[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1731 Introduced in House (IH)]







104th CONGRESS
  1st Session
                                H. R. 1731

   To provide for a Federal program of insurance against the risk of 
 catastrophic earthquakes, volcanic eruptions, and hurricanes, and for 
                            other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                              May 25, 1995

 Mrs. Mink of Hawaii introduced the following bill; which was referred 
to the Committee on Banking and Financial Services, and in addition to 
the Committee on Science, for a period to be subsequently determined by 
the Speaker, in each case for consideration of such provisions as fall 
           within the jurisdiction of the committee concerned

_______________________________________________________________________

                                 A BILL


 
   To provide for a Federal program of insurance against the risk of 
 catastrophic earthquakes, volcanic eruptions, and hurricanes, and for 
                            other purposes.
    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.

    (a) Short Title.--This Act shall be cited as the ``Earthquake, 
Volcanic Eruption, and Hurricane Hazards Insurance Act of 1995''.
    (b) Table of Contents.--

Sec. 1. Short title and table of contents.
Sec. 2. Findings.
Sec. 3. Definitions.
   TITLE I--PARTICIPATION BY STATES IN ADOPTION OF HAZARD REDUCTION 
                                MEASURES

Sec. 101. Identification of earthquake-prone, volcanic eruption-prone, 
                            and hurricane-prone States.
Sec. 102. Earthquake, Volcanic Eruption, and Hurricane Loss Mitigation 
                            Advisory Committee.
Sec. 103. Establishment of criteria for loss-reduction measures.
Sec. 104. Self-Sustaining Mitigation Fund.
Sec. 105. State implementation of loss-reduction measures.
Sec. 106. Requirement to purchase primary insurance.
Sec. 107. Effect of noncompliance with State mitigation program.
Sec. 108. Coordination with other programs.
Sec. 109. Report to Congress.
Sec. 110. Regulations.
                  TITLE II--PRIMARY INSURANCE PROGRAM

Sec. 201. Basic authority and program organization.
Sec. 202. Scope of program.
Sec. 203. Terms and limitations of insurance coverage.
Sec. 204. Establishment of actuarial premium rates.
Sec. 205. Chargeable premium rates.
Sec. 206. Insurance mitigation incentives.
Sec. 207. Earthquake, Volcanic Eruption, and Hurricane Insurance and 
                            Reinsurance Advisory Committee.
Sec. 208. Residential Property Insurance Fund.
Sec. 209. Borrowing from Treasury.
TITLE III--NATIONAL EARTHQUAKE, VOLCANIC ERUPTION, AND HURRICANE EXCESS 
                        LOSS REINSURANCE PROGRAM

Sec. 301. Reinsurance program.
Sec. 302. Lines of insurance.
Sec. 303. Rates.
Sec. 304. Reinsurance contracts.
Sec. 305. Reinsurance Fund.
Sec. 306. Borrowing from Treasury.
SEC. 2. FINDINGS.

    The Congress finds that--
            (1) the catastrophic and unpredictable nature of 
        earthquakes, volcanic eruptions, and hurricanes prevent 
        individual private insurers from offering the necessary 
        insurance against these perils without the participation of the 
        Federal Government;
            (2) in the absence of an adequate system for insuring 
        against losses from earthquakes, volcanic eruptions, and 
        hurricanes, the Federal Government and State governments will 
        bear excessive and avoidable costs of disaster relief and the 
        commerce and economy of the Nation would be seriously 
        destabilized;
            (3) the existing systems of private insurance, reinsurance, 
        and government disaster relief are inadequate and should be 
        improved and better coordinated;
            (4) a reasonable method of providing insurance against such 
        losses is to create a Federal earthquake, volcanic eruption, 
        and hurricane insurance and reinsurance program, to assist in 
        making insurance against such disasters widely available and 
        affordable to the general public; and
            (5) in providing such insurance, the Federal Government 
        should work constructively with the States and localities to 
        assist and require, if appropriate, the development, adoption, 
        and enforcement of hazard reduction measures, including 
        building codes, land-use planning, and strengthening of new and 
        existing structures.

SEC. 3. DEFINITIONS.

    For purposes of this Act:
            (1) The term ``additional losses'' means claim and loss 
        adjustment expense payments for earthquake, volcanic eruption, 
        and hurricane coverage issued pursuant to title II that exceed 
        the accumulated amounts in the Residential Property Insurance 
        Fund.
            (2) The term ``alien insurer'' means an insurer or 
        reinsurer organized or incorporated in a country other than the 
        United States.
            (3) The term ``critical facilities vulnerable to 
        hurricanes'' means schools and structures essential to 
        emergency services necessary for post hurricane recovery 
        (including hospitals, fire and policy facilities, temporary 
        shelters, and emergency operating and preparedness centers) 
        that--
                    (A) have unreinforced masonry bearing walls, tilt-
                up construction, nonductile concrete frame 
                construction, or other construction, as determined by 
                the Director, that makes them susceptible to damage 
                from hurricanes; and
                    (B) are located in hurricane zones within 
                hurricane-prone States.
            (4) The term ``Director'' means the Director of the Federal 
        Emergency Management Agency.
            (5) The term ``earthquake'' means any shaking or trembling 
        of the crust of the earth caused by underground seismic forces 
        or by breaking and shifting of rock beneath the surface.
            (6) The term ``earthquake, volcanic eruption, and hurricane 
        coverage'' means insurance issued pursuant to title II.
            (7) The term ``earthquake-prone State'' means a State 
        determined by the Director pursuant to section 101 to have an 
        exposure to the earthquake peril.
            (8) The term ``Federal agency'' means any department, 
        agency, corporation, or other instrumentality of the executive 
        branch of the Federal Government, and includes the Federal 
        National Mortgage Association and the Federal Home Loan 
        Mortgage Corporation.
            (9) The term ``federally related mortgage loan'' has the 
        meaning given the term in section 3(1) of the Real Estate 
        Settlement Procedures Act of 1974, except that the term does 
        not include any loan described in subparagraph (B)(iv) of such 
        section.
            (10) The term ``fires associated with an earthquake'' means 
        any fire proximately caused by an earthquake.
            (11) The term ``fires associated with a volcanic eruption'' 
        means any fire proximately caused by a volcanic eruption.
            (12) The term ``hurricane-prone State'' means a State 
        determined by the Director pursuant to section 101 to have an 
        exposure to hurricane peril.
            (13) The term ``hurricane zone'' means an area within a 
        State identified and classified by the Director under section 
        101(a) as subject to major hurricane risk.
            (14) The term ``Insurance and Reinsurance Advisory 
        Committee'' means the Earthquake, Volcanic Eruption, and 
        Hurricane Insurance and Reinsurance Advisory Committee 
        established under section 207.
            (15) The term ``Insurance Fund'' means the Residential 
        Property Insurance Fund established under section 208.
            (16) The term ``insurance industry'' means all private 
        insurers and private reinsurers.
            (17) The term ``large building'' means any nonresidential 
        structure that has more than 1 story or more than 5,000 square 
        feet per story.
            (18) The term ``Loss Mitigation Advisory Committee'' means 
        the Earthquake, Volcanic Eruption, and Hurricane Loss 
        Mitigation Advisory Committee established under section 102.
            (19) The term ``loss-reduction criteria'' means the 
        criteria for earthquake, volcanic eruption, and hurricane loss 
        mitigation established by the Director under section 103.
            (20) the term ``Primary Insurance Program'' means the 
        national earthquake, volcanic eruption, and hurricane insurance 
        program under title II.
            (21) The terms ``private insurer'' and ``private 
        reinsurer'' mean any insurer or reinsurer that is (A) licensed 
        or admitted to write property and casualty insurance or 
        reinsurance within a State, or (B) is a branch of an alien 
        insurer or reinsurer that is entered through and licensed by a 
        State to conduct insurance or reinsurance business. In the case 
        of an insurance exchange or group of unincorporated 
        underwriters, the term means an underwriting syndicate, 
        notwithstanding the licensed or admitted status of the 
        insurance exchange or group of unincorporated underwriters.
            (22) The term ``Reinsurance Fund'' means the Reinsurance 
        Fund established under section 305.
            (23) The term ``Reinsurance Program'' means the national 
        earthquake, volcanic eruption, and hurricane excess loss 
        reinsurance program under title III.
            (24) The term ``residential property'' means any (A) 1- to 
        4-family residential structure (including mobile or 
        manufactured homes) and the personal property therein, and (B) 
        personal property of occupants of residential structures 
        (including condominiums, cooperatives, and apartment 
        structures).
            (25) The term ``residential property insurance coverage'' 
        means policies, riders, or endorsements of insurance that 
        provide indemnity, in whole or in part, for the loss, 
        destruction, or damage of residential property and other 
        eligible property as determined by the Director.
            (26) The term ``seismically hazardous critical facilities'' 
        means schools and structures essential to emergency services 
        necessary for post earthquake recovery (including hospitals, 
        fire and policy facilities, temporary shelters, and emergency 
        operating and preparedness centers) that--
                    (A) have unreinforced masonry bearing walls, tilt-
                up construction, or nonductile concrete frame 
                construction; and
                    (B) are located in seismic zones within earthquake-
                prone States.
            (27) The term ``Self-Sustaining Mitigation Fund'' means the 
        Fund established under section 104.
            (28) The term ``seismic zone'' means an area within a State 
        identified and classified by the Director under section 101(a) 
        as subject to major seismic risk.
            (29) The term ``tsunami'' means an ocean wave generated by 
        underwater disturbances in the earth's crust, primarily 
        earthquakes and submarine volcanic eruptions.
            (30) The term ``volcanic eruption'' means the expulsion, as 
        a result of natural causes, of molten rock, rock fragments, 
        gases, ashes, mud, lava flows, and other natural substances 
        through an opening in the crust of the Earth.
            (31) The term ``volcanic eruption-prone State'' means a 
        State determined by the Director pursuant to section 101 to 
        have an exposure to the volcanic eruption peril.
            (32) The term ``volcanic zone'' means an area within a 
        State identified and classified by the Director under section 
        101(a) as subject to major volcanic eruption risk.

   TITLE I--PARTICIPATION BY STATES IN ADOPTION OF HAZARD REDUCTION 
                                MEASURES

SEC. 101. IDENTIFICATION OF EARTHQUAKE-PRONE, VOLCANIC ERUPTION-PRONE, 
              AND HURRICANE-PRONE STATES.

    (a) Initial Identification of States.--The Director, in 
consultation with the United States Geological Survey, other relevant 
Federal entities, and seismic, volcanic, and meteorological experts in 
the private sector, shall identify States having an exposure to 
earthquake perils, States having an exposure to volcanic eruption 
peril, and States having an exposure to hurricane peril, which shall 
include any State subject to major or moderate seismic, volcanic 
eruption, or hurricane risk, as appropriate. The Director shall also 
identify and establish any areas, within such States, that are subject 
to major seismic, volcanic eruption, or hurricane risk as seismic 
zones, volcanic zones, or hurricane zones, as appropriate. The Director 
shall identify such States and zones before the expiration of the 1-
year period beginning on the date of the enactment of the Earthquake, 
Volcanic Eruption, and Hurricane Hazards Insurance Act of 1995, and 
shall cause a listing of such States and zones to be published in the 
Federal Register and in widely circulated local newspapers in the 
applicable States before the expiration of such 1-year period.
    (b) Final Notification.--Each State identified under subsection (a) 
shall be considered for purposes of this Act to be an earthquake-prone, 
volcanic eruption-prone, or hurricane-prone State, as appropriate, upon 
the expiration of the 6-month period beginning upon the expiration of 
the period under subsection (a). The Director shall notify the chief 
executive officer of each State identified under subsection (a) in 
writing, before the expiration of such 6-month period, that the State 
is an earthquake-prone, volcanic eruption-prone, or hurricane-prone 
State, as appropriate, for purposes of this Act.
    (c) Ongoing Identification and Notification.--Based upon any 
additional seismic, volcanic, and meteorological information that from 
time to time becomes available, the Director may identify States (not 
identified under subsection (a)) having an exposure to earthquake, 
volcanic eruption, or hurricane perils. Any such States shall be 
considered to be an earthquake-prone, volcanic eruption-prone, or 
hurricane-prone State, as appropriate, for purposes of this Act upon 
the notification of the chief executive officer of the State, in 
writing, of the identification of the State as such a State.
    (d) Appeal.--Any State aggrieved by a final determination as an 
earthquake-prone, volcanic eruption-prone, or hurricane-prone State 
pursuant to subsection (b) or (c), may, after exhausting administrative 
remedies, appeal such determination to any United States district court 
for a district located within the State, not more than 60 days after 
receipt of notice of such determination. The scope of review by the 
court shall be as provided under chapter 7 of title 5, United States 
Code. During the pendency of any such litigation, all determinations of 
the Director shall be effective and final for the purposes of this 
title unless stayed by the court for good cause shown.

SEC. 102. EARTHQUAKE, VOLCANIC ERUPTION, AND HURRICANE LOSS MITIGATION 
              ADVISORY COMMITTEE.

    (a) Establishment.--There is established an independent advisory 
committee within the executive branch to be known as the Earthquake, 
Volcanic Eruption, and Hurricane Loss Mitigation Advisory Committee (in 
this section referred to as the ``Committee''). The Committee, its 
members, and its functions shall be separate from the Insurance and 
Reinsurance Advisory Committee established under section 207. To the 
extent not contradicted by the provisions of this section, the 
Committee shall be subject to the provisions of the Federal Advisory 
Committee Act.
    (b) Membership.--
            (1) Appointed members.--The Committee shall be composed of 
        7 members appointed by the President, by and with the advice 
        and consent of the Senate. The members shall be chosen from 
        among citizens of the United States who are respected experts 
        in the fields of earthquake, volcanic eruption, and hurricane 
        loss mitigation, who shall include--
                    (A) 1 individual who is employed by a State 
                government as an emergency planner;
                    (B) 1 individual who is knowledgeable regarding 
                local community building codes;
                    (C) 1 individual who is employed as a seismic 
                engineer;
                    (D) 1 individual who is employed as an expert in 
                the field of volcanic eruptions; and
                    (E) 1 individual who is employed as an expert in 
                the field of hurricanes.
            (2) Ex officio member.--Notwithstanding paragraph (1), the 
        Chairman of the Insurance and Reinsurance Advisory Committee 
        under section 207 shall serve as an ex officio member of the 
        Committee under this section.
    (c) Vacancies.--A vacancy in the Committee shall be filled in the 
manner in which the original appointment was made.
    (d) Chairperson.--The President shall designate a chairperson of 
the Committee from among members selected for appointment to the 
Committee.
    (e) Selection.--Not later than 180 days after the date of the 
enactment of the Earthquake, Volcanic Eruption, and Hurricane Hazards 
Insurance Act of 1995, the President shall submit to the Senate 
nominations for appointment to the Committee.
    (f) Functions of the Committee.--The Committee shall review the 
loss reduction criteria (including the specific loss-reduction 
measures) established under section 103. Not later than 180 days after 
receiving the draft of the loss-reduction criteria under section 
103(a)(3), the Committee shall submit to the Director written comments 
and recommendations for any changes to the criteria.
    (g) Responsibilities of Director.--The Director shall fully 
cooperate with the Committee and provide the Committee with access to 
personnel and information and may request assistance from relevant 
Federal agencies (including the National Institute of Standards and 
Technology) as the Committee considers necessary to carry out its 
functions.
SEC. 103. ESTABLISHMENT OF CRITERIA FOR LOSS-REDUCTION MEASURES.

    (a) Development of Criteria.--
            (1) In general.--On the basis of research carried out under 
        this title, the Director shall develop comprehensive loss-
        reduction criteria for State and local land use and management 
        ordinances, building codes, and other loss-reduction measures 
        consistent with the requirements under subsection (b). The 
        Director shall periodically update such criteria to reflect 
        technical advances designed to reduce losses from earthquakes, 
        volcanic eruptions, and hurricanes.
            (2) Coordination.--The Director shall develop the loss-
        reduction criteria in coordination and consistent with the 
        earthquake hazards reduction program under title I of this Act 
        and the Robert T. Stafford Disaster Relief and Emergency 
        Assistance Act (and Executive Order 12699 of January 5, 1990). 
        In developing the loss reduction criteria, the Director shall 
        consult other affected Federal entities (including the National 
        Institute of Standards and Technology), the Building Seismic 
        Safety Council, the Interagency Committee on Seismic Safety in 
        Construction, the National Oceanic and Atmospheric 
        Administration, representatives of State and local governments, 
        regional earthquake, volcanic eruption, and hurricane 
        preparedness organizations, model building code organizations, 
        and insurance industry groups.
            (3) Submission of draft to advisory committee.--Not later 
        than the expiration of the 9-month period beginning on the date 
        of the enactment of the Earthquake, Volcanic Eruption, and 
        Hurricane Hazards Insurance Act of 1995, the Director shall 
        submit a draft of the loss-reduction criteria to the Loss 
        Mitigation Advisory Committee established under section 102. 
        Before issuing any final regulations under paragraph (4), the 
        Director shall consider any recommendations made by such 
        Advisory Committee regarding the draft criteria.
            (4) Regulations.--Not later than the expiration of the 18-
        month period beginning on the date of the enactment of the 
        Earthquake, Volcanic Eruption, and Hurricane Hazards Insurance 
        Act of 1995, the Director shall issue regulations establishing 
        the loss-reduction criteria under this section, subject to the 
        provisions of subchapter II of chapter 5 of title 5, United 
        States Code. In issuing final regulations under this paragraph, 
        the Director shall cause to be published in the Federal 
        Register a description of any differences between the 
        recommendations of the Loss Mitigation Advisory Committee and 
        the final regulations (including the applicability of loss-
        reduction measures to States and localities) developed by the 
        Director. The description shall contain, for each such 
        difference, an explanation of why the recommendations of the 
        Advisory Committee were not included in the final regulations.
    (b) Content of Criteria.--The Federal loss-reduction criteria 
established under this section shall include measures for the reduction 
of losses from future earthquakes, volcanic eruptions, and hurricanes, 
as follows:
            (1) Mandatory inclusion.--The Director shall include in the 
        loss-reduction criteria the following loss-reduction measures:
                    (A) Minimum seismic and hurricane building 
                standards applicable to new residential property and 
                other buildings located in earthquake-prone States and 
                hurricane-prone States.
                    (B) Community-based building codes applicable to 
                new residential property, which shall meet or exceed 
                any minimum provisions relating to seismic or hurricane 
                hazards contained in (i) the most recent edition of the 
                National Building Code, (ii) the most recent edition of 
                the Standard Building Code, or (iii) the most recent 
                edition of the Uniform Building Code.
            (2) Discretionary inclusion.--Consistent with reports 
        submitted to Congress pursuant to section 104(a)(2) of the 
        Earthquake Hazards Reduction Act of 1977 and section 947 of the 
        Cranston-Gonzalez National Affordable Housing Act, the Director 
        shall consider and may include in the loss-reduction criteria 
        established under this section, any of the following additional 
        loss-reduction measures:
                    (A) Community-based building codes which contain 
                minimum seismic or hurricane provisions (including 
                restrictions on new unreinforced masonry construction) 
                for new residential property that is located in a 
                seismic or hurricane zone, as appropriate, not 
                currently covered by any of the building codes referred 
                to in paragraph (1)(B) but identified by the Director 
                as being located in earthquake-prone or hurricane-prone 
                States, as appropriate.
                    (B) Geotechnical techniques to minimize the effects 
                of ground failures for new large buildings in high-risk 
                fault, landslide, site amplification, and liquefaction 
                zones identified in earthquake-prone States and, to the 
                extent practicable and cost-effective, application of 
                the same geotechnical techniques to existing large 
                buildings in the same zones.
                    (C) Measures to control construction of buildings 
                in high-risk fault, landslide, site amplification, 
                liquefaction zones, and volcanic zones identified in 
                earthquake-prone or volcanic eruption-prone States.
                    (D) To the extent practicable, retrofitting of 
                seismically hazardous critical facilities and critical 
                facilities vulnerable to hurricanes.
                    (E) Securing of building parapets and external 
                ornamentations of existing buildings located in 
                earthquake-prone States or hurricane-prone States.
                    (F) Bracing of gas water heaters and other measures 
                to reduce the risk of earthquake-induced fires in 
                residential property located in earthquake-prone 
                States.
                    (G) Inspections before transfer of residential 
                property in earthquake-prone States and hurricane-prone 
                States (and provision to buyers of inspection reports) 
                regarding the adequacy of the anchoring of the 
                residential structure to the foundation, the presence 
                of unbraced or braced cripple walls for woodframe 
                structures, and the bracing of gas water heaters to the 
                walls for all structures, as appropriate based on risk 
                of damage by earthquakes or hurricanes.
            (3) Recommended measures.--The Director may recommend, in 
        the loss-reduction criteria, any of the following earthquake 
        and hurricane preparedness and planning measures:
                    (A) Expanded research and development by the 
                National Institute of Standards and Technology and 
                other government and private sector entities of new 
                cost-effective building technologies for new 
                construction and retrofitting of existing buildings.
                    (B) Educational and promotional campaigns to 
                encourage additional voluntary mitigation.
                    (C) Reward-based fiscal incentives, such as lower 
                property tax assessments, no reassessments for 
                retrofitting which results in increased property 
                values, or other tax incentives to encourage use of 
                state-of-the-art mitigation technology.
                    (D) State or community-based efforts to assist low- 
                and moderate-income households to purchase needed 
                earthquake, volcanic eruption, or hurricane insurance 
                and to adopt cost-effective loss-reduction measures.
                    (E) Improvements in long-term earthquake and 
                hurricane construction practices, including the 
                training and licensing of earthquake and hurricane 
                design professionals as well as public and private 
                building inspectors.
                    (F) Institutional support, training in earthquake 
                and hurricane engineering technology and other 
                disciplines, and staffing to ensure compliance with the 
                community-based building codes.
                    (G) Minimizing damage to public utilities, 
                including sewer, gas, electrical and water systems, and 
                other lifelines.
    (c) Standard.--Any mitigation measures included in the loss-
reduction criteria established under this section shall be practical, 
cost-effective, workable, and directly related to the risk of loss from 
earthquakes, volcanic eruptions, or hurricanes in areas where 
residential property is located.
    (d) Technical Assistance.--The Director, in consultation with the 
National Institute of Standards and Technology, shall coordinate with 
and provide technical assistance to States, interstate, and local 
officials and agencies to encourage adoption and enforcement of State 
and local actions that incorporate and support the loss-reduction 
measures and preparedness goals developed by the Director under this 
section.

SEC. 104. SELF-SUSTAINING MITIGATION FUND.

    (a) In General.--A percentage of the annual earthquake, volcanic 
eruption, and hurricane insurance and excess reinsurance premiums 
collected under the Primary Insurance program under title II, as the 
Director shall designate, shall be deposited in a separate fund to be 
known as the Self-Sustaining Mitigation Fund. The percentage may not 
exceed 5 percent, unless the Director determines that the amounts in 
the Insurance Fund are sufficient to provide for any probable expected 
losses from future earthquakes, volcanic eruptions, or hurricanes. 
Interest on amounts in the Fund shall be credited to the Fund.
    (b) Use.--Amounts in the Self-Sustaining Mitigation Fund shall be 
available, to the extent provided in appropriations Acts, to the 
Director to provide assistance to support the earthquake, volcanic 
eruption, and hurricane hazard reduction activities, as follows:
            (1) Assistance to States under section 105(c).
            (2) Assistance to provide earthquake, volcanic eruption, 
        and hurricane education pursuant to subsection (c).
            (3) Assistance for research and development supported by 
        the National Institute of Standards and Technology on 
        construction techniques to reduce costs of new construction and 
        retrofitting of existing buildings.
            (4) Low-interest loans or grants for the retrofitting of 
        seismically hazardous critical facilities and critical 
        facilities vulnerable to hurricanes.
    (c) Education Program.--In coordination with the educational 
programs authorized under title I, the Director shall provide 
assistance under this section to support programs educating the general 
public on the national dimensions of the seismic, volcanic eruption, 
and hurricane risk and on methods for homeowners to reduce the hazards 
resulting from future earthquakes and hurricanes.

SEC. 105. STATE IMPLEMENTATION OF LOSS-REDUCTION MEASURES.

    (a) Definition of Compliance State.--An earthquake-prone, volcanic 
eruption-prone, or hurricane-prone State shall be considered a 
compliance State for purposes of this title if--
            (1) before the expiration of the 2-year period beginning 
        upon the promulgation of final regulations under section 103 
        establishing loss-reduction criteria--
                    (A) the counties and municipalities located in all 
                seismic, volcanic, and hurricane zones within the State 
                have adopted and are enforcing minimum applicable 
                mitigation measures required under the loss-reduction 
                criteria; and
                    (B) the chief executive officer of the State has 
                designated an administrative authority to coordinate 
                the development and enforcement of earthquake, volcanic 
                eruption, and hurricane implementation plans for the 
                State, which plans are equivalent to or exceed the 
                loss-reduction criteria; and
            (2) the State is certified under section 105(b) as a 
        compliance State.
    (b) Determination of Compliance.--
            (1) State submission of certification.--Before the 
        expiration of the 2-year period referred to in subsection 
        (a)(1), each earthquake-prone, volcanic eruption-prone, or 
        hurricane-prone State shall submit a certification to the 
        Director stating whether the State has substantially adopted 
        and is substantially enforcing the applicable mitigation 
        measures under the loss-reduction criteria. In providing such 
        certification, each State may consult with relevant private-
        sector accreditation and rating organizations approved by the 
        Director. The Director shall issue regulations not later than 
        18 months after the date of the enactment of the Earthquake, 
        Volcanic Eruption, and Hurricane Hazards Insurance Act of 1995 
        describing the criteria to be used in making and reviewing such 
        State certifications.
            (2) Review by director.--The Director shall review each 
        certification submitted under paragraph (1) to determine 
        whether it is an accurate manifestation of the submitting 
        State's substantial compliance with, and enforcement of, the 
        applicable mitigation measures under the loss-reduction 
        criteria. If the Director determines that the State 
        certification is substantially accurate and the State has 
        adopted and is enforcing the applicable mitigation measures, 
        the Director shall certify the State for purposes of subsection 
        (a). Using the criteria established under paragraph (1), the 
        Director shall review the compliance with, and enforcement of, 
        the applicable mitigation measures by each compliance State 
        meeting the requirements of subsection (a) not less than once 
        every 2 years and shall renew compliance certificates as 
        appropriate.
            (3) Noncompliance states.--If an earthquake-prone, volcanic 
        eruption-prone, or hurricane-prone State fails to submit a 
        certification under paragraph (1) or the Director determines 
        under paragraph (1) or (2) that the State has submitted an 
        inaccurate certification, has not adopted or enforced minimum 
        applicable mitigation measures, or has failed to have its 
        compliance certification renewed, the Director shall certify 
        the State as a noncompliance State for purposes of this title 
        and shall promptly prepare and publish proposed regulations 
        setting forth the minimum mitigation measures applicable to the 
        State.
            (4) Review of noncompliance.--A State certified as a 
        noncompliance State pursuant to paragraph (3) may at any time 
        after such certification request the Director to revoke its 
        noncompliance certification and to certify the State pursuant 
        to paragraph (2).
    (c) Assistance To Promote Compliance.--The Director shall provide 
assistance to each compliance State from amounts in the Self-Sustaining 
Mitigation Fund under section 104, to the extent that amounts for such 
assistance are made available under appropriations Acts. The amount of 
such assistance provided to each State shall be based on the State's 
need for hazard reduction as measured by the State's lack of 
preparedness efforts, the amount of earthquake, volcanic eruption, and 
hurricane insurance premiums collected in that State under the Primary 
Insurance Program, and the State's risk of future earthquakes, volcanic 
eruptions, and hurricanes. Such financial assistance shall be used to 
support the State's development and implementation of its mitigation 
plan, including education, enforcement, and mitigation economic 
incentives, such as low-interest loans for seismic retrofitting.
SEC. 106. REQUIREMENT TO PURCHASE PRIMARY INSURANCE.

    (a) Connection to Federally Related Mortgage Loans.--After the 
expiration of the 2-year period beginning upon the promulgation of 
final regulations under section 103 establishing loss-reduction 
criteria, no federally related mortgage loan secured by residential 
property located in an earthquake-prone, volcanic eruption-prone, or 
hurricane-prone State may be made, increased, extended, or renewed 
unless the property securing the loan is covered by earthquake, 
volcanic eruption, and hurricane insurance coverage available under 
title II or equivalent insurance from a private insurer, in the amount 
required under section 203(a)(6). The Director shall determine, in 
cooperation with the appropriate Federal agencies, the methods by which 
such mortgagors shall be required to present proof that they have 
obtained an insurance policy consistent with the provisions of this 
title.
    (b) Exemption for State Properties.--Notwithstanding the other 
provisions of this section, earthquake, volcanic eruption, and 
hurricane insurance coverage shall not be required on any State-owned 
property that is covered under a State policy of self-insurance 
adequate in the determination of the Director. The Director shall 
publish and periodically revise a list of States to which this 
subsection applies.
SEC. 107. EFFECT OF NONCOMPLIANCE WITH STATE MITIGATION PROGRAM.

    Each Federal agency or instrumentality responsible for the 
supervision, approval, regulation, or insuring any banks, savings and 
loans associations, or similar institutions shall, by regulation, 
prohibit such institutions from making, increasing, extending, or 
renewing a federally related mortgage loan secured by improved real 
estate or a mobile home located or to be located in an earthquake-
prone, volcanic eruption-prone, or hurricane-prone State, if--
            (1) the State has been determined to be a noncompliance 
        State pursuant to section 105; and
            (2) a presale inspection of the property securing the 
        loan--
                    (A) indicates that the property does not meet the 
                minimum mitigation measures applicable to the property 
                under the loss-reduction criteria; or
                    (B) has not been conducted.

SEC. 108. COORDINATION WITH OTHER PROGRAMS.

    In carrying out this Act, the Director shall consult with other 
departments and agencies of the Federal Government, and with 
interstate, State, and local agencies having responsibilities regarding 
earthquakes, volcanic eruptions, and hurricanes to ensure that the 
programs of such agencies and the Primary Insurance Program under title 
II are mutually consistent.

SEC. 109. REPORT TO CONGRESS.

    The Director shall submit an annual report under this section to 
the Congress, within 90 days after the end of each fiscal year. The 
report shall describe the activities carried out under this title and 
evaluate any progress achieved in such activities during the preceding 
fiscal year.

SEC. 110. REGULATIONS.

    (a) Director.--The Director may issue any regulations necessary to 
carry out this Act, pursuant to the provisions of subchapter II of 
chapter 5 of title 5, United States Code.
    (b) Federal Agencies.--Each Federal agency or instrumentality 
responsible for the supervision, approval, regulation, or insuring of 
banks, savings and loan associations, or similar institutions, shall, 
in cooperation with the Director, issue any regulations necessary to 
implement the responsibilities of such agency under this Act, pursuant 
to the provisions of subchapter II of chapter 5 of title 5, United 
States Code.

                  TITLE II--PRIMARY INSURANCE PROGRAM

SEC. 201. BASIC AUTHORITY AND PROGRAM ORGANIZATION.

    (a) Establishment.--To carry out the purposes of this Act, the 
Director shall establish and carry out a national earthquake, volcanic 
eruption, and hurricane insurance program to provide insurance against 
loss resulting from physical damage to or loss of real property or 
personal property related thereto, in the United States, arising from 
any earthquake, volcanic eruption, or hurricane, including any fire 
associated with a volcanic eruption.
    (b) Implementation.--In carrying out the Primary Insurance Program 
under this title, the Director shall arrange for participation, on 
other than a risk-sharing basis, by private insurers, insurance agents 
and brokers, insurance adjustment organizations, and other persons. The 
Director may take any actions reasonably necessary and appropriate to 
carry out this title, including the making of contracts, the employment 
and compensation of persons, and the acquisition of real and personal 
property.
    (c) Insurance Practices.--Any actions of the Director under this 
title shall be consistent with standard insurance practices and 
generally accepted accounting, actuarial, and underwriting principles.
    (d) Suits.--Any lawsuits by or against the Director (or employees 
of the Federal Emergency Management Agency) in connection with 
activities under this title shall be brought in the district court of 
the United States with jurisdiction over the action, except that any 
action by an insurer or reinsurer against the Director (or employees of 
the Federal Emergency Management Agency) shall be brought in the United 
States District Court for the District of Columbia.
    (e) Plan of Operation.--
            (1) Development.--The Director shall develop a plan of 
        operation under this subsection to ensure the fair, reasonable, 
        and equitable administration of the Insurance Fund, the 
        Reinsurance Fund, and other activities under this title and 
        title III.
            (2) Contents.--The plan of operation shall set forth the 
        specific policy and programmatic details for operating the 
        Primary Insurance Program and the Reinsurance Program, and 
        shall include--
                    (A) all guidelines, criteria, definitions, 
                clarifications, and procedures necessary to carry out 
                this title;
                    (B) procedures for implementing the mitigation 
                incentives under section 206; and
                    (C) standards for insurers to retain expense 
                allowances from premiums collected under this title.
            (3) Study of low-income rates.--In developing the plan of 
        operation, the Director shall consider options for charging 
        less than actuarial rates for residential property occupied by 
        low-income policyholders and may include in the plan any such 
        option the Director considers necessary, appropriate, and 
        practicable, subject to the requirements under section 205(c).
            (4) Establishment.--
                    (A) Submission of draft to advisory committee.--Not 
                later than the expiration of the 12-month period 
                beginning on the date of the enactment of the 
                Earthquake, Volcanic Eruption, and Hurricane Hazards 
                Insurance Act of 1995, the Director shall submit a 
                draft of the plan of operation to the Insurance and 
                Reinsurance Advisory Committee established under 
                section 207. Before issuing any proposed regulations 
                under subparagraph (B), the Director shall consider any 
                recommendations made by such Advisory Committee 
                regarding the draft plan of operation.
                    (B) Proposed regulations.--Not later than the 
                expiration of the 18-month period beginning on the date 
                of the enactment of the Earthquake, Volcanic Eruption, 
                and Hurricane Hazards Insurance Act of 1995, the 
                Director shall issue proposed regulations establishing 
                the plan of operation under this section, subject to 
                the provisions of subchapter II of chapter 5 of title 
                5, United States Code. In issuing proposed regulations 
                under this paragraph, the Director shall cause to be 
                published in the Federal Register a description of any 
                differences between the recommendations of the 
                Insurance and Reinsurance Advisory Committee and the 
                final regulations (including the guidelines, criteria, 
                definitions, clarifications, and procedures under the 
                plan) developed by the Director. The description shall 
                contain, for each such difference, an explanation of 
                why the recommendations of the Advisory Committee were 
                not included in the proposed regulations.
                    (C) Comments.--After the regulations have been 
                issued under subparagraph (B), the Director shall 
                request comments from the Insurance and Reinsurance 
                Advisory Committee regarding any changes to the 
                regulations.
                    (D) Subsequent changes.--Any changes to the plan of 
                operation contained in final regulations shall be made 
                pursuant to regulations issued in the manner provided 
                in subparagraphs (B) and (C).

SEC. 202. SCOPE OF PROGRAM.

    (a) Residential Properties.--In carrying out the Primary Insurance 
Program, the Director shall make earthquake, volcanic eruption, and 
hurricane coverage available only for residential property. The 
Director shall make such coverage available in earthquake-prone States, 
volcanic eruption-prone States, and hurricane-prone States.
    (b) Additional Types of Properties.--If, on the basis of studies 
and investigations undertaken and carried out and information received 
or exchanged under section 204, and such other information as may be 
necessary, the Director determines that it would be feasible to extend 
the Primary Insurance Program to cover other properties, the Director 
may recommend to Congress that earthquake, volcanic eruption, and 
hurricane coverage under this title be made available to cover any 
types and classes of--
            (1) other properties in residential areas;
            (2) small business properties that are owned or leased and 
        operated by small business concerns;
            (3) religious properties;
            (4) agricultural properties;
            (5) properties occupied by primary nonprofit organizations; 
        and
            (6) properties owned by State and local governments and 
        agencies thereof.

SEC. 203. TERMS AND LIMITATIONS OF INSURANCE COVERAGE.

    (a) Terms.--Pursuant to the plan of operation established under 
section 201 and after consultation with the Insurance and Reinsurance 
Advisory Committee, the Director shall establish, by regulation, the 
general terms and conditions of insurability for properties eligible 
for residential property insurance coverage under section 202. Such 
regulations shall meet the requirements of this section and may 
include--
            (1) the type and locational classification of such eligible 
        properties;
            (2) the nature of damage that may be covered by such 
        insurance;
            (3) appropriate minimum premiums;
            (4) appropriate loss-deductibles including variable 
        deductibles based on the existence of loss-reducing measures 
        that affect the risk of loss;
            (5) appropriate limits on coverage for each classification 
        of eligible properties;
            (6) appropriate minimum coverage amounts pursuant to 
        section 106(a) for each classification of eligible properties, 
        which may not be less than the outstanding principal balance of 
        the mortgage loan securing the property or the maximum coverage 
        limit for the property under paragraph (5), whichever is less; 
        and
            (7) any other terms and limitations relating to such 
        residential property insurance coverage that may be necessary 
        to carry out the purposes of this title.
    (b) Limitations.--Earthquake, volcanic eruption, and hurricane 
coverage under this title shall cover--
            (1) any damage to covered eligible property proximately 
        caused by--
                    (A) an earthquake, volcanic eruption, or hurricane;
                    (B) a tsunami associated with an earthquake, 
                volcanic eruption, or hurricane;
                    (C) a fire associated with a volcanic eruption; and
            (2) coverage for debris removal and additional living 
        expenses incurred as a result of direct damage to the premises 
        by--
                    (A) earthquake, volcanic eruption, or hurricane;
                    (B) a tsunami associated with an earthquake, 
                volcanic eruption, or hurricane; and
                    (C) a fire associated with a volcanic eruption.
The coverage shall not include coverage for any fires associated with 
an earthquake.
    (c) Eligibility of Coverage.--Any private insurer issuing 
residential property insurance coverage in any earthquake-prone, 
volcanic eruption-prone, or hurricane-prone State may provide the 
coverage under this title, on behalf of the Federal Government, to 
residential property policyholders of the insurer. Any private insurer 
electing to participate in the Primary Insurance Program shall make 
coverage available to all residential property policyholders of the 
insurer in earthquake-prone, volcanic eruption-prone, or hurricane-
prone States. Any private insurer electing to purchase the excess 
reinsurance coverage pursuant to title III shall make the coverage 
available, on behalf of the Federal Government, or at equivalent 
coverage and rates on their own behalf, to all residential property 
policyholders of the insurer.

SEC. 204. ESTABLISHMENT OF ACTUARIAL PREMIUM RATES.

    (a) Studies and Establishment of Rates.--The Director may undertake 
and carry out such studies and investigations and receive and exchange 
such information as may be necessary to establish, and shall from time 
to time establish and prescribe, by regulation, on a State, 
territorial, or other appropriate basis, actuarial premium rates for 
types of classes of property eligible for residential property 
insurance coverage and the terms and conditions under which such rates 
apply.
    (b) Arrangements for Services.--In carrying out such studies, the 
Director shall consult with the Loss Mitigation Advisory Committee and 
the Insurance and Reinsurance Advisory Committee and may enter into 
contracts, agreements, or other arrangements to utilize the services of 
the United States Geological Survey and other relevant Federal, State, 
and local governmental agencies, and other persons.
    (c) Considerations.--The Director shall establish actuarial rates 
under this section based on--
            (1) considerations of the risks involved, including--
                    (A) the severity and frequency of earthquakes by 
                seismic zone and States in which the insured property 
                is located, including known differences in risks from 
                active faults and known susceptibility to landslide, 
                site amplification, and liquefaction;
                    (B) the risk of damage associated with a volcanic 
                eruption by volcanic zone and States in which the 
                insured property is located, including proximity to 
                known lava flows;
                    (C) the severity and frequency of hurricanes by 
                hurricane zone and States in which the insured property 
                is located;
                    (D) the value of the insured property;
                    (E) the age of the structures located on the 
                insured property;
                    (F) the construction type of the structures located 
                on the insured property, including woodframe, masonry, 
                and masonry veneer;
                    (G) the architectural type of the structures 
                located on the insured property, including soft first 
                floor, box construction, and split level;
                    (H) earthquake or hurricane loss-reduction 
                measures, including measures described in section 103, 
                followed in the construction or subsequent retrofitting 
                of residential property structures; and
                    (I) any other relevant criteria; and
            (2) application of accepted actuarial and rate-making 
        principles that reflect the risks involved, anticipated 
        insurance related administrative and operating costs and loss 
        and loss-adjustment expense payments, and provide for adequate 
        reserves.
    (d) Limitation.--Any rate classification system used by the 
Director to establish actuarial rates under this section shall be cost-
effective and shall not impose costs for the initial establishment or 
the subsequent administration of the rate plan that are 
disproportionate to the size of the insurance premiums.

SEC. 205. CHARGEABLE PREMIUM RATES.

    (a) Establishment.--On the basis of actuarial rates established 
under section 204 and such other information as may be necessary, the 
Director shall from time to time, and after consultation with the Loss 
Mitigation Advisory Committee and the Insurance and Reinsurance 
Advisory Committee, establish and prescribe, by regulation--
            (1) chargeable premium rates for any types and classes of 
        properties eligible for earthquake, volcanic eruption, and 
        hurricane coverage; and
            (2) the terms and conditions under which such rates shall 
        apply.
    (b) Minimization of Cross-Subsidization.--To the maximum extent 
practicable, such chargeable rates shall be actuarial rates over an 
extended period of time and shall result in a minimum of cross-
subsidization by reasonably reflecting the risk of damaging 
earthquakes, volcanic eruptions, and hurricanes in total and for each 
subclassification of policyholders. In setting and adjusting chargeable 
rates under this section, the Director shall provide that, over an 
extended period of time, expected expenditures from the Insurance Fund 
under section 208(c) do not exceed expected receipts of the Fund under 
section 208(b).
    (c) Low-Income Rates and Mitigation Incentives.--The Director may, 
pursuant to the plan of operation under section 201, establish 
chargeable rates under this section for (1) residential property 
occupied by low-income residents, and (2) residential properties 
described in section 206(4), that are less than the actuarial rates 
established under section 204, but only to the extent that such rates 
do not prevent compliance with the last sentence of subsection (b).

SEC. 206. INSURANCE MITIGATION INCENTIVES.

    In carrying out the Primary Insurance Program under this title 
pursuant to the plan of operation, the Director shall provide for the 
following insurance mitigation incentives:
            (1) Charging lower deductible amounts for any residential 
        property meeting the seismic and hurricane building standards 
        under the loss-reduction criteria.
            (2) Requiring under earthquake, volcanic eruption, and 
        hurricane coverage that repairs to residential property 
        sustaining earthquake damage in excess of the deductible 
        include, at a minimum, anchoring the dwelling to the foundation 
        and the addition of bracing to cripple walls.
            (3) Requiring under earthquake, volcanic eruption, and 
        hurricane coverage that repairs to residential property 
        sustaining hurricane damage in excess of the deductible include 
        such structural or other repairs as the Director considers 
        appropriate to mitigate against future hurricane damage.
            (4) Requiring under earthquake, volcanic eruption, and 
        hurricane coverage that residential property suffering damage 
        in an amount greater than 50 percent of the replacement value 
        of the property shall be rebuilt to at least the minimum 
        standards under the loss-reduction criteria under section 103 
        and applicable to the State.
            (5) Charging lower premiums or deductible amounts for any 
        residential property located in a seismic zone in an 
        earthquake-prone State, or in a hurricane zone in a hurricane-
        prone State that passes an earthquake or hurricane inspection 
        that is required as a condition of sale, paid for by the 
        seller, and meets the requirements of section 103(b)(2)(G).
            (6) Charging lower premiums or deductible amounts for new 
        residential property not constructed in volcanic zones in a 
        volcanic eruption-prone State.

SEC. 207. EARTHQUAKE, VOLCANIC ERUPTION, AND HURRICANE INSURANCE AND 
              REINSURANCE ADVISORY COMMITTEE.

    (a) Establishment.--There is established an independent advisory 
committee within the executive branch to be known as the Earthquake, 
Volcanic Eruption, and Hurricane Insurance and Reinsurance Advisory 
Committee (in this section referred to as the ``Committee''). The 
Committee, its members, and its functions shall be separate from the 
Loss Mitigation Advisory Committee established under section 102. To 
the extent not contradicted by the provisions of this section, the 
Committee shall be subject to the provisions of the Federal Advisory 
Committee Act.
    (b) Membership.--
            (1) Appointed members.--The Committee shall be composed of 
        5 members appointed by the President, by and with the advice 
        and consent of the Senate. The members shall be chosen from 
        among citizens of the United States and shall include--
                    (A) 2 individuals who represent the interests of 
                private insurers;
                    (B) 1 individual who represents the interests of 
                private reinsurers;
                    (C) 1 individual who represents the interests of 
                insurance agents; and
                    (D) 1 individual who is a State insurance 
                regulator.
            (2) Ex officio member.--Notwithstanding paragraph (1), the 
        Chairman of the Loss Mitigation Advisory Committee under 
        section 102 shall serve as an ex officio member of the 
        Committee under this section.
    (c) Vacancies.--A vacancy in the Commission shall be filled in the 
manner in which the original appointment was made.
    (d) Chairman.--The President shall designate a chairman of the 
Committee from among members selected for appointment to the Committee.
    (e) Selection.--Not later than 180 days after the date of the 
enactment of the Earthquake, Volcanic Eruption, and Hurricane Hazards 
Insurance Act of 1995, the President shall submit to the Senate 
nominations for appointment to the Committee.
    (f) Functions of the Committee.--The Committee shall review the 
draft plan of operation established under section 201. Within 120 days 
after receiving the draft plan of operation, the Committee shall submit 
to the Director written comments and recommendations for any changes to 
the plan. After final regulations establishing the plan of operation 
have been issued, the Committee shall submit a written report not less 
than once every 180 days to the Director and the Congress evaluating 
the operation of the Federal earthquake, volcanic eruption, and 
hurricane insurance and reinsurance programs under this title and 
making recommendations for any actions relating to such programs. The 
Committee shall respond as soon as practicable to all requests of the 
Director made pursuant to subsection (g) or section 201(e)(4)(C).
    (g) Responsibilities of the Director.--The Director shall fully 
cooperate with the Committee and provide the Committee with access to 
personnel and information as the Committee considers necessary to carry 
out its functions. The Director shall request comments from the 
Committee on any questions regarding operation of the Federal 
earthquake, volcanic eruption, and hurricane insurance and reinsurance 
programs established under this title.

SEC. 208. RESIDENTIAL PROPERTY INSURANCE FUND.

    (a) Establishment.--There is established in the Treasury of the 
United States the Residential Property Insurance Fund for the purpose 
of carrying out the Primary Insurance Program under this title.
    (b) Credits of Fund.--The Insurance Fund shall be credited with--
            (1) insurance premiums received by the Director under the 
        Primary Insurance Program (less any amounts credited to the 
        Self-Sustaining Mitigation Fund under section 104) and interest 
        earned on premiums, as provided in subsection (e) of this 
        section;
            (2) any amounts borrowed under section 209;
            (3) any amounts appropriated to the Insurance Fund; and
            (4) any interest earned on amounts invested under 
        subsection (d).
    (c) Uses of Fund.--Amounts in the Insurance Fund shall be available 
for--
            (1) payments for losses and loss adjustment expenses under 
        subsection (f);
            (2) payments for insurance company expense allowances paid 
        (including agents' commissions, State premium taxes, and 
        companies' administration expenses);
            (3) administrative expenses of the Primary Insurance 
        Program; and
            (4) interest payments on amounts borrowed under section 209 
        for additional losses, if any.
    (d) Investment of Amounts.--The Director may request the Secretary 
of Treasury to invest any amount in the Residential Property Insurance 
Fund in obligations issued or guaranteed by the United States, as the 
Director considers appropriate.
    (e) Insurance Payments to Fund.--Private insurers issuing 
earthquake, volcanic eruption, and hurricane insurance coverage shall 
remit the premiums collected, less the insurers' expense allowances (as 
provided for in the plan of operation), to the Director on a quarterly 
basis 30 days after the end of the quarter, according to the procedures 
prescribed in the plan of operation. Such private insurers shall 
maintain a separate, interest-bearing account for the premiums to be 
submitted to the Director. The interest collected on this account shall 
be forwarded to the Residential Property Insurance Fund with the 
premiums on a quarterly basis.
    (f) Reimbursement of Insurers.--
            (1) Requirement and procedure.--The Director shall 
        reimburse private insurers providing earthquake, volcanic 
        eruption, and hurricane insurance coverage pursuant to this 
        title from amounts made available from the Insurance Fund. 
        Reimbursement for all claim payments up to and including the 
        policy limits of coverage and for all loss adjustment expenses 
        paid as a result of earthquake, volcanic eruption, and 
        hurricane shall be made as follows:
                    (A) The Director shall reimburse insurers for all 
                claim payments and loss adjustment expense payments 
                made pursuant to the Federal Government's obligations. 
                To the extent that reimbursement is obtained by private 
                insurers for losses also covered under the Reinsurance 
                Program, the insurer shall reimburse the Residential 
                Property Insurance Fund accordingly.
                    (B) If the gross reimbursements exceed amounts 
                available in the Residential Property Insurance Fund, a 
                combination of amounts borrowed from the industry under 
                subparagraph (C) and amounts borrowed from the Treasury 
                of the United States under section 209 shall cover the 
                additional losses.
                    (C) The industry share under subparagraph (B) shall 
                be equivalent to 10 percent of the additional losses. 
                Private insurers issuing earthquake, volcanic eruption, 
                and hurricane coverage shall be assessed for the 
                industry participation in the additional losses based 
                upon the proportion that each insurer's written 
                premiums for this coverage in each State in which the 
                earthquake, volcanic eruption, or hurricane events 
                occurred bear to the total written premiums for such 
                coverage from all insurers in each State in which the 
                same events occurred, based on the most recently 
                published annual report of the Federal Emergency 
                Management Agency. Assessments under this subparagraph 
                may be reinsured under title III.
            (2) Regulations.--The Director may issue regulations 
        establishing the general method or methods by which proved and 
        approved claims for losses may be adjusted and paid for damages 
        covered by the earthquake, volcanic eruption, and hurricane 
        coverage issued under this title. The claim practices of the 
        Insurance Fund shall be subject to and conform with any 
        applicable State insurance unfair trade practices statutes. 
        Judicial review of a decision of the Director regarding 
        reimbursement of a private insurer shall be available pursuant 
        to section 201(d).
    (g) Obligations.--All earthquake, volcanic eruption, and hurricane 
insurance coverage provided through the Primary Insurance Program under 
this title shall constitute obligations, in accordance with the 
provisions of this title, of the United States. The full faith and 
credit of the United States is pledged for the full payment and 
performance of such obligations, subject to the provisions of 
subsection (f)(1)(C). The private insurers participating in the program 
shall bear no risk and shall assume no liability for the earthquake, 
volcanic eruption, and hurricane coverage provided through the program 
except as provided in subsection (f)(1)(C).
    (h) Status of Fund.--Any premiums collected for deposit in the 
Insurance Fund shall be exempt from all taxation now or hereafter 
imposed by the United States, by any territory, dependency or 
possession thereof, or by the State, county, municipality, or local 
taxing authority, except that the insurance policies issued by or in 
conjunction with the Federal Government pursuant to this title shall be 
subject, where applicable, to State insurance premium taxes.

SEC. 209. BORROWING FROM TREASURY.

    (a) Authority.--To the extent that the accumulated assets, 
including any return on investments, in the Residential Property 
Insurance Fund are insufficient to pay claims and expenses, the 
Director shall issue, from time to time, to the Secretary of the 
Treasury, notes and other obligations to cover the insufficiency; 
except that the amounts of such obligations outstanding at any one time 
shall not exceed--
            (1) $25,000,000,000 (or such greater amount as may be 
        approved by the President); and
            (2) such sums as the Congress may provide acting upon the 
        recommendation of the Director.
    (b) Interest Rate.--Obligations under subsection (a) shall bear 
interest at a rate determined by the Secretary of the Treasury, taking 
into consideration the current average market yield on outstanding 
marketable obligations of the United States of comparable maturities.
    (c) Deposits.--Any amounts borrowed by the Director under this 
section shall be deposited in the Residential Property Insurance Fund.
    (d) Repayment.--Any amounts borrowed under this section shall be 
recouped, including interest on the borrowed funds, in future 
chargeable rates for earthquake, volcanic eruption, and hurricane 
coverage pursuant to the plan of operation. The Secretary of the 
Treasury shall liberally grant extensions in repayment schedules that 
the Director advises the Secretary are necessary.
TITLE III--NATIONAL EARTHQUAKE, VOLCANIC ERUPTION, AND HURRICANE EXCESS 
                        LOSS REINSURANCE PROGRAM

SEC. 301. REINSURANCE PROGRAM.

    (a) Availability.--
            (1) Initial.--Upon the issuance of final regulations 
        establishing the plan of operation under section 201, the 
        Director shall make available, to any private insurer 
        participating in the Primary Insurance Program under title II 
        or any private reinsurer which reinsures any such private 
        insurer, excess reinsurance coverage for direct and indirect 
        losses that are not eligible for insurance coverage under title 
        II and arise from an earthquake, a volcanic eruption, or a 
        hurricane.
            (2) Expanded.--Upon the expiration of the 2-year period 
        beginning upon issuance of the regulations referred to in 
        paragraph (1), the Director shall make available, to any 
        private insurer or private reinsurer, excess reinsurance 
        coverage for direct and indirect losses that are not eligible 
        for insurance coverage under title II and arise from an 
        earthquake, a volcanic eruption, or a hurricane. Each private 
        insurer or reinsurer participating in the Primary Insurance 
        Program under title II shall purchase the excess reinsurance 
        coverage under this title.
    (b) Liability.--Excess reinsurance under this title shall be 
offered as follows:
            (1) Industry.--The Reinsurance Fund shall be liable with 
        respect to such reinsurance in the event of an earthquake, a 
        volcanic eruption, or a hurricane after the insurance industry 
        has incurred losses and loss adjustment expenses from the 
        single event that are covered under the lines set forth in 
        section 302(a) and that exceed 8 percent of the industry 
        countrywide subject net written premium, as determined by the 
        Director.
            (2) Federal government.--After the insurance industry has 
        sustained losses described in paragraph (1), the Federal 
        Government shall be liable to an individual private insurer or 
        private reinsurer for 95 percent of qualifying losses in excess 
        of 8 percent of the private insurer's or private reinsurer's 
        countrywide subject net written premium.
    (c) Qualifying Losses.--For the purposes of subsection (b), the 
term ``qualifying losses'' means losses and loss adjustment expenses 
incurred by a private insurer or private reinsurer from an earthquake 
(including losses and loss adjustment expenses from foreshocks and 
aftershocks attributable to the same event and including separate 
earthquakes occurring within a 12-month period encompassing the event 
described in subsection (b)(1) whose incurred losses and loss 
adjustment expenses exceed 2 percent of the private insurer's or 
private reinsurer's countrywide subject net written premium), a 
volcanic eruption, or a hurricane, reduced--
            (1) by any collectible reinsurance recoverable; and
            (2) if the percentage of uncollectible reinsurance arising 
        from the event, as compared to total reinsurance (other than 
        earthquake, volcanic eruption, or hurricane excess catastrophe 
        reinsurance purchased from the Federal Government) with respect 
        to the event is--
                    (A) more than 0 but not more than 5 percent, by 0 
                percent of such uncollectible reinsurance amount;
                    (B) more than 5 percent, but not more than 15 
                percent, by 33.33 percent of the uncollectible 
                reinsurance amount above 5 percent;
                    (C) more than 15 percent, but not more than 25 
                percent, by--
                            (i) the amount determined under 
                        subparagraph (B); and
                            (ii) 66.66 percent of the uncollectible 
                        reinsurance amount above 15 percent; and
                    (D) more than 25 percent, by--
                            (i) the amount determined under 
                        subparagraph (C); and
                            (ii) 100 percent of the uncollectible 
                        reinsurance amount above 25 percent.
    (d) Other Eligibility.--
            (1) In general.--Notwithstanding the requirements of 
        subsections (b) and (c), a private insurer or private reinsurer 
        shall be eligible for excess reinsurance coverage and 
        reimbursement from the Federal Government if the insurer or 
        reinsurer has incurred losses, prior to any reinsurance 
        coverage, from a single event that are included in the lines 
        covered in section 302(a) and that exceed 50 percent of their 
        countrywide subject direct written premium or their countrywide 
        subject net written premium, whichever is greater.
            (2) Liability.--After the private insurer or private 
        reinsurer has sustained losses described in paragraph (1), the 
        Federal Government shall be liable for 95 percent of qualifying 
        losses, as defined in subsection (c), in excess of 20 percent 
        of the private insurer's or the private reinsurer's countrywide 
        subject net written premium.
            (3) Limitation on liability.--The liability of the Federal 
        Government under this subsection shall be limited to 200 
        percent of the private insurer's countrywide subject direct net 
        written premium and 600 percent of the private reinsurer's 
        countrywide subject assumed net written premium. In the event a 
        company is both a private insurer and a private reinsurer, the 
        liability limits shall be 200 percent of their subject direct 
        net written premium and 600 percent of their subject assumed 
        net written premium. Intracompany or intragroup reinsurance 
        arrangements or contracts shall not be considered as 
        reinsurance in the calculation of insurance and reinsurance 
        subject direct or subject assumed net written premium under 
        this subsection.
    (e) Definitions.--For purposes of this title:
            (1) The term ``subject assumed net written premium'' means 
        premiums received from other insurance companies for 
        reinsurance less ceded reinsurance, for all lines of coverage 
        listed in section 302.
            (2) The term ``subject direct net written premium'' means 
        the aggregate amount of recorded originated premiums, other 
        than reinsurance, issued during the year whether collected or 
        not at the close of the year (plus retrospective audit premium 
        collections) after deducting all return premiums and ceded 
        reinsurance premiums, for all lines of coverage listed in 
        section 302.
            (3) The term ``subject net written premium'' means direct 
        and reinsurance premiums received by private insurers and 
        private reinsurers, less premiums paid for ceded reinsurance, 
        for all lines of coverage listed in section 302.
            (4) The term ``uncollectible reinsurance'' means 
        reinsurance proceeds due and payable in accordance with the 
        terms of the reinsurance contract which are not paid within 12 
        months of the due date.

SEC. 302. LINES OF INSURANCE.

    (a) Covered Lines.--The Director shall provide reinsurance coverage 
to private insurers for all of the following lines of insurance 
appearing in the National Association of Insurance Commissioners Fire 
and Casualty Annual Statement filed with the applicable State 
department of insurance:
            (1) Fire.
            (2) Allied Lines.
            (3) Farmowner's Multiple Peril.
            (4) Homeowner's Multiple Peril.
            (5) Commercial Multiple Peril.
            (6) Ocean Marine.
            (7) Inland Marine.
            (8) Earthquake.
            (9) Workers Compensation.
            (10) Other Liability.
            (11) Aircraft (All Perils).
            (12) Glass.
            (13) Burglary and Theft.
            (14) Boiler and Machinery.
            (15) Reinsurance.
Reinsurance coverage must be purchased for all covered lines of 
insurance and in all affected seismic, volcanic, and hurricane rating 
zones in earthquake-prone, volcanic eruption-prone, or hurricane-prone 
States with the rates for such coverage set by the Director, pursuant 
to section 303.
    (b) Other Lines.--The Federal Government shall provide reinsurance 
coverage to private reinsurers for all of the lines of insurance 
referred to in subsection (a) as well as other lines of insurance 
appearing in the National Association of Insurance Commissioners Fire 
and Casualty Annual Statement, as determined by the Director in the 
plan of operation and in consultation with the Insurance and 
Reinsurance Advisory Committee.

SEC. 303. RATES.

    (a) Establishment.--The Director shall establish the rates for the 
excess reinsurance coverage and adjust the rates when necessary using 
generally accepted actuarial principles. To the maximum extent 
practicable, such rates shall be actuarial rates which produce a 
minimum degree of cross-subsidization over an extended period of time 
consistent with the infrequency of catastrophic earthquakes, volcanic 
eruptions, and hurricanes. In setting and adjusting the rates, the 
Director shall provide that, over an extended period of time, expected 
expenditures from the Reinsurance Fund under section 305(c) do not 
exceed expected receipts of the Reinsurance Fund under section 305(b).
    (b) Considerations.--In setting or adjusting such rates, the 
Director shall also provide for a minimum degree of cross-subsidization 
among classes of reinsureds by reasonably reflecting the differences in 
risk of and vulnerability to loss from earthquakes, volcanic eruptions, 
and hurricanes that would be subject to payment from the Reinsurance 
Fund, by giving due consideration to the following:
            (1) The premium volume of the reinsured by line of 
        insurance under section 302(a) by seismic, volcanic, and 
        hurricane zone or State in which the risks insured or reinsured 
        by the reinsurer are located.
            (2) The proportion of the total expected amount of payments 
        for qualifying losses and loss adjustment expenses by line of 
        insurance under section 302(a) by seismic, volcanic, and 
        hurricane zone or State expected for each reinsured.
    (c) Limitation.--Any rate classification system used by the 
Director under this section shall be cost-effective and shall not 
impose costs for the initial establishment or the subsequent 
administration of the rating plan that are disproportionate to the size 
of the premiums.
    (d) Quarterly Payment.--Premiums paid to the Reinsurance Fund for 
reinsurance coverage under this title shall be paid on a quarterly 
basis and shall be accumulated in the Reinsurance Fund, to be managed 
pursuant to section 305.

SEC. 304. REINSURANCE CONTRACTS.

    (a) Terms.--The reinsurance contracts issued by the Federal 
Government pursuant to this title shall contain terms and conditions 
similar to those generally used in private catastrophic reinsurance 
contracts.
    (b) Judicial Review.--Judicial review of a decision of the Director 
regarding payment of claims shall be made available pursuant to section 
201(d).
    (c) Obligations.--All reinsurance contracts issued under this title 
shall constitute obligations, in accordance with the terms of such 
reinsurance, of the United States. The full faith and credit of the 
United States is pledged for the full payment and performance of such 
obligations.
    (d) Single Entities.--Any private insurance and reinsurance 
companies under the same ownership or management, as determined under 
the plan of operation, shall be considered a single entity for purposes 
of this title.

SEC. 305. REINSURANCE FUND.

    (a) Establishment.--There is established in the Treasury of the 
United States the Reinsurance Fund for the purposes of carrying out the 
excess loss reinsurance program under this title.
    (b) Credits of Fund.--The Reinsurance Fund shall be credited with--
            (1) any reinsurance premiums received by the Director under 
        the excess loss reinsurance program;
            (2) any amounts borrowed under section 306; and
            (3) any amounts earned under subsection (d).
    (c) Use of Fund.--The Reinsurance Fund shall be available to the 
Director for--
            (1) payments for qualifying losses and loss adjustment 
        expenses under the excess loss reinsurance program under this 
        title;
            (2) administrative expenses of carrying out the program; 
        and
            (3) interest payments on amounts borrowed from the Treasury 
        under section 306, if any.
    (d) Investment.--The Director shall request the Secretary of the 
Treasury to invest any amounts in the Reinsurance Fund in obligations 
issued or guaranteed by the United States, as the Director considers 
appropriate.
    (e) Status of Funds.--Any reinsurance premiums collected for 
deposit in the Reinsurance Fund shall be exempt from all taxation now 
or hereafter imposed by the United States, by any territory, dependency 
or possession thereof, or by any State, county, municipality, or local 
taxing authority, except that the insurance policies issued by or in 
conjunction with the Federal Government pursuant to this title shall be 
subject, where applicable, to State insurance premium taxes.

SEC. 306. BORROWING FROM TREASURY.

    (a) Authority.--To the extent that the accumulated assets, 
including any return on investments, in the Reinsurance Fund are 
insufficient to pay claims and expenses, the Director shall issue, from 
time to time, to the Secretary of the Treasury, notes and other 
obligations to cover the insufficiency; except that the amounts of such 
obligations outstanding at any one time shall not exceed--
            (1) $25,000,000,000 (or such greater amount as may be 
        approved by the President); and
            (2) such sums as the Congress may provide acting upon the 
        recommendation of the Director.
    (b) Interest Rate.--Obligations under subsection (a) shall bear 
interest at a rate determined by the Secretary of the Treasury, taking 
into consideration the current average market yield on outstanding 
marketable obligations of the United States of comparable maturities.
    (c) Deposits.--Any amounts borrowed by the Director under this 
section shall be deposited in the Reinsurance Fund.
    (d) Repayment.--Any amounts borrowed pursuant to this section shall 
be recouped, including interest on the borrowed funds, in future rates 
for excess reinsurance coverage pursuant to the plan of operation. The 
Secretary of the Treasury shall liberally grant extensions in repayment 
schedules that the Director advises the Secretary are necessary.
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