1.Short title; table of contents
(a)This Act may be cited as the
Homeowners Protection Act of
2007
.
(b)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.
Regulations.
Sec. 11.
Termination.
Sec. 12. Annual study
concerning benefits of the Act.
Sec. 13. GAO study of
the National Flood Insurance Program and hurricane-related
flooding.
Sec. 14.
Definitions.
2.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 thousands of deaths and over
$36,000,000,000 in loss;
(4)if the 1906 San Francisco earthquake
occurred again it could cause thousands of deaths, displace millions of
residents, destroy thousands of businesses, and cause over $400,000,000,000 in
loss;
(5)if a Category 5 hurricane were to hit Miami
it could cause thousands of deaths and over $50,000,000,000 in loss and
devastate the local and national economy;
(6)if a repeat of the 1938 Long Island
Express
were to occur again it could cause thousands of deaths and over
$30,000,000,000 in damage, and if a hurricane that strong were to directly hit
Manhattan it could cause over $150,000,000,000 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 exercised leadership
through reasonable action 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 is likely to exceed the financial capacity of these programs and the
local insurance markets;
(13)a limited national insurance backstop 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 national
insurance backstop 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.
3.National Commission on Catastrophe
Preparation and Protection
(a)The Secretary of the Treasury shall
establish a commission to be known as the National Commission on Catastrophe
Preparation and Protection.
(b)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—
(A)the costs of providing catastrophe
protection are decreased; and
(B)the United States is better
prepared.
(c)
(1)Appointment and qualificationThe Commission shall consist of 9 members,
as follows:
(A)The Secretary of Homeland Security or the
Secretary’s designee.
(B)8 members appointed by the Secretary, who
shall consist of—
(i)1 individual who is an actuary;
(ii)1 individual who is employed in
engineering;
(iii)1 individual representing the scientific
community;
(iv)1 individual representing property and
casualty insurers;
(v)1 individual representing
reinsurers;
(vi)1 individual who is a member or former
member of the National Association of Insurance Commissioners; and
(vii)2 individuals who are consumers.
(2)Prevention of conflicts of
interestMembers shall have
no personal or financial interest at stake in the deliberations of the
Commission.
(d)Treatment of non-federal
membersEach 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)
(1)The Commission may procure temporary and
intermittent services from individuals or groups recognized as experts in the
fields of meteorology, seismology, vulcanology, 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.
(2)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)
(1)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.
(2)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)
(1)The Commission and the Secretary may
solicit loss exposure data and such other information as either the Commission
or the Secretary deems necessary to carry out its responsibilities from
governmental agencies and bodies and organizations that act as statistical
agents for the insurance industry.
(2)Obligation to keep
confidentialThe Commission
and the Secretary shall take such actions as are necessary to ensure that
information that either deems confidential or proprietary is disclosed only to
authorized individuals working for the Commission or the Secretary.
(3)No State insurance or reinsurance program
may participate if any governmental agency within that State has refused to
provide information requested by the Commission or the Secretary.
(h)
(1)Authorization of
appropriationsThere is
authorized to be appropriated—
(A)$10,000,000 for fiscal year 2008 for
the—
(i)initial expenses in establishing the
Commission; and
(ii)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 2008 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)
(A)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.
(B)Inclusion in pricing
contractsAny offset obtained
under subparagraph (A) 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)The Commission shall terminate upon the
effective date of the repeal under section 11(c).
4.
(a)The Secretary, 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)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)Under the program established 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; and
(2)provide coverage based solely on insured
losses within a State for the eligible State program purchasing the
contract.
5.Qualified lines of coverageEach contract for reinsurance coverage made
available under this Act shall provide insurance coverage against residential
property losses to—
(1)homes (including dwellings owned under
condominium and cooperative ownership arrangements); and
(2)the contents of apartment buildings.
6.
(a)Each contract for reinsurance coverage made
available under this Act shall cover losses insured or reinsured by an 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 peril (not
including any flood) insured or reinsured under the eligible State program for
which reinsurance coverage under section 7 is provided.
(b)The Secretary shall, by regulation, define
the natural catastrophe perils described in subsection (a)(7).
7.Contracts for reinsurance coverage for
eligible State programs
(a)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)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
(II)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—
(i)homes (which may include dwellings owned
under condominium and cooperative ownership arrangements); and
(ii)the contents of apartments.
(2)
(A)The program shall meet the following
requirements:
(i)A majority of the members of the governing
body of the program shall be public officials.
(ii)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.
(iii)The State shall not be eligible for
Consumer HELP Fund assistance under section 9 if a State has appropriated money
from the State fund and not paid it back to the State fund, with
interest.
(iv)Upon receipt of assistance from the
Consumer HELP Fund, each reimbursement contract sold by a State shall provide
for reimbursements at 100 percent of eligible losses.
(v)A State shall be required to utilize
either—
(I)an open rating system that permits insurers
to set homeowners' insurance rates without prior approval of the State;
or
(II)a rate approval process that requires
actuarially sound, risk-based, self-sufficient homeowners' insurance
rates.
(B)A State shall not be eligible for Consumer
HELP Fund assistance unless the Secretary can certify that such State is in
compliance with the requirement described in clause (v).
(3)The program shall be structured and carried
out in a manner so that the program is exempt from all Federal taxation.
(4)The program shall cover perils enumerated
in section 6.
(5)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
(A)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.
(B)For purposes of this paragraph, prevention
and mitigation shall include methods to reduce losses of life and property,
including appropriate measures to adequately reflect—
(i)encouragement of awareness about the risk
factors and what can be done to eliminate or reduce them;
(ii)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
(iii)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)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)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, 2008, 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)
(A)
(i)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 Protection established under section
3.
(ii)The regulations issued under clause (i)
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)The regulations issued under subparagraph
(A)(i) 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 provides 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)Each contract under this section for
reinsurance coverage under this Act shall be subject to the following terms and
conditions:
(1)The term of the contract shall not exceed 1
year or such longer term as the Secretary may determine.
(2)The contract shall authorize claims
payments for eligible losses only to the eligible State program purchasing the
coverage.
(3)Retained losses requirementFor 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)The contract shall—
(A)cover any eligible losses from 1 or more
covered events that may occur during the term of the contract; and
(B)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 lossesEligible 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)
(A)The price of reinsurance coverage under the
contract shall be an amount established by the Secretary as follows:
(i)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)The price shall be established at a level
that—
(I)is designed to reflect the risks and costs
being borne under each reinsurance contract issued under this Act; and
(II)takes into consideration empirical models
of natural disasters and the capacity of private markets to absorb insured
losses from natural disasters.
(iii)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)The price shall consist of the following
components:
(i)A risk-based price, which shall reflect the
anticipated annualized payout of the contract according to the actuarial
analysis and recommendations of the Commission.
(ii)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)The contract shall contain a condition
providing that the Commission may require a 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
(A)The contract shall provide that the
purchaser of the contract may, during a 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.
(B)An additional contract purchased under
subparagraph (A) 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)The contract shall contain such other terms
as the Secretary considers necessary—
(A)to carry out this Act; and
(B)to ensure the long-term financial integrity
of the program under this Act.
(c)Participation by multi-State catastrophe
fund programs
(1)Nothing in this Act shall prohibit, and
this Act shall be construed to facilitate and encourage, the creation of
multi-State catastrophe insurance or reinsurance programs, or the participation
by such programs in the program established pursuant to section 4.
(2)The Secretary shall, by regulation, apply
the provisions of this Act to multi-State catastrophe insurance and reinsurance
programs.
8.Minimum level of retained losses and
maximum Federal liability
(a)Available levels of retained
lossesIn 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 programsSubject 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)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 at least once every 50 years on an annual basis
from covered perils.
(B)Transition rule for existing
programs
(i)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)
(I)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.
(II)The Secretary may extend the 5-year period
under subclause (I) for not more than 5 additional 1-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.
(III)The Secretary shall consult with the
appropriate officials of the State program regarding the required schedule and
any potential 1-year extensions.
(C)Transition rule for new programs
(i)The Secretary may provide that, in the case
of an eligible State program that, after January 1, 2008, 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)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)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)
(I)The Secretary may extend the 5-year period
for not more than 5 additional 1-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.
(II)The Secretary shall consult with the
appropriate officials of the State program regarding the required schedule and
any potential 1-year extensions.
(E)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)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
liabilityThe 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 soldEligible 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)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)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)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).
9.Consumer Hurricane, Earthquake, Loss
Protection (HELP) Fund
(a)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)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)Amounts in the Fund shall be available to
the Secretary only for the following purposes:
(1)For payments to covered purchasers under
contracts for reinsurance coverage for eligible losses under such
contracts.
(2)To pay for the operating costs of the
Commission.
(3)To pay for the administrative expenses
incurred by the Secretary in carrying out the reinsurance program under this
Act.
(4)Upon termination under section 11, as
provided in such section.
(d)
(1)To the extent that the amounts in the Fund
are insufficient to pay claims and expenses under subsection (c), the
Secretary—
(A)may issue such obligations of the Fund as
may be necessary to cover the insufficiency; and
(B)shall purchase any such obligations
issued.
(2)For the purpose of purchasing any such
obligations under paragraph (1)—
(A)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
(B)the purposes for which such 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
obligationsObligations
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)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)Any obligations issued under this
subsection shall be—
(A)repaid including interest, from the Fund;
and
(B)recouped from premiums charged for
reinsurance coverage provided under this Act.
(e)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 fundsExcept 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.
10.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.
11.
(a)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)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)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)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.
12.Annual study concerning benefits of the
Act
(a)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)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)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
requirementThe Secretary
shall first submit an annual report under this section not later than 2 years
after the date of the enactment of this Act.
13.GAO study of the National Flood Insurance
Program and hurricane-related flooding
(a)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)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 national flood insurance program to cover the perils covered by
this Act.
(c)In conducting the study under this section,
the Comptroller General shall consult with the Administrator of the Federal
Emergency Management Agency.
(d)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.
14.For purposes of this Act, the following
definitions shall apply:
(1)The term Commission
means
the National Commission on Catastrophe Preparation and Protection established
under section 3.
(2)The term
covered perils
means the natural disaster perils under section
6.
(3)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)The term disaster area
means
a geographical area, with respect to which—
(A)a covered peril specified in section 6 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)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)The term eligible State
program
means—
(A)a State program that, pursuant to section
7(a), is eligible to purchase reinsurance coverage made available through
contracts under section 7; or
(B)a multi-State program that is eligible to
purchase such coverage pursuant to section 7(c).
(7)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)The term qualified lines
means lines of insurance coverage for which losses are covered under section 5
by reinsurance coverage under this Act.
(9)The term reinsurance coverage under
this Act
means coverage under contracts made available under section
7.
(10)The term Secretary
means the
Secretary of the Treasury.
(11)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.