[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1517 Introduced in House (IH)]







104th CONGRESS
  1st Session
                                H. R. 1517

To amend title XII of the National Housing Act to establish a national 
      property reinsurance program to ensure the availability and 
       affordability of property insurance in underserved areas.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             April 7, 1995

  Ms. Waters introduced the following bill; which was referred to the 
              Committee on Banking and Financial Services

_______________________________________________________________________

                                 A BILL


 
To amend title XII of the National Housing Act to establish a national 
      property reinsurance program to ensure the availability and 
       affordability of property insurance in underserved areas.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``National Property Reinsurance Act''.

SEC. 2. PROGRAM AUTHORITY.

    Section 1201(b) of the National Housing Act (12 U.S.C. 1749bbb(b)) 
is amended--
            (1) in the matter preceding paragraph (1)--
                    (A) by striking ``November 30, 1983, and'' and 
                inserting ``September 30, 1999,''; and
                    (B) by striking ``September 30, 1985'' and 
                inserting ``September 30, 1999''; and
            (2) in paragraph (1)--
                    (A) by striking ``1223(b)'' and inserting 
                ``1222(f)''; and
                    (B) by striking ``September 30, 1985'' and 
                inserting ``September 30, 2000''.

SEC. 3. STATEWIDE PLANS TO ASSURE FAIR ACCESS TO INSURANCE 
              REQUIREMENTS.

    (a) Targeting of Underserved Areas.--The first sentence of section 
1211(b) of the National Housing Act (12 U.S.C. 1749bbb-3(b)) is amended 
by inserting ``and underserved areas designated under subsection (d)'' 
before the period at the end.
    (b) Determination of Underserved Areas.--Section 1211 of the 
National Housing Act (12 U.S.C. 1749bbb-3) is amended by adding at the 
end the following new subsection:
    ``(d) Designation of Underserved Areas.--For purposes of this 
section, the Director shall designate areas in each State in which 
property insurance coverage of the type that may be reinsured under 
part B is not available or affordable (or not sufficiently available or 
affordable) for residences or business and commercial properties. Such 
areas shall include urban and rural areas that historically have been 
subject to a lack of availability or affordability of such insurance. 
In designating such areas for a State, the Director shall consult with 
the Board under section 1202, the relevant State insurance authority 
for the State that supervises the plan under this part for the State, 
the governing or advisory board or committee referred to in subsection 
(c) for the plan in the State, insurers and pools in the State, and 
community and consumer groups in the State. The Director shall from 
time to time review and, if necessary, revise the designations of 
underserved areas under this subsection.''.
    (c) Studies.--Section 1246(a)(2) of the National Housing Act (12 
U.S.C. 1749bbb-16(a)(2)) is amended by inserting ``and underserved 
areas designated under section 1211(d)'' before the semicolon at the 
end.

SEC. 4. NATIONAL PROPERTY REINSURANCE PROGRAM.

    Title XII of the National Housing Act (12 U.S.C. 1749bbb et seq.) 
is amended by striking part B and inserting the following new part:

            ``Part B--National Property Reinsurance Program

``SEC. 1221. NATURE AND AVAILABILITY OF REINSURANCE COVERAGE.

    ``(a) In General.--The Director may establish and carry out a 
national property reinsurance program under this part. Under such 
program, the Director may offer to insurers or pools reinsurance 
against physical loss of property or damage to property in any one or 
more States, subject to the conditions under section 1222.
    ``(b) Availability Only In Underserved Areas.--Reinsurance under 
this part shall be available only with respect to property insurance 
for property located in underserved areas designated under section 
1211(d).
    ``(c) Eligibility of Insurance.--Reinsurance under this part shall 
be available only with respect to property insurance meeting 
requirements for reinsurance under this part as the Director shall, by 
regulation, establish. Such requirements shall include provisions 
regarding--
            ``(1) the type and locational classification of eligible 
        properties that are covered by insurance that may be reinsured, 
        which shall include such residential properties and business 
        and commercial properties that the Director considers 
        appropriate;
            ``(2) the specific types of property loss and damage that 
        are covered by insurance that may be reinsured;
            ``(3) appropriate premium rates for such insurance, based 
        on generally accepted actuarial principles, which provide 
        appropriate loss deductibles, including variable deductibles, 
        taking into consideration the existence and extent of measures 
        and activities taken to reduce the risk of loss to the insured 
        property for which reinsurance is provided;
            ``(4) appropriate limits of coverage for each 
        classification of eligible property; and
            ``(5) any other terms, conditions, or limitations of 
        insurance coverage that the Director considers appropriate to 
        carry out the reinsurance program under this part.
    ``(d) Available Lines.--Reinsurance under this part shall be 
offered to an insurer or pool only on all of the standard lines of 
property insurance specified in subparagraphs (A) through (E) of 
section 1203(a)(13) together, and any insurer or pool purchasing such 
reinsurance shall also be eligible to purchase reinsurance on any one 
or more standard lines of property insurance specified under paragraphs 
(F) through (J) of section 1203(a)(13) or that may be designated by 
regulation pursuant to subparagraph (K) of such section.
    ``(e) Temporary Coverage.--
            ``(1) Authority.--Immediately after the enactment of the 
        National Property Reinsurance Act, the Director may provide 
        reinsurance coverage under this section in any State on a 
        temporary basis to any insurer or pool that meets the 
        requirements under section 1222(a), on such terms and 
        conditions as may be agreed upon.
            ``(2) Binders.--Coverage under such terms and conditions 
        may be bound with respect to any such insurer or pool by means 
        of a written binder which shall remain in force not more than 
        12 months and shall expire upon the earlier of--
                    ``(A) the termination of such 12-month period; or
                    ``(B) the effective date of any reinsurance 
                agreement entered into between the insurer or pool and 
                the Director under section 1223.

``SEC. 1222. REQUIREMENTS FOR REINSURANCE.

    ``(a) FAIR Plan Participation.--No reinsurance may be offered to 
any insurer or pool in a State after reinsurance coverage pursuant to 
reinsurance agreements under section 1223 is made available (or in the 
case of an insurer or pool that enters into a written binder under 
section 1221(e), after the expiration of the binder) unless--
            ``(1) there is in effect in such State a plan meeting the 
        requirements under part A;
            ``(2) the insurer or pool is participating in such plan; 
        and
            ``(3) in the case of an insurer in a State in which a pool 
        has been established pursuant to State law, the insurer is 
        participating in such pool.
    ``(b) State Reimbursement.--The Director may not offer reinsurance 
under this part in a State, and such reinsurance shall not be 
applicable to insurance policies written in the State by an insurer, 
unless the State has, before the conclusion of the second full regular 
session of the appropriate State legislative body beginning after the 
date of the enactment of the National Property Reinsurance Act, adopted 
appropriate legislation that--
            ``(1) provides that the State and its political 
        subdivisions, or a governmental corporation or fund established 
        pursuant to State law, shall reimburse the Director for any 
        reinsured losses in the State in any reinsurance agreement year 
        in the amount or according to such formula as the Director 
        shall prescribe by regulation; and
            ``(2) is retroactive to the date of the enactment of the 
        National Property Reinsurance Act.
    ``(c) State Property Insurance Program.--After the expiration of 
the 30-day period beginning upon notification to the insurer that the 
Director has made a finding under this subsection, reinsurance under 
this part shall not be applicable to insurance policies written by an 
insurer in a State for which the Director finds (after consultation 
with the State insurance authority) that--
            ``(1) the State has not adopted a suitable program or 
        programs, in addition to plans under part A, to make essential 
        property insurance available without regard to environmental 
        hazards,
            ``(2) the property insurance industry in the State has not 
        adopted such a program or programs, and
            ``(3) taking action under this subsection to make 
        reinsurance inapplicable to such insurance policies is 
        necessary to carry out the purposes of this part.
    ``(d) Participation of Insurers.--After the expiration of the 30-
day period beginning upon notification to the insurer or the applicable 
State insurance authority that the Director has made a finding under 
this subsection, reinsurance under this part shall not be applicable to 
insurance policies written in a State by an insurer that the Director 
finds (after consultation with the State insurance authority) is not 
fully participating--
            ``(1) in the plan in the State,
            ``(2) where it exists, in a pool, and
            ``(3) where it exists, in any other program found by the 
        Director to aid in making essential property insurance more 
        readily available in the State;
except that the Director may not make any such finding with respect to 
any insurer unless (A) before making the finding the Director has 
requested and considered the views of the State insurance authority 
regarding whether the finding should be made, or (B) the Director has 
made such a request in writing to the State insurance authority and 
such authority has failed to respond to the request within a reasonable 
period of time after receiving the request.
    ``(e) Merger or Withdrawal of Insurers.--Reinsurance under this 
part shall not be applicable to insurance policies written in a State 
by an insurer--
            ``(1) after such insurer participates in a merger, 
        acquisition, consolidation, or reorganization involving 1 or 
        more insurers having lines of property insurance in the State 
        reinsured under this part and 1 or more insurers with or 
        without such reinsurance, unless the surviving company--
                    ``(A) meets the criteria of eligibility for 
                reinsurance; and
                    ``(B) within 10 days pays any reinsurance premiums 
                due; or
            ``(2) after receipt by the Director of written notice from 
        the insurer or pool that it is canceling its reinsurance 
        agreement with the Director in the State.
    ``(f) Continuance of Existing Reinsurance Policies.--
Notwithstanding any other provision of this section, reinsurance 
pursuant to a policy written before the date of termination or 
nonrenewal of reinsurance under this section may be continued for the 
term of the policy, for such time as the insurer annually pays 
reinsurance premiums in such amounts as are established under section 
1223, based on the annual premiums earned on such reinsured policies. 
For purposes of this subsection, any policy renewed, extended, 
modified, or otherwise changed, for which any additional premium is 
charged for such change, shall be considered to be a policy written on 
the date such change was made.

``SEC. 1223. REINSURANCE AGREEMENTS, PREMIUMS, AND RETAINED LOSSES.

    ``(a) In General.--Reinsurance made available under this part shall 
reimburse an insurer or pool for its total proved and approved claims 
for covered physical loss of property or damage to property during the 
term of the reinsurance agreement under subsection (b) for the insurer 
or pool (and all direct expenses incurred in connection therewith, 
including expenses for processing, verifying, and paying such claims) 
that are in excess of such losses retained by the insurer or pool in 
accordance with the regulations issued under subsection (d) and the 
reinsurance agreement.
    ``(b) Reinsurance Agreements.--Such reinsurance shall be made 
available pursuant to a reinsurance agreement, which shall be a 
contract, agreement, treaty, or other arrangement for reinsurance 
coverage entered into by the Director with an insurer or pool, in 
consideration of payment of premiums, fees, or other charges by the 
insurer or pool.
    ``(c) Premiums.--The Director shall, by regulation, establish the 
amount of premiums, fees, or other charges to be charged under a 
reinsurance agreement, which shall be the amount determined by the 
Director to be necessary to cover the estimated amount of losses and 
other costs of providing such reinsurance. The rates of the premiums, 
fees, and other charges shall be established based upon generally 
accepted actuarial principles and shall provide for a minimum of cross-
subsidization among classifications of reinsurance. In any single year, 
the rates under contracts with insurers or pools throughout the States 
shall be uniform. The Director may not change any premiums, fees, or 
other charges except by regulations issued in accordance with section 
1247.
    ``(d) Retained Losses.--The Director shall, by regulation, 
establish the amount of losses that, under each reinsurance agreement, 
an insurer or pool shall retain before reinsurance coverage under this 
part applies to losses of the insurer or pool. Such amount shall be 
adequate to further the purposes of this part and consistent with the 
objective of maintaining appropriate financial participation and risk 
sharing to the maximum extent practicable on the part of ceding 
insurers and pools. In establishing such amount the Director shall 
consult with the Advisory Board.
    ``(e) Other Provisions.--Each reinsurance agreement shall include 
terms and conditions similar to those generally used in private 
catastrophe reinsurance contracts, as the Director considers necessary 
or appropriate to carry out the purposes of this part, and such other 
terms and conditions as the Director considers necessary or 
appropriate. Each reinsurance agreement shall provide that any approved 
reinsurance claims payable under this part shall be reduced by the 
amount of any reinsurance collectible from sources other than the 
reinsurance program under this part. In any single year, the terms and 
conditions under reinsurance contracts with insurers or pools 
throughout the States shall be uniform. The provisions of section 
1341(a) of title 31, United States Code, shall not apply to reinsurance 
agreements under this section.
    ``(f) Contract Term.--Each reinsurance agreement shall be for a 12-
month term expiring on September 30.

``SEC. 1224. SUITS FOR RECOVERY OF PREMIUMS.

    ``(a) In General.--The Director may bring a suit in the appropriate 
United States district court to recover from any insurer the amount of 
any unpaid premiums for reinsurance under this part lawfully payable by 
such insurer to the Director.
    ``(b) Statute of Limitations.--
            ``(1) In general.--No action or proceeding shall be brought 
        under subsection (a) or for the recovery of any premium paid to 
        the Director in excess of the amount due to the Director, after 
        the expiration of the 5-year period beginning upon the accrual 
        of the right for which the claim is made.
            ``(2) Fraud.--Where an insurer has made or filed with the 
        Director a false or fraudulent annual statement or other 
        document with the intent to evade, in whole or in part, the 
        payment of premiums, a right for which a claim may be made 
        shall not be considered to have accrued for purposes of this 
        subsection until its discovery by the Director.

``SEC. 1225. NATIONAL PROPERTY REINSURANCE FUND.

    ``(a) Establishment.--To carry out the national property 
reinsurance program under this part, the Director shall establish in 
the Treasury of the United States a fund to be known as the National 
Property Reinsurance Fund (in this section referred to as the 
``Fund''), which shall be separate from the National Insurance 
Development Fund established under section 1243. Amounts in the Fund 
shall be available, to the extent provided in appropriation Acts--
            ``(1) to make such payments as may, from time to time, be 
        required under reinsurance contracts under this part;
            ``(2) to pay such administrative expenses as may be 
        necessary or appropriate to carry out this part; and
            ``(3) to repay to the Secretary of the Treasury any 
        amounts, including interest thereon, as may be borrowed for the 
        Secretary under section 520(b) for purposes of the national 
        property reinsurance program under this part.
    ``(b) Credits.--The Fund shall be credited with--
            ``(1) reinsurance premiums, fees, and other charges paid or 
        collected in connection with reinsurance provided under this 
        part;
            ``(2) any amounts appropriated for the Fund;
            ``(3) interest earned on the investments of the Fund 
        pursuant to subsection (c); and
            ``(4) amounts borrowed by the Director under section 520(b) 
        and deposited in the Fund.
    ``(c) Investment.--If the Director determines that the amounts in 
the Fund are in excess of amounts needed to carry out the national 
property reinsurance program under this part, the Director may request 
the Secretary of the Treasury to invest any excess amounts the Director 
determines advisable in obligations issued or guaranteed by the United 
States.
    ``(d) Budget.--An annual business-type budget for the Fund shall be 
prepared, submitted to the Congress, considered, and acted upon in the 
manner prescribed by sections 9103 and 9104 of title 31, United States 
Code, for wholly owned Government corporations.
    ``(e) Authorization of Appropriations.--There is authorized to be 
appropriated to the Fund $250,000,000 for fiscal year 1996.''.

SEC. 5. BORROWING AUTHORITY AND TAXATION.

    (a) Borrowing Authority.--Section 520(b) of the National Housing 
Act (12 U.S.C. 1735d(b)) is amended--
            (1) by striking ``(1)'';
            (2) by striking ``, and (2)'' and inserting ``. The 
        Director of the Federal Emergency Management Agency is 
        authorized to borrow from the Treasury from time to time such 
        amounts as the Director shall determine are necessary''; and
            (3) by inserting ``or Director'' before ``in borrowing''.
    (b) Taxation.--Section 1250 of the National Housing Act (12 U.S.C. 
1749bbb-20) is amended--
            (1) in subsection (a)--
                    (A) by inserting ``and the National Property 
                Reinsurance Fund'' after ``Fund''; and
                    (B) by striking ``its reserves, surplus, and 
                income'' and inserting ``the reserves, surplus, and 
                income of such funds''; and
            (2) in subsection (b), by striking ``section 1223(a)(1)'' 
        and inserting ``section 1222(b)''.

SEC. 6. ADVISORY BOARD.

    (a) Reestablishment of Board.--Notwithstanding section 14 of the 
Federal Advisory Committee Act or any other law, there is hereby 
reestablished the Advisory Board under section 1202(a) of the National 
Housing Act.
    (b) Reappointment of Members.--Not later than the expiration of the 
6-month period beginning on the date of the enactment of this Act, the 
Director shall appoint members of the Advisory Board referred to in 
subsection (a) in accordance with the provisions of section 1202(a) of 
the National Housing Act and, pursuant to paragraph (2) of such 
section, shall designate a Chairman and Vice Chairman of such Board.
    (c) Membership.--Section 1202(a)(1) of the National Housing Act (12 
U.S.C. 1749bbb-1(a)(1)) is amended--
            (1) in the second sentence, by inserting ``community and 
        consumer groups,'' after the last comma; and
            (2) in the last sentence--
                    (A) by striking ``and'' after ``Government,'';
                    (B) by striking ``and'' after ``industry'' and 
                inserting a comma; and
                    (C) by inserting before the period at the end the 
                following: ``, and not less than 4 shall be 
                representatives of community and consumer groups''.
    (d) Termination.--Section 1202 of the National Housing Act (12 
U.S.C. 1749bbb-1) is amended by adding at the end the following new 
subsection:
    ``(e) The Board shall terminate upon the date referred to in 
section 1201(b)(1) that relates to section 1222(f).''.
    (e) Technical Correction.--Section 1202(d) of the National Housing 
Act (12 U.S.C. 1749bbb-1(d)) is amended by striking ``rate for grade 
GS-18 of the General Schedule under section 5332'' and inserting 
``maximum rate payable under section 5376''.

SEC. 7. DEFINITIONS.

    Section 1203(a) of the National Housing Act (12 U.S.C. 1749bbb-
2(a)) is amended--
            (1) in paragraph (5)--
                    (A) by striking ``and extended coverage endorsement 
                thereon'' and inserting ``, extended coverage 
                endorsement thereon, and policies for other allied 
                lines of fire insurance''; and
                    (B) by striking ``. Such'' and inserting ``; 
                such'';
            (2) by striking paragraph (9) and inserting the following 
        new paragraph:
            ``(9) The term `reinsurance agreement' means a reinsurance 
        agreement under section 1223(b).'';
            (3) in paragraph (13)(K), by striking ``damage from riot or 
        civil commotion'' and inserting ``loss of or damage to 
        property,''; and
            (4) by striking paragraph (14) and inserting the following 
        new paragraph:
            ``(14) The term `State' means the States of the United 
        States, the District of Columbia, the Commonwealth of Puerto 
        Rico, the Commonwealth of the Northern Mariana Islands, Guam, 
        the Virgin Islands, American Samoa, the Trust Territory of the 
        Pacific Islands, and any other territory or possession of the 
        United States.''.

SEC. 8. CONFORMING AMENDMENTS.

    (a) National Insurance Development Fund.--Section 1243 of the 
National Housing Act (12 U.S.C. 1749bbb-13) is amended--
            (1) in subsection (a)--
                    (A) in the matter preceding paragraph (1), by 
                striking ``programs authorized under this title'' and 
                inserting ``insurance program authorized under part 
                C'';
                    (B) in paragraph (1), by striking ``reinsurance and 
                direct insurance contracts under this title'' and 
                inserting ``direct insurance contracts under such 
                part'';
                    (C) in paragraph (2), by inserting ``(not including 
                such expenses for carrying out part B)'' after 
                ``title''; and
                    (D) in paragraph (3), by striking ``programs'' and 
                inserting ``program'';
            (2) in subsection (b)(1)--
                    (A) by striking ``reinsurance and'' each place it 
                appears; and
                    (B) by striking ``parts B and'' and inserting 
                ``part''; and
            (3) in paragraph (6), by inserting ``for purposes of the 
        program under part C'' after ``section 520(b)''.
    (b) Repeal.--Section 1245 of the National Housing Act (12 U.S.C. 
1749bbb-15) is hereby repealed.

SEC. 9. REGULATIONS AND EFFECTIVE DATE.

    The Secretary shall issue regulations pursuant to section 1247 of 
the National Housing Act necessary to carry out the amendments made by 
this Act. Such regulations shall be issued not later than 6 months 
after the date of the enactment of this Act and shall provide for the 
availability of reinsurance coverage under part B of title XII of such 
Act (pursuant to reinsurance agreements under section 1223 of such Act) 
not later than 12 months after such date of enactment.

                                 <all>

HR 1517 IH----2