113 S1461 IS: Homeowners’ Defense Act of 2013
U.S. Senate
2013-08-01
text/xml
EN
Pursuant to Title 17 Section 105 of the United States Code, this file is not subject to copyright protection and is in the public domain.
1.Short title; table of
contents
(a)This Act may be cited as the Homeowners’ Defense Act of
2013
.
(b)The table of contents for this Act is as follows:
Sec. 1. Short title; table of contents.
Sec. 2. Findings and purposes.
Sec. 3. Qualified reinsurance programs.
Sec. 4. Definitions.
Sec. 5. Regulations.
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—National Homeowners’ Insurance Stabilization
Program
Sec. 201. Establishment.
Sec. 202. Liquidity loans and catastrophic loans for State and
regional reinsurance programs.
Sec. 203. Reports and audits.
Sec. 204. Funding.
2.
(a)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)historically, when
a natural disaster eclipses the ability of the private industry and a State to
manage the loss, the Federal Government has stepped in to provide the funding
and services needed for recovery;
(6)the cost of such
Federal bail-outs are borne by all taxpayers equally, as there is
no provision to repay the money and resources provided, which thereby unfairly
burdens citizens who live in lower risk communities;
(7)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 (known as timing risk), 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;
(8)such effects on
the insurance industry have been harmful to economic activity in States exposed
to major catastrophes and have placed significant burdens on existing residents
of such States;
(9)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;
(10)since 2004, the
Congress has appropriated more than $58,000,000,000 in disaster relief to the
States affected by natural catastrophes;
(11)the Federal
Government has provided and will continue to provide resources to pay for
losses from future catastrophes;
(12)when Federal
assistance is provided to the States, accountability for Federal funds
disbursed is paramount;
(13)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 wasted and citizens are enabled to
rebuild and resume productive activities as quickly as possible;
(14)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;
(15)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; and
(16)State insurers
and reinsurers, if appropriately backstopped themselves, can absorb
catastrophic risk borne by private insurers without bearing timing risk, and
thus enable all insurers (whether State-operated or privately owned) to
underwrite and price insurance without timing risk and in such a way to
encourage property owners to pay for the appropriate insurance to protect
themselves and to take steps to mitigate against the risks of disaster by
locally appropriate methods.
(b)The purposes of this Act are to establish a
program to provide a Federal backstop 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.
3.Qualified reinsurance
programs
(a)For purposes of this
Act only, a program shall be considered to be a qualified reinsurance program
if the program—
(1)is authorized by
State law for the purposes described in this section;
(2)is
an entity in which the authorizing State maintains a material, financial
interest;
(3)provides
reinsurance or retrocessional coverage to underlying primary insurers or
reinsurers for losses arising from all personal residential lines of insurance,
as defined in the Uniform Property & Casualty Product Coding Matrix
published and maintained by the National Association of Insurance
Commissioners;
(4)has a governing
body, a majority of whose members are public officials;
(5)provides
reinsurance or retrocessional coverage to underlying primary insurers or
reinsurers for losses in excess of such amount that the Secretary has
determined represents a catastrophic event in that particular State;
(6)is authorized by a
State that has in effect such laws, regulations, or other requirements, as the
Secretary shall by regulation provide, that—
(A)ensure, to the
extent that reinsurance coverage made available under the qualified reinsurance
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;
(B)require that any
new construction, substantial rehabilitation, and renovation insured or
reinsured by the program complies with applicable State or local government
building, fire, and safety codes;
(C)require State
authorized insurance entities within that State to establish an insurance rate
structure that takes into account measures to mitigate insurance losses;
(D)require State
authorized insurance and reinsurance entities within that State to establish
rates at a level that annually produces expected premiums that shall be
sufficient to pay the expected annualized cost of all claims, loss adjustment
expenses, and all administrative costs of reinsurance coverage offered;
and
(E)encourage State
authorized insurance and reinsurance entities within that State to establish
rates that do not involve cross-subsidization between any separate property and
casualty lines covered under the State authorized insurance or reinsurance
entity; and
(7)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)For the 5-year
period beginning on the date of enactment of this Act, in the case of a State
that does not have a qualified reinsurance program for the State, a State
residual insurance market entity for such State shall be considered to be a
qualified reinsurance program, but only if such State residual insurance market
entity was in existence before such date of enactment.
(c)The
Secretary shall establish procedures and standards for State and regional
reinsurance programs and the State residual insurance market entities described
in subsection (b) to apply to the Secretary at any time for certification (and
recertification) as qualified reinsurance programs.
(d)Reinsurance To
cover exposureThis section may not be construed to limit or
prevent any insurer from obtaining reinsurance coverage for insured losses
retained by insurers pursuant to this section, nor shall the obtaining of such
coverage affect the calculation of the amount of any loan under this
Act.
4.For purposes of this Act, the following
definitions shall apply:
(1)The term ceiling coverage level means, with
respect to a qualified reinsurance program, the maximum liability, under law,
that could be incurred at any time by the qualified reinsurance program.
(2)The
term Commission means the National Commission on Natural
Catastrophe Preparation and Protection established under title II.
(3)The
term Consortium means the National Catastrophic Risk Consortium
established under title I.
(4)The term insured loss means any loss insured by
a qualified reinsurance program.
(5)Qualified
reinsurance programThe term qualified reinsurance
program means a State or regional program that meets the requirements of
section 3.
(6)The
term Secretary means the Secretary of the Treasury.
(7)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.
5.The Secretary shall issue such regulations
as may be necessary to carry out this Act.
<enum>I</enum><header>National
Catastrophe Risk Consortium</header>
<section id="HF6067B7DCAB246DE83244D2995C2F376"><enum>101.</enum><header>Establishment;
status; principal office; membership</header>
<subsection id="H68A0A730C9934017AE1241787E12BFD2"><enum>(a)</enum><header>Establishment</header><text>There
is established an entity to be known as the <term>National Catastrophe Risk
Consortium</term>.</text>
</subsection><subsection id="H5364D82266C24462985593828F8B1E65"><enum>(b)</enum><header>Status</header><text>The
Consortium is not a department, agency, or instrumentality of the United States
Government.</text>
</subsection><subsection id="H49B85DB8D0544A84A74E90F73CBE41E"><enum>(c)</enum><header>Principal
office</header><text>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.</text>
</subsection><subsection id="H516C4BDD1ED04C69AF54F9E6BFE733A0"><enum>(d)</enum><header>Membership</header><text>Any
State that has established a reinsurance fund or has authorized the operation
of a State residual insurance market entity shall be eligible to participate in
the Consortium.</text>
</subsection></section><section id="H8A2D4CC052FF43B98F5504A423563FF7"><enum>102.</enum><header>Functions</header><text display-inline="no-display-inline">The Consortium shall—</text>
<paragraph id="H385CB153F57B4D7D0058788231F6D5DB"><enum>(1)</enum><text>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 and State residual insurance market entities;</text>
</paragraph><paragraph id="HD1FD4314495A4FDAA6543D7C300000BA"><enum>(2)</enum><text>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;</text>
</paragraph><paragraph id="H1830D0D18B8042A7A1811706B7F24049"><enum>(3)</enum><text>coordinate
reinsurance contracts between participating, qualified reinsurance funds and
private parties;</text>
</paragraph><paragraph id="H7F5FF5DF74D0490D853F0086C0BD794"><enum>(4)</enum><text>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;</text>
</paragraph><paragraph id="H69CCBC7290204EE1B4B0EA4168B18DA9"><enum>(5)</enum><text>use a catastrophe
risk database to perform research and analysis that encourages standardization
of the risk-linked securities market;</text>
</paragraph><paragraph id="H5B99C48A705048819D52C44D000139D5"><enum>(6)</enum><text>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</text>
</paragraph><paragraph id="H8C9AFDDFBF7545A99049E3FC155EA119"><enum>(7)</enum><text>submit annual
reports to Congress describing the activities of the Consortium for the
preceding year.</text>
</paragraph></section><section id="H53B74BC06F514E09BE42A1E552FA84B0"><enum>103.</enum><header>Powers</header><text display-inline="no-display-inline">The Consortium—</text>
<paragraph id="HFA8F94B60E8146F7BC0081E794F79FD"><enum>(1)</enum><text>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</text>
</paragraph><paragraph id="H3EB573C0A04E462FA967F3FC22EE5CAF"><enum>(2)</enum><text>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.</text>
</paragraph></section><section id="HD88D7D2F48F943029D11923B76B987D"><enum>104.</enum><header>Nonprofit
entity; conflicts of interest; audits</header>
<subsection id="H2E725E855DB848AE9C74A64EFFD3DEF2"><enum>(a)</enum><header>Nonprofit
entity</header><text>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.</text>
</subsection><subsection id="H57BAE4A0A7F44BE5BC2521CAD4A08FBA"><enum>(b)</enum><header>Conflicts of
interest</header><text>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.</text>
</subsection><subsection id="H073BE806EB8340DBA12D4309B5D0A406"><enum>(c)</enum><header>Audits</header>
<paragraph id="HF15F9B178C81484EA191FA497686CDFC"><enum>(1)</enum><header>Annual
audit</header><text>The financial statements of the Consortium shall be audited
annually in accordance with generally accepted auditing standards by
independent certified public accountants.</text>
</paragraph><paragraph id="H4E81CB6F1D3443748FDFEBBB00167E8D"><enum>(2)</enum><header>Reports</header><text>The
report of each annual audit pursuant to paragraph (1) shall be included in the
annual report submitted in accordance with section 102(7).</text>
</paragraph></subsection></section><section id="H19785091D24C46088256959C9C3F6BD9"><enum>105.</enum><header>Management</header>
<subsection id="H3102629A1E9D414097A622DE087EBFE6"><enum>(a)</enum><header>Board of
directors; membership; designation of chairperson</header>
<paragraph id="HBA7A527ABE584826A48ED52585E1AE00"><enum>(1)</enum><header>Board of
directors</header><text>The management of the Consortium shall be vested in a
board of directors (referred to in this title as the <term>Board</term>)
composed of not fewer than 3 members.</text>
</paragraph><paragraph id="H6A2AD6555D7C4AAD968C00C1D5D57DF0"><enum>(2)</enum><header>Chairperson</header><text>The
Secretary, or the designee of the Secretary, shall serve as the chairperson of
the Board.</text>
</paragraph><paragraph id="H6E615BBAD6BB4B95B35EDBF8BC7BF0F6"><enum>(3)</enum><header>Membership</header><text>The
members of the Board shall include—</text>
<subparagraph id="H6D0EC8BD78FB46869D89A7FC32564508"><enum>(A)</enum><text>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 2
States participating in the Consortium; and</text>
</subparagraph><subparagraph id="H685E0BD2AE6C45B2A215ABCC36E0EB4E"><enum>(B)</enum><text>a member from each
State participating in the Consortium, who shall be appointed by such
State.</text>
</subparagraph></paragraph></subsection><subsection id="H1324E6E754364E07AD852E98BD526707"><enum>(b)</enum><header>Bylaws</header><text>The
Board may prescribe, amend, and repeal such bylaws as may be necessary for
carrying out the functions of the Consortium.</text>
</subsection><subsection id="H089B4DB6C4A345FE9F1E636087F0CEEE"><enum>(c)</enum><header>Compensation,
actual, necessary, and transportation expenses</header>
<paragraph id="H562D421DF9014FE8926E788E03007120"><enum>(1)</enum><header>Non-Federal
employees</header><text>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
<external-xref legal-doc="usc" parsable-cite="usc/5/5315">section 5315</external-xref> 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.</text>
</paragraph><paragraph id="H8268ACE4C16643468B2FE843B267E101"><enum>(2)</enum><header>Federal
employees</header><text>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.</text>
</paragraph><paragraph id="H6541E6204617448995E438A8A8D4BB2D"><enum>(3)</enum><header>Travel
expenses</header><text>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 <external-xref legal-doc="usc-chapter" parsable-cite="usc-chapter/5/57">chapter 57</external-xref> of title 5, United States Code.</text>
</paragraph></subsection><subsection id="H58B4C9FAD73647B9AA60D206CDB33DFD"><enum>(d)</enum><header>Quorum</header><text>A
majority of the Board shall constitute a quorum.</text>
</subsection><subsection id="H8E6ED4769AD841E0B317858890901BB1"><enum>(e)</enum><header>Executive
director</header><text>The Board shall appoint an executive director of the
Consortium, on such terms as the Board may determine.</text>
</subsection></section><section id="H7CB21F93CCF843BD9EB28F92FA8B893"><enum>106.</enum><header>Staff; experts
and consultants</header>
<subsection id="H3DEC0E41F9BD4E6F83EBD2A6CE35CD72"><enum>(a)</enum><header>Staff</header>
<paragraph id="H50C636F3E6E242A08163E075F358862C"><enum>(1)</enum><header>Appointment</header><text>The
Board of the Consortium may appoint and terminate such other staff as are
necessary to enable the Consortium to perform its duties.</text>
</paragraph><paragraph id="H5CC5F96474F448F6009E18A1EBA03181"><enum>(2)</enum><header>Compensation</header><text>The
Board of the Consortium may fix the compensation of the executive director and
other staff.</text>
</paragraph></subsection><subsection id="HA62F1CD9DD8B42A6956BD100DC16B8E9"><enum>(b)</enum><header>Experts and
consultants</header><text>The Board shall procure the services of experts and
consultants as the Board considers appropriate.</text>
</subsection></section><section id="HD23B0DB22F4044CE8090A0AC729400C"><enum>107.</enum><header>Federal
liability</header><text display-inline="no-display-inline">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.</text>
</section><section id="HE8AE0BCC43F642EA9704B841DB126179"><enum>108.</enum><header>Authorization
of appropriations</header><text display-inline="no-display-inline">There are
authorized to be appropriated to carry out this title $20,000,000 for each of
fiscal years 2013 through 2018.</text>
</section><enum>II</enum><header>National
Homeowners’ Insurance Stabilization Program</header>
<section id="HCDD944C160C842E3B554114138AF5EBC"><enum>201.</enum><header>Establishment</header><text display-inline="no-display-inline">The Secretary shall carry out a program
under this title to make liquidity loans and catastrophic loans under section
202 to qualified reinsurance programs to ensure the solvency of such programs,
to improve the availability and affordability of homeowners’ insurance, to
provide incentive for risk transfer to the private capital and reinsurance
markets, and to spread the risk of catastrophic financial loss resulting from
natural disasters and catastrophic events.</text>
</section><section id="H03E64CDD679F492092004ECD96FE59FA"><enum>202.</enum><header>Liquidity loans
and catastrophic loans for State and regional reinsurance programs</header>
<subsection id="H73EB246678BB4B9EB97F7D8C91A1A21F"><enum>(a)</enum><header>Contracts</header><text>The
Secretary may enter into a contract with a qualified reinsurance program to
carry out this title, as the Secretary may deem appropriate. The contract shall
include, at a minimum, the conditions for loan eligibility set forth in this
section.</text>
</subsection><subsection id="H27233E2AA57C41E5A8007B2E18621628"><enum>(b)</enum><header>Conditions for
loan eligibility</header><text>A loan under this section may be made only to a
qualified reinsurance program and only if—</text>
<paragraph display-inline="no-display-inline" id="H7B8402548EED440A0000C1F3E44869CB"><enum>(1)</enum><text display-inline="yes-display-inline">before the loan is made—</text>
<subparagraph id="H1D97A897184D423191CC52548F288444"><enum>(A)</enum><text>the State or
regional reinsurance program submits to the Secretary a report setting forth,
in such form and including such information as the Secretary shall require, how
the program plans to repay the loan; and</text>
</subparagraph><subparagraph id="HE7A96F81A33E4D96890599FB2E00C74B"><enum>(B)</enum><text>based upon the
report of the program, the Secretary determines that the program can meet its
repayment obligation under the loan and certifies that the program can meet
such obligation;</text>
</subparagraph></paragraph><paragraph id="HDBE92F5C5E0540A5A060DB61291D331"><enum>(2)</enum><text>the program cannot
access capital in the private market, including through catastrophe bonds and
other securities sold through the facility created in title I of this Act, as
determined by the Secretary, and a loan may be made to such a qualified
reinsurance program only to the extent that such program cannot access capital
in the private market;</text>
</paragraph><paragraph id="H60ABAA6F49D74C63AF67AE44A7A3BDF"><enum>(3)</enum><text>the Secretary
determines that an event has resulted in insured losses in a State with a
qualified reinsurance program;</text>
</paragraph><paragraph id="H6CD982E16DB342F08646557535BF0BB"><enum>(4)</enum><text>the loan complies
with the requirements under subsection (d) and or (e), as applicable;
and</text>
</paragraph><paragraph id="H2CBE26D0250548CC92FBFA329E641758"><enum>(5)</enum><text>the loan is
afforded the full faith and credit of the State and the State demonstrates to
the Secretary that it has the ability to repay the loans.</text>
</paragraph></subsection><subsection id="H057D584D02D8418AB15592E044ABB3EB"><enum>(c)</enum><header>Mandatory
assistance for qualified reinsurance programs</header><text>The Secretary
shall, upon the request of a qualified reinsurance program and subject to
subsection (b), make a loan under subsection (d) or (e) for such program in the
amount requested by such program (subject to the limitations under subsections
(d)(2) and (e)(2), respectively).</text>
</subsection><subsection id="H6CBF62A1046F4EF49D591B085B6724F1"><enum>(d)</enum><header>Liquidity
loans</header><text>A loan under this subsection for a qualified reinsurance
program shall be subject to the following requirements:</text>
<paragraph id="H10DAB848617E420788DC8C1366BB3035"><enum>(1)</enum><header>Preconditions</header><text>The
Secretary shall have determined that the qualified reinsurance program—</text>
<subparagraph id="H19A6DCF0E5C24089A94D9232BE1DD451"><enum>(A)</enum><text>has a capital
liquidity shortage, in accordance with regulations that the Secretary shall
establish; and</text>
</subparagraph><subparagraph id="HAC757F7FECF64AAD82E9FAD29D24CD04"><enum>(B)</enum><text>cannot access
capital markets at effective rates of interest lower than those provided in
paragraph (3).</text>
</subparagraph></paragraph><paragraph id="HFD15D866979A419CBA8C16B0466EE679"><enum>(2)</enum><header>Amount</header><text>The
principal amount of the loan may not exceed the ceiling coverage level for the
qualified reinsurance program.</text>
</paragraph><paragraph id="H9AAA727C3D2F4020B51E7C9D92BCFDB5"><enum>(3)</enum><header>Rate of
interest</header><text>The loan shall bear interest at an annual rate 3
percentage points higher than marketable obligations of the Treasury having the
same term to maturity as the loan and issued during the most recently completed
month, as determined by the Secretary, or such higher rate as may be necessary
to ensure that the amounts of interest paid under such loans exceed the sum of
the costs (as such term is defined in section 502 of the Federal Credit Reform
Act of 1990 (<external-xref legal-doc="usc" parsable-cite="usc/2/661a">2 U.S.C. 661a</external-xref>)) of such loans, the administrative costs involved
in carrying out a program under this title for such loans, and any incidental
effects on governmental receipts and outlays.</text>
</paragraph><paragraph id="H1A0ED78F98794B359C6BD5EA7DBF2EEB"><enum>(4)</enum><header>Term</header><text>The
loan shall have a term to maturity of not less than 5 years and not more than
10 years.</text>
</paragraph></subsection><subsection id="H2550F639926C4C7D9717AC43F250CA7"><enum>(e)</enum><header>Catastrophic
loans</header><text>A loan under this subsection for a qualified reinsurance
program shall be subject to the following requirements:</text>
<paragraph id="HC2C043C844124A408FEDEC9561C178E1"><enum>(1)</enum><header>Preconditions</header><text>The
Secretary shall have determined that an event has resulted in insured losses in
a State with a qualified reinsurance program and that such insured losses in
such State are in excess of 150 percent of the aggregate amount of direct
written premium for privately issued property and casualty insurance, for risks
located in that State, over the calendar year preceding such event, in
accordance with regulations that the Secretary shall establish.</text>
</paragraph><paragraph id="HBDFCDA4C1A9D408088DF00D920C22693"><enum>(2)</enum><header>Amount</header><text>The
principal amount of the loan made pursuant to an event referred to in paragraph
(1) may not exceed the amount by which the insured losses sustained as a result
of such event exceed the ceiling coverage level for the qualified reinsurance
program.</text>
</paragraph><paragraph id="H464E12A14EBE45C285DE943F0057E93D"><enum>(3)</enum><header>Rate of
interest</header><text>The loan shall bear interest at an annual rate 0.20
percentage points higher than marketable obligations of the United States
Treasury having a term to maturity of not less than 10 years and issued during
the most recently completed month, as determined by the Secretary, or such
higher rate as may be necessary to ensure that the amounts of interest paid
under such loans exceed the sum of the costs (as such term is defined in
section 502 of the Federal Credit Reform Act of 1990 (<external-xref legal-doc="usc" parsable-cite="usc/2/661a">2 U.S.C. 661a</external-xref>)) of such
loans, the administrative costs involved in carrying out a program under this
title for such loans, and any incidental effects on governmental receipts and
outlays.</text>
</paragraph><paragraph id="H267DA1E3B0FE4985ABC943749490F9C1"><enum>(4)</enum><header>Term</header><text>The
loan shall have a term to maturity of not less than 10 years.</text>
</paragraph></subsection><subsection id="H9774F79D83444644ACE2CDC6043864C6"><enum>(f)</enum><header>Use of
funds</header><text display-inline="yes-display-inline">Amounts from a loan
under this section shall only be used to provide reinsurance or retrocessional
coverage to underlying primary insurers or reinsurers for losses arising from
all personal real property or homeowners’ lines of insurance, as defined in the
Uniform Property & Casualty Product Coding Matrix published and maintained
by the National Association of Insurance Commissioners. Such amounts shall not
be used for any other purpose.</text>
</subsection></section><section id="H85991D3A2A5E4D65B99E018B55FD94D"><enum>203.</enum><header>Reports and
audits</header><text display-inline="no-display-inline">The Secretary shall
submit a report to the President and the Congress annually that identifies and
describes any loans made under this title during such year and any repayments
during such year of loans made under this title, and describes actions taken to
ensure accountability of loan funds. The Secretary shall provide for regular
audits to be conducted for each loan made under this title, and shall make the
results of such audits publicly available.</text>
</section><section id="HCD385D21BD81449E00D22D66CD722411"><enum>204.</enum><header>Funding</header>
<subsection id="H9224FB70AFE645DCA1075626C79FCB25"><enum>(a)</enum><header>Program
fee</header>
<paragraph id="H267149FDF6974D40A1569BE0D2DD9B02"><enum>(1)</enum><header>In
general</header><text>The Secretary may establish and collect, from qualified
reinsurance programs that are precertified pursuant to section 3(c), a
reasonable fee, as may be necessary to offset the expenses of the Secretary in
connection with carrying out the responsibilities of the Secretary under this
title, including—</text>
<subparagraph id="H49F04C0DFEF14E97A68B13B4587F3537"><enum>(A)</enum><text>costs of
developing, implementing, and carrying out the program under this title;
and</text>
</subparagraph><subparagraph id="H794A91BF470742839FCE432EC6FFBEF1"><enum>(B)</enum><text>costs of providing
for precertification pursuant to section 3(c) of State and regional reinsurance
programs as qualified reinsurance programs.</text>
</subparagraph></paragraph><paragraph id="HECADE1549F17449D00E295BB83B8796F"><enum>(2)</enum><header>Adjustment</header><text>The
Secretary may, from time to time, adjust the fee under paragraph (1) as
appropriate based on expenses of the Secretary referred to in such
paragraph.</text>
</paragraph><paragraph id="H5976BFE9304440D7941837B48B72D141"><enum>(3)</enum><header>Use</header><text>Any
fees collected pursuant to this subsection shall be credited as offsetting
collections of the Department of the Treasury and shall be available to the
Secretary only for expenses referred to in paragraph (1).</text>
</paragraph></subsection><subsection id="HDAB301D1FF03492C9220F604F1C335AE"><enum>(b)</enum><header>Costs of loans;
administrative costs</header><text>To the extent that amounts of negative
credit subsidy are received by the Secretary in any fiscal year pursuant to
loans made under this title, such amounts shall be available for costs (as such
term is defined in section 502 of the Federal Credit Reform Act of 1990 (2
U.S.C. 661a)) of such loans and for costs of carrying out the program under
this title for such loans.</text>
</subsection><subsection id="H5735D0C758434DA8960040AA75857C7B"><enum>(c)</enum><header>Full taxpayer
repayment</header><text>The Secretary shall require the full repayment of all
loans made under this title. If the Secretary determines at any time that such
full repayment will not made, or is likely not to be made, the Secretary shall
promptly submit a report to the Congress explaining why such full repayment
will not be made or is likely not to be made.</text>
</subsection></section>