118 HR 3997 IH: Homeowners’ Defense Act of 2023
U.S. House of Representatives
2023-06-09
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EN
Pursuant to Title 17 Section 105 of the United States Code, this file is not subject to copyright protection and is in the public domain.
1.Short title; table of contents(a)This Act may be cited as the Homeowners’ Defense Act of 2023
.(b)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 ConsortiumSec. 101. Establishment; chairperson; membership; bylaws.Sec. 102. Functions.Sec. 103. Authorization of appropriations.Title II—Catastrophe Obligation GuaranteesSec. 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 programsSec. 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. Consideration of rebuilding.Sec. 307. Regulations.Title IV—Mitigation grant programSec. 401. Mitigation grant program.Title V—General provisionsSec. 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.2.(a)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, their costs are likely to escalate in the coming years, in part because of the intensifying impacts of climate change, coastal development patterns, and increasing property values along the hurricane-prone or earthquake-vulnerable coastlines of the United States;(3)such disasters present physical risk to assets, publicly traded securities, private investments, and companies;(4)as the risk of catastrophe 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, 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;(5)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 and the Federal Government; and(6) under the current disaster risk management system, the Federal Government and, hence, taxpayers pay for rebuilding through government grants and low-interest loans.(b)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.<enum>I</enum><header>National Catastrophe Risk Consortium</header><section display-inline="no-display-inline" id="HF7B0A0173C4645168DA52C7F1B096256" section-type="subsequent-section"><enum>101.</enum><header>Establishment; chairperson; membership; bylaws</header><subsection id="HC507C5E4B1E949CAAD20F81EA88635BF"><enum>(a)</enum><header>Establishment</header><text>There is established an entity to be known as the <term>National Catastrophe Risk Consortium</term> (in this title referred to as the <term>Consortium</term>).</text></subsection><subsection id="H9F1525E53D714E8685BE452AC95E2F6E"><enum>(b)</enum><header>Chairperson</header><text display-inline="yes-display-inline">The Secretary of the Treasury, or the designee of the Secretary, shall serve as the chairperson of the Consortium.</text></subsection><subsection id="HFD0162AFA23F43FEAFF76B4CD069D940"><enum>(c)</enum><header>Membership</header><text display-inline="yes-display-inline">Any State shall be eligible to participate in the Consortium.</text></subsection><subsection id="H778D4423BE354B3897F6D3E7D006316B"><enum>(d)</enum><header>Considerations</header><text display-inline="yes-display-inline">In selecting members of the Consortium, the States shall—</text><paragraph id="H0AECF11D2E00440DB670C00D2E664721"><enum>(1)</enum><text display-inline="yes-display-inline">select members who have a background and expertise relevant to the functions of the Consortium; and</text></paragraph><paragraph id="HB1E70573CDA643958F336E0A66A093E4"><enum>(2)</enum><text>ensure the participation of one individual or representative of an organization that represents consumers, minorities, and low- and moderate-income housing persons by reflecting the communities that are being affected by catastrophic natural disasters.</text></paragraph></subsection><subsection id="H0681F2E46EB5464F8061967696180A48"><enum>(e)</enum><header>Bylaws</header><text display-inline="yes-display-inline">The Consortium may prescribe, amend, and repeal such bylaws as necessary to carry out the functions of the Consortium.</text></subsection></section><section display-inline="no-display-inline" id="HBBAE7AD3ADE144288529736976FEBD26" section-type="subsequent-section"><enum>102.</enum><header>Functions</header><text display-inline="no-display-inline">The Consortium shall—</text><paragraph id="HACB68487E00C4344ACAABBFC11FD59A3"><enum>(1)</enum><text display-inline="yes-display-inline">work with States to gather and maintain an inventory of catastrophe risk obligations held by providers of natural catastrophe insurance;</text></paragraph><paragraph id="H3E96DD8BBD0846A695DE08B4CEB17AB3"><enum>(2)</enum><text display-inline="yes-display-inline">assess issues or gaps in the insurance sector of the United States financial system and any related effects on insurance affordability for policyholders;</text></paragraph><paragraph id="H1C6133CF54504B659FDCAC4FB92B83FC"><enum>(3)</enum><text display-inline="yes-display-inline">advance consistent, clear, intelligible, comparable, and accurate disclosure of catastrophic risk;</text></paragraph><paragraph id="H0E6FC116B46649158BC2F9CFD3D85896"><enum>(4)</enum><text>submit annual reports to the 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 the regions associated with catastrophe risk;</text></paragraph><paragraph id="H0FF2E9CC0D074345AFF0C23C855ECA60"><enum>(5)</enum><text>assess the potential for major disruptions of private insurance coverage in United States markets particularly vulnerable to catastrophes;</text></paragraph><paragraph id="H766044F41F7E43ABB1D4F802ACB60771"><enum>(6)</enum><text>make such other recommendations on how identified financial risk can be mitigated, including through new or revised regulatory standards, as appropriate; and</text></paragraph><paragraph id="HBE2C6784BE6E41F1BA7CC7CA75047107"><enum>(7)</enum><text>account for and identify disparate impacts of catastrophic risks on disadvantaged communities and communities of color.</text></paragraph></section><section id="HB7DA136E49FE48DD986E9571B283F016"><enum>103.</enum><header>Authorization of appropriations</header><text display-inline="no-display-inline">There are authorized to be appropriated to carry out this title such sums as may be necessary for each of fiscal years 2024 through 2027.</text></section><enum>II</enum><header>Catastrophe Obligation Guarantees</header><section id="HE520286890C6449C80863DCC15C65EB0"><enum>201.</enum><header>Purposes</header><text display-inline="no-display-inline">The purposes of this title are to establish a program—</text><paragraph id="HF2DE1AECDD8343EAB37FC339A6716910"><enum>(1)</enum><text>to promote the availability of private capital to provide liquidity and capacity to State catastrophe insurance programs; and</text></paragraph><paragraph id="HE9635D86B3084F4F8AD99C899E6007BF"><enum>(2)</enum><text>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.</text></paragraph></section><section id="H8DA63C37E5744394A4A4A768F7E9D0A6"><enum>202.</enum><header>Establishment of debt guarantee program</header><subsection id="H0D46CB9DEA144C41959DB208A19D7F29"><enum>(a)</enum><header>Authority of Secretary</header><text>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—</text><paragraph id="H46A80FBAF2E1404A9269B803FCC6CE8A"><enum>(1)</enum><text>for eligible State programs that cover earthquake peril shall not exceed $3,500,000,000; and</text></paragraph><paragraph id="HD7B82828FBFC4581AA7485C3B972E8D1"><enum>(2)</enum><text>for eligible State programs that cover all other perils shall not exceed $17,000,000,000.</text></paragraph></subsection><subsection id="H4B80E294E2964C5FA7D06B58CFDCC676"><enum>(b)</enum><header>Conditions for guarantee eligibility</header><text>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:</text><paragraph id="H0B56423B65D94A3A918BC3855F200711"><enum>(1)</enum><text>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.</text></paragraph><paragraph id="HA42E103078AB456687D920BEB2F6BFFD"><enum>(2)</enum><text>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.</text></paragraph><paragraph id="H67095BD884924B378B047C7A24588894"><enum>(3)</enum><text>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.</text></paragraph><paragraph id="HE951B937FD50420E974D672EF018DCFF"><enum>(4)</enum><text>The commitment to guarantee shall specify the fees for debt guarantee coverage.</text></paragraph><paragraph id="H6FC9E7BE83B54DF3890301F7B9CDCA5F"><enum>(5)</enum><text>The maximum term of the debt that shall be specified in a commitment issued under this section may not exceed 30 years.</text></paragraph><paragraph id="H3E43CFDE1FBD4228A61A87BD79C4B91D"><enum>(6)</enum><text display-inline="yes-display-inline">The Secretary determines that the eligible State program does not cover losses arising from floods to properties that are required to be covered by flood insurance, covered by flood insurance, or 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). </text></paragraph></subsection><subsection id="H602ABF64A62B4C289723BB57814F81A4"><enum>(c)</enum><header>Mandatory assistance for eligible State programs</header><text>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).</text></subsection><subsection id="H28572BDA1F2141A680263694F288CB21"><enum>(d)</enum><header>Catastrophic debt guarantee</header><text>A debt guarantee under this subsection for an eligible State program shall be subject to the following requirements:</text><paragraph id="HC9BACC789123430CAA14D6C5F8E41634"><enum>(1)</enum><header>Preconditions</header><text>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 of immediately before the date of the event.</text></paragraph><paragraph id="HE02D8066688E400A868B8C17DB8DA388"><enum>(2)</enum><header>Amount</header><text>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.</text></paragraph><paragraph id="H59766784A3AA4D91AA3E3CAC97EF6CBF"><enum>(3)</enum><header>Use of funds</header><text>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.</text></paragraph></subsection><subsection id="H003B61E194614947A397ED07179A611C"><enum>(e)</enum><header>Funding</header><text display-inline="yes-display-inline">There are authorized to be appropriated such sums as may be necessary to carry out this section.</text></subsection></section><section id="HB6BA99A0554947DF8243F01B892EA2BB"><enum>203.</enum><header>Effect of guarantee</header><text display-inline="no-display-inline">The issuance of any guarantee by the Secretary under this title shall be conclusive evidence that—</text><paragraph id="H33EB1E00DBE64DDDB7A0F710435C53C6"><enum>(1)</enum><text>the guarantee has been properly obtained;</text></paragraph><paragraph id="H58CB2E9ADF5043D79DE43DAEA4DD5C4D"><enum>(2)</enum><text>the underlying debt qualified for such guarantee; and</text></paragraph><paragraph id="H5FA222CAE8424B2CB9C0A640C2A6C40E"><enum>(3)</enum><text>the guarantee is valid, legal, and enforceable.</text></paragraph></section><section id="H846BC206C66148D79DBA740D96C2C2E2"><enum>204.</enum><header>Full faith and credit</header><text display-inline="no-display-inline">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.</text></section><section id="HF193766B55064433B8DD30311B888167"><enum>205.</enum><header>Fees for guarantees; amount; collection</header><text display-inline="no-display-inline">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 percent per annum of the outstanding indebtedness covered by each guarantee.</text></section><section id="H02A9EDFA0FAE4AA9A0B05D08B88189AD"><enum>206.</enum><header>Payment of losses</header><subsection id="H60D05734929542A6A6A1988745728C78"><enum>(a)</enum><header>In general</header><text>The Secretary agrees to pay to the duly appointed paying agent or trustee (in this section referred to as the <quote>Fiscal Agent</quote>) 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.</text></subsection><subsection id="H9EB5844D2F244528857ED9F772E511F5"><enum>(b)</enum><header>Role of the Attorney General</header><text>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.</text></subsection><subsection id="H57A1BD2A751F452A9C677D77A8756D0E"><enum>(c)</enum><header>Right of the Secretary</header><text>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.</text></subsection></section><section id="H6FE79B60892547588C2DFB6C378CAD3C"><enum>207.</enum><header>Regulations</header><text display-inline="no-display-inline">The Secretary shall issue any regulations necessary to carry out the debt-guarantee program established under this title.</text></section><enum>III</enum><header>Reinsurance coverage for eligible State programs</header><section id="HBAFF134CC33841F49E4E339DDD8BAF4A"><enum>301.</enum><header>Program authority</header><text display-inline="no-display-inline">The Secretary of the Treasury, shall make available for purchase, only by eligible State programs, contracts for reinsurance coverage under this title.</text></section><section id="HE5F8235BD8754B438EB8A9F1EFBF3CC1"><enum>302.</enum><header>Contract principles</header><text display-inline="no-display-inline">Contracts for reinsurance coverage made available under this title—</text><paragraph id="H77809C3CE0474161A2782333E5848E04"><enum>(1)</enum><text display-inline="yes-display-inline">shall be priced on an actuarially sound basis;</text></paragraph><paragraph id="H7914527CC9E6454CA14C9101909F4056"><enum>(2)</enum><text>shall minimize the administrative costs of the Federal Government; and</text></paragraph><paragraph id="H23C1A58FA1DB47CA92D35527300CC97F"><enum>(3)</enum><text>shall provide coverage based solely on insured losses covered by the eligible State program purchasing the contract.</text></paragraph></section><section display-inline="no-display-inline" id="H3849931D36FB4E909775C2BF8A6A01FE" section-type="subsequent-section"><enum>303.</enum><header>Terms of reinsurance contracts</header><subsection id="H853DAAC711A54B79935575573F71C41C"><enum>(a)</enum><header>Minimum attachment point and levels of coverage</header><text display-inline="yes-display-inline">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—</text><paragraph id="H18CEC474200A4AB1852187DB9D944D5E"><enum>(1)</enum><text>the coverage available through eligible State programs;</text></paragraph><paragraph id="HDC07F2B7075A419F88FBEE9C5414108D"><enum>(2)</enum><text>the availability and accessibility of reinsurance in the private market; and</text></paragraph><paragraph id="HA8469144523749B495BA70F8CEB79F24"><enum>(3)</enum><text>other factors as deemed appropriate by the Secretary. </text></paragraph></subsection><subsection commented="no" id="H840E3F0BEF90486E92F1FA42CFB922E8"><enum>(b)</enum><header>Eighty to ninety percent coverage of insured losses in excess of retained losses</header><text>Each contract for reinsurance coverage under this title shall provide that the amount paid out under the contract shall be equal to at least 80 percent, but not more than 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.</text></subsection><subsection id="H4AD20EFA3F4F40C3B5D0506C9B380DDF"><enum>(c)</enum><header>Maturity</header><text display-inline="yes-display-inline">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.</text></subsection><subsection id="HF9FB0C006A4347BAAA0D23A0702B41C6"><enum>(d)</enum><header>Payment condition</header><text display-inline="yes-display-inline">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.</text></subsection><subsection id="HDC2BB8D6B1574617B437AE160E5C4E63"><enum>(e)</enum><header>Multiple events</header><text>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.</text></subsection><subsection commented="no" id="HF789F72D07994BF3B49D4EE94FF358A2"><enum>(f)</enum><header>Timing of claims</header><text display-inline="yes-display-inline">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.</text></subsection><subsection id="H4B7EE3C8F2A74833BE95CC961F0264FF"><enum>(g)</enum><header>Actuarial pricing</header><text display-inline="yes-display-inline">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.</text></subsection><subsection id="H92D1244CA5724488BE2F857FD3A9FDEC"><enum>(h)</enum><header>Information</header><text display-inline="yes-display-inline">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.</text></subsection><subsection id="H22742056121540B2B98BFDABB770E553"><enum>(i)</enum><header>Others</header><text>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.</text></subsection></section><section display-inline="no-display-inline" id="H4C156DC884004B11A9E4A2D71692A8EF" section-type="subsequent-section"><enum>304.</enum><header>Maximum Federal liability</header><subsection id="H8B899908BB7B4A9A8AEBDFACC2A974A1"><enum>(a)</enum><header>In general</header><text display-inline="yes-display-inline">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.</text></subsection><subsection id="HEE427CCFF07D44E6ABBDEE5466A5F01F"><enum>(b)</enum><header>Limitation</header><text display-inline="yes-display-inline">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.</text></subsection></section><section id="H2823BDFFD4AE4DAC8AC14CC9C94C3D63"><enum>305.</enum><header>Federal Natural Catastrophe Reinsurance Fund</header><subsection id="H145116F0FE4E4B81A80D0F92CBC60681"><enum>(a)</enum><header>Establishment</header><text>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 <quote>Fund</quote>).</text></subsection><subsection id="HAEABF0C5E0CF43D4BAC3A54E6286995D"><enum>(b)</enum><header>Credits</header><text>The Fund shall be credited with—</text><paragraph id="H9639241795AD46BC9E7191F4E4D161D3"><enum>(1)</enum><text>amounts received annually from the sale of contracts for reinsurance coverage under this title;</text></paragraph><paragraph id="HDEA068F05ED7444DBD2CCB5A12E3C279"><enum>(2)</enum><text display-inline="yes-display-inline">any amounts appropriated for the aggregate potential liability for payment of claims under all contracts for reinsurance coverage under this title; and</text></paragraph><paragraph id="H704A6BF9D44242ED8E44D028CF6DEA79"><enum>(3)</enum><text>any amounts earned on investments of the Fund pursuant to subsection (d).</text></paragraph></subsection><subsection id="H72AACDB8EE244BD9B2FC1C7AEA0900AC"><enum>(c)</enum><header>Uses</header><text>Amounts in the Fund shall be available to the Secretary only for the following purposes:</text><paragraph id="H9908CBB709624B03A5BA70CFE9086319"><enum>(1)</enum><header>Contract payments</header><text>For payments to purchasers covered under contracts for reinsurance coverage for eligible losses under such contracts.</text></paragraph><paragraph id="HEDC90428CD09423E846884D18CFA6CF8"><enum>(2)</enum><header>Administrative expenses</header><text>To pay for the administrative expenses incurred by the Secretary in carrying out the reinsurance program under this title.</text></paragraph><paragraph id="HBEFD28FB6C14416BA4489E34EBDED816"><enum>(3)</enum><header>Outwards reinsurance</header><text display-inline="yes-display-inline">To obtain retrocessional or other reinsurance coverage of any kind to cover risk reinsured under contracts for reinsurance coverage made available under this title.</text></paragraph></subsection><subsection id="HAEDEB192ED674E93AC83C1F9480FA693"><enum>(d)</enum><header>Investment</header><text display-inline="yes-display-inline">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.</text></subsection></section><section id="H2EDC2445BFAC4F6DB0C2ED3792F0C7B4"><enum>306.</enum><header>Consideration of rebuilding</header><text display-inline="no-display-inline">Nothing in this title may be construed to prevent counties, municipalities, and other localities from undertaking land and environmental assessments to determine the efficacy of rebuilding.</text></section><section display-inline="no-display-inline" id="H37A7EBD39395422DA572DD0FA405FABF" section-type="subsequent-section"><enum>307.</enum><header>Regulations</header><text display-inline="no-display-inline">The Secretary shall issue any regulations necessary to carry out the program for reinsurance coverage under this title.</text></section><enum>IV</enum><header>Mitigation grant program</header><section id="H805261EDA0C747B0B813CE16D642FC85"><enum>401.</enum><header>Mitigation grant program</header><subsection id="H30ED56911FE048D38EEC877AEA26AFD0"><enum>(a)</enum><header>Establishment</header><text display-inline="yes-display-inline">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.</text></subsection><subsection id="HAC409FA96BBA47B39FAF37A606392AA9"><enum>(b)</enum><header>Grants</header><text display-inline="yes-display-inline">A grant provided under subsection (a) shall be used to reduce loss of life and property by—</text><paragraph id="HE8AE5203253243A0BFBB27CBD8EED323"><enum>(1)</enum><text display-inline="yes-display-inline">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;</text></paragraph><paragraph id="HDD9923978CAD48C499A60FE6D6C4AADD"><enum>(2)</enum><text>assisting in the determination of the location of risk by giving careful consideration to the natural risks for the location of a property;</text></paragraph><paragraph id="H23D6A60807C748D3A774C0920A685DAD"><enum>(3)</enum><text display-inline="yes-display-inline">providing inspections of homes to identify areas to strengthen such homes and reduce exposure to natural catastrophes;</text></paragraph><paragraph id="H503A6E5C63444159B15DC8B775517C56"><enum>(4)</enum><text display-inline="yes-display-inline">providing financial assistance to homeowners to retrofit homes to reduce exposure to natural catastrophes; or</text></paragraph><paragraph id="H96ECBC709C0545048A3E46E02B8D3686"><enum>(5)</enum><text display-inline="yes-display-inline">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.</text></paragraph></subsection><subsection id="HC8124C0505B94425A2FE99E09D025CBD"><enum>(c)</enum><header>Priority</header><text display-inline="yes-display-inline">In making grants under the program under subsection (a), the Secretary shall give priority to applicants demonstrating greater financial need, including applicants serving lower income individuals and areas.</text></subsection><subsection id="H36FF9E162B824C7EA758E3EF42B95141"><enum>(d)</enum><header>Consultation with experts</header><text>In carrying out the program established under subsection (a), the Secretary of Housing and Urban Development shall consult with—</text><paragraph id="H3E6075F75E454778BB814C6AB0F9F72A"><enum>(1)</enum><text>disaster preparedness and response organizations;</text></paragraph><paragraph id="HD71AB9BDFFE34F4C9CB059CF0EBC6FB9"><enum>(2)</enum><text>homebuilders;</text></paragraph><paragraph id="H134E9CDC52834A4FBD19D2C69FBE4C74"><enum>(3)</enum><text>real estate professionals;</text></paragraph><paragraph id="H3A5B025A42F74804A4DAB360E05E614A"><enum>(4)</enum><text>building code enforcement agencies; and</text></paragraph><paragraph id="HC8A01D7F51A249CDBE4F74327D85D74D"><enum>(5)</enum><text>any other person that the Secretary considers appropriate.</text></paragraph></subsection><subsection id="H508B1BEE95E24BA79CFEB03FCE0F10E1"><enum>(e)</enum><header>Eligible entity defined</header><text display-inline="yes-display-inline">In this section, the term <quote>eligible entity</quote> 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.</text></subsection><subsection id="HE56D609B757B4910A33DB220C47A121A"><enum>(f)</enum><header>Grant mandate</header><text display-inline="yes-display-inline">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.</text></subsection></section><enum>V</enum><header>General provisions</header><section id="H8106E1C72B9C4F9085475D55FFE6178B"><enum>501.</enum><header>Eligible State programs</header><subsection id="H6DEF5390606D4A278D10F31224440F16"><enum>(a)</enum><header>Eligible State programs</header><text>A State program shall be considered an <quote>eligible State program</quote> 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:</text><paragraph id="HAD2E6BB37D5745379CD577F9FFB9754C"><enum>(1)</enum><header>State program design</header><text>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.</text></paragraph><paragraph id="H6046B464DB2043F6B31A05445D70F576"><enum>(2)</enum><header>Operation</header><text>The State program shall meet the following requirements:</text><subparagraph id="H97BB484A3ABF4B698B476070D226A9AE"><enum>(A)</enum><text>A majority of the members of the governing body of the State program shall be public officials or appointed by public officials.</text></subparagraph><subparagraph id="HAFA74EDBF5414BEE8EC8E8165A71C023"><enum>(B)</enum><text>The State shall have a financial interest in the State program.</text></subparagraph><subparagraph id="HC854F4ECDD1046419342DD04ABD68132"><enum>(C)</enum><text display-inline="yes-display-inline">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 as determined by the individual State on such amounts.</text></subparagraph></paragraph><paragraph id="H459C466382054E7B9928B9EBB570E73C"><enum>(3)</enum><header>Tax status</header><text>The State program shall have received from the Secretary (or the Secretary’s designee) a written determination, within the meaning of <external-xref legal-doc="usc" parsable-cite="usc/26/6110">section 6110(b)</external-xref> of the Internal Revenue Code of 1986, that the program either—</text><subparagraph id="HC3B060C0BDB64EE482947943C9556CB7"><enum>(A)</enum><text>constitutes an <quote>integral part</quote> of the State that has created it; or</text></subparagraph><subparagraph id="H709CCBBEA31E4CF6A0D0A75274568663"><enum>(B)</enum><text>is otherwise exempt from Federal income taxation.</text></subparagraph></paragraph><paragraph id="HAECB3C46614D4B619A7025F0206B9C98"><enum>(4)</enum><header>Earnings</header><text>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.</text></paragraph><paragraph id="HBB814FE08C414185B04F4AF24A598A54"><enum>(5)</enum><header>Prevention and mitigation</header><subparagraph id="H315AD28B4EDE4E60A78FA490E7C02A77"><enum>(A)</enum><header>Mitigation of losses</header><text>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.</text></subparagraph><subparagraph id="HD03613E669D4475F86B0B5BD9FF04FFF"><enum>(B)</enum><header>Operational requirements</header><text>The State program shall operate in a State that—</text><clause display-inline="no-display-inline" id="H6F855DA6C6534DFDBBC60D7854D5AE47"><enum>(i)</enum><text>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;</text></clause><clause id="HA0859A454AE64575AF388B6778C7B9BF"><enum>(ii)</enum><text>has taken actions to establish an insurance rate structure that takes into account measures to mitigate insured losses; and</text></clause><clause display-inline="no-display-inline" id="H648E2D9D22104383B906E409E283EA09"><enum>(iii)</enum><text>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.</text></clause></subparagraph></paragraph><paragraph id="H833EC54F8F774F399DE6151D7048636D"><enum>(6)</enum><header>Requirements regarding coverage</header><text>The State program—</text><subparagraph id="H6C4B25689EF64E11A9364D1ABDA5CC14"><enum>(A)</enum><text>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);</text></subparagraph><subparagraph id="H1DDD35B395D4444C9FB4DA1E085C5D59"><enum>(B)</enum><text display-inline="yes-display-inline">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);</text></subparagraph><subparagraph id="HCC1CEB466DC648A8A5370CA4B7ABC7D9"><enum>(C)</enum><text>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</text></subparagraph><subparagraph id="H0CE43CD4CD0E4E49AD06DDF03BD44607"><enum>(D)</enum><text display-inline="yes-display-inline">publishes, and displays in a prominent location on a website 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.</text></subparagraph></paragraph><paragraph display-inline="no-display-inline" id="HB5913AC9855440F6B9A511AEB221FB5D"><enum>(7)</enum><header>Land use and zoning</header><text>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.</text></paragraph><paragraph id="HDB0C94BE808C4D73AC562DE3C65632B3"><enum>(8)</enum><header>Risk-based capital requirements</header><text display-inline="yes-display-inline">The State program—</text><subparagraph id="H149C95F046684D08975D79FA6498B72D"><enum>(A)</enum><text>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</text></subparagraph><subparagraph id="H841E477212174334BDCA89F10A1B3ADA"><enum>(B)</enum><text>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.</text></subparagraph></paragraph><paragraph id="H16C15AA737DB45EBB75294E20E83754C"><enum>(9)</enum><header>Other requirements</header><text display-inline="yes-display-inline">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.</text></paragraph></subsection><subsection id="HE8C7F1A858804642A7FA1742FD1682E9"><enum>(b)</enum><header>Certification</header><text>The Secretary shall establish procedures for initial certification and recertification as an eligible State program.</text></subsection><subsection id="H4A4B6B7982A940F4A23331D5FFD325CB"><enum>(c)</enum><header>Transitional Mechanisms</header><text display-inline="yes-display-inline">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.</text></subsection><subsection id="H15BF8F0B36904EDE831E6853F0B9CBAA"><enum>(d)</enum><header>Reinsurance To cover exposure</header><text>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.</text></subsection></section><section id="HAC0D5F90DA024307B340D85CABB6EFA8"><enum>502.</enum><header>Study and conditional coverage of commercial residential lines of insurance</header><text display-inline="no-display-inline">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.</text></section><section id="H76571A8C5635411B8AFE37F63FE31AF6"><enum>503.</enum><header>Study of risk-based pricing and State program rates</header><text display-inline="no-display-inline">The Comptroller General of the United States shall conduct a study to analyze—</text><paragraph id="H421A3C79F9D44B979BC94D095BF810CD"><enum>(1)</enum><text>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;</text></paragraph><paragraph id="HEF4CD6607504460988DC31507ADD303D"><enum>(2)</enum><text>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; and</text></paragraph><paragraph id="HBE413179AA154AA696373C6BBA8CDBB1"><enum>(3)</enum><text display-inline="yes-display-inline">any financial complications arising for policyholders resulting from increased policy costs.</text></paragraph><continuation-text continuation-text-level="subsection">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.</continuation-text></section><section commented="no" id="H80378783DF6E43FAB6B2E746F7E079CE"><enum>504.</enum><header>Definitions</header><text display-inline="no-display-inline">In this Act:</text><paragraph commented="no" id="H1B531E99D7F84ED09F50EE47DCCF39AD"><enum>(1)</enum><header>Commitment to guarantee</header><text>The term <quote>commitment to guarantee</quote> means a commitment to make debt guarantees to an eligible State program pursuant to section 202(c).</text></paragraph><paragraph commented="no" id="HBD18B73B2A464D21A9EA2D0443084521"><enum>(2)</enum><header>Eligible State program</header><text>The term <term>eligible State program</term> means a State program that the Secretary certifies as an eligible State program under section 501.</text></paragraph><paragraph commented="no" id="HAB974550FB8D44C1B49BFE3519615FC6"><enum>(3)</enum><header>Insured loss</header><text>The term <term>insured loss</term> 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.</text></paragraph><paragraph commented="no" id="HDD3AE94DC5AD438FBDEE29365DCEBBBD"><enum>(4)</enum><header>Qualifying assets</header><text>The term <term>qualifying assets</term> 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.</text></paragraph><paragraph commented="no" id="H25450CF058B94BEA9ED7A85680B2C645"><enum>(5)</enum><header>Secretary</header><text>The term <quote>Secretary</quote> means the Secretary of the Treasury.</text></paragraph><paragraph commented="no" id="H4BB7786104FB4609AE16B934E8607CFF"><enum>(6)</enum><header>State</header><text>The term <quote>State</quote> 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.</text></paragraph></section><section id="H540B81866A994601A91ACF1360D41550"><enum>505.</enum><header>Regulations</header><text display-inline="no-display-inline">The Secretary shall issue such regulations as may be necessary to carry out this Act.</text></section>