[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[H.R. 230 Introduced in House (IH)]







105th CONGRESS
  1st Session
                                H. R. 230

   To ensure that insurance against the risk of catastrophic natural 
disasters, such as hurricanes, earthquakes, and volcanic eruptions, is 
available and affordable, and to provide for expanded hazard mitigation 
                  and relief, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            January 7, 1997

   Mr. McCollum (for himself, Mr. Shaw, Mr. Lazio of New York, Mrs. 
  Emerson, Mr. Bilirakis, Mr. Canady of Florida, Mr. Diaz-Balart, Mr. 
 Deutsch, Mrs. Fowler, Mr. Hastings of Florida, Mrs. Meek of Florida, 
     Mr. Mica, Ms. Ros-Lehtinen, Mr. Scarborough, and Mr. Stearns) 
 introduced the following bill; which was referred to the Committee on 
  Banking and Financial Services, and in addition to the Committee on 
  Transportation and Infrastructure, for a period to be subsequently 
   determined by the Speaker, in each case for consideration of such 
 provisions as fall within the jurisdiction of the committee concerned

_______________________________________________________________________

                                 A BILL


 
   To ensure that insurance against the risk of catastrophic natural 
disasters, such as hurricanes, earthquakes, and volcanic eruptions, is 
available and affordable, and to provide for expanded hazard mitigation 
                  and relief, and for other purposes.

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

SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Natural Disaster 
Protection and Insurance Act of 1997''.
    (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title.
Sec. 2. Findings.
Sec. 3. Purpose.
Sec. 4. Definitions.
Sec. 5. Severability.
                  TITLE I--NATURAL DISASTER INSURANCE

Sec. 101. National Commission on Catastrophe Risk and Insurance Loss 
                            Costs.
Sec. 102. Catastrophic excess-of-loss contracts.
Sec. 103. Private disaster insurance corporation.
Sec. 104. Study on tax treatment of insurer catastrophic reserves.
Sec. 105. Flood insurance.
Sec. 106. Insurance pricing incentives.
Sec. 107. Study of availability and affordability of catastrophe 
                            insurance.
                TITLE II--MULTIHAZARD MITIGATION PROGRAM

Sec. 201. Development of State mitigation plans.
Sec. 202. Natural Disaster Hazard Mitigation Fund.
Sec. 203. Public infrastructure retrofitting.
Sec. 204. Wildland fires.
Sec. 205. Authorization of appropriations.

SEC. 2. FINDINGS.

    The Congress finds that--
            (1) in addition to earthquakes, other catastrophic natural 
        disasters, such as major hurricanes and volcanic eruptions, 
        will--
                    (A) continue to strike the United States; and
                    (B) inflict substantial long-term adverse 
                consequences in terms of deaths, injuries, damage to 
                property and other economic losses, as well as social 
                problems;
            (2) the Federal Government and the governments of States 
        and local communities are often not adequately equipped to 
        respond to catastrophic natural disasters;
            (3) billions of dollars in taxpayer-supported government 
        assistance will be paid to rebuild following catastrophic 
        natural disasters;
            (4) millions of persons in the United States do not have 
        adequate insurance coverage to protect their property from 
        catastrophic natural disasters;
            (5) the unique risks posed by catastrophic natural 
        disasters make it difficult to provide adequate insurance 
        coverage through existing insurance mechanisms, including--
                    (A) a low frequency of occurrence;
                    (B) a high severity of losses;
                    (C) a high concentration of losses in particular 
                geographic areas; and
                    (D) a considerable degree of uncertainty associated 
                with estimating expected losses over a projected time 
                period;
            (6) in the early 1990's, catastrophic disasters (including 
        Hurricane Andrew and Hurricane Iniki and the Northridge 
        earthquake) have inflicted substantial losses on private 
        insurance companies and those losses have affected the ability 
        to write new coverages in the affected regions and other parts 
        of the United States;
            (7) the natural disasters referred to in paragraph (6)--
                    (A) inflicted substantial losses on State 
                governments and local communities; and
                    (B) caused severe strains on the budgets of the 
                governments referred to in subparagraph (A);
            (8) hazard mitigation can reduce the long-term consequences 
        of natural disasters, especially with respect to those persons 
        who are least capable of helping themselves;
            (9) hazard mitigation measures, including the adoption and 
        implementation of appropriate building and fire safety codes, 
        retrofitting of structures, and providing for public and 
        community awareness, have proven effective in reducing deaths, 
        injuries, and property damage caused by catastrophic natural 
        disasters;
            (10) hazard mitigation measures are not--
                    (A) in place in many high-hazard areas; and
                    (B) adequately enforced where the measures are in 
                place; and
            (11) emergency 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.

SEC. 3. PURPOSE.

    The purpose of this Act is--
            (1) to enhance access to disaster insurance coverage by 
        improving the capacity of the private insurance industry 
        through--
                    (A) the expanded availability of private insurance 
                and reinsurance coverage for natural disaster perils;
                    (B) the establishment of premium rates based on 
                expected losses and risk;
                    (C) an increased likelihood that the insurance 
                industry continues to provide affordable coverage 
                following a catastrophic natural disaster; and
                    (D) more effective employment of the insurance 
                industry through the provision of more coverage, that 
                should--
                            (i) speed rebuilding following a 
                        catastrophic natural disaster;
                            (ii) finance losses from natural disasters, 
                        and consequently save funds derived from tax 
                        revenues by reducing reliance on disaster 
                        assistance from governments; and
                            (iii) encourage cost-effective hazard 
                        mitigation efforts; and
            (2) to reduce deaths, injuries, property damage, and 
        business interruptions from natural disasters through a hazard 
        mitigation program that provides for--
                    (A) the building of safer structures and the 
                upgrading of existing buildings and lifelines;
                    (B) the enhancement of State and local community 
                emergency management;
                    (C) the improvement of State and local emergency 
                response capability, including the development of 
                standards and guidelines for staffing, operations, and 
                training;
                    (D) the forging of a partnership between the 
                Federal Government and the States and local communities 
                that makes the States and local communities ultimately 
                responsible for implementing and enforcing multihazard 
                mitigation measures and emergency management; and
                    (E) the creation of a self-sustaining funding 
                mechanism to assist States in paying for hazard 
                mitigation efforts.

SEC. 4. DEFINITIONS.

    For purposes of this Act, the following definitions shall apply:
            (1) Building.--The term ``building'' means any structure 
        that is--
                    (A) fully or partially enclosed; and
                    (B) used or intended for housing persons or 
                sheltering property.
            (2) Catastrophe loss costs.--The term ``catastrophe loss 
        costs'' means loss costs for the perils listed in section 
        101(e)(1).
            (3) Commercial losses.--
                    (A) The term ``commercial losses'' means physical 
                damage losses to insured commercial property (other 
                than residential property) and other losses that are 
                the result of earthquakes, volcanic eruptions, 
                tsunamis, or hurricanes for the lines of insurance 
                described in subparagraph (B).
                    (B) The lines of insurance described in this 
                subparagraph are listed in the most recent fire and 
                casualty annual statement of the National Association 
                of Insurance Commissioners as--
                            (i) commercial multiple peril;
                            (ii) workers' compensation;
                            (iii) allied lines;
                            (iv) farm owners;
                            (v) fire;
                            (vi) reinsurance;
                            (vii) liability;
                            (viii) earthquake;
                            (ix) inland marine; or
                            (x) ocean marine.
            (4) Commercial property.--The term ``commercial property'' 
        means--
                    (A) nonresidential property that is subject to 
                commercial losses; and
                    (B) includes any building that is occupied as a 
                condominium, apartment, or cooperative.
            (5) Critical facility.--The term ``critical facility'' 
        means any school or structure that is essential to emergency 
        services necessary for recovery after a natural disaster, 
        including a hospital, fire, or police facility, temporary 
        shelter, or emergency operating and preparedness center.
            (6) Director.--The terms ``Director of the Agency'' and 
        ``Director'' mean the Director of the Federal Emergency 
        Management Agency.
            (7) Earthquake.--The term ``earthquake'' means any shaking 
        or trembling of the crust of the earth that is caused by 
        underground seismic forces.
            (8) Emergency responder.--The term ``emergency 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.
            (9) Flood.--The terms ``flood'' and ``flooding'' mean a 
        general and temporary condition of partial or complete 
        inundation of a normally dry land area that results from--
                    (A) the overflow of inland or tidal waters; or
                    (B) the unusual and rapid accumulation of runoff or 
                surface waters from any source.
            (10) Hazard mitigation.--The term ``hazard mitigation'' 
        means sustained action to reduce or eliminate long-term risk to 
        people and property from natural disaster hazards and the 
        effects of those hazards.
            (11) Hurricane.--The term ``hurricane''--
                    (A) means a nonfrontal, warm core, low pressure 
                atmospheric system that is officially declared to be--
                            (i) a hurricane by the National Hurricane 
                        Center or the Central Pacific Hurricane Center; 
                        or
                            (ii) a typhoon by the Joint Typhoon Warning 
                        Center; and
                    (B) includes any associated windstorm events.
            (12) Lifeline.--The term ``lifelines'' means public works 
        and utilities, including transportation facilities and 
        infrastructure, oil and gas pipelines, electrical power and 
        communication facilities, and water supply and sewage treatment 
        facilities.
            (13) Local community.--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.
            (14) Loss costs.--The term ``loss costs''--
                    (A) means the actuarially based mean annual amount 
                or appropriate range that is sufficient to pay expected 
                insured losses resulting from a particular peril; and
                    (B) does not include loss adjustment expense, 
                administrative expense, taxes, commissions, risk 
                charge, profits, and contingencies.
            (15) Mitigation fund.--The term ``Mitigation Fund'' means 
        the Natural Disaster Hazard Mitigation Fund established under 
        section 202.
            (16) Private insurer.--The term ``private insurer'' means 
        any private insurer or private reinsurer, including all related 
        affiliates or subsidiaries under the same ownership or 
        management in a manner consistent with the definition of the 
        term ``affiliated group'' under 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.
            (17) Public facility.--The term ``public facility'' has the 
        meaning given the term in section 102 of the Robert T. Stafford 
        Disaster Relief and Emergency Assistance Act (42 U.S.C. 
        5122(8)).
            (18) Rating variable.--The term ``rating variable'' means 
        the characteristics of individual risks that affect loss costs, 
        including--
                    (A) geographic territory;
                    (B) type of construction;
                    (C) amount of insurance coverage;
                    (D) insurance policy deductibles; and
                    (E) hazard mitigation measures.
            (19) Residential property.--The term ``residential 
        property'' means--
                    (A) any family residential building that houses not 
                less than 1 and not more than 4 families (including 
                mobile or manufactured homes); and
                    (B) personal property of the occupants of a 
                residential building (including any condominium, 
                cooperative, or apartment building).
            (20) Residential property losses.--The term ``residential 
        property losses'' means physical damage losses to insured 
        residential property.
            (21) Risk charge.--The term ``risk charge'' means the 
        component of an insurance rate that reflects the degree of 
        variability of losses around the mean value of the subject of 
        the insurance.
            (22) State.--The term ``State'' means each of the States of 
        the United States, the District of Columbia, the Commonwealth 
        of Puerto Rico, the Virgin Islands, Guam, American Samoa, the 
        Commonwealth of the Northern Mariana Islands, and any other 
        territory or possession of the United States.
            (23) State department of insurance.--The term ``State 
        department of insurance'' means the office of the chief 
        insurance regulatory official of a State (or the equivalent 
        State entity).
            (24) State insurance pool.--The term ``State insurance 
        pool'' means any State-authorized joint underwriting or joint 
        reinsurance association, risk pool, or residual market 
        mechanism that provides insurance or reinsurance coverage 
        against hurricanes, earthquakes, volcanic eruptions, or 
        tsunamis.
            (25) Tsunami.--The term ``tsunami'' means an ocean wave 
        generated by underwater disturbances in the earth's crust (that 
        consist primarily of earthquakes and submarine volcanic 
        eruptions).
            (26) United states.--The term ``United States'' means, when 
        used in a geographical sense, all of the States (as such term 
        is defined in paragraph (21)).
            (27) Volcanic eruption.--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.
            (28) Windstorm.--The term ``windstorm'' means an 
        atmospheric disturbance that--
                    (A) is marked by high velocity movements of air, 
                including a tornado; and
                    (B) is not officially declared to be a hurricane 
                (including a typhoon, as defined in paragraph (10)).

SEC. 5. SEVERABILITY.

    If any provision of this Act, or the application of that provision 
to any person, circumstance, or venue, is held invalid, the remainder 
of this Act, or the application of that provision to persons, 
circumstances, or venues other than those as to which it is held 
invalid, shall not be affected.

                  TITLE I--NATURAL DISASTER INSURANCE

SEC. 101. NATIONAL COMMISSION ON CATASTROPHE RISK AND INSURANCE LOSS 
              COSTS.

    (a) Establishment.--The Secretary of the Treasury (in this title 
referred to as the ``Secretary'') shall establish within the Department 
of the Treasury a National Commission on Catastrophe Risk and Insurance 
Loss Costs (in this section referred to as the ``Commission'') to 
estimate loss costs from catastrophic natural disasters.
    (b) Duties.--
            (1) In general.--The Commission shall meet periodically to 
        participate in public hearings, estimate proposed loss costs, 
        and approve and file loss costs under subsection (e).
            (2) Plan of operation.--Not later than 180 days after the 
        date on which the Commission is established, the Commission 
        shall develop, and submit to the Secretary for review, a plan 
        of operation that sets forth the specific policies and details 
        of the operation of the Commission that includes all 
        guidelines, criteria, definitions and procedures that the 
        Commission determines to be necessary to carry out the 
        functions of the Commission under this section.
    (c) Staffing.--The Chairperson of the Commission may appoint and 
terminate such full-time professional and clerical staff, attorneys, 
examiners, and other experts as may be necessary to enable the 
Commission to carry out its duties. The staff shall be Federal 
employees who are subject to the civil service laws under title 5, 
United States Code.
    (d) Members.--
            (1) Appointment.--
                    (A) Initial appointment.--The Commission shall be 
                composed of 13 members appointed by the Secretary not 
                later than 90 days after the date of enactment of this 
                Act.
                    (B) Vacancies.--A vacancy on the Commission shall 
                be filled in the manner in which the original 
                appointment was made and shall be subject to any 
                conditions which applied with respect to the original 
                appointment. The Secretary shall ensure that the 
                composition of the Commission meets at all times the 
                qualifications described in paragraph (2).
            (2) Qualifications.--
                    (A) In general.--
                            (i) Citizenship and expertise.--Each member 
                        appointed to the Commission shall be--
                                    (I) a citizen of the United States; 
                                and
                                    (II) recognized as qualified in a 
                                field related to natural disaster 
                                hazard mitigation and insurance.
                            (ii) Treatment of non-federal members.--
                        Each member who is not otherwise employed by 
                        the Federal Government shall be deemed to be 
                        special government employees, as defined in 
                        section 202 of title 18, United States Code, 
                        for purposes of sections 201, 202, 203, 205, 
                        and 208 of such title.
                    (B) Specific disciplines.--The members appointed to 
                the Commission described in paragraph (1) shall consist 
                of the following:
                            (i) 1 structural engineer, who shall not 
                        otherwise be an employee of the Federal 
                        Government, or an employee of a State 
                        government or a private insurer.
                            (ii) 1 meteorologist, who shall not 
                        otherwise be an employee of the Federal 
                        Government, or an employee of a State 
                        government or a private insurer.
                            (iii) 1 seismologist, who shall not 
                        otherwise be an employee of the Federal 
                        Government or an employee of a State government 
                        or a private insurer.
                            (iv) 2 professional actuaries who have 
                        previous experience in developing or setting 
                        actuarially sound property and casualty rates 
                        who shall not otherwise be employed by the 
                        Federal Government, or employed by a State 
                        government or private insurer.
                            (v) 2 members who each serve as an elected 
                        regulator of a department of insurance of a 
                        State.
                            (vi) 1 member who is otherwise employed by 
                        the Department of the Treasury.
                            (vii) 1 member who is an employee of the 
                        Federal Emergency Management Agency.
                            (viii) 1 member who is a private insurer.
                            (ix) 1 representative from the consumers of 
                        property and casualty insurance.
                            (x) 1 representative who is a real estate 
                        agent.
                            (x) 1 representative who is a professional 
                        builder.
                    (C) Effects of loss of qualification.--If any 
                member appointed under paragraph (1) ceases to meet the 
                applicable qualifications under this paragraph, the 
                term of that member shall terminate, and the Secretary 
                shall fill the vacancy immediately upon that 
                termination.
            (3) Chairperson.--The Secretary shall designate a 
        chairperson of the Commission from among members appointed to 
        the Commission.
            (4) Terms of service.--
                    (A) In general.--The members appointed under 
                paragraph (1) shall serve staggered 6-year terms, as 
                determined by the Secretary at the time of appointment.
                    (B) Reappointment.--
                            (i) In general.--Subject to paragraph (2), 
                        upon the termination of the term of a member, 
                        the Secretary may appoint that member to serve 
                        for an additional term.
                            (ii) Limitation.--No member may serve as a 
                        member of the Commission for an aggregate 
                        period longer than 12 years.
            (5) Compensation of members.--Each member of the Commission 
        who is not an officer or employee of the Federal Government 
        shall be compensated at a rate equal to the daily equivalent of 
        the annual rate of basic pay prescribed for level V of the 
        Executive Schedule under section 5316 of title 5, United States 
        Code, for each day (including travel time) during which such 
        member is engaged in the performance of the duties of the 
        Commission. All members of the Commission who are officers or 
        employees of the United States shall serve without compensation 
        in addition to that received for their services as officers or 
        employees of the United States.
            (6) Travel expenses.--The members of the Commission shall 
        be allowed travel expenses, including per diem in lieu of 
        subsistence, at rates authorized for employees of agencies 
        under subchapter I of chapter 57 of title 5, United States 
        Code, while away from their homes or regular places of business 
        in the performance of services for the Commission.
    (e) Functions.--
            (1) Catastrophe loss cost estimates.--
                    (A) In general.--In accordance with the process 
                described under subsection (f), the Commission shall 
                make an initial estimate of catastrophe loss costs, and 
                update that estimate at not less frequently than once 
                every 3 years (or more frequently as appropriate).
                    (B) Rating variables.--In making an estimate under 
                this paragraph, the Commission shall use appropriate 
                rating variables for the base insurance policy commonly 
                used in each State or relevant jurisdiction, as 
                determined by the Commission, for the perils of 
                earthquakes, hurricanes, tsunamis, and volcanic 
                eruptions for--
                            (i) insured residential property exposures; 
                        and
                            (ii) all class-rated insured commercial 
                        property exposures and, if practical, other 
                        insured commercial property exposures.
            (2) File loss costs.--As soon as is practicable, but not 
        later than 26 months after the date of enactment of this Act, 
        and at least every 3 years thereafter, the Commission shall 
        file the estimates of catastrophe loss costs developed under 
        this subsection for the perils described in paragraph (1) 
        with--
                    (A) each State department of insurance; and
                    (B) the Secretary.
            (3) Data collection.--
                    (A) Sources of data.--
                            (i) In general.--The Commission may request 
                        from the entities under clause (ii) such data 
                        or information as may be necessary to carry out 
                        the purposes of this section.
                            (ii) Entities.--An entity from which the 
                        Commission may procure information under this 
                        subparagraph is--
                                    (I) a statistical agent or 
                                organization designated by a State 
                                department of insurance or a designated 
                                statistical agent of a State department 
                                of insurance to gather and compile 
                                insurance statistical experience; or
                                    (II) a private insurer if the 
                                private insurer provides the data or 
                                information on a voluntary basis.
                    (B) Confidential.--Any data that is company-
                specific for a private insurer and that is reported to 
                the Commission, either directly through a State 
                department of insurance or through a designated 
                statistical agent of a State department of insurance--
                            (i) shall be presumed to be confidential, 
                        trade secret information; and
                            (ii) may not be disclosed to any other 
                        party.
                    (C) Restrictions on use.--The Commission may only 
                use the data and information obtained under this 
                paragraph to carry out the duties of the Commission 
                under this section. The Commission may not--
                            (i) make confidential information described 
                        in subparagraph (B) available to any Federal 
                        agency or State department or agency for any 
                        purpose; and
                            (ii) use confidential information described 
                        in subparagraph (B) for any purpose other than 
                        a purpose specified in this paragraph.
            (4) Conduct of special studies.--The Commission shall 
        conduct special studies of catastrophe insurance issues in 
        order to develop estimates of catastrophe loss costs in 
        accordance with paragraph (1). The studies conducted under this 
        paragraph shall include an investigation of the following 
        issues:
                    (A) The potential variability in mean loss costs 
                and probable maximum losses in each State.
                    (B) The potential effect of various hazard 
                mitigation strategies on loss costs.
                    (C) The potential effect of demographic changes, 
                such as population trends, on loss costs.
                    (D) The potential effect of climatic cycles on loss 
                costs.
                    (E) The uninsured catastrophe losses that are 
                likely to occur, including losses to public facilities 
                and lifelines.
    (f) Process for Development of Estimates of Catastrophe Loss 
Costs.--The Commission shall develop the estimates of catastrophe loss 
costs under subsection (e)(1) in accordance with the following process:
            (1) Investigation.--In consultation with the experts 
        referred to in subsection (g), the Commission shall conduct an 
        investigation to determine the appropriate range of loss costs 
        estimates. In conducting that investigation the Commission 
        shall hold public hearings.
            (2) Proposed loss costs.--Based on the investigation under 
        paragraph (1), the Commission shall propose initial estimates 
        of catastrophe loss costs not later than 18 months after the 
        date of enactment of this Act. In developing proposed estimates 
        of catastrophe loss costs and any updates of such estimates 
        under this section, the Commission shall be subject to the 
        public comment and hearings requirements under subchapter II of 
        chapter 5 and chapter 7 of title 5, United States Code.
            (3) Modification of proposed loss costs.--Upon receipt of 
        public comments solicited by the Commission in accordance with 
        this section, the Commission may modify a proposed estimate 
        referred to in paragraph (2) to take into account those 
        comments.
            (4) Finalization of initial estimates.--The initial 
        estimates of catastrophe loss costs developed by the Commission 
        under this subsection shall become final not later than 22 
        months after the date of enactment of this Act. Any updates of 
        catastrophe loss costs estimates shall become final upon the 
        completion of the process described in paragraphs (1) through 
        (3) for such updates.
            (5) Appeal.--
                    (A) Right.--Not later than 30 days after the 
                finalization of an estimate of catastrophe loss costs 
                under paragraph (4), any individual, organization, 
                private insurer, State insurance pool, or State 
                department of insurance adversely affected or aggrieved 
                by such estimate may appeal the estimate in writing to 
                the Commission.
                    (B) Process.--
                            (i) In general.--The Commission shall hear 
                        any appeal brought under subparagraph (A) on 
                        the record or in a public proceeding not later 
                        than 30 days after the appeal is submitted.
                            (ii) Determination by commission.--Not 
                        later than 90 days after the date on which an 
                        appeal is submitted under subparagraph (A), the 
                        Commission shall make a determination on the 
                        appeal, and make any necessary changes to the 
                        estimate of catastrophe loss costs involved.
            (6) Methodologies.--At the same time as the Commission 
        issues proposed estimates of catastrophe loss costs under 
        paragraph (2) and the final estimates of catastrophe loss costs 
        under paragraph (4) the Commission shall issue a report 
        prepared by the Commission concerning the methodologies and 
        assumptions used in developing the estimates of catastrophe 
        loss costs.
            (7) Judicial review.--Except as provided in subsection (j), 
        any action taken, or determination made, by the Commission in 
        connection with developing or filing catastrophe loss costs 
        estimates under this section shall not be subject to judicial 
        review.
    (g) Consultation.--The Commission shall consult experts in the 
following fields, or employed by the following entities, to assist in 
the investigation of natural disaster catastrophe loss costs estimates:
            (1) The property and casualty industry.
            (2) Natural disaster catastrophe modeling organizations.
            (3) Consumers of property and casualty insurance.
            (4)(A) Scientific agencies of the Federal Government, such 
        as the United States Geological Survey of the Department of the 
        Interior and the National Oceanic and Atmospheric 
        Administration, the National Hurricane Center, and the Bureau 
        of the Census of the Department of Commerce; and
            (B) The National Academy of Sciences.
            (5) State departments of insurance.
            (6) Other appropriate experts in the area of natural 
        disaster catastrophe loss costs.
    (h) Use of Estimates of Catastrophe Loss Costs.--
            (1) Private insurers.--
                    (A) Election.--For the natural disaster perils 
                listed in subsection (e)(1), a private insurer may 
                elect to cite the final estimates of catastrophe loss 
                costs determined under subsection (f) in the rate 
                filings of the private insurer to the appropriate State 
                department of insurance.
                    (B) Disapproval.--If a private insurer chooses to 
                cite the loss costs estimates under subparagraph (A), 
                the appropriate State department of insurance--
                            (i) shall consider those loss costs 
                        estimates as authoritative; and
                            (ii) may not disapprove the catastrophe 
                        loss costs component of the property insurance 
                        rate filing submitted by the private insurer 
                        for the perils described in subsection (e)(1) 
                        unless the chief insurance regulatory official 
                        of the State finds, not later than 30 days 
                        after the date the rate filing is submitted by 
                        the private insurer, that the estimates of 
                        catastrophe loss costs are excessive, 
                        inadequate, or unfairly discriminatory.
                    (C) Deviations.--Nothing in this paragraph shall 
                preclude a State department of insurance from 
                evaluating, in a manner consistent with applicable 
                State law, rate filings submitted by a private insurer 
                electing to cite the loss costs estimates under 
                subparagraph (A) if the private insurer deviates from 
                the rating variables or base insurance policy used 
                under subsection (e)(1) by the Commission in estimating 
                the loss costs.
            (2) Consideration of estimates of catastrophe loss costs by 
        secretary of the treasury.--The Secretary of the Treasury 
        shall, to the maximum extent practicable, consider estimates of 
        catastrophe loss costs filed with the Secretary under 
        subsection (e)(2) in developing the reserve prices for the 
        Federal excess-of-loss reinsurance contracts under section 102.
            (3) State insurance pools.--In order to be eligible to 
        purchase the Federal excess-of-loss reinsurance contracts under 
        section 102 directly from the Treasury Department or through a 
        private corporation described in section 103, a State insurance 
        pool that provides direct insurance shall, to the maximum 
        extent practicable, consider the estimates of catastrophe loss 
        costs as the minimum loss costs to be filed with the State 
        departments of insurance under subsection (e)(2) in developing 
        the rates for property insurance coverage they provide.
    (i) Standards.--The estimates of catastrophe loss costs developed 
under this section shall--
            (1) reflect actuarial principles of basing rates on the 
        risk to insured property from natural disaster perils by--
                    (A) minimizing cost-subsidization of the loss costs 
                between geographic risk territories and different 
                construction types for buildings; and
                    (B) ensuring that the estimated catastrophe loss 
                costs are sufficient to cover expected losses; and
            (2) produce insurance rates that are not excessive, 
        inadequate, or unfairly discriminatory.
    (j) Judicial Review.--If the chief insurance regulatory official of 
a State disapproves final estimates for catastrophe loss costs under 
subsection (h)(1)(B), the parties described in subsection (f)(5)(A) may 
seek judicial review in the district court of the United States with 
appropriate jurisdiction. The scope of review shall be determined in 
accordance with chapter 7 of title 5, United States Code.
    (k) Catastrophe Loss Costs Models.--
            (1) Certification.--If after following the processes of 
        subsections (f)(1) and (g), the Commission concludes that 
        developing estimates of catastrophe loss costs according to 
        subsection (e)(1) is impractical, the Commission may review and 
        certify, if appropriate, private commercial natural disaster 
        hazard models intended to be used to make estimates of 
        catastrophe loss costs.
            (2) Use.--
                    (A) Election.--Subject to the applicable conditions 
                under subsection (h)(1), a private insurer may elect to 
                cite the catastrophe loss costs models certified by the 
                Commission under paragraph (1) in rate filings to the 
                State department of insurance for the natural disaster 
                perils described in subsection (e)(1).
                    (B) Rates.--In any case in which a private insurer 
                chooses to cite the catastrophe loss costs models under 
                subparagraph (A), the chief insurance regulatory 
                official of the State shall approve or disapprove the 
                rate filing in accordance with subparagraphs (B) and 
                (C) of subsection (h)(1).
            (3) Appeal.--
                    (A) In general.--A certification of models for 
                estimating catastrophe loss costs under paragraph (1) 
                shall be subject to appeal in the same manner as is 
                provided for an appeal of estimates of catastrophe loss 
                costs under subsection (f)(5).
                    (B) Judicial review.--A certification of 
                catastrophe loss cost models under paragraph (1) shall 
                be subject to judicial review in the same manner as is 
                provided for a review of estimates of loss costs under 
                subsection (j).
            (4) Review.--The Commission shall make available for public 
        review the models for estimating catastrophe loss costs 
        certified under paragraph (1).
    (l) Oversight.--The Secretary shall oversee, and may audit the 
activities of the Commission to ensure the Commission carries out its 
duties in a manner consistent with this section. The Secretary shall 
periodically submit to the Congress a written report on the performance 
of the Commission in carrying out this section.
    (m) Exemption.--The Federal Advisory Committee Act (5 U.S.C. App.) 
shall not apply to the Commission.
    (n) Authorization of Appropriations.--
            (1) In general.--There are authorized to be appropriated to 
        the Department of the Treasury--
                    (A) $5,000,000 for the initial expenses in 
                establishing the Commission, and the initial activities 
                of the Commission, as determined by the Secretary of 
                the Treasury; and
                    (B) such additional sums as may be necessary to 
                carry out subsequent activities of the Commission.
            (2) Offset.--Sums authorized to be appropriated under 
        paragraph (1)(B) shall be offset, to the maximum extent 
        practicable, through a surcharge assessed by the Secretary on 
        the catastrophic excess-of-loss contracts described in section 
        102.
            (3) Treatment of spending authority.--Any spending 
        authority authorized by this section shall be effective only to 
        such extent, and in such amounts, as are provided in 
        appropriation Acts.
    (o) Intent of Congress.--It is the intent of Congress that--
            (1) the provisions of this section relate specifically to 
        the business of insurance; and
            (2) except as provided in subsection (h)(1)(B), all 
        activities prescribed by this section applicable to the 
        business of insurance shall be regulated by State law.

SEC. 102. CATASTROPHIC EXCESS-OF-LOSS CONTRACTS.

    (a) General Authority.--
            (1) Contracts defined.--As used in this section, the term 
        ``contract'' means a Federal excess-of-loss reinsurance 
        contract issued pursuant to this section.
            (2) Auctioning of contracts.--The Secretary shall carry out 
        a program to auction Federal excess-of-loss reinsurance 
        contracts to eligible purchasers for the purpose of increasing 
        the capacity of insurance coverage against the catastrophic 
        natural disaster perils listed in subsection (d).
    (b) Qualified Purchasers.--Any of the following entities shall be 
qualified to purchase contracts under this section, if the entity 
provides insurance or reinsurance for property located within a State:
            (1) A private insurer.
            (2) A State insurance pool.
    (c) Qualified Lines of Coverage.--
            (1) Mandatory lines.--The contracts auctioned by the 
        Secretary under this section shall provide insurance coverage 
        against the following losses:
                    (A) Residential property losses.
                    (B) Commercial losses, except for workers' 
                compensation and liability.
            (2) Discretionary inclusion.--The Secretary is authorized 
        to include additional lines of insurance that are not listed 
        under paragraph (1) as qualified property and casualty lines of 
        coverage for the contracts auctioned by the Secretary under 
        this section.
    (d) Covered Perils.--The contracts auctioned by the Secretary under 
this section shall cover losses that are proximately caused by the 
following natural disaster perils (as defined by the Secretary):
            (1) Earthquakes.
            (2) Volcanic eruptions.
            (3) Tsunamis.
            (4) Hurricanes.
    (e) Contract Terms and Conditions.--The Secretary shall include the 
following terms and conditions in the contracts auctioned under this 
section:
            (1) Maturity.--The maturity period for each such contract 
        shall not exceed 1 year.
            (2) Multiple events.--The Secretary may offer contracts 
        that cover more than 1 natural disaster occurring during a 12-
        month period, on the condition that disasters occurring after 
        the first event may be subject to a different threshold than 
        the threshold under paragraph (5).
            (3) Transferability.--Each such contract shall at all times 
        be fully transferable and divisible.
            (4) Payment condition.--Each such contract shall only 
        authorize payments to a qualified purchaser described in 
        subsection (b) that actually sustains natural disaster losses. 
        No qualified purchaser may exercise a cumulated total of 
        contracts that exceed actual losses sustained by such entity.
            (5) Threshold of coverage.--The holder of a contract 
        auctioned by the Secretary under this section may receive a 
        payment for losses covered under the contract if, under a 
        process specified in the contract, the Secretary determines 
        that the insurance industry within the United States will, as a 
        result of a hurricane, earthquake, volcanic eruption, or 
        tsunami event involved, incur losses covered by one or more 
        lines of insurance under subsection (c) in an aggregate amount 
        greater than $10,000,000,000.
            (6) Payout period.--Each contract auctioned by the 
        Secretary under this subsection shall limit payments for 
        natural disaster claims paid by the holder of the contract for 
        a 3-year period, beginning on the date of the natural disaster 
        event that meets the threshold specified in paragraph (5).
            (7) Payout function.--If the Secretary determines that the 
        threshold specified in paragraph (5) will be met, the Secretary 
        shall pay out claims to contract holders at a ratio determined 
        by the Secretary.
    (f) Sale of Contracts.--
            (1) Annual auction.--The Secretary shall auction contracts 
        under this section not less frequently than annually.
            (2) Types of contracts.--
                    (A) Categories of perils.--The Secretary shall 
                offer contracts for sale that cover the following 
                categories of perils:
                            (i) Earthquakes, volcanic eruptions, and 
                        tsunamis.
                            (ii) Hurricanes.
                            (iii) A combination of the categories under 
                        clauses (i) and (ii).
                    (B) Multistate contracts.--The Secretary may offer 
                contracts for sale covering losses sustained in one or 
                more States or all States.
            (3) Reserve price.--In auctioning a contract under this 
        section, the Secretary shall set a reserve price as the lowest 
        base price for that contract. The reserve price shall be 
        determined on the basis of the following:
                    (A) A risk-based price, that shall--
                            (i) reflect the anticipated payouts of the 
                        contract; and
                            (ii) be consistent, to the maximum extent 
                        practicable, with the loss costs estimates as 
                        provided in section 101(h)(2).
                    (B) A cost-of-capital adjustment that shall reflect 
                the marginal difference in the cost to the Federal 
                Government for borrowing money, as compared to the cost 
                to private insurers for borrowing money in the private 
                marketplace.
                    (C) Adjustments for--
                            (i) a surcharge for the operation of the 
                        National Commission on Catastrophe Risk and 
                        Insurance Loss Costs to offset costs of the 
                        operation of the Commission after the initial 
                        funds authorized to be appropriated under 
                        section 101(n)(1) have been expended;
                            (ii) the anticipated contribution to the 
                        Mitigation Fund as provided in section 202(b); 
                        and
                            (iii) the administrative expenses incurred 
                        by the Secretary in carrying out this section.
            (4) Limits on number of contracts.--
                    (A) Minimum number of contracts.--
                            (i) In general.--Except as provided under 
                        clause (ii), the Secretary shall auction 
                        annually not less than 25 percent of the 
                        maximum number of contracts that the Secretary 
                        may make available under this section.
                            (ii) Exception.--Clause (i) shall apply 
                        subject to the availability of qualified 
                        purchasers that are prepared to pay not less 
                        than the price described in paragraph (3) for a 
                        contract.
                    (B) Additional contracts.--In addition to 
                auctioning the minimum amount of contracts under 
                subparagraph (A), the Secretary shall auction 
                additional contracts in relation to, as determined by 
                the Secretary, any bids received during the auction for 
                the immediately preceding fiscal year for the contracts 
                that exceed the reserve price described in paragraph 
                (3).
                    (C) Maximum number of contracts.--The total payout 
                for all contracts auctioned on the basis of the payout 
                function determined by the Secretary under subsection 
                (e)(7) shall not exceed $25,000,000,000.
    (g) Inflation Adjustment.--Beginning with calendar year 1998, the 
Secretary may adjust the dollar amounts specified in subsections (e)(5) 
and (f)(4)(C) by the applicable percentage change in the value of 
property exposed to the natural disaster perils described in subsection 
(d).
    (h) Trust Fund.--
            (1) Establishment.--There is established within the 
        Treasury of the United States a trust fund to be known as the 
        Federal Excess-of-Loss Reinsurance Fund (hereafter in this 
        section referred to as the ``Trust Fund'') consisting of such 
        amounts as are transferred to this fund under paragraph (2) and 
        any interest earned on investment accounts in the fund under 
        paragraph (3)(A).
            (2) Transfer of proceeds of auction.--The Secretary of the 
        Treasury shall transfer to the Trust Fund an amount equal to 
        the amounts received from an auction conducted under section 
        102.
            (3) Investment of trust fund.--
                    (A) In general.--It shall be the duty of the 
                Secretary of the Treasury to invest such portion of the 
                Trust Fund as is not, in the Secretary's judgment, 
                required to meet current withdrawals. Such investments 
                may be made only in interest-bearing obligations of the 
                United States or in obligations guaranteed as to both 
                principal and interest by the United States. For such 
                purpose, such obligations may be acquired--
                            (i) on original issue at the issue price, 
                        or
                            (ii) by purchase of outstanding obligations 
                        at the market price.
                    (B) Sale of obligations.--Any obligation acquired 
                by the Trust Fund may be sold by the Secretary of the 
                Treasury at the market price.
                    (C) Credits to trust fund.--The interest on, and 
                the proceeds from the sale or redemption of, any 
                obligations held in the Trust Fund shall be credited to 
                and form a part of the Trust Fund.
            (4) Obligations from trust fund.--The Secretary is 
        hereafter authorized to obligate such sums as are available in 
        the Trust Fund (including any amounts not obligated in previous 
        fiscal years) for--
                    (A) payments of claims to qualified holders of 
                contracts issued under this section that submit claims 
                pursuant to this section (as the sole source of those 
                payments);
                    (B) making payments for the surcharge on the 
                operation of the National Commission on Catastrophe 
                Risk and Insurance Loss Costs as described in section 
                101(n)(2);
                    (C) making payments for the anticipated 
                contribution of the Federal Government to the 
                Mitigation Fund under section 202(b); and
                    (D) making payments for administrative expenses 
                incurred by this section.
    (i) Authority To Borrow Funds.--
            (1) In general.--The Secretary of the Treasury may borrow 
        from the Treasury of the United States such funds as may be 
        necessary to cover any shortfall sustained by the Trust Fund in 
        making payments described in subsection (h)(4).
            (2) Rate.--The rate of interest charged in connection with 
        any loan made pursuant to this subsection shall be determined 
        by the Secretary, taking into account the then current market 
        yields on outstanding marketable obligations of the United 
        States of comparable maturities.
            (3) Public debt.--All loans and repayments made under this 
        subsection shall be treated as public debt transactions of the 
        United States in a manner consistent with chapter 31 of title 
        31, United States Code.

SEC. 103. PRIVATE DISASTER INSURANCE CORPORATION.

    (a) Qualifications.--In order to qualify for the special status 
provision described in subsection (c), a corporation shall--
            (1) be a private corporation;
            (2) operate for the sole purpose of providing excess 
        reinsurance coverage for catastrophic natural disasters in 
        accordance with the requirements specified in subsection (b); 
        and
            (3) be licensed by a State as an insurer to provide excess 
        reinsurance coverage as described in subsection (b).
    (b) Excess Reinsurance Coverage.--In order to qualify for the 
special status provision of subsection (c), the excess reinsurance 
coverage provided by a corporation shall--
            (1) be provided to--
                    (A) private insurers; and
                    (B) State insurance pools,
        that meet minimum criteria and financial viability standards 
        established by the corporation;
            (2) only provide reinsurance for any amounts that exceed 
        the amount of reinsurance available in the private market for--
                    (A) residential property losses; and
                    (B) commercial losses;
            (3) cover losses proximately caused by--
                    (A) earthquakes;
                    (B) volcanic eruptions;
                    (C) tsunamis; and
                    (D) hurricanes;
            (4) be provided at rates established, and adjusted if 
        necessary, by the corporation, based on--
                    (A) generally accepted actuarial principles; and
                    (B) the catastrophe loss costs estimates submitted 
                to the States under section 101(e)(2);
            (5) include, at a minimum--
                    (A) eligibility requirements; and
                    (B) limits on the amount of coverage available; and
            (6) include terms for the payment of claims based on the 
        losses sustained by the purchaser of the excess reinsurance 
        coverage.
    (c) Special Status Provision.--The operations under this section of 
a corporation that meets the qualifications of subsection (a) shall not 
be subject to liability under Federal antitrust laws or State antitrust 
laws, if the actions of the corporation and the board of directors or 
similar governing body of the corporation in providing excess 
reinsurance coverage are consistent with the requirements under 
subsection (b).
    (d) Intent of Congress.--It is the intent of Congress that the 
provisions of this section relate specifically to the business of 
insurance.

SEC. 104. STUDY ON TAX TREATMENT OF INSURER CATASTROPHIC RESERVES.

    (a) Joint Study.--The Comptroller General of the United States, in 
cooperation with the Secretary of the Treasury, and the Secretary of 
Commerce shall conduct a study to evaluate the public policy issues 
described in subsection (b) associated with conferring favorable 
Federal tax treatment to insurance reserves set aside by private 
insurers for future catastrophic natural disasters.
    (b) Factors To Be Studied.--The study conducted under this section 
shall evaluate the likelihood and magnitude of the following public 
policy objectives with respect to the implementation of the tax 
treatment proposed under subsection (a):
            (1) The increased financial capacity of private insurers to 
        respond to future natural disasters.
            (2) The enhanced financial ability of private insurers to 
        continue providing property coverage following catastrophic 
        natural disasters.
            (3) The overall benefit to the competitiveness of United 
        States business and private insurers in the worldwide economy.
            (4) The short- and long-term revenue impact to the United 
        States Treasury.
    (c) Consultation.--The Comptroller General of the United States, 
the Secretary of the Treasury, and the Secretary of Commerce shall 
consult with recognized experts in carrying out the study under this 
section. The experts shall include representatives from State 
departments of insurance, private insurers, insurance agents, 
economists, natural disaster risk modeling experts, consumers of 
property and casualty insurance, and other experts that the Comptroller 
General of the United States, in cooperation with the Secretary of the 
Treasury, and the Secretary of Commerce, determine to be appropriate.
    (d) Report to Congress.--Not later than 9 months after the date of 
this Act, the Comptroller General of the United States, in cooperation 
with the Secretary of the Treasury and the Secretary of Commerce, shall 
submit to the Congress a report that contains--
            (1) the findings of the study conducted under this section; 
        and
            (2) any recommendations that the Comptroller General, in 
        consultation with the Secretary of the Treasury and the 
        Secretary of Commerce, consider to be appropriate.

SEC. 105. FLOOD INSURANCE.

    (a) Study.--The Director shall enter into an arrangement with the 
National Academy of Sciences (or if the National Academy of Sciences is 
not available, a similar entity) to conduct a study on the operation of 
the national flood insurance program managed by the Director pursuant 
to the National Flood Insurance Act of 1968 (42 U.S.C. 4001 et seq.). 
The study shall evaluate and provide specific recommendations 
concerning--
            (1) necessary and appropriate measures, including 
        additional sanctions, to increase the purchase of Federal flood 
        insurance; and
            (2) the advisability and feasibility of privatizing the 
        entire national flood insurance program managed by the 
        Director.
    (b) Content of Study.--
            (1) In general.--The study described in subsection (a) 
        shall be performed by a panel of recognized experts appointed 
        by the head of the National Academy of Sciences (or similar 
        entity).
            (2) Experts.--The experts appointed to the panel under 
        paragraph (1) shall include representatives of--
                    (A) building constructors;
                    (B) real estate interests;
                    (C) lending institutions;
                    (D) private insurers;
                    (E) the organizations that establish model building 
                codes;
                    (F) local government zoning and land use planning 
                entities; and
                    (G) other experts that the head of the National 
                Academy of Sciences (or similar entity) determines to 
                be relevant.
    (c) Report.--Not later than 18 months after the date of enactment 
of this Act, the head of the National Academy of Sciences (or similar 
entity) shall submit to the Director a report that contains the results 
of the study conducted under this section, including the 
recommendations described in paragraphs (1) and (2) of subsection (a). 
The Director shall submit the report to Congress.

SEC. 106. INSURANCE PRICING INCENTIVES.

    Each State department of insurance shall take into account natural 
disaster hazard mitigation measures, such as the strategic mitigation 
plan processes described in section 201(b)(2), in setting rates and 
deductibles for property insurance provided in that State.

SEC. 107. STUDY OF AVAILABILITY AND AFFORDABILITY OF CATASTROPHE 
              INSURANCE.

    (a) Joint Study.--The Director, the Secretary of the Treasury, and 
the Secretary of Commerce shall conduct a study to evaluate--
            (1) the availability and affordability of catastrophe 
        insurance for natural hazards to private individuals and 
        businesses and State and local governments; and
            (2) the effect that this Act has on the availability and 
        affordability of such insurance to such persons and entities.
    (b) Factors To Be Studied.--The study described in subsection (a) 
shall include--
            (1) an examination of the extent to which private insurers 
        have maintained, increased, or decreased the marketing of 
        catastrophe insurance for individuals and businesses;
            (2) an examination of the extent to which States have 
        responded to market availability problems by the creation of 
        State pools or other mechanisms; and
            (3) recommended legislation that includes amendments to 
        this Act to encourage private insurers to expand voluntary 
        marketing of catastrophe insurance.
    (c) Report to Congress.--Not later than 36 months after the date of 
enactment of this Act, the Comptroller General of the United States 
shall submit to the Congress a report containing the results of the 
study conducted under subsection (a), including any recommendations 
that the Director, the Secretary of the Treasury, and the Secretary of 
Commerce consider to be appropriate.

                TITLE II--MULTIHAZARD MITIGATION PROGRAM

SEC. 201. DEVELOPMENT OF STATE MITIGATION PLANS.

    (a) General Authority.--Not later than the date specified in 
subsection (d)(1), each State shall either--
            (1) develop, in consultation with responsible elected local 
        officials with appropriate jurisdiction, or the official 
        designated representatives of appropriate State associations of 
        those responsible elected local officials, and the public, a 
        statewide strategic mitigation plan to reduce hazards of future 
        natural disasters, such as hurricanes, windstorms, earthquakes, 
volcanic eruptions, and tsunamis; or
            (2) designate, in consultation with responsible elected 
        local officials with appropriate jurisdiction, or the official 
        designated representatives of appropriate State associations of 
        those responsible elected local officials, and the public, a 
        mitigation plan that is in effect at the time of the 
        designation that includes the elements described in subsection 
        (b) as the applicable natural hazards statewide strategic 
        mitigation plan.
    (b) Elements of State Mitigation Plans.--
            (1) In general.--Each statewide strategic mitigation plan 
        of a State under subsection (a) shall be based on broad 
        national criteria and priorities established by the Director.
            (2) Specific processes.--Each statewide strategic 
        mitigation plan under subsection (a) shall include, at a 
        minimum, a process for--
                    (A) ensuring that structures in hazard-prone areas 
                are built with hazard-mitigation techniques, by--
                            (i) working with appropriate governmental 
                        jurisdictions to promote adoption and 
                        enforcement of the hazard-mitigation portions 
                        of technical construction standards and 
                        building and safety codes that are in effect; 
                        and
                            (ii) making available the necessary 
                        funding, personnel, and professional training 
                        to provide for the adequate enforcement of the 
                        construction standards and codes referred to in 
                        clause (i);
                    (B) improving the capabilities for emergency 
                response to natural disasters, including capabilities 
                for firefighting, search and rescue, and the provision 
                of shelters, communications, and medical relief;
                    (C) developing standards and guidelines for the 
                regular training of emergency responders to minimize 
                the effects of natural disasters;
                    (D) achieving enforcement of local community land 
                use ordinances;
                    (E) addressing further development in high-risk, 
                disaster-prone areas and the impact of such development 
                on public safety and the environment; and
                    (F) identifying and prioritizing essential critical 
                facilities, lifelines, and public facilities for cost-
                effective retrofitting that is based on the 
                availability of resources.
            (3) Deadline for implementation.--Each State shall 
        implement the processes described in paragraph (2) by not later 
        than the date specified in subsection (d)(2).
    (c) Approval of Plan.--The Director shall review each statewide 
strategic mitigation plan submitted under subsection (d)(1). Upon the 
completion of the review of a plan under this subsection, the Director 
shall approve the plan if the Director determines that the plan meets 
the requirements of subsection (b).
    (d) Deadlines.--
            (1) Submission of mitigation plans to fema.--
                    (A) In general.--Not later than 2 years after the 
                date of enactment of this Act, the chief executive 
                officer of each State shall submit to the Director a 
                statewide strategic mitigation plan for that State 
                developed pursuant to this section.
                    (B) Noncompliance.--If, under this paragraph, a 
                chief executive officer--
                            (i) submits a statewide strategic 
                        mitigation plan that does not meet the 
                        requirements of this section; or
                            (ii) fails to submit the plan by the date 
                        specified in this paragraph,
                the State of that chief executive officer shall be 
                considered to be in noncompliance with the requirements 
                of this paragraph.
            (2) Implementation of mitigation plans.--
                    (A) In general.--Not later than 2 years after the 
                Director approves a statewide strategic mitigation plan 
                pursuant to subsection (c), the chief executive officer 
                of the State involved shall certify to the Director 
                whether the State is implementing the plan, including 
                each element of the plan described in subsection (b) in 
                accordance with the requirements of this section.
                    (B) Noncompliance.--If the chief executive officer 
                of a State--
                            (i) certifies under this paragraph that the 
                        State has not implemented an element of the 
                        statewide strategic management plan under 
                        subsection (b); or
                            (ii) 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.
            (3) Updating of mitigation plans.--
                    (A) In general.--Not later than 3 years after the 
                Director approves a statewide strategic mitigation plan 
                pursuant to subsection (c), and not less frequently 
                than every 3 years thereafter, the chief executive 
                officer of each State shall submit a certification to 
                the Director that indicates whether the State has 
                reviewed and updated, as appropriate, the statewide 
                strategic mitigation plan to reflect the most recent 
                developments in the processes required to be included 
                in the plan under subsection (b).
                    (B) Noncompliance.--If the chief executive officer 
                of a State--
                            (i) certifies under this paragraph that the 
                        statewide strategic mitigation plan has not 
                        been updated in accordance with subparagraph 
                        (A); or
                            (ii) fails to make a certification by the 
                        applicable date specified in this paragraph,
                the State shall be considered to be in noncompliance 
                with the requirements of this paragraph.
    (e) Notification and Opportunity To Cure.--
            (1) In general.--Upon making a determination under 
        subsection (d) that a State is in noncompliance, the Director 
        shall notify the State in writing of the noncompliance.
            (2) Reduction in certain assistance.--If a State does not 
        take corrective action within the 180-day period beginning on 
        the date that the State receives notification under paragraph 
        (1), the State shall be denied hazard mitigation funds as 
        specified in subsection (f) until such date as the Director 
        determines that the State has taken the necessary corrective 
        action.
    (f) Denial of Mitigation Funds.--During the applicable period 
specified in subsection (e)(2), a State that fails to meet an 
applicable deadline described in subsection (d) shall not be eligible 
to receive funds from the Natural Disaster Hazard Mitigation Fund 
established under section 202.

SEC. 202. NATURAL DISASTER HAZARD MITIGATION FUND.

    (a) Establishment.--There is established within the Treasury of the 
United States a trust fund to be known as the Natural Disaster Hazard 
Mitigation Fund, consisting of such amounts as may be transferred or 
credited to the Mitigation Fund, as provided in subsection (c).
    (b) Mitigation Set-Aside.--The Secretary of the Treasury shall 
reserve a portion, not to exceed 5 percent, of the proceeds of the sale 
of the Federal excess-of-loss reinsurance contracts as described in 
section 102 for transfer to the Mitigation Fund.
    (c) Deposits.--
            (1) In general.--The Secretary of the Treasury shall credit 
        on an annual basis to the Mitigation Fund amounts--
                    (A) reserved under subsection (b);
                    (B) transferred to the Secretary under paragraph 
                (2); or
                    (C) appropriated under the authorization under 
                section 205(b).
            (2) Transfer of certain unexpended and unobligated funds.--
        The Director shall transfer to the Secretary of the Treasury 
        any funds made available by appropriations to the Director 
        under section 404 of the Robert T. Stafford Disaster Relief and 
        Emergency Assistance Act (42 U.S.C. 5170c) that have not been 
        obligated or expended by the Director during a 2-year period 
        beginning on the date on which the funds are initially made 
        available to the Director.
    (d) Funds to States.--
            (1) Authority.--On the first day of the first full fiscal 
        year beginning after the date of enactment of this Act, and on 
        the first day of every fiscal year thereafter, the Director 
        shall allocate, to the extent provided in appropriations Acts, 
        to the States (except for any State that is denied funds under 
        section 201(f)) all available amounts in the Mitigation Fund.
            (2) Formula.--
                    (A) In general.--The Director of the Agency shall 
                allocate amounts from the Mitigation Fund to a State 
                based on a pro rata formula of the catastrophe loss 
                costs filed for that State under section 101(e)(2).
                    (B) Regulations.--Not later than 1 year after the 
                date of enactment of this Act, the Director shall issue 
                final Federal regulations describing the pro rata 
                formula described in subparagraph (A).
    (e) Use.--
            (1) In general.--The amounts received by States from the 
        Mitigation Fund shall be used to assist natural disaster hazard 
        mitigation activities. The assistance provided under this 
        paragraph may include assistance for--
                    (A) training of emergency responders and building 
                code enforcers;
                    (B) State revolving loan funds, if established, to 
                undertake financing, including the leveraging of funds 
                for various hazard mitigation activities;
                    (C) the adoption and enforcement of those portions 
                of established technical construction standards and 
                building and safety codes that relate to hazard 
                mitigation;
                    (D) low-income individuals and families to assist 
                in paying for the undertaking of hazard mitigation 
                measures;
                    (E) 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;
                    (F) addressing further development in high-risk, 
                disaster-prone areas and the impact of such 
                development; and
                    (G) prenatural disaster hazard mitigation, 
                including retrofitting critical facilities, lifelines, 
                and public facilities.
            (2) Priority.--Each State that receives an allotment under 
        subsection (d) shall give priority in using the amounts 
        received from the Mitigation Fund to fund hazard mitigation 
        activities necessary to bring the State into compliance with 
        the statewide strategic mitigation plan developed by the State 
        under section 201, including the elements under section 201(b).
    (f) Local Communities.--As a condition to receiving an initial 
allotment under subsection (d), each statewide strategic mitigation 
plan shall be--
            (1) developed or designated in consultation with the 
        parties described in section 201(a); and
            (2) based on the criteria and priorities described in 
        section 201(b)(1).
    (g) State Performance.--
            (1) Evaluation.--The Director shall evaluate not later than 
        3 years after approving a statewide strategic management plan 
        under section 201 and not less frequently than every 3 years 
        thereafter, the progress of each State with respect to the 
        implementation of a statewide strategic mitigation plan under 
        section 201, including the implementation of the processes 
        under section 201(b).
            (2) Allotments.--Allotments made under subsection (d) from 
        the Mitigation Fund shall be conditioned on a satisfactory 
        evaluation under paragraph (1).
    (h) Audits.--The Director shall periodically conduct audits to 
ensure that States and local communities are using the funds from the 
allocations made under subsection (d) to support the hazard mitigation 
activities described in this section and section 101.

SEC. 203. PUBLIC INFRASTRUCTURE RETROFITTING.

    (a) Study.--The Comptroller General of the United States shall 
conduct a study to identify all Federal programs that provide 
assistance for public facilities and lifelines. The study shall 
determine which of such programs include or could include as an 
eligible use of Federal assistance the retrofitting or strengthening of 
the public facilities and lifelines to minimize damage from future 
natural disasters.
    (b) Report to Congress.--Not later than 1 year after the date of 
enactment of this Act, the results of the study described in subsection 
(a), including the determinations on retrofitting, shall be transmitted 
by the Director of the Agency to Congress.

SEC. 204. WILDLAND FIRES.

    (a) Study.--The Secretary of Agriculture, in cooperation with the 
Secretary of the Interior, shall enter into an agreement with the 
interagency National Wildfire Coordinating Group to--
            (1) conduct a study of the threat posed by wildfires; and
            (2) issue a report on the findings of the study that 
        includes recommendations on controlling that threat.
    (b) Scope of Study.--In conducting the study under this section, 
the National Wildfire Coordinating Group shall evaluate, and make 
recommendations on, the following issues:
            (1) The critical wildfire concerns in the United States, 
        including wildfires in urban areas that expand into wildland.
            (2) Suggested approaches to achieve more effective and 
        efficient responses to catastrophic wildfires.
            (3) The effects of downsizing of Federal agencies on fire 
        emergency capabilities and experience.
            (4) Funding mechanisms to address catastrophic wildfires.
            (5) Suggested approaches to reduce hazardous fuel loading 
        and other mitigation measures in wildland and urban areas that 
        abut wildlands.
            (6) Suggested approaches to improve the coordination of 
        fire prevention and suppression efforts in wildland and urban 
        areas that abut wildland between the Federal Government and 
        States and local communities.
            (7) Suggested approaches to improve the organization and 
        training assistance provided to non-Federal governmental 
        entities concerning the prevention and suppression of 
        wildfires.
            (8) Suggested approaches for the integration of all rural 
        fire and emergency response activities under a common incident 
        management system.
            (9) Suggested approaches for improving the education of 
        homeowners who reside near wildland that is susceptible to 
        wildfires and private insurers concerning fire prevention and 
        fire suppression, and the responsibilities of those homeowners 
        and private insurers concerning those activities.
    (c) Report.--
            (1) In general.--On completion of the study conducted under 
        this section, but not later than 1 year after the date of 
        enactment of this Act, the National Wildfire Coordinating Group 
        shall prepare a report on the results of the study that 
        includes any recommendations that the National Wildfire 
        Coordinating Group determines to be appropriate and submit a 
        copy of that report to the Secretary of Agriculture and the 
        Secretary of the Interior.
            (2) Submission to congress.--On receiving a copy of the 
        report under paragraph (1), the Secretary of Agriculture shall 
        transmit to the Congress a copy of the report.

SEC. 205. AUTHORIZATION OF APPROPRIATIONS.

    (a) Operations.--There are authorized to be appropriated to the 
Agency such sums as may be necessary for the Director of the Agency to 
carry out this title.
    (b) Mitigation Fund.--In addition to the funds authorized to be 
appropriated under subsection (a), there are authorized to be 
appropriated to the Mitigation Fund established under section 202 such 
sums as may be necessary to support hazard mitigation.
    (c) Treatment of Spending Authority.--Any spending authority 
authorized by this section shall be effective only to such extent and 
in such amounts as are provided in appropriation Acts.
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