[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4366 Introduced in House (IH)]







109th CONGRESS
  1st Session
                                H. R. 4366

    To establish a program to provide reinsurance for State natural 
catastrophe insurance programs to help the United States better prepare 
      for and protect its citizens against the ravages of natural 
 catastrophes, to encourage and promote mitigation and prevention for, 
   and recovery and rebuilding from such catastrophes, and to better 
        assist in the financial recovery from such catastrophes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                           November 17, 2005

Ms. Ginny Brown-Waite of Florida (for herself and Mr. Shaw) introduced 
 the following bill; which was referred to the Committee on Financial 
                                Services

_______________________________________________________________________

                                 A BILL


 
    To establish a program to provide reinsurance for State natural 
catastrophe insurance programs to help the United States better prepare 
      for and protect its citizens against the ravages of natural 
 catastrophes, to encourage and promote mitigation and prevention for, 
   and recovery and rebuilding from such catastrophes, and to better 
        assist in the financial recovery from such catastrophes.

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

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Homeowners 
Insurance Protection Act of 2005''.
    (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; table of contents.
Sec. 2. Congressional findings.
Sec. 3. National Commission on Catastrophe Preparation and Protection.
Sec. 4. Program authority.
Sec. 5. Qualified lines of coverage.
Sec. 6. Covered perils.
Sec. 7. Contracts for reinsurance coverage for eligible State programs.
Sec. 8. Minimum level of retained losses and maximum Federal liability.
Sec. 9. Consumer Hurricane, Earthquake, Loss Protection (HELP) Fund.
Sec. 10. Definitions.
Sec. 11. Regulations.
Sec. 12. Termination.
Sec. 13. Annual study concerning benefits of the Act.
Sec. 14. GAO study of the National Flood Insurance Program and 
                            hurricane-related flooding.

SEC. 2. CONGRESSIONAL FINDINGS.

    The Congress finds that--
            (1) America needs to take steps to be better prepared for 
        and better protected from catastrophes;
            (2) the hurricane seasons of 2004 and 2005 are startling 
        reminders of both the human and economic devastation that 
        hurricanes, flooding, and other natural disasters can cause;
            (3) if a repeat of the deadly 1900 Galveston hurricane 
        occurred again it could cause over $36 billion in loss;
            (4) if the 1904 San Francisco earthquake occurred again it 
        could cause over $400 billion in loss;
            (5) if a Category 5 hurricane were to hit Miami it could 
        cause over $50 billion in loss and devastate the insurance 
        industry in the United States;
            (6) if a repeat of the 1938 ``Long Island Express'' were to 
        occur again it could cause over $30 billion in damage and if a 
        hurricane that strong were to directly hit Manhattan it could 
        cause over $150 billion in damage and cause irreparable harm to 
        our Nation's economy;
            (7) a more comprehensive and integrated approach to dealing 
        with catastrophes is needed;
            (8) using history as a guide, natural catastrophes will 
        inevitably place a tremendous strain on homeowners' insurance 
        markets in many areas, will raise costs for consumers, and will 
        jeopardize the ability of many consumers to adequately insure 
        their homes and possessions;
            (9) the lack of sufficient insurance capacity and the 
        inability of private insurers to build enough capital, in a 
        short amount of time, threatens to increase the number of 
        uninsured homeowners, which, in turn, increases the risk of 
        mortgage defaults and the strain on the Nation's banking 
        system;
            (10) some States have intervened to ensure the continued 
        availability and affordability of homeowners' insurance for all 
        residents;
            (11) it is appropriate that efforts to improve insurance 
        availability be designed and implemented at the State level;
            (12) while State insurance programs may be adequate to 
        cover losses from most natural disasters, a small percentage of 
        events are likely to exceed the financial capacity of these 
        programs and the local insurance markets;
            (13) limited Federal reinsurance will improve the 
        effectiveness of State insurance programs and private insurance 
        markets and will increase the likelihood that homeowners' 
        insurance claims will be fully paid in the event of a large 
        natural catastrophe and that routine claims that occur after a 
        mega-catastrophe will also continue to be paid;
            (14) it is necessary to provide a Federal reinsurance 
        program that will provide more protection at an overall lower 
        cost and that will promote stability in the homeowners' 
        insurance market;
            (15) it is the proper role of the Federal Government to 
        prepare for and protect its citizens from catastrophes and to 
        facilitate consumer protection, victim assistance, and 
        recovery, including financial recovery; and
            (16) any Federal reinsurance program must be founded upon 
        sound actuarial principles and priced in a manner that 
        encourages the creation of State funds and maximizes the buying 
        potential of these State funds and encourages and promotes 
        prevention and mitigation, recovery and rebuilding, and 
        consumer education, and emphasizes continuous analysis and 
        improvement.

SEC. 3. NATIONAL COMMISSION ON CATASTROPHE PREPARATION AND PROTECTION.

    (a) Establishment.--The Secretary of the Treasury shall establish a 
commission to be known as the National Commission on Catastrophe 
Preparation and Protection.
    (b) Duties.--The Commission shall meet for the purpose of advising 
the Secretary regarding the estimated loss costs associated with the 
contracts for reinsurance coverage available under this Act and 
carrying out the functions specified in this Act, including--
            (1) the development and implementation of public education 
        concerning the risks posed by natural catastrophes;
            (2) the development and implementation of prevention, 
        mitigation, recovery, and rebuilding standards that better 
        prepare and protect the United States from catastrophes; and
            (3) conducting continuous analysis of the effectiveness of 
        this Act and recommending improvements to the Congress so that 
        the costs of providing catastrophe protection are decreased and 
        so that the United States is better prepared.
    (c) Members.--
            (1) Appointment and qualification.--The Commission shall 
        consist of 9 members, as follows:
                    (A) Homeland security member.--The Secretary of 
                Homeland Security or the Secretary's designee.
                    (B) Appointed members.--8 members appointed by the 
                Secretary, who shall consist of--
                            (i) one individual who is an actuary;
                            (ii) one individual who is employed in 
                        engineering;
                            (iii) one individual representing the 
                        scientific community;
                            (iv) one individual representing property 
                        and casualty insurers;
                            (v) one individual representing reinsurers;
                            (vi) one individual who is a member or 
                        former member of the National Association of 
                        Insurance Commissioners; and
                            (vii) two individuals who are consumers.
            (2) Prevention of conflicts of interest.--Members shall 
        have no personal or financial interest at stake in the 
        deliberations of the Commission.
    (d) Treatment of Non-Federal Members.--Each member of the 
Commission who is not otherwise employed by the Federal Government 
shall be considered a special Government employee for purposes of 
sections 202 and 208 of title 18, United States Code.
    (e) Experts and Consultants.--The Commission may procure temporary 
and intermittent services from individuals or groups recognized as 
experts in the fields of meteorology, seismology, vulcanlogy, geology, 
structural engineering, wind engineering, and hydrology, and other 
fields, under section 3109(b) of title 5, United States Code, but at a 
rate not in excess of the daily equivalent of the annual rate of basic 
pay payable for level V of the Executive Schedule, for each day during 
which the individual procured is performing such services for the 
Commission. The Commission may also procure, and the Congress 
encourages the Commission to procure, experts from universities, 
research centers, foundations, and other appropriate organizations who 
could study, research, and develop methods and mechanisms that could be 
utilized to strengthen structures to better withstand the perils 
covered by this Act.
    (f) Compensation.--Each member of the Commission who is not an 
officer or employee of the Federal Government shall be compensated at a 
rate of basic pay payable for level V of the Executive Schedule, 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.
    (g) Obtaining Data.--The Commission and the Secretary may solicit 
loss exposure data and such other information either deems necessary to 
carry out its responsibilities from governmental agencies and bodies 
and organizations that act as statistical agents for the insurance 
industry. The Commission and the Secretary shall take such actions as 
are necessary to ensure that information that either deems is 
confidential or proprietary is disclosed only to authorized individuals 
working for the Commission or the Secretary. No company which refuses 
to provide information requested by the Commission or the Secretary may 
participate in the program for reinsurance coverage authorized under 
this Act, nor may any State insurance or reinsurance program 
participate if any governmental agency within that State has refused to 
provide information requested by the Commission or the Secretary.
    (h) Funding.--
            (1) Authorization of appropriations.--There is authorized 
        to be appropriated--
                    (A) $10,000,000 for fiscal year 2006 for the 
                initial expenses in establishing the Commission and the 
                initial activities of the Commission that cannot timely 
                be covered by amounts obtained pursuant to section 
                7(b)(6)(B)(iii), as determined by the Secretary;
                    (B) such additional sums as may be necessary to 
                carry out subsequent activities of the Commission;
                    (C) $10,000,000 for fiscal year 2006 for the 
                initial expenses of the Secretary in carrying out the 
                program authorized under section 4; and
                    (D) such additional sums as may be necessary to 
                carry out subsequent activities of the Secretary under 
                this Act.
            (2) Offset.--The Secretary shall provide, to the maximum 
        extent practicable, that an amount equal to any amount 
        appropriated under paragraph (1) is obtained from purchasers of 
        reinsurance coverage under this Act and deposited in the Fund 
        established under section 9. Such amounts shall be obtained by 
        inclusion of a provision for the Secretary's and the 
        Commission's expenses incorporated into the pricing of the 
        contracts for such reinsurance coverage, pursuant to section 
        7(b)(6)(B)(iii).
    (i) Termination.--The Commission shall terminate upon the effective 
date of the repeal under section 12(c).

SEC. 4. PROGRAM AUTHORITY.

    (a) In General.--The Secretary of the Treasury, in consultation 
with the Secretary of Homeland Security, shall carry out a program 
under this Act to make homeowners protection coverage available through 
contracts for reinsurance coverage under section 7, which shall be made 
available for purchase only by eligible State programs.
    (b) Purpose.--The program shall be designed to make reinsurance 
coverage under this Act available--
            (1) to improve the availability and affordability of 
        homeowners' insurance for the purpose of facilitating the 
        pooling, and spreading the risk, of catastrophic financial 
        losses from natural catastrophes;
            (2) to improve the solvency and capacity of homeowners' 
        insurance markets;
            (3) to encourage the development and implementation of 
        mitigation, prevention, recovery, and rebuilding standards; and
            (4) to recommend methods to continuously improve the way 
        the United States reacts and responds to catastrophes, 
        including improvements to the HELP Fund established under 
        section 9.
    (c) Contract Principles.--Under the program under this Act, the 
Secretary shall offer reinsurance coverage through contracts with 
covered purchasers, which contracts shall--
            (1) minimize the administrative costs of the Federal 
        Government;
            (2) provide coverage based solely on insured losses within 
        the State for the eligible State program purchasing the 
        contract.

SEC. 5. QUALIFIED LINES OF COVERAGE.

    Each contract for reinsurance coverage made available under this 
Act shall provide insurance coverage against residential property 
losses to homes (including dwellings owned under condominium and 
cooperative ownership arrangements) and the contents of apartment 
buildings.

SEC. 6. COVERED PERILS.

    Each contract for reinsurance coverage made available under this 
Act shall cover losses insured or reinsured by the eligible State 
program purchasing the contract that are proximately caused by--
            (1) earthquakes;
            (2) perils ensuing from earthquakes, including fire and 
        tsunamis;
            (3) tropical cyclones having maximum sustained winds of at 
        least 74 miles per hour, including hurricanes and typhoons;
            (4) tornadoes;
            (5) volcanic eruptions;
            (6) catastrophic winter storms; and
            (7) any other natural catastrophe (not including any flood) 
        insured or reinsured under the eligible State program for which 
        reinsurance coverage under section 7 is provided.
The Secretary shall, by regulation, define the natural catastrophe 
perils under this section.

SEC. 7. CONTRACTS FOR REINSURANCE COVERAGE FOR ELIGIBLE STATE PROGRAMS.

    (a) Eligible State Programs.--A program shall be eligible to 
purchase a contract under this section for reinsurance coverage under 
this Act only if the State entity authorized to make such 
determinations certifies to the Secretary that the program complies 
with the following requirements:
            (1) Program design.--The program shall be a State-
        operated--
                    (A) insurance program that--
                            (i) offers coverage for homes (which may 
                        include dwellings owned under condominium and 
                        cooperative ownership arrangements) and the 
                        contents of apartments to State residents; and
                            (ii) is authorized by State law; or
                    (B) reinsurance program that is designed to improve 
                private insurance markets that offer coverage for homes 
                (which may include dwellings owned under condominium 
                and cooperative ownership arrangements) and the 
                contents of apartments.
            (2) Operation.--The program shall meet the following 
        requirements:
                    (A) A majority of the members of the governing body 
                of the program shall be public officials.
                    (B) The State shall have a financial interest in 
                the program, which shall not include a program 
                authorized by State law or regulation that requires 
                insurers to pool resources to provide property 
                insurance coverage for covered perils.
                    (C) The State shall not be eligible for consumer 
                HELP Fund assistance if a State has appropriated money 
                from the State fund and not paid it back to the State 
                fund, with interest.
            (3) Tax status.--The program shall be structured and 
        carried out in a manner so that the program is exempt from all 
        Federal taxation.
            (4) Coverage.--The program shall cover all perils 
        enumerated in section 6.
            (5) Earnings.--The program may not provide for, nor shall 
        have ever made, any redistribution of any part of any net 
        profits of the program to any insurer that participates in the 
        program.
            (6) Prevention and mitigation.--The program shall include 
        prevention and mitigation provisions that require that not less 
        $10,000,000 and not more than 35 percent of the net investment 
        income of the State insurance or reinsurance program be used 
        for programs to mitigate losses from natural catastrophes for 
        which the State insurance or reinsurance program was 
        established. For purposes of this paragraph, prevention and 
        mitigation shall include methods to reduce losses of life and 
        property, including appropriate measures to adequately 
        reflect--
                    (A) encouragement of awareness about the risk 
                factors and what can be done to eliminate or reduce 
                them;
                    (B) location of the risk, by giving careful 
                consideration of the natural risks for the location of 
                the property before allowing building and 
                considerations if structures are allowed; and
                    (C) construction relative to the risk and hazards, 
                which act upon--
                            (i) State mandated building codes 
                        appropriate for the risk;
                            (ii) adequate enforcement of the risk-
                        appropriate building codes;
                            (iii) building materials that prevent or 
                        significantly lessen potential damage from the 
                        natural catastrophes;
                            (iv) building methods that prevent or 
                        significantly lessen potential damage from the 
                        natural catastrophes; and
                            (v) a focus on prevention and mitigation 
                        for any substantially damaged structure, with 
                        an emphasis on how structures can be 
                        retrofitted so as to make them building code 
                        compliant.
            (7) Requirements regarding coverage.--
                    (A) In general.--The program--
                            (i) may not, except for charges or 
                        assessments related to post-event financing or 
                        bonding, involve cross-subsidization between 
                        any separate property and casualty lines 
                        covered under the program unless the 
                        elimination of such activity in an existing 
                        program would negatively impact the eligibility 
                        of the program to purchase a contract for 
                        reinsurance coverage under this Act pursuant to 
                        paragraph (3);
                            (ii) shall include provisions that 
                        authorize the State insurance commissioner or 
                        other State entity authorized to make such a 
                        determination to terminate the program if the 
                        insurance commissioner or other such entity 
                        determines that the program is no longer 
                        necessary to ensure the availability of 
                        homeowners' insurance for all residents of the 
                        State; and
                            (iii) shall provide that, for any insurance 
                        coverage for homes (which may include dwellings 
                        owned under condominium and cooperative 
                        ownership arrangements) and the contents of 
                        apartments that is made available under the 
                        State insurance program and for any reinsurance 
                        coverage for such insurance coverage made 
                        available under the State reinsurance program, 
                        the premium rates charged shall be amounts 
                        that, at a minimum, are sufficient to cover the 
                        full actuarial costs of such coverage, based on 
                        consideration of the risks involved and 
                        accepted actuarial and rate making principles, 
                        anticipated administrative expenses, and loss 
                        and loss-adjustment expenses.
                    (B) Applicability.--This paragraph shall apply--
                            (i) before the expiration of the 2-year 
                        period beginning on the date of the enactment 
                        of this Act, only to State programs which, 
                        after January 1, 2006, commence offering 
                        insurance or reinsurance coverage described in 
                        subparagraph (A) or (B), respectively, of 
                        paragraph (1); and
                            (ii) after the expiration of such period, 
                        to all State programs.
            (8) Other qualifications.--
                    (A) In general.--The State program shall (for the 
                year for which the coverage is in effect) comply with 
                regulations that shall be issued under this paragraph 
                by the Secretary, in consultation with the National 
                Commission on Catastrophe Preparation and Prevention 
                established under section 3. The regulations shall 
                establish criteria for State programs to qualify to 
                purchase reinsurance under this section, which are in 
                addition to the requirements under the other paragraphs 
                of this subsection.
                    (B) Contents.--The regulations issued under this 
                paragraph shall include requirements that--
                            (i) the State program shall have public 
                        members on its board of directors or have an 
                        advisory board with public members;
                            (ii) the State program provide adequate 
                        insurance or reinsurance protection, as 
                        applicable, for the peril covered, which shall 
                        include a range of deductibles and premium 
                        costs that reflect the applicable risk to 
                        eligible properties;
                            (iii) insurance or reinsurance coverage, as 
                        applicable, provided by the State program is 
                        made available on a nondiscriminatory basis to 
                        all qualifying residents;
                            (iv) any new construction, substantial 
                        rehabilitation, and renovation insured or 
                        reinsured by the program complies with 
                        applicable State or local government building, 
                        fire, and safety codes;
                            (v) the State, or appropriate local 
                        governments within the State, have in effect 
                        and enforce nationally recognized model 
                        building, fire, and safety codes and consensus-
                        based standards that offer risk responsive 
                        resistance that is substantially equivalent or 
                        greater than the resistance to earthquakes or 
                        high winds;
                            (vi) the State has taken actions to 
                        establish an insurance rate structure that 
                        takes into account measures to mitigate 
                        insurance losses;
                            (vii) there are in effect, in such State, 
                        laws or regulations sufficient to prohibit 
                        price gouging, during the term of reinsurance 
                        coverage under this Act for the State program 
                        in any disaster area located within the State; 
                        and
                            (viii) the State program complies with such 
                        other requirements that the Secretary considers 
                        necessary to carry out the purposes of this 
                        Act.
    (b) Terms of Contracts.--Each contract under this section for 
reinsurance coverage under this Act shall be subject to the following 
terms and conditions:
            (1) Maturity.--The term of the contract shall not exceed 1 
        year or such other term as the Secretary may determine.
            (2) Payment condition.--The contract shall authorize claims 
        payments for eligible losses only to the eligible State program 
        purchasing the coverage.
            (3) Retained losses requirement.--For each event of a 
        covered peril, the contract shall make a payment for the event 
        only if the total amount of insurance claims for losses, which 
        are covered by qualified lines, occur to properties located 
        within the State covered by the contract, and that result from 
        events, exceeds the amount of retained losses provided under 
        the contract (pursuant to section 8(a)) purchased by the 
        eligible State program.
            (4) Multiple events.--The contract shall cover any eligible 
        losses from one or more covered events that may occur during 
        the term of the contract and shall provide that if multiple 
        events occur, the retained losses requirement under paragraph 
        (3) shall apply on a calendar year basis, in the aggregate and 
        not separately to each individual event.
            (5) Timing of eligible losses.--Eligible losses under the 
        contract shall include only insurance claims for property 
        covered by qualified lines that are reported to the eligible 
        State program within the 3-year period beginning upon the event 
        or events for which payment under the contract is provided.
            (6) Pricing.--
                    (A) Determination.--The price of reinsurance 
                coverage under the contract shall be an amount 
                established by the Secretary as follows:
                            (i) Recommendations.--The Secretary shall 
                        take into consideration the recommendations of 
                        the Commission in establishing the price, but 
                        the price may not be less than the amount 
                        recommended by the Commission.
                            (ii) Fairness to taxpayers.--The price 
                        shall be established at a level that is 
                        designed to reflect the risks and costs being 
                        borne under each reinsurance contract issued 
                        under this Act and that takes into 
                        consideration empirical models of natural 
                        disasters and the capacity of private markets 
                        to absorb insured losses from natural 
                        disasters.
                            (iii) Self-sufficiency.--The rates for 
                        reinsurance coverage shall be established at a 
                        level that annually produces expected premiums 
                        that shall be sufficient to pay the expected 
                        annualized cost of all claims, loss adjustment 
                        expenses, and all administrative costs of 
                        reinsurance coverage offered under this 
                        section.
                    (B) Components.--The price shall consist of the 
                following components:
                            (i) Risk-based price.--A risk-based price, 
                        which shall reflect the anticipated annualized 
                        payout of the contract according to the 
                        actuarial analysis and recommendations of the 
                        Commission.
                            (iii) Administrative costs.--A sum 
                        sufficient to provide for the operation of the 
                        Commission and the administrative expenses 
                        incurred by the Secretary in carrying out this 
                        Act.
            (7) Information.--The contract shall contain a condition 
        providing that the Commission may require the State program 
        that is covered under the contract to submit to the Commission 
        all information on the State program relevant to the duties of 
        the Commission, as determined by the Secretary.
            (8) Additional contract option.--The contract shall provide 
        that the purchaser of the contract may, during the term of such 
        original contract, purchase additional contracts from among 
        those offered by the Secretary at the beginning of the term, 
        subject to the limitations under section 8, at the prices at 
        which such contracts were offered at the beginning of the term, 
        prorated based upon the remaining term as determined by the 
        Secretary. Such additional contracts shall provide coverage 
        beginning on a date 15 days after the date of purchase but 
        shall not provide coverage for losses for an event that has 
        already occurred.
            (9) Others.--The contract shall contain such other terms as 
        the Secretary considers necessary to carry out this Act and to 
        ensure the long-term financial integrity of the program under 
        this Act.
    (c) Participation by Multi-State Catastrophe Fund Programs.--
Nothing in this Act shall prohibit the creation of multi-State 
catastrophe insurance or reinsurance programs, or the participation by 
such programs in the program established pursuant to section 4. The 
Secretary shall, by regulation, apply the provisions of this Act to 
multi-State catastrophe insurance and reinsurance programs.

SEC. 8. MINIMUM LEVEL OF RETAINED LOSSES AND MAXIMUM FEDERAL LIABILITY.

    (a) Available Levels of Retained Losses.--In making reinsurance 
coverage available under this Act, the Secretary shall make available 
for purchase contracts for such coverage that require the sustainment 
of retained losses from covered perils (as required under section 
7(b)(3) for payment of eligible losses) in various amounts, as the 
Secretary, in consultation with the Commission, determines appropriate 
and subject to the requirements under subsection (b).
    (b) Minimum Level of Retained Losses.--
            (1) Contracts for state programs.--Subject to paragraphs 
        (3) and (4) and notwithstanding any other provision of this 
        Act, a contract for reinsurance coverage under section 7 for an 
        eligible State program that offers insurance or reinsurance 
        coverage described in subparagraph (A) or (B), respectively, of 
        section 7(a)(1) may not be made available or sold unless the 
        contract requires retained losses from covered perils in the 
        following amount:
                    (A) In general.--The State program shall sustain an 
                amount of retained losses of not less than--
                            (i) the claims-paying capacity of the 
                        eligible State program, as determined by the 
                        Secretary; and
                            (ii) an amount, determined by the Secretary 
                        in consultation with the Commission, that is 
                        the amount equal to the eligible losses 
                        projected to be incurred once every 50 years on 
                        an annual basis from covered perils.
                    (B) Transition rule for existing programs.--
                            (i) Claims-paying capacity.--Subject to 
                        clause (ii), in the case of any eligible State 
                        program that was offering insurance or 
                        reinsurance coverage on the date of the 
                        enactment of this Act and the claims-paying 
                        capacity of which is greater than the amount 
                        determined under subparagraph (A)(i) but less 
                        than an amount determined for the program under 
                        subparagraph (A)(ii), the minimum level of 
                        retained losses applicable under this paragraph 
                        shall be the claims-paying capacity of such 
                        State program.
                            (ii) Agreement.--Clause (i) shall apply to 
                        a State program only if the program enters into 
                        a written agreement with the Secretary 
                        providing a schedule for increasing the claims-
                        paying capacity of the program to the amount 
                        determined for the program under subparagraph 
                        (A)(ii) over a period not to exceed 5 years. 
                        The Secretary may extend the 5-year period for 
                        not more than 5 additional one-year periods if 
                        the Secretary determines that losses incurred 
                        by the State program as a result of covered 
                        perils create excessive hardship on the State 
                        program. The Secretary shall consult with the 
                        appropriate officials of the State program 
                        regarding the required schedule and any 
                        potential one-year extensions.
                    (C) Transition rule for new programs.--
                            (i) 50-year event.--The Secretary may 
                        provide that, in the case of an eligible State 
                        program that, after January 1, 2006, commences 
                        offering insurance or reinsurance coverage, 
                        during the 7-year period beginning on the date 
                        that reinsurance coverage under section 7 is 
                        first made available, the minimum level of 
                        retained losses applicable under this paragraph 
                        shall be the amount determined for the State 
                        under subparagraph (A)(i), except that such 
                        minimum level shall be adjusted annually as 
                        provided in clause (ii) of this subparagraph.
                            (ii) Annual adjustment.--Each annual 
                        adjustment under this clause shall increase the 
                        minimum level of retained losses applicable 
                        under this subparagraph to an eligible State 
                        program described in clause (i) in a manner 
                        such that--
                                    (I) during the course of such 7-
                                year period, the applicable minimum 
                                level of retained losses approaches the 
                                minimum level that, under subparagraph 
                                (A) (ii), will apply to the eligible 
                                State program upon the expiration of 
                                such period; and
                                    (II) each such annual increase is a 
                                substantially similar amount, to the 
                                extent practicable.
                    (D) Reduction because of reduced claims-paying 
                capacity.--
                            (i) Authority.--Notwithstanding 
                        subparagraphs (A), (B), and (C) or the terms 
                        contained in a contract for reinsurance 
                        pursuant to such subparagraphs, if the 
                        Secretary determines that the claims-paying 
                        capacity of an eligible State program has been 
                        reduced because of payment for losses due to an 
                        event, the Secretary may reduce the minimum 
                        level of retained losses.
                            (ii) Term of reduction.--The Secretary may 
                        extend the 5-year period for not more than 5 
                        additional one-year periods if the Secretary 
                        determines that losses incurred by the State 
                        program as a result of covered perils create 
                        excessive hardship on the State program. The 
                        Secretary shall consult with the appropriate 
                        officials of the State program regarding the 
                        required schedule and any potential one-year 
                        extensions.
                    (E) Claims-paying capacity.--For purposes of this 
                paragraph, the claims-paying capacity of a State-
                operated insurance or reinsurance program under section 
                7(a)(1) shall be determined by the Secretary, in 
                consultation with the Commission, taking into 
                consideration the claims-paying capacity as determined 
                by the State program, retained losses to private 
                insurers in the State in an amount assigned by the 
                State insurance commissioner, the cash surplus of the 
                program, and the lines of credit, reinsurance, and 
                other financing mechanisms of the program established 
                by law.
    (c) Maximum Federal Liability.--
            (1) In general.--Notwithstanding any other provision of 
        law, the Secretary may sell only contracts for reinsurance 
        coverage under this Act in various amounts that comply with the 
        following requirements:
                    (A) Estimate of aggregate liability.--The aggregate 
                liability for payment of claims under all such 
                contracts in any single year is unlikely to exceed 
                $200,000,000,000 (as such amount is adjusted under 
                paragraph (2)).
                    (B) Eligible loss coverage sold.--Eligible losses 
                covered by all contracts sold within a State during a 
                12-month period do not exceed the difference between 
                the following amounts (each of which shall be 
                determined by the Secretary in consultation with the 
                Commission):
                            (i) The amount equal to the eligible loss 
                        projected to be incurred once every 500 years 
                        from a single event in the State.
                            (ii) The amount equal to the eligible loss 
                        projected to be incurred once every 50 years 
                        from a single event in the State.
            (2) Annual adjustments.--The Secretary shall annually 
        adjust the amount under paragraph (1)(A) (as it may have been 
        previously adjusted) to provide for inflation in accordance 
        with an inflation index that the Secretary determines to be 
        appropriate.
    (d) Limitation on Percentage of Risk in Excess of Retained 
Losses.--
            (1) In general.--The Secretary may not make available for 
        purchase contracts for reinsurance coverage under this Act that 
        would pay out more than 100 percent of eligible losses in 
        excess of retained losses in the case of a contract under 
        section 7 for an eligible State program, for such State.
            (2) Payout.--For purposes of this subsection, the amount of 
        payout from a reinsurance contract shall be the amount of 
        eligible losses in excess of retained losses multiplied by the 
        percentage under paragraph (1).

SEC. 9. CONSUMER HURRICANE, EARTHQUAKE, LOSS PROTECTION (HELP) FUND.

    (a) Establishment.--There is established within the Treasury of the 
United States a fund to be known as the Consumer HELP Fund (in this 
section referred to as the ``Fund'').
    (b) Credits.--The Fund shall be credited with--
            (1) amounts received annually from the sale of contracts 
        for reinsurance coverage under this Act;
            (2) any amounts borrowed under subsection (d);
            (3) any amounts earned on investments of the Fund pursuant 
        to subsection (e); and
            (4) such other amounts as may be credited to the Fund.
    (c) Uses.--Amounts in the Fund shall be available to the Secretary 
only for the following purposes:
            (1) Contract payments.--For payments to covered purchasers 
        under contracts for reinsurance coverage for eligible losses 
        under such contracts.
            (2) Commission costs.--To pay for the operating costs of 
        the Commission.
            (3) Administrative expenses.--To pay for the administrative 
        expenses incurred by the Secretary in carrying out the 
        reinsurance program under this Act.
            (4) Termination.--Upon termination under section 13, as 
        provided in such section.
    (d) Borrowing.--
            (1) Authority.--To the extent that the amounts in the Fund 
        are insufficient to pay claims and expenses under subsection 
        (c), the Secretary may issue such obligations of the Fund as 
        may be necessary to cover the insufficiency and shall purchase 
        any such obligations issued.
            (2) Public debt transaction.--For the purpose of purchasing 
        any such obligations, the Secretary may use as a public debt 
        transaction the proceeds from the sale of any securities issued 
        under chapter 31 of title 31, United States Code, and the 
        purposes for which securities are issued under such chapter are 
        hereby extended to include any purchase by the Secretary of 
        such obligations under this subsection.
            (3) Characteristics of obligations.--Obligations issued 
        under this subsection shall be in such forms and denominations, 
        bear such maturities, bear interest at such rate, and be 
        subject to such other terms and conditions, as the Secretary 
        shall determine.
            (4) Treatment.--All redemptions, purchases, and sales by 
        the Secretary of obligations under this subsection shall be 
        treated as public debt transactions of the United States.
            (5) Repayment.--Any obligations issued under this 
        subsection shall be repaid including interest, from the Fund 
        and shall be recouped from premiums charged for reinsurance 
        coverage provided under this Act.
    (e) Investment.--If the Secretary determines that the amounts in 
the Fund are in excess of current needs, the Secretary may invest such 
amounts as the Secretary considers advisable in obligations issued or 
guaranteed by the United States.
    (f) Prohibition of Federal Funds.--Except for amounts made 
available pursuant to subsection (d) and section 3(h), no further 
Federal funds shall be authorized or appropriated for the Fund or for 
carrying out the reinsurance program under this Act.

SEC. 10. DEFINITIONS.

    For purposes of this Act, the following definitions shall apply:
            (1) Commission.--The term ``Commission'' means the National 
        Commission on Catastrophe Risks and Insurance Loss Costs 
        established under section 3.
            (2) Covered perils.--The term ``covered perils'' means the 
        natural disaster perils under section 6.
            (3) Covered purchaser.--The term ``covered purchaser'' 
        means an eligible State-operated insurance or reinsurance 
        program that purchases reinsurance coverage made available 
        under a contract under section 7.
            (4) Disaster area.--The term ``disaster area'' means a 
        geographical area, with respect to which--
                    (A) a covered peril specified in section 6has 
                occurred; and
                    (B) a declaration that a major disaster exists, as 
                a result of the occurrence of such peril--
                            (i) has been made by the President of the 
                        United States; and
                            (ii) is in effect.
            (5) Eligible losses.--The term ``eligible losses'' means 
        losses in excess of the sustained and retained losses, as 
        defined by the Secretary after consultation with the 
        Commission.
            (6) Eligible state program.--The term ``eligible State 
        program'' means a State program that, pursuant to section 7(a), 
        is eligible to purchase reinsurance coverage made available 
        through contracts under section 7, or a multi-State program 
        that is eligible to purchase such coverage pursuant to section 
        7(c).
            (7) Price gouging.--The term ``price gouging'' means the 
        providing of any consumer good or service by a supplier related 
        to repair or restoration of property damaged from a catastrophe 
        for a price that the supplier knows or has reason to know is 
        greater, by at least the percentage set forth in a State law or 
        regulation prohibiting such act (notwithstanding any real cost 
        increase due to any attendant business risk and other 
        reasonable expenses that result from the major catastrophe 
        involved), than the price charged by the supplier for such 
        consumer good or service immediately before the disaster.
            (8) Qualified lines.--The term ``qualified lines'' means 
        lines of insurance coverage for which losses are covered under 
        section 5 by reinsurance coverage under this Act.
            (9) Reinsurance coverage.--The term ``reinsurance coverage 
        under this Act'' means coverage under contracts made available 
        under section 7.
            (10) Secretary.--The term ``Secretary'' means the Secretary 
        of the Treasury.
            (11) 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.

SEC. 11. REGULATIONS.

    The Secretary, in consultation with the Secretary of the Department 
of Homeland Security, shall issue any regulations necessary to carry 
out the program for reinsurance coverage under this Act.

SEC. 12. TERMINATION.

    (a) In General.--Except as provided in subsection (b), the 
Secretary may not provide any reinsurance coverage under this Act 
covering any period after the expiration of the 20-year period 
beginning on the date of the enactment of this Act.
    (b) Extension.--If upon the expiration of the period under 
subsection (a) the Secretary, in consultation with the Commission, 
determines that continuation of the program for reinsurance coverage 
under this Act is necessary or appropriate to carry out the purpose of 
this Act under section 4(b) because of insufficient growth of capacity 
in the private homeowners' insurance market, the Secretary shall 
continue to provide reinsurance coverage under this Act until the 
expiration of the 5-year period beginning upon the expiration of the 
period under subsection (a).
    (c) Repeal.--Effective upon the date that reinsurance coverage 
under this Act is no longer available or in force pursuant to 
subsection (a) or (b), this Act (except for this section) is repealed.
    (d) Deficit Reduction.--The Secretary shall cover into the General 
Fund of the Treasury any amounts remaining in the Fund under section 9 
upon the repeal of this Act.

SEC. 13. ANNUAL STUDY CONCERNING BENEFITS OF THE ACT.

    (a) In General.--The Secretary shall, on an annual basis, conduct a 
study and submit to the Congress a report that--
            (1) analyzes the cost and availability of homeowners' 
        insurance for losses resulting from catastrophic natural 
        disasters covered by the reinsurance program under this Act;
            (2) describes the efforts of the participating States in--
                    (A) enacting preparedness, prevention, mitigation, 
                recovery, and rebuilding standards; and
                    (B) educating the public on the risks associated 
                with natural catastrophe; and
            (3) makes recommendations regarding ways to improve the 
        program under this Act and its administration.
    (b) Contents.--Each annual study under this section shall also 
determine and identify, on an aggregate basis--
            (1) for each State or region, the capacity of the private 
        homeowners' insurance market with respect to coverage for 
        losses from catastrophic natural disasters;
            (2) for each State or region, the percentage of homeowners 
        who have such coverage, the catastrophes covered, and the 
        average cost of such coverage; and
            (3) for each State or region, the effects this Act is 
        having on the availability and affordability of such insurance.
    (c) Timing.--Each annual report under this section shall be 
submitted not later than March 30 of the year after the year for which 
the study was conducted.
    (d) Commencement of Reporting Requirement.--The Secretary shall 
first submit an annual report under this section not later than two 
years after the date of the enactment of this Act.

SEC. 14. GAO STUDY OF THE NATIONAL FLOOD INSURANCE PROGRAM AND 
              HURRICANE-RELATED FLOODING.

    (a) In General.--In light of the flooding associated with Hurricane 
Katrina, the Comptroller General of the United States shall conduct a 
study of the availability and adequacy of flood insurance coverage for 
losses to residences and other properties caused by hurricane-related 
flooding.
    (b) Contents.--The study under this section shall determine and 
analyze--
            (1) the frequency and severity of hurricane-related 
        flooding during the last 20 years in comparison with flooding 
        that is not hurricane-related;
            (2) the differences between the risks of flood-related 
        losses to properties located within the 100-year floodplain and 
        those located outside of such floodplain;
            (3) the extent to which insurance coverage referred to in 
        subsection (a) is available for properties not located within 
        the 100-year floodplain;
            (4) the advantages and disadvantages of making such 
        coverage for such properties available under the national flood 
        insurance program;
            (5) appropriate methods for establishing premiums for 
        insurance coverage under such program for such properties that, 
        based on accepted actuarial and rate making principles, cover 
        the full costs of providing such coverage;
            (6) appropriate eligibility criteria for making flood 
        insurance coverage under such program available for properties 
        that are not located within the 100-year floodplain or within a 
        community participating in the national flood insurance 
        program;
            (7) the appropriateness of the existing deductibles for all 
        properties eligible for insurance coverage under the national 
        flood insurance program, including the standard and variable 
        deductibles for pre-FIRM and post-FIRM properties, and whether 
        a broader range of deductibles should be established;
            (8) income levels of policyholders of insurance made 
        available under the national flood insurance program whose 
        properties are pre-FIRM subsidized properties;
            (9) how the national flood program is marketed, if changes 
        can be made so that more people are aware of flood coverage, 
        and how take-up rates may be improved;
            (10) the number of homes that are not primary residences 
        that are insured under the national flood insurance program and 
        are pre-FIRM subsidized properties; and
            (11) suggestions and means on how the program under this 
        Act can better meet its stated goals as well as the feasibility 
        of expanding the NFIP to cover the perils covered by this Act.
    (c) Consultation With FEMA.--In conducting the study under this 
section, the Comptroller General shall consult with the Director of the 
Federal Emergency Management Agency.
    (d) Report.--The Comptroller General shall complete the study under 
this section and submit a report to the Congress regarding the findings 
of the study not later than 5 months after the date of the enactment of 
this Act.
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