsPermalink

SEC. 101. ESTABLISHMENT; STATUS; PRINCIPAL OFFICE; MEMBERSHIP.

(a) Establishment- There is established an entity to be known as the ‘National Catastrophe Risk Consortium’ (in this title referred to as the ‘Consortium’).CommentsClose CommentsPermalink





(b) Status- The Consortium is not a department, agency, or instrumentality of the United States Government.CommentsClose CommentsPermalink





(c) Principal Office- The principal office and place of business of the Consortium shall be such location within the United States determined by the Board of Directors to be the most advantageous for carrying out the purpose and functions of the Consortium.CommentsClose CommentsPermalink





(d) Membership- Any State that has established a reinsurance fund or has authorized the operation of a State residual insurance market entity, or State-sponsored provider of natural catastrophe insurance, shall be eligible to participate in the Consortium.CommentsClose CommentsPermalink

SEC. 102. FUNCTIONS.

The Consortium shall--CommentsClose CommentsPermalink





(1) work with all States, particularly those participating in the Consortium, to gather and maintain an inventory of catastrophe risk obligations held by State reinsurance funds, State residual insurance market entities, and State-sponsored providers of natural catastrophe insurance;CommentsClose CommentsPermalink





(2) at the discretion of the affected members and on a conduit basis, issue securities and other financial instruments linked to the catastrophe risks insured or reinsured through members of the Consortium in the capital markets;CommentsClose CommentsPermalink





(3) coordinate reinsurance contracts between participating, qualified reinsurance funds and private parties;CommentsClose CommentsPermalink





(4) act as a centralized repository of State risk information that can be accessed by private-market participants seeking to participate in the transactions described in paragraphs (2) and (3) of this section;CommentsClose CommentsPermalink





(5) establish a catastrophe risk database to perform research and analysis that encourages standardization of the risk-linked securities market;CommentsClose CommentsPermalink





(6) perform any other functions, other than assuming risk or incurring debt, that are deemed necessary to aid in the transfer of catastrophe risk from participating States to private parties; andCommentsClose CommentsPermalink





(7) submit annual reports to Congress describing the activities of the Consortium for the preceding year, and the first such annual report shall include an assessment of the costs to States and regions associated with catastrophe risk and an analysis of the costs and benefits, for States not participating in the Consortium, of such nonparticipation.CommentsClose CommentsPermalink

SEC. 103. POWERS.

The Consortium--CommentsClose CommentsPermalink





(1) may make and perform such contracts and other agreements with any individual or other private or public entity however designated and wherever situated, as may be necessary for carrying out the functions of the Consortium; andCommentsClose CommentsPermalink





(2) shall have such other powers, other than the power to assume risk or incur debt, as may be necessary and incident to carrying out this Act.CommentsClose CommentsPermalink

SEC. 104. NONPROFIT ENTITY; CONFLICTS OF INTEREST; AUDITS.

(a) Nonprofit Entity- The Consortium shall be a nonprofit entity and no part of the net earnings of the Consortium shall inure to the benefit of any member, founder, contributor, or individual.CommentsClose CommentsPermalink





(b) Conflicts of Interest- No director, officer, or employee of the Consortium shall in any manner, directly or indirectly, participate in the deliberation upon or the determination of any question affecting his or her personal interests or the interests of any Consortium, partnership, or organization in which he or she is directly or indirectly interested.CommentsClose CommentsPermalink





(c) Audits-CommentsClose CommentsPermalink





(1) ANNUAL AUDIT- The financial statements of the Consortium shall be audited annually in accordance with generally accepted auditing standards by independent certified public accountants.CommentsClose CommentsPermalink





(2) REPORTS- The report of each annual audit pursuant to paragraph (1) shall be included in the annual report submitted in accordance with section 102(7).CommentsClose CommentsPermalink





(d) Prohibition on Election and Lobbying Activities-CommentsClose CommentsPermalink





(1) FEDERAL- The Consortium may not--CommentsClose CommentsPermalink





(A) make any contribution to a candidate for election for Federal office or to a political committee;CommentsClose CommentsPermalink





(B) employ or retain--CommentsClose CommentsPermalink





(i) a registered lobbyist under the Lobbying Disclosure Act of 1995 (2 U.S.C. 1601 et seq.); orCommentsClose CommentsPermalink





(ii) an organization that employs one or more lobbyists and is registered under section 4(a)(2) of such Act (2 U.S.C. 1603(a)(2)); orCommentsClose CommentsPermalink





(C) provide any thing of value, other than educational materials or information, to any elected official of the Federal Government.CommentsClose CommentsPermalink





For purposes of this paragraph, the terms ‘contribution’, ‘candidate’, ‘Federal office’, and ‘political committee’ have the meanings given such terms in section 301 of the Federal Election Campaign Act of 1971 (2 U.S.C. 431).CommentsClose CommentsPermalink





(2) CONSORTIUM- The Consortium may not--CommentsClose CommentsPermalink





(A) make any contribution to a candidate for election for any State or local office or to any committee, club, association, or other group that receives contributions or makes expenditures for the purpose of influencing any such election;CommentsClose CommentsPermalink





(B) employ or retain any person who engages in influencing legislating (as such term is defined in section 4911(d) of the Internal Revenue Code of 1986 (26 U.S.C. 4911(d))) of any State or local legislative body; orCommentsClose CommentsPermalink





(C) provide any thing of value, other than educational materials or information, to any elected official of any State or local government.CommentsClose CommentsPermalink

SEC. 105. MANAGEMENT.

(a) Board of Directors; Membership; Designation of Chairperson-CommentsClose CommentsPermalink





(1) BOARD OF DIRECTORS- The management of the Consortium shall be vested in a board of directors (referred to in this title as the ‘Board’) composed of not less than 3 members.CommentsClose CommentsPermalink





(2) CHAIRPERSON- The Secretary of the Treasury, or the designee of the Secretary, shall serve as the chairperson of the Board.CommentsClose CommentsPermalink





(3) MEMBERSHIP- The members of the Board shall include--CommentsClose CommentsPermalink





(A) the Secretary of Homeland Security and the Secretary of Commerce, or the designees of such Secretaries, respectively, but only during such times as there are fewer than two States participating in the Consortium; andCommentsClose CommentsPermalink





(B) a member from each State participating in the Consortium, who shall be appointed by such State.CommentsClose CommentsPermalink





(b) Bylaws- The Board may prescribe, amend, and repeal such bylaws as may be necessary for carrying out the functions of the Consortium.CommentsClose CommentsPermalink





(c) Compensation, Actual, Necessary, and Transportation Expenses-CommentsClose CommentsPermalink





(1) NON-FEDERAL EMPLOYEES- A member of the Board who is not otherwise employed by the Federal Government shall be entitled to receive the daily equivalent of the annual rate of basic pay payable for level IV of the Executive Schedule under section 5315 of title 5, United States Code, as in effect from time to time, for each day (including travel time) during which such member is engaged in the actual performance of duties of the Consortium.CommentsClose CommentsPermalink





(2) FEDERAL EMPLOYEES- A member of the Board who is an officer or employee of the Federal Government shall serve without additional pay (or benefits in the nature of compensation) for service as a member of the Consortium.CommentsClose CommentsPermalink





(3) TRAVEL EXPENSES- Members of the Consortium shall be entitled to receive travel expenses, including per diem in lieu of subsistence, equivalent to those set forth in subchapter I of chapter 57 of title 5, United States Code.CommentsClose CommentsPermalink





(d) Quorum- A majority of the Board shall constitute a quorum.CommentsClose CommentsPermalink





(e) Executive Director- The Board shall appoint an executive director of the Consortium on such terms as the Board may determine.CommentsClose CommentsPermalink

SEC. 106. STAFF; EXPERTS AND CONSULTANTS.

(a) Staff-CommentsClose CommentsPermalink





(1) APPOINTMENT- The Board of the Consortium may appoint and terminate such other staff as are necessary to enable the Consortium to perform its duties.CommentsClose CommentsPermalink





(2) COMPENSATION- The Board of the Consortium may fix the compensation of the executive director and other staff.CommentsClose CommentsPermalink





(b) Experts and Consultants- The Board shall procure the services of experts and consultants as the Board considers appropriate.CommentsClose CommentsPermalink

SEC. 107. FEDERAL LIABILITY.

The Federal Government and the Consortium shall not bear any liabilities arising from the actions of the Consortium. Participating States shall retain all catastrophe risk until the completion of a transaction described in paragraphs (2) and (3) of section 102.CommentsClose CommentsPermalink

SEC. 108. AUTHORIZATION OF APPROPRIATIONS.

There are authorized to be appropriated to carry out this title $20,000,000 for each of fiscal years 2012 through 2016.CommentsClose CommentsPermalink

TITLE II--CATASTROPHE OBLIGATION GUARANTEESCommentsClose CommentsPermalink

SEC. 201. PURPOSES.

The purposes of this title are to establish a program--CommentsClose CommentsPermalink





(1) to promote the availability of private capital to provide liquidity and capacity to State catastrophe insurance programs; andCommentsClose CommentsPermalink





(2) to expedite the payment of claims under State catastrophe insurance programs and better assist the financial recovery from significant natural catastrophes by authorizing the Secretary of the Treasury to guarantee debt for such purposes.CommentsClose CommentsPermalink

SEC. 202. ESTABLISHMENT OF DEBT GUARANTEE PROGRAM.

(a) Authority of Secretary- The Secretary of the Treasury is authorized and shall have the powers and authorities necessary to guarantee, and to enter into commitments to guarantee, holders of debt against loss of principal or interest, or both, on any such debt issued by eligible State programs for purposes of this title, provided that the total principal amount of debt obligations guaranteed by the Secretary--CommentsClose CommentsPermalink





(1) for eligible State programs that cover earthquake peril shall not exceed $3,500,000,000; andCommentsClose CommentsPermalink





(2) for eligible State programs that cover all other perils shall not exceed $17,000,000,000.CommentsClose CommentsPermalink





(b) Conditions for Guarantee Eligibility- A debt guarantee under this section may be made only if the Secretary has issued a commitment to guarantee to an eligible State program. The commitment to guarantee shall be for a period of 3 years and may be extended by the Secretary for a period of 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:CommentsClose CommentsPermalink





(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 the debt.CommentsClose CommentsPermalink





(2) Based upon 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 the debt.CommentsClose CommentsPermalink





(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.CommentsClose CommentsPermalink





(4) The commitment to guarantee shall specify the fees for debt guarantee coverage.CommentsClose CommentsPermalink





(5) The maximum term of the debt that shall be specified in a commitment issued under this section may not exceed 30 years.CommentsClose CommentsPermalink





(6) The Secretary determines that the eligible State program does not cover losses arising from floods to properties located in areas having special flood hazards (as such term is defined for purposes of the National Flood Insurance Act of 1968 and the Flood Disaster Protection Act of 1973).CommentsClose CommentsPermalink





(c) 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 (b), provide a guarantee under subsection (d) for such eligible State program in the amount requested by such eligible State program, subject to the limitation under subsection (d)(2).CommentsClose CommentsPermalink





(d) Catastrophic Debt Guarantee- A debt guarantee under this subsection for an eligible State program shall be subject to the following requirements:CommentsClose CommentsPermalink





(1) PRECONDITIONS- The eligible State program shows to the satisfaction of the Secretary that insured losses in the State to the eligible State program arising from the event or events covered by the commitment to guarantee are likely to exceed the eligible State program’s available cash resources, as calculated on the date of the event.CommentsClose CommentsPermalink





(2) AMOUNT- The aggregate principal amount of the debt guaranteed following an event or events referred to in paragraph (1) may not exceed the amount by which the insured losses expected to be sustained by the State program as a result of such event or events exceed 80 percent of the qualifying assets of the eligible State program as stated in the most recent quarterly financial statement filed with the domiciliary regulator of the program prior to the event or events, except that, for eligible State programs that are not required to file such quarterly financial statements, the aggregate principal amount of the debt guaranteed may not exceed the amount by which insured losses sustained by the State program as a result of such event or events exceed 80 percent of the unrestricted net assets as stated in the annual financial statement for the program’s fiscal year ending immediately prior to the event or events.CommentsClose CommentsPermalink





(3) USE OF FUNDS- Amounts of debt guaranteed under this section shall be used only to pay the costs of issuing debt and to pay the insured losses and loss adjustment expenses incurred by an eligible State program. Such amounts shall not be used for any other purpose.CommentsClose CommentsPermalink





(e) Funding- There are authorized to be appropriated such sums as may be necessary to carry out this section.CommentsClose CommentsPermalink

SEC. 203. EFFECT OF GUARANTEE.

The issuance of any guarantee by the Secretary under this title shall be conclusive evidence that--CommentsClose CommentsPermalink





(1) the guarantee has been properly obtained;CommentsClose CommentsPermalink





(2) the underlying debt qualified for such guarantee; andCommentsClose CommentsPermalink





(3) the guarantee is valid, legal, and enforceable.CommentsClose CommentsPermalink

SEC. 204. FULL FAITH AND CREDIT.

The full faith and credit of the United States is pledged to the payment of all guarantees issued under this title with respect to principal and interest.CommentsClose CommentsPermalink

SEC. 205. FEES FOR GUARANTEES; AMOUNT; COLLECTION.

The Secretary shall charge and collect fees for each guarantee in amounts specified in the commitment to guarantee, which shall be in amounts sufficient in the judgment of the Secretary at the time of issuance of the commitment to guarantee to cover applicable administrative costs and probable losses on the guaranteed obligations covered by the commitment to guarantee, but in any event not to exceed one-half of 1 per centum per annum of the outstanding indebtedness covered by each guarantee.CommentsClose CommentsPermalink

SEC. 206. 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 title that shall become due for 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 title.CommentsClose CommentsPermalink





(b) Role of the Attorney General- The Attorney General shall take such action as may be appropriate to enforce any right accruing to the United States as a result of the issuance of any guarantee under this title.CommentsClose CommentsPermalink





(c) 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 title.CommentsClose CommentsPermalink

SEC. 207. REGULATIONS.

The Secretary shall issue any regulations necessary to carry out the debt-guarantee program established under this title.CommentsClose CommentsPermalink

TITLE III--REINSURANCE COVERAGE FOR ELIGIBLE STATE PROGRAMSCommentsClose CommentsPermalink

SEC. 301. PROGRAM AUTHORITY.

The Secretary of the Treasury, shall make available for purchase, only by eligible State programs, contracts for reinsurance coverage under this title.CommentsClose CommentsPermalink

SEC. 302. CONTRACT PRINCIPLES.

Contracts for reinsurance coverage made available under this title--CommentsClose CommentsPermalink





(1) shall be priced on an actuarially sound basis;CommentsClose CommentsPermalink





(2) shall minimize the administrative costs of the Federal Government; andCommentsClose CommentsPermalink





(3) shall provide coverage based solely on insured losses covered by the eligible State program purchasing the contract.CommentsClose CommentsPermalink

SEC. 303. TERMS OF REINSURANCE CONTRACTS.

(a) Minimum Attachment Point and Levels of Coverage- The Secretary shall establish attachment points at which reinsurance coverage under this title is provided to eligible State programs. In setting attachment points and in determining the levels of reinsurance coverage provided, the Secretary shall take into consideration--CommentsClose CommentsPermalink





(1) the coverage available through eligible State programs;CommentsClose CommentsPermalink





(2) the availability and accessibility of reinsurance in the private market; andCommentsClose CommentsPermalink





(3) other factors as deemed appropriate by the Secretary.CommentsClose CommentsPermalink





(b) Ninety Percent Coverage of Insured Losses in Excess of Retained Losses- Each contract for reinsurance coverage under this title shall provide that the amount paid out under the contract shall be equal to 90 percent of the amount of insured losses of the eligible State program in excess of the amount of retained losses that the contract requires, pursuant to subsection (a), to be incurred by such program.CommentsClose CommentsPermalink





(c) Maturity- The term of each contract for reinsurance coverage under this title shall not exceed 1 year or such other term as the Secretary may determine.CommentsClose CommentsPermalink





(d) Payment Condition- Each contract for reinsurance coverage under this title shall authorize claims payments to the eligible State program purchasing the coverage only for insured losses provided under the contract.CommentsClose CommentsPermalink





(e) Multiple Events- The contract shall cover any insured losses from one or more events that may occur during the term of the contract and shall provide that if multiple events occur, the retained losses requirement under subsection (a) shall apply on a calendar year basis, in the aggregate and not separately to each individual event.CommentsClose CommentsPermalink





(f) Timing of Claims- Claims under a contract for reinsurance coverage under this title shall include only insurance claims that are reported to the eligible State program within the 3-year period beginning upon the event or events for which payment under the contract is provided.CommentsClose CommentsPermalink





(g) Actuarial Pricing- The price of coverage under a reinsurance contract under this title shall be an amount, established by the Secretary at a level that annually produces expected premiums that shall be sufficient to pay the reasonably anticipated cost of all claims (which may not be equal only to average annual costs), loss adjustment expenses, all administrative costs of reinsurance coverage offered under this title, and any such outwards reinsurance, as described in section 305(c)(3), as the Secretary considers prudent taking into consideration the demand for reinsurance coverage under this title. The anticipated cost of all claims shall be comparable to amounts being included in the price for similar layers of coverage in the private sector, taking into account the savings associated with non-profit and tax-exempt status of the Fund established under section 305.CommentsClose CommentsPermalink





(h) Information- Each contract for reinsurance coverage under this title shall contain a condition providing that the Secretary may require the eligible State program that is covered under the contract to submit to the Secretary all information on the eligible State program relevant to the duties of the Secretary under this title.CommentsClose CommentsPermalink





(i) Others- Contracts for reinsurance coverage under this title shall contain such other terms as the Secretary considers necessary to carry out this title and to ensure the long-term financial integrity of the program under this title.CommentsClose CommentsPermalink

SEC. 304. MAXIMUM FEDERAL LIABILITY.

(a) In General- Subject to subsection (b) and notwithstanding any other provision of law, the aggregate potential liability for payment of claims under all contracts for reinsurance coverage under this title sold in any single year shall be determined by the Secretary based on review of the market for reinsurance coverage under this title.CommentsClose CommentsPermalink





(b) Limitation- The authority of the Secretary to enter into contracts for reinsurance coverage under this title shall be effective for any fiscal year only to such extent or in such amounts as are or have been provided in appropriation Acts for such fiscal year for the aggregate potential liability for payment of claims under all contracts for reinsurance coverage under this title.CommentsClose CommentsPermalink

SEC. 305. FEDERAL NATURAL CATASTROPHE REINSURANCE FUND.

(a) Establishment- There is established within the Treasury of the United States a fund to be known as the Federal Natural Catastrophe Reinsurance Fund (in this section referred to as the ‘Fund’).CommentsClose CommentsPermalink





(b) Credits- The Fund shall be credited with--CommentsClose CommentsPermalink





(1) amounts received annually from the sale of contracts for reinsurance coverage under this title;CommentsClose CommentsPermalink





(2) any amounts appropriated for the aggregate potential liability for payment of claims under all contracts for reinsurance coverage under this title; andCommentsClose CommentsPermalink





(3) any amounts earned on investments of the Fund pursuant to subsection (d).CommentsClose CommentsPermalink





(c) Uses- Amounts in the Fund shall be available to the Secretary only for the following purposes:CommentsClose CommentsPermalink





(1) CONTRACT PAYMENTS- For payments to purchasers covered under contracts for reinsurance coverage for eligible losses under such contracts.CommentsClose CommentsPermalink





(2) ADMINISTRATIVE EXPENSES- To pay for the administrative expenses incurred by the Secretary in carrying out the reinsurance program under this title.CommentsClose CommentsPermalink





(3) OUTWARDS REINSURANCE- To obtain retrocessional or other reinsurance coverage of any kind to cover risk reinsured under contracts for reinsurance coverage made available under this title.CommentsClose CommentsPermalink





(d) Investment- The Secretary shall invest such amounts in the Fund as the Secretary considers advisable in obligations issued or guaranteed by the United States. For purposes of the grant mandate in section 401(e) for a fiscal year, the Secretary shall disclose the annual net investment income available not later than 60 days after the conclusion of such fiscal year and disperse appropriate funds not later than 90 days after the conclusion of such fiscal year.CommentsClose CommentsPermalink

SEC. 306. REGULATIONS.

The Secretary shall issue any regulations necessary to carry out the program for reinsurance coverage under this title.CommentsClose CommentsPermalink

TITLE IV--MITIGATION GRANT PROGRAMCommentsClose CommentsPermalink

SEC. 401. MITIGATION GRANT PROGRAM.

(a) Establishment- The Secretary of Housing and Urban Development shall establish and carry out a program to provide grants to eligible entities to develop, enhance, or maintain programs to prevent and mitigate losses from natural catastrophes.CommentsClose CommentsPermalink





(b) Grants- A grant provided under subsection (a) shall be used to reduce loss of life and property by--CommentsClose CommentsPermalink





(1) encouraging awareness of risk factors and what steps can be taken to eliminate or reduce them, including public education campaigns to promote citizen and community preparedness;CommentsClose CommentsPermalink





(2) assisting in the determination of the location of risk by giving careful consideration to the natural risks for the location of a property;CommentsClose CommentsPermalink





(3) providing inspections of homes to identify areas to strengthen such homes and reduce exposure to natural catastrophes;CommentsClose CommentsPermalink





(4) providing financial assistance to homeowners to retrofit homes to reduce exposure to natural catastrophes; orCommentsClose CommentsPermalink





(5) supporting disaster response readiness programs, including initiatives that develop, enhance ,or maintain the capacity of a public safety organization to be better prepared, equipped, and trained to respond to natural catastrophes.CommentsClose CommentsPermalink





(c) Consultation With Experts- In carrying out the program established under subsection (a), the Secretary of Housing and Urban Development shall consult with--CommentsClose CommentsPermalink





(1) disaster preparedness and response organizations;CommentsClose CommentsPermalink





(2) homebuilders;CommentsClose CommentsPermalink





(3) real estate professionals;CommentsClose CommentsPermalink





(4) building code enforcement agencies; andCommentsClose CommentsPermalink





(5) any other person that the Secretary considers appropriate.CommentsClose CommentsPermalink





(d) Eligible Entity Defined- In this section, the term ‘eligible entity’ means a State or local government, a part or program of a State or local government, or a nationally recognized, congressionally chartered disaster response non-profit organization.CommentsClose CommentsPermalink





(e) Grant Mandate- The Secretary shall, to the extent provided in advance in appropriation Acts, use not less than 35 percent of the net investment income from the Federal Natural Catastrophe Reinsurance Fund earned in each fiscal year pursuant to section 305(d) for grants under this section.CommentsClose CommentsPermalink

TITLE V--GENERAL PROVISIONSCommentsClose CommentsPermalink

SEC. 501. ELIGIBLE STATE PROGRAMS.

(a) Eligible State Programs- A State program shall be considered an ‘eligible State program’ for purposes of this Act if the Secretary certifies, in accordance with the procedures established under subsection (c), that the State program complies with the following requirements:CommentsClose CommentsPermalink





(1) STATE PROGRAM DESIGN- The State program is established and authorized by State law as an insurance program or a reinsurance program that is designed to improve private insurance markets and that offers residential property insurance coverage for losses arising from any personal residential line of insurance, as defined in the Uniform Property and Casualty Product Coding Matrix of the National Association of Insurance Commissioners.CommentsClose CommentsPermalink





(2) OPERATION- The State program shall meet the following requirements:CommentsClose CommentsPermalink





(A) A majority of the members of the governing body of the State program shall be public officials or appointed by public officials.CommentsClose CommentsPermalink





(B) The State shall have a financial interest in the State program.CommentsClose CommentsPermalink





(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.CommentsClose CommentsPermalink





(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 program either--CommentsClose CommentsPermalink





(A) constitutes an ‘integral part’ of the State that has created it; orCommentsClose CommentsPermalink





(B) is otherwise exempt from Federal income taxation.CommentsClose CommentsPermalink





(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.CommentsClose CommentsPermalink





(5) PREVENTION AND MITIGATION-CommentsClose CommentsPermalink





(A) MITIGATION OF LOSSES- The State program shall include provisions designed to encourage and support programs to mitigate losses from natural catastrophes for which the State insurance or reinsurance program was established to provide insurance coverage.CommentsClose CommentsPermalink





(B) OPERATIONAL REQUIREMENTS- The State program shall operate in a State that--CommentsClose CommentsPermalink





(i) requires that an appropriate public body within the State shall have adopted adequate mitigation measures with effective enforcement provisions which the Secretary finds are consistent with the criteria for construction described in the International Code Council building codes;CommentsClose CommentsPermalink





(ii) has taken actions to establish an insurance rate structure that takes into account measures to mitigate insured losses; andCommentsClose CommentsPermalink





(iii) ensures, to the extent that reinsurance coverage made available under the eligible State program results in any cost savings in providing insurance coverage for risks in such State, such cost savings are reflected in premium rates charged to consumers for such coverage.CommentsClose CommentsPermalink





(6) REQUIREMENTS REGARDING COVERAGE- The State program--CommentsClose CommentsPermalink





(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 covered under the State program pursuant to paragraph (1);CommentsClose CommentsPermalink





(B) shall be subject to a requirement under State law that for any insurance coverage made available under the State insurance program or for any reinsurance coverage for such insurance coverage made available under the State reinsurance program, the premium rates charged shall cover the expected value of all future costs associated with insurance policies or reinsurance contracts written by such program, in accordance with the principles under section 303(g);CommentsClose CommentsPermalink





(C) shall make available to all qualifying policyholders insurance or reinsurance coverage, as applicable, and mitigation services on a basis that is not unfairly discriminatory; andCommentsClose CommentsPermalink





(D) publishes, and displays in a prominent location on a Web site for the State insurance program, information for the State insurance program of estimated assessments and surcharges on policyholders, in accordance with State laws, regulations, or other requirements, for a range of natural disaster or catastrophic events having a varying magnitude of losses, including an event projected to result in losses of such magnitude that they have a 1 percent chance of being equaled or exceeded in any single year, based on the current year estimated aggregate funding capacity of the State insurance program and State reinsurance program.CommentsClose CommentsPermalink





(7) LAND USE AND ZONING- The State program, to the extent possible, seeks to encourage appropriate State and local government units to develop comprehensive land use and zoning plans that include natural hazard mitigation.CommentsClose CommentsPermalink





(8) RISK-BASED CAPITAL REQUIREMENTS- The State program--CommentsClose CommentsPermalink





(A) complies with such risk-based capital requirements as applicable State law may impose and shall take into consideration asset risk, credit risk, underwriting risk, and such other relevant risk as determined by the Secretary; andCommentsClose CommentsPermalink





(B) for each calendar year, prepares and submits to the Secretary a report identifying its claim-paying capacity at such time after the conclusion of such year, and containing such information and in such form, as the Secretary shall require.CommentsClose CommentsPermalink





(9) OTHER REQUIREMENTS- The State program complies with such additional organizational, underwriting, and financial requirements as the Secretary shall, by regulation, provide to carry out the purposes of this Act.CommentsClose CommentsPermalink





(b) Certification- The Secretary shall establish procedures for initial certification and recertification as an eligible State program.CommentsClose CommentsPermalink





(c) Transitional Mechanisms- For the 5-year period beginning on the date of the enactment of this Act, in the case of a State that does not have an eligible State program for the State, a State residual insurance market entity, or State-sponsored provider of natural catastrophe insurance, for such State shall be considered to be an eligible State program, but only if such State residual insurance market entity, or State-sponsored provider of natural catastrophe insurance, was in existence before such date of enactment.CommentsClose CommentsPermalink





(d) Reinsurance To Cover Exposure- This section may not be construed to limit or prevent any eligible State program from obtaining reinsurance coverage for insured losses retained by insurers pursuant to this section.CommentsClose CommentsPermalink

SEC. 502. STUDY AND CONDITIONAL COVERAGE OF COMMERCIAL RESIDENTIAL LINES OF INSURANCE.

The Secretary shall study, on an expedited basis, the need for and impact of expanding the programs established by this Act to apply to insured losses of eligible State programs for losses arising from all commercial insurance policies which provide coverage for properties that are composed predominantly of residential rental units. The Secretary shall consider the catastrophic insurance and reinsurance market for commercial residential properties, and specifically the availability of adequate private insurance coverage when an insured event occurs, the impact any such capacity restrictions have on housing affordability for renters, and the likelihood that such an expansion of the program would increase insurance capacity for this market segment.CommentsClose CommentsPermalink

SEC. 503. STUDY OF RISK-BASED PRICING AND STATE PROGRAM RATES.

The Comptroller General of the United States shall conduct a study to analyze--CommentsClose CommentsPermalink





(1) risk-based rate pricing, to determine the use of actuarially sound pricing for State insurance, reinsurance, or residual market programs, including what measures States are taking to implement actuarially sound rates; andCommentsClose CommentsPermalink





(2) rates for State insurance, reinsurance, or residual market programs that fail to cover the expected value of all future costs, including the cost of capital, associated with insurance policies or reinsurance contracts written by such programs or fail to have sufficient assets above their indebtedness to meet their obligations.CommentsClose CommentsPermalink





Not later than 6 months after the date of the enactment of this Act, the Comptroller General shall submit a report to the Congress on the results of the study under this section.CommentsClose CommentsPermalink

SEC. 504. DEFINITIONS.

In this Act:CommentsClose CommentsPermalink





(1) COMMITMENT TO GUARANTEE- The term ‘commitment to guarantee’ means a commitment to make debt guarantees to an eligible State program pursuant to section 202(d).CommentsClose CommentsPermalink





(2) ELIGIBLE STATE PROGRAM- The term ‘eligible State program’ means a State program that the Secretary certifies as an eligible State program under section 501.CommentsClose CommentsPermalink





(3) INSURED LOSS- The term ‘insured loss’ means any loss that is determined by an eligible State program as being covered by insurance or reinsurance made available under that eligible State program.CommentsClose CommentsPermalink





(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 the event or events.CommentsClose CommentsPermalink





(5) SECRETARY- The term ‘Secretary’ means the Secretary of the Treasury.CommentsClose CommentsPermalink





(6) STATE- The term ‘State’ includes the several States, the District of Columbia, the Commonwealth of Puerto Rico, Guam, the Commonwealth of the Northern Mariana Islands, the United States Virgin Islands, and American Samoa, and any other territory or possession of the United States.CommentsClose CommentsPermalink

SEC. 505. REGULATIONS.

The Secretary shall issue such regulations as may be necessary to carry out this Act.CommentsClose CommentsPermalink