[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[H.R. 846 Introduced in House (IH)]






109th CONGRESS
  1st Session
                                H. R. 846

 To establish a Federal program to provide reinsurance to improve the 
                 availability of homeowners' insurance.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                           February 16, 2005

 Ms. Ginny Brown-Waite of Florida (for herself, Mr. Davis of Florida, 
Mr. Sherman, Ms. Ros-Lehtinen, Mr. Larsen of Washington, Ms. Bordallo, 
Mr. Lewis of Georgia, Mr. Weldon of Florida, Ms. Hooley, Mr. Wolf, Ms. 
  Wasserman Schultz, Mr. Bilirakis, Mr. Gene Green of Texas, and Mr. 
   Feeney) introduced the following bill; which was referred to the 
                    Committee on Financial Services

_______________________________________________________________________

                                 A BILL


 
 To establish a Federal program to provide reinsurance to improve the 
                 availability of homeowners' insurance.

    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 ``Homeowners' 
Insurance Availability 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. Program authority.
Sec. 3. Qualified lines of coverage.
Sec. 4. Covered perils.
Sec. 5. Auction of contracts for reinsurance coverage.
Sec. 6. Minimum level of retained losses and maximum Federal liability.
Sec. 7. Disaster Reinsurance Fund.
Sec. 8. National Commission on Catastrophe Risks and Insurance Loss 
                            Costs.
Sec. 9. Definitions.
Sec. 10. Regulations.
Sec. 11. Termination.
Sec. 12. Annual study of cost and availability of disaster insurance 
                            and program need.

SEC. 2. 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 5, which shall be made 
available for purchase by purchasers under section 5(a)(1) only through 
auctions under section 5(a).
    (b) Purpose.--The program shall be designed to make reinsurance 
coverage under this Act available to improve the availability of 
homeowners' insurance for the purpose of facilitating the pooling, and 
spreading the risk, of catastrophic financial losses from disasters and 
to improve the solvency of homeowners' insurance markets.
    (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 region established pursuant to section 5(a) for 
        which the auction is held.

SEC. 3. 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. 4. COVERED PERILS.

    Each contract for reinsurance coverage made available under this 
Act shall cover losses that are proximately caused by--
            (1) earthquakes;
            (2) perils ensuing from earthquakes, including fire and 
        tsunamis; and
            (3) tropical cyclones having maximum sustained winds of at 
        least 74 miles per hour, including hurricanes and typhoons.
The Secretary shall, by regulation, define the disaster perils under 
this section.

SEC. 5. AUCTION OF CONTRACTS FOR REINSURANCE COVERAGE.

    (a) Auction Program Requirements.--The Secretary shall carry out a 
program to auction contracts for reinsurance coverage under this Act 
made available pursuant to section 2(a), which shall comply with the 
following requirements:
            (1) Purchasers.--The auction program shall provide for 
        auctioning all contracts made available under this section to 
        private insurers and reinsurers, State insurance and 
        reinsurance programs, and other interested entities.
            (2) Regional auctions.--The auction program shall provide 
        for auctions on a regional basis. The Secretary shall divide 
        the States into not less than 6 regions for the purpose of 
        holding such regional auctions, which shall include separate 
        regions for all or part of the State of California and all or 
        part of the State of Florida. In determining the boundaries for 
        such regions, the Secretary shall consider which areas have 
        greater risks of losses from covered perils and which areas 
        have lesser risks of losses from covered perils, and shall 
        attempt not to combine those different types of areas. Auctions 
        for each region shall be conducted not less often than 
        annually.
            (3) Reserve price.--In auctioning contracts under this 
        section for reinsurance coverage, the Secretary shall set, for 
        each contract, a reserve price that is the minimum price at 
        which the contract may be sold, based upon the recommendations 
        of the Commission. The reserve price shall be determined on the 
        basis of the following components:
                    (A) 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.
                    (B) Risk load.--A risk load in an amount that is 
                not less than the risk-based price under subparagraph 
                (A).
                    (C) 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 section.
                    (D) Mitigation.--An adjustment based on an 
                actuarial analysis that takes into account any efforts 
                that are being made to reduce losses to property in the 
                region in which the contract is being sold.
            (4) Price gouging protections.--The auction program may 
        provide reinsurance coverage for losses incurred only for 
        property located in a State for which the State entity 
        authorized to make such determinations has certified to the 
        Secretary that there are in effect, in such State, laws or 
        regulations sufficient to prohibit price gouging, during the 
        term of such reinsurance coverage, in any disaster area located 
        within the State.
            (5) Mitigation requirements.--
                    (A) In general.--The auction program shall require 
                each purchaser of a contract, as a condition of such 
                purchase, to contribute an amount, that the Secretary 
                (in consultation with the Director of the Federal 
                Emergency Management Agency) shall establish and which 
                shall not exceed 5 percent of the price paid for the 
                contract, to communities that--
                            (i) are located in the State in which the 
                        reinsurance coverage under the contract is 
                        provided (or in the case of multiple States, 
                        among such States, as determined by the 
                        Secretary);
                            (ii) are designated by the Director of the 
                        Federal Emergency Management Agency and the 
                        appropriate emergency management agency for the 
                        State as Project Impact communities (for 
                        purposes of the pre-disaster mitigation program 
                        of such Agency); and
                            (iii) are participating in such programs or 
                        initiatives as the Secretary may require that 
                        provide incentives for construction of 
                        structures and communities that are resistant 
                        to damage from covered perils, which shall 
                        include the Building Code Effectiveness Grading 
                        Schedule of the Insurance Services Office.
                    (B) Use of contributions.--Amounts contributed to 
                communities pursuant to the requirement under 
                subparagraph (A) shall be used only--
                            (i) for activities to reduce losses from 
                        covered perils to properties covered under the 
                        reinsurance contract purchased under the 
                        auction program that are located in such 
                        communities; and
                            (ii) in accordance with such requirements 
                        as the Secretary, in consultation with the 
                        Director of the Federal Emergency Management 
                        Agency and appropriate State agencies, shall 
                        establish to ensure cost-effective use of such 
                        amounts.
                    (C) Allocation.--The Secretary, in consultation 
                with the Director of the Federal Emergency Management 
                Agency, shall establish requirements for allocation of 
                contributions among communities eligible under 
                subparagraph (A) to receive such contributions.
            (6) Other requirements.--The Secretary may establish such 
        other requirements for the auction program as the Secretary 
        considers necessary to carry out this Act.
    (b) Contract Terms and Conditions.--Each contract for reinsurance 
coverage under this Act shall include the following terms and 
conditions:
            (1) Maturity.--The term of each such contract shall not 
        exceed 1 year or such other term as the Secretary may 
        determine.
            (2) Transferability.--The contract shall at all times be 
        fully transferable, assignable, and divisible.
            (3) Threshold of coverage.--The contract shall provide that 
        the covered purchaser may receive a payment for losses covered 
        under the contract if, under a process specified in the 
        contract, the Secretary determines that the insurance industry 
        will, as a result of a single event of a covered peril, incur 
        losses within the coverage area for the region established 
        under subsection (a)(2) for which the contract was auctioned 
        that are covered by one or more lines of insurance under 
        section 4 in an aggregate amount, for such event, greater than 
        the level of retained losses specified in section 6.
            (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) 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 6, 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.
            (6) Submission of information.--The contract shall include 
        terms that--
                    (A) require the purchaser to notify the Secretary 
                of any sale, transfer, assignment, or division of the 
                contract or any interest in the contract, identify the 
                interest involved, and identify the price paid or 
                compensation provided; and
                    (B) authorize the disclosures required under 
                subsection (c)(2).
            (7) Other terms.--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) GAO Audit.--
            (1) In general.--For each fiscal year, the Comptroller 
        General of the United States shall conduct an audit of prices 
        for contracts made available under the auction program under 
        this section during such fiscal year that determines--
                    (A) the reserve prices established for such 
                contracts;
                    (B) the prices paid for such contracts that are 
                purchased;
                    (C) the prices paid, or compensation provided, in 
                any sales, transfers, assignments, or divisions of any 
                such contracts (or any interests in such contracts) in 
                the secondary market or to any third party; and
                    (D) pursuant to the information obtained under 
                subparagraphs (A) through (C), the appropriate reserve 
                prices for such contracts that are to be made available 
                in the succeeding fiscal year.
            (2) Use of information.--The Secretary shall provide any 
        information referred to in subsection (b)(6) that is obtained 
        by the Secretary to the Comptroller General, the Director of 
        the Congressional Budget Office, and the Director of the Office 
        of Management and Budget, and shall make such information 
        publicly available. The Secretary, the Director of the 
        Congressional Budget Office, the Director of the Office of 
        Management and Budget shall each take such information into 
        consideration in preparing any budget, report, estimate, or 
        recommendation to the extent it relates to the auction program 
        under this section, and in any determinations relating to the 
        Budget of the United States or the concurrent resolution on the 
        budget (as such term is defined in section 3 of the 
        Congressional Budget Act of 1974). The Secretary shall take 
        such information into consideration in establishing reserve 
        prices for contracts made available under this section.
    (d) 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 regional auction 
        procedure and contract cycle established under this section by 
        the Secretary, to offer to provide, in lieu of reinsurance 
        coverage under this Act made available by the Secretary, 
        reinsurance coverage that is substantially similar to such 
        coverage.
            (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 regional auction during which any reinsurance 
                coverage under this Act is to be made available, the 
                Secretary shall publish in the Federal Register the 
                reserve prices and terms for contracts for such 
                reinsurance coverage that are to be made available 
                during the auction;
                    (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 auction) 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 Act by the Secretary;
                    (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 
                commencement of the auction) to submit to the Secretary 
                an offer to provide, in lieu of the reinsurance 
                coverage under this Act otherwise to be made available 
                under an auction 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 to be made available during the auction for 
                the same contract cycle and at a reserve price and 
                terms that are substantially similar to the reserve 
                price and terms for reinsurance coverage otherwise to 
                be made available at the auction under this section by 
                the Secretary, the Secretary shall accept the offer (if 
                still outstanding) and, notwithstanding any other 
                provision of this Act, provide that the reinsurance 
                coverage provided by such entity in accordance with the 
                offer shall be made available at the auction; and
                    (F) if the Secretary accepts an offer pursuant to 
                subparagraph (E) to make reinsurance coverage available 
                at the auction, notwithstanding any other provision of 
                this Act, the Secretary shall reduce, to an equivalent 
                extent, the amount of reinsurance coverage otherwise to 
                be made available under this Act by the Secretary at 
                the auction, unless and until the Secretary determines 
                that the entity is not complying with the terms of the 
                accepted offer.

SEC. 6. 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 5(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) of this section.
    (b) Minimum Level of Retained Losses.--
            (1) Cumulative amount.--Subject to paragraphs (2), (3), and 
        (4) and notwithstanding any other provision of this Act, a 
        contract for reinsurance coverage may not be made available or 
        sold under section 5 through a regional auction unless the 
        contract requires that the insurance industry in the region for 
        which the auction was conducted sustains a cumulative amount of 
        retained losses (in covered lines resulting from covered 
        perils) of not less than an amount, determined by the Secretary 
        in consultation with the Commission, that is in the range 
        between the amount equal to the eligible loss projected to be 
        incurred once every 100 years from a single event in the region 
        and the amount equal to the eligible loss projected to be 
        incurred once every 250 years from such an event.
            (2) Initial adjustment based on private market.--The 
        Secretary may, before making contracts for reinsurance coverage 
        under this Act initially available under section 5, raise the 
        minimum level of retained losses from the amount required under 
        paragraph (1) for a region to ensure, as determined by the 
        Secretary, that such contracts comply with the principle under 
        section 2(c)(1).
            (3) Annual adjustment.--The Secretary may annually raise 
        the minimum level of retained losses established under 
        paragraph (1) for a region to reflect, as determined by the 
        Secretary--
                    (A) changes in the capacity of public reinsurance 
                programs or the private insurance and reinsurance 
                market;
                    (B) increases in the market value of properties; or
                    (C) such other situations as the Secretary 
                considers appropriate.
        The Secretary shall consider the minimum level of retained 
        losses requirement in paragraph (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 amounts 
        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 to the Commission 
        market information relevant to such determination and has 
        provided the Commission with an opportunity to advise the 
        Secretary regarding such information and determination.
            (4) 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 
        region 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 or region 
                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 or region.
                            (ii) The amount equal to the eligible loss 
                        projected to be incurred once every 100 years 
                        from a single event in the State or region.
            (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 region for which the contract was 
        made available.
            (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. 7. 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 under this Act 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 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) of this section and section 8(h), 
no Federal funds shall be authorized or appropriated for the Fund or 
for carrying out the reinsurance program under this Act.

SEC. 8. NATIONAL COMMISSION ON CATASTROPHE RISKS AND INSURANCE LOSS 
              COSTS.

    (a) Establishment.--The Secretary shall establish a commission to 
be known as the National Commission on Catastrophe Risks and Insurance 
Loss Costs.
    (b) Duties.--The Commission shall meet for the sole purpose of 
advising the Secretary regarding the estimated loss costs associated 
with the contracts for reinsurance coverage under this Act and carrying 
out the functions specified in this Act.
    (c) Members.--The Commission shall consist of not more than 5 
members, who shall be appointed by the Secretary and shall be broadly 
representative of the public interest. Members shall have no personal, 
professional, or financial interest at stake in the deliberations of 
the Commission. The membership of the Commission shall at all times 
include at least 1 representative of a nationally recognized consumer 
organization.
    (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 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.
    (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 are authorized 
        to be appropriated--
                    (A) $1,000,000 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 
                5(a)(3)(C), as determined by the Secretary;
                    (B) such additional sums as may be necessary to 
                carry out subsequent activities of the Commission;
                    (C) $1,000,000 for fiscal year 2006 for the initial 
                expenses of the Secretary in carrying out the program 
                authorized under section 2; 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 7. 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 
        5(a)(3)(C).
    (i) Termination.--The Commission shall terminate upon the effective 
date of the repeal under section 11(c).

SEC. 9. 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 8.
            (2) Covered perils.--The term ``covered perils'' means the 
        disaster perils under section 4.
            (3) Covered purchaser.--The term ``covered purchaser'' 
        means, with respect to reinsurance coverage made available 
        under a contract under section 5, the purchaser of the contract 
        auctioned under such section or any subsequent holder or 
        holders of the contract.
            (4) Disaster area.--The term ``disaster area'' means a 
        geographical area, with respect to which--
                    (A) a covered peril 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.
            (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) 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 3 by reinsurance coverage under this Act.
            (8) Reinsurance coverage.--The term ``reinsurance coverage 
        under this Act'' means coverage under contracts made available 
        under section 5 by the Secretary.
            (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, in consultation with the Commission, 
determines that continuation of the program for reinsurance coverage 
under this Act is necessary to carry out the purpose of this Act under 
section 2(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 7 
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 homeowners' 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 or region, the capacity of the private 
        homeowners' insurance market with respect to coverage for 
        losses from catastrophic disasters;
            (2) for each State or region, the percentage of homeowners 
        who have such coverage, the disasters covered, and the average 
        cost of such coverage;
            (3) for each State or region, the progress that private 
        reinsurers and capital markets have made in providing 
        reinsurance for such homeowners' insurance;
            (4) for each State or region, 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 not later than 2 years 
after the date of the enactment of this Act.
                                 <all>