[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2582 Introduced in House (IH)]

112th CONGRESS
  1st Session
                                H. R. 2582

 To ensure the availability and affordability of homeowners' insurance 
                   coverage for catastrophic events.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             July 19, 2011

Ms. Wilson of Florida introduced the following bill; which was referred 
                 to the Committee on Financial Services

_______________________________________________________________________

                                 A BILL


 
 To ensure the availability and affordability of homeowners' insurance 
                   coverage for catastrophic events.

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

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Homeowners' 
Defense Act of 2011''.
    (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; table of contents.
Sec. 2. Findings and purposes.
             TITLE I--NATIONAL CATASTROPHE RISK CONSORTIUM

Sec. 101. Establishment; status; principal office; membership.
Sec. 102. Functions.
Sec. 103. Powers.
Sec. 104. Nonprofit entity; conflicts of interest; audits.
Sec. 105. Management.
Sec. 106. Staff; experts and consultants.
Sec. 107. Federal liability.
Sec. 108. Authorization of appropriations.
              TITLE II--CATASTROPHE OBLIGATION GUARANTEES

Sec. 201. Purposes.
Sec. 202. Establishment of debt guarantee program.
Sec. 203. Effect of guarantee.
Sec. 204. Full faith and credit.
Sec. 205. Fees for guarantees; amount; collection.
Sec. 206. Payment of losses.
Sec. 207. Regulations.
      TITLE III--REINSURANCE COVERAGE FOR ELIGIBLE STATE PROGRAMS

Sec. 301. Program authority.
Sec. 302. Contract principles.
Sec. 303. Terms of reinsurance contracts.
Sec. 304. Maximum Federal liability.
Sec. 305. Federal Natural Catastrophe Reinsurance Fund.
Sec. 306. Regulations.
                   TITLE IV--MITIGATION GRANT PROGRAM

Sec. 401. Mitigation grant program.
                      TITLE V--GENERAL PROVISIONS

Sec. 501. Eligible State programs.
Sec. 502. Study and conditional coverage of commercial residential 
                            lines of insurance.
Sec. 503. Study of risk-based pricing and State program rates.
Sec. 504. Definitions.
Sec. 505. Regulations.

SEC. 2. FINDINGS AND PURPOSES.

    (a) Findings.--The Congress finds that--
            (1) the United States has a history of catastrophic natural 
        disasters, including hurricanes, tornadoes, flood, fire, 
        earthquakes, and volcanic eruptions;
            (2) although catastrophic natural disasters occur 
        infrequently, they will continue to occur and are predictable;
            (3) such disasters generate large economic losses and a 
        major component of those losses comes from damage and 
        destruction to homes;
            (4) for the majority of Americans, their investment in 
        their home represents their single biggest asset and the 
        protection of that investment is paramount to economic and 
        social stability;
            (5) the United States needs to take and support State 
        actions to be better prepared for and better protected from 
        catastrophes;
            (6) as the risk of catastrophic losses grows, so do the 
        risks that any premiums collected by private insurers for 
        extending coverage will be insufficient to cover future 
        catastrophes, and private insurers, in an effort to protect 
        their shareholders and policyholders (in the case of mutually 
        owned companies), have thus significantly raised premiums and 
        curtailed insurance coverage in States exposed to major 
        catastrophes;
            (7) such effects on the insurance industry have been 
        harmful to economic activity in States exposed to major 
        catastrophes and have placed significant burdens on residents 
        of such States;
            (8) Hurricanes Katrina, Rita, and Wilma struck the United 
        States in 2005, causing over $200,000,000,000 in total economic 
        losses, and insured losses to homeowners in excess of 
        $50,000,000,000;
            (9) the Federal Government has provided and will continue 
        to provide resources to pay for losses from future 
        catastrophes;
            (10) when Federal assistance is provided to the States, 
        accountability for Federal funds disbursed is paramount;
            (11) the Government Accountability Office or other 
        appropriate agencies must have the means in place to confirm 
        that Federal funds for catastrophe relief have reached the 
        appropriate victims and have contributed to the recovery effort 
        as efficiently as possible so that taxpayer funds are not 
        misspent and citizens are enabled to rebuild and resume 
        productive activities as quickly as possible;
            (12) States that are recipients of Federal funds must be 
        responsible to account for and provide an efficient means for 
        distribution of funds to homeowners to enable the rapid 
        rebuilding of local economies after a catastrophic event 
        without unduly burdening taxpayers who live in areas seldom 
        affected by natural disasters;
            (13) State insurance and reinsurance programs can provide a 
        mechanism for States to exercise that responsibility if they 
        appropriately underwrite and price risk, and if they pay claims 
        quickly and within established contractual terms;
            (14) making available Federal guarantees to enhance the 
        capability of eligible State programs to issue debt will 
        minimize the exposure of State and Federal taxpayers who 
        otherwise may bear the consequences of underfunded programs or 
        under-insured communities following catastrophic events, 
        especially during today's historic market turmoil; and
            (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.
    (b) Purposes.--The purposes of this Act are to establish a program 
to provide Federal support for State-sponsored insurance programs to 
help homeowners prepare for and recover from the damages caused by 
natural catastrophes, to encourage mitigation and prevention for such 
catastrophes, to promote the use of private market capital as a means 
to insure against such catastrophes, to expedite the payment of claims 
and better assist in the financial recovery from such catastrophes.

             TITLE I--NATIONAL CATASTROPHE RISK CONSORTIUM

SEC. 101. ESTABLISHMENT; STATUS; PRINCIPAL OFFICE; MEMBERSHIP.

    (a) Establishment.--There is established an entity to be known as 
the ``National Catastrophe Risk Consortium'' (in this title referred to 
as the ``Consortium'').
    (b) Status.--The Consortium is not a department, agency, or 
instrumentality of the United States Government.
    (c) Principal Office.--The principal office and place of business 
of the Consortium shall be such location within the United States 
determined by the Board of Directors to be the most advantageous for 
carrying out the purpose and functions of the Consortium.
    (d) Membership.--Any State that has established a reinsurance fund 
or has authorized the operation of a State residual insurance market 
entity, or State-sponsored provider of natural catastrophe insurance, 
shall be eligible to participate in the Consortium.

SEC. 102. FUNCTIONS.

    The Consortium shall--
            (1) work with all States, particularly those participating 
        in the Consortium, to gather and maintain an inventory of 
        catastrophe risk obligations held by State reinsurance funds, 
        State residual insurance market entities, and State-sponsored 
        providers of natural catastrophe insurance;
            (2) at the discretion of the affected members and on a 
        conduit basis, issue securities and other financial instruments 
        linked to the catastrophe risks insured or reinsured through 
        members of the Consortium in the capital markets;
            (3) coordinate reinsurance contracts between participating, 
        qualified reinsurance funds and private parties;
            (4) act as a centralized repository of State risk 
        information that can be accessed by private-market participants 
        seeking to participate in the transactions described in 
        paragraphs (2) and (3) of this section;
            (5) establish a catastrophe risk database to perform 
        research and analysis that encourages standardization of the 
        risk-linked securities market;
            (6) perform any other functions, other than assuming risk 
        or incurring debt, that are deemed necessary to aid in the 
        transfer of catastrophe risk from participating States to 
        private parties; and
            (7) submit annual reports to Congress describing the 
        activities of the Consortium for the preceding year, and the 
        first such annual report shall include an assessment of the 
        costs to States and regions associated with catastrophe risk 
        and an analysis of the costs and benefits, for States not 
        participating in the Consortium, of such nonparticipation.

SEC. 103. POWERS.

    The Consortium--
            (1) may make and perform such contracts and other 
        agreements with any individual or other private or public 
        entity however designated and wherever situated, as may be 
        necessary for carrying out the functions of the Consortium; and
            (2) shall have such other powers, other than the power to 
        assume risk or incur debt, as may be necessary and incident to 
        carrying out this Act.

SEC. 104. NONPROFIT ENTITY; CONFLICTS OF INTEREST; AUDITS.

    (a) Nonprofit Entity.--The Consortium shall be a nonprofit entity 
and no part of the net earnings of the Consortium shall inure to the 
benefit of any member, founder, contributor, or individual.
    (b) Conflicts of Interest.--No director, officer, or employee of 
the Consortium shall in any manner, directly or indirectly, participate 
in the deliberation upon or the determination of any question affecting 
his or her personal interests or the interests of any Consortium, 
partnership, or organization in which he or she is directly or 
indirectly interested.
    (c) Audits.--
            (1) Annual audit.--The financial statements of the 
        Consortium shall be audited annually in accordance with 
        generally accepted auditing standards by independent certified 
        public accountants.
            (2) Reports.--The report of each annual audit pursuant to 
        paragraph (1) shall be included in the annual report submitted 
        in accordance with section 102(7).
    (d) Prohibition on Election and Lobbying Activities.--
            (1) Federal.--The Consortium may not--
                    (A) make any contribution to a candidate for 
                election for Federal office or to a political 
                committee;
                    (B) employ or retain--
                            (i) a registered lobbyist under the 
                        Lobbying Disclosure Act of 1995 (2 U.S.C. 1601 
                        et seq.); or
                            (ii) an organization that employs one or 
                        more lobbyists and is registered under section 
                        4(a)(2) of such Act (2 U.S.C. 1603(a)(2)); or
                    (C) provide any thing of value, other than 
                educational materials or information, to any elected 
                official of the Federal Government.
        For purposes of this paragraph, the terms ``contribution'', 
        ``candidate'', ``Federal office'', and ``political committee'' 
        have the meanings given such terms in section 301 of the 
        Federal Election Campaign Act of 1971 (2 U.S.C. 431).
            (2) Consortium.--The Consortium may not--
                    (A) make any contribution to a candidate for 
                election for any State or local office or to any 
                committee, club, association, or other group that 
                receives contributions or makes expenditures for the 
                purpose of influencing any such election;
                    (B) employ or retain any person who engages in 
                influencing legislating (as such term is defined in 
                section 4911(d) of the Internal Revenue Code of 1986 
                (26 U.S.C. 4911(d))) of any State or local legislative 
                body; or
                    (C) provide any thing of value, other than 
                educational materials or information, to any elected 
                official of any State or local government.

SEC. 105. MANAGEMENT.

    (a) Board of Directors; Membership; Designation of Chairperson.--
            (1) Board of directors.--The management of the Consortium 
        shall be vested in a board of directors (referred to in this 
        title as the ``Board'') composed of not less than 3 members.
            (2) Chairperson.--The Secretary of the Treasury, or the 
        designee of the Secretary, shall serve as the chairperson of 
        the Board.
            (3) Membership.--The members of the Board shall include--
                    (A) the Secretary of Homeland Security and the 
                Secretary of Commerce, or the designees of such 
                Secretaries, respectively, but only during such times 
                as there are fewer than two States participating in the 
                Consortium; and
                    (B) a member from each State participating in the 
                Consortium, who shall be appointed by such State.
    (b) Bylaws.--The Board may prescribe, amend, and repeal such bylaws 
as may be necessary for carrying out the functions of the Consortium.
    (c) Compensation, Actual, Necessary, and Transportation Expenses.--
            (1) Non-federal employees.--A member of the Board who is 
        not otherwise employed by the Federal Government shall be 
        entitled to receive the daily equivalent of the annual rate of 
        basic pay payable for level IV of the Executive Schedule under 
        section 5315 of title 5, United States Code, as in effect from 
        time to time, for each day (including travel time) during which 
        such member is engaged in the actual performance of duties of 
        the Consortium.
            (2) Federal employees.--A member of the Board who is an 
        officer or employee of the Federal Government shall serve 
        without additional pay (or benefits in the nature of 
        compensation) for service as a member of the Consortium.
            (3) Travel expenses.--Members of the Consortium shall be 
        entitled to receive travel expenses, including per diem in lieu 
        of subsistence, equivalent to those set forth in subchapter I 
        of chapter 57 of title 5, United States Code.
    (d) Quorum.--A majority of the Board shall constitute a quorum.
    (e) Executive Director.--The Board shall appoint an executive 
director of the Consortium on such terms as the Board may determine.

SEC. 106. STAFF; EXPERTS AND CONSULTANTS.

    (a) Staff.--
            (1) Appointment.--The Board of the Consortium may appoint 
        and terminate such other staff as are necessary to enable the 
        Consortium to perform its duties.
            (2) Compensation.--The Board of the Consortium may fix the 
        compensation of the executive director and other staff.
    (b) Experts and Consultants.--The Board shall procure the services 
of experts and consultants as the Board considers appropriate.

SEC. 107. FEDERAL LIABILITY.

    The Federal Government and the Consortium shall not bear any 
liabilities arising from the actions of the Consortium. Participating 
States shall retain all catastrophe risk until the completion of a 
transaction described in paragraphs (2) and (3) of section 102.

SEC. 108. AUTHORIZATION OF APPROPRIATIONS.

    There are authorized to be appropriated to carry out this title 
$20,000,000 for each of fiscal years 2012 through 2016.

              TITLE II--CATASTROPHE OBLIGATION GUARANTEES

SEC. 201. PURPOSES.

    The purposes of this title are to establish a program--
            (1) to promote the availability of private capital to 
        provide liquidity and capacity to State catastrophe insurance 
        programs; and
            (2) to expedite the payment of claims under State 
        catastrophe insurance programs and better assist the financial 
        recovery from significant natural catastrophes by authorizing 
        the Secretary of the Treasury to guarantee debt for such 
        purposes.

SEC. 202. ESTABLISHMENT OF DEBT GUARANTEE PROGRAM.

    (a) Authority of Secretary.--The Secretary of the Treasury is 
authorized and shall have the powers and authorities necessary to 
guarantee, and to enter into commitments to guarantee, holders of debt 
against loss of principal or interest, or both, on any such debt issued 
by eligible State programs for purposes of this title, provided that 
the total principal amount of debt obligations guaranteed by the 
Secretary--
            (1) for eligible State programs that cover earthquake peril 
        shall not exceed $3,500,000,000; and
            (2) for eligible State programs that cover all other perils 
        shall not exceed $17,000,000,000.
    (b) Conditions for Guarantee Eligibility.--A debt guarantee under 
this section may be made only if the Secretary has issued a commitment 
to guarantee to an eligible State program. The commitment to guarantee 
shall be for a period of 3 years and may be extended by the Secretary 
for a period of 1 year on each annual anniversary of the issuance of 
the commitment to guarantee. The commitment to guarantee and each 
extension of such commitment may be issued by the Secretary only if the 
following requirements are satisfied:
            (1) The eligible State program submits to the Secretary a 
        report setting forth, in such form and including such 
        information as the Secretary shall require, how the eligible 
        State program plans to repay the debt.
            (2) Based upon the eligible State program's report 
        submitted pursuant to paragraph (1), the Secretary determines 
        there is reasonable assurance that the eligible State program 
        can meet its repayment obligation under the debt.
            (3) The eligible State program enters into an agreement 
        with the Secretary, as the Secretary shall require, that the 
        eligible State program will not use Federal funds of any kind 
        or from any Federal source (including any disaster or other 
        financial assistance, loan proceeds, and any other assistance 
        or subsidy) to repay the debt.
            (4) The commitment to guarantee shall specify the fees for 
        debt guarantee coverage.
            (5) The maximum term of the debt that shall be specified in 
        a commitment issued under this section may not exceed 30 years.
            (6) The Secretary determines that the eligible State 
        program does not cover losses arising from floods to properties 
        located in areas having special flood hazards (as such term is 
        defined for purposes of the National Flood Insurance Act of 
        1968 and the Flood Disaster Protection Act of 1973).
    (c) Mandatory Assistance for Eligible State Programs.--The 
Secretary shall upon the request of an eligible State program and 
pursuant to a commitment to guarantee issued under subsection (b), 
provide a guarantee under subsection (d) for such eligible State 
program in the amount requested by such eligible State program, subject 
to the limitation under subsection (d)(2).
    (d) Catastrophic Debt Guarantee.--A debt guarantee under this 
subsection for an eligible State program shall be subject to the 
following requirements:
            (1) Preconditions.--The eligible State program shows to the 
        satisfaction of the Secretary that insured losses in the State 
        to the eligible State program arising from the event or events 
        covered by the commitment to guarantee are likely to exceed the 
        eligible State program's available cash resources, as 
        calculated on the date of the event.
            (2) Amount.--The aggregate principal amount of the debt 
        guaranteed following an event or events referred to in 
        paragraph (1) may not exceed the amount by which the insured 
        losses expected to be sustained by the State program as a 
        result of such event or events exceed 80 percent of the 
        qualifying assets of the eligible State program as stated in 
        the most recent quarterly financial statement filed with the 
        domiciliary regulator of the program prior to the event or 
        events, except that, for eligible State programs that are not 
        required to file such quarterly financial statements, the 
        aggregate principal amount of the debt guaranteed may not 
        exceed the amount by which insured losses sustained by the 
        State program as a result of such event or events exceed 80 
        percent of the unrestricted net assets as stated in the annual 
        financial statement for the program's fiscal year ending 
        immediately prior to the event or events.
            (3) Use of funds.--Amounts of debt guaranteed under this 
        section shall be used only to pay the costs of issuing debt and 
        to pay the insured losses and loss adjustment expenses incurred 
        by an eligible State program. Such amounts shall not be used 
        for any other purpose.
    (e) Funding.--There are authorized to be appropriated such sums as 
may be necessary to carry out this section.

SEC. 203. EFFECT OF GUARANTEE.

    The issuance of any guarantee by the Secretary under this title 
shall be conclusive evidence that--
            (1) the guarantee has been properly obtained;
            (2) the underlying debt qualified for such guarantee; and
            (3) the guarantee is valid, legal, and enforceable.

SEC. 204. FULL FAITH AND CREDIT.

    The full faith and credit of the United States is pledged to the 
payment of all guarantees issued under this title with respect to 
principal and interest.

SEC. 205. FEES FOR GUARANTEES; AMOUNT; COLLECTION.

    The Secretary shall charge and collect fees for each guarantee in 
amounts specified in the commitment to guarantee, which shall be in 
amounts sufficient in the judgment of the Secretary at the time of 
issuance of the commitment to guarantee to cover applicable 
administrative costs and probable losses on the guaranteed obligations 
covered by the commitment to guarantee, but in any event not to exceed 
one-half of 1 per centum per annum of the outstanding indebtedness 
covered by each guarantee.

SEC. 206. PAYMENT OF LOSSES.

    (a) In General.--The Secretary agrees to pay to the duly appointed 
paying agent or trustee (in this section referred to as the ``Fiscal 
Agent'') for the eligible State program that portion of the principal 
and interest on any debt guaranteed under this title that shall become 
due for payment but shall be unpaid by the eligible State program as a 
result of such program having provided insufficient funds to the Fiscal 
Agent to make such payments. The Secretary shall make such payments on 
the date such principal or interest becomes due for payment or on the 
business day next following the day on which the Secretary shall 
receive notice of failure on the part of the eligible State program to 
provide sufficient funds to the Fiscal Agent to make such payments, 
whichever is later. Upon making such payment, the Secretary shall be 
subrogated to all the rights of the ultimate recipient of the payment. 
The Secretary shall be entitled to recover from the eligible State 
program the amount of any payments made pursuant to any guarantee 
entered into under this title.
    (b) Role of the Attorney General.--The Attorney General shall take 
such action as may be appropriate to enforce any right accruing to the 
United States as a result of the issuance of any guarantee under this 
title.
    (c) Right of the Secretary.--Notwithstanding any other provision of 
law relating to the acquisition, handling, or disposal of property by 
the United States, the Secretary shall have the right in the discretion 
of the Secretary to complete, recondition, reconstruct, renovate, 
repair, maintain, operate, or sell any property acquired by the 
Secretary pursuant to the provisions of this title.

SEC. 207. REGULATIONS.

    The Secretary shall issue any regulations necessary to carry out 
the debt-guarantee program established under this title.

      TITLE III--REINSURANCE COVERAGE FOR ELIGIBLE STATE PROGRAMS

SEC. 301. PROGRAM AUTHORITY.

    The Secretary of the Treasury, shall make available for purchase, 
only by eligible State programs, contracts for reinsurance coverage 
under this title.

SEC. 302. CONTRACT PRINCIPLES.

    Contracts for reinsurance coverage made available under this 
title--
            (1) shall be priced on an actuarially sound basis;
            (2) shall minimize the administrative costs of the Federal 
        Government; and
            (3) shall provide coverage based solely on insured losses 
        covered by the eligible State program purchasing the contract.

SEC. 303. TERMS OF REINSURANCE CONTRACTS.

    (a) Minimum Attachment Point and Levels of Coverage.--The Secretary 
shall establish attachment points at which reinsurance coverage under 
this title is provided to eligible State programs. In setting 
attachment points and in determining the levels of reinsurance coverage 
provided, the Secretary shall take into consideration--
            (1) the coverage available through eligible State programs;
            (2) the availability and accessibility of reinsurance in 
        the private market; and
            (3) other factors as deemed appropriate by the Secretary.
    (b) Ninety Percent Coverage of Insured Losses in Excess of Retained 
Losses.--Each contract for reinsurance coverage under this title shall 
provide that the amount paid out under the contract shall be equal to 
90 percent of the amount of insured losses of the eligible State 
program in excess of the amount of retained losses that the contract 
requires, pursuant to subsection (a), to be incurred by such program.
    (c) Maturity.--The term of each contract for reinsurance coverage 
under this title shall not exceed 1 year or such other term as the 
Secretary may determine.
    (d) Payment Condition.--Each contract for reinsurance coverage 
under this title shall authorize claims payments to the eligible State 
program purchasing the coverage only for insured losses provided under 
the contract.
    (e) Multiple Events.--The contract shall cover any insured losses 
from one or more events that may occur during the term of the contract 
and shall provide that if multiple events occur, the retained losses 
requirement under subsection (a) shall apply on a calendar year basis, 
in the aggregate and not separately to each individual event.
    (f) Timing of Claims.--Claims under a contract for reinsurance 
coverage under this title shall include only insurance claims 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.
    (g) Actuarial Pricing.--The price of coverage under a reinsurance 
contract under this title shall be an amount, established by the 
Secretary at a level that annually produces expected premiums that 
shall be sufficient to pay the reasonably anticipated cost of all 
claims (which may not be equal only to average annual costs), loss 
adjustment expenses, all administrative costs of reinsurance coverage 
offered under this title, and any such outwards reinsurance, as 
described in section 305(c)(3), as the Secretary considers prudent 
taking into consideration the demand for reinsurance coverage under 
this title. The anticipated cost of all claims shall be comparable to 
amounts being included in the price for similar layers of coverage in 
the private sector, taking into account the savings associated with 
non-profit and tax-exempt status of the Fund established under section 
305.
    (h) Information.--Each contract for reinsurance coverage under this 
title shall contain a condition providing that the Secretary may 
require the eligible State program that is covered under the contract 
to submit to the Secretary all information on the eligible State 
program relevant to the duties of the Secretary under this title.
    (i) Others.--Contracts for reinsurance coverage under this title 
shall contain such other terms as the Secretary considers necessary to 
carry out this title and to ensure the long-term financial integrity of 
the program under this title.

SEC. 304. MAXIMUM FEDERAL LIABILITY.

    (a) In General.--Subject to subsection (b) and notwithstanding any 
other provision of law, the aggregate potential liability for payment 
of claims under all contracts for reinsurance coverage under this title 
sold in any single year shall be determined by the Secretary based on 
review of the market for reinsurance coverage under this title.
    (b) Limitation.--The authority of the Secretary to enter into 
contracts for reinsurance coverage under this title shall be effective 
for any fiscal year only to such extent or in such amounts as are or 
have been provided in appropriation Acts for such fiscal year for the 
aggregate potential liability for payment of claims under all contracts 
for reinsurance coverage under this title.

SEC. 305. FEDERAL NATURAL CATASTROPHE REINSURANCE FUND.

    (a) Establishment.--There is established within the Treasury of the 
United States a fund to be known as the Federal Natural Catastrophe 
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 title;
            (2) any amounts appropriated for the aggregate potential 
        liability for payment of claims under all contracts for 
        reinsurance coverage under this title; and
            (3) any amounts earned on investments of the Fund pursuant 
        to subsection (d).
    (c) Uses.--Amounts in the Fund shall be available to the Secretary 
only for the following purposes:
            (1) Contract payments.--For payments to purchasers covered 
        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 title.
            (3) Outwards reinsurance.--To obtain retrocessional or 
        other reinsurance coverage of any kind to cover risk reinsured 
        under contracts for reinsurance coverage made available under 
        this title.
    (d) Investment.--The Secretary shall invest such amounts in the 
Fund as the Secretary considers advisable in obligations issued or 
guaranteed by the United States. For purposes of the grant mandate in 
section 401(e) for a fiscal year, the Secretary shall disclose the 
annual net investment income available not later than 60 days after the 
conclusion of such fiscal year and disperse appropriate funds not later 
than 90 days after the conclusion of such fiscal year.

SEC. 306. REGULATIONS.

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

                   TITLE IV--MITIGATION GRANT PROGRAM

SEC. 401. MITIGATION GRANT PROGRAM.

    (a) Establishment.--The Secretary of Housing and Urban Development 
shall establish and carry out a program to provide grants to eligible 
entities to develop, enhance, or maintain programs to prevent and 
mitigate losses from natural catastrophes.
    (b) Grants.--A grant provided under subsection (a) shall be used to 
reduce loss of life and property by--
            (1) encouraging awareness of risk factors and what steps 
        can be taken to eliminate or reduce them, including public 
        education campaigns to promote citizen and community 
        preparedness;
            (2) assisting in the determination of the location of risk 
        by giving careful consideration to the natural risks for the 
        location of a property;
            (3) providing inspections of homes to identify areas to 
        strengthen such homes and reduce exposure to natural 
        catastrophes;
            (4) providing financial assistance to homeowners to 
        retrofit homes to reduce exposure to natural catastrophes; or
            (5) supporting disaster response readiness programs, 
        including initiatives that develop, enhance ,or maintain the 
        capacity of a public safety organization to be better prepared, 
        equipped, and trained to respond to natural catastrophes.
    (c) Consultation With Experts.--In carrying out the program 
established under subsection (a), the Secretary of Housing and Urban 
Development shall consult with--
            (1) disaster preparedness and response organizations;
            (2) homebuilders;
            (3) real estate professionals;
            (4) building code enforcement agencies; and
            (5) any other person that the Secretary considers 
        appropriate.
    (d) Eligible Entity Defined.--In this section, the term ``eligible 
entity'' means a State or local government, a part or program of a 
State or local government, or a nationally recognized, congressionally 
chartered disaster response non-profit organization.
    (e) Grant Mandate.--The Secretary shall, to the extent provided in 
advance in appropriation Acts, use not less than 35 percent of the net 
investment income from the Federal Natural Catastrophe Reinsurance Fund 
earned in each fiscal year pursuant to section 305(d) for grants under 
this section.

                      TITLE V--GENERAL PROVISIONS

SEC. 501. ELIGIBLE STATE PROGRAMS.

    (a) Eligible State Programs.--A State program shall be considered 
an ``eligible State program'' for purposes of this Act if the Secretary 
certifies, in accordance with the procedures established under 
subsection (c), that the State program complies with the following 
requirements:
            (1) State program design.--The State program is established 
        and authorized by State law as an insurance program or a 
        reinsurance program that is designed to improve private 
        insurance markets and that offers residential property 
        insurance coverage for losses arising from any personal 
        residential line of insurance, as defined in the Uniform 
        Property and Casualty Product Coding Matrix of the National 
        Association of Insurance Commissioners.
            (2) Operation.--The State program shall meet the following 
        requirements:
                    (A) A majority of the members of the governing body 
                of the State program shall be public officials or 
                appointed by public officials.
                    (B) The State shall have a financial interest in 
                the State program.
                    (C) If the State has at any time appropriated 
                amounts from the State program's funds for any purpose 
                other than payments for losses insured under the State 
                program, or payments made in connection with any of the 
                State program's authorized activities, the State shall 
                have returned such amounts to the State fund, together 
                with interest on such amounts.
            (3) Tax status.--The State program shall have received from 
        the Secretary (or the Secretary's designee) a written 
        determination, within the meaning of section 6110(b) of the 
        Internal Revenue Code of 1986, that the program either--
                    (A) constitutes an ``integral part'' of the State 
                that has created it; or
                    (B) is otherwise exempt from Federal income 
                taxation.
            (4) Earnings.--The State program may not provide for any 
        distribution of any part of any net profits of the State 
        program to any insurer that participates in the State program.
            (5) Prevention and mitigation.--
                    (A) Mitigation of losses.--The State program shall 
                include provisions designed to encourage and support 
                programs to mitigate losses from natural catastrophes 
                for which the State insurance or reinsurance program 
                was established to provide insurance coverage.
                    (B) Operational requirements.--The State program 
                shall operate in a State that--
                            (i) requires that an appropriate public 
                        body within the State shall have adopted 
                        adequate mitigation measures with effective 
                        enforcement provisions which the Secretary 
                        finds are consistent with the criteria for 
                        construction described in the International 
                        Code Council building codes;
                            (ii) has taken actions to establish an 
                        insurance rate structure that takes into 
                        account measures to mitigate insured losses; 
                        and
                            (iii) ensures, to the extent that 
                        reinsurance coverage made available under the 
                        eligible State program results in any cost 
                        savings in providing insurance coverage for 
                        risks in such State, such cost savings are 
                        reflected in premium rates charged to consumers 
                        for such coverage.
            (6) Requirements regarding coverage.--The State program--
                    (A) may not, except for charges or assessments 
                related to post-event financing or bonding, involve 
                cross-subsidization between any separate property and 
                casualty insurance lines covered under the State 
                program pursuant to paragraph (1);
                    (B) shall be subject to a requirement under State 
                law that for any insurance coverage made available 
                under the State insurance program or for any 
                reinsurance coverage for such insurance coverage made 
                available under the State reinsurance program, the 
                premium rates charged shall cover the expected value of 
                all future costs associated with insurance policies or 
                reinsurance contracts written by such program, in 
                accordance with the principles under section 303(g);
                    (C) shall make available to all qualifying 
                policyholders insurance or reinsurance coverage, as 
                applicable, and mitigation services on a basis that is 
                not unfairly discriminatory; and
                    (D) publishes, and displays in a prominent location 
                on a Web site for the State insurance program, 
                information for the State insurance program of 
                estimated assessments and surcharges on policyholders, 
                in accordance with State laws, regulations, or other 
                requirements, for a range of natural disaster or 
                catastrophic events having a varying magnitude of 
                losses, including an event projected to result in 
                losses of such magnitude that they have a 1 percent 
                chance of being equaled or exceeded in any single year, 
                based on the current year estimated aggregate funding 
                capacity of the State insurance program and State 
                reinsurance program.
            (7) Land use and zoning.--The State program, to the extent 
        possible, seeks to encourage appropriate State and local 
        government units to develop comprehensive land use and zoning 
        plans that include natural hazard mitigation.
            (8) Risk-based capital requirements.--The State program--
                    (A) complies with such risk-based capital 
                requirements as applicable State law may impose and 
                shall take into consideration asset risk, credit risk, 
                underwriting risk, and such other relevant risk as 
                determined by the Secretary; and
                    (B) for each calendar year, prepares and submits to 
                the Secretary a report identifying its claim-paying 
                capacity at such time after the conclusion of such 
                year, and containing such information and in such form, 
                as the Secretary shall require.
            (9) Other requirements.--The State program complies with 
        such additional organizational, underwriting, and financial 
        requirements as the Secretary shall, by regulation, provide to 
        carry out the purposes of this Act.
    (b) Certification.--The Secretary shall establish procedures for 
initial certification and recertification as an eligible State program.
    (c) Transitional Mechanisms.--For the 5-year period beginning on 
the date of the enactment of this Act, in the case of a State that does 
not have an eligible State program for the State, a State residual 
insurance market entity, or State-sponsored provider of natural 
catastrophe insurance, for such State shall be considered to be an 
eligible State program, but only if such State residual insurance 
market entity, or State-sponsored provider of natural catastrophe 
insurance, was in existence before such date of enactment.
    (d) Reinsurance To Cover Exposure.--This section may not be 
construed to limit or prevent any eligible State program from obtaining 
reinsurance coverage for insured losses retained by insurers pursuant 
to this section.

SEC. 502. STUDY AND CONDITIONAL COVERAGE OF COMMERCIAL RESIDENTIAL 
              LINES OF INSURANCE.

    The Secretary shall study, on an expedited basis, the need for and 
impact of expanding the programs established by this Act to apply to 
insured losses of eligible State programs for losses arising from all 
commercial insurance policies which provide coverage for properties 
that are composed predominantly of residential rental units. The 
Secretary shall consider the catastrophic insurance and reinsurance 
market for commercial residential properties, and specifically the 
availability of adequate private insurance coverage when an insured 
event occurs, the impact any such capacity restrictions have on housing 
affordability for renters, and the likelihood that such an expansion of 
the program would increase insurance capacity for this market segment.

SEC. 503. STUDY OF RISK-BASED PRICING AND STATE PROGRAM RATES.

    The Comptroller General of the United States shall conduct a study 
to analyze--
            (1) risk-based rate pricing, to determine the use of 
        actuarially sound pricing for State insurance, reinsurance, or 
        residual market programs, including what measures States are 
        taking to implement actuarially sound rates; and
            (2) rates for State insurance, reinsurance, or residual 
        market programs that fail to cover the expected value of all 
        future costs, including the cost of capital, associated with 
        insurance policies or reinsurance contracts written by such 
        programs or fail to have sufficient assets above their 
        indebtedness to meet their obligations.
Not later than 6 months after the date of the enactment of this Act, 
the Comptroller General shall submit a report to the Congress on the 
results of the study under this section.

SEC. 504. DEFINITIONS.

    In this Act:
            (1) Commitment to guarantee.--The term ``commitment to 
        guarantee'' means a commitment to make debt guarantees to an 
        eligible State program pursuant to section 202(d).
            (2) Eligible state program.--The term ``eligible State 
        program'' means a State program that the Secretary certifies as 
        an eligible State program under section 501.
            (3) Insured loss.--The term ``insured loss'' means any loss 
        that is determined by an eligible State program as being 
        covered by insurance or reinsurance made available under that 
        eligible State program.
            (4) Qualifying assets.--The term ``qualifying assets'' 
        means the policyholder surplus of the eligible State program as 
        stated in the most recent quarterly financial statement filed 
        by the program with the domiciliary regulator of the program in 
        the last quarter ending prior to the event or events.
            (5) Secretary.--The term ``Secretary'' means the Secretary 
        of the Treasury.
            (6) State.--The term ``State'' includes the several States, 
        the District of Columbia, the Commonwealth of Puerto Rico, 
        Guam, the Commonwealth of the Northern Mariana Islands, the 
        United States Virgin Islands, and American Samoa, and any other 
        territory or possession of the United States.

SEC. 505. REGULATIONS.

    The Secretary shall issue such regulations as may be necessary to 
carry out this Act.
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