Homeowners' Defense Act of 2010 - Title I: National Catastrophe Risk Consortium - (Sec. 101) Establishes the National Catastrophe Risk Consortium as a nonprofit, nonfederal entity to: (1) 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; (2) issue, on a conduit basis, securities and other financial instruments linked to catastrophe risks insured or reinsured through Consortium members; (3) coordinate reinsurance contracts; (4) act as a centralized repository of state risk information accessible by certain private-market participants; and (5) establish a database to perform research and analysis that encourages standardization of the risk-linked securities market.
(Sec. 104) Prohibits the Consortium from: (1) engaging in federal election and lobbying activities; (2) making any contribution to a candidate for election for any state or local office or to any group that receives contributions or makes expenditures for the purpose of influencing any election; (3) employing or retaining any person who engages in influencing any such election or the legislating of any state or local legislative body; or (4) providing any thing of value, other than educational materials or information, to any elected official of a governmental entity.
(Sec. 107) Shields the federal government and the Consortium from liability for Consortium actions. Declares that participating states retain all catastrophe risk until the Consortium: (1) issues securities and other financial instruments linked to the catastrophe risks insured or reinsured through members of the Consortium in the capital markets; and (2) coordinates reinsurance contracts between participating, qualified reinsurance funds and private parties.
(Sec. 108) Authorizes appropriations for FY2010-FY2014.
Title II: Catastrophe Obligation Guarantees - (Sec. 202) Authorizes the Secretary of the Treasury to guarantee holders of debt against loss of principal or interest, or both, on debt issued by eligible state programs that: (1) promote the availability of private capital to provide liquidity and capacity to state catastrophe insurance programs; (2) expedite claims payments; and (3) assist financial recovery from significant natural catastrophes.
Provides separate limits on the total principal amount of such obligations for programs that cover earthquake peril and those that cover all other perils.
Subjects the catastrophic debt guarantee to specified requirements.
(Sec. 204) Pledges the full faith and credit of the United States to the payment of all guarantees with respect to principal and interest.
(Sec. 205) Directs the Secretary to charge and collect fees for such guarantees.
Title III: Reinsurance Coverage for Eligible State Programs - (Sec. 301) Directs the Secretary to make contracts for reinsurance coverage available for purchases only by eligible state programs.
(Sec. 302) Sets pricing guidelines and limits aggregate potential federal liability.
(Sec. 305) Establishes a Federal Natural Catastrophe Reinsurance Fund to be funded by: (1) sales of reinsurance coverage contracts; (2) amounts appropriated for liability for claims payment; and (3) earnings on investments.
Title IV: Mitigation Grant Program - (Sec. 401) Directs the Secretary of Housing and Urban Development (HUD) to establish and implement a program of grants to eligible entities to develop, enhance, or maintain programs to prevent and mitigate losses from natural catastrophes. Includes among such eligible entities a nationally recognized, congressionally chartered disaster response non-profit organization.
Requires the Secretary of HUD to use for such grants at least 35% of the net investment income from the Federal Natural Catastrophe Reinsurance Fund earned in each fiscal year.
Title V: General Provisions - (Sec. 501) Prescribes grant criteria for eligible state programs.
Prohibits this Act from being construed to limit or prevent any eligible state program from obtaining reinsurance coverage for insured losses retained by insurers.
(Sec. 502) Directs the Secretary to study 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 commercial insurance policies that provide coverage for properties composed predominantly of residential rental units.
(Sec. 503) Directs the Comptroller General to study and report to Congress on: (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); and (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 that fail to have sufficient assets above their indebtedness to meet their obligations.
[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2555 Introduced in House (IH)]
111th CONGRESS
1st Session
H. R. 2555
To ensure the availability and affordability of homeowners' insurance
coverage for catastrophic events.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
May 21, 2009
Mr. Klein of Florida (for himself, Mr. Frank of Massachusetts, Mr.
Grayson, Ms. Kosmas, Mr. Larson of Connecticut, Mr. Clyburn, Mr.
Crowley, Mrs. Tauscher, Mr. Hare, Mr. Meek of Florida, Mr. Welch, Ms.
Castor of Florida, Mr. Wexler, Mr. Delahunt, Mr. Kennedy, Ms. Ginny
Brown-Waite of Florida, Mr. Abercrombie, Mr. Posey, Ms. Ros-Lehtinen,
Mr. Buchanan, Mr. Griffith, Mr. Melancon, Mr. Schiff, Mr. Walz, Ms.
Berkley, Ms. Jackson-Lee of Texas, Mr. Hastings of Florida, Mr. Braley
of Iowa, Mr. Boyd, Mr. Ryan of Ohio, Ms. Wasserman Schultz, Mr. Berman,
Mr. Crenshaw, Mr. Inslee, Mr. Kagen, Mr. McNerney, Mr. Perlmutter, Ms.
Corrine Brown of Florida, Ms. Harman, Mr. Lincoln Diaz-Balart of
Florida, Mr. Ackerman, Mr. Yarmuth, Mr. Rooney, and Mr. Donnelly of
Indiana) introduced the following bill; which was referred to the
Committee on Financial Services
_______________________________________________________________________
A BILL
To ensure the availability and affordability of homeowners' insurance
coverage for catastrophic events.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Homeowners'
Defense Act of 2009''.
(b) Table of Contents.--The table of contents for this Act is as
follows:
Sec. 1. Short title; table of contents.
Sec. 2. Findings and purposes.
TITLE I--NATIONAL CATASTROPHE RISK CONSORTIUM
Sec. 101. Establishment; status; principal office; membership.
Sec. 102. Functions.
Sec. 103. Powers.
Sec. 104. Nonprofit entity; conflicts of interest; audits.
Sec. 105. Management.
Sec. 106. Staff; experts and consultants.
Sec. 107. Federal liability.
Sec. 108. Authorization of appropriations.
TITLE II--CATASTROPHE OBLIGATION GUARANTEES
Sec. 201. Purposes.
Sec. 202. Establishment of debt guarantee program.
Sec. 203. Effect of guarantee.
Sec. 204. Full faith and credit.
Sec. 205. Fees for guarantees; amount; collection.
Sec. 206. Payment of losses.
Sec. 207. Regulations.
TITLE III--REINSURANCE COVERAGE FOR ELIGIBLE STATE PROGRAMS
Sec. 301. Program authority.
Sec. 302. Contract principles.
Sec. 303. Terms of reinsurance contracts.
Sec. 304. Maximum Federal liability.
Sec. 305. Federal Natural Catastrophe Reinsurance Fund.
Sec. 306. Regulations.
TITLE IV--MITIGATION GRANT PROGRAM
Sec. 401. Mitigation grant program.
TITLE V--GENERAL PROVISIONS
Sec. 501. Eligible State programs.
Sec. 502. Study and conditional coverage of commercial residential
lines of insurance.
Sec. 503. Definitions.
Sec. 504. Regulations.
SEC. 2. FINDINGS AND PURPOSES.
(a) Findings.--The Congress finds that--
(1) the United States has a history of catastrophic natural
disasters, including hurricanes, tornadoes, flood, fire,
earthquakes, and volcanic eruptions;
(2) although catastrophic natural disasters occur
infrequently, they will continue to occur and are predictable;
(3) such disasters generate large economic losses and a
major component of those losses comes from damage and
destruction to homes;
(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;
(5) the United States needs to take and support State
actions to be better prepared for and better protected from
catastrophes;
(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;
(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;
(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;
(9) the Federal Government has provided and will continue
to provide resources to pay for losses from future
catastrophes;
(10) when Federal assistance is provided to the States,
accountability for Federal funds disbursed is paramount;
(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;
(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;
(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;
(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; and
(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.
(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.
TITLE I--NATIONAL CATASTROPHE RISK CONSORTIUM
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'').
(b) Status.--The Consortium is not a department, agency, or
instrumentality of the United States Government.
(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.
(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.
SEC. 102. FUNCTIONS.
The Consortium shall--
(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;
(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;
(3) coordinate reinsurance contracts between participating,
qualified reinsurance funds and private parties;
(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;
(5) establish a catastrophe risk database to perform
research and analysis that encourages standardization of the
risk-linked securities market;
(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; and
(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.
SEC. 103. POWERS.
The Consortium--
(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; and
(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.
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.
(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.
(c) Audits.--
(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.
(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).
SEC. 105. MANAGEMENT.
(a) Board of Directors; Membership; Designation of Chairperson.--
(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.
(2) Chairperson.--The Secretary of the Treasury, or the
designee of the Secretary, shall serve as the chairperson of
the Board.
(3) Membership.--The members of the Board shall include--
(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; and
(B) a member from each State participating in the
Consortium, who shall be appointed by such State.
(b) Bylaws.--The Board may prescribe, amend, and repeal such bylaws
as may be necessary for carrying out the functions of the Consortium.
(c) Compensation, Actual, Necessary, and Transportation Expenses.--
(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.
(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.
(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.
(d) Quorum.--A majority of the Board shall constitute a quorum.
(e) Executive Director.--The Board shall appoint an executive
director of the Consortium on such terms as the Board may determine.
SEC. 106. STAFF; EXPERTS AND CONSULTANTS.
(a) Staff.--
(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.
(2) Compensation.--The Board of the Consortium may fix the
compensation of the executive director and other staff.
(b) Experts and Consultants.--The Board shall procure the services
of experts and consultants as the Board considers appropriate.
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.
SEC. 108. AUTHORIZATION OF APPROPRIATIONS.
There are authorized to be appropriated to carry out this title
$20,000,000 for each of fiscal years 2010 through 2014.
TITLE II--CATASTROPHE OBLIGATION GUARANTEES
SEC. 201. PURPOSES.
The purposes of this title are to establish a program--
(1) to promote the availability of private capital to
provide liquidity and capacity to State catastrophe insurance
programs; and
(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.
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--
(1) for eligible State programs that cover earthquake peril
shall not exceed $5,000,000,000; and
(2) for eligible State programs that cover all other perils
shall not exceed $20,000,000,000.
(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:
(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.
(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.
(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.
(4) The commitment to guarantee shall specify the fees for
debt guarantee coverage.
(5) The maximum term of the debt that shall be specified in
a commitment issued under this section may not exceed 30 years.
(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).
(d) Catastrophic Debt Guarantee.--A debt guarantee under this
subsection for an eligible State program shall be subject to the
following requirements:
(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.
(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.
(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.
(e) Funding.--There are authorized to be appropriated such sums as
may be necessary to carry out this section.
SEC. 203. EFFECT OF GUARANTEE.
The issuance of any guarantee by the Secretary under this title
shall be conclusive evidence that--
(1) the guarantee has been properly obtained;
(2) the underlying debt qualified for such guarantee; and
(3) the guarantee is valid, legal, and enforceable.
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.
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.
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.
(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.
(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.
SEC. 207. REGULATIONS.
The Secretary shall issue any regulations necessary to carry out
the debt-guarantee program established under this title.
TITLE III--REINSURANCE COVERAGE FOR ELIGIBLE STATE PROGRAMS
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.
SEC. 302. CONTRACT PRINCIPLES.
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 eligible State program purchasing the contract.
SEC. 303. TERMS OF REINSURANCE CONTRACTS.
(a) Minimum Attachment Point.--Notwithstanding any other provision
of this title, a contract for reinsurance coverage under this title for
an eligible State program may not be made available or sold unless the
contract requires that the eligible State program sustain an amount of
retained losses from events in an amount, as determined by the
Secretary, that is equal to the amount of losses projected to be
incurred from a single event of such magnitude that it has a 0.5
percent chance of being equaled or exceeded in any year.
(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.
(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.
(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.
(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.
(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.
(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, 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.
(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.
(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.
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 by the Secretary shall not exceed
$200,000,000,000 or such lesser amount as is determined by the
Secretary based on review of the market for reinsurance coverage under
this title.
(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.
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'').
(b) Credits.--The Fund shall be credited with--
(1) amounts received annually from the sale of contracts
for reinsurance coverage under this title;
(2) any amounts appropriated for the aggregate potential
liability for payment of claims under all contracts for
reinsurance coverage under this title; and
(3) any amounts earned on investments of the Fund pursuant
to subsection (d).
(c) Uses.--Amounts in the Fund shall be available to the Secretary
only for the following purposes:
(1) Contract payments.--For payments to purchasers covered
under contracts for reinsurance coverage for eligible losses
under such contracts.
(2) Administrative expenses.--To pay for the administrative
expenses incurred by the Secretary in carrying out the
reinsurance program under this title.
(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.
(d) Investment.--If the Secretary determines that the amounts in
the Fund are in excess of current needs, the Secretary may invest such
amounts as the Secretary considers advisable in obligations issued or
guaranteed by the United States.
SEC. 306. REGULATIONS.
The Secretary shall issue any regulations necessary to carry out
the program for reinsurance coverage under this title.
TITLE IV--MITIGATION GRANT PROGRAM
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.
(b) Grants.--A grant provided under subsection (a) shall be used to
reduce loss of life and property by--
(1) encouraging awareness of risk factors and what steps
can be taken to eliminate or reduce them;
(2) assisting in the determination of the location of risk
by giving careful consideration to the natural risks for the
location of a property;
(3) providing inspections of homes to identify areas to
strengthen such homes and reduce exposure to natural
catastrophes; or
(4) providing financial assistance to homeowners to
retrofit homes to reduce exposure to natural catastrophes.
(c) Consultation With Experts.--In carrying out the program
established under subsection (a), the Secretary of Housing and Urban
Development shall consult with--
(1) disaster preparedness and response organizations;
(2) homebuilders;
(3) real estate professionals;
(4) building code enforcement agencies; and
(5) any other person that the Secretary considers
appropriate.
(d) Eligible Entity Defined.--In this section, the term ``eligible
entity'' means a State or local government, or a part or program of a
State or local government.
(e) Authorization of Appropriations.--There are authorized to be
appropriated to carry out this section $15,000,000 for each of fiscal
years 2010 through 2014.
TITLE V--GENERAL PROVISIONS
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:
(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.
(2) Operation.--The State program shall meet the following
requirements:
(A) A majority of the members of the governing body
of the State program shall be public officials or
appointed by public officials.
(B) The State shall have a financial interest in
the State program.
(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.
(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--
(A) constitutes an ``integral part'' of the State
that has created it; or
(B) is otherwise exempt from Federal income
taxation.
(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.
(5) Prevention and mitigation.--
(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.
(B) Operational requirements.--The State program
shall operate in a State that--
(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;
(ii) has taken actions to establish an
insurance rate structure that takes into
account measures to mitigate insured losses;
and
(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;
(6) Requirements regarding coverage.--The State program--
(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);
(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 be actuarially sound or
actuarially indicated; and
(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.
(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.
(8) Risk-based capital requirements.--The State program
complies with the risk-based capital requirements under
subsection (b);
(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.
(b) Risk-Based Capital Requirements.--
(1) In general.--Except for programs deemed to be eligible
State programs pursuant to subsection (d), each eligible State
program shall maintain risk-based capital in accordance with
requirements established by the Secretary, in consultation with
the National Association of Insurance Commissioners and
consistent with the Risk-Based Capital Model Act of the
National Association of Insurance Commissioners, and take into
consideration asset risk, credit risk, underwriting risk, and
such other relevant risk as determined by the Secretary.
(2) Report.--For each calendar year, each eligible State
program shall prepare and submit to the Secretary a report
identifying its risk based capital, at such time after the
conclusion of such year, and containing such information and in
such form, as the Secretary shall require.
(c) Certification.--The Secretary shall establish procedures for
initial certification and recertification as an eligible State program.
(d) 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.
(e) 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.
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.
SEC. 503. DEFINITIONS.
In this Act:
(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(c).
(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.
(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.
(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.
(5) Secretary.--The term ``Secretary'' means the Secretary
of the Treasury.
(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.
SEC. 504. REGULATIONS.
The Secretary shall issue such regulations as may be necessary to
carry out this Act.
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Financial Services.
Committee Consideration and Mark-up Session Held.
Ordered to be Reported (Amended) by the Yeas and Nays: 39 - 26.
Reported (Amended) by the Committee on Financial Services. H. Rept. 111-534.
Reported (Amended) by the Committee on Financial Services. H. Rept. 111-534.
Placed on the Union Calendar, Calendar No. 306.
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