[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[S. 1043 Introduced in Senate (IS)]







104th CONGRESS
  1st Session
                                S. 1043

To amend the Earthquake Hazards Reduction Act of 1977 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 SENATE OF THE UNITED STATES

                July 17 (legislative day, July 10), 1995

  Mr. Stevens (for himself, Mr. Inouye, Mr. Murkowski, Mr. Simon, Mr. 
   Inhofe, Mr. Dodd, Mr. Simpson, Mr. Akaka, Mr. Santorum, and Mrs. 
  Feinstein) introduced the following bill; which was read twice and 
   referred to the Committee on Commerce, Science, and Transportation

_______________________________________________________________________

                                 A BILL


 
To amend the Earthquake Hazards Reduction Act of 1977 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 may be cited as the ``Natural Disaster Protection and 
Insurance Act of 1995''.

SEC. 2. FINDINGS AND PURPOSES.

    Section 2 of the Earthquake Hazards Reduction Act of 1977 (42 
U.S.C. 7701) is amended by adding at the end the following new 
paragraphs:
            ``(12) In addition to earthquakes, other catastrophic 
        natural disasters, such as major hurricanes and volcanic 
        eruptions, will strike the United States in the future and will 
        inflict substantial long-term consequences in terms of deaths, 
        injuries, property damages, and social and economic losses.
            ``(13) The Federal Government and the governments of States 
        are ill-equipped to respond to catastrophic natural disasters.
            ``(14) Billions of dollars in taxpayer-supported government 
        assistance will be paid to rebuild following catastrophic 
        natural disasters.
            ``(15) Hazard mitigation can significantly and cost-
        effectively reduce the long-term consequences of natural 
        disasters, especially for those least capable of helping 
        themselves, including the elderly.
            ``(16) Hazard mitigation measures, including building 
        codes, have proved effective in reducing deaths, injuries, and 
        property damage caused by catastrophic natural disasters.
            ``(17) Hazard mitigation measures are not in place in many 
        high-hazard areas, and are not adequately enforced where they 
        are in place.
            ``(18) First response capability, including fire fighting, 
        emergency medical assistance, and search and rescue personnel, 
        is as important as hazard mitigation in lessening the impact of 
        natural disasters.
            ``(19) Millions of persons in the United States do not have 
        adequate insurance coverage to protect property from 
        catastrophic natural disasters.
            ``(20) In the early 1990's, catastrophic natural disasters 
        (including Hurricane Andrew and Hurricane Iniki and the 
        Northridge earthquake)--
                    ``(A) have inflicted substantial losses on private 
                insurance companies; and
                    ``(B) those losses have limited the ability to 
                write new coverages in the stricken regions and other 
                parts of the United States.
            ``(21) The natural disasters referred to in paragraph (20) 
        inflicted substantial losses on State and local governments and 
        caused severe strains on the budgets of those local 
        governments.
            ``(22) The flooding in the Midwest in the early 1990's 
        underscored the need to improve the participation in the 
        National Flood Insurance Program. Programs should be evaluated 
        for possible privatization or coordination with and inclusion 
        in the disaster insurance program authorized by the Natural 
        Disaster Protection and Insurance Act of 1995.''.

SEC. 3. PURPOSE.

    Section 3 of the Earthquake Hazards Reduction Act of 1977 (42 
U.S.C. 7702) is amended--
            (1) by inserting ``(a) Earthquake Hazard Reduction.--'' 
        before ``It is the purpose''; and
            (2) by adding at the end the following new subsection:
    ``(b) Natural Disaster, Relief, and Insurance.--It is the purpose 
of the Congress to reduce deaths, injuries, and property damage from 
natural disasters through a hazard mitigation program and to ensure 
that all people of the United States have adequate disaster insurance 
coverage. The objectives of the program shall include--
            ``(1) the building of safer structures and the upgrading of 
        existing buildings and lifelines;
            ``(2) the enhancement of State and local community 
        emergency management;
            ``(3) the improvement of State and local emergency first 
        response capability, including the development of standards and 
        guidelines for staffing, operations, and training;
            ``(4) the forging of a partnership with the Federal 
        Government that makes the States and political subdivisions 
        thereof ultimately responsible for implementing and enforcing 
        multihazard mitigation measures and emergency management;
            ``(5) the creation of a self-sustaining funding mechanism 
        to assist States in paying for mitigation efforts;
            ``(6) the provision of coverage for natural disaster perils 
        together with standard insurance policies;
            ``(7) the establishment of premium rates based on risk, so 
        that if a State or political subdivision thereof has no 
        discernible hazard for a particular peril, the amount of 
        premiums collected for that risk would be minimal or 
        nonexistent;
            ``(8) assurances that the insurance industry--
                    ``(A) makes a substantial contribution in paying 
                losses; and
                    ``(B) continues to provide coverage following a 
                catastrophic natural disaster;
            ``(9) the employment of the insurance industry through a 
        private natural disaster insurance corporation to speed 
        rebuilding following a catastrophic natural disaster; and
            ``(10) the saving of taxpayer money through a self-funded 
        hazard mitigation and insurance Natural Disaster Protection 
        Fund in order to reduce reliance on disaster assistance from 
        governments.''.

SEC. 4. DEFINITIONS.

    Section 4 of the Earthquake Hazards Reduction Act of 1977 (42 
U.S.C. 7703) is amended by adding at the end the following new 
paragraphs:
            ``(8) The term `building' means any structure that is--
                    ``(A) fully or partially enclosed; and
                    ``(B) used or intended for sheltering persons or 
                property.
            ``(9) 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, or 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 302 
        and which shall, at a minimum, include loss of insurance for--
                    ``(A) commercial multiple peril;
                    ``(B) workers' compensation;
                    ``(C) allied lines;
                    ``(D) fire;
                    ``(E) reinsurance;
                    ``(F) liability;
                    ``(G) earthquake;
                    ``(H) inland marine; and
                    ``(I) ocean marine.
            ``(10) The term `critical facility' means any school or 
        structure that is essential to emergency services necessary for 
        post-natural disaster recovery, including a hospital, fire or 
        police facility, temporary shelter, or emergency operating and 
        preparedness center.
            ``(11) The term `Corporation' means the Natural Disaster 
        Insurance Corporation referred to in section 301.
            ``(12) The term `Director of the Agency' means the Director 
        of the Federal Emergency Management Agency.
            ``(13) The term `earthquake' means any shaking or trembling 
        of the crust of the Earth caused by underground seismic forces.
            ``(14) 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)).
            ``(15) The term `first responder' means any fire fighting, 
        police, or other emergency medical personnel who has the 
        authority under applicable law to engage in and provide 
        immediate emergency response services.
            ``(16) 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.
            ``(17) The term `hurricane'--
                    ``(A) means a nonfrontal, warm core, low pressure 
                atmospheric system--
                            ``(i) having a definite organized 
                        circulation with sustained wind speeds of 74 
                        miles per hour or greater; and
                            ``(ii) that is officially declared to be a 
                        hurricane by the National Hurricane Center; and
                    ``(B) includes any associated windstorm events 
                occurring within 168 hours before and after the 
                hurricane first makes landfall within a State.
            ``(18) The term `local community' means a political 
        subdivision of a State that has a department, or similar 
        entity, that oversees local zoning and building code compliance 
        efforts.
            ``(19) The term `natural disaster-prone State' means a 
        State determined by the Director of the Agency pursuant to 
        section 204 to have an exposure to the earthquake, volcanic 
        eruption, tsunami, windstorm, or hurricane perils.
            ``(20) The term `new building construction' means 
        construction of a structure carried out pursuant to a building 
        permit issued after the date of enactment of the Natural 
        Disaster Protection and Insurance Act of 1995.
            ``(21) 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.
            ``(22) 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 
        311 that provide indemnity, in whole or in part, for the loss, 
        destruction, or damage of residential property.
            ``(23) 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 in section 1504(a) of the Internal Revenue 
        Code of 1986, that is licensed or admitted to write property 
        and casualty insurance or reinsurance within a State.
            ``(24) The term `public facility' has the meaning given the 
        term in section 102(8) of the Robert T. Stafford Disaster 
        Relief and Emergency Assistance Act (42 U.S.C. 5122(8)).
            ``(25) The term `rate', when used in the context of 
        insurance--
                    ``(A) means the cost of--
                            ``(i) insurance per exposure unit assessed 
                        for the primary insurance coverages under 
                        subtitle B of title III; and
                            ``(ii) the reinsurance coverage under 
                        subtitle C of title III; and
                    ``(B) includes--
                            ``(i) the pure expected loss cost that is 
                        actuarially based on the level of risk and 
                        represents the amount needed to pay expected 
                        losses;
                            ``(ii) the loss adjustment expense;
                            ``(iii) a factor for the mitigation set-
                        aside assessed under section 404(b);
                            ``(iv) administrative costs of the Natural 
                        Disaster Insurance Corporation created under 
                        section 301; and
                            ``(v) compensation for any costs incurred 
                        by private insurers, including--
                                    ``(I) administrative expenses;
                                    ``(II) agent commissions; and
                                    ``(III) taxes.
            ``(26) The term `reinsurance coverage' means the contract 
        provided by the Natural Disaster Insurance Corporation under 
        section 321 under which that 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 family 
        residential building that houses between
         1 and 4 families (including mobile or manufactured homes).
            ``(28) The term `standard residential property insurance 
        contract' means any conventional policy 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 that--
                    ``(A) provides property insurance coverage against 
                hurricanes, earthquakes, volcanic eruptions, or 
                tsunamis; and
                    ``(B) meets minimum standards established by the 
                Natural Disaster Insurance Corporation under section 
                302 regarding actuarially sound rates, the 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, reduced 
        by any premiums paid for--
                    ``(A) ceded reinsurance;
                    ``(B) residential property insurance; or
                    ``(C) any covered commercial line of insurance 
                included in the plan of operation under section 
                302(a)(4)(B).
            ``(31) The term `substantially modified building 
        construction' means with respect to additions or improvements 
        to an existing building--
                    ``(A) made during any 18-month period beginning on 
                or after the date of enactment of the Natural Disaster 
                Protection and Insurance Act of 1995; and
                    ``(B) that result in a value of the building that 
                is at least 50 percent greater than the value of the 
                building at the time of the commencement of the 
                additions or improvements, as measured by the most 
                recent official property assessment.
            ``(32) The term `tsunami' means an ocean wave generated by 
        underwater disturbances in the crust of the Earth, 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'--
                    ``(A) means an atmospheric disturbance marked by 
                high velocity movements of air, including a tornado, 
                and
                    ``(B) does not include a hurricane.''.

SEC. 5. CONFORMING AMENDMENTS.

    The Earthquake Hazards Reduction Act of 1977 (42 U.S.C. 7701 et 
seq.) is amended--
            (1) in section 4(2) (42 U.S.C. 7703(2))--
                    (A) by inserting ``, as used in title I,'' before 
                ``means''; and
                    (B) by striking ``section 5'' and inserting 
                ``section 101'';
            (2) by inserting after section 4 the following heading:

           ``TITLE I--EARTHQUAKE HAZARDS REDUCTION PROGRAM'';

            (3) by redesignating sections 5 through 12 as sections 101 
        through 108, respectively;
            (4) in sections 101, 103, 105, 106, and 108 (as 
        redesignated by paragraph (3)), by striking ``this Act'' each 
        place it appears and inserting ``this title'' in each such 
        place; and
            (5) in section 108 (as redesignated by paragraph (3))--
                    (A) by striking ``sections 5 and 6'' each place it 
                appears and inserting ``sections 101 and 102''; and
                    (B) by striking ``section 11'' and inserting 
                ``section 107''.

SEC. 6. MULTIHAZARD MITIGATION PROGRAM.

    The Earthquake Hazards Reduction Act of 1977 (42 U.S.C. 7701 et 
seq.) is amended by adding at the end the following new title:

               ``TITLE II--MULTIHAZARD MITIGATION PROGRAM

           ``Subtitle A--Federal Emergency Management Agency

``SEC. 201. SUPPORT PROGRAMS.

    ``(a) In General.--The Director of the Agency shall establish and 
carry out natural disaster hazard mitigation programs that support the 
purposes specified in subsections (b) through (d).
    ``(b) Research.--The Director of the Agency shall undertake 
research to strengthen building codes and promote the development of 
cost-effective building technologies and other related hazard 
mitigation measures.
    ``(c) Technology.--The Director of the Agency shall develop hazard 
mitigation technology for States, local communities, and architects, 
engineers, building contractors, and other persons responsible for the 
implementation and enforcement of hazard mitigation measures.
    ``(d) Education.--The Director of the Agency 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. 202. NEW FEDERAL BUILDING STANDARDS.

    ``Federally leased, assisted, or regulated buildings shall be 
subject to the requirements contained in Executive Order No. 12699 
entitled `Seismic Safety of Federal and Federally Assisted or Regulated 
New Building Construction', issued on January 5, 1990, relating to 
design and construction standards for federally leased, assisted, or 
regulated buildings with appropriate seismic design to accommodate 
earthquakes.
``SEC. 203. NATIONAL MINIMUM CONSENSUS BUILDING CONSTRUCTION STANDARDS.

    ``(a) Study.--The Director of the Agency shall enter into an 
arrangement with the Director of 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.
    ``(b) National Academy of Sciences.--The study described in 
subsection (a) shall be performed by a panel of recognized experts 
appointed by the Director of 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 that 
the Director of the National Academy of Sciences determines to be 
appropriate.
    ``(c) Transmit to Congress.--Not later than 2 years after the date 
of enactment of this title, the Director of the National Academy of 
Sciences shall transmit to the Congress a report of the findings of the 
study conducted under subsection (a) that includes any recommendations 
that the Director of the National Academy of Sciences considers 
appropriate.

``SEC. 204. DESIGNATION OF NATURAL DISASTER-PRONE STATES.

    ``(a) Designation.--Not later than 180 days after the date of 
enactment of this title, and on January 1 of each year thereafter, the 
Director of the Agency shall determine which States are considered to 
have an exposure to earthquake, volcanic eruption, tsunami, windstorm, 
or hurricane perils. Based upon scientific risk data, the Director of 
the Agency shall classify those States as natural disaster-prone States 
for purposes of this Act.
    ``(b) Scientific Risk Data.--
            ``(1) Seismic perils.--The determination and classification 
        under subsection (a) concerning which States are considered to 
        have an exposure for earthquake, volcanic eruption, or tsunami 
        perils shall be based solely on seismic data provided by the 
        United States Geological Survey of the Department of the 
        Interior, or the designated successor agency of the United 
        States Geological Survey.
            ``(2) Hurricane peril.--The determination of which States 
        are considered to have an exposure to windstorm or hurricane 
        peril shall be based solely on windstorm and hurricane data 
        provided by the National Oceanic and Atmospheric Administration 
        of the Department of Commerce, or the designated successor 
        agency of the National Oceanic and Atmospheric Administration.

               ``Subtitle B--State and Community Programs

``SEC. 211. ADOPTION OF BUILDING AND SAFETY CODES.

    ``(a) Multihazard Building and Safety Codes.--
            ``(1) In general.--Notwithstanding any other provision of 
        law, each natural disaster-prone State, as designated under 
        section 204, shall, not later than the date specified in 
        section 213(a)(2), either adopt building codes in accordance 
        with paragraph (2) or make a certification in accordance with 
        paragraph (3).
            ``(2) Building codes.--
                    ``(A) In general.--If a State chooses to adopt 
                building codes in accordance with paragraph (1), the 
                State shall 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 most recent 
                edition of at least one of the model building codes 
                specified in subparagraph (B) that shall be applicable 
                to regions that are exposed to any of those natural 
                disaster perils.
                    ``(B) Model building codes.--The model building 
                codes specified in this subparagraph are--
                            ``(i) the National Building Code prepared 
                        by the Building Officials and Code 
                        Administrators;
                            ``(ii) the Standard Building Code prepared 
                        by the Southern Building Code Congress; and
                            ``(iii) the Uniform Building Code prepared 
                        by the International Congress of Building 
                        Officials.
                    ``(C) Other relevant building and housing codes and 
                standards.--Each State referred to in subparagraph (A) 
                shall, incorporate in the building codes of the State 
                relevant housing codes and standards in addition to 
                those specified in subparagraph (B), including the 
                national consensus safety codes of the National Fire 
                Protection Association, including--
                            ``(i) the National Electrical Code;
                            ``(ii) the National Fuel Gas Code;
                            ``(iii) the Flammable and Combustible 
                        Liquids Code; and
                            ``(iv) the Standard for Storage and 
                        Handling of Liquified Petroleum Gases.
            ``(3) Certification.--If a State chooses to make a 
        certification in accordance with paragraph (1), the chief 
        executive officer of the State shall certify to the Director of 
        the Agency that the local communities of the State have adopted 
        and are enforcing building codes that meet the appropriate 
        minimum natural disaster hazard mitigation portions of any of 
        the model building codes referred to in paragraph (2)(A) and 
        other building and housing codes and standards described in 
        paragraph (2)(B) for all new and substantially modified 
        building construction in that State.
    ``(b) Flood Performance Standards.--At a minimum, each State that 
contains local communities identified as flood-prone communities under 
chapter III of the National Flood Insurance Act of 1968 (42 U.S.C. 4101 
et seq.) shall, not later than the date specified in section 213(a)(2), 
either--
            ``(1) adopt relevant flood minimum performance standards, 
        flood-proofing, and other flood protection measures that 
        minimize flood damage for new and substantially modified 
        building construction located in flood-prone local communities 
        that meet the criteria established by the Director of the 
        Agency under section 1361 of the National Flood Insurance Act 
        of 1968 (42 U.S.C. 4102); or
            ``(2) certify to the Director of the Agency that all of the 
        flood-prone local communities in the State have adopted and are 
        enforcing the minimum performance standards described in 
        paragraph (1) for new and substantially modified building 
        construction.

``SEC. 212. DEVELOPMENT OF STATE MITIGATION PLANS.

    ``(a) General Authority.--Not later than the date specified in 
section 213(a)(3), each natural disaster-prone State, as determined 
under section 204, shall--
            ``(1) develop, with active public participation, a 
        mitigation plan that establishes a plan with accompanying 
        schedules for improving the ability of the State to reduce the 
        hazards of natural disasters, such as hurricanes, windstorms, 
        earthquakes, volcanic eruptions, tsunamis, and floods; or
            ``(2) designate a mitigation plan that is in effect at the 
        time of the designation that includes the processes described 
        in subsection (b) as the applicable natural hazards mitigation 
        plan.
    ``(b) Content of State Mitigation Plans.--
            ``(1) In general.--Each State natural hazards mitigation 
        plan described in subsection (a) shall include, a process for--
                    ``(A) ensuring compliance with building and safety 
                codes, including those described in section 211;
                    ``(B) improving emergency response to natural 
                disasters (including capabilities for fire fighting, 
                search and rescue, and the provision of shelters, 
                communications, and medical relief);
                    ``(C) developing standards and guidelines for the 
                regular training of first responders for disaster 
                emergency mitigation;
                    ``(D) enforcing local community land use and 
                management ordinances;
                    ``(E) addressing further development in high-risk, 
                disaster-prone areas and the impact of such development 
                on life, safety, and the environment;
                    ``(F) developing voluntary training programs to 
                instruct planners, construction engineers, architects, 
                code officials, plumbers, electricians, and building 
                inspectors on wind- and earthquake-resistant design and 
                construction with emphasis on hazard mitigation of 
                applicable codes; and
                    ``(G) identifying essential critical facilities, 
                lifelines, and public facilities to be retrofitted 
                within a time period specified in the plan.
            ``(2) Deadline for implementation.--Each State covered 
        under a State natural hazards mitigation plan described in 
        subsection (a) shall implement the processes described in 
        paragraph (1) by not later than the date specified in section 
        213(a)(3).

``SEC. 213. TIME PERIODS FOR STATE DEVELOPMENT AND IMPLEMENTATION OF 
              BUILDING CODES AND MITIGATION PLANS AND CERTIFICATION OF 
              COMPLIANCE.

    ``(a) Deadlines.--
            ``(1) Submission of state mitigation plans to fema.--Not 
        later than 2 years after the date of enactment of this title, 
        the chief executive officer of each State covered under section 
        212 shall submit to the Director of the Agency the mitigation 
        plan of the State developed pursuant to section 212. If the 
        chief executive officer submits a mitigation plan under this 
        paragraph that does not meet the requirements of section 212, 
        or if the chief executive officer fails to meet the deadline 
        specified in this paragraph, the State shall be considered to 
        be in noncompliance with the requirements of this paragraph.
            ``(2) Adoption of building codes.--
                    ``(A) In general.--Not later than 3 years after the 
                date of enactment of this title, the chief executive 
                officer of each State covered under section 211 shall 
                certify to the Director of the Agency--
                            ``(i) whether the State has adopted the 
                        building and safety codes identified in section 
                        211(a)(2) in accordance with the requirements 
                        of that section; or
                            ``(ii) whether the local communities of the 
                        State have adopted applicable building and 
                        safety codes in accordance with the 
                        requirements of section 211(a)(3).
                    ``(B) Noncompliance.--If the chief executive 
                officer certifies under subparagraph (A) that the State 
                has not met applicable requirements referred to in that 
                subparagraph, or if the chief executive officer fails 
                to make a certification by the date specified in that 
                subparagraph, the State shall be considered to be in 
                noncompliance with the requirements of this paragraph.
            ``(3) Implementation of mitigation plans.--
                    ``(A) In general.--Not later than 4 years after the 
                date of enactment of this title, the chief executive 
                officer of each State covered under section 212 shall 
                certify to the Director of the Agency whether the 
                processes of its mitigation plan as described in 
                section 212(b) have been implemented in accordance with 
                the requirements of that section.
                    ``(B) Noncompliance.--If the chief executive 
                officer certifies under this paragraph that those 
                processes have not been implemented, or if the chief 
                executive officer fails to make a certification by the 
                date specified in this paragraph, the State shall be 
                considered to be in noncompliance with the requirements 
                of this paragraph.
            ``(4) Building code enforcement.--
                    ``(A) In general.--Not later than 5 years after the 
                date of enactment of this title, each State covered 
                under section 212 shall certify to the Director of the 
                Agency whether the applicable building and safety codes 
                identified in section 212 are being adequately 
                enforced.
                    ``(B) Noncompliance.--If the chief executive 
                officer certifies under this paragraph that the 
                applicable building and safety codes identified in 
                section 212 are not being adequately enforced, or if 
                the chief executive officer fails to make a 
                certification by the date specified in this paragraph, 
                the State shall be considered to be in noncompliance 
                with the requirements of this paragraph.
    ``(b) Notification and Opportunity To Cure.--
            ``(1) In general.--The Director of the Agency shall 
        promptly notify in writing those States that fail to meet an 
        applicable compliance requirement referred to in subsection 
        (a).
            ``(2) Reduction in certain assistance.--If a State does not 
        take corrective action within 180 days after receiving 
        notification under paragraph (1), the State shall be subject to 
        a reduction in assistance specified in section 214 until such 
        date as the Director of the Agency determines that the State 
        has taken the necessary corrective action.
    ``(c) Regulations.--Not later than 1 year after the date of 
enactment of this title, the Director of the Agency shall issue final 
regulations necessary to carry out this section. The regulations issued 
under this subsection shall include guidance to States concerning what 
constitutes adequate compliance with the hazard mitigation measures of 
this subtitle.

``SEC. 214. FEDERAL SHARE OF FINANCIAL ASSISTANCE.

    ``(a) Reduced Federal Share for Disaster Aid.--During the 
applicable period specified in section 213(b)(2), with respect to a 
State that fails to meet an applicable deadline under section 213, the 
Federal share of assistance otherwise available to that State under 
sections 406(b)(1) and 407(d)(1) of the Robert T. Stafford Disaster 
Relief and Emergency Assistance Act (42 U.S.C. 5172(b)(1) and 
5173(d)(1)) shall be reduced by 50 percent.
    ``(b) Denial of Mitigation Funds.--During the applicable period 
specified in section 213(b)(2), a State that fails to meet an 
applicable deadline under section 213 shall not be eligible to receive 
funds from the Mitigation Account.

``SEC. 215. MITIGATION ACCOUNT.

    ``(a) Funds to States.--
            ``(1) Authority.--Beginning with the first day of the full 
        fiscal year beginning after the date of enactment of this 
        title, and on the first day of every fiscal year thereafter, 
        after the Director of the Agency credits premiums from the 
        Natural Disaster Insurance Corporation described in section 
        301, the Director of the Agency shall allocate to the States 
        (except for any State that is denied funds under section 
        214(b)) all of the funds appropriated to the Mitigation Account 
        described in section 404.
            ``(2) Formula.--
                    ``(A) In general.--Subject to paragraph (3), the 
                Director of the Agency shall allocate funds from the 
                Mitigation Account to a State on the basis of a pro 
                rata formula that is based on the primary insurance 
                coverages and reinsurance coverage premiums described 
                in section 303 that are collected from that State.
                    ``(B) Regulations.--Not later than 1 year after the 
                date of enactment of this title, the Director of the 
                Agency shall issue final regulations describing the pro 
                rata formula described in subparagraph (A).
            ``(3) Minimum amount.--The minimum amount allotted to a 
        State under this subsection for a fiscal year shall be equal to 
        the greater of--
                    ``(A) 0.25 percent of the amounts in the Mitigation 
                Account on the day before the date of the allotment; or
                    ``(B) $250,000.
    ``(b) Use.--
            ``(1) In general.--The funds allotted to States under 
        subsection (a) 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 hazard mitigation activities;
                    ``(C) low-income individuals and families to assist 
                in paying for the undertaking of hazard mitigation 
                measures;
                    ``(D) the dissemination of cost-effective 
                technologies--
                            ``(i) to prevent or substantially reduce 
                        damage caused by natural disasters; and
                            ``(ii) for the establishment of 
                        geographically dispersed and duly incorporated 
                        natural disaster damage prevention and 
                        mitigation Centers for Protection Against 
                        Natural Disasters to carry out the 
                        dissemination of those technologies;
                    ``(E) addressing further development in high-risk, 
                disaster-prone areas and the impact of that development 
                on the environment; and
                    ``(F) the construction of buildings to serve as 
                models for the advancement of public education 
                concerning cost-effective hazard mitigation technology 
                in the design and construction of buildings, including 
                the employment of fire suppression and water catchment 
                systems.
            ``(2) Priority.--Each State that receives an allotment 
        under subsection (a) shall give priority to using that 
        assistance to fund hazard mitigation activities that are 
        necessary to bring the State into compliance with the building 
        and safety code requirements of section 211 and the mitigation 
        plan requirements of section 212.
    ``(c) Local Communities.--As a condition to receiving an allotment 
under subsection (a), each State shall agree to transfer not less than 
25 percent of the amount
 of the allotment to local communities to support activities necessary 
to ensure State compliance with the hazard mitigation requirements of 
this subtitle.
    ``(d) Audits.--The Director of the Agency shall periodically 
conduct audits to ensure that States and local communities are using 
the funds from the allotments made under subsection (a) to support the 
hazard mitigation activities described in this section.

``SEC. 216. NO UNFUNDED MANDATES.

    ``(a) In General.--If the appropriate official of a State documents 
to the Director of the Agency that the State has not received adequate 
funds from the Mitigation Account under section 215 to fully cover the 
costs of complying with a specific mitigation requirement described in 
this subtitle, that mitigation requirement shall not apply to that 
State until such time as the State receives adequate funds to fully 
cover the cost of that requirement.
    ``(b) Exceptions.--
            ``(1) Adequate funds.--Subsection (a) does not apply to any 
        mitigation requirement described in this subtitle with respect 
        to which a State has failed to document that the State received 
        an inadequate amount of funds from the Mitigation Account to 
        fully cover the cost of complying with that mitigation 
        requirement.
            ``(2) Noncompliance states.--During the applicable period 
        specified in section 214(b), subsection (a) shall not apply to 
        any State that is ineligible to receive funds from the 
        Mitigation Account pursuant to section 214(b).
            ``(3) Conditional federal assistance.--Subsection (a) shall 
        not apply to any duty imposed on a State by this subtitle that 
        is a condition relating to Federal assistance provided to the 
        State under the Robert T. Stafford Disaster Relief and 
        Emergency Assistance Act (42 U.S.C. 5121 et seq.).''.

SEC. 7. NATURAL DISASTER INSURANCE.

    The Earthquake Hazards Reduction Act of 1977 (42 U.S.C. 7701 et 
seq.), as amended by section 6, is further amended by adding after 
title II the following new title:

                ``TITLE III--NATURAL DISASTER INSURANCE

          ``Subtitle A--Natural Disaster Insurance Corporation

``SEC. 301. ORGANIZATIONAL STRUCTURE.

    ``(a) Creation.--The Secretary of the Treasury shall grant loans in 
accordance with section 306(d) to a private, nongovernmental, and not-
for-profit membership corporation, that meets the requirements of 
subsection (b) (hereafter in this title referred to as the `Natural 
Disaster Insurance Corporation' or `Corporation').
    ``(b) Purpose.--The Natural Disaster Insurance Corporation that 
receives loans as described in subsection (a)--
            ``(1) shall provide primary insurance coverages and 
        reinsurance coverage for hurricanes, earthquakes, volcanic 
        eruptions, and tsunamis; and
            ``(2) shall only be eligible to receive loans under section 
        306(d), if it complies with all requirements of this subtitle.
    ``(c) Membership.--The members of the Corporation shall own shares 
in the Corporation and shall consist of--
            ``(1) private insurers that participate as service 
        providers for the primary insurance coverages insured by the 
        Corporation under section 311; and
            ``(2) private insurers and State insurance pools that 
        purchase the reinsurance coverage provided by the Corporation 
        under section 321.
    ``(d) Startup.--
            ``(1) Administrator.--
                    ``(A) In general.--An administrator of the 
                Corporation shall be selected by the members of the 
                Corporation, at the initial organizational meeting of 
                the Corporation.
                    ``(B) Duties of the administrator.--The 
                administrator of the Corporation shall, with respect to 
                the Corporation, coordinate--
                            ``(i) the hiring of temporary staff;
                            ``(ii) obtaining office space;
                            ``(iii) contracting with consultants and 
                        entities;
                            ``(iv) managing the election of the initial 
                        Board of Directors of the Corporation; and
                            ``(v) receiving the startup loans described 
                        in paragraph (2).
                    ``(C) Termination of administrator.--The activities 
                of the administrator shall terminate when all members 
                of the Board of Directors of the Corporation have been 
                selected.
            ``(2) Startup loans.--
                    ``(A) Startup administrative costs.--Startup 
                administrative costs of the Corporation shall be 
                derived from loans received from the private insurers 
                participating as members of the Corporation.
                    ``(B) Amount of startup loans.--The amount of 
                startup loans received from private insurers shall be 
                in proportion to each of the participating insurer's 
                countrywide subject net written premium (as defined and 
                determined by the Director of the Agency).
                    ``(C) Repayment of startup loans.--Not later than 3 
                years after the Corporation is established under 
                subsection (a), or such later time as sufficient funds 
                become available, all startup loans received from 
                private insurers as described in this paragraph shall 
                be repaid with interest by the Corporation from amounts 
                in the trust accounts established pursuant to section 
                306.
    ``(e) Board of Directors.--
            ``(1) Governance.--
                    ``(A) In general.--The Corporation shall be 
                governed by a 15-member Board of Directors (hereafter 
                in this title referred to as the `Board').
                    ``(B) Voting.--Each director of the Board shall 
                have 1 vote and the Board shall set policy and decide 
                all matters by a simple majority of the votes cast.
                    ``(C) Duties of the board.--The Board shall develop 
                and approve the plan of operation described in section 
                302 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. Except as provided in clause 
                        (iii), each insurance director shall have 1 
                        vote. The selection of 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 more than 1 employee of a 
                        specific private insurer may serve on the Board 
                        at any time.
                            ``(ii) Special classes of insurers.--During 
                        the period that the Corporation is in 
                        existence, of the directors of the Board--
                                    ``(I) one director shall represent 
                                reinsurers that write primarily 
                                reinsurance;
                                    ``(II) one director shall represent 
                                small providers of direct insurance 
                                that write primarily in personal lines 
                                of insurance in less than 10 States; 
                                and
                                    ``(III) one director shall 
                                represent commercial insurers that 
                                write primarily commercial insurance 
                                lines throughout the United States.
                            ``(iii) Election based on premium volume.--
                        Three insurance directors shall be elected to 
                        the Board on the basis of the premium volume 
                        weighting criteria described as follows:
                                    ``(I) Initial election.--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 that insurer's 
                                countrywide subject net written premium 
                                (as defined and determined by the 
                                Director of the Agency) in relationship 
                                to the countrywide subject net written 
                                premium for all private insurers 
                                serving as members of the Corporation.
                                    ``(II) Subsequent election.--For 
                                the election of the 3 directors under 
                                this clause other than the initial 3 
                                such directors, the vote of each 
                                private insurer serving as a member of 
                                the Corporation shall be weighted to 
                                reflect the 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 
                                collected by the private insurer.
                                    ``(III) Number of votes.--For each 
                                election held to elect any 1 of the 3 
                                directors under this clause, a private 
                                insurer may only vote for 1 candidate.
                            ``(iv) At-large election.--Three insurance 
                        directors shall be elected at large by the 
                        private insurers serving as members of the 
                        Corporation.
                    ``(B) Noninsurance directors.--
                            ``(i) In general.--Not later than 180 days 
                        after the election of the insurance directors 
                        under subparagraph (A), the insurance directors 
                        elected pursuant to subparagraph (A) shall 
                        nominate 6 noninsurance directors, who shall be 
                        elected by the members of the Corporation.
                            ``(ii) Interests represented.--Each of the 
                        following interests shall be represented by at 
                        least 1, but not more than 2, of the 6 
                        noninsurance directors:
                                    ``(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 director who is selected in 
                the manner described in the plan of operation developed 
                under section 302.
            ``(3) Terms of service.--The directors elected under 
        paragraph (2) shall serve staggered terms of not more than 6 
        years, as determined by the Board at the time of election.
            ``(4) Chairperson.--The Board shall select a chairperson 
        from among its directors.
            ``(5) Fiduciary duty.--For carrying out the duties of the 
        Board, the directors of the Board shall have a fiduciary duty 
        to the Corporation, that shall supersede any duty to an 
        employer or other special interest that the director may 
        otherwise represent.
    ``(f) Powers.--
            ``(1) Control.--The Corporation shall be--
                    ``(A) privately owned by the members of the 
                Corporation, as described in subsection (b); and
                    ``(B) under the direction of the Board, as 
                described in subsection (d).
            ``(2) General powers.--Upon the selection of the 9 
        insurance directors under subsection (d)(2)(A), the Corporation 
        shall take all necessary and appropriate actions to carry out 
        the functions of the Corporation, 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 
        306.
            ``(3) Specific powers.--Consistent with the plan of 
        operation developed under section 302, the Corporation, under 
        the direction of the Board, shall have the power--
                    ``(A) to provide--
                            ``(i) the primary insurance coverages 
                        described in subtitle B; and
                            ``(ii) the reinsurance coverage described 
                        in subtitle C;
                    ``(B) to manage the trust accounts described in 
                section 306;
                    ``(C) to raise funds by issuing obligations in the 
                private market, except that such obligations shall not 
                carry the full faith and credit of the United States; 
                and
                    ``(D) to take all other actions necessary and 
                proper to carry out the operations of the Corporation.
            ``(4) Excluded powers.--The Corporation may not--
                    ``(A) exercise powers that are reserved to the 
                Federal Government as a sovereign government;
                    ``(B) make financial commitments with any sovereign 
                government; and
                    ``(C) have as an employee any Federal employee who 
                is subject to the civil service laws under title 5, 
                United States Code.
    ``(g) Limitations on Liability.--
            ``(1) Individual members.--Individual members of the 
        Corporation, as described 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 306.
            ``(2) Under federal law.--No action by the Corporation or 
        the Board pertaining to the plan of operation described in 
        section 302 or the rates described in section 303 shall subject 
        the Corporation or the Board to liability under Federal law or 
        any law of a State if that action is taken pursuant to 
        authority granted to the Corporation under this Act.

``SEC. 302. PLAN OF OPERATION.

    ``(a) Establishment.--
            ``(1) Development.--The Board shall develop a plan of 
        operation (hereafter in this section referred to as the `plan') 
        describing the administration of the Corporation and the 
        provision of insurance coverages 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 
        that shall be applicable in all States.
            ``(3) Insurance coverage particulars.--Concerning the 
        particular information regarding the insurance coverages issued 
        or provided by the Corporation (hereafter in this subsection 
        referred to as `coverage particulars'), the plan shall 
        include--
                    ``(A) final rates, or adjustments thereto, 
                established under section 303;
                    ``(B) specific terms and conditions of insurance 
                coverages, including--
                            ``(i) coverage eligibility requirements;
                            ``(ii) coverage limits;
                            ``(iii) deductibles;
                            ``(iv) quota-share amounts as described in 
                        section 314(c); and
                            ``(v) levels of retained losses as 
                        described in section 323;
                    ``(C) specific insurance forms and policy 
                contracts; and
                    ``(D) criteria for the settlement of insurance 
                claims.
            ``(4) Miscellaneous plan provisions.--In addition to the 
        coverage particulars described in paragraph (3), the plan shall 
        include--
                    ``(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 321(b);
                    ``(B) the commercial lines of insurance that 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 301(e)(3)(C);
                    ``(D) the conditions for private insurers to 
                withdraw from acting as service providers of the 
                primary insurance coverages pursuant to section 
                306(d)(3)(C);
                    ``(E) appropriate limitations on private insurers 
                acting as service providers of the primary insurance 
                coverages under section 312(b) to restrict the insurers 
                withdrawing from offering property and casualty 
                insurance in the voluntary private market in certain 
                States; and
                    ``(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 shall protect as proprietary specific 
        information provided by private insurers that is necessary to 
        develop the rates and specific terms and conditions of the 
        insurance coverages issued or provided by the Corporation.
            ``(6) Insurer stability in insurance coverages.--To the 
        maximum extent practicable, the plan shall encourage stability 
        with respect to participation by private insurers in the 
        insurance coverages issued or provided by the Corporation.
    ``(b) Plan Approval.--The Natural Disaster Insurance Board of 
Actuaries shall review and approve the plan and any amendments made to 
the plan in accordance with the process described in section 304(c).
    ``(c) Annual Report.--
            ``(1) In general.--Not later than 1 year after the initial 
        meeting of the Board, and annually thereafter, the Board shall 
        prepare a written report on the overall operations of the 
        Corporation.
            ``(2) Distribution.--The Board shall distribute a copy of 
        the report prepared under paragraph (1) to--
                    ``(A) each member of the Corporation; and
                    ``(B) the Independent Board of Actuaries 
                established under section 304.

``SEC. 303. PRICING.

    ``(a) Establishment of Rates.--
            ``(1) In general.--Using generally accepted actuarial 
        principles and consistent with section 304(d)(5), the Board 
        shall develop, establish, and adjust when necessary, the rates 
        for the primary insurance coverages issued by the Corporation 
        under section 311 and rates for the reinsurance coverage 
        provided by the Corporation under section 321.
            ``(2) Determination of rates and adjustments.--The rates 
        and adjustments referred to in paragraph (1) shall be based on 
        historical aggregate losses supplemented by natural disaster 
        modeling techniques and other scientific evidence and loss 
        adjustment expenses that are--
                    ``(A) calculated to determine the ultimate value of 
                the losses; and
                    ``(B) projected through the utilization of trend 
                analysis to a future point of time (as determined by 
                the Board).
    ``(b) Actuarially Sound Requirement.--
            ``(1) In general.--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 both of the actuarial 
        principles described in paragraph (2).
            ``(2) Actuarial principles.--The rates established by the 
        Board shall--
                    ``(A) result in a minimum of cross-subsidization 
                between the geographic risk territories (as defined and 
                determined by the Board); and
                    ``(B) produce expected premiums that shall be 
                sufficient to pay for all--
                            ``(i) claims;
                            ``(ii) loss adjustment expenses; and
                            ``(iii) administrative costs of the 
                        Corporation in administering the trust accounts 
                        established in section 306.
    ``(c) Approval of Rates.--The Natural Disaster Insurance Board of 
Actuaries shall review and approve the rates, and adjustments to the 
rates, developed by the Board under this section in accordance with the 
process described in section 304.

``SEC. 304. INDEPENDENT BOARD OF ACTUARIES.

    ``(a) Establishment.--There is established an independent Natural 
Disaster Insurance Board of Actuaries (referred to in this section as 
the `Independent Board') to review and approve the plan of operation 
developed under section 302 and the rates developed under section 303.
    ``(b) Membership.--
            ``(1) Appointment.--Not later than 180 days after the date 
        of enactment of the Natural Disaster Protection and Insurance 
        Act of 1995, the Secretary of the Treasury (hereafter in this 
        section referred to as the `Secretary') shall appoint the 
        members of the Independent Board.
            ``(2) Members.--
                    ``(A) In general.--The Independent Board shall be 
                comprised of 5 members.
                    ``(B) Vacancies.--The Secretary shall, upon the 
                occurrence of a vacancy on the Independent Board, 
                immediately appoint a member to fill the vacancy in the 
                same manner as the original appointment.
            ``(2) Qualifications.--The members of the Independent Board 
        described in paragraph (1)--
                    ``(A) shall be citizens of the United States;
                    ``(B) may 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 
                        (or its successor) and meet the qualification 
                        standards of the Academy (or its successor) 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.--The members appointed under 
        paragraph (2) shall serve staggered terms of not more than 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.--Not 
        later than 15 months after the date of enactment of this title, 
        the Board of the Corporation shall submit to the Independent 
        Board a draft plan of operation that satisfies the requirements 
        of section 302(a).
            ``(2) Approval of the plan.--If, upon the termination of 
        the 90-day period beginning on the date on which the 
        Independent Board receives the draft plan under paragraph (1), 
        the Independent Board has not disapproved the draft plan under
         paragraph (3), the draft plan shall be deemed to have been 
approved and shall become final.
            ``(3) Standard for disapproval.--The Independent Board may 
        disapprove 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.--
                    ``(A) In general.--If the Independent Board 
                disapproves a draft plan under paragraph (2), the 
                chairperson of the Independent Board shall immediately 
                return the plan to the Board of the Corporation, 
                together with written instructions of the changes 
                required for the plan to be materially consistent with 
                the provisions of this title.
                    ``(B) Revisions.--Upon receipt of the plan and 
                instructions returned under subparagraph (A), the Board 
                of the Corporation shall--
                            ``(i) modify the plan in a manner 
                        consistent with the instructions; and
                            ``(ii) submit a modified plan to the 
                        Independent Board for approval in accordance 
                        with the process described in paragraph (2).
            ``(5) Amendments to the plan.--Any amendments to the plan 
        shall be developed by the Board of the Corporation under 
        section 302 and approved by the Independent Board in accordance 
        with the process described in paragraph (2).
            ``(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 Rates.--
            ``(1) Submission of proposed rates to the independent 
        board.--Not later than 1 year after the date of enactment of 
        this title, the Board of the Corporation shall submit to the 
        Independent Board for approval rates developed by the Board of 
        the Corporation that are proposed to be established for the 
        insurance coverages issued or provided by the Corporation under 
        section 303(a), including any methodologies used in developing 
        such rates.
            ``(2) Approval by the independent board.--
                    ``(A) Primary insurance coverages rates.--If, at 
                the termination of the 90-day period beginning on the 
                date on which the Independent Board receives the rates 
                under paragraph (1), the Independent Board has not 
                approved the rates under paragraph (3), the rates shall 
                be deemed to have been approved.
                    ``(B) Reinsurance coverage methodologies.--If, at 
                the termination of the 90-day period beginning on the 
                date on which the Independent Board receives the 
                information concerning the methodologies used for 
                determining proposed rates under paragraph (1), the 
                Independent Board has not disapproved the methodologies 
                on the basis of the standard described in paragraph 
                (3), the methodologies shall be deemed to have been 
                approved.
            ``(3) Standard for disapproval.--The Independent Board may 
        disapprove the rates or methodologies described in paragraph 
        (2) only if the Independent Board presents compelling and 
        substantial actuarial evidence on the record that the rates or 
        methodologies are materially inconsistent with the actuarial 
        soundness requirement of section 303(b).
            ``(4) Opportunity to cure.--
                    ``(A) In general.--If the Independent Board 
                disapproves any proposed rates or methodologies under 
                this subsection, the chairperson of the Independent 
                Board shall immediately return the rates and 
                methodologies to the Board of the Corporation together 
                with written instructions of the changes required to 
                the rates and methodologies to satisfy the actuarial 
                requirement of section 303(b).
                    ``(B) Revisions.--Upon receipt of the rates or 
                methodologies returned under subparagraph (A), the 
                Board shall modify the rates or methodologies in a 
                manner consistent with the instructions of the 
                Independent Board and resubmit them to the Independent 
                Board for approval according to the process described 
                in paragraph (2).
            ``(5) Approval of rates.--
                    ``(A) Primary insurance coverages rates.--Upon the 
                approval by the Independent Board of rates for the 
                primary insurance coverages under this subsection, 
                rates proposed under paragraph (1) shall--
                            ``(i) become final; and
                            ``(ii) be included by the Board of the 
                        Corporation in the plan of operation under 
                        section 302 for the primary insurance coverages 
                        issued by the Corporation.
                    ``(B) Reinsurance coverage rates.--Upon the 
                approval by the Independent Board of methodologies for 
                the reinsurance coverage rates under this subsection, 
                the rates for the reinsurance coverage proposed under 
                paragraph (1) shall--
                            ``(i) become final; and
                            ``(ii) be included by the Board in the plan 
                        of operation under section 302 for the 
                        reinsurance coverage provided by the 
                        Corporation.
            ``(6) Adjustment of 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 303 and 
        approved by the Independent Board according to the process 
        described in paragraph (2).
    ``(e) Consultation.--The Independent Board shall consult risk 
assessment experts who are employed by the United States Geological 
Survey of the Department of the Interior
 (or its designated successor agency), the National Oceanic and 
Atmospheric Administration of the Department of Commerce (or its 
designated successor agency), the National Academy of Sciences, and 
similar public and private scientific groups to ensure that natural 
disaster risk models and the geographic rating territories used in 
developing and approving the actuarial rates under this section are 
accurate.

``SEC. 305. PARTICIPATION OF STATE INSURANCE REGULATORS.

    ``(a) Informational Filings.--
            ``(1) Items to file.--The Board of the Corporation shall 
        file with each State insurance commission or equivalent State 
        agency information copies (including any revised copies) of--
                    ``(A) the rates charged for the primary coverage 
                issued by the Corporation under subtitle B; and
                    ``(B) any insurance forms or policies 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), the items submitted to a State insurance 
        commission or equivalent State agency under paragraph (1) shall 
        be for informational purposes only, and shall not be subject to 
        the approval of those State insurance regulators.
            ``(3) Filing of deviations.--
                    ``(A) General authority.--Subject to subparagraph 
                (B), private insurers participating as service 
                providers of the primary insurance coverages under 
                section 312(b) may apply rates that deviate from the 
                rates established by the Corporation.
                    ``(B) Deviations limited to insurer costs.--The 
                rate deviations described in subparagraph (A) shall be 
                based only on the difference in cost to the private 
                insurer (as compared to the costs determined by the 
                Corporation for calculating that portion of the rate 
                filed by the Corporation under paragraph (1)(A)) in an 
                amount sufficient to compensate the private insurer for 
                costs incurred by the private insurer, including 
                administrative expenses, agent commissions, and taxes.
                    ``(C) State requirements.--Each determination of a 
                rate deviation under this paragraph shall be subject to 
                any applicable State requirement for the filing of 
                property insurance rates.
    ``(b) Claims Settlement.--The Corporation shall address inquiries 
and complaints concerning claims settlement practices related to the 
insurance coverages issued or provided by the Corporation, including 
complaints brought to the attention of a State insurance regulator, in 
accordance with the plan of operation under section 302.
    ``(c) State Premium Taxes.--Each State may assess an insurance 
premium tax on any insurance policy issued by the Corporation under 
section 311 in that State, to the extent that the rate of such tax does 
not exceed the rate of the applicable premium taxes assessed by the 
State for the equivalent standard residential property insurance 
contract charged by a domestic private insurer (as determined by the 
appropriate official of the State).
    ``(d) State Funds.--The Corporation may not participate in any 
State guaranty insurance fund or any State insurance pool. 
Policyholders of the Corporation may not file 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.--No State may 
require a private insurer acting as a service provider for the 
Corporation of primary insurance coverages under subtitle B to sell 
insurance coverages or participate in any program that provides 
insurance for damages related to earthquakes, volcanic eruptions, 
tsunamis, or hurricanes in amounts greater than the amounts provided by 
the primary insurance coverages issued by the Corporation.

``SEC. 306. TRUST ACCOUNTS.

    ``(a) Primary Insurance Coverage Trust Account.--
            ``(1) Establishment.--The Corporation shall establish and 
        maintain a Primary Insurance Coverage Trust Account (hereafter 
        in this section 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 404(b), the Board 
        shall deposit in the primary account the portion of the 
        premiums collected by private insurers servicing the primary 
        insurance coverage policies described in subtitle B that is due 
        to the Corporation, plus any interest income accrued on those 
        premiums.
            ``(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 314(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 (hereafter in 
        this section 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 404(b), the Board 
        shall deposit in the reinsurance account premiums paid by 
        private insurers that have purchased the reinsurance coverage 
        policy described in subtitle C, plus any interest income 
        accrued on those premiums.
            ``(3) Payment of claims.--From amounts in the reinsurance 
        account, the Corporation shall pay qualifying claims, as 
        described in section 322(c), to private insurers that have 
        purchased the reinsurance coverage.
    ``(c) Investments.--
            ``(1) General authority.--The Board shall invest as the 
        Board considers appropriate, in the primary account and the 
        reinsurance account such amounts as are not required to meet 
        current financial commitments.
            ``(2) Deposits.--Any income generated from the investments 
        described in paragraph (1) shall be deposited by the Board, 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 trust accounts described in 
        subsection (a) or (b), or funds raised by issuing obligations 
        in the private market pursuant to section 301(e)(3)(C), are 
        insufficient to pay claims and expenses resulting from the 
        primary insurance coverages or the reinsurance coverage, the 
        Secretary of the Treasury shall provide direct loans from the 
        Private Loss Account described in section 402 in sufficient 
        amounts to cover that shortfall in accordance with this 
        subsection.
            ``(2) Conditions.--The following conditions shall apply to 
        each Federal loan provided to the Corporation under this 
        subsection:
                    ``(A) Financial capacity.--The aggregate amount of 
                all outstanding loans to the Corporation at any given 
                time shall not exceed the financial capacity of the 
                Corporation to repay those loans not later than 20 
                years after receiving the loans.
                    ``(B) No subsidy cost.--All loans authorized by 
                this subsection shall be made under such terms and 
                conditions as are necessary to ensure that, at the time 
                the loans are made, there is no subsidy cost to the 
                Federal Government for purposes of the Federal Credit 
                Reform Act of 1990.
                    ``(C) Loan subject to appropriations.--All loans 
                are subject to the availability of funds pursuant to 
                appropriations Acts.
            ``(3) Repayment.--
                    ``(A) In general.--In a manner consistent with 
                paragraph (2), the Secretary of the Treasury shall 
                recoup--
                            ``(i) any amounts that the Corporation 
                        borrows from the Federal Government under this 
                        subsection; and
                            ``(ii) interest on the borrowed funds.
                    ``(B) Interest rates.--The rate of interest on any 
                loan made to the Corporation under this subsection 
                shall be at a nonsubsidized rate of interest 
                established by the Secretary of the Treasury, taking 
                into consideration the current average market yield on 
                outstanding marketable obligations of the United States 
                of comparable maturities.
                    ``(C) Primary coverage repayment terms.--The 
                Corporation shall require, under contractual terms and 
                conditions, that a private insurer acting as a service 
                provider of the primary insurance coverages under 
                section 312 that receives reimbursements for qualifying 
                claims under section 314(d) consisting of funds loaned 
                from the Federal Government or from private sources 
                under this subsection shall--
                            ``(i) continue acting as a service provider 
                        of such primary insurance coverages at levels 
                        that are at least equivalent to the levels 
                        provided by those service providers before 
                        receiving reimbursement until the loans made to 
                        the Corporation, including interest, are fully 
                        repaid by the Corporation pursuant to 
                        subparagraph (A); or
                            ``(ii) discontinue acting as a service 
                        provider of such primary insurance coverages, 
                        if that private insurer satisfies the 
                        conditions of withdrawal set by the Board of 
                        the Corporation in the plan of operation under 
                        section 302(a)(4)(D).
                    ``(D) Reinsurance repayment terms.--The Corporation 
                shall require, under contractual terms and conditions 
                with eligible entities (as defined in section 321(b)), 
                that those eligible entities that receive payments for 
                qualifying claims under section 322(c) that consist of 
                funds loaned from the Federal Government or from 
                private sources under this subsection shall--
                            ``(i) continue to purchase the reinsurance 
                        coverage provided under section 321 at levels 
                        that are at least equivalent to the levels of 
                        coverage in effect before the receipt of such 
                        payments until the loans made to the 
                        Corporation, including interest, are fully 
                        repaid by the Corporation pursuant to 
                        subparagraph (A); or
                            ``(ii) fully repay the portion of the loans 
                        made to the Corporation, including interest, 
                        within a reasonable period established by the 
                        Corporation.
            ``(4) Mitigation payments.--The failure of the Corporation 
        to pay natural disaster hazard mitigation funds and deposit 
        those funds in the Mitigation Account as provided in section 
        404 shall render the Corporation ineligible to obtain Federal 
        loans under this subsection.
    ``(e) No Comingling.--The amounts in the primary account 
established in subsection (a) and the reinsurance account established 
in subsection (b) shall be kept separate. The Corporation shall not 
permit the transfer of funds between the two accounts.

``SEC. 307. NO FEDERAL FUNDS.

    ``Except as provided for in section 306(d), no Federal funds shall 
be authorized or appropriated to fund any activity of the Corporation.

``SEC. 308. GAO AUDITS.

    ``(a) Audits.--Not later than 1 year after the Corporation 
commences the issuance of primary insurance coverages under section 311 
and reinsurance coverage under section 321, and once every 3 years 
thereafter, during the period that the Corporation provides insurance 
or reinsurance coverages, the Comptroller General of the United States 
shall audit activities of the Corporation and
 the Independent Board of Actuaries established under section 304 to 
ensure that both entities are complying with the provisions of this 
title.
    ``(b) Submission to Congress.--Upon completion of each audit 
conducted under subsection (a), the Comptroller General of the United 
States shall submit to the Congress a report on the results of the 
audit.

               ``Subtitle B--Primary Insurance Coverages

``SEC. 311. SCOPE OF COVERAGE.

    ``(a) General Authority.--The Corporation may not receive Federal 
loans under section 306(d) unless the Corporation issues primary 
insurance coverages that--
            ``(1) shall cover losses to the eligible property described 
        in subsection (b) resulting from the natural disaster perils 
        described in subsection (c); and
            ``(2) are subject to the terms and conditions described in 
        section 314.
    ``(b) Eligible Property.--Any primary insurance coverages provided 
by the Corporation shall insure against physical damages and losses to 
residential property, including debris removal, additional living 
expenses incurred as a result of direct damage to the residential 
property, and ordinance and law coverages.
    ``(c) Natural Disaster Perils Covered.--Any 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, other than 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; or
            ``(4) a hurricane.

``SEC. 312. PROVISION OF COVERAGE.

    ``(a) Type of Policy.--The primary insurance coverages described in 
section 311 shall be supplemental contracts of insurance issued by the 
Corporation in conjunction with a standard residential property 
insurance contract issued by a private insurer acting as a service 
provider.
    ``(b) Private Insurers Acting as Service Providers.--
            ``(1) In general.--A private insurer that is participating 
        as a member of the Corporation under section 301(b) may act as 
        a service provider by offering the primary insurance coverages 
        described in section 311 in accordance with this subsection.
            ``(2) Seismic perils.--A private insurer acting as a 
        service provider under this subsection shall offer the primary 
        insurance coverages on behalf of the Corporation for 
        earthquake, volcanic eruption, and tsunami perils, as described 
        in section 311(c), to all residential property policyholders of 
        the private insurer that are located in earthquake, volcanic 
        eruption, and tsunami-prone States, as determined by the 
        Director of the Agency under section 204(a).
            ``(3) Hurricane peril.--In addition to offering the 
        coverages described in paragraph (2), a private insurer acting 
        as a service provider under this section may offer the primary 
        insurance coverage on behalf of the Corporation for hurricane 
        peril, if that coverage is offered to all of the residential 
        property policyholders of the private insurer in hurricane-
        prone States, as determined by the Director of the Agency under 
        section 204(a).
            ``(4) Quota-share amounts.--Any private insurer acting as a 
        service provider shall agree to accept the applicable quota-
        share amounts for each coverage described in section 314(c).

``SEC. 313. INSURANCE PURCHASE REQUIREMENT.

    ``(a) Coverage Required With Federal Mortgages.--No federally 
related mortgage loan secured by residential property located in an 
earthquake-, volcanic eruption-, tsunami-, or hurricane-prone State (as 
determined by the Director of the Agency under section 204(a)) shall be 
made or renewed unless the property used to secure the loan is covered 
by--
            ``(1) primary insurance coverages issued by the Corporation 
        described in section 311; or
            ``(2) coverage insured by a private insurer that--
                    ``(A) has terms, conditions, and rates that are at 
                least equivalent to the primary insurance coverages for 
                seismic perils as described in section 312(b)(1); and
                    ``(B) has at least equivalent terms and conditions 
                as the primary insurance coverage for the hurricane 
                peril, as described in section 312(b)(2).
    ``(b) Escrow Insurance Premiums.--
            ``(1) Escrow requirement.--
                    ``(A) In general.--If a lender or other servicer of 
                residential property mortgage loans requires the 
                escrowing of taxes, insurance premiums, or any other 
                charges as a condition of the loan, any premiums from 
                earthquake, volcanic eruption, tsunami, and hurricane 
                insurance for residential property that is used to 
                secure a federally related mortgage loan shall be paid 
                to that lender or servicer of the loan.
                    ``(B) Payments.--The premiums referred to in 
                subparagraph (A) shall be paid in such manner as to 
                make sufficient payments as due for the duration of the 
                loan.
            ``(2) Escrow account.--
                    ``(A) In general.--Upon receipt of premiums 
                described in paragraph (1), the lender or servicer of a 
                residential property loan referred to in paragraph (1) 
                shall deposit the premiums in an escrow account on 
                behalf of the borrower.
                    ``(B) Payment.--Upon receipt of a notice from the 
                private insurer acting as a service provider or direct 
                insurer that provides the insurance referred to in 
                paragraph (1) 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 (including temporary housing) provided 
        under section 408 or 411 of the Robert T. Stafford Disaster 
        Relief and Emergency Assistance Act (42 U.S.C. 5174 and 5178) 
        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 
                that are at least equivalent to--
                            ``(i) the primary insurance coverages 
                        provided under section 311; and
                            ``(ii) the flood insurance coverage 
                        provided under the National Flood Insurance Act 
                        of 1968 (42 U.S.C. 4001 et seq.), if the 
                        residential owner is required to have such 
                        coverage under that Act; and
                    ``(B) the annual household income of the 
                residential property--
                            ``(i) exceeds $60,000 in 1995; or
                            ``(ii) in any calendar year after 1995 
                        exceeds the base amount for 1995 under clause 
                        (i), adjusted for the percentage increase in 
                        the Consumer Price Index for each subsequent 
                        year.
            ``(2) Business properties.--An owner of business properties 
        in natural disaster-prone States shall be ineligible to receive 
        any financial assistance provided under sections 408 or 411 of 
        the Robert T. Stafford Disaster Relief and Emergency Assistance 
        Act (42 U.S.C. 5174 and 5178) or any other similar disaster 
        assistance provided by the Small Business Administration or any 
        other Federal agency, notwithstanding any other provision of 
        those Acts or other Federal law, 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) Applicability.--The provisions of subsections (a) through (c) 
shall not take effect until--
            ``(1) the Corporation described in section 301 has been 
        created;
            ``(2) the terms and conditions of the primary insurance 
        coverages issued by the Corporation under section 311 fully 
        satisfy the provisions of section 314; and
            ``(3) the premiums written by the private insurers 
        participating as service providers of the Corporation described 
        in section 312(b) represent at least 51 percent of the private 
        residential property insurance market in the natural disaster-
        prone States.
    ``(e) Effect of Failure To Write a Sufficient Amount of Premiums.--
If, after having written premiums for the private residential property 
insurance market referred to in subsection (d)(3) at the level 
specified in that subsection, the participating private insurers fail 
to maintain that level, subsections (a) through (c) shall not apply 
until that level is attained.

``SEC. 314. 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. The Board 
        may, from time to time, modify the terms and conditions. The 
        Board shall include the terms and conditions in the plan of 
        operation developed pursuant to section 302.
            ``(2) Guiding principle.--The Board shall standardize terms 
        and conditions for the primary insurance coverage policies, and 
        to the maximum extent practicable, design the terms and 
        conditions to limit the financial exposure of the primary 
        account described in section 306(a) to a manageable level, 
        taking into consideration the probable maximum losses for the 
        natural disaster perils described in section 311(c).
            ``(3) Considerations.--In setting the terms and conditions 
        of the primary insurance coverages, the Board shall give due 
        consideration to--
                    ``(A) the rates, scope and limits of coverage, and 
                the deductibles in the standard residential property 
                insurance contract for the natural disaster perils 
                described in section 311(c) available in the voluntary 
                primary market on the date of enactment of this title; 
                and
                    ``(B) the ability 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 313.
    ``(b) Specific Terms and Conditions.--The terms and conditions for 
the primary insurance coverages shall include--
            ``(1) limits on the amount of coverage available;
            ``(2) rates, as determined under section 303;
            ``(3) deductibles that may vary based on the type of peril, 
        geographic areas, and the existence of loss-reduction measures 
        that affect the risk of loss; and
            ``(4) any other terms and conditions that the Board 
        determines to be necessary, consistent with the purposes of 
        this subtitle.
    ``(c) Quota-Share Amounts.--
            ``(1) In general.--The primary insurance coverages issued 
        by the Corporation in accordance with this subtitle shall offer 
        the quota-share amounts prescribed under this subsection as a 
        condition to participation as a service provider, except that 
        the private insurer shall have the option of retaining quota-
        share amounts in amounts greater than prescribed under this 
        subsection.
            ``(2) Seismic perils.--The quota-share amount offered by 
        the Corporation for earthquake, volcanic eruption, and tsunami 
        perils shall be 10 percent.
            ``(3) Hurricane peril.--The quota-share amount offered by 
        the Corporation for 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, if the Corporation certifies to the private insurers 
        that sufficient amounts are available in the primary account, 
        including any Federal loans available pursuant to section 
        306(d), to fully reimburse the private insurers under paragraph 
        (2).
            ``(2) Reimbursement of insurers.--The Corporation shall 
        reimburse fully a private insurer with funds from the primary 
        account not later than 90 days after the date on which any 
        claim payments are made and any loss adjustment expenses are 
        incurred by the 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 full 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. 315. FLOOD INSURANCE.

    ``(a) Flood Insurance Study.--
            ``(1) Measures to increase coverage.--Not later than 18 
        months after the date of enactment of the Natural Disaster 
        Protection and Insurance Act of 1995, the Director of the 
        Agency, in cooperation with the Corporation, shall submit a 
        report to Congress concerning any additional sanctions, or 
        other measures, that they consider necessary and appropriate to 
        ensure that 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--
                    ``(A) 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 311; or
                    ``(B) privatizing the National Flood Insurance 
                Program managed by the Director of the Agency 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 later than 18 months after the date of enactment 
        of the Natural Disaster Protection and Insurance Act of 1995, 
        all residential property insurance contracts issued by private 
        insurers that 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 a private insurer referred to in paragraph 
                (1) is engaged in the Write Your Own program of the 
                National Flood Insurance program established pursuant 
                to section 1345 of the National Flood Insurance Act of 
                1968 (42 U.S.C. 4081) and the regulations promulgated 
                pursuant to that section, 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 a private insurer referred to in paragraph 
                (1) is not engaged in a Write Your Own program 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 that contrasts by typography, layout, or color 
        with other printed materials on the policy issued by the 
        private insurer.
            ``(4) Consequences of noncompliance.--Any private insurer 
        referred to in paragraph (1) that fails to comply with this 
        section shall be ineligible to participate as a member of the 
        Corporation under section 301.

                   ``Subtitle C--Reinsurance Coverage

``SEC. 321. SCOPE OF COVERAGE.

    ``(a) General Authority.--The Corporation may not receive Federal 
loans under section 306(d) unless the Corporation makes available 
excess reinsurance coverage that 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) comply with terms and conditions described in 
        sections 322 and 323.
    ``(b) Eligible Entities.--As members of the Corporation, private 
insurers and State insurance pools may purchase the excess reinsurance 
coverage described in subsection (a), if such entities meet the minimum 
criteria and financial viability standards set by the Corporation in 
the plan of operation under section 302.
    ``(c) Covered Losses.--The excess reinsurance coverage described in 
subsection (a) shall insure against--
            ``(1) residential losses, including quota-share amounts 
        retained by the private insurers under section 314(c), that 
        have not already been insured by the Corporation under the 
        primary insurance coverage policies described in section 311; 
        and
            ``(2) commercial losses.
    ``(d) Natural Disaster Perils.--The excess reinsurance coverage 
described in subsection (a) shall cover losses from natural disaster 
perils that are proximately caused by--
            ``(1) earthquakes;
            ``(2) volcanic eruptions;
            ``(3) tsunamis; and
            ``(4) hurricanes.

``SEC. 322. TERMS AND CONDITIONS.

    ``(a) General Authority.--
            ``(1) Setting of terms and conditions.--The Board of the 
        Corporation shall--
                    ``(A) set the terms and conditions of the 
                reinsurance coverage issued under this subtitle; and
                    ``(B) include the terms and conditions in the plan 
                of operation developed pursuant to section 302.
            ``(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 306(b) to 
                a manageable level given the probable maximum losses 
                for the natural disaster perils described in section 
                321(d).
            ``(3) Modifications.--The Board may from time to time 
        modify the terms and conditions set forth in accordance with 
        this subsection.
    ``(b) Specific Terms and Conditions.--The terms and conditions for 
reinsurance coverage issued under this subtitle shall include--
            ``(1) limits on the amount of coverage available;
            ``(2) rates determined under section 303, that shall take 
        into account--
                    ``(A) the financial standing of the private 
                insurers; and
                    ``(B) the exposure of the private insurer to the 
                natural disaster perils described in section 321(d); 
                and
            ``(3) any other terms and conditions that the Board 
        determines necessary, consistent with the purposes of this 
        subtitle.
    ``(c) Payment of Claims.--From amounts in the reinsurance account 
described in section 306(b), including any Federal loans provided under 
section 306(d), the Corporation shall pay the qualifying losses (as 
determined under section 323) of those private insurers that have 
purchased the reinsurance coverage provided by the Corporation under 
section 321.

``SEC. 323. LEVELS OF RETAINED LOSSES.

    ``(a) Industrywide Eligibility.--
            ``(1) In general.--Excess reinsurance coverage under this 
        subtitle shall be available to all private insurers that are 
        eligible for reinsurance pursuant to section 321(b) in 
        accordance with this subsection.
            ``(2) Industry retained losses.--
                    ``(A) In general.--The reinsurance account 
                established under section 306(b) shall provide excess 
                reinsurance coverage when the Board of the Corporation 
                determines, pursuant to the plan of operation under 
                section 302, that the insurance industry is likely, as 
                a result of hurricane, earthquake, volcanic eruption, 
                or tsunami events occurring during any 12-month period, 
                to incur gross losses in the lines of insurance covered 
                under section 321(c) that exceed 15 percent of the 
                consolidated industry surplus as regards policyholders.
                    ``(B) Calculation.--In calculating the percentage 
                of consolidated industry surplus as regards 
                policyholders, the Board shall aggregate only such 
                separate events as will likely result in industry gross 
                losses of at least $1,500,000,000, aggregated to 
                determine whether the applicable percentage level for 
                gross losses described in subparagraph (A) is met. For 
                any calendar year after 1995, the Board shall adjust 
                the dollar amount specified in the preceding sentence 
                by the applicable percentage change in the Consumer 
                Price Index for the preceding calendar year.
            ``(3) Individual company retained losses.--If the Board 
        determines that the insurance industry has sustained gross 
        losses at the applicable percentage level described in 
        paragraph (1), the Board shall pay from the reinsurance account 
        established under section 306(b) to a private insurer that is 
        eligible for reinsurance under section 321(b) 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 the Board 
        determines that the applicable percentage level under 
        subsection (a)(1) has not been reached for gross losses 
        sustained by the insurance industry, a private insurer that is 
        eligible for reinsurance under section 321(b) shall be eligible 
        for excess reinsurance coverage and reimbursement from the 
        reinsurance account established under section 306(b) if the 
        private insurer has incurred--
                    ``(A) gross losses from a single earthquake, 
                volcanic eruption, or tsunami event that--
                            ``(i) are included in the lines of 
                        insurance covered in section 321(c); and
                            ``(ii) exceed 20 percent of the 
                        consolidated surplus as regards policyholders 
                        of the private insurer; or
                    ``(B) gross losses from a single hurricane event 
                that--
                            ``(i) are included in the lines covered in 
                        section 321(c)(other than workers' compensation 
                        and earthquake lines of insurance); and
                            ``(ii) exceed 20 percent of the 
                        consolidated surplus as regards policyholders 
                        of the private insurer.
            ``(2) Reinsurance account payments.--If the Board 
        determines that a private insurer referred to in paragraph (1) 
        has sustained gross losses described in paragraph (1), the 
        Board shall pay from the reinsurance account established under 
        section 306(b), 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 Board from 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.--
            ``(1) In general.--Excess reinsurance coverage under this 
        subtitle shall be available to each State insurance pool 
        eligible for reinsurance pursuant to section 321(b) in 
        accordance with paragraph (2).
            ``(2) State pool losses.--
                    ``(A) In general.--Subject to paragraph (3), the 
                reinsurance account established under section 306(b) 
                shall provide excess reinsurance coverage when the 
                Board determines, pursuant to the plan of operation 
                under section 302, that 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, or tsunami events 
                occurring during any 12-month period that exceed the 
                lesser of--
                            ``(i) an amount equal to 10 times the sum 
                        of the direct earned premiums for that State 
                        insurance pool for the losses covered in 
                        section 321(c); or
                            ``(ii) $10,000,000,000.
                    ``(B) Adjustment.--For any calendar year after 
                1995, the Board shall adjust the amount specified in 
                subparagraph (A) by the applicable percentage change in 
                the Consumer Price Index for the preceding calendar 
                year.
            ``(3) Minimum losses.--The minimum amount payable to a 
        State insurance pool under paragraph (2) shall be $500,000,000. 
        For any calendar year after 1995, the Board shall adjust the 
        amount specified in the preceding sentence by the applicable 
        percentage change in the Consumer Price Index for the preceding 
        calendar year.
            ``(4) Retained losses.--If the Board determines that the 
        insurance industry has sustained gross losses described in 
        paragraph (2), the reinsurance account established under 
        section 306(b) shall pay to an individual State insurance pool, 
        95 percent of qualifying losses in excess of the applicable 
        amount determined under paragraph (2)(A).
    ``(d) Qualifying Losses Defined.--
            ``(1) In general.--For purposes of this subtitle, the term 
        `qualifying losses' shall include--
                    ``(A) the losses and loss adjustment expenses 
                incurred by a private insurer or State insurance pool 
                referred to in section 321(b); and
                    ``(B) any assessments, surcharges, or other 
                liabilities imposed by any State residual insurance 
                pooling program or guaranty account,
        attributable to hurricanes, earthquakes, volcanic eruptions, or 
        tsunamis occurring during any 12-month period encompassing the 
        events described in subsections (a)(1) and (c)(1) or the event 
        described in subsection (b)(1), reduced by the amount specified 
        in paragraph (2).
            ``(2) Reduction.--Qualifying losses determined under 
        paragraph (1) shall be reduced by--
                    ``(A) any collectible reinsurance recoverable; and
                    ``(B) an appropriate percentage of any 
                uncollectible reinsurance arising from the event, as 
                set forth in the plan of operation under section 302.
    ``(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.--For the purposes of this section the following 
definitions shall apply:
            ``(1) Consolidated industry surplus as regards 
        policyholders.--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)(1), as 
        determined by the National Association of Insurance 
        Commissioners or other credible source (as determined by the 
        Corporation).
            ``(2) Consolidated surplus as regards policyholders.--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 event described in subsections 
        (a)(1) and (b)(1).
            ``(3) Direct earned premiums.--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 calendar year 
        available preceding the hurricane, earthquake, volcanic 
        eruption, or tsunami event described in subsection (c)(1).
            ``(4) Gross losses.--The term `gross losses' means all 
        losses and loss adjustment expenses, prior to deducting any 
        private reinsurance recoverables.
            ``(5) Uncollectible reinsurance.--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.''.

SEC. 8. NATURAL DISASTER PROTECTION FUND.

    The Earthquake Hazards Reduction Act of 1977 (42 U.S.C. 7701 et 
seq.), as amended by section 7, is further amended by adding at the end 
the following new title:

              ``TITLE IV--NATURAL DISASTER PROTECTION FUND

``SEC. 401. 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 (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 is established in the Fund the following 
accounts:
            ``(1) Private loss account.--A Private Loss Account, as 
        described in section 402.
            ``(2) Public loss account.--A Public Loss Account, as 
        described in section 403.
            ``(3) Mitigation Account.--A Mitigation Account, as 
        described in section 404.
    ``(c) No Comingling.--The amounts in the accounts established in 
subsection (b) shall be kept separate. The Secretary of the Treasury 
shall not permit borrowing of moneys among the accounts.

``SEC. 402. PRIVATE LOSS ACCOUNT.

    ``Funds in the Private Loss Account established in section 401(b) 
shall be used by the Secretary of the Treasury to provide direct 
Federal loans to cover shortfalls in the primary account described in 
section 306(a) and the reinsurance account described in section 306(b), 
subject to the lending authority, conditions, and repayment terms of 
section 306(d).

``SEC. 403. PUBLIC LOSS ACCOUNT.

    ``(a) In General.--The Public Loss Account established in section 
401(b) shall be used by the Secretary of the Treasury to cover losses 
to, and retrofitting of, public facilities, critical facilities, and 
lifelines.
    ``(b) Description of Account.--
            ``(1) Source of funds.--The Director of the Agency or the 
        appropriate head of a Federal agency shall transfer to the 
        Secretary of the Treasury and the Secretary of the Treasury 
        shall credit to the Public Loss Account amounts specifically 
        designated and appropriated (if the specifically designated 
        amounts under this paragraph are in addition to and not in lieu 
        of annual appropriations for the programs)--
                    ``(A) annually pursuant to title IV of the Robert 
                T. Stafford Disaster Relief and Emergency Assistance 
                Act (42 U.S.C. 5170 et seq.) for repair and restoration 
                of Federal facilities, public facilities, 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 and 
                Insurance Act of 1995 and intended to be allocated to 
                the Federal Emergency Management Agency, the Department 
                of Transportation, the Department of Housing and Urban 
                Development, or any other Federal agency for the repair 
                and restoration of public facilities, critical 
                facilities, and lifelines; and
                    ``(C) annually after the date of enactment of the 
                Natural Disaster Protection and Insurance Act of 1995 
                for the public infrastructure programs or Federal 
                entities specified in paragraph (2).
            ``(2) Programs and entities.--The programs and entities 
        referred to in paragraph (1)(C) are as follows:
                    ``(A) The Highway Trust Fund.
                    ``(B) The Airport and Airway Trust Fund.
                    ``(C) The Harbor Maintenance Trust Fund.
                    ``(D) Grants for construction of water treatment 
                works under title II of the Federal Water Pollution 
                Control Act (33 U.S.C. 1281 et seq.).
                    ``(E) The Natural Resources Conservation Service.
                    ``(F) The Economic Development Administration.
                    ``(G) The Army Corps of Engineers.
                    ``(H) The General Services Administration.
            ``(3) Amount of account.--The Secretary of the Treasury 
        shall retain in the Public Loss Account a reserve of funds 
        sufficient to cover the anticipated costs resulting from 
        natural disasters for an annual 10-year historical average of 
        disaster relief provided to the Secretary of the Treasury by 
        the Director of the Agency.
            ``(4) Authorization.--There are authorized to be 
        appropriated such sums as may be necessary to carry out this 
        section.
    ``(c) Purposes of Account.--
            ``(1) Rebuilding grants.--Funds from the Public Loss 
        Account shall be used by the Director of the Agency to provide 
        grants to States for the repair or restoration of public 
        facilities, critical facilities, lifelines, and infrastructure 
        damaged or destroyed by natural disasters.
            ``(2) Predisaster mitigation.--The Public Loss Account 
        shall provide grants to States for pre-natural disaster hazard 
        mitigation, including the retrofitting of public facilities, 
        critical facilities, and lifelines.
            ``(3) Federal share.--
                    ``(A) Compliance state.--The Federal share of a 
                grant provided from the Public Loss Account under this 
                subsection shall be 75 percent if the State receiving 
                the grant is in compliance with each applicable 
                deadline under section 213.
                    ``(B) Noncompliance state.--Consistent with the 
                penalty described in section 214(a), the Federal share 
                of a grant from the Public Loss Account under this 
                subsection shall be 50 percent if the State receiving 
                the grant is not in compliance with any applicable 
                deadline under section 213.
                    ``(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. 
                401(b)(2)(D)).

``SEC. 404. MITIGATION ACCOUNT.

    ``(a) Purpose of the Account.--The Mitigation Account established 
in section 401(b) shall support the natural disaster hazard mitigation 
efforts described in subtitle B of title VII.
    ``(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 III and the 
        reinsurance coverage described in subtitle C of title III for 
        natural disaster hazard mitigation purposes.
            ``(2) Precise percentage.--
                    ``(A) In general.--The percent amount described in 
                paragraph (1) shall be a percentage amount that totals 
                on an annual basis $200,000,000.
                    ``(B) Adjustment.--For any calendar year after 
                1995, the dollar amount specified in subparagraph (A) 
                shall be adjusted by the percentage change in the 
                Consumer Price Index for the preceding calendar year.
    ``(c) Deposits.--The Director of the Agency shall transfer and 
credit on an annual basis to the Mitigation Account amounts received 
from--
            ``(1) the amounts set aside of the annual premiums 
        described in subsection (b); and
            ``(2) appropriations provided for pre-natural disaster 
        hazard mitigation activities conducted under the Robert T. 
        Stafford Disaster Relief and Emergency Assistance Act (42 
        U.S.C. 5121 et seq.).
    ``(d) Authorization.--For the purposes of subsection (c)(2) only, 
there is authorized to be appropriated to the Mitigation Account for 
fiscal year 1996, and annually thereafter, an amount equal to the 
amounts provided annually from the percent set aside of premiums 
received pursuant to subsection (b).''.
SEC. 9. FEDERAL DISASTER ASSISTANCE AMENDMENTS.

    (a) Contributions.--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 before the semicolon the following: ``if the State 
has paid, or agreed to pay, at least $5 per each resident of the State 
(as determined by the most recent official census for that State 
conducted by the Bureau of the Census) for the repair, restoration, 
reconstruction, or replacement of public facilities damaged or 
destroyed by that major disaster in that State''.
    (b) Minimum Federal Share.--Section 406(b) of the Robert T. 
Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 
5172(b)) is amended--
            (1) in the subsection heading, by striking ``Minimum'';
            (2) by striking ``The'' and inserting the following:
            ``(1) Share amounts.--The'';
            (3) by striking ``be not less than--'' and inserting ``be--
        '';
            (4) by striking ``(1) 75'' and inserting the following:
                    ``(A) 75'';
            (5) by striking ``(2) 100'' and inserting the following:
                    ``(B) 100'';
            (6) by striking ``(3) 75'' and inserting the following:
                    ``(C) 75''; and
            (7) by adding at the end the following new paragraph:
            ``(2) Waiver.--The Federal share percentages described in 
        paragraph (1) (which may be modified by section 214(a) of the 
        Natural Disaster Protection and Insurance Act of 1995) shall be 
        increased only upon the enactment of a joint resolution the 
        appropriations for which shall not be designated as emergency 
        requirements 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) Federal Share.--Section 407(d) of the Robert T. Stafford 
Disaster Relief and Emergency Assistance Act (42 U.S.C. 5173(d)) is 
amended--
            (1) by striking ``The Federal share'' and inserting the 
        following:
            ``(1) Share amount.--The Federal share'';
            (2) by striking ``not less than''; and
            (3) by adding at the end the following new paragraph:
            ``(2) Waiver.--The Federal share percentage described in 
        paragraph (1) (which may be modified by section 214(a) of the 
        Natural Disaster Protection and Insurance Act of 1995) shall be 
        increased only upon the enactment of a joint resolution the 
        appropriations for which shall not be designated as emergency 
        requirements 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)).''.
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