[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1856 Introduced in House (IH)]







104th CONGRESS
  1st Session
                                H. R. 1856

     To amend the Robert T. Stafford Disaster Relief and Emergency 
  Assistance Act to provide for an expanded Federal program of hazard 
  mitigation, relief, and insurance against the risk of catastrophic 
   natural disasters, such as hurricanes, earthquakes, and volcanic 
                   eruptions, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             June 15, 1995

  Mr. Emerson (for himself, Mr. Mineta, Mr. Ewing, Mr. Boehlert, Mr. 
 Abercrombie, Mr. Ackerman, Mr. Andrews, Mr. Baesler, Mr. Bliley, Mr. 
  Borski, Mr. Brown of Ohio, Mr. Burton of Indiana, Mr. Calvert, Mr. 
Canady of Florida, Mr. Clyburn, Mr. Collins of Georgia, Miss Collins of 
Michigan, Mr. Condit, Mr. Costello, Mr. Cramer, Mr. Crane, Ms. Danner, 
 Mr. DeFazio, Mr. Deutsch, Mr. Diaz-Balart, Mr. Dicks, Mr. Dickey, Mr. 
Dingell, Mr. Dixon, Mr. Doolittle, Mr. Dornan, Mr. Dreier, Mr. Durbin, 
  Ms. Eshoo, Mr. Faleomavaega, Mr. Farr, Mr. Fazio of California, Mr. 
  Fields of Texas, Mr. Filner, Mr. Ford, Mrs. Fowler, Ms. Furse, Mr. 
Gallegly, Mr. Gillmor, Mr. Gordon, Mr. Gene Green of Texas, Mr. Hall of 
 Texas, Mr. Hastert, Mr. Hayes, Mr. Herger, Mr. Hobson, Mr. Horn, Mr. 
    Hutchinson, Ms. Eddie Bernice Johnson of Texas, Mr. Johnston of 
   Florida, Mr. Kim, Mr. Knollenberg, Mr. LaHood, Mrs. Lincoln, Mr. 
 LaTourette, Mr. Laughlin, Mr. Lewis of California, Mr. Lipinski, Mr. 
Livingston, Mr. Matsui, Mr. Manzullo, Mr. McCollum, Mr. McDermott, Mr. 
  McKeon, Mrs. Meek of Florida, Mr. Minge, Mr. Moorhead, Mr. Myers of 
Indiana, Mr. Neal of Massachusetts, Mr. Ney, Mr. Nussle, Mr. Oberstar, 
   Mr. Pallone, Mr. Pastor, Mr. Paxon, Mr. Peterson of Florida, Mr. 
 Pomeroy, Mr. Porter, Mr. Poshard, Mr. Quillen, Mr. Quinn, Mr. Rahall, 
 Mr. Riggs, Mr. Romero-Barcelo, Mr. Schiff, Mr. Shaw, Mr. Skelton, Mr. 
    Solomon, Mr. Spence, Mr. Stearns, Mr. Talent, Mr. Thornton, Mr. 
  Torricelli, Mr. Towns, Mr. Traficant, Mr. Tucker, Mr. Volkmer, Mr. 
  Weldon of Pennsylvania, Mr. Whitfield, and Mr. Wise) introduced the 
 following bill; which was referred to the Committee on Transportation 
  and Infrastructure, and in addition to the Committees on Commerce, 
Banking and Financial Services, and Ways and Means, 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 amend the Robert T. Stafford Disaster Relief and Emergency 
  Assistance Act to provide for an expanded Federal program of hazard 
  mitigation, relief, and insurance against the risk of catastrophic 
   natural disasters, such as hurricanes, earthquakes, and volcanic 
                   eruptions, 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.

    This Act shall be cited as the ``Natural Disaster Protection 
Partnership Act of 1995''.

SEC. 2. FINDINGS AND PURPOSES.

    Section 101 of the Robert T. Stafford Disaster Relief and Emergency 
Assistance Act (42 U.S.C. 5121) is amended as follows:
            (1) In subsection (a), by--
                    (A) striking ``and'' at the end of paragraph (1);
                    (B) inserting ``and'' following the semi-colon in 
                paragraph (2);
                    (C) inserting the following new paragraph before 
                ``special measures'':
            ``(3) because catastrophic natural disasters, such as major 
        hurricanes, earthquakes, volcanic eruptions, and floods pose 
        significant problems in terms of substantial long-term 
        consequences, ill-equipped preparedness efforts, lack of hazard 
        mitigation measures (such as enforced building codes), and 
        inadequate insurance coverage;'';
                    (D) inserting ``promoting hazard mitigation 
                compliance and in'' after ``affected States in''; and
                    (E) inserting ``insurance coverage,'' after 
                ``rendering of aid, assistance,''.
            (2) In subsection (b), by--
                    (A) inserting before the semi-colon in paragraph 
                (1) ``by including State and community disaster 
                mitigation and expanded insurance and reinsurance 
                coverage to supplement insurance available in the 
                private market'';
                    (B) inserting after ``preparedness'' in paragraph 
                (2) ``, hazard mitigation, compliance,'';
                    (C) inserting after ``preparedness'' in paragraph 
                (3) ``, hazard mitigation, emergency first response,'';
                    (D) inserting after ``insurance coverage'' in 
                paragraph (4) ``with premiums based on risk'';
                    (E) inserting before the semi-colon in paragraph 
                (4) ``and by creating a private Natural Disaster 
                Insurance Corporation which shall provide primary 
                insurance to homeowners and reinsurance to State 
                insurance pools and private insurance companies'';
                    (F) inserting before the semi-colon in paragraph 
                (5) ``, adoption and enforcement of building codes, and 
                improvement of first responder capabilities''; and
                    (G) inserting after ``disasters'' in paragraph (6) 
                ``and establishing a funding mechanism to help States 
                and communities pay for pre-disaster hazard 
                mitigation''.

SEC. 3. DEFINITIONS.

    Section 102 of the Robert T. Stafford Disaster Relief and Emergency 
Assistance Act (42 U.S.C. 5122) is amended by adding at the end the 
following new paragraphs:
            ``(10) The term `building' means any structure, fully or 
        partially enclosed, used or intended for sheltering persons or 
        property.
            ``(11) The term `commercial losses' means physical damage 
        losses to insured commercial (other than residential) property 
        and other losses arising out of the effects of earthquakes, 
        volcanic eruptions, tsunamis, and hurricanes for the lines of 
        insurance appearing in the National Association of Insurance 
        Commissioners Fire and Casualty Annual Statement as determined 
        by the Natural Disaster Insurance Corporation under section 902 
        and which shall, at a minimum, include the following:
                    ``(A) Commercial Multiple Peril.
                    ``(B) Workers' Compensation.
                    ``(C) Allied Lines.
                    ``(D) Fire.
                    ``(E) Reinsurance.
                    ``(F) Liability.
                    ``(G) Earthquake.
                    ``(H) Inland Marine.
                    ``(I) Ocean Marine.
            ``(12) The term `critical facilities and lifelines' means 
        major public infrastructure, including highways, roads, 
        bridges, mass transit facilities,
         airports, public buildings, water transportation and treatment 
facilities, electric utilities, electric power and natural gas 
transmission lines, and telecommunication facilities.
            ``(13) The term `Director' means the Director of the 
        Federal Emergency Management Agency.
            ``(14) The term `earthquake' means any shaking or trembling 
        of the crust of the Earth caused by underground seismic forces.
            ``(15) 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 (12 U.S.C. 2602(1)).
            ``(16) The term `first responder' means fire-fighting, 
        police, and emergency medical personnel who have the statutory 
        authority to engage in and provide immediate emergency response 
        services.
            ``(17) The term `flood' or `flooding' means a general and 
        temporary condition of partial or complete inundation of 
        normally dry land areas from the overflow of inland or tidal 
        waters or the unusual and rapid accumulation of runoff or 
        surface waters from any source.
            ``(18) The term `hurricane' means a non-frontal, warm core, 
        low pressure atmospheric system having a definite organized 
        circulation with sustained wind speeds of 74 miles per hour or 
        greater and officially declared to be a hurricane by the 
        National Hurricane Center, including any associated windstorm 
        events occurring within 168 hours before and after the 
        hurricane first makes landfall within a State.
            ``(19) The term `local community' means a political 
        subdivision of a State that has a department, or similar 
        entity, which oversees local zoning and building code 
        compliance efforts.
            ``(20) The term `natural disaster-prone State' means a 
        State determined by the Director pursuant to section 804 to 
        have an exposure to the earthquake, volcanic eruption, 
        tsuanami, windstorm, or hurricane perils.
            ``(21) The term `new', when used in connection with 
        buildings, construction, or property, means structures built 
        pursuant to building permits issued after the date of enactment 
        of the Natural Disaster Protection Partnership Act of 1995.
            ``(22) The term `ordinance or law coverage' means insurance 
        coverage for the increased cost of construction to repair or 
        rebuild buildings and the cost of demolition due to the 
        enforcement of any ordinance or law, such as building codes.
            ``(23) The term `primary insurance coverage' means policies 
        or supplemental contracts of insurance insured in the name of 
        the Natural Disaster Insurance Corporation pursuant to section 
        911 that provide indemnity, in whole or in part, for the loss, 
        destruction, or damage of residential property.
            ``(24) The term `private insurer' means any private insurer 
        or private reinsurer, including all related affiliates or 
        subsidiaries under the same ownership or management consistent 
        with the definition of affiliated group under section 1504(a) 
        of the Internal Revenue Code of 1986 (26 U.S.C. 1504(a)), that 
        is licensed or admitted to write property and casualty 
        insurance or reinsurance within a State.
            ``(25) The term `rate', when used in the context of 
        insurance, means the cost of insurance per exposure unit 
        assessed for the primary insurance coverages under subtitle B 
        of title IX and the reinsurance coverage under subtitle C of 
        title IX which shall include the following:
                    ``(A) The pure expected loss cost that is 
                actuarially based on the level of risk and represents 
                the amount needed to pay expected losses.
                    ``(B) The loss adjustment expense.
                    ``(C) A factor for the mitigation set aside 
                assessed under section 904(b).
                    ``(D) Administrative costs of the Natural Disaster 
                Insurance Corporation created under section 901.
                    ``(E) Compensation for private insurers' costs, 
                including administrative expenses, agent commissions, 
                and taxes.
            ``(26) The term `reinsurance coverage' means the contract 
        provided by the Natural Disaster Insurance Corporation under 
        section 921 in which such Corporation accepts and agrees to pay 
        part of the losses for certain catastrophic natural disasters 
        covered by a private insurer or a State insurance pool.
            ``(27) The term `residential property' means any 1- to 4-
        family residential building (including mobile or manufactured 
        homes).
            ``(28) The term `standard residential property insurance 
        contract' means the conventional policies offered by a private 
        insurer to its residential property policyholders that provides 
        indemnity, in whole or in part, for the loss, destruction, or 
        damage of residential property.
            ``(29) The term `State insurance pool' means any State-
        authorized joint underwriting or joint reinsurance association, 
        risk pool, residual market mechanism, or other type of State-
        sanctioned entity providing property insurance coverage against 
        hurricanes, earthquakes, volcanic eruptions, or tsunamis which 
        meets minimum standards established by the Natural Disaster 
        Insurance Corporation under section 902 regarding
         actuarially sound rates, use of available local financing, and 
reasonable underwriting standards.
            ``(30) The term `subject net written premium' means direct 
        and reinsurance premiums received by private insurers, less 
        premiums paid for ceded reinsurance, for residential property 
        insurance and for all covered commercial lines of insurance 
        included in the plan of operation under section 902(a)(4)(B).
            ``(31) The term `substantially modified building 
        construction' means additions or improvements to an existing 
        building which constitute over an 18-month period at least a 50 
        percent increase in the current value of the building, as 
        measured by the most recent official property assessment.
            ``(32) The term `tsunami' means an ocean wave generated by 
        underwater disturbances in the earth's crust, primarily 
        earthquakes and submarine volcanic eruptions.
            ``(33) 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.
            ``(34) The term `windstorm' means an atmospheric 
        disturbance marked by high velocity movements of air, including 
        a tornado, but does not include a hurricane.''.

SEC. 4. FEDERAL SHARE OF FINANCIAL ASSISTANCE.

    (a) Section 406(a)(1) of the Robert T. Stafford Disaster Relief and 
Emergency Assistance Act (42 U.S.C. 5172(a)(1)) is amended by inserting 
following before the semicolon: ``if the State has paid, or agreed to 
pay, at least $5 per each resident of the State, as determined by the 
latest official census, for the repair, restoration, reconstruction, or 
replacement of public facilities damaged or destroyed by such major 
disaster in the State''.
    (b) Section 406(b) of the Robert T. Stafford Disaster Relief and 
Emergency Assistance Act (42 U.S.C. 5172(b)) is amended as follows:
            (1) Strike ``Minimum'' and ``not less than''.
            (2) Insert following the first dash ``(1) Share amounts.--
        ''.
            (3) Redesignate paragraphs (1), (2), and (3) as 
        subparagraphs (A), (B), and (C) respectively.
            (4) Add at the end the following new paragraph:
            ``(2) Waiver.--The Federal share percentages described in 
        paragraph (1), as may be modified by section 914(a), shall be 
        increased only upon the enactment of a joint resolution that 
        shall not be designated as an emergency under section 
        251(b)(2)(D) of the Balanced Budget and Emergency Deficit 
        Control Act of 1985 (2 U.S.C. 901(b)(2)(D)).''.
    (c) Section 407(d) of the Robert T. Stafford Disaster Relief and 
Emergency Assistance Act (42 U.S.C. 5173(d)) is amended as follows:
            (1) Strike ``not less than''.
            (2) Insert following the dash ``(1) Share amount.--''.
            (3) Add at the end the following new paragraph:
            ``(2) Waiver.--The Federal share percentage described in 
        paragraph (1), as may be modified by section 914(a), shall be 
        increased only upon the enactment of a joint resolution that 
        shall not be designated as an emergency under section 
        251(b)(2)(D) of the Balanced Budget and Emergency Deficit 
        Control Act of 1985 (2 U.S.C. 901(b)(2)(D)).''.

SEC. 5. AMENDMENTS TO THE ACT.

    The Robert T. Stafford Disaster Relief and Emergency Assistance Act 
(42 U.S.C. 5121 et seq.) is amended by adding at the end the following 
new titles:

                   ``TITLE VIII--DISASTER MITIGATION

             ``Subtitle Federal Emergency Management Agency

``SEC. 801. SUPPORT PROGRAMS.

    ``The Director shall establish and carry out natural disaster 
hazard mitigation programs that support the following purposes:
            ``(1) Research.--The Director shall undertake research to 
        strengthen building codes and promote development of cost-
        effective building technologies and other related hazard 
        mitigation measures.
            ``(2) Technology.--The Director shall develop hazard 
        mitigation technology for States, local communities, and 
        architects, engineers, building contractors, and other persons 
        responsible for implementation and enforcement of hazard 
        mitigation measures.
            ``(3) Education.--The Director shall undertake educational 
        programs to enhance public awareness of the risks and hazards 
        associated with natural disasters and ways to mitigate losses 
        from such disasters.

``SEC. 802. NEW FEDERAL BUILDING STANDARDS.

    ``Executive Order 12699 (55 Fed. Reg. 835 (January 5, 1990)) 
relating to earthquake design and construction standards for Federally 
leased, assisted, or regulated buildings shall have the effect of law.
``SEC. 803 STUDIES.

    ``(a) National Minimum Consensus Building Construction Standards.--
            ``(1) Study.--The Director shall enter into an arrangement 
        with the National Academy of Sciences to conduct a study of the 
        advisability and feasibility of establishing national minimum 
        consensus building construction standards for residential and 
        commercial building construction. The study shall be limited to 
        the use of national minimum consensus building construction 
        standards to minimize property damage and reduce personal 
        injuries that result from natural disasters, such as 
        hurricanes, windstorms, earthquakes, and floods.
            ``(2) National academy of sciences.--The study described in 
        paragraph (1) shall be performed by a panel of recognized 
        experts appointed by the National Academy of Sciences. The 
        experts shall include representatives of building constructors, 
        realtors, private insurers, building code officials from the 
        model building code organizations, organized labor, and other 
        experts deemed relevant by the National Academy of Sciences.
            ``(3) Transmit to congress.--The study described in 
        paragraph (1), with any recommendations, shall be transmitted 
        by the National Academy of Sciences to Congress within 2 years 
        of the date of enactment of the Natural Disaster Protection 
        Partnership Act of 1995.
    ``(b) Residential Disaster Inspections.--
            ``(1) Study.--The Director shall enter into an arrangement 
        with the National Academy of Sciences to conduct a study of the 
        advisability and feasibility of establishing standards for the 
        training and licensing of home inspectors and using home 
        inspections as a means to promote natural disaster hazard 
        mitigation of residential property.
            ``(2) National academy of sciences.--The study described in 
        paragraph (1) shall be performed by a panel of recognized 
        experts appointed by the National Academy of Sciences. The 
        experts shall include representatives of building constructors, 
        lending institutions, local community officials, private 
        insurers, homeowners organizations, organized labor, and other 
        experts deemed relevant by the National Academy of Sciences.
            ``(3) Transmit to congress.--The study, with any 
        recommendations, described in paragraph (1) shall be 
        transmitted by the National Academy of Sciences to Congress 
        within 2 years of the date of enactment of the Natural Disaster 
        Protection Partnership Act of 1995.

``SEC. 804. DESIGNATION OF NATURAL DISASTER-PRONE STATES.

    ``(a) Designation.--Within 6 months of the date of enactment of the 
Natural Disaster Protection Partnership Act of 1995 and at the 
beginning of each new calendar year thereafter, the Director shall 
determine which States are deemed to have an exposure to the 
earthquake, volcanic eruption, tsunami, windstorm, or hurricane perils. 
Based upon scientific risk data, such States shall be classified as 
natural disaster-prone for purposes of this Act.
    ``(b) Scientific Risk Data.--
            ``(1) Seismic perils.--The determination of which States 
        are deemed to have an exposure to the earthquake, volcanic 
        eruption, or tsunami perils shall be based solely on seismic 
        data provided by the United States Geological Survey, or its 
        designated successor agency.
            ``(2) Hurricane peril.--The determination of which States 
        are deemed to have an exposure to the windstorm or hurricane 
        peril shall be based solely on windstorm and hurricane data 
        provided by the National Oceanic and Atmospheric 
        Administration, or its designated successor agency.

               ``Subtitle B--State and Community Programs

``SEC. 811. ADOPTION OF BUILDING AND SAFETY CODES.

    ``(a) Multi-Hazard Building and Safety Codes.--At a minimum, each 
natural disaster-prone State shall either--
            ``(1) adopt for all new and substantially modified building 
        construction in that State building codes that meet the 
        appropriate hurricane, windstorm, earthquake, volcanic 
        eruption, or tsunami natural disaster hazard mitigation 
        portions of the newest edition of--
                    ``(A) at least one of the following model building 
                codes which shall be applicable to regions that are 
                exposed to such natural disaster perils:
                            ``(i) the National Building Code,
                            ``(ii) the Standard Building Code,
                            ``(iii) the Uniform Building Code; and
                    ``(B) other relevant building and housing codes and 
                standards, including the national consensus safety 
                codes of the National Fire Protection Association 
                (specifically the National Electrical Code, the 
                National Fuel Gas Code, the Flammable and Combustible 
                Liquids Code, and the Standard for the Storage and 
                Handling of Liquefied Petroleum Gases); or
            ``(2) certify that the State's local communities have 
        adopted and are enforcing building codes that meet the 
        appropriate minimum natural disaster hazard mitigation portions 
        of any of the three model building codes and other building and 
        housing codes and standards described in paragraph (1) for all 
        new and substantially modified building construction in that 
        State.
    ``(b) Flood Performance Standards.--At a minimum, each State that 
contains local communities designated as flood-prone pursuant to the 
National Flood Insurance Act of 1968 (42 U.S.C. 4001 et seq.) shall 
either--
            ``(1) adopt the relevant flood minimum performance 
        standards, flood-proofing, and other flood protection measures 
        authorized pursuant to the National Flood Insurance Act of 
        1968, which minimize flood damage for new and substantially 
        modified building construction located in flood-prone local 
        communities; or
            ``(2) certify that all the State's flood-prone local 
        communities have adopted and are enforcing the minimum 
        performance standards described in paragraph (1) for new and 
        substantially modified building construction.

``SEC. 812. DEVELOPMENT OF STATE MITIGATION PLANS.

    ``(a) General Authority.--Each natural disaster-prone State shall 
either--
            ``(1) develop with active public participation a mitigation 
        plan which establishes the State's plan with accompanying 
        schedules for improving the State's ability to reduce the 
        hazards of future natural disasters, such as hurricanes, 
        windstorms, earthquakes, volcanic eruptions, tsunamis, and 
        floods; or
            ``(2) designate an existing mitigation plan which includes 
        the processes described in subsection (b).
    ``(b) Content of State Mitigation Plans.--Each State mitigation 
plan described in subsection (a) shall include, at a minimum, a process 
for--
            ``(1) ensuring compliance with building and safety codes, 
        including those described in section 811;
            ``(2) improving the emergency response to natural disasters 
        which shall include capabilities for firefighting, search and 
        rescue, and the provision of shelters, communications, and 
        medical relief;
            ``(3) developing standards and guidelines for the regular 
        training of first responders for disaster emergency mitigation;
            ``(4) enforcing local community land use and management 
        ordinances;
            ``(5) addressing further development in high-risk, 
        disaster-prone areas and the impact of such development on life 
        safety and the environment;
            ``(6) ensuring all builders, plumbers, electricians, and 
        building inspectors are licensed or certified; and
            ``(7) identifying essential critical facilities and 
        lifelines and public facilities to be retrofitted within a 
        fixed time period.

``SEC. 813. TIME PERIODS FOR STATE DEVELOPMENT AND IMPLEMENTATION OF 
              BUILDING CODES AND MITIGATION PLANS.

    ``(a) Time Periods.--Each natural disaster-prone State shall meet 
the following mitigation compliance milestones within the prescribed 
time periods which shall be measured from the date of enactment of the 
Natural Disaster Protection Partnership Act of 1995:
            ``(1) Submission of state mitigation plans to fema.--Within 
        2 years, submit to the Director its mitigation plan developed 
        pursuant to section 812.
            ``(2) Adoption of building codes.--Within 3 years, certify 
        to the Director that it has adopted the building and safety 
        codes identified in section 811 or certified that its local 
        communities have adopted them.
            ``(3) Implementation of mitigation plans.--Within 4 years, 
        certify to the Director that the processes of its mitigation 
        plan as described in section 812(b) are being implemented.
            ``(4) Building code enforcement.--Within 5 years, certify 
        to the Director that the building and safety codes identified 
        in section 811 are being adequately enforced.
    ``(b) Notification and Opportunity To Cure.--The Director shall 
promptly notify in writing those States which fail to meet a compliance 
requirement described in subsection (a). If after receiving such 
notification, the State shall be subject to the provisions specified in 
section 814 until such date as the Director determines that the State 
has taken the necessary corrective action.
    ``(c) Regulations.--Within 12 months of the date of enactment of 
the Natural Disaster Protection Partnership Act of 1995, the Director 
shall issue final Federal regulations, pursuant to the provisions of 
subchapter II of chapter 5 of title 5, United States Code, necessary to 
carry out this section. These regulations shall include guidance to 
States as to what constitutes adequate compliance with the hazard 
mitigation measures of this subtitle.
``SEC. 814. FEDERAL SHARE OF FINANCIAL ASSISTANCE.

    ``(a) Reduce Federal Share for Disaster Aid.--The Federal share of 
public assistance available to States under sections 406(b)(1) and 
407(d)(1) shall be reduced to 50 percent for any State which has not 
met, within the prescribed time periods, the requirements of section 
813.
    ``(b) No Mitigation Funds.--Funds from the Mitigation Account under 
section 815 shall be denied to any State which has not met, within the 
prescribed time periods, the requirements of section 813.

``SEC. 815. MITIGATION ACCOUNT.

    ``(a) Funds to States.--
            ``(1) Authority.--After the Director credits premiums from 
        the Natural Disaster Insurance Corporation under section 901, 
        all of the funds appropriated to the Mitigation Account 
        established by section 1004 shall be allocated by the Director 
        to States at the beginning of every fiscal year following the 
        date of enactment of the Natural Disaster Protection 
        Partnership Act of 1995, except that those States subject to 
        the provisions of section 814(b) shall be denied such funds.
            ``(2) Formula.--The Mitigation Account funds shall be 
        allocated to a State based on a pro rata formula of the primary 
        insurance coverages and reinsurance coverage premiums described 
        in section 903 collected from that State. Within 12 months of 
        the date of enactment of the Natural Disaster Protection 
        Partnership Act of 1995, the Director shall issue final Federal 
        regulations, pursuant to the provisions of subchapter II of 
        chapter 5 of title 5, United States Code, describing the pro 
        rata formula.
            ``(3) Minimum amount.--Notwithstanding the formula 
        established under paragraph (2), each State shall receive 
        annually at least 0.25 percent of the amounts in the Mitigation 
        Account or $250,000, whichever amount is greater.
    ``(b) Use.--
            ``(1) In general.--The funds received by States from the 
        Mitigation Account shall be used to support natural disaster 
        hazard mitigation activities, including providing assistance 
        for--
                    ``(A) first responders;
                    ``(B) State revolving loan funds, if established, 
                to undertake financing, including the leveraging of 
                funds for various hazard mitigation activities;
                    ``(C) low-income individuals and families to help 
                pay for the undertaking of hazard mitigation measures;
                    ``(D) the dissemination of cost-effective 
                technologies to prevent or substantially reduce damage 
                caused by natural disasters and for the establishment 
                of geographically-dispersed and duly-incorporated 
                natural disaster damage prevention and mitigation 
                Centers for Protection Against Natural Disasters to 
                carry out such dissemination;
                    ``(E) addressing further development in high-risk, 
                disaster-prone areas and the impact of such development 
                on the environment; and
                    ``(F) the construction of buildings to serve as 
                models for the advancement of public education about 
                cost-effective hazard mitigation technology in the 
                design and construction of buildings, such as the 
                employment of fire suppression and water catchment 
                systems.
            ``(2) Priority.--The States shall give priority in using 
        the funds received from the Mitigation Account to those hazard 
        mitigation activities necessary to bring the State into 
        compliance with the building and safety code requirements of 
        section 811 and the mitigation plan requirements of section 
        812.
    ``(c) Local Communities.--States shall transfer not less than 25 
percent of the funds received each year under this section to local 
communities to support activities necessary to ensure State compliance 
with the hazard mitigation requirements of this subtitle.
    ``(d) Audits.--The Director shall from time-to-time conduct audits 
to ensure that States and local communities are using the funds 
received each year under this section to support the hazard mitigation 
activities described in this section.

``SEC. 816. NO UNFUNDED MANDATES.

    ``(a) In General.--If a State documents to the Director that such 
State has not received adequate funds from the Mitigation Account 
established by section 1004 to cover the costs of complying with a 
particular mitigation requirement described in this subtitle, that 
particular mitigation requirement shall not apply to such State.
    ``(b) Exceptions.--
            ``(1) Adequate funds.--Subsection (a) shall not apply to 
        mitigation requirements described in this subtitle for which 
        the State has failed to document that it has received an 
        inadequate amount of funds from the Mitigation Account to fully 
        cover the cost of complying with such mitigation requirements.
            ``(2) Non-compliance states.--Subsection (a) shall not 
        apply to States that are subject to the provisions of section 
        814(b).
            ``(3) Conditional federal assistance.--Subsection (a) shall 
        not apply to any duty imposed by this subtitle that is a 
        condition of any Federal assistance provided by this Act.

             ``Subtitle C--Insurance Mitigation Incentives

``SEC. 821. INSURANCE PRICING INCENTIVES.

    ``Each private insurer that participates as a member of the Natural 
Disaster Insurance Corporation should be encouraged to take natural 
disaster hazard mitigation measures into account in setting rates and 
deductibles for its property insurance.

                 ``TITLE IX--NATURAL DISASTER INSURANCE

          ``Subtitle A--Natural Disaster Insurance Corporation

``SEC. 901. ORGANIZATIONAL STRUCTURE.

    ``(a) Creation.--As a condition of receiving Federal loans under 
section 906(d), there shall be established a non-governmental, not-for-
profit membership corporation, to be known as the Natural Insurance 
Corporation (hereinafter in the Act referred to as the 
``Corporation''), to provide primary insurance coverages and 
reinsurance coverage for hurricanes, earthquakes, volcanic eruptions, 
and tsunamis.
    ``(b) Membership.--The members of the Corporation shall own shares 
in the Corporation and shall consist of private insurers that 
participate as service providers for the primary insurance coverages 
insured by the Corporation under section 911 and private insurers and 
State insurance pools that purchase the reinsurance coverage provided 
by the Corporation under section 921.
    ``(c)  Start-up.--
            ``(1) Administrator.--
                    ``(A) Selection.--A start-up administrator shall be 
                selected by the Corporation's members at the 
                Corporation's initial organization meeting.
                    ``(B) Duties.--The administrator shall coordinate 
                the following activities of the Corporation:
                            ``(i) Hiring of temporary staff.
                            ``(ii) Obtaining office space.
                            ``(iii) Contracting with consultants and 
                        entities.
                            ``(iv) Managing the election of the initial 
                        Board of Directors.
                            ``(v) Collecting the start-up loans 
                        described in paragraph (2).
                    ``(C) Termination.--The activities of the 
                administrator shall terminate when the Board of the 
                Directors for the Corporation has been selected.
            ``(2) Start-up loans.--
                    ``(A) In general.--Start-up administrative costs of 
                the Corporation shall be paid from loans received from 
                the private insurers participating as members of the 
                Corporation.
                    ``(B) Amount.--The amount of start-up loans 
                received from private insurers shall be in proportion 
                to each participating insurers' countrywide subject net 
                written premium.
                    ``(C) Repayment.--Within 36 months after the 
                Corporation is established under subsection (a), or 
                such later time when sufficient funds are available, 
                all start-up loans received from private insurers under 
                this paragraph shall be repaid with interest by the 
                Corporation from amounts in the trust accounts 
                established in section 906.
    ``(d) Board of Directors.--
            ``(1) Governance.--The Corporation shall be governed by a 
        15-member Board of Directors (hereinafter in this title 
        referred to as the ``Board''). Each Director of the Board shall 
        have one vote and the Board shall set policy and decide all 
        matters by a simple majority of the votes cast. The Board shall 
        develop and approve the plan of operation described in section 
        902 and shall be responsible for the operation and management 
        of the Corporation.
            ``(2) Selection of directors.--The 15 Directors of the 
        Board shall be selected as follows:
                    ``(A) Insurance directors.--
                            ``(i) In general.--Nine insurance Directors 
                        shall be elected by the members of the 
                        Corporation with each member having one vote, 
                        except as provided in clause (iii). The 
                        insurance Directors shall reflect an equitable 
                        cross-section of the private
                         insurers participating as members of the 
Corporation in accordance with this subparagraph. No private insurer 
may have more than one of its employees serving on the Board.
                            ``(ii) Special classes of insurers.--For as 
                        long as the Corporation is in existence, 3 of 
                        the Directors shall represent special classes 
                        of insurers. Each of the following special 
                        classes of insurers shall be represented:
                                    ``(I) Reinsurers which write 
                                primarily reinsurance.
                                    ``(II) Small providers of direct 
                                insurance that write primarily in 
                                personal lines of insurance in less 
                                than 10 States.
                                    ``(III) Commercial insurers which 
                                write primarily commercial insurance 
                                lines throughout the United States.
                            ``(iii) Election based on premium volume.--
                        Three insurance Directors shall be elected 
                        based on the premium volume weighting criteria 
                        described as follows:
                                    ``(I) For the initial election of 
                                the 3 Directors under this clause, the 
                                vote of each private insurer serving as 
                                a member of the Corporation shall be 
                                weighted in proportion to such 
                                insurer's countrywide subject net 
                                written premium in relationship to the 
                                countrywide subject net written premium 
                                for all private insurers serving as a 
                                member.
                                    ``(II) For the subsequent election 
                                of the 3 Directors under this clause, 
                                the vote of each private insurer 
                                serving as a member of the Corporation 
                                shall be weighted as its proportion of 
                                all premium collected by all 
                                participating providers of the primary 
                                insurance coverages described in 
                                subtitle B and the premium paid by all 
                                purchasers of the reinsurance coverage 
                                provided by the Corporation pursuant to 
                                subtitle C.
                                    ``(III) For each election held to 
                                select any 1 of the 3 Directors elected 
                                under this clause, private insurers can 
                                cast their vote for only 1 candidate.
                            ``(iv) At large election.--The remaining 3 
                        insurance Directors shall be elected at large 
                        by the private insurers participating as 
                        members of the Corporation.
                    ``(B) Non-insurance directors.--Within 180 days of 
                the election of the insurance Directors under 
                subparagraph (A), 6 non-insurance Directors shall be 
                nominated by the 9 insurance Directors and shall be 
                elected by the members of the Corporation. Each of the 
                following interests shall be represented by at least 1, 
                but not more than 2, of the 6 non-insurance Directors 
                elected:
                            ``(i) Insurance agents or brokers.
                            ``(ii) State insurance regulators.
                            ``(iii) Risk assessment experts who are 
                        members of the National Academy of Sciences.
                            ``(iv) Consumers of property-casualty 
                        insurance, including consumers of commercial 
                        insurance.
                            ``(v) Representatives of the banking or 
                        real estate industry which are impacted by 
                        property-casualty insurance.
                    ``(C) Vacancies.--A vacancy on the Board shall be 
                immediately filled with a new Director selected in the 
                manner described in the plan of operation developed 
                under section 902.
            ``(3) Terms of service.--All 15 Directors elected under 
        paragraph (2) shall serve staggered terms for a maximum of 6 
        years as determined by the Board at the time of election.
            ``(4) Chairperson.--The Board shall select a chairperson 
        from among its 15 Directors.
            ``(5) Fiduciary duty.--For carrying out the purposes of 
        this Act, the members of the Board, once selected under 
        paragraph (2), shall have a fiduciary duty to the Corporation, 
        not to their employer or to the special interests they may 
        represent.
    ``(e) Powers.--
            ``(1) Control.--The Corporation shall be privately owned by 
        its members as described in subsection (b) and under the 
        direction of its Board of Directors as described in subsection 
        (d).
            ``(2) General powers.--Upon selection of the 9 insurance 
        Directors described in subsection (d)(2)(A), the Corporation 
        shall be empowered to take all necessary and appropriate 
        actions to implement this title, including hiring staff, making 
        contracts, and paying the salaries and expenses of employees 
        with funds from start-up loans described in subsection (c)(2) 
        and the trust accounts described in section 906.
            ``(3) Specific powers.--Consistent with the plan of 
        operation developed under section 902, the Corporation, under 
        the direction of its Board, shall have the power to--
                    ``(A) provide the primary insurance coverages 
                described in subtitle B and provide the reinsurance 
                coverage described in subtitle C;
                    ``(B) manage the trust accounts described in 
                section 906;
                    ``(C) raise funds by issuing obligations in the 
                private market, provided that such obligations shall 
                not carry the full faith and credit of the United 
                States; and
                    ``(D) take all other actions necessary and proper 
                to carry out the operations of the Corporation.
            ``(4) Excluded powers.--The Corporation shall not--
                    ``(A) exercise powers that are reserved to the 
                Federal Government as sovereign;
                    ``(B) have the power to commit any sovereign 
                government financially; and
                    ``(C) have as employees Federal employees subject 
                to title 5 of the United States Code.
    ``(f) Tax Status.--
            ``(1) In general.--The Corporation shall be subject to the 
        Federal taxation applied to private corporations, except as 
        described in paragraph (2).
            ``(2) Net operating loss carryback.--Consistent with the 
        section 172(b)(1) of the Internal Revenue Code of 1986 (26 
        U.S.C. 172(b)(1)), a net operating loss of the Corporation for 
        any taxable year shall be a--
                    ``(A) net operating loss carryback to each of the 
                taxable years during the period--
                            ``(i) beginning with the taxable year in 
                        which the Corporation commenced operation, and
                            ``(ii) ending with the taxable year 
                        preceding the loss year, and
                    ``(B) a net operating loss carryover to each of the 
                15 taxable years following the taxable year of the 
                loss.
    ``(g) Limitations of Liability.--
            ``(1) Individual members.--Individual members of the 
        Corporation, as defined in subsection (b), shall not be liable, 
        or in any way responsible, for the obligations of the 
        Corporation and the trust accounts described in section 906.
            ``(2) Under federal law.--No action by the Corporation or 
        its Board pertaining to the plan of operation described in 
        section 902 or the rates described in section 903 shall subject 
        the Corporation or the Board to liability under Federal law or 
        any law of a State if that action has been taken pursuant to 
        authority taken under this Act.
``SEC. 902 PLAN OF OPERATION.

    ``(a) Establishment.--
            ``(1) Development.--The Board shall develop a plan of 
        operation (hereinafter in this title referred to as the 
        ``plan'') describing the administration of the Corporation and 
        the provision of the insurance coverages provided by the 
        Corporation.
            ``(2) General contents.--The plan shall set forth the 
        specific policy and programmatic details, including all 
        guidelines, criteria, definitions, clarifications, and 
        procedures necessary for the primary insurance coverages 
        described in subtitle B and the reinsurance coverage described 
        in subtitle C to operate under standard conditions of insurance 
        which shall be applicable in all States.
            ``(3) Insurance coverage particulars.--The plan, at a 
        minimum, shall include the following particulars regarding the 
        insurance coverages issued or provided by the Corporation:
                    ``(A) The final rates, or adjustments thereto, 
                established under section 903.
                    ``(B) The specific terms and conditions which shall 
                include--
                            ``(i) coverage eligibility requirements;
                            ``(ii) coverage limits;
                            ``(iii) deductibles;
                            ``(iv) quota-share amounts as described in 
                        section 914(c); and
                            ``(v) levels of retained losses as 
                        described in section 923.
                    ``(C) The specific insurance forms and policy 
                contracts.
                    ``(D) The criteria for the settlement of insurance 
                claims.
            ``(4) Miscellaneous plan provisions.--The plan, at a 
        minimum, shall include the following miscellaneous provisions:
                    ``(A) The minimum financial viability standards 
                necessary for private insurers and State insurance 
                pools to qualify as eligible entities to purchase the 
                reinsurance coverage under section 921(b).
                    ``(B) The commercial lines of insurance which have 
                a significant loss potential from earthquakes, volcanic 
                eruptions, tsunamis, and hurricanes that will be used 
                in determining commercial losses.
                    ``(C) The terms for the repayment of any 
                obligations issued in the private market pursuant to 
                section 901(e)(3)(C).
                    ``(D) The conditions for private insurers to 
                withdraw from acting as service providers of the 
                primary insurance coverages pursuant to section 
                906(d)(3)(C).
                    ``(E) Appropriate limitations on private insurers 
                acting as service providers of the primary insurance 
                coverages under section 912(b) from withdrawing from 
                offering property and casualty insurance in the 
                voluntary private market in certain States.
                    ``(F) Grievance procedures for resolving disputes 
                among members of the Corporation resulting from the 
                decisions of the Board.
            ``(5) Proprietary information.--To the maximum extent 
        practicable, the plan of operation shall protect as proprietary 
        specific information provided by private insurers necessary to 
        develop the rates and specific terms and conditions of the 
        insurance coverages issued or provided by the Corporation.
            ``(6) Insurer stability in the insurance coverages.--To the 
        maximum extent practicable, the plan of operation shall 
        encourage stability with respect to private insurer 
        participation in the insurance coverages issued or provided by 
        the Corporation.
    ``(b) Approval of the Plan.--The plan described in paragraph (a), 
and amendments thereto, shall be revised and approved by the Natural 
Disaster Insurance Board of Actuaries according to the process 
described in section 904(c).
    ``(c) Annual Report.--The Board shall prepare a written report 
annually on the overall operations of the Corporation which shall be 
distributed to all members of the Corporation and to the Independent 
Board of Actuaries established in section 904.

``SEC. 903. PRICING.

    ``(a) Establishment of Rates.--Using generally accepted actuarial 
principles and consistent with section 904(d)(5), the Board shall 
develop and establish, and adjust when necessary, the rates for the 
primary insurance coverages issued by the Corporation under section 911 
and rates for the reinsurance coverage provided by the Corporation 
under section 921. Such rates, and adjustments thereto, shall be based 
on historical aggregate losses supplemented by natural disaster 
modeling techniques and other scientific evidence and loss adjustment 
expenses calculated to determine to their ultimate value and projected 
through the utilization of trend analysis to a future point of time.
    ``(b) Actuarially Sound Requirement.--The rates established or 
adjusted under subsection (a) shall be actuarially sound by reflecting 
the risk of loss to the insured property from the natural disaster 
perils covered and shall satisfy the following two actuarial 
principles:
            ``(1) Minimize cross-subsidization.--The rates established 
        shall result in a minimum of cross-subsidization between the 
        geographic risk territories.
            ``(2) Financial soundness.--The rates established shall 
        produce expected premiums which shall be sufficient to pay for 
        all claims, loss adjustment expense, and all administrative 
        costs due to the Corporation for the two trust accounts 
        established under section 906.
    ``(c) Approval of Rates.--The rates, and adjustments thereto, 
developed by the Board under this section shall be reviewed and 
approved by the Natural Disaster Insurance Board of Actuaries according 
to the process described in section 904.

``SEC. 904. INSURANCE BOARD OF ACTUARIES.

    ``(a) Establishment.--There is established an independent Natural 
Disaster Insurance Board of Actuaries (in this section referred to as 
the ``Independent Board'') to review and approve the plan of operation 
developed under section 902 and the rates developed under section 903.
    ``(b) Membership.--
            ``(1) Appointment.--
                    ``(A) Initial appointment.--The Independent Board 
                shall be composed of 5 members appointed by the 
                Secretary of the United States Treasury (hereinafter in 
                this title referred to as the ``Secretary'') within 180 
                days of the date of enactment of the Natural Disaster 
                Protection Partnership Act of 1995.
                    ``(B) Vacancies.--The Secretary shall immediately 
                appoint new members to fill any vacancies that arise on 
                the Independent Board.
            ``(2) Qualifications.--The members of the Independent Board 
        described in paragraph (1)--
                    ``(A) shall be citizens of the United States;
                    ``(B) shall not be employees of members of the 
                Corporation; and
                    ``(C) shall be professional actuaries who--
                            ``(i) are members of the Casualty Actuarial 
                        Society or the American Academy of Actuaries 
                        and meet the Academy's qualification standards 
                        for public statements of actuarial opinion, and
                            ``(ii) have previous experience in setting 
                        actuarially sound property and casualty rates.
            ``(3) Chairperson.--The Secretary shall designate a 
        chairperson of the Independent Board from among members 
        appointed to the Independent Board.
            ``(4) Terms of service.--All members appointed under 
        paragraph (2) shall serve staggered terms for a maximum of 6 
        years as determined by the Secretary at the time of 
        appointment.
    ``(c) Approval of the Plan of Operation.--
            ``(1) Submission of draft plan to independent board.--A 
        draft plan of operation that satisfies the requirements of 
        section 902(a) shall be submitted by the Board of the 
        Corporation to the Independent Board within 15 months of 
        enactment of the Natural Disaster Protection Partnership Act of 
        1995.
            ``(2) Approval of the plan.--The draft plan submitted to 
        the Independent Board under paragraph (1) shall be deemed 
        approved and shall become final, except if within 90 days of 
        receiving the plan from the Board, the Independent Board 
        disapproves it pursuant to the standard described in paragraph 
        (3).
           ``(3) Standard for disapproval.--The Independent Board may 
        disapprove the entirety of the draft plan described in 
        paragraph (2) only if the plan, as a whole, is materially 
        inconsistent with the provisions of this title.
            ``(4) Opportunity to cure.--If the Independent Board 
        disapproves the draft plan under paragraph (2), the chairperson 
        of the Independent Board shall immediately return such plan to 
        the Board with written instructions of the changes required for 
        the plan to be materially consistent with the provisions of 
        this title. The Board shall modify the plan consistent with the 
        Independent Board's instructions and submit it back to the 
        Independent Board for approval according to the process 
        described in its subsection.
            ``(5) Amendments to the plan.--Any amendments to the plan 
        shall be developed by the Board of the Corporation under 
        section 902 and approved by the Independent Board according to 
        the process described in this subsection.
            ``(6) Report to secretary.--After reviewing the draft plan 
        of operation, and amendments thereto, the Independent Board 
        shall prepare and submit a report to the Secretary of its 
        finding regarding such plan.
    ``(d) Approval of the Rates.--
            ``(1) Submission of proposed rates to the independent 
        board.--Rates developed by the Board that are proposed to be 
        established for the insurance coverages issued or provided by 
        the Corporation under section 903(a), including any 
        methodologies used in developing such rates, shall be submitted 
        by the Board of the Corporation to
         the Independent Board within 12 months of the date of 
enactment of the Natural Disaster Protection Partnership Act of 1995.
            ``(2) Approval by the independent board.--
                    ``(A) Primary insurance coverages rates.--The rates 
                proposed for the primary insurance coverages submitted 
                to the Independent Board under paragraph (1) shall be 
                deemed approved, except if within 90 days of receiving 
                such proposed rates, the Independent Board disapproves 
                such rates pursuant to the standard described in 
                paragraph (3).
                    ``(B) Reinsurance coverage methodologies.--The 
                methodologies used in developing the rates proposed for 
                the reinsurance coverage submitted to the Independent 
                Board under paragraph (1) shall be deemed approved, 
                except if within 90 days of receiving such 
                methodologies, the Independent Board disapproves such 
                methodologies pursuant to the standard described in 
                paragraph (3).
            ``(3) Standard for disapproval.--The Independent Board may 
        disapprove the rates or methodologies described in paragraph 
        (2) only if compelling and substantial actuarial evidence is 
        presented on the record that the rates or methodologies are 
        materially inconsistent with the actuarial soundness 
        requirement of section 903(b).
            ``(4) Opportunity to cure.--If the Independent Board 
        disapproves any proposed rates or methodologies under this 
        subsection, the chairperson of the Independent Board shall 
        immediately return such rates and methodologies to the Board of 
        the Corporation with written instructions of the changes 
        required to the rates and methodologies to satisfy the 
        actuarial requirement of section 903(b). The Board shall modify 
        the rates or methodologies consistent with the Independent 
        Board's instructions and submit them back to the Independent 
        Board for approval according to the process described in the 
        subsection.
            ``(5) Approval of rates.--
                    ``(A) Primary insurance coverages rates.--Once the 
                rates for the primary insurance coverages are approved 
                by the Independent Board under this subsection, such 
                rates as proposed under paragraph (1) shall become 
                final and shall be included by the Board in the plan of 
                operation under section 902 for the primary insurance 
                coverages issued by the Corporation.
                    ``(B) Reinsurance coverage rates.--Once the 
                methodologies for the reinsurance coverage rates are 
                approved by the Independent Board under this 
                subsection, the rates proposed under paragraph (1) for 
                the reinsurance coverage shall become final and shall 
                be included by the Board in the plan of operation under 
                section 902 for the reinsurance coverage provided by 
                the Corporation.
            ``(6) Adjustments of the rates.--Any adjustment of the 
        rates for the primary insurance coverages and the methodologies 
        used in developing the rates for the reinsurance coverage shall 
        be developed by the Board of the Corporation under section 903 
        and approved by the Independent Board according to the process 
        described in this subsection.
    ``(e) Consultation.--The Independent Board shall consult risk 
assessment experts at the United States Geological Survey (or its 
designated successor agency), the National Oceanic and Atmospheric 
Administration (or its designated successor agency), the National 
Academy of Sciences, and similar public and private scientific groups 
to ensure the accuracy of natural disaster risk models and the 
geographic rating territories used in developing and approving the 
actuarial rates under this paragraph.

``SEC. 905. PARTICIPATION OF STATE INSURANCE REGULATORS.

    ``(a) Informational Filings.--
            ``(1) Items to file.--The Board shall file with each State 
        insurance regulator information copies of the initial material 
        and future revisions to the following items:
                    ``(A) The rates charged for the primary coverage 
                issued by the Corporation under subtitle B.
                    ``(B) Any insurance forms or polices and subsequent 
                revisions that describe the terms or conditions of the 
                insurance coverages issued or provided by the 
                Corporation.
            ``(2) Not subject to approval.--Except as provided in 
        paragraph (3), none of the items submitted to the State 
        insurance regulators under paragraph (1) shall be subject to 
        the approval of such State insurance regulators.
            ``(3) Filing of deviations.--
                    ``(A) General authority.--Subject to the limitation 
                in subparagraph (B), private insurers participating as 
                service providers of the primary insurance coverages 
                under section 912(b) may use rates which deviate from 
                those established by the Corporation.
                    ``(B) Deviations limited to insurer costs.--The 
                rate deviations described in subparagraph (A) shall be 
                based only on the private insurers difference in cost 
                from those used by the Corporation for calculating that 
                portion of the rate filed by the Corporation under 
                paragraph (1)(A) which compensate the private insurer 
                for its costs, including administrative expenses, agent 
                commissions, and taxes.
                    ``(C) State requirements.--The rate deviations 
                described in this paragraph shall be subject to any 
                applicable State requirement for the filing of property 
                insurance rates.
    ``(b) Claims Settlement.--Inquiries and complaints dealing with 
claims settlement practices related to the insurance coverages issued 
or provided by the Corporation, including those brought to the 
attention of a State insurance regulator, are to be handled by the 
Corporation in accordance with the plan of operation under section 902.
    ``(c) State Premium Taxes.--States may assess insurance premium 
taxes on the insurance policies issued under section 911 by the 
Corporation, except that a State shall not charge a premium tax greater 
than the premium taxes assessed by the State for the standard 
residential property insurance contracts charged by domestic private 
insurers.
    ``(d) State Funds.--The Corporation shall not participate in any 
State guaranty insurance fund or any State insurance pool. 
Policyholders of the Corporation shall not have claims against any 
State guaranty insurance fund for purposes of the insurance coverages 
issued or provided by the Corporation.
    ``(e) State Required Disaster Insurance Policies.--A private 
insurer acting as a service provider of primary insurance coverages 
under subtitle B shall not be required by any State to sell insurance 
coverages or participate in any program which provides insurance for 
earthquakes, volcanic eruptions, tsunamis, or hurricanes in amounts 
greater than provided by the primary insurance coverages issued by the 
Corporation for which such private insurer acts as a service provider.

``SEC. 906. TRUST ACCOUNTS.

    ``(a) Primary Insurance Coverage Trust Account.--
            ``(1) Establishment.--The Corporation shall establish and 
        maintain a primary insurance coverage trust account 
        (hereinafter in this Act referred to as the ``primary 
        account'') to hold funds in trust generated through the primary 
        insurance coverages described in subtitle B.
            ``(2) Account deposits.--Except for the amount set aside 
        for the Mitigation Account under section 1004(b), the portion 
        of the premiums collected by private insurers servicing the 
        primary insurance coverage policies described in subtitle B 
        which is due the Corporation, plus any interest income accrued 
        on such premiums, shall be deposited in the primary account.
            ``(3) Payment of claims.--From amounts in the primary 
        account, the Corporation shall only pay qualifying claims and 
        loss adjustment expenses, as described in section 914(d), to 
        private insurers acting as service providers of the primary 
        insurance coverages
    ``(b) Reinsurance Coverage Trust Account.--
            ``(1) Establishment.--The Corporation shall establish and 
        maintain a reinsurance coverage trust account (hereinafter in 
        this Act referred to as the ``reinsurance account'') to hold 
        funds in trust generated through the reinsurance coverage 
        described in subtitle C.
            ``(2) Account deposits.--Except for the amount set aside 
        for the Mitigation Account under section 1004(b), the premiums 
        paid by private insurers which purchased the reinsurance 
        coverage policy described in subtitle C, plus any interest 
        income accrued on such premiums, shall be deposited in the 
        reinsurance account.
            ``(3) Payment of claims.--From amounts in the reinsurance 
        account, the Corporation shall pay qualifying claims, as 
        described in section 922(c), to private insurers which 
        purchased the reinsurance coverage.
    ``(c) Investments.--
            ``(1) General authority.--The Board of the Corporation 
        shall invest amounts in the primary account and the reinsurance 
        account not required to meet current financial commitments as 
        the Board sees appropriate.
            ``(2) Deposits.--Any income generated from the investments 
        described in paragraph (1) shall be deposited, as appropriate, 
        into the primary account or the reinsurance account.
    ``(d) Federal Loans.--
            ``(1) Lending authority.--To the extent that the 
        accumulated assets of the Corporation's trust accounts 
        described in subsection (a) or (b), or funds raised by issuing 
        obligations in the private market pursuant to section 
        901(e)(3)(C), are insufficient to pay claims and expenses 
        resulting from the primary insurance coverages or the 
        reinsurance coverage, the Secretary of Treasury shall provide 
        direct loans from the Private Loss Account established by 
        section 1002 in sufficient amounts to cover such shortfall in 
        accordance with this subsection.
            ``(2) Conditions.--The following conditions shall apply to 
        any Federal loans provided to the Corporation under this 
        subsection:
                    ``(A) The total amount of outstanding loans at any 
                given time shall not exceed the capacity of the 
                Corporation to repay those loans within 20 years.
                    ``(B) All loans authorized by this subsection shall 
                be made under terms and conditions so that the subsidy 
                cost to the Federal Government for purposes of title V 
                of the Congressional Budget Act of 1974 (2 U.S.C. 661 
                et seq.) is zero at the time the loans are made.
                    ``(C) All loans are subject to such extent and in 
                such amounts as are provided in appropriations Acts.
            ``(3) Repayment.--
                    ``(A) In general.--Consistent with paragraph (2), 
                any amounts borrowed from, and to be repaid to, the 
                Federal Government under this subsection shall be 
                recouped, including interest on the borrowed funds, in 
                addition to future rates, respectively, for the primary 
                insurance coverages issued under section 911 and for 
                the reinsurance coverage provided under section 921.
                    ``(B) Interest rates.--The borrowing by the 
                Corporation shall be at non-subsidized interest rates 
                determined by the Secretary, taking into consideration 
                the current average market yield on outstanding 
                marketable obligations of the United States of 
                comparable maturities.
                    ``(C) Primary coverage repayment terms.--The 
                Corporation shall require under its contractual terms 
                and conditions with private insurers acting as service 
                providers of the primary insurance coverages under 
                section 912 that such private insurers which receive 
                reimbursements for qualifying claims under section 
                914(d) that consist of monies loaned from the Federal 
                Government or from private sources under this 
                subsection shall either--
                            ``(i) continue acting as service providers 
                        of such primary insurance coverage at levels 
                        which are at least as great as before the 
                        receipt of such reimbursements until such 
                        borrowed monies, including interest, are repaid 
                        pursuant to subparagraph (A); or
                            ``(ii) opt to discontinue acting as service 
                        providers of such primary insurance coverages, 
                        provided such private insurers satisfy the 
                        conditions of withdrawal set by the Board of 
                        the Corporation in the plan of operation under 
                        section 902(a)(4)(D).
                    ``(D) Reinsurance repayment terms.--The Corporation 
                shall require under its contractual terms and 
                conditions with eligible entities as defined in section 
                921(b) that such entities which receive payments for 
                qualifying claims under section 922(c) that consist of 
                monies loaned from the Federal Government or from 
                private sources under this subsection shall either--
                            ``(i) continue to purchase the reinsurance 
                        coverage provided under section 921 at levels 
                        which are at least as great as before the 
                        receipt of such payments until such borrowed 
                        monies, including interest, are repaid pursuant 
                        to subparagraph (A); or
                            ``(ii) repay its portion of such borrowed 
                        monies, including interest, within a reasonable 
                        period established by the Corporation.
            ``(4) Mitigation payments.--Failure of the Corporation to 
        pay natural disaster hazard mitigation funds and deposit such 
        funds in the Mitigation Account as provided in section 1004 
        shall render the Corporation ineligible to obtain Federal loans 
        under this subsection.
    ``(e) No Co-Mingling.--The amounts in the primary account 
established in subsection (a) and the reinsurance account in subsection 
(b) shall be kept separate. The Corporation shall not permit borrowing 
of monies between the 2 accounts.

``SEC. 907. NO FEDERAL FUNDS.

    ``Except for section 906(d), no Federal funds shall be authorized 
or appropriated to fund any activity of the Corporation.

``SEC. 908. GAO AUDIT.

    ``(a) Initial Audit.--12 months after the Corporation starts 
issuing primary insurance coverages under section 911 and providing 
reinsurance coverage under section 921 the Comptroller General of the 
United States shall audit activities of the Corporation and the Natural 
Disaster Insurance Board of Actuaries established by section 904 to 
ensure both entities are complying with the provisions of this Act.
    ``(b) Follow-up Audits.--Following the completion of the audit 
described in subsection(a), the Comptroller General of the United 
States shall conduct similar audits at least every 3 years for as long 
as the Corporation issues and provides insurance or reinsurance 
coverages.
    ``(c) Submission to Congress.--The Comptroller General of the 
United States shall submit reports of the audits performed under this 
section to the Congress.
               ``Subtitle B--Primary Insurance Coverages

``SEC. 911. SCOPE OF COVERAGE.

    ``(a) General Authority.--As a condition of receiving Federal loans 
under section 906(d), the Corporation shall issue primary insurance 
coverages which shall--
            ``(1) cover losses to the eligible property described in 
        subsection (b) resulting from the natural disaster perils 
        described in subsection (c); and
            ``(2) have the terms and conditions described in section 
        914.
    ``(b) Eligibility Property.--The primary insurance coverages 
provided by the Corporation shall insure against physical damages and 
losses to residential property, including debris removal, additional 
living expense incurred as a result of direct damage to the residential 
property, and ordinance and law coverages.
    ``(c) Natural Disaster Perils Covered.--The primary insurance 
coverages issued by the Corporation shall cover any damage to the 
eligible property and related coverages described in subsection (b) 
proximately caused by--
            ``(1) an earthquake, except for any fire proximately caused 
        by an earthquake;
            ``(2) a volcanic eruption, including any fire proximately 
        caused by a volcanic eruption;
            ``(3) a tsunami associated with an earthquake or volcanic 
        eruption; and
            ``(4) a hurricane.

``SEC. 912. PROVISION OF COVERAGE.

    ``(a) Type of Policy.--The primary insurance coverages described in 
section 911 shall be supplemental contracts of insurance which shall be 
issued by the Corporation in conjunction with standard residential 
property insurance contracts issued by private insurers acting as 
service providers.
    ``(b) Private Insurers Acting as Service Providers.--Private 
insurers which are participating as members of the Corporation under 
section 901(b) may act as service providers by offering the primary 
insurance coverages described in section 911 according to the terms of 
this subsection.
            ``(1) Seismic perils.--Private insurers acting as service 
        providers shall offer the primary insurance coverages on behalf 
        of the Corporation for the earthquake, volcanic eruption, and 
        tsunami perils, as described in section 911(c), to all of its 
        residential property policyholders in earthquake, volcanic 
        eruption, and tsunami-prone States as determined by section 
        804.
            ``(2) Hurricane peril.--Private insurers acting as service 
        providers may also elect to offer the primary insurance 
        coverage on behalf of the Corporation for the hurricane peril, 
        provided it is offered to all of its residential property 
        policyholders in hurricane-prone States as determined by 
        section 804.
            ``(3) Quota-share amounts.--Any private insurer acting as a 
        service provider shall agree to accept the quota-share amounts 
        for each coverage as described in section 914(c).

``SEC. 913. INSURANCE PURCHASE REQUIREMENT.

    ``(a) Coverage Required With Federal Mortgages.--No federally 
related mortgage loan secured by residential property located in an 
earthquake, volcanic eruption, tsuanami, or hurricane-prone State shall 
be made, renewed unless the property securing the loan is covered by--
            ``(1) the primary insurance coverages insured by the 
        Corporation described in section 911, or
            ``(2) coverage insured by a private insurer which has at 
        least equivalent terms, conditions, and rates as the primary 
        insurance coverages for seismic perils as described in section 
        912(b)(1) and which has at least equivalent terms and 
        conditions as the primary insurance coverage for the hurricane 
        peril as described in section 912(b)(2).
    ``(b) Escrow Insurance Premiums.--
            ``(1) Escrow requirements.--If the lender or other servicer 
        of residential property mortgage loans requires the escrowing 
        of taxes,
         insurance premiums, or any other charges, any premiums from 
earthquake, volcanic eruption, tsunami, and hurricane insurance for 
residential property acting as security for a federally related 
mortgage loan shall be paid to such lender or servicer of the loan. 
Such premiums shall be paid in a manner sufficient to make payments as 
due for the duration of the loan.
            ``(2) Escrow account.--Upon receipt of the premiums 
        described in paragraph (1), the lender or servicer of the 
        residential property loan shall deposit the premiums in an 
        escrow account on behalf of the borrower. Upon receipt of a 
        notice from the private issuer acting as a service provider or 
        direct insurer of the earthquake, volcanic eruption, tsunami, 
        and hurricane insurance that insurance premiums are due, the 
        lender or servicer shall pay from the escrow account to the 
        provider of the insurance the amount of the insurance premiums 
        owed.
    ``(c) Eligibility Requirements.--
            ``(1) Residential property.--Residential property owners in 
        natural disaster-prone States shall be ineligible to receive 
        any financial assistance provided under sections 408 or 411 or 
        any other similar disaster assistance provided by any Federal 
        Agency if--
                    ``(A) the residential property was not insured at 
                the time of the natural disaster at coverage levels 
                which are at least as sufficient as--
                            ``(i) the primary insurance coverages 
                        provided under section 911; and
                            ``(ii) the flood coverage provided under 
                        the National Flood Insurance Act of 1968 (42 
                        U.S.C. 4001 et seq.); provided that the 
                        residential owner is required to have such 
                        coverage under such Act; and
                    ``(B) the annual household income of the 
                residential property owner exceeds $60,000 in 1995 
                dollars, adjusted annually in accordance with the 
                percentage change in the Consumer Price Index.
            ``(2) Business properties.--Owners of business properties 
        in natural disaster-prone States shall be ineligible to receive 
        any financial assistance provided under sections 408 or 411 or 
        any other similar disaster assistance provided by the Small 
        Business Administration or any other Federal agency if the 
        business property was not insured at the time of the natural 
        disaster by disaster insurance that comports with the coverages 
        described in paragraph (1)(A).
    ``(d) Conditions.--The provisions of subsections (a), (b), and (c) 
shall not take effect until--
            ``(1) the Corporation described in section 901 has been 
        established;
            ``(2) the terms and conditions of the primary insurance 
        coverages issued by the Corporation under section 911 satisfy 
        the provisions of section 914; and
            ``(3) the premiums written by the private insurers 
        participating as service providers of the Corporation described 
        in section 912(b) represents, at any given time, at least 51 
        percent of the private residential property insurance market in 
        the natural disaster-prone States.

``SEC. 914. TERMS AND CONDITIONS.

    ``(a) General Authority.--
            ``(1) Setting the terms and conditions.--The Board of the 
        Corporation shall set the terms and conditions of the primary 
        insurance coverages provided under this subtitle. Such terms 
        and conditions, as may be modified from time to time, shall be 
        included in the plan of operation pursuant to section 902.
            ``(2) Guiding principle.--the terms and conditions for the 
        primary insurance coverage policies shall be standardized and 
        designed, to the maximum extent practicable, to limit the 
        financial exposure of the primary account described in section 
        906(a) to a manageable level given the probable maximum losses 
        for the natural disaster perils described in section 911(c).
            ``(3) Considerations.--In setting the terms and conditions 
        of the primary insurance coverages, the Board of the 
        Corporation should give due consideration to the following:
                    ``(A) The rates, the scope and limits of coverage, 
                and the deductibles in the standard residential 
                property insurance contract for the natural disaster 
                perils described in section 911(c) available in the 
                voluntary primary market on the date of enactment of 
                Natural Disaster Protection Partnership Act of 1995.
                    ``(B) the viability of the Corporation to maintain 
                a financially prudent level of risk in protecting 
                against the exposure caused, in part, by the insurance 
                purchase requirement described in Section 913.
    ``(b) Specific Terms and Conditions.--The terms and conditions for 
the primary insurance coverages shall include the following:
            ``(1) Limits on the amount of coverage available.
            ``(2) Rates as determined under section 903.
            ``(3) Deductibles which may vary based on the type of 
        peril, geographic areas, and the existence of loss-reduction 
        measures that affect the risk of loss.
            ``(4) Any other terms and conditions that may be necessary 
        to carry out the purposes of the subtitle.
    ``(c) Quota-Share Amounts.--
            ``(1) In general.--The primary insurance coverages issued 
        by the Corporation shall offer quota-share amounts as described 
        in this subsection that private insurers participating as 
        service providers shall agree to retain, except that such 
        private insurers have the option to retain higher quota-share 
        amounts.
            ``(2) Seismic perils.--The quota-share amount offered by 
        the Corporation for the earthquake, volcanic-eruption, and 
        tsunami perils shall be 10 percent.
            ``(3) Hurricane peril.--The quota-share amount offered by 
        the Corporation for the hurricane peril shall be 50 percent.
    ``(d) Payment of Claims.--
            ``(1) Paying qualifying losses.--Private insurers acting as 
        service providers of the primary insurance coverages under this 
        subtitle shall pay qualifying losses to policyholders as 
        determined by the terms of the primary insurance coverage 
        policies, provided the Corporation certifies to the private 
        insurers that sufficient amounts are available in the primarily 
        account, including any Federal loans available pursuant to 
        section 906(d), to reimburse the private insurers under the 
        provisions of paragraph (2).
            ``(2) Reimbursement of insurers.--The primary account 
        described in section 906(a) shall reimburse a private insurer 
        within 90 days of the date for any claim payments made and loss 
        adjustment expenses incurred by such private insurer under the 
        terms of the primary insurance coverage policies.
            ``(3) No liability for private insurers.--Private insurers 
        acting as service providers of the primary insurance coverages 
        shall not be liable, or in any way responsible, for the payment 
        of claims for which reimbursement under the terms of paragraph 
        (2) is not provided, except that such private insurers shall be 
        responsible for payment of claims resulting from the quota 
        share amounts such insurers agree to retain under subsection 
        (c).

``SEC. 915. FLOOD INSURANCE.

    ``(a) Flood Insurance Study.--
            ``(1) Measures to increase coverage.--Within 18 months of 
        the date of enactment of the Natural Disaster Protection 
        Partnership Act of 1995, the Director and the Corporation shall 
        jointly submit a report to Congress of any additional sanctions 
        or other measures deemed necessary and appropriate to assure 
        policyholders purchase Federal flood insurance provided 
        pursuant to the National Flood Insurance Act of 1968 (42 U.S.C. 
        4001 et seq.).
            ``(2) Assessment of proposals.--The report described in 
        paragraph (1) shall include an assessment of the advisability 
        and feasibility of the following two proposals:
                    ``(A) Inclusion in the primary coverage.--Adding 
                the Standard Flood Insurance Policy issued pursuant to 
                the National Flood Insurance Act of 1968 (42 U.S.C. 
                4001 et seq.), or the content thereof, to the primary 
                insurance coverage contracts issued by the Corporation 
                pursuant to section 911.
                    ``(B) Privatization.--Privatizing the entire 
                national flood insurance program managed by the 
                Director pursuant to the National Flood Insurance Act 
                of 1968 (42 U.S.C. 4001 et seq.).
    ``(b) Improved Participation in the Federal Flood Insurance 
Program.--
            ``(1) Warning statement required from all private 
        insurers.--Not late than 18 months after the date of enactment 
        of the Natural Disaster Protection Partnership Act of 1995, all 
        residential property insurance contracts issued by private 
        insurers which exclude coverage for physical damage caused by 
        flooding shall bear the following warning statement: `FLOOD 
        INSURANCE WARNING: This policy does not cover losses caused by 
        flooding. However, if you have purchased a separate flood 
        insurance policy, including one issued under the National Flood 
        Insurance Program, you have coverage against physical damage 
        caused by flooding. If your property is located in a flood-
        prone area and you have a mortgage from a bank or other lending 
        institution regulated or insured by a Federal entity (as most 
        are), you may be required by that lending institution to have 
        flood insurance. If this requirement applies to you and you 
        fail to have flood insurance coverage, your eligibility to 
        obtain Federal disaster aid for flood losses could be subject 
        to conditions.'.
            ``(2) Alternative warning statement.--
                    ``(A) If the private insurer is engaged in the 
                national flood insurance program as a write-your-own 
                company pursuant to section 1345 of the National Flood 
                Insurance Act of 1968 (42 U.S.C. 4081) and the 
                accompanying Federal regulations, the following 
                sentence shall appear at the end of the warning 
                statement required by paragraph (1): `For more 
                information about obtaining insurance to cover physical 
                damage caused by flooding, consult your insurance 
                agent, broker, or insurance company representative.'.
                    ``(B) If the private insurer is not engaged as a 
                write-your-own company as described in subparagraph 
                (A), the following sentence shall appear at the end of 
                the warning statement required by paragraph (1): `For 
                more information about obtaining insurance to cover 
                physical damage caused by flooding, consult your 
                insurance agent, broker, or insurance company 
                representative or call the National Flood Insurance 
                Program.'.
            ``(3) Location and format of warning statement.--The 
        warning statement required by paragraphs (1) and (2) shall be 
        located in a conspicuous and prominent place on the residential 
        property insurance contract. The statement shall be displayed 
        in legible type which contrasts by typography, layout, or color 
        with other printed materials on the policy.
            ``(4) Consequences of noncompliance.--Private insurers 
        failing to comply with this section shall be ineligible to 
        participate as members of the Corporation described in section 
        901.
                   ``Subtitle C--Reinsurance Coverage

``SEC. 921. SCOPE OF COVERAGE.

    ``(a) General Authority.--As a condition of receiving Federal loans 
under section 906(d), the Corporation shall make available excess 
reinsurance coverage which shall--
            ``(1) provide coverage to eligible entities described in 
        subsection (b) for any direct and indirect losses for the 
        covered losses set forth in subsection (c) that are caused by 
        the natural disaster perils described in subsection (d); and
            ``(2) have the terms and conditions described in sections 
        922 and 923.
    ``(b) Eligible Entities.--The following entities, as members of the 
Corporation, are eligible to purchase the excess reinsurance coverage 
described in subsection (a), provided such entities meet the minimum 
criteria and financial viability standards set by the Corporation in 
the plan of operation under section 902:
            ``(1) Private insurers.
            ``(2) State insurance pools.
    ``(c) Covered Losses.--The excess reinsurance coverage described in 
subsection (a) shall insure against the following losses:
            ``(1) Residential losses, including quota-share amounts 
        retained by the private insurers under section 914(c), not 
        already insured by the Corporation under the primary insurance 
        coverage policies described in section 911.
            ``(2) Commercial losses.
    ``(d) Natural Disaster Perils.--The excess reinsurance coverage 
described in subsection (a) shall cover losses that are proximately 
caused by the following natural disaster perils:
            ``(1) Earthquakes.
            ``(2) Volcanic eruptions.
            ``(3) Tsunamis.
            ``(4) Hurricanes

``SEC. 922. TERMS AND CONDITIONS.

    ``(a) General Authority.--
            ``(1) Setting the terms and conditions.--The Board of the 
        Corporation shall set the terms and conditions of the 
        reinsurance coverage issued under this subtitle. Such terms and 
        conditions, as may be modified from time to time, shall be 
        included in the plan of operation pursuant to section 902.
            ``(2) Guiding principle.--The terms and conditions for the 
        reinsurance coverage policy shall be--
                    ``(A) similar to those generally used in private 
                catastrophic reinsurance contracts; and
                    ``(B) standardized and designed, to the maximum 
                extent practicable, to limit the financial exposure of 
                the reinsurance account described in section 906(b) to 
                a manageable level given the probable maximum losses 
                for the natural disaster perils described in section 
                921(d).
    ``(b) Specific Terms and Conditions.--The terms and conditions for 
the reinsurance coverage shall include the following:
            ``(1) Limits on the amount of coverage available.
            ``(2) Rates as determined under section 903 which shall 
        take into account the private insurer's financial standing and 
        its exposure to the natural disaster perils described in 
        section 921(d).
            ``(3) Any other terms and conditions that may be necessary 
        to carry out the purposes of this subtitle.
    ``(c) Payment of Claims.--From amounts in the reinsurance account 
described in section 906(b), including any Federal loans provided under 
section 906(d), the Corporation shall pay the qualifying losses as 
determined under section 923 of those private insurers which purchased 
the reinsurance coverage provided by the Corporation under section 921.

``SEC. 923. LEVELS OF RETAINED LOSSES.

    ``(a) Industry Wide Eligibility.--
            ``(1) In general.--Excess reinsurance coverage under this 
        subtitle shall be available to all private insurers eligible 
        for reinsurance pursuant to section 921(b) in accordance with 
        this subsection.
            ``(2) Industry retained losses.--
                    ``(A) In general.--The reinsurance account 
                established under section 906(b) shall provide excess 
                reinsurance coverage when, as determined by the Board 
                of the Corporation pursuant to the plan of operation 
                under section 902, the insurance industry is likely to 
                incur gross losses covered under section 921(c) arising 
                from hurricane, earthquake, volcanic eruption, and 
                tusnami events occurring during any 12-month period 
                that exceed 15 percent of the consolidated industry 
                surplus as regards policyholders.
                    ``(B) Calculation.--Only such separate events that 
                will likely result in industry gross losses of at least 
                $1,500,000,000, adjusted annually in accordance with 
                the percentage change in the
                 Consumer Price Index, shall be aggregated to reach the 
15 percent level for gross losses described in subparagraph (A).
            ``(3) Individual company retained losses.--After the 
        insurance industry has sustained gross losses described in 
        paragraph (2), the reinsurance account established under 
        section 906(b) shall pay to a private insurer 95 percent of 
        qualifying losses in excess of 15 percent of the consolidated 
        surplus as regards policyholders of the private insurer.
    ``(b) Individual Insurer Eligibility.--
            ``(1) Individual insurer retained losses.--If subsection 
        (a) is not applicable, a private insurer shall be eligible for 
        excess reinsurance coverage and reimbursement from the 
        reinsurance account established under section 906(b) if the 
        insurer has incurred gross losses from a single--
                    ``(A) earthquake, volcanic eruption, or tsunami 
                event that is included in the lines covered under 
                section 921(c) and that exceeds 20 percent of the 
                consolidated surplus as regards policyholders of the 
                private insurer; or
                    ``(B) hurricane event that is included in the lines 
                covered under section 921(c) and that exceed 20 percent 
                of the consolidated surplus as regards policyholders of 
                the private insurer, except that losses in the workers' 
                compensation and earthquake lines of coverage shall be 
                excluded.
            ``(2) Reinsurance account payments.--After the private 
        insurer has sustained gross losses described in paragraph (1), 
        the reinsurance account established under section 906(b) shall 
        pay 95 percent of qualifying losses in excess of 20 percent of 
        the consolidated surplus as regards policyholders of the 
        private insurer.
            ``(3) Limitation of reinsurance account payments.--The 
        payments by the reinsurance account under this subsection shall 
        be limited to 200 percent of the consolidated surplus as 
        regards policyholders of the private insurer.
    ``(c) State Insurance Programs.--Excess reinsurance coverage under 
this subtitle shall be available to each insurance pool eligible for 
reinsurance pursuant to section 921(b) in accordance with the 
following:
            ``(1) State pool losses.--The reinsurance account 
        established under section 906(b) shall provide excess 
        reinsurance coverage when, as determined by the Director 
        pursuant to the plan of operation under section 902, the State 
        insurance pool is likely to incur gross losses in the State 
        served by the eligible State insurance pool arising from 
        hurricane, earthquake, volcanic eruption, and tsunami events 
        occurring during any 12-month period that exceed 10 times the 
        sum of the direct earned premiums for that State insurance pool 
        for the losses covered under section 921(c) or $10,000,000,000, 
        adjusted annually in accordance with the percentage change in 
        the Consumer Price Index, whichever amount is less.
            ``(2) Minimum losses.--The lesser amount described in 
        paragraph (1) must equal at least $500,000,000, adjusted 
        annually in accordance with the percentage change in the 
        Consumer Price Index.
            ``(3) Retained losses.--After the insurance industry has 
        sustained gross losses described in paragraph (1), the 
        reinsurance account established under section 906(b) shall pay 
        to an individual State insurance pool 95 percent of qualifying 
        losses in excess of the lesser amount described in paragraph 
        (1).
    ``(d) Qualifying Losses.--For the purpose of this subtitle, 
`qualifying losses' include--
            ``(1) the losses and loss adjustment expense incurred by a 
        private insurer or State insurance pool; and
            ``(2) any assessments, surcharges, or other liabilities 
        imposed by any State residual insurance pooling program or 
        guaranty account, attributable to hurricanes, earthquakes, 
        volcanic eruptions, and tsunamis occurring during any 12-month 
        period encompassing the events described in subsections (a)(2) 
        and (c)(1) or the event described in subsection (b)(1), reduced 
        by--
                    ``(A) any collectible reinsurance recoverable, and
                    ``(B) an appropriate percentage of any 
                uncollectible reinsurance arising from the event as set 
                in the plan of operation under section 902.
    ``(e) Obligations.--All reinsurance contracts issued under this 
subtitle shall constitute obligations, in accordance with the terms of 
the reinsurance, of the Corporation.
    ``(f) Definitions.--In this section, the following definitions 
apply:
            ``(1) The term `consolidated industry surplus as regards 
        policyholders' means the consolidated surplus as regards 
        policyholders of the property and casualty insurance industry 
        (excluding life insurance) for the calendar year immediately 
        preceding the hurricane, earthquake, volcanic eruption, or 
        tsunami events described in subsection (a)(2) as determined by 
        the National Association of Insurance Commissioners or other 
        credible source as determined by the Corporation.
            ``(2) The term `consolidated surplus as regards 
        policyholders' means the surplus as regards policyholders of 
        the private insurer (excluding life insurance) based on 
        financial data submitted to the National Association of
         Insurance Commissioners or other credible source as determined 
by the Corporation for the calendar year immediately preceding the 
hurricane, earthquake, volcanic eruption, or tsunami events described 
in subsections (a)(2) and (b)(1).
            ``(3) The term `direct earned premiums' means the direct 
        earned premiums for certain lines of property and casualty 
        insurance coverage as published in the National Association of 
        Insurance Commissioners Fire and Casualty Annual Statement 
        filed with the applicable State department of insurance for the 
        most recent calender year available preceding the hurricane, 
        earthquake, volcanic eruption, or tsunami events described in 
        subsection (c)(1).
            ``(4) The term `gross losses' means all losses and loss 
        adjustment expenses, before deduction of any private 
        reinsurance recoverables.
            ``(5) The term `uncollectible reinsurance' means 
        reinsurance proceeds due and payable in accordance with the 
        terms of the reinsurance contract that are not paid within 12 
        months of the due date.

              ``TITLE X--NATURAL DISASTER PROTECTION FUND

``SEC. 1001. ESTABLISHMENT.

    ``(a) The Fund.--There is established within the Treasury of the 
United States a trust fund to be known as the Natural Disaster 
Protection Fund (hereinafter referred to in this title as the `Fund'), 
consisting of such amounts as may be appropriated or credited to the 
Fund as provided in this title.
    ``(b) Accounts.--There are established in the Fund three separate 
accounts as follows:
            ``(1) A Private Loss Account as described in section 1002.
            ``(2) A Public Loss Account as described in section 1003.
            ``(3) A Mitigation Account as described in section 1004.
    ``(c) No Commingling.--The amounts in the three accounts 
established in subsection (b) shall be kept separate. The Secretary of 
the Treasury shall not permit borrowing of monies between the three 
accounts.

``SEC. 1002. PRIVATE LOSS ACCOUNT.

    ``The Private Loss Account established in section 1001(b) shall 
provide direct Federal loans to cover shortfalls in the primary account 
described in section 906(a) and the reinsurance account described in 
section 906(b), subject to the lending authority, conditions, and 
repayment terms of section 906(d).

``SEC. 1003. PUBLIC LOSS ACCOUNT.

    ``(a) In General.--The Public Loss Account established in section 
1001(b) shall cover losses to, and retrofitting of, public facilities 
and critical facilities and lifelines.
    ``(b) Description of Account.--
            ``(1) Source of funds.--The Director shall transfer and 
        credit to the Public Loss Account amounts specifically 
        designated and appropriated--
                    ``(A) annually pursuant to title IV for repair and 
                restoration of Federal facilities, public facilities, 
                and critical facilities and lifelines;
                    ``(B) pursuant to any natural disaster emergency 
                supplemental appropriations Act enacted after the date 
                of enactment of the Natural Disaster Protection 
                Partnership Act of 1995 and intended to be allocated to 
                the Director, the Department of Transportation, the 
                Department of Housing and Urban Development, and other 
                Federal agencies for the repair and restoration of 
                critical facilities and lifelines and public 
                facilities; and
                    ``(C) annually after the date of enactment of the 
                Natural Disaster Protection Partnership Act of 1995 for 
                the following public infrastructure programs or Federal 
                entities:
                            ``(i) the Highway Trust Fund (26 U.S.C. 
                        9503),
                            ``(ii) the Airport and Airway Trust Fund 
                        (26 U.S.C. 9502),
                            ``(iii) the Harbor Maintenance Trust Fund 
                        (26 U.S.C. 9505),
                            ``(iv) the grants for construction of water 
                        treatment works under title II of the Federal 
                        Water Pollution Control Act (33 U.S.C. 1281 et 
                        seq.),
                            ``(v) the Soil Conservation Service (16 
                        U.S.C. 590 et seq.),
                            ``(vi) the Economic Development 
                        Administration (42 U.S.C. 3121 et seq.),
                            ``(vii) the Corps of Engineers, and
                            ``(viii) the General Services 
                        Administration (40 U.S.C. 751 et seq.);
        provided that such specifically designated amounts under this 
        paragraph shall be in addition to and not in lieu of annual 
        appropriations for these programs.
            ``(2) Amount of account.--The Public Loss Account shall 
        retain a reserve of funds sufficient to cover the anticipated 
        costs resulting
         from natural disasters up to the annual 10-year historical 
average of disaster relief provided by the Director.
            ``(3) Authorization.--There is authorized to be 
        appropriated from the general fund such sums as may be 
        necessary to carry out this section.
    ``(c) Purposes of Account.--
            ``(1) Rebuilding grants.--The Public Loss Account shall 
        provide grants to States for the repair or restoration of 
        critical facilities and lifelines, public facilities, and 
        infrastructure damaged or destroyed by natural disasters.
            ``(2) Pre-disaster mitigation.--The Public Loss Account 
        shall provide grants to States for pre-natural disaster hazard 
        mitigation, including retrofitting of critical facilities and 
        lifelines and public facilities.
            ``(3) Federal share.--
                    ``(A) Compliance state.--The Federal share of the 
                grants provided from the Public Loss Account under this 
                subsection shall be 75 percent if the State receiving 
                such grants is in compliance with the hazard mitigation 
                time periods described in section 813.
                    ``(B) Non-compliance state.--Consistent with the 
                penalty described in section 814(a), the Federal share 
                shall be 50 percent if the State receiving grants under 
                this subsection is not in compliance with the hazard 
                mitigation time periods described in section 813.
                    (C) Waiver.--The Federal share percentages 
                described in subparagraphs (A) and (B) shall be 
                increased only upon the enactment of a joint resolution 
                that shall not be designated as an emergency under 
                section 251(b)(2)(D) of the Balanced Budget and 
                Emergency Deficit Control Act of 1985 (2 U.S.C. 
                901(b)(2)(D)).

``SEC. 1004. MITIGATION ACCOUNT.

    ``(a) Purpose of the Account.--The Mitigation Account established 
in section 1001(b) shall support the natural disaster hazard mitigation 
efforts described in subtitle B of title VIII.
    ``(b) Mitigation Set Aside.--
            ``(1) In general.--The Corporation shall pay a percent of 
        the annual net premiums collected for the primary insurance 
        coverages described in subtitle B of title IX and the 
        reinsurance coverage described in subtitle C of title IX for 
        natural disaster hazard mitigation purposes.
            ``(2) Precise percentage.--The percent amount described in 
        paragraph (1) shall be 7.5 percent or a percentage amount which 
        totals on an annual basis $200,000,000, adjusted annually in 
        accordance with the percentage change in the Consumer Price 
        Index, which ever amount is less.
    ``(c) Deposits.--The Director shall transfer and credit on an 
annual basis to the Mitigation Account amounts received from--
            ``(1) the percent set aside of the annual premiums 
        described in subsection (b); and
            ``(2) appropriations provided for pre-natural disaster 
        hazard mitigation activities under this Act.
    ``(d) Authorization.--For the purposes of subsection (c)(2) only, 
there is authorized to be appropriated annually amounts equal to the 
amounts provided annually from the percent set aside of premiums 
received pursuant to subsection (b).''.
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