[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3303 Introduced in House (IH)]







106th CONGRESS
  1st Session
                                H. R. 3303

  To provide for the establishment of the Natural Disaster Insurance 
  Solvency Fund to ensure adequate private insurance reserves in the 
                event of catastrophic natural disasters.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                           November 10, 1999

  Mr. Burr of North Carolina introduced the following bill; which was 
  referred to the Committee on Banking and Financial Services, and in 
  addition to the Committees on Ways and Means, and the Budget, for a 
 period to be subsequently determined by the Speaker, in each case for 
consideration of such provisions as fall within the jurisdiction of the 
                          committee concerned

_______________________________________________________________________

                                 A BILL


 
  To provide for the establishment of the Natural Disaster Insurance 
  Solvency Fund to ensure adequate private insurance reserves in the 
                event of catastrophic natural disasters.

    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 Insurance Solvency 
Act of 1999''.

SEC. 2. CONGRESSIONAL FINDINGS.

    The Congress makes the following findings:
            (1) The risk of a truly catastrophic natural disaster 
        threatens the homeowners and small businesses of this Nation 
        and jeopardizes the solvency of our private insurance industry.
            (2) It is critical that insurance companies and State 
        insurance pools have adequate risk management plans in place 
        that will allow them to remain solvent when a truly 
        catastrophic event occurs.
            (3) State insurance regulators in the United States must be 
        assured that our property and casualty companies and insurance 
        pools have adequate capital reserves to pay out insurance 
        claims when a catastrophe occurs.
            (4) The Congress must assist State insurance regulators in 
        their efforts to help private property and casualty insurance 
        companies to afford sufficient reserves to remain solvent after 
        a catastrophic natural disaster.
            (5) The creation of a private natural disaster insurance 
        solvency fund will encourage private insurance companies and 
        State pools to set aside reserves for future events and will 
        assist State insurance regulators when monitoring these 
        companies for solvency purposes.
            (6) Creating private sector, rather than government, 
        solutions to the issue of natural disaster financing will 
        encourage companies to put in place risk management plans that 
        will result in a healthier and more vibrant insurance 
        marketplace, and most importantly will result in increased 
        availability of property and casualty insurance in disaster-
        prone areas.

SEC. 3. NATURAL DISASTER SOLVENCY INSURANCE FUND.

    (a) Establishment.--There is established the Natural Disaster 
Insurance Solvency Fund (in this Act referred to as the ``NDISF''). The 
NDISF shall be a body corporate under the direction of a Board of 
Directors.
    (b) Private Insurance Status.--The NDISF shall--
            (1) not be considered a Federal agency;
            (2) have employees appointed without regard to the 
        provisions of title 5, United States Code, governing 
        appointments in the competitive service, and paid without 
        regard to the provisions of chapter 51 and subchapter III of 
        chapter 53 of that title relating to classification and General 
        Schedule pay rates; and
            (3) not be subject to the Federal Advisory Committee Act or 
        any other Federal law governing the operation of Federal 
        agencies.
    (c) Purpose.--The purpose of the NDISF shall be to hold, invest, 
and distribute private insurance solvency reserve amounts for rare 
catastrophic events, in accordance with this Act. Such solvency 
reserves may be included on the annual statements of participating 
companies for accounting purposes to assist State insurance regulators 
in monitoring and maintaining the solvency of such companies.
    (d) Powers.--The NDISF--
            (1) shall have perpetual succession;
            (2) may sue and be sued, make contracts, and acquire, hold, 
        and dispose of real and personal property, as may be necessary 
        for its corporate purposes;
            (3) may adopt and alter a corporate seal;
            (4) may conduct any and all acts necessary and proper to 
        carry out the purposes of this Act.
    (e) Membership.--The NDISF shall provide for membership, which 
shall consist of only those insurance companies that make contributions 
of solvency reserve amounts to the NDISF in accordance with section 4.
    (f) Board of Directors.--
            (1) Membership.--The Board of Directors of the NDISF shall 
        consist of 15 persons, who shall be selected as follows:
                    (A) 7 directors shall be elected by the members of 
                the NDISF, but not more than 1 employee of any single 
                private insurer may serve on the Board at any time.
                    (B) 7 directors shall be persons who serve as 
                insurance regulators of a State and shall be appointed 
                by any national association which represents the 
                insurance regulatory authorities of all the States, 
                except that if an insufficient number of such insurance 
                regulators are willing to serve or such association 
                fails to make such appointments, any remaining deficit 
                in the members of the Board shall be selected by the 
                members of the NDISF in the manner that elections are 
                conducted pursuant to subparagraph (A), except that 
                such individuals may not be employed by any private 
                insurer that is a member of the NDISF.
                    (C) The Secretary of Commerce.
            (2) Election.--In any election for members of the Board of 
        Directors of the NDISF, the vote of each member of the NDISF 
        shall be weighted according to the proportion of the reserves 
        of the NDISF contributed by the member. The Board shall 
        reevaluate such proportions on not less than an annual basis.
            (3) Terms.--The Board shall establish the number of years 
        of service for terms of members of the Board, and shall select 
        a chairperson and officers as appropriate.
            (4) Voting.--Each member 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.
            (5) Fiduciary duty.--For carrying out the duties of the 
        Board, the members of the Board that are not State insurance 
        regulators shall have a fiduciary duty to the NDISF that shall 
        supersede any duty to an employer or other special interest 
        that the member may otherwise represent.
            (6) Limitations on liability.--Individual members of the 
        NDISF shall not be liable, or in any way responsible, for the 
        obligations of the NDISF.
            (7) Initial organization.--Beginning on the date of the 
        enactment of this Act and until such time that at least 2 
        members of the Board are appointed, the Secretary of Commerce 
        shall act for all purposes and with full powers of the Board. 
        The Secretary may utilize the services of the employees from 
        the Department of Commerce to perform services for the Board 
        during such transition period. During such period, the 
        Secretary shall establish initial standards for membership in 
        the NDISF and shall call an initial meeting of the NDISF for 
        purposes of organization.
    (g) Treatment for Purpose of Suits.--
            (1) Jurisdiction and removal.--The United States district 
        courts shall have original but not exclusive jurisdiction over 
        all actions brought by or against the NDISF. Any action brought 
        in a State court to which the NDISF is a party may be removed 
        to the appropriate United States district court under the 
        provision of chapter 89 of title 28, United States Code.
            (2) Process, venue, and time limitations.--The provisions 
        of title 28, United States Code, relating to service of 
        process, venue, and limitations of time for bringing action in 
        suits in which the United States, its officers, or employees 
        are parties, and the rules of procedure adopted under title 28 
        for suits in which the United States, its officers, or 
        employees are parties, shall apply in like manner to suits in 
        which the NDISF, its officers, or employees are parties.
            (3) Claims.--The provisions of chapter 171 and all other 
        provisions of title 28 relating to tort claims shall apply to 
        tort claims arising out of activities of the NDISF.
            (4) Representation.--The Department of Justice shall 
        furnish the NDISF such legal representation as it may require, 
        but with the prior consent of the Attorney General the NDISF 
        may employ attorneys by contract or otherwise to conduct 
        litigation brought by or against the NDISF or its officers or 
        employees in matters affecting the NDISF.
            (5) Judgments.--A judgment against the NDISF or the 
        Government of the United States arising out of activities of 
        the NDISF shall be paid by the NDISF out of any funds available 
        to the NDISF.

SEC. 4. CONTRIBUTIONS AND DISTRIBUTIONS.

    (a) Development.--The Board shall adopt bylaws for the NDISF that 
provide for the NDISF to make contracts to receive insurers' 
contributions and make distributions in accordance with this Act.
    (b) Solvency Contributions.--
            (1) Limitation on amount.--The amount of solvency reserves 
        contributed to the NDISF by any member insurer may not exceed 
        the sum of--
                    (A) 10 percent of any surplus of the member as of 
                the date of the beginning of the companies' fiscal year 
                related to covered perils; and
                    (B) an amount not exceeding the lesser of--
                            (i) 20 percent of any surplus of the member 
                        as of the date of the beginning of the 
                        companies' fiscal year related to covered 
                        perils; or
                            (ii) the aggregate premium amount of any 
                        insurance coverage for covered perils under 
                        insurance contracts written by the member after 
                        such date.
            (2) Transfer.--The acquisition of the assets of a member of 
        the NDISF by another entity, including the right to any 
        reserves of the original member held by the NDISF and the right 
        to any distributions under subsection (c) of this section, 
        shall not affect the treatment of such reserves under this Act 
        or section 832 of the Internal Revenue Code.
    (c) Distributions.--
            (1) In general.--A distribution under this paragraph may be 
        made only upon the request of a member pursuant to a loss 
        that--
                    (A) proximately results from a rare catastrophic 
                event; or
                    (B) the State insurance regulator for the State 
                involved determines--
                            (i) is the result of a covered peril under 
                        section 5; and
                            (ii) occurs to a member that (I) is 
                        insolvent upon such occurrence; or (II) will 
                        result in the insolvency of the member, except 
                        that any such distribution not exceed the 
                        amount necessary to avoid such insolvency.
            (2) Limitation on amount.--In no case may a distribution 
        under this paragraph exceed--
                    (A) the sum of the amount of the member's solvency 
                contributions to the NDISF and any interest accumulated 
                on such amounts pursuant to section 6(d), except that 
                if some or all of the solvency reserves of a member of 
                the NDISF are transferred to another entity, the amount 
                of the distribution to such entity may not exceed the 
                amount transferred to such entity plus any interest 
                attributable to such amount transferred; or
                    (B) for an event--
                            (i) the amount of losses and loss 
                        adjustment expenses incurred, net of 
                        reinsurance, as reported in the member's annual 
                        statement for the taxable year, that are 
                        attributable to the event;
                            (ii) any nonrecoverable assessments, 
                        surcharges, or other liabilities that are borne 
                        by the member and are attributable to such 
                        event.
    (d) Tax Treatment.--
            (1) Deduction for contributions.--Subsection (c) of section 
        832 of the Internal Revenue Code of 1986 (relating to the 
        taxable income of insurance companies other than life insurance 
        companies) is amended by striking ``and'' at the end of 
        paragraph (12), by striking the period at the end of paragraph 
        (13) and inserting in lieu thereof ``; and'', and by adding at 
        the end the following new paragraph:
            ``(14) the qualified contributions during the taxable year 
        to the NDISF Catastrophe Emergency Solvency Reserve Account 
        established under section 6 of the Natural Disaster Insurance 
        Solvency Act of 1999.''.
            (2) Gross income.--Paragraph (1) of section 832(b) of such 
        Code is amended by striking ``and'' at the end of subparagraph 
        (D), by striking the period at the end of subparagraph (E) and 
        inserting in lieu thereof ``, and'', and by adding at the end 
        the following new subparagraph:
                    ``(F) the amount of any distributions from the 
                NDISF during the taxable year, except that a 
                distribution made to return to the insurance company 
                any contribution which is not a qualified contribution 
                (as defined in subsection (h)) for a taxable year shall 
                not be included in gross income if such distribution is 
                made prior to the filing of the tax return for such 
                taxable year.''.
            (3) Definition.--Section 832 of such Code (relating to 
        insurance company taxable income) is amended by adding at the 
        end the following new subsection:
    ``(h) Definitions Relating to Natural Disaster Insurance Solvency 
Fund.--For purposes of subsections (b)(1)(F) and (c)(14), the term 
`qualified contribution' has the meaning given such term in section 9 
of the Natural Disaster Insurance Solvency Act of 1999.''.
    (e) Proprietary Information.--The Board may classify information 
submitted to the NDISF for the determination of contributions and 
distributions to be proprietary information, which shall not be made 
public except as required by State or Federal law.

SEC. 5. COVERED PERILS.

    For purposes of this Act, the term ``covered peril'' means--
            (1) earthquakes;
            (2) perils ensuing from earthquakes, including fire and 
        tsunami;
            (3) hurricanes and windstorms;
            (4) volcanic eruptions;
            (5) wildfires; and
            (6) such other natural disasters as the Board deems 
        appropriate.

SEC. 6. CATASTROPHE EMERGENCY SOLVENCY RESERVE ACCOUNT.

    (a) Establishment.--The NDISF shall establish and maintain a 
Catastrophe Emergency Solvency Reserve Account as a custodial account, 
trust, or other appropriate arrangement, to hold all contributions of 
solvency reserve amounts submitted to the NDISF in accordance with 
section 4. Such funds shall be exempt from all taxation imposed by the 
Federal Government or any State, county, municipality, or local taxing 
authority.
    (b) Account Deposits.--The Board shall deposit in the Account any 
contributions of solvency reserves and any interest income accrued on 
such reserves pursuant to subsection (d).
    (c) Availability of Amounts.--Amounts in the Account shall be 
available only--
            (1) for distribution to members in accordance with section 
        4;
            (2) for expenses of the NDISF; and
            (3) for activities of the NDISF, in coordination with 
        private insurance companies and State insurance regulators, to 
        provide for mitigation of damages resulting from covered perils 
        but in an amount not to exceed 1 percent of the annual interest 
        in the Catastrophic Emergency Solvency Reserve Account in 
        subsection (d) less any amount provided under paragraph (2).
    (d) Investments.--The Board shall invest amounts in the Catastrophe 
Emergency Solvency Reserve Account that are not required to meet 
current financial commitments, as the Board considers appropriate, but 
only in interest-bearing securities issued by the United States having 
such maturities as the Board considers appropriate. Any interest from 
such investments shall be exempt from all taxation imposed by the 
Federal Government or any State, county, municipality, or local taxing 
authority.

SEC. 7. GAO AUDITS.

    Not later than 1 year after the NDISF first commences receipt of 
contributions in accordance with section 4, and once every 3 years for 
the 12-year period beginning upon the expiration of such 1-year period, 
the Comptroller General of the United States shall audit activities of 
the NDISF to ensure that it is complying with the provisions of this 
Act and shall submit a report regarding each such audit to the 
Congress.

SEC. 8. OFF-BUDGET STATUS AND DEFICIT REDUCTION.

    (a) In General.--Notwithstanding any other provision of law, the 
receipts and disbursements of the NDISF, including the Trust Account, 
shall not be counted as new budget authority or outlays for purposes 
of--
            (1) the budget of the United States Government as submitted 
        by the President,
            (2) the congressional budget, or
            (3) the Balanced Budget and Emergency Deficit Control Act 
        of 1985.
    (b) Public Enterprise Revolving Fund.--The financial position of 
the NDISF shall be reflected in the appendix to the budget of the 
United States Government as a public enterprise revolving fund and 
shall be treated as a public enterprise revolving fund for budget 
accounting purposes.
    (c) Deficit Reduction.--Notwithstanding any other provision of law, 
amounts received and held by the NDISF shall not be subject to 
sequestration or apportionment for the purpose of chapter 15 of title 
31, United States Code, or under any other authority.

SEC. 9. DEFINITIONS.

    For purposes of this Act, the following definitions shall apply:
            (1) Account.--The term ``Account'' means the Catastrophe 
        Emergency Solvency Reserve Account established by the NDISF 
        pursuant to section 6.
            (2) Board.--The term ``Board'' means the Board of Directors 
        of the NDISF.
            (3) Member.--The term ``member'' means any state insurance 
        pool or private insurer that makes qualified contributions to 
        the NDISF.
            (4) NDISF.--The term ``NDISF'' means the National Disaster 
        Insurance Solvency Fund established under section 3.
            (5) Qualified contribution.--The term ``qualified 
        contribution'' means a contribution to the NDISF in accordance 
        with the limitations of this Act.
            (6) Rare catastrophic event.--The term ``rare catastrophic 
        event'' means a covered peril that occurs no more frequently 
        than once every 250 years that causes at least $10,000,000,000 
        in insured losses, except that the Board shall annually adjust 
        such amount (as it may have been previously adjusted) to 
        provide for inflation in accordance with the Consumer Price 
        Index prepared by the Bureau of Labor Statistics of the 
        Department of Labor.
            (7) State.--The term ``State'' means the States of the 
        United States, the District of Columbia, the Commonwealth of 
        Puerto Rico, the Commonwealth of the Northern Mariana Islands, 
        Guam, the Virgin Islands, American Samoa, and any other 
        territory or possession of the United States.
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