[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4507 Introduced in House (IH)]







109th CONGRESS
  1st Session
                                H. R. 4507

To establish a Federal program to provide reinsurance for State natural 
                      disaster insurance programs.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                           December 13, 2005

 Mrs. Maloney introduced the following bill; which was referred to the 
                    Committee on Financial Services

_______________________________________________________________________

                                 A BILL


 
To establish a Federal program to provide reinsurance for State natural 
                      disaster insurance programs.

    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 
Catastrophe Insurance Act of 2005''.
    (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title and table of contents.
Sec. 2. Congressional findings.
Sec. 3. Program authority.
Sec. 4. Qualified lines of coverage.
Sec. 5. Covered perils.
Sec. 6. Contracts for reinsurance coverage for eligible State programs.
Sec. 7. Minimum level of retained losses and maximum Federal liability.
Sec. 8. Disaster Reinsurance Fund.
Sec. 9. Definitions.
Sec. 10. Regulations.
Sec. 11. Termination.
Sec. 12. Annual study of cost and availability of disaster insurance 
                            and program need.
Sec. 13. GAO study of Federal program for reinsurance for all solvency-
                            threatening events.

SEC. 2. CONGRESSIONAL FINDINGS.

    The Congress finds that --
            (1) in the last quarter-century, multiple significant 
        natural disasters have severely impacted the nation and caused 
        major insured losses;
            (2) in 2004, four major hurricanes hit the United States, 
        and each was among the 10 most costly hurricanes in the 
        Nation's history;
            (3) in 2005, the United States sustained the most costly 
        storm in its history, Hurricane Katrina, which caused insured 
        losses estimated at between $40 billion and $60 billion, and 
        suffered two other storms, Wilma and Rita;
            (4) the rising costs resulting from natural disasters have 
        placed a strain on the market for homeowners and commercial 
        insurance in many areas, jeopardizing the ability of consumers 
        adequately to insure their homes and businesses;
            (5) the threat of insufficient insurance capacity threatens 
        to increase the number of uninsured homes and businesses, which 
        in turn increases the risk of mortgage or business defaults and 
        the adverse impact such default can have on the Nation's 
        financial system;
            (6) in order to ensure capacity at a reasonable price, a 
        national plan needs to be implemented that allows the private 
        market to operate at full capacity while at the same time 
        supporting that market through State and Federal resources;
            (7) the risk of catastrophes may best be addressed by a 
        public-private partnership involving private industry, State 
        and local governments, and the Federal Government, each playing 
        their appropriate role;
            (8) it is appropriate that efforts to improve insurance 
        availability be designed and implemented at the State level;
            (9) some States have created State catastrophe funds to 
        ensure the continued availability of homeowners or business 
        insurance against a particular peril or to spread the costs of 
        such insurance;
            (10) while existing State programs have to date been 
        adequate to cover losses from natural disasters, it is 
        foreseeable that a small percentage of such events may exceed 
        the financial capacity of these programs;
            (11) providing Federal reinsurance for such State funds, at 
        the highest levels of insured losses, will improve the 
        effectiveness of State programs and will increase the 
        likelihood that claims will be paid in the event of a natural 
        mega-catastrophe--that is, a natural event which threatens the 
        solvency of the insurance industry as a whole;
            (12) it is necessary to provide a Federal reinsurance 
        program that will promote stability in the homeowners and 
        business insurance markets and encourage the continued growth 
        of capacity by the private and capital markets;
            (13) such a Federal program should not displace the ability 
        of the private entities or the capital markets to provide 
        adequate reinsurance capacity to address insurance market 
        dislocations caused by natural disasters, nor should it 
        discourage risk-spreading by individual insurers in accordance 
        with sound business practices; and
            (14) any Federal program must be founded upon sound 
        actuarial principles and structured in a manner that minimizes 
        bureaucracy and the potential impact on the Treasury.

SEC. 3. PROGRAM AUTHORITY.

    (a) In General.--The Secretary of the Treasury shall carry out a 
program under this Act to make reinsurance coverage available through 
contracts for reinsurance coverage under section 6, 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 to improve the availability of 
homeowners' insurance and insurance for businesses for the purpose of 
facilitating the pooling, and spreading the risk, of catastrophic 
financial losses from natural disasters and to improve the solvency of 
the markets for homeowners' insurance and business insurance.
    (c) Contract Principles.--Under the program under this Act, the 
Secretary shall offer reinsurance coverage through contracts with 
covered purchasers, which contracts--
            (1) shall not displace or compete with the private 
        insurance or reinsurance markets or capital markets;
            (2) shall minimize the administrative costs of the Federal 
        Government; and
            (3) shall provide coverage based solely on insured losses 
        within the State of the eligible State program purchasing the 
        contract.

SEC. 4. QUALIFIED LINES OF COVERAGE.

    A contract for reinsurance coverage made available under this Act 
shall provide insurance coverage against--
            (1) residential property losses to homes (including 
        dwellings owned under condominium and cooperative ownership 
        arrangements) and the contents of apartment buildings; and
            (2) real property losses to businesses and the contents of 
        business properties.

SEC. 5. COVERED PERILS.

    A contract for reinsurance coverage made available under this Act 
shall cover losses that are insured or reinsured by the eligible State 
program purchasing the contract, that are proximately caused by--
            (1) windstorm (hurricane, cyclone, or tornado);
            (2) earthquake (including any fire following);
            (3) winter catastrophe (snow, ice, or freezing);
            (4) fire;
            (5) tsunami;
            (6) flood;
            (7) volcanic eruption; or
            (8) hail
and the Secretary shall, by regulation, define the natural disaster 
perils under this section.

SEC. 6. 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 is a State-
operated program that complies with the following requirements:
            (1) Program design.--The program shall be a State-
        operated--
                    (A) insurance program that--
                            (i) offers coverage for--
                                    (I) homes (which may include 
                                dwellings owned under condominium and 
                                cooperative ownership arrangements) and 
                                the contents of apartments to State 
                                residents because of a finding by the 
                                State insurance commissioner or other 
                                State entity authorized to make such 
                                determination that such a program is 
                                necessary in order to provide for the 
                                continued availability of such 
                                residential coverage for all residents; 
                                or
                                    (II) business properties and the 
                                contents of business properties to 
                                businesses located in the State because 
                                of a finding by the State insurance 
                                commissioner or other State entity 
                                authorized to make such determination 
                                that such a program is necessary in 
                                order to provide for the continued 
                                availability of such coverage for all 
                                such businesses; and
                            (ii) is authorized by State law; or
                    (B) reinsurance program that is designed to improve 
                private insurance markets that offer coverage described 
                in subclause (I) or (II) of clause (i) because of a 
                finding described in subclause (I) or (II), 
                respectively, of clause (i).
            (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.
            (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 only a single peril.
            (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) Mitigation.--
                    (A) In general.--The State operating the program 
                shall, by law or regulation, have enacted--
                            (i) a program to mitigate insurance losses 
                        from natural catastrophes; and
                            (ii) a comprehensive, modern, and uniform 
                        statewide building code establishing minimum 
                        standards for the construction and maintenance 
                        of buildings and other structures to mitigate 
                        against future disasters, increase public 
                        safety, and enhance the rebuilding of such 
                        States, with minimum standards at least as 
                        comprehensive as the model building standards 
                        and codes developed by the International Code 
                        Council.
                    (B) Regulations.--The Secretary shall issue 
                regulations that establish the minimum standards for 
                States to satisfy the mitigation requirements under 
                subparagraph (A).
            (7) Coverage.--
                    (A) In general.--The program--
                            (i) may not 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;
                            (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 or insurance for 
                        businesses, as appropriate, for all State 
                        residents or businesses; and
                            (iii) shall provide that, for any insurance 
                        coverage 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, 2005, 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) State insurance pricing laws.--
                    (A) Requirement to allow risk-based pricing.--
                Except as provided in subparagraph (B), the State 
                operating such eligible State program may not have in 
                effect any law or regulation that prohibits or prevents 
                insurers (other than the State) from providing 
                insurance coverage for losses from covered perils to 
                any risks located in such State at premium rates which 
                are based on consideration of the risks involved and 
                accepted actuarial rate-making principles.
                    (B) Exception for certain state residual markets.--
                In the case of a State operating a residual market 
                insurance program for losses from covered perils to any 
                risks located in the State, if the premium rates 
                charged by the residual market insurance program are 
                below the premium rates the private market would charge 
                for similar coverage under the principles set forth in 
                subparagraph (A), the residual market insurance program 
                must make such coverage available to any person 
                requesting such coverage who pays the applicable 
                premium charged for such coverage.
            (9) 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. 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 have public members 
                        on its board of directors or have an advisory 
                        board with public members;
                            (ii) insurance or reinsurance coverage, as 
                        applicable, made available through the State 
                        program not supplant coverage that is otherwise 
                        reasonably available and affordable in the 
                        private market;
                            (iii) 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;
                            (iv) insurance or reinsurance coverage, as 
                        applicable, provided by the State program is 
                        made available on a nondiscriminatory basis to 
                        all qualifying residents or businesses;
                            (v) 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;
                            (vi) 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 disaster resistance 
                        that is substantially equivalent or greater 
                        than the resistance under any requirements for 
                        floods, earthquakes, or wind resistance issued 
                        by the Federal Emergency Management Agency;
                            (vii) the State has taken actions to 
                        establish an insurance rate structure that 
                        takes into account measures to mitigate 
                        insurance losses;
                            (viii) 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
                            (ix) 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 result from the 
        event, exceeds the amount of retained losses provided under the 
        contract (pursuant to section 7(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 to each 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.--The price of reinsurance coverage under the 
        contract for an eligible State program shall be an amount 
        established by the Secretary for the contract, as follows:
                    (A) 1 percent above market rate.--Except as 
                provided in subparagraph (B), the price of reinsurance 
                coverage under the contract shall be the amount that is 
                one percent greater than the lowest amount for which 
                such State program can obtain equivalent coverage in 
                the private reinsurance market, as demonstrated to the 
                Secretary by the eligible State program.
                    (B) Market coverage unavailable.--In the event that 
                an eligible State program can not demonstrate a price 
                for equivalent coverage in the private reinsurance 
                market for purposes of subparagraph (A), the price of 
                reinsurance coverage under the contract for such State 
                program shall be the amount that is one percent greater 
                than the lowest amount for which a private insurer with 
                an equivalent risk portfolio can obtain equivalent 
                coverage in the private reinsurance market, as 
                demonstrated to the Secretary by the eligible State 
                program.
            (7) 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 7, 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.
            (8) 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) Private Sector Right to Participate.--
            (1) Establishment of competitive procedure.--The Secretary 
        shall establish, by regulation, a competitive procedure under 
        this subsection that provides qualified entities an 
        opportunity, on a basis consistent with the contract cycle 
        established under this Act by the Secretary, to offer to 
        provide, in lieu of reinsurance coverage under this section, 
        reinsurance coverage that is substantially similar to coverage 
        otherwise made available under this section.
            (2) Competitive procedure.--Under the procedure established 
        under this subsection--
                    (A) the Secretary shall establish criteria for 
                private insurers, reinsurers, and capital market 
                companies, and consortia of such entities to be treated 
                as qualified entities for purposes of this subsection, 
                which criteria shall require such an entity to have at 
                all times capital sufficient to satisfy the terms of 
                the reinsurance contracts and shall include such other 
                industry and credit rating standards as the Secretary 
                considers appropriate;
                    (B) not less than 30 days before the beginning of 
                each contract cycle during which any reinsurance 
                coverage under this section is to be made available, 
                the Secretary may request proposals and shall publish 
                in the Federal Register the rates and terms for 
                contracts for reinsurance coverage under this section 
                that are to be made available during such contract 
                cycle;
                    (C) the Secretary shall provide qualified entities 
                a period of not less than 10 days (which shall 
                terminate not less than 20 days before the beginning of 
                the contract cycle) to submit to the Secretary a 
                written expression of interest in providing reinsurance 
                coverage in lieu of the coverage otherwise to be made 
                available under this section;
                    (D) the Secretary shall provide any qualified 
                entity submitting an expression of interest during the 
                period referred to in subparagraph (C) a period of not 
                less than 20 days (which shall terminate before the 
                beginning of the contract cycle) to submit to the 
                Secretary an offer to provide, in lieu of the 
                reinsurance coverage otherwise to be made available 
                under this section, coverage that is substantially 
                similar to such coverage;
                    (E) if the Secretary determines that an offer 
                submitted during the period referred to in subparagraph 
                (D) is a bona fide offer to provide reinsurance 
                coverage during the contract cycle at rates and terms 
                that are substantially similar to the rates and terms 
                for reinsurance coverage otherwise to be provided under 
                this section by the Secretary, the Secretary shall 
                accept the offer (if still outstanding) and, 
                notwithstanding any other provision of this Act, 
                provide for such entity to make reinsurance coverage 
                available in accordance with the offer; and
                    (F) if the Secretary accepts an offer pursuant to 
                subparagraph (E) to make reinsurance coverage 
                available, notwithstanding any other provision of this 
                Act, the Secretary shall reduce, to an equivalent 
                extent, the amount of reinsurance coverage available 
                under this section during the contract cycle to which 
                the offer relates, unless and until the Secretary 
                determines that the entity is not complying with the 
                terms of the accepted offer.

SEC. 7. 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 a single event of a covered peril (as required 
under section 6(b)(3) for payment of eligible losses) in various 
amounts, as the Secretary determines appropriate and subject to the 
requirements under subsection (b).
    (b) Minimum Level of Retained Losses.--
            (1) In general.--Subject to paragraphs (2) and (3) and 
        notwithstanding any other provision of this Act, a contract for 
        reinsurance coverage under section 6 for an eligible State 
        program that offers insurance or reinsurance coverage described 
        in subparagraph (A) or (B), respectively, of section 6(a)(1) 
        may not be made available or sold unless the contract requires 
        that the State program shall sustain an amount of retained 
        losses from a single event of a covered peril of not less than 
        $50,000,000,000.
            (2) Annual adjustment.--The Secretary may annually raise 
        the minimum level of retained losses established under 
        paragraph (1) for an eligible State program to reflect, as 
        determined by the Secretary--
                    (A) changes to the claims-paying capacity of the 
                program;
                    (B) changes in the capacity of the private 
                insurance and reinsurance market;
                    (C) increases in the market value of properties; or
                    (D) such other situations as the Secretary 
                considers appropriate.
        The Secretary shall consider the minimum level of retained 
        losses requirements in paragraphs (1) as a minimum requirement 
        only and shall have full authority, effective on the date of 
        the enactment of this Act, to establish levels of required 
        minimum retained losses in any amount greater than the amount 
        specified in such paragraph. In making any determination under 
        this paragraph in the minimum level of retained losses, the 
        Secretary shall establish such level at an amount such that the 
        program under this Act for making reinsurance coverage 
        available does not displace or compete with the private 
        insurance or reinsurance markets or capital markets, as 
        determined by the Secretary after the Secretary has provided 
        interested parties an opportunity to submit market information 
        relevant to such determination.
            (3) Optional annual inflationary or exposure adjustment.--
        The Secretary may, on an annual basis, raise the minimum level 
        of retained losses established under paragraph (1) for each 
        eligible State program to reflect the annual rate of inflation 
        or growth in exposures, whichever is greater. Any such raise 
        shall be made in accordance with an inflation index or exposure 
        index, as appropriate, that the Secretary determines to be 
        appropriate. The first such raise may be made one year after 
        contracts for reinsurance coverage under this Act are first 
        made available for purchase.
    (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 which 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 
                $25,000,000,000 (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 a prescribed level of 
                losses as determined by the Secretary:
            (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 50 percent of eligible losses in excess 
        of retained losses for the State of the program purchasing the 
        contract.
            (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. 8. DISASTER REINSURANCE FUND.

    (a) Establishment.--There is established within the Treasury of the 
United States a fund to be known as the Disaster Reinsurance 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) Administrative expenses.--To pay for the administrative 
        expenses incurred by the Secretary in carrying out the 
        reinsurance program under this Act.
            (3) Termination.--Upon termination under section 11, 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 9(h), no Federal funds 
shall be authorized or appropriated for the Fund or for carrying out 
the reinsurance program under this Act.

SEC. 9. DEFINITIONS.

    For purposes of this Act, the following definitions shall apply:
            (1) Covered perils.--The term ``covered perils'' means the 
        perils under section 5.
            (2) 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 6.
            (3) Disaster area.--The term ``disaster area'' means a 
        geographical area, with respect to which--
                    (A) a covered peril specified in section 5 has 
                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.
            (4) Eligible losses.--The term ``eligible losses'' means 
        losses in excess of the sustained and retained losses, as 
        defined by the Secretary.
            (5) Eligible state program.--The term ``eligible State 
        program'' means a State program that, pursuant to section 6(a), 
        is eligible to purchase reinsurance coverage made available 
        through contracts under section 6.
            (6) Price gouging.--The term ``price gouging'' means the 
        providing of any consumer good or service by a supplier 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 disaster 
        involved), than the price charged by the supplier for such 
        consumer good or service immediately before the disaster.
            (7) Qualified lines.--The term ``qualified lines'' means 
        lines of insurance coverage for which losses are covered under 
        section 4 by reinsurance coverage under this Act.
            (8) Reinsurance coverage.--The term ``reinsurance coverage 
        under this Act'' means coverage under contracts made available 
        under section 6.
            (9) Secretary.--The term ``Secretary'' means the Secretary 
        of the Treasury.
            (10) 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. 10. REGULATIONS.

    The Secretary shall issue any regulations necessary to carry out 
the program for reinsurance coverage under this Act.

SEC. 11. 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 10-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 determines that continuation of the 
program for reinsurance coverage under this Act, or a portion of such 
program is necessary to carry out the purpose of this Act under section 
3(b) because of insufficient growth of capacity in the private 
insurance market, the Secretary shall continue to provide reinsurance 
coverage under this Act or such portion of the program 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 8 
upon the repeal of this Act.

SEC. 12. ANNUAL STUDY OF COST AND AVAILABILITY OF DISASTER INSURANCE 
              AND PROGRAM NEED.

    (a) In General.--The Secretary shall, on an annual basis, conduct a 
study and submit to the Congress a report on the cost and availability 
of insurance for losses resulting from catastrophic disasters covered 
by the reinsurance program under this Act.
    (b) Contents.--Each annual study under this section shall determine 
and identify, on an aggregate basis--
            (1) for each State, the capacity of the private insurance 
        market with respect to coverage for losses from catastrophic 
        disasters;
            (2) for each State, the percentage of homeowners and 
        businesses who have such coverage, the disasters covered, and 
        the average cost of such coverage;
            (3) for each State, the progress that private reinsurers 
        and capital markets have made in providing reinsurance for such 
        homeowners' and business insurance;
            (4) for each State, the effects of the Federal reinsurance 
        program under this Act on the availability and affordability of 
        such insurance; and
            (5) the appropriate time for termination of the Federal 
        reinsurance program under this Act.
    (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 2 years after the date 
of the enactment of this Act.

SEC. 13. GAO STUDY OF FEDERAL PROGRAM FOR REINSURANCE FOR ALL SOLVENCY-
              THREATENING EVENTS.

    The Comptroller General of the United States shall conduct a study 
of the need for a Federal program to provide reinsurance for insured 
losses resulting from any catastrophic event that may threaten the 
solvency of any segment of the catastrophe insurance industry, 
including all naturally and non-naturally occurring events, regardless 
of cause, and the appropriateness of such a program to stabilize 
financial and insurance markets and to ensure the availability and 
affordability of insurance in the United States for losses from such 
events. The Comptroller General shall submit to the Congress a report 
regarding the conclusions of such study not later than the expiration 
of the 6-month period beginning on the date of the enactment of this 
Act.
                                 <all>