[Congressional Record (Bound Edition), Volume 153 (2007), Part 22]
[House]
[Pages 30629-30650]
[From the U.S. Government Publishing Office, www.gpo.gov]




                    HOMEOWNERS' DEFENSE ACT OF 2007

  The SPEAKER pro tempore. Pursuant to House Resolution 802 and rule 
XVIII, the Chair declares the House in the Committee of the Whole House 
on the state of the Union for the consideration of the bill, H.R. 3355.

                              {time}  1510


                     In the Committee of the Whole

  Accordingly, the House resolved itself into the Committee of the 
Whole House on the state of the Union for the consideration of the bill 
(H.R. 3355) to ensure the availability and affordability of homeowners' 
insurance coverage for catastrophic events, with Mr. Ross in the chair.
  The Clerk read the title of the bill.
  The CHAIRMAN. Pursuant to the rule, the bill is considered read the 
first time.
  The gentleman from Florida (Mr. Klein) and the gentlewoman from West 
Virginia (Mrs. Capito) each will control 30 minutes.
  The Chair recognizes the gentleman from Florida.
  Mr. KLEIN of Florida. Mr. Chairman, I yield myself such time as I may 
consume.
  Mr. Chairman, I rise today to discuss H.R. 3355, the Homeowners' 
Defense Act. This bill responds to the growing crisis in the 
availability and affordability of homeowners insurance and further 
works to protect the financial solvency of States. This bipartisan 
legislation represents many months of deliberation and thoughtful input 
from members of both parties and across each region of the United 
States. We recognize that disasters will continue to occur across the 
country and are moving proactively to ensure that a plan is in place 
before the next one strikes.
  Every region of the United States is susceptible to some form of 
natural disaster, be it earthquakes, hurricanes, blizzards, tornadoes, 
or wildfires, and we are here to provide relief.
  It is important to understand that insurance availability and 
affordability problems have become a national issue. Hundreds of 
thousands of homeowners across the country have already had their 
insurance coverage dropped or are currently slated for nonrenewal by 
their insurance company. Those who remain insured are confronted with 
crippling premiums, which in some cases is forcing homeowners to make 
tough decisions about whether to go with or without property insurance, 
if they have that choice.
  Insurance problems are not isolated to Florida, Mississippi, or 
Louisiana. Last year property insurers indicated that they plan to stop 
offering new coverage in Maryland and Virginia's coastal markets, and 
property insurers have also stopped writing new policies for residents 
in Delaware, New Jersey, and Connecticut, no matter where in the State 
the property is located.
  Furthermore, tens of thousands of homeowners in Massachusetts, New 
York, North Carolina, South Carolina, Alabama, and Texas have also been 
dropped as well. And adding to that, even with California's known 
record of seismic activity, over 84 percent of California homeowners 
currently do not have earthquake policies. It is simply unacceptable 
for property owners not to be able to get reliable coverage in these 
markets, and it is precisely this reason that legislation is necessary.
  The Homeowners' Defense Act aims to take a twofold approach by 
establishing a program to help States responsibly manage their risk 
before disaster strikes while also providing financial assistance to 
ensure that they can quickly and efficiently respond to homeowners 
insurance claims following a natural disaster.
  Specifically, this bill provides a venue for State-sponsored 
insurance funds to voluntarily bundle their catastrophic risk with one 
another and then transfer that risk to the private markets through the 
use of catastrophic bonds and reinsurance contracts. The legislation 
also allows for the Federal Government to extend loans to cash-strapped 
States after a large-scale natural disaster so that they can meet their 
obligations to homeowners.
  By utilizing new strategies and an innovative capital market 
approach, the bill allows investors to assume some of the risk 
currently held by the States in return for an interest payment. The 
voluntary nature of the program, coupled with the use of the capital 
markets, ensures that homeowners in less disaster-prone States will not 
be on the hook if a disaster strikes a neighboring State.
  I want to emphasize that the opt-in nature of this plan creates no 
burden or obligation whatsoever on States that do not choose to 
participate. This is essential.
  The total economic impact accompanying natural disasters resonates 
throughout our entire Nation. The total economic damages from the 2005 
hurricanes will likely exceed $200 billion, with the Federal Government 
taking responsibility for paying out in excess of $109 billion for 
disaster relief.

                              {time}  1515

  Although we all agree that it is necessary, this Federal spending is 
drawn equally from taxpayers across the country, not simply from those 
in affected regions.
  Through this legislation, we are looking to take a proactive approach 
where States responsibly plan in advance of a disaster, rather than a 
reactive approach, where the Federal Government and every taxpayer 
opens up the Treasury after a catastrophe. It is important to 
emphasize, however, that the status quo is no longer an option. We must 
work together to establish a system to make sure that property 
insurance is both available and affordable for hardworking families and 
those most in need.
  I urge Members to vote in favor of this much-needed legislation.
  Mr. Chairman, I reserve the balance of my time.
  Mrs. CAPITO. Mr. Chairman, I yield myself such time as I may consume.
  First of all, I would like to thank the two gentlemen from Financial 
Services from Florida for bringing this bill forward.
  Mr. Chairman, we are all concerned about insurance rates that are 
increasing in Florida and other States. Representatives Brown-Waite, 
Putnam, Buchanan and Feeney have all been very effective and passionate 
advocates for their constituencies, and I would like to commend them 
for their hard work.
  We can all agree that many States are facing considerable problems 
with the affordability of homeowners insurance. However, at this point, 
there is no consensus that H.R. 3355 is the best

[[Page 30630]]

solution to the problem. In fact, there is quite a bit of disagreement 
amongst a broad spectrum as to what is the best manner to address this 
problem. Instead of granting long-term relief to middle-income coastal 
homeowners confronted with rising insurance costs, this bill could 
potentially place taxpayers at risk for bailing out insolvent State 
insurance companies.
  In the past few years, some of the largest hurricanes on record tore 
through the gulf coast and coastal Florida. Some of the affected States 
have tried to protect their local markets, to limit rate increases, 
force coverage, or restrict market freedom. Unfortunately, these 
efforts have had severe unintended consequences and have done little to 
lower the cost of insurance for consumers. Competition has been reduced 
and homeowners have been left with fewer choices. Ironically, State 
initiatives designed to secure more coverage for their constituents 
have resulted in less affordability.
  Florida created Citizens Property Insurance Corporation in 2002 
because private insurers have reservations about insuring risky coastal 
development. While Citizens was supposed to be an insurer of last 
resort, it is now Florida's largest insurer, with over 1.3 million 
policyholders, and a total exposure of $434 billion, yet only enough 
funding to pay approximately $9.4 billion in claims. This 
undercapitalization means that if a major hurricane hits Florida, 
Citizens could be bankrupt by hundreds of billions of dollars.
  To bring down the cost of insurance even more, Florida created a 
State reinsurance fund to sell inexpensive reinsurance to private 
companies to encourage them to write more business in the State. This 
fund has never had enough cash on hand to pay claims and has driven out 
the global reinsurance market, recouping losses through taxpayer 
assessments. According to a Georgetown University report released last 
summer, the Florida catastrophe fund offers $32 billion in coverage and 
has $1 billion on hand.
  Of the two main titles of the bill, H.R. 3355, the first doesn't add 
anything new that States cannot already do on their own. The second one 
makes inexpensive federally subsidized loans available to State 
insurance companies that are curtailing the private market, resulting 
in less competition and higher costs to the customer. And I will add 
here that anytime you're federally subsidizing somebody, that's a cost 
to every single taxpayer in the country.
  The Congressional Budget Office estimates that over the next 5 years 
implementing this bill would cost $75 million, but even this number 
seriously underestimates the true cost to the American taxpayers. CBO 
concluded that few States would actually be interested in these loans 
and that they would only be made on rare occasions. Nevertheless, 
taxpayers could potentially be exposed to billions of dollars, leaving 
them with an enormous cost of capital for the loan's duration and 
subjecting leaders here in Congress to the inevitable pressure to later 
forgive loans at the taxpayers' expense.
  Mr. Chairman, the federally headed consortium provided for in this 
bill, while a novel approach, likely offers nothing but an implicit 
Federal backing for any insured securities, much like the GSEs; not to 
mention States already have the ability to engage in these pooling 
arrangements at this day. Further emphasized in the President's 
Statement of Administration Policy on this bill: ``There is no need for 
a Federal role because States are currently free to associate to 
address catastrophic risk.''
  It is also debatable whether securitization represents any 
significant advantages over the sophisticated private reinsurance 
markets. According to the Georgetown Environmental Law and Policy 
Institute: ``The mere creation of this consortium would likely skew 
insurance premiums and encourage unwise development.''
  Of concern as well is that the Treasury would make loans to State 
catastrophe programs. Florida is currently the only State with a 
reinsurance fund that would qualify for these loans, but there is no 
doubt that this bill would encourage other States to create these 
programs, most likely in the Florida mode, further undermining the 
private market.
  The legislation at hand even allows an interim period where other 
state-run insurers, such as the financially troubled Citizens in 
Florida, could receive these loans. We should think twice about 
bankrolling State insurance companies. A Federal loan to an insolvent 
State catastrophe fund sounds eerily similar to me to the Federal 
Government's ongoing loan to the National Flood Insurance Program, 
which is currently carrying $18 billion in debt.
  Republicans will offer a number of critical amendments today to try 
to steer this debate towards fiscal responsibility, mitigation, and 
free market competition. We will consider an amendment by Congressman 
Shays to replace the text of the bill with a bipartisan, blue-ribbon 
commission to report to Congress specific proposals to improve the 
affordability and availability of national catastrophe insurance. It 
would be very prudent of this body to take a step back, allow for 
further study, and gain a consensus that we do not have on this 
proposal before us today.
  Mr. Chairman, we need to be careful when confronting this very 
complex issue affecting millions of homeowners that could expose all 
American taxpayers to huge liabilities, and we shouldn't rush to 
judgment for an appropriate response.
  All of us Members of Congress here know that natural disasters can 
strike anywhere and everywhere in this country; and by no means are we 
saying, in opposition to this bill, that we shouldn't have the American 
response of a helping hand. We just don't feel that this is the right 
way to do it. We need to work together on bipartisan reforms to address 
market dysfunction. I think H.R. 3355 falls short on that standard.
  There will be many productive ideas put forward this afternoon that 
will improve the legislation that we're considering; however, if these 
are not adopted, I would urge my colleagues to vote against this bill.
  Mr. Chairman, I reserve the balance of my time.
  Mr. KLEIN of Florida. Mr. Chairman, I yield 6\1/2\ minutes to the 
gentleman from Florida (Mr. Mahoney).
  Mr. MAHONEY of Florida. Mr. Chairman, today is a turning point for 
how the Federal Government responds to natural catastrophes. Today, the 
House of Representatives has the ability to ensure that homeowners 
across the country will have access to affordable property insurance. 
More importantly, we have the opportunity to protect and preserve the 
American Dream of home ownership with the passage of H.R. 3355, the 
Homeowners' Defense Act of 2007.
  Before I begin summarizing the national catastrophe insurance crisis 
affecting the 16th Congressional District of Florida, I want to 
reiterate that this is a national problem. Let me be clear: Congress 
has been forced to act because private markets for homeowners insurance 
have failed. The issue is not the industry's ability to pay claims or 
write policies. It is the American's ability to purchase affordable 
homeowners insurance.
  This legislation we are considering today, the Homeowners' Defense 
Act of 2007, is essential, as an individual's home is the single 
biggest investment an average American has, and it is vital that we 
protect it.
  North America has the greatest occurrence of natural disasters of any 
continent. And thanks to global warming, science is forecasting that we 
are going to see the incidence and severity of disasters increase.
  I am proud that the legislation we are considering today preserves 
the private homeowners insurance industry. H.R. 3355 recognizes that no 
one got into the insurance business to underwrite a catastrophic event, 
whether it be an act of war or an act of Mother Nature. The bill gives 
the insurance industry the ability to operate without fear of 
insolvency due to a mega-catastrophe we all know will happen. However, 
because no one can predict when the next earthquake, hurricane or 
tornado will strike, the industry is forced

[[Page 30631]]

to plan and incur the expense necessary to cover a 1-in-200 year event 
every year.
  The program established by this legislation is voluntary. Each State 
will have the opportunity to assess its risk of natural catastrophes. 
After analyzing its exposure to natural catastrophes, a State can 
choose to participate or not.
  H.R. 3355 is fiscally responsible. The legislation sets a historic 
precedent. No longer will the American taxpayer have to foot the cost 
of a natural disaster with an expensive government bailout. As I said 
earlier, we know that these catastrophic events will happen. The 
Homeowners' Defense Act ensures that we plan for them in a fiscally 
responsible manner and does not cost the American taxpayer a dime, 
while ensuring that homeowners take personal responsibility for their 
choice to live in areas prone to more frequent natural catastrophes.
  In 2004 and 2005, natural disasters resulted in approximately $89 
billion in privately insured catastrophic losses. Science tells us that 
these disasters, their severity and frequency, are going to increase 
and have caused the insurance industry to adjust their models for 
insuring these events. As a result, insurers are pulling out or 
reducing their exposure in disaster-prone areas of the country. In some 
cases, new companies encouraged to enter the market do not have the 
financial strength to pay claims following a natural disaster because 
they are undercapitalized. Likewise, larger insurance companies have 
created smaller State subsidiaries for the purpose of limiting their 
liability. This problem has concentrated risk in States, further 
complicating the problem.
  In some situations, like in my home State of Florida, the market has 
deteriorated so drastically homeowners can't get insurance, regardless 
of price. In an effort to address this growing problem, Florida has had 
to step up to avert an economic disaster by creating a State-owned 
insurance company. Today, unfortunately, the citizens of my State are 
the owners of the biggest homeowners insurance company in Florida with 
over 30 percent of the market.
  Lost insurance capacity is not the only issue confronting homeowners 
today. Families have seen their insurance premiums skyrocket. The toxic 
cocktail of rising gas prices, health care costs, and homeowners 
insurance have created a vicious cycle of terror for our seniors living 
on fixed incomes and our middle-class families struggling to provide 
for their children.
  Just yesterday, I spoke with a single mother in Stuart, Florida, who 
is making a good income of approximately $60,000 per year. She told me 
that, without warning, her monthly payment went up almost $500 per 
month. She is struggling to save money to put her daughter through 
college, and she's fearful she won't be able to pay her bills.
  The Financial Services Committee has held numerous hearings this year 
on this issue. During these hearings, several facts became clear. The 
risk posed by natural catastrophes is not going away. The damage caused 
by disasters will keep growing, and insurance premiums are likely to 
remain high.
  As Congressman Klein noted, the Homeowners' Defense Act is a two-
pronged approach designed to address the property insurance crisis, 
which I have outlined, and ensures a stable insurance market that will 
give States impacted by severe natural catastrophes the ability to help 
their citizens rebuild their homes and their lives.
  Title II of the bill, ``The National Homeowners Insurance 
Stabilization Program,'' extends Federal loans to States impacted by 
severe natural disasters. These loans, which will be paid back by the 
States, will allow a State's catastrophe program the ability to cover 
its liability in the event it is not fully funded at the time of the 
disaster.
  Because the legislation utilizes private capital markets and a loan 
program that requires repayment in affected States, it eliminates 
cross-subsidization. Taxpayers will not be asked to subsidize 
homeowners that choose to live in high-risk communities.
  In a letter dated November 6, the National Association of Insurance 
Commissioners stated that H.R. 3355 provides a viable solution for the 
State and Federal governments to work together to address this dilemma 
and address the natural catastrophe threat.
  In closing, I would like to thank Chairman Frank, Congressman 
Kanjorski and Congresswoman Maxine Waters, as well as their staff, for 
their continued commitment to America's homeowners. Their support and 
leadership has been essential to making this legislation a reality. I 
would also like to thank my colleagues from Florida, Representatives 
Ginny Brown-Waite and Adam Putnam. Their input on this legislation has 
been invaluable and serves as an example of what Congress can achieve 
when we work together in a bipartisan manner.
  I would ask my colleagues to stand up for the American homeowner and 
taxpayer by voting ``yes'' on H.R. 3355.

                              {time}  1530

  Mrs. CAPITO. Mr. Chairman, I would like to yield 3 minutes to the 
gentleman from Illinois (Mr. Roskam), a member of the Financial 
Services Committee.
  Mr. ROSKAM. I thank the gentlewoman for yielding.
  I want to commend our colleagues on the other side of the aisle from 
Florida as good advocates for their districts in recognizing that 
Florida has a serious problem. I think that if everybody had that same 
confidence that Federal taxpayers weren't going to be involved and that 
this ultimately was an insurance program that was going to be 
completely clearly funded, the money was going to come in, it was 
actuarially sound, and it was going to go out, a lot of us would say 
``no harm, no foul, great.''
  But a lot of us have a real sense of concern because what we have 
done is we have looked at Florida, and my conclusion is that part of 
the problem of Florida and the difficulty that they are facing is 
because of governmental intervention in the insurance marketplace. It 
seems to me that the State of Florida came in and began to manipulate 
the marketplace insofar as other companies then ultimately made 
decisions, ``look, this is too high maintenance, this is too 
complicated, we are not able to price this appropriately, we are out of 
here.''
  We heard testimony during the Financial Services Committee from folks 
who said the depth and breadth of building in Florida, in many cases, 
is simply inappropriate, building in very risky areas. Now, the bill 
speaks to some to mitigation, but I think we can do much better. And 
over the course of this afternoon, in a series of amendments that we 
intend to offer, some of them on the manager's amendment and some of 
them specific roll calls that we will be seeking, we are going to try 
and drive the conversation toward market solutions to this problem.
  We are told time and again, I have heard both speakers this afternoon 
on the other side talk about an opt-in, talk as if this is a voluntary 
program. Well, I will tell you what; it is not a voluntary program for 
the Federal taxpayers that I represent. Federal taxpayers that I 
represent, I believe, are ultimately going to be on the hook for the 
liabilities and the commitments that are made either explicitly or 
implicitly through the language of this bill.
  I urge a great sense of caution not to get caught up in the emotion 
of this, but to be clear-eyed and clear-thinking in how we debate this, 
and ultimately to oppose this bill in its current form.
  Mr. KLEIN of Florida. Mr. Chairman, I yield 1 minute to the 
gentlewoman from Florida (Ms. Wasserman Schultz).
  Ms. WASSERMAN SCHULTZ. Mr. Chairman, I rise today in support of the 
Homeowners' Defense Act of 2007.
  Over the past few years, most Americans have witnessed devastating 
images of natural catastrophes strike our fellow citizens, from 
wildfires in California, tornadoes in the Midwest, to the hurricanes 
hitting the Gulf States in Florida, and wondered if they might be next. 
Even as the recovery begins after these disasters, for many, a new

[[Page 30632]]

nightmare of rising insurance rates and dropped policy coverage begins. 
However, thanks to the sponsor of the Homeowners' Defense Act of 2007, 
Congressmen Ron Klein and Tim Mahoney, many homeowners across America 
will be spared a similar nightmare. This bipartisan bill, and it is 
good to see my colleagues on the other side of the aisle from Florida 
here as well, this bipartisan bill provides a critical tool that will 
help provide a fair and equitable solution to this crisis.
  I cannot think of an issue that is more important to the economic 
survival of the homeowners of my State of Florida than dealing with the 
homeowners insurance crisis. Thank you, Congressmen Klein and Mahoney, 
and thank you to Chairman Barney Frank for bringing this bill to the 
floor today. It has been a long time in coming.
  I urge Members to support it.
  Mrs. CAPITO. Mr. Chairman, I would like to yield 3 minutes to the 
gentleman from Florida (Mr. Buchanan).
  Mr. BUCHANAN. Mr. Chairman, there is no larger issue in my home State 
of Florida than the high cost of homeowners insurance. Like many 
Floridians, my constituents are finding property insurance more 
expensive and, many times, impossible to get. Skyrocketing insurance is 
hurting the middle class and it is damaging our real estate market and 
our economy. Insurance in the State of Florida has gone up 385 percent 
in last 5 years, 77 percent a year.
  This bill is necessary to encourage insurance companies to write 
policies that will work for families and small businesses that they can 
afford. One of our businesses, and I don't want to leave them out 
either, in our community, their insurance went from $25,000 to 
$125,000. They called me and asked me what could they do. I said, 
``Well, get some other prices.'' He called back and said there was 
nobody else that will even write it. One insurance company. They had to 
have it because they had a mortgage.
  I am pleased the House will pass a manager's amendment that includes 
language authorized by my colleague Ginny Brown-Waite. I want to thank 
her for her leadership on this effort for the last 3 years. She is 
going to establish a Federal catastrophic fund. This amendment mirrors 
legislation I introduced with her at the beginning of the year. I also 
want to thank my Florida colleagues Congressman Tim Mahoney and 
Congressman Ron Klein for introducing this legislation.
  Mr. Chairman, I am proud that we have been able to work on a 
bipartisan basis in Florida.
  Mr. KLEIN of Florida. Mr. Chairman, I yield 2 minutes to the 
gentlewoman from New York (Mrs. Maloney).
  Mrs. MALONEY of New York. Mr. Chairman, I rise in support and thank 
Congressmembers Klein and Mahoney for their leadership.
  I have long held the belief that we need solutions to the growing 
crisis of availability and affordability of homeowner insurance. That 
is why I was the sponsor of the National Catastrophe Insurance Act in 
previous congresses, which would have established a Federal reinsurance 
plan following a disaster with more than $50 billion in insured losses.
  Right now we are seeing the consequences of not having these products 
available. In the wake of a series of devastating hurricanes, large 
swaths of our country are seeing insurance companies either leaving the 
market or premiums that are simply too high for homeowners to afford. 
The legislation before us focuses on stabilizing the catastrophic 
insurance market by expanding private insurance capacity to cover 
natural disasters and by helping States better manage risk. This 
legislation allows States to participate in the plan by allowing their 
State-sponsored insurance funds to voluntarily pool their catastrophic 
risk with one another.
  The private market, and not taxpayers, will take on the risk through 
the purchasing of catastrophic bonds and reinsurance contracts. Just as 
I support other efforts such as TRIA to provide certainty after 
catastrophic events, I believe it is prudent to put in place a system 
that insures risk. This allows affected communities and our economy as 
a whole to respond to each and every disaster in a clear and rational 
manner while protecting the residents, and I urge my colleagues to 
support the bill.
  Mrs. CAPITO. Mr. Chairman, I yield 3 minutes to the gentlewoman from 
Florida (Ms. Ginny Brown-Waite) who has been very active on this issue.
  Ms. GINNY BROWN-WAITE of Florida. I thank the gentlewoman for 
yielding time.
  The bill that we have before us today is one that is not just about 
Florida. The bill that is before us today is about the availability of 
any State being able to participate if they form a catastrophic fund in 
their State. Whether it is hurricanes in Florida or earthquakes or 
perhaps wildfires in California, whatever the State wants to cover in 
their catastrophic fund is what would be covered.
  Let me point out also that this is purely voluntary. This isn't 
mandatory. We are not mandating States to participate. We are 
encouraging States to be responsible. Sometimes we tend to, especially 
at the Federal level, we tend to wait until something happens and then 
we react. Well, we all remember how many hurricanes hit, Hurricane 
Katrina, but other hurricanes also in 2005.
  As a matter of fact, in 2005, the Federal taxpayer alone paid $89.6 
billion in post-disaster assistance. That is post disaster. That is 
after the fact. Wouldn't it be better to encourage States with some 
Federal backstop to work to have a plan there to plan and have the 
availability of a catastrophic fund?
  I have served on the Financial Services Committee now, this is my 
third term. I have spent 5 years on the Financial Services Committee. I 
want to thank the gentleman who just walked in, Chairman Barney Frank, 
who has worked in a very bipartisan manner to help get this bill in the 
form that it is today. Later we will be seeing the manager's amendment. 
I certainly want to thank Representatives Klein and Mahoney and their 
great staffs and also Annie Woeber from my staff, who I think lives, 
eats, drinks and breathes this issue.
  Mr. KLEIN of Florida. Mr. Chairman, I yield 2 minutes to the 
gentleman from Florida (Mr. Wexler).
  Mr. WEXLER. Mr. Chairman, opponents of the Homeowners' Defense Act 
suggest we should not get caught up in the emotion of the moment. But, 
Mr. Chairman, our Nation is suffering from a property insurance crisis 
that desperately demands Federal action.
  Millions of American homeowners are enduring the skyrocketing costs 
of homeowner insurance premiums at the same time that their coverage is 
reduced. And millions more in Florida and throughout the Nation have 
had their policies cancelled. Those fortunate enough to still have 
coverage have experienced 200 and 300 percent increases in premiums, 
even though they have not filed a single claim. This is a terrible 
situation. I applaud Congressmen Klein and Mahoney for leading this 
critical effort.
  The insurance crisis is not a Florida-specific crisis, nor is it a 
coastal only crisis. Homeowners across the Nation are starting to see 
the same premium increases and cancellations that Floridians have 
endured for the past several years.
  Let me be clear. This is a crisis that affects each and every State 
in our Nation. As we have tragically seen in recent weeks and months, 
all Americans are vulnerable to hurricanes, floods, fires and other 
natural disasters. The economic impact of these catastrophes do not 
recognize State borders. We must act together as Americans to end this 
insurance crisis.
  This bill brings substantial savings to homeowners without degrading 
the private insurance market. It would be inexcusable for Congress to 
waste this golden opportunity to provide relief to millions of 
Americans suffering from the devastating combination of rising gas 
prices, health care costs, and homeowners insurance. Again, thank you 
to Mr. Klein, thank you to Mr. Mahoney, thank you for the time.
  Mrs. CAPITO. Mr. Chairman, I would like to yield 2 minutes to the 
gentleman from Florida (Mr. Bilirakis).
  Mr. BILIRAKIS. Mr. Chairman, in the early morning hours of August 29,

[[Page 30633]]

2005, a catastrophe obliterated New Orleans. The ocean had breached the 
city's levees and our Nation looked on while tens of thousands clung to 
rooftops. Hundreds of thousands of Americans were suddenly homeless and 
scattered across the country. Many coastal States have been in crisis 
ever since, including my home State of Florida.
  Upon arriving in Congress this year, I introduced two bills to help 
with this crisis. One bill would strongly encourage homeowners to 
hurricane-proof their homes by providing a tax credit for the cost of 
specific home modifications. The second bill I introduced would 
authorize Gulf Coast States to enter into an interstate compact to pool 
their resources and spread the risk of disaster.
  Today, I am pleased to have an opportunity to vote on H.R. 3355, the 
Homeowners' Defense Act. This important legislation authorizes loans to 
States that will have to be repaid to the Treasury. This is a fiscally 
sound approach to disaster planning. Further, Chairman Frank, with my 
colleague, Ms. Brown-Waite, who has been working on this issue for 4 
years, and the sponsors of this bill, and as a result of genuine 
bipartisanship, the manager's amendment will implement a critically 
needed Federal catastrophe fund.
  I thank the sponsors of this legislation, and I thank the chairman 
and Ms. Brown-Waite for their efforts in bringing this bill to the 
floor. I strongly encourage my colleagues to vote for this bill and the 
manager's amendment and protect Americans from the devastating effects 
of natural disasters.
  Mr. KLEIN of Florida. Mr. Chairman, may I inquire as to the time we 
have remaining.
  The CHAIRMAN. The gentleman from Florida has 14 minutes remaining. 
The gentlewoman from West Virginia has 15\1/2\ minutes remaining.

                              {time}  1545

  Mr. KLEIN of Florida. Mr. Chairman, I yield 4 minutes to the 
gentleman from Louisiana (Mr. Melancon).
  Mr. MELANCON. Mr. Chairman, I want to thank my colleagues from 
Florida for devising this great program which will be national, 
voluntary, and fiscally sound for the people that are experiencing 
problems with insurance throughout the country.
  I am proud to speak today on H.R. 3355, the Homeowners' Defense Act. 
Recovering from the two hurricanes that devastated our State and the 
gulf coast in 2005 continues to be a challenge to the people of 
Louisiana. One of the biggest roadblocks to our recovery remains the 
lack of affordable and available property insurance.
  However, as we have seen in the past few weeks with the wildfires 
that have ravaged California, affordable insurance isn't just a problem 
for the residents of the gulf coast. This is a nationwide problem that 
needs our immediate attention and a practical and effective long-term 
solution. I believe that this bill offers that long-term solution.
  Mr. Chairman, in the wake of Hurricanes Katrina and Rita in 2005, 
after the victims of these storms suffered two of the worst natural 
disasters in this country's history, our people were forced through the 
indignity of another battle, a battle with their insurance companies. 
All along the coast, insurance companies have packed up and moved out. 
They have canceled their policies, refused to write new ones, or raised 
their rates exponentially, with less coverage and higher deductibles.
  In Louisiana, more and more people are being forced to turn to 
Louisiana's State-sponsored insurer of last resort and, again, paying 
premiums way above the market rates. For those lucky enough to have 
their policies renewed, they are now being hit with skyrocketing 
premium increases, often as much as two, three, four, five times what 
they paid before, and some even higher.
  The district in Louisiana that I represent is entirely in the ``new'' 
hard-to-insure part of the State. Every day I get calls, e-mails, and 
letters from constituents begging Congress to do something about the 
insurance crisis. Here is just a sample:
  Roy Barrios of Lafourche Parish wrote to me, saying that Allstate 
recently canceled his homeowners insurance and he is now having to pay 
3 times as much coverage, which he is thankful to get, but still in 
all, from Louisiana's insurer of last resort. He is only two months shy 
of being covered by Louisiana's consumer protection laws that would 
have kept his policy from being canceled, although he noted that 
Allstate is happy to renew his more profitable car insurance policy.
  Jeanette Tanguis of Houma, Louisiana, said a premium increase of $200 
a month stretches her budget tremendously. In a letter to me she wrote: 
``Having spent most of my life living in Terrebonne Parish, it never 
occurred to me that I would ever be forced to move from the place I 
love and have called home for most of my life. Unfortunately, my family 
and I are being forced to make this sad decision,'' because of the 
insurance situation.
  Similarly, Nolan Falgout of Thibodaux wrote to me and said: ``In the 
event we do not get a handle on this issue, this will become the next 
reason why your constituents who enjoyed growing up in this section of 
`Cajun' Louisiana will no longer be able to afford to live here.''
  These are only a few of the many stories I hear from people forced to 
leave their homes and their communities. If claimants from the 2 
hurricanes had been awarded the settlements that they were entitled to 
from their insurance companies, this may not have been an issue that 
requires the attention of Congress.
  Sadly, this is not the case. It is time we recognize that market 
failures exist. The victims of these hurricanes, the victims of the 
wildfires and unforeseen natural disasters all deserve to know that the 
insurance system will not abandon them when they need it the most.
  Mr. Chairman, I believe that H.R. 3355 will provide for this 
stability and the long-term solution we need to solve this insurance 
crisis so that America's families will not have to abandon their 
communities and can return to their homes. I again thank my friends, my 
colleagues, the chairman of the committee and others that have put so 
much time and effort into this good legislation.
  Mrs. CAPITO. Mr. Chairman, I reserve the balance of my time.
  Mr. KLEIN of Florida. Mr. Chairman, I yield 1 minute to the gentleman 
from Ohio (Mr. Kucinich).
  Mr. KUCINICH. Mr. Chairman, I am from Cleveland, Ohio; and it would 
seem from this discussion that while this is all about Florida, it is 
not. All over this country there are communities that are in coastal 
areas and flood plains, in hurricane alleys; and they are all looking 
at this legislation, realizing that the insurance companies are just 
withdrawing from areas where there's a high number of claims. They 
don't want to take the risk anymore, even though people, many of whom 
have been paying premiums, have never filed a claim.
  So it is appropriate for this legislation to be passed. I have to say 
that the occasion of this legislation raises even deeper questions 
about the insurance industry across this country as to their practices, 
as to a new form of environmental redlining. And what we are looking at 
is we also have to see the interplay between environmental and energy 
policies and weather and climate patterns.
  We are at a moment of transition here. Certainly this legislation 
ought to be supported.
  Mrs. CAPITO. Mr. Chairman, I would like to point out a couple of 
things. I represent the State of West Virginia. In our home State for 
many, many, many years we had a state-run workers comp program, which 
caused businesses to leave, which caused workers comp rates to rise 
because of the nature of a state-run insurance company. Maybe this is 
what is going on in Florida to a certain degree with the catastrophic 
insurance situation and the state-run insurance company.
  The solution we went to in West Virginia is to move workers comp to 
the private sector to incent private markets to come into our State. 
Starting January 1, we are going to have competitive bidding on our 
workers comp

[[Page 30634]]

and workers comp rate. They are beginning to slide now, and our great 
hope is that it will become more reasonable as time goes on.
  One concern I think that I ought to also raise and that has been 
raised to me, the Wildlife Federation opposes this bill because of the 
concerns the gentleman from Ohio alluded to in his statements in terms 
of the environmental aspects of this bill. Are we encouraging 
redevelopment in areas, particularly in our very fragile coastal areas, 
that are in dangerous kinds of environmental situations but also maybe 
were developed under less stringent rules and regulations?
  What kind of protections do we have for our fragile coastal regions 
in this bill? I think it's a logical question to ask and one that has 
been brought forth to all of us in the Committee on Financial Services.
  Mr. Chairman, I reserve the balance of my time.
  Mr. KLEIN of Florida. Mr. Chairman, I yield 2 minutes to the 
gentleman from Washington (Mr. Inslee).
  Mr. INSLEE. Mr. Chairman, before I comment on this bill, I want to 
comment on two leaders who helped to get it here, Mr. Klein and Mr. 
Mahoney. Usually, when freshmen Congressmen have bills in the House, it 
is something like naming a post office or something. These two fellows 
have worked a very well-crafted bill that I hope has broad consensus, 
and they have my admiration for their great work.
  I think it is a very important bill for all of us because it responds 
to the need for a stable insurance market in these areas. Some have 
suggested somehow this displaces the private insurance industry. In 
fact, it just allows that market to work. It is preferable to have 
catastrophe bonds and some reinsurance contracts in advance, rather 
than trying to deal with catastrophe afterwards through Federal 
Government bailouts. This is a market-driven way to do it. It makes the 
market stronger. It spreads the risk in a way that is consistent with 
our economic system, and we need to pass this bill.
  Mrs. CAPITO. Mr. Chairman, as I have said in my opening statement and 
some of my comments, I think that this bill presents an implicit 
Federal backstop for catastrophe insurance to spread the risk. It has 
potential to cost the taxpayers of this country enormous amounts of 
money.
  Let's just do a scenario where, say in Florida, hopefully this never 
happens, there is a catastrophe of a hurricane of very large 
proportions, and Florida goes through all the insurance that is 
available to them and comes to the Federal Government and asks for a 
loan. Let's say this catastrophe is of such proportions that Florida 
looks to their lawmakers and looks to their taxpayers and realizes they 
can't pay this loan back. What are we going to do here in the United 
States Congress? We know what we are going to do: we are going to 
forgive the loan.
  I think therein lies one of the big problems in this bill, that it 
does go to every taxpayer in this country, it does have a formal 
liability to every taxpayer. Whether it says it explicitly in the bill, 
it is going to result in that.
  My suggestion and some of the suggestions coming from my side of the 
aisle are going to be, let's step back. Let's do a study. Let's look at 
this. Let's make sure we have mitigation and let's make sure we are 
doing this responsibly.
  I don't happen to live in Florida, and there are many times during 
the year when I really wish I did. Although I love living in West 
Virginia, many West Virginians do live in Florida, by the way, during 
certain parts of the year, and I know how difficult some of the 
catastrophes that Floridians suffer are, as well as across the 
coastline and across the Nation.
  This is not about shutting them out or making them not have the 
ability to be able to insure their properties and live a good, 
wonderful life in the State of Florida. This is about finding the best 
solution, not only for Floridians but for the rest of the Nation.
  Mr. Chairman, I yield back the balance of my time.
  Mr. KLEIN of Florida. Mr. Chairman, with the indulgence of the 
gentlewoman from West Virginia, I yield such time as he may consume to 
my cosponsor, the gentleman from Florida (Mr. Mahoney).
  Mr. MAHONEY of Florida. Mr. Chairman, I want to thank everybody for 
having this open debate today and discussing something that is very 
important to people across this country. This is all about the dream of 
homeownership. This is about markets working. This is about stabilizing 
the insurance market so that people who go to work every day can 
fulfill their dream of homeownership.
  What we have today is a situation that is understandable. We have a 
situation where as a result of an increase in the severity and the 
frequency of natural disasters, insurance companies are prudently 
increasing premiums. What they are seeing is, as a result of this, an 
unfunded liability in the billions that they have no other recourse but 
to either leave markets or raise rates so high that working families 
can't afford their homeowners insurance.
  Today, we have the ability to help those people; and we have a very 
special opportunity, because we can do something here in Washington, DC 
that we can all be proud of when we go back home, and that is we can 
fix a problem and do it responsibly. We can end the bailout. We can end 
the cycle of writing checks and expecting nobody to pay them back, 
which is exactly what has happened over the years with Katrina and 
Wilma and other major storms across the Nation.
  I hope that everybody takes a very close look at this. Many people 
have described this as a payoff or a bailout for Florida. This is not. 
This is responsible legislation. It not only expands the market for 
private insurance; it makes sure that States have the ability to get 
money to people after a disaster so they can get in their homes and so 
they can keep their communities alive. Finally, it is responsible 
because it encourages mitigation and it encourages building codes. It 
supports the idea of responsible development.
  In conclusion, I want to thank my dear friend Congressman Klein and 
the journey over the last year to the week when we both got elected to 
Congress and came here with the hope of trying to solve this problem 
and being here today.
  I want to thank my staff. I want to thank Patrick Givens for all the 
work that he has done. I want to thank Garrett Donovan, who has done an 
amazing job, and the complete staff of the Financial Services 
Committee.
  In closing, I want to thank Barney Frank and the leadership for 
understanding that this is about people. This is not about companies.

                                              National Association


                                   of Insurance Commissioners,

                                Kansas City, MO, November 6, 2007.
     Re H.R. 3355, the Homeowner's Defense Act.

     Hon. Ron Klein,
     Cannon House Building,
     Washington, DC.
     Hon. Timothy Mahoney,
     Longworth House Building,
     Washington, DC.
       Dear Congressmen Klein and Mahoney: The NAIC congratulates 
     you for putting forth legislation intended to help States 
     better manage the threat of natural catastrophes. We 
     appreciate your willingness to consider our perspective 
     during the bill's development. States have developed a 
     variety of tools to fill insurance gaps in areas where the 
     private market is either unwilling to provide property 
     coverage, or where consumers are unable to afford it. Your 
     legislation provides another tool for States to consider, 
     without handing down a federal mandate to participate.
       H.R. 3355 provides a strong correlation to guiding 
     principles the NAIC adopted when evaluating federal 
     catastrophe proposals. For example, the bill is voluntary; it 
     does not impede State functions; it encourages availability; 
     it recognizes the States' important role in insurance 
     regulation; it forms a State-federal partnership approach to 
     address availability; it follows actuarial principles; and it 
     allows States to pool risk and utilizes the capital markets.
       The insurance and reinsurance markets have a significant 
     amount of capacity, and access to that capacity for events 
     that are small yet frequent is generally affordable. But for 
     those that live in areas where events can be infrequent yet 
     catastrophic, access to insurance capacity after a 
     significant event is either unavailable or unaffordable. This 
     is the dilemma that regulators and legislators must face 
     together.

[[Page 30635]]

       H.R. 3355 provides a viable solution for the State and 
     federal government to work together to address this dilemma 
     and address the natural catastrophe threat. We encourage our 
     members to strongly consider this program for their needs.
       We thank you for your leadership on this critical, national 
     issue, and we look forward to continuing to work with you to 
     enhance the bill through passage.
           Sincerely,
     Walter Bell,
       Alabama Insurance Commissioner, NAIC President.
     Catherine J . Weatherford,
       NAIC Executive Vice President and CEO.

  Mr. KLEIN of Florida. Mr. Chairman, I yield myself such time as I may 
consume.
  Mr. Chairman, I would also like to acknowledge Chairman Barney Frank, 
who, without his guidance and leadership and thoughtfulness and process 
of good ideas, we wouldn't be here today, as well as Tom Glassic, 
Kathleen Mellody, Lawranne Stewart, Peter Roberson, Patrick Givens from 
Congressman Mahoney's office, and Garrett Donovan from my office, and 
all the staff and experts from around the country who have participated 
in this very carefully thought out piece of innovative legislation.
  We are very honored to be here today, because the bill that we have 
before us is a comprehensive step in the right direction. As a Member 
of Congress from south Florida, I have lived under the threat of 
natural disasters for some time. It was only when I came to Washington, 
however, that I began to discuss this issue with Members from other 
parts of country who also shared stories about disasters that their 
constituents faced, earthquakes, hurricanes, wildfires, tornadoes. It 
was then that I began to realize that this is not a regional problem; 
it is a national one.
  I further reflected on the fact that the Federal response following a 
major disaster is very predictable. We open up the Treasury and start 
spending. This spending is entirely necessary, but often is delivered 
with only few restraints and comes equally from taxpayers in every 
corner of our country. So even if you are not in a high-risk region, 
you are still impacted by the event.
  Under this bill, participating States would be better protected, 
again, States that only opt in on their own if they choose; and they 
would be increasingly able to provide services for those who are not 
able to find insurance on their own. The State-Federal partnership 
would present States with the tools necessary to responsibly, fiscally 
responsibly, manage their risk before disaster strikes, while also 
ensuring that States can quickly and efficiently respond to homeowners' 
insurance claims following a natural catastrophe.

                              {time}  1600

  This legislation employs several new ideas to help States address the 
property insurance crisis, such as the transfer of States' insurance 
risk through the use of catastrophe bonds. By utilizing an innovative 
capital market approach, the bill allows investors to assume some of 
the risk, while at the same time putting the burden on local homeowners 
to do all the necessary mitigation responsibility they have to reduce 
risk to their own home, to the State, and to the Federal Government.
  This is a fundamental rethinking of disaster planning and response, 
and it is long overdue. Our bill works because it's voluntary, 
actuarially sound, and stabilizes the market by ensuring that 
homeowners will always get their claim paid while capping the State 
liability.
  In addition, our bill is fiscally responsible. The Homeowners' 
Defense Act will end the policy of Federal bailouts following natural 
disasters.
  The steps taken in this bill provide us with a blueprint of how 
States can responsibly plan for catastrophes ahead while also providing 
them with a path to recovery.
  As I have said time and time again, the status quo is no longer an 
option. I urge Members of this body to vote ``yes'' on this bill.
  Ms. CORRINE BROWN of Florida. Mr. Chairman, as a Member from Florida, 
I rise in strong support of the Homeowners' Defense Act, H.R. 3355.
  The terribly high cost for homeowners paying property insurance in my 
State of Florida, as well as for those on the Gulf Coast, and as we saw 
just recently, in California, has become a growing concern for 
homeowners. We saw what happened after hurricane Katrina and Rita and 
the four hurricanes that hit my district in Florida back in 2004.
  These hurricanes, and other recent natural disasters, have led the 
insurance companies to limit their exposure to such disasters by 
outright pulling out, or reducing their risk. And this back peddling on 
their obligations on the part of the insurance industry has resulted in 
homeowner insurance rates rising by 100 percent to over 600 percent in 
higher-risk areas. This is entirely unacceptable. How can homeowners 
possibly afford this? This is just outrageous. We need to take action 
and step in. Just last week we saw the insurance companies out in 
California saying they will not provide insurance to hundreds of 
thousands of people that lost their homes in the terrible wildfires 
that hit the coast, all the way from LA to the Mexican border.
  This is why people buy insurance: to protect themselves. How is it 
then that after disaster after disaster can we just sit back and allow 
these companies to pull out of the market.
  Rising insurance rates are affecting homeowners across the country, 
not just in Florida. Clearly, the insurance market is not working, and 
it is time to put through a plan to stabilize the market and lower 
insurance rates for consumers.
  Mr. BACHUS. Mr. Chairman, many of us are sympathetic to the insurance 
rate increases coastal catastrophe-prone areas have experienced 
recently, but there is no consensus that H.R. 3355 would offer any 
long-term help. Instead of granting long-term relief for middle-income 
coastal homeowners confronted with rising insurance costs, this bill 
would stick taxpayers wiith the tab of bailing out insolvent State 
insurance companies. In the past few years since some of the largest 
hurricanes on record tore through the gulf coast and coastal Florida, 
affected States have tried to protect their local markets, to limit 
rates increases, force coverage, or restrict market freedom. 
Competition is reduced and homeowners are left with fewer choices--
State efforts to secure more coverage for their constituents have 
ironically resulted in less affordability.
  The Florida members on the minority side of the Financial Services 
Committee--Ginny Brown-Waite, Tom Feeney, and Adam Putnam--have been 
very attentive to the needs of their constituents and have constantly 
kept us updated on the problems there. We commend them for their 
service.
  Of the two primary titles, the first does nothing that States can't 
already do under current law. The second is nothing more creative then 
giving cheap federally-subsidized loans to State insurance companies 
that are driving out the private market. The Congressional Budget 
Office estimates that over the next 5 years, implementing this bill 
would cost $75 million. But even this number grossly underestimates the 
true cost for American taxpayers. CBO apparently finds little value in 
Title II of this bill, finding that the federally subsidized loans 
would be made ``very rarely,'' as CBO does not expect any states would 
even bother applying for a loan following a disaster. In essence, they 
agreed this provision is of little value. However, taxpayers could 
potentially be on the hook for tens of billions of dollars, stuck with 
an enormous cost of capital for the loan's duration, and subject to the 
inevitable pressure to forgive the loans on the taxpayers' dime. This 
is the old two step ``ask for'' by people borrowing from government--
ask for the money now and then ask for debt forgiveness later.
  Because private insurers don't want to provide underpriced, risky 
coastal insurance, Florida created Citizens Property Insurance 
Corporation in 2002. While Citizens was supposed to be an insurer of 
last resort, it is now Florida's largest insurer with over 1.3 million 
policyholders and total exposure of more than $434 billion, yet only 
enough funding to pay approximately $9.4 billion in claims. This 
undercapitalization means that if a major hurricane hits Florida, 
Citizens could be bankrupt by hundreds of billions of dollars. To bring 
down the cost of insurance even more, Florida created a state 
reinsurance fund to sell cheap reinsurance to private companies to 
encourage them to write business in the state. This fund is chronically 
undercapitalized and has driven out the global reinsurance market, 
recouping losses through taxpayer assessments. According to a 
Georgetown University report released last summer, the Florida cat fund 
offers $32 billion in coverage despite having only $1 billion in hand 
[or, according to the Florida Cat Fund staff, around $28 billion in 
liabilities and $2.2 billion in non-debt cash assets].

[[Page 30636]]

  Mr. Chairman, the federally-headed consortium, while novel, likely 
offers nothing but an implicit federal backing for any issued 
securities, much like a GSE. According to the President's Statement of 
Administration Policy for this bill, ``there is no need for a federal 
role because states are currently free to associate to address 
catastrophe risk.'' It is also questionable whether such securitization 
represents any significant advantages over the sophisticated private 
reinsurance markets. According to the Georgetown Environmental Law & 
Policy Institute, ``the mere creation of the consortium would likely 
skew insurance premiums and encourage unwise development.'' Masking the 
true cost of insurance puts homeowners in harm's way while subsidizing 
state cat funds and developers.
  Perhaps most troubling are the provisions of the bill that would 
mandate cheap Treasury loans to state catastrophe programs. Today, 
Florida is the only state with a reinsurance fund that would qualify 
for these loans, but there is no doubt this bill would spur the 
creation of other state programs based on the Florida ``model.'' One 
property and casualty insurance trade association stated that that 
these loans would ``impede private markets and would send the wrong 
signals to states.'' H.R. 3355 even allows an interim period where 
other state-run insurers--such as the bankrupt Citizens in Florida--
could receive these loans. We should question the wisdom of bankrolling 
state insurance companies like Citizens. Congress should also consider 
whether a Federal loan to an insolvent state catastrophe fund would be 
like the Federal Government's ongoing ``loan'' to the National Flood 
Insurance Program, which is currently carrying $18 billion in debt to 
the U.S. Treasury that is unlikely to ever be repaid.
  Republicans will offer a number of important amendments today to 
steer this debate towards fiscal responsibility, taxpayer protection, 
and free market competition. We will also consider an amendment by 
Congressman Shays to replace the text of this bill with a bipartisan, 
blue-ribbon commission to report to Congress specific proposals to 
improve the affordability and availability of natural catastrophe 
insurance. We need to look more closely at the various solutions 
proposed by members on both sides of the aisle that could help 
homeowners access more coverage through the private market.
  Mr. Chairman, we have an obligation to be thoughtful and deliberate 
when confronting this complex issue affecting millions of homeowners. 
The problem has many root causes, namely overregulation, overbuilding, 
and overreaching by state insurance entities. This bill, nor any one 
proposal, is the silver bullet. Congress should craft meaningful 
bipartisan reforms that address market dysfunction and the growing 
threat excessive coastal development poses. The Nation's homeowners and 
taxpayers deserve better than a scramble to rush a partisan bill 
through Congress. If the amendments are not accepted, we should vote it 
down but keep working.
  Mr. HASTING of Florida. Mr. Chairman, I rise today in strong support 
of the Homeowners' Defense Act of 2007. I can think of no other bill 
which has the ability to help the people in my district rebuild 
following a natural disaster.
  I applaud the leadership of my good friends and congressional 
neighbors, Representatives Ron Klein and Tim Mahoney. In championing 
this vital legislation, they are providing the leadership that we all 
knew they both would show when elected last November. Indeed, they are 
leaders not only in Florida, but as evidenced today, in this great 
institution and the entire country.
  In the aftermath of the wildfires in California, tornadoes and floods 
in the Midwest and Northeast, and the hurricanes in the Gulf Coast and 
Florida, insurance companies are abandoning homeowners in need. In many 
vulnerable states, including my own, insurance companies have stopped 
offering coverage or increased rates exponentially where their services 
are most needed. These companies have protected their own pocketbooks 
at the expense of the American people for far too long.
  The bill before us today establishes the necessary safety net which 
is needed in the absence of a stable insurance market. The legislation 
gives states a choice on whether or not they wish to participate in 
this safety net. In investing a little today, states will effectively 
stabilize their own insurance markets and ensure access to necessary 
homeowners' insurance at affordable rates. Importantly, these funds 
will then be used to rebuild our communities quickly and cost 
efficiently.
  I have said for years that our approach toward natural disasters is 
too responseoriented. We wait and we wait for something bad to happen. 
Then we react. Time and time again, Congress passes emergency 
appropriations to rebuild but never makes the necessary investments to 
plan for the future. This legislation changes the way we go about doing 
business around here.
  This legislation establishes a mechanism for states to acquire 
necessary funds for recovery after a natural disaster in an orderly and 
equitable manner. Frankly, it is high time that we proactively address 
disaster mitigation by stabilizing the insurance market and 
establishing a reliable funding mechanism for recovery.
  In Florida, my constituents are being put out of their homes because 
they cannot afford their insurance rates. With the instability of the 
housing market leaving so many homeowners on the verge of foreclosure, 
we cannot afford to allow skyrocketing insurance rates to push them 
over the edge. In the event of a natural disaster, homeowners should 
never be forced to risk everything because they can not afford the 
necessary coverage.
  My two colleagues from Florida have drafted balanced legislation 
which incorporates the bipartisan contributions and expertise of many 
stakeholders. By passing this legislation, the House can once again 
demonstrate its solidarity and compassion for those Americans who find 
themselves victims of natural disasters.
  I have seen with my very own eyes what happens to people when a 
hurricane barrels through their neighborhood. I have seen the damage, 
and I have seen the emotional pain.
  Americans should no longer be forced to place their livelihoods at 
risk in the event that a natural disaster strikes their home, and 
states should not be forced to participate in a program of which they 
do not wish to be a part. To both of these ends, this legislation is a 
success.
  Rest assured, when this bill becomes law, Florida will participate. 
Unfortunately, many states will not. Though I hope that every state 
ultimately participates, under this bill, the choice is rightfully 
theirs.
  Not one of the 50 states nor any of the territories is immune to 
natural disasters. Whether today, tomorrow, next year, or sometime in 
the future, we will all be affected by a natural disaster fIrst-hand. 
States which participate in this disaster insurance program will have a 
much easier time recovering and they will do so by placing a smaller 
burden on the American taxpayer. This is a common sense solution to an 
unfortunately all too common problem.
  Ms. WATERS. Mr. Chairman, I would also like to thank Mr. Klein and 
Mr. Mahoney for their leadership in authoring this bill.
  Too well, we all remember the aftermath of Hurricane Katrina and the 
resulting confusion families encountered about their insurance coverage 
or lack thereof. Well, imagine if a hurricane were to go through a 
state and only 1 in 8 homeowners were covered by an insurance policy. 
Unfortunately, this is exactly the situation that exists in California 
today--only 1 in 8 (or 12 percent) of Californians possess earthquake 
insurance. At the time of the Northridge earthquake in 1994 almost 3 
times as many people were covered. After the Northridge earthquake, the 
cost of the coverage doubled and the amount of coverage provided was 
cut in half.
  The California Earthquake Authority (CEA)--created after the 
Northridge earthquake when insurers restricted homeowners' insurance 
policies in order to avoid earthquake exposure--currently provides 
about two-thirds of the residential insurance coverage in California. 
Since its inception 11 years ago, CEA has been unable to accumulate the 
amount of capital it projects it will need in the event of a 
catastrophic earthquake. This year approximately 40 percent of the 
premium that CEA collects from policyholders will be paid to re-
insurers rather than towards capital accumulation or more coverage 
under the policy.
  Including the CEA in the benefits provided under H.R. 3355 will allow 
it to reduce its claims-paying financing costs while still being able 
to pay the cost of its losses and repay any reinsurance or loans from 
the Federal government. By reducing its claims paying costs CEA will be 
able to accumulate capital faster and encourage more people to buy 
earthquake insurance.
  Inclusion of the CEA in H.R. 3355 makes good economic sense, good 
actuarial sense, and good common sense. I urge my colleagues to support 
the Manager's Amendment and the underlying bill before us today.
  Mr. KLEIN of Florida. Mr. Chairman, I yield back the balance of my 
time.
  The CHAIRMAN. All time for general debate has expired.
  Pursuant to the rule, the amendment in the nature of a substitute 
printed in the bill shall be considered as an original bill for the 
purpose of amendment under the 5-minute rule and shall be considered 
read.
  The text of the amendment in the nature of a substitute is as 
follows:

[[Page 30637]]



                               H.R. 3355

       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 2007''.
       (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--NATIONAL HOMEOWNERS' INSURANCE STABILIZATION PROGRAM

       Sec. 201. Establishment.
       Sec. 202. Liquidity loans and catastrophic loans for state 
           and regional reinsurance programs.
       Sec. 203. Reports and audits.
       Sec. 204. Funding.

                     TITLE III--GENERAL PROVISIONS

       Sec. 301. Qualified reinsurance programs.
       Sec. 302. Definitions.
       Sec. 303. 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) historically, when a natural disaster eclipses the 
     ability of the private industry and a State to manage the 
     loss, the Federal Government has stepped in to provide the 
     funding and services needed for recovery;
       (6) the cost of such Federal ``bail-outs'' are borne by all 
     taxpayers equally, as there is no provision to repay the 
     money and resources provided, which thereby unfairly burdens 
     citizens who live in lower risk communities;
       (7) 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 (known as timing risk), 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;
       (8) such effects on the insurance industry have been 
     harmful to economic activity in States exposed to major 
     catastrophes and have placed significant burdens on existing 
     residents of such States;
       (9) 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;
       (10) since 2004, the Congress has appropriated more than 
     $58,000,000,000 in disaster relief to the States affected by 
     natural catastrophes;
       (11) the Federal Government has provided and will continue 
     to provide resources to pay for losses from future 
     catastrophes;
       (12) when Federal assistance is provided to the States, 
     accountability for Federal funds disbursed is paramount;
       (13) 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 wasted and citizens are enabled to rebuild and resume 
     productive activities as quickly as possible;
       (14) 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;
       (15) 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; and
       (16) State insurers and reinsurers, if appropriately 
     backstopped themselves, can absorb catastrophic risk borne by 
     private insurers without bearing timing risk, and thus enable 
     all insurers (whether State-operated or privately owned) to 
     underwrite and price insurance without timing risk and in 
     such a way to encourage property owners to pay for the 
     appropriate insurance to protect themselves and to take steps 
     to mitigate against the risks of disaster by locally 
     appropriate methods.
       (b) Purposes.--The purposes of this Act are to establish a 
     program to provide a Federal backstop 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 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 
     and State residual insurance market entities;
       (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) use 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.

     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).

     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 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

[[Page 30638]]

     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 2008 through 2013.

     TITLE II--NATIONAL HOMEOWNERS' INSURANCE STABILIZATION PROGRAM

     SEC. 201. ESTABLISHMENT.

       The Secretary of the Treasury shall carry out a program 
     under this title to make liquidity loans and catastrophic 
     loans under section 202 to qualified reinsurance programs to 
     ensure the solvency of such programs, to improve the 
     availability and affordability of homeowners' insurance, to 
     incent risk transfer to the private capital and reinsurance 
     markets, and to spread the risk of catastrophic financial 
     loss resulting from natural disasters and catastrophic 
     events.

     SEC. 202. LIQUIDITY LOANS AND CATASTROPHIC LOANS FOR STATE 
                   AND REGIONAL REINSURANCE PROGRAMS.

       (a) Contracts.--The Secretary may enter into a contract 
     with a qualified reinsurance program to carry out the 
     purposes of this Act as the Secretary may deem appropriate. 
     The contract shall include, at a minimum, the conditions for 
     loan eligibility set forth in this section.
       (b) Conditions for Loan Eligibility.--A loan under this 
     section may be made only to a qualified reinsurance program 
     and only if--
       (1) before the loan is made--
       (A) the State or regional reinsurance program submits to 
     the Secretary a report setting forth, in such form and 
     including such information as the Secretary shall require, 
     how the program plans to repay the loan; and
       (B) based upon the report of the program, the Secretary 
     determines that the program can meet its repayment obligation 
     under the loan and certifies that the program can meet such 
     obligation;
       (2) the program cannot access capital in the private 
     market, including through catastrophe bonds and other 
     securities sold through the facility created in title I of 
     this Act, as determined by the Secretary, and a loan may be 
     made to such a qualified reinsurance program only to the 
     extent that such program cannot access capital in the private 
     market;
       (3) the Secretary determines that an event has resulted in 
     insured losses in a State with a qualified reinsurance 
     program;
       (4) the loan complies with the requirements under 
     subsection (d) and or (e), as applicable; and
       (5) the loan is afforded the full faith and credit of the 
     State and the State demonstrates to the Secretary that it has 
     the ability to repay the loans.
       (c) Mandatory Assistance for Qualified Reinsurance 
     Programs.--The Secretary shall upon the request of a 
     qualified reinsurance program and subject to subsection (b), 
     make a loan under subsection (d) or (e) for such program in 
     the amount requested by such program (subject to the 
     limitations under subsections (d)(2) and (e)(2), 
     respectively).
       (d) Liquidity Loans.--A loan under this subsection for a 
     qualified reinsurance program shall be subject to the 
     following requirements:
       (1) Preconditions.--The Secretary shall have determined 
     that the qualified reinsurance program--
       (A) has a capital liquidity shortage, in accordance with 
     regulations that the Secretary shall establish; and
       (B) cannot access capital markets at effective rates of 
     interest lower than those provided in paragraph (3).
       (2) Amount.--The principal amount of the loan may not 
     exceed the ceiling coverage level for the qualified 
     reinsurance program.
       (3) Rate of interest.--The loan shall bear interest at an 
     annual rate 3 percentage points higher than marketable 
     obligations of the Treasury having the same term to maturity 
     as the loan and issued during the most recently completed 
     month, as determined by the Secretary, or such higher rate as 
     may be necessary to ensure that the amounts of interest paid 
     under such loans exceed the sum of the costs (as such term is 
     defined in section 502 of the Federal Credit Reform Act of 
     1990 (2 U.S.C. 661a)) of such loans, the administrative costs 
     involved in carrying out a program under this title for such 
     loans, and any incidental effects on governmental receipts 
     and outlays.
       (4) Term.--The loan shall have a term to maturity of not 
     less than 5 years and not more than 10 years.
       (e) Catastrophic Loans.--A loan under this subsection for a 
     qualified reinsurance program shall be subject to the 
     following requirements:
       (1) Preconditions.--The Secretary shall have determined 
     that an event has resulted in insured losses in a State with 
     a qualified reinsurance program and that such insured losses 
     in such State are in excess of 150 percent of the aggregate 
     amount of direct written premium for privately issued 
     property and casualty insurance, for risks located in that 
     State, over the calendar year preceding such event, in 
     accordance with regulations that the Secretary shall 
     establish.
       (2) Amount.--The principal amount of the loan made pursuant 
     to an event referred to in paragraph (1) may not exceed the 
     amount by which the insured losses sustained as a result of 
     such event exceed the ceiling coverage level for the 
     qualified reinsurance program.
       (3) Rate of interest.--The loan shall bear interest at an 
     annual rate 0.20 percentage points higher than marketable 
     obligations of the Treasury having a term to maturity of not 
     less than 10 years and issued during the most recently 
     completed month, as determined by the Secretary, or such 
     higher rate as may be necessary to ensure that the amounts of 
     interest paid under such loans exceed the sum of the costs 
     (as such term is defined in section 502 of the Federal Credit 
     Reform Act of 1990 (2 U.S.C. 661a)) of such loans, the 
     administrative costs involved in carrying out a program under 
     this title for such loans, and any incidental effects on 
     governmental receipts and outlays.
       (4) Term.--The loan shall have a term to maturity of not 
     less than 10 years.
       (f) Use of Funds.--Amounts from a loan under this section 
     shall only be used to provide reinsurance or retrocessional 
     coverage to underlying primary insurers or reinsurers for 
     losses arising from all personal real property or homeowners' 
     lines of insurance, as defined in the Uniform Property & 
     Casualty Product Coding Matrix published and maintained by 
     the National Association of Insurance Commissioners. Such 
     amounts shall not be used for any other purpose.

     SEC. 203. REPORTS AND AUDITS.

       The Secretary shall submit a report to the President and 
     the Congress annually that identifies and describes any loans 
     made under this title during such year and any repayments 
     during such year of loans made under this title, and 
     describes actions taken to ensure accountability of loan 
     funds. The Secretary shall provide for regular audits to be 
     conducted for each loan made under this title and shall make 
     the results of such audits publicly available.

     SEC. 204. FUNDING.

       (a) Program Fee.--
       (1) In general.--The Secretary may establish and collect, 
     from qualified reinsurance programs that are precertified 
     pursuant to section 301(c), a reasonable fee, as may be 
     necessary to offset the expenses of the Secretary in 
     connection with carrying out the responsibilities of the 
     Secretary under this title, including--
       (A) costs of developing, implementing, and carrying out the 
     program under this title; and
       (B) costs of providing for precertification pursuant to 
     section 301(c) of State and regional reinsurance programs as 
     qualified reinsurance programs.
       (2) Adjustment.--The Secretary may, from time to time, 
     adjust the fee under paragraph (1) as appropriate based on 
     expenses of the Secretary referred to in such paragraph.
       (3) Use.--Any fees collected pursuant to this subsection 
     shall be credited as offsetting collections of the Department 
     of the Treasury and shall be available to the Secretary only 
     for expenses referred to in paragraph (1).
       (b) Costs of Loans; Administrative Costs.--To the extent 
     that amounts of negative credit subsidy are received by the 
     Secretary in any fiscal year pursuant to loans made under 
     this title, such amounts shall be available for costs (as 
     such term is defined in section 502 of the Federal Credit 
     Reform Act of 1990 (2 U.S.C. 661a)) of such loans and for 
     costs of carrying out the program under this title for such 
     loans.
       (c) Full Taxpayer Repayment.--The Secretary shall require 
     the full repayment of all loans made under this title. If the 
     Secretary determines at any time that such full repayment 
     will not made, or is likely not to be made, the Secretary 
     shall promptly submit a report to the Congress explaining why 
     such full repayment will not be made or is likely not to be 
     made.

                     TITLE III--GENERAL PROVISIONS

     SEC. 301. QUALIFIED REINSURANCE PROGRAMS.

       (a) In General.--For purposes of this Act only, a program 
     shall be considered to be a qualified reinsurance program if 
     the program--
       (1) is authorized by State law for the purposes described 
     in this section;
       (2) is an entity in which the authorizing State maintains a 
     material, financial interest;

[[Page 30639]]

       (3) provides reinsurance or retrocessional coverage to 
     underlying primary insurers or reinsurers for losses arising 
     from all personal residential lines of insurance, as defined 
     in the Uniform Property & Casualty Product Coding Matrix 
     published and maintained by the National Association of 
     Insurance Commissioners;
       (4) has a governing body, a majority of whose members are 
     public officials;
       (5) provides reinsurance or retrocessional coverage to 
     underlying primary insurers or reinsurers for losses in 
     excess of such amount that the Secretary has determined 
     represents a catastrophic event in that particular State;
       (6) is authorized by a State that has in effect such laws, 
     regulations, or other requirements, as the Secretary shall by 
     regulation provide, that--
       (A) ensure, to the extent that reinsurance coverage made 
     available under the qualified reinsurance 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;
       (B) require that any new construction, substantial 
     rehabilitation, and renovation insured or reinsured by the 
     program complies with applicable State or local government 
     building, fire, and safety codes;
       (C) require State authorized insurance entities within that 
     State to establish an insurance rate structure that takes 
     into account measures to mitigate insurance losses;
       (D) require State authorized insurance and reinsurance 
     entities within that State to establish rates at a level that 
     annually produces expected premiums that shall be sufficient 
     to pay the expected annualized cost of all claims, loss 
     adjustment expenses, and all administrative costs of 
     reinsurance coverage offered; and
       (E) encourage State authorized insurance and reinsurance 
     entities within that State to establish rates that do not 
     involve cross-subsidization between any separate property and 
     casualty lines covered under the State authorized insurance 
     or reinsurance entity; and
       (7) 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) Transitional Mechanisms.--For the five-year period 
     beginning on the date of the enactment of this Act, in the 
     case of a State that does not have a qualified reinsurance 
     program for the State, a State residual insurance market 
     entity for such State shall be considered to be a qualified 
     reinsurance program, but only if such State residual 
     insurance market entity was in existence before such date of 
     enactment.
       (c) Precertification.--The Secretary shall establish 
     procedures and standards for State and regional reinsurance 
     programs and the State residual insurance market entities 
     described in section (b) to apply to the Secretary at any 
     time for certification (and recertification) as qualified 
     reinsurance programs.
       (d) Reinsurance To Cover Exposure.--This section may not be 
     construed to limit or prevent any insurer from obtaining 
     reinsurance coverage for insured losses retained by insurers 
     pursuant to this section, nor shall the obtaining of such 
     coverage affect the calculation of the amount of any loan 
     under this title.

     SEC. 302. DEFINITIONS.

       For purposes of this Act, the following definitions shall 
     apply:
       (1) Ceiling coverage level.--The term ``ceiling coverage 
     level'' means, with respect to a qualified reinsurance 
     program, the maximum liability, under law, that could be 
     incurred at any time by the qualified reinsurance program.
       (2) Insured loss.--The term ``insured loss'' means any loss 
     insured by a qualified reinsurance program.
       (3) Qualified reinsurance program.--The term ``qualified 
     reinsurance program'' means a State or regional program that 
     meets the requirements under section 301.
       (4) Secretary.--The term ``Secretary'' means the Secretary 
     of the Treasury.
       (5) 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.

     SEC. 303. REGULATIONS.

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

  The CHAIRMAN. No amendment to that amendment shall be in order except 
those printed in the portion of the Congressional Record designated for 
that purpose and pro forma amendments for the purpose of debate. 
Amendments printed in the Record may be offered only by the Member who 
caused it to be printed or a designee and shall be considered read.


            Amendment No. 17 Offered by Mr. Klein of Florida

  Mr. KLEIN of Florida. Mr. Chairman, I offer an amendment.
  The CHAIRMAN. The Clerk will designate the amendment.
  The text of the amendment is as follows:

       Amendment No. 17 offered by Mr. Klein of Florida:
       Page 2, after line 7, in the item in the table of contents 
     relating to section 202, strike ``State and Regional'' and 
     insert ``Qualified''.
       Page 4, line 6, strike ``(known as timing risk)''.
       Page 4, line 15, strike ``existing''.
       Page 6, strike lines 3 through 12, and insert the following 
     new paragraph:
       (16) State catastrophe reinsurance programs, if 
     appropriately structured and regulated, assume catastrophic 
     risk borne by private insurers without incurring many of the 
     additional costs imposed on private insurers, and thus enable 
     all insurers within the State to underwrite and price 
     coverage at rates designed to encourage property owners to 
     acquire levels of insurance appropriate to their individual 
     risks.
       Page 6, line 14, strike ``a Federal backstop'' and insert 
     ``Federal support''.
       Page 7, line 18, after ``entity'' insert ``, or State-
     sponsored provider of natural catastrophe insurance,''.
       Page 8, line 1, strike ``and'' and insert a comma.
       Page 8, line 2, before the semicolon insert ``, and State-
     sponsored providers of natural catastrophe insurance''.
       Page 13, line 19, strike ``state and regional'' and insert 
     ``qualified''.
       Page 14, line 5, strike ``State or regional'' and insert 
     ``qualified''.
       Page 14, line 16, before the comma insert ``at a 
     commercially reasonable rate''.
       Page 14, line 21, before the semicolon insert ``at a 
     commercially reasonable rate''.
       Page 15, line 2, strike ``and'' the first place such term 
     appears.
       Page 15, lines 3 and 4, strike ``the loan is afforded the 
     full faith and credit of the State and''.
       Page 15, strike lines 21 through 23 and insert the 
     following new subparagraph:
       (B) cannot access capital in the private markets at a 
     commercially reasonable rate.
       Page 17, line 4, strike ``privately issued''.
       Page 18, lines 9 and 10, strike ``real property or 
     homeowners''' and insert ``residential''.
       Page 19, strike ``section 301(c)'' each place such term 
     appears in lines 3 and 11 and insert ``section 401(d)''.
       Page 20, line 9, after ``not'' insert ``be''.
       Page 20, after line 12, insert the following new title:

   TITLE III--REINSURANCE COVERAGE FOR QUALIFIED REINSURANCE PROGRAMS

     SEC. 301. PROGRAM AUTHORITY.

       Subject to section 304(c), the Secretary of the Treasury, 
     shall make available for purchase, only by qualified 
     reinsurance programs (as such term is defined in section 
     401), contracts for reinsurance coverage under this title.

     SEC. 302. CONTRACT PRINCIPLES.

       Contracts for reinsurance coverage made available under 
     this title--
       (1) shall not displace or compete with the private 
     insurance or reinsurance markets or the capital market;
       (2) shall minimize the administrative costs of the Federal 
     Government; and
       (3) shall provide coverage based solely on insured losses 
     covered by the qualified reinsurance program purchasing the 
     contract.

     SEC. 303. TERMS OF REINSURANCE CONTRACTS.

       (a) Minimum Attachment Point.--Notwithstanding any other 
     provision of this title, a contract for reinsurance coverage 
     under this title for a qualified reinsurance program may not 
     be made available or sold unless the contract requires that 
     the qualified reinsurance program sustain an amount of 
     retained losses from events in an amount, as determined by 
     the Secretary, that is equal to the amount of losses 
     projected to be incurred from a single event of such 
     magnitude that it has a 0.5 percent chance of being equaled 
     or exceeded in any year.
       (b) 90 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, subject to section 304, be equal to 90 
     percent of the amount of insured losses of the qualified 
     reinsurance 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 qualified reinsurance 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 qualified 
     reinsurance 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, loss 
     adjustment expenses, all

[[Page 30640]]

     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 and the limits specified in section 304.
       (h) Information.--Each contract for reinsurance coverage 
     under this title shall contain a condition providing that the 
     Secretary may require the qualified reinsurance program that 
     is covered under the contract to submit to the Secretary all 
     information on the qualified reinsurance 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 by the Secretary shall not exceed $200,000,000,000 or 
     such lesser amount as is 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 under section 304; 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.--If the Secretary determines that the 
     amounts in the Fund are in excess of current needs, the 
     Secretary may invest such amounts as the Secretary considers 
     advisable in obligations issued or guaranteed by the United 
     States.

     SEC. 306. REGULATIONS.

       The Secretary shall issue any regulations necessary to 
     carry out the program for reinsurance coverage under this 
     title.
       Page 20, line 13, strike ``TITLE III'' and insert ``TITLE 
     IV''.
       Page 20, line 15, strike ``SEC. 301.'' and insert ``SEC. 
     401.''.
       Page 22, line 4, after the semicolon insert ``and''.
       Page 22, line 17, strike ``and''.
       Page 22, strike lines 9 through 11 and insert the 
     following: ``the reasonably anticipated cost of all claims, 
     loss adjustment expenses, and all administrative costs of the 
     insurance or reinsurance coverage offered by such entities, 
     and any such outwards reinsurance as the program 
     administrator deems prudent;''.
       Page 22, strike lines 12 through 17 and insert the 
     following new paragraphs:
       (7) to the extent possible, seeks to avoid cross-
     subsidization between any separate property and casualty 
     lines covered under the State authorized insurance or 
     reinsurance entity;
       (8) complies with the risk-based capital requirements under 
     subsection (b); and
       Page 22, line 18, strike ``(7)'' and insert ``(9)''.
       Page 22, after line 21, insert the following new 
     subsection:
       (b) Risk-Based Capital Requirements.--
       (1) In general.--Except for programs deemed to be qualified 
     reinsurance programs pursuant to section 401(c), each 
     qualified reinsurance program shall maintain risk-based 
     capital in accordance with requirements established by the 
     Secretary, in consultation with the National Association of 
     Insurance Commissioners and consistent with the Risk-Based 
     Capital Model Act of the National Association of Insurance 
     Commissioners, and take into consideration asset risk, credit 
     risk, underwriting risk, and such other relevant risk as 
     determined by the Secretary.
       (2) Treatment of access to liquidity loans.--
       (A) In general.--To the extent that a qualified reinsurance 
     program is deficient in complying with any aspect of the 
     risk-based capital requirements established pursuant to this 
     subsection, the Secretary shall recognize and give credit for 
     the ability of such qualified reinsurance program to access 
     capital through the liquidity loan program established under 
     section 202(d).
       (B) Annual diminution.--The extent of credit recognized and 
     given for a qualified reinsurance program pursuant to 
     subparagraph (A) shall diminish annually in a proportion 
     equal to the earned premium for the program for the prior 
     calendar year.
       (C) Reset upon occurrence of catastrophe.--To the extent 
     that a qualified reinsurance program is obligated to pay 
     losses as a result of the occurrence of a catastrophe, the 
     Secretary shall increase the credit recognized and given for 
     the program pursuant to subparagraph (A) by an amount equal 
     to the losses paid by the program as a result of the 
     catastrophe.
       (D) Resumption after catastrophe.--After a reset occurs 
     pursuant to subparagraph (C) for a qualified reinsurance 
     program, the diminution described in subparagraph (B) shall 
     resume and continue until the program has accumulated capital 
     sufficient to satisfy the risk-based capital requirement 
     determined by the Secretary to be appropriate given the 
     ceiling coverage level of that particular qualified 
     reinsurance program.
       (3) Report.--For each calendar year, each qualified 
     reinsurance program shall prepare and submit to the Secretary 
     a report identifying its risk based capital, at such time 
     after the conclusion of such year, and containing such 
     information and in such form, as the Secretary shall require.
       Page 22, line 22, strike ``(b)'' and insert ``(c)''.
       Page 23, line 1, after ``entity'' insert ``, or State-
     sponsored provider of natural catastrophe insurance,''.
       Page 23, line 3, after ``entity'' insert ``, or State-
     sponsored provider of natural catastrophe insurance,''.
       Page 23, line 5, strike ``(c)'' and insert ``(d)''.
       Page 23, line 11, strike ``(d)'' and insert ``(e)''.
       Page 23, after line 16, insert the following new section:

     SEC. 402. STUDY AND CONDITIONAL COVERAGE OF COMMERCIAL 
                   RESIDENTIAL LINES OF INSURANCE.

       (a) Study.--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 
     qualified reinsurance 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 has on housing 
     affordability for renters, and the likelihood that such an 
     expansion of the program would increase insurance capacity 
     for this market segment.
       (b) Conditional Coverage.--To the extent that the Secretary 
     determines that there is such a need to expand such programs 
     and such expansion will be effective in increasing insurance 
     capacity for the commercial residential insurance market, the 
     Secretary shall, in consultation with the National 
     Association of Insurance Commissioners--
       (1) apply the provisions of this Act, as appropriate, to 
     insured losses of a qualified reinsurance program for losses 
     arising from commercial insurance policies which provide 
     coverage for properties that are composed predominantly of 
     residential rental units, as described in paragraph (a); and
       (2) provide such restrictions, limitations, or conditions 
     with respect to the programs under this Act that the 
     Secretary deems appropriate, based on the study under 
     subsection (a).
       Page 23, line 17, strike ``sec. 302.'' and insert ``sec. 
     403.''.
       Page 23, lines 22 and 23, strike ``, under law,''.
       Page 24, line 7, strike ``section 301'' and insert 
     ``section 401''.
       Page 24, line 15, strike ``SEC. 303.'' and insert ``SEC. 
     404.''.

  The CHAIRMAN. The gentleman is recognized for 5 minutes.
  Mr. KLEIN of Florida. Mr. Chairman, the amendment before us is 
testament to the fact that this legislation is truly a work of 
bipartisanship. Democrats and Republicans came together as this 
legislation began to work its way through the process. A number of 
interested Members reached out to us with well-thought suggestions on 
how to improve the underlying bill. I am pleased to say we were able to 
incorporate many suggestions into this amendment, including the 
adoption of a provision that the gentlewoman from Florida (Ms. Ginny 
Brown-Waite) has been developing over the last couple of years.

[[Page 30641]]

  This amendment would establish a high-level natural catastrophe 
reinsurance fund which would be authorized to write reinsurance 
contracts to cover catastrophic natural disasters. The addition of such 
a fund would add a third layer of protection to the legislation, which 
could further help to increase availability and stabilize rates for 
homeowners. The fund would provide reinsurance contracts for coverage 
that is available after the qualified reinsurance program has sustained 
losses resulting from a 1-in-200-year event.
  Coverage would be provided on an actuarially sound basis and would 
not displace or compete with the private market. This provision will go 
a long way with providing high-level protection for States coping with 
natural disasters.
  The amendment also provides for a study and conditional authorization 
for the inclusion of commercial residential lines of coverage. It is 
important for us to make sure that renters are not left behind 
following a disaster, and this provision takes us in the right step of 
determining how capacity restrictions impact housing affordability for 
renters. I know this was a concern brought up, and I am glad to include 
it in this amendment.
  I am also pleased that we were able to include a provision suggested 
by the gentleman from Florida (Mr. Putnam) which ensures that qualified 
reinsurance programs will engage in responsible reserving. This 
provision would use an NAIC-developed formula to ensure that 
participating States will be operating in a sound fashion.
  We also wanted to make sure that States would not become overly 
reliant on programs established under the legislation, and this 
addition will add a safeguard against that concern.
  Again, I would like to thank those Members who have come forward with 
suggestions on how to improve the bill. I urge a ``yes'' vote on the 
amendment.
  I yield back the balance of my time.
  Mr. ROSKAM. Mr. Chairman, I rise in opposition to the amendment and 
to engage in a colloquy.
  The Acting CHAIRMAN (Mr. Cardoza). The gentleman from Illinois is 
recognized for 5 minutes.
  Mr. ROSKAM. Mr. Chairman, I had previously presented or put at the 
desk 11 amendments to the manager's amendment that I am not going to be 
offering this afternoon. Instead, and in the interest of time, since I 
wasn't seeking roll calls on them, anyway, I just raise a series of 
questions that I am putting forward in good faith. They have been 
brought to my attention by our staff. Some you may have answers for; 
some you may have contemplated. Others you may say, let's think through 
that a little further, because my sense is, while the House is about to 
act, this is still very much a work in progress on Capitol Hill when it 
goes to the other Chamber.
  The first question I had is the term ``capital liquidity shortage.'' 
It is a term that is used exclusively in the text of the bill itself, 
but it is not defined anywhere else. It is not a legal term of art that 
I am aware of. We have done some Google searches on the Internet, and 
it is a phrase that is unique to this bill. It is not defined.
  My concern is that it could create, really, the maximum liability 
that could be incurred at any time. I am wondering if the gentleman 
from Florida is open to further defining ``capital liquidity 
shortage''?
  And I will be happy to yield.
  Mr. KLEIN of Florida. I thank the gentleman from Illinois, and I do 
appreciate the fact in our committee, the Committee on Financial 
Services, you had a number of interesting inquiries, some of which were 
incorporated and some are still a work in progress.
  I will be more than happy to sit down, as this bill goes through the 
process. Obviously the Senate is going to begin to consider this bill. 
There will be opportunity through the conference, and I think there 
should be an opportunity to take a closer look at this issue.
  Mr. ROSKAM. I yield to the chairman.
  Mr. FRANK of Massachusetts. I appreciate it and I appreciate the 
gentleman's cooperation.
  I would just say, to move this along, as the gentleman from Florida 
responds, he will be speaking for the committee leadership. These are 
matters on which we have some general agreement that work needs to be 
done. I won't have to say this every time, but when the gentleman from 
Florida gives you that assurance, it comes from the committee 
leadership as well.
  Mr. ROSKAM. I thank the gentleman.
  Another term is the term ``commercially reasonable rate.'' It is also 
not defined anywhere, and I would just submit that is another area that 
we ought to be looking at.
  The other notion is that State programs should be required to charge 
actuarially sound rates and build up reserves based on a 1-in-200 year 
standard used elsewhere in the manager's amendment. My concern is we 
run into a situation like we have with the flood insurance program. We 
should learn from that mistake.
  The weakness of the flood insurance program was that it contemplated 
simply anticipating the actual output, as it were, the actual claims, 
rather than thinking from an actuarial point of view where you 
contemplate the unanticipated. The way we have to do this, the way this 
process has to be set up, is it has to literally anticipate the 
unanticipated. And the way the manager's amendment is currently 
crafted, it doesn't do that. In other words, it doesn't allow the 
building up of reserves over a period of time so that the fund itself 
is actuarially sound and that it can sustain an unexpected loss, the 
massive storm, the unbelievable event that is literally not 
contemplated.
  There are two things that are inconsistent within the bill, it seems 
to me. There is this lower view of contemplation of what you can build 
up. But it also says you have to pass on the savings to the consumer. 
So, literally, the fund is not able to build up the reserves that are 
necessary in anticipation of what can't be anticipated.
  With that, I yield to the gentleman.
  Mr. KLEIN of Florida. I thank the gentleman from Illinois. And just 
to respond to a couple of points there, the building up of reserves and 
the passing of savings to consumers are not necessarily inconsistent 
points. One of the goals of this bill is not to make more money for 
insurance companies, many of them are doing just fine, it is to try to 
create stability in the market at an actuarially sound rate. I take 
your points, and they are well taken in terms of making sure we learn 
from mistakes. I commit to the fact that we will continue to work 
through this and make sure that it is based on sound actuarial 
principles by which definition usually sound actuarial estimations do 
take into account future anticipated events. I commit to that point.
  Mr. ROSKAM. Reclaiming my time, I thank you. I just submit that the 
language, as I understand it in the manager's amendment, doesn't 
achieve the goal that you and I are seeking.
  The Acting CHAIRMAN. The time of the gentleman from Illinois has 
expired.
  (On request of Mr. Frank of Massachusetts, and by unanimous consent, 
Mr. Roskam was allowed to proceed for 5 additional minutes.)
  Mr. ROSKAM. Finally, I would also like to draw attention to the 
notion of, sort of what I am characterizing in my fear as that 
repayment is a myth fear.
  Under the manager's amendment, if a State program is somehow going to 
incur losses that exceeds its maximum liabilities, shouldn't it have to 
show how it is going to prevent that in the future? And there is no 
point in the manager's amendment where there is that reporting 
requirement. Again, I don't think that is onerous. I don't think it is 
difficult, but I think it would be a good idea to require a State 
before they make a claim or before they default to come forward and 
say, look, this is how we are going to avoid this in the future. I 
think it is a de minimis reporting requirement.
  I yield to the gentleman from Florida.
  Mr. KLEIN of Florida. I thank the gentleman from Illinois. The notion 
of the terms of repayment are to be negotiated with the Treasury. Each 
State may have a slightly different scenario in terms of terms and 
conditions.

[[Page 30642]]

  What I would expect to be negotiated would be, just like any other 
private sector contract with a set of covenants and defaults in terms 
of understanding what the expectations are. So I would expect the 
Treasury, and if we need to get that clarified in the future, I would 
be happy to, but I expect the terms to be very clear regarding 
notification and things like that.
  Mr. ROSKAM. I thank the gentleman.
  Another observation is that States should pay the cost of the 
consortium. Now, as drafted, the cost of the consortium is by Federal 
taxpayers. There is no payment mechanism in the manager's amendment for 
the consortium to be funded by the States. I think that is an oversight 
and it should be revisited.
  The manager's amendment sets up $120 million over 6 years, I think, 
but I think there should be a way for the States to pony up. At least 
theoretically you can contemplate where the Federal Government would 
create this consortium, and maybe nobody's in. At that point it would 
be a foolish enterprise. I think there has to be a way.
  I yield to the gentleman.
  Mr. KLEIN of Florida. I thank the gentleman from Illinois.
  I think the thinking is this is an authorization. It is not an 
appropriation. The general notion is in the early stage of this thing, 
it is a relatively small amount of dollars. It creates authorization if 
necessary.
  If you have a number of States that do participate, which we 
anticipate, I think the language of the bill talks about the fact that 
they will pay for that. The notion is there is an authorization. And to 
get more States involved to pay for it, there is this limited amount of 
Federal responsibility. I think the thinking is that the States will 
take responsibility.
  Mr. ROSKAM. Finally, on the basis of time, and I will be happy to 
continue the conversation with you and the chairman, in my view, I 
think the grace period for States is too long for their mitigation 
efforts. For those States currently with a program in place, the 
manager's amendment says all of these mitigation components are 
excellent, but we are going to give you 5 years to get your act 
together.
  My suggestion would be let's shorten that up. Let's make it 2 years, 
and I think that is still very gracious, to follow on the word of 
grace. But 5 years is almost the length of the entire program that is 
being proposed. That is a suggestion regarding a way that I think the 
bill can be improve.
  I yield to the gentleman.
  Mr. KLEIN of Florida. I am a true believer, if you give somebody 5 
years to do it, it will take 5 years. At the same time I realize from 
the experience we have had in Florida and many other States that have 
tried to move forward with building codes and other things, it does 
take some time. But I am all for encouraging as strong as possible to 
move as quickly as possible.
  Mr. ROSKAM. I yield to the chairman.
  Mr. FRANK of Massachusetts. I want to express my appreciation to the 
gentleman, both for the cogency of the points he raised, because we 
want this to work well, and he has helped us both previously and today 
in refining this. I also appreciate his courtesy in helping us move 
this. I thank the gentleman from Illinois.
  Mr. ROSKAM. Mr. Chairman, I yield back the balance of my time.

                              {time}  1615

  The Acting CHAIRMAN. The question is on the amendment offered by the 
gentleman from Florida (Mr. Klein).
  The question was taken; and the Acting Chairman announced that the 
ayes appeared to have it.
  Mrs. CAPITO. Mr. Chairman, I demand a recorded vote.
  The Acting CHAIRMAN. Pursuant to clause 6 of rule XVIII, further 
proceedings on the amendment offered by the gentleman from Florida will 
be postponed.


                 Amendment No. 6 Offered by Mr. Roskam

  Mr. ROSKAM. Mr. Chairman, I offer an amendment.
  The Acting CHAIRMAN. The Clerk will designate the amendment.
  The text of the amendment is as follows:

       Amendment No. 6 offered by Mr. Roskam:
       Page 21, strike lines 21 through 25.
       Page 22, line 1, strike ``(C)'' and insert ``(B)''.
       Page 22, line 5, strike ``(D)'' and insert ``(C)''.
       Page 22, line 12, strike ``(E)'' and insert ``(D)''.
       Page 22, line 17, strike ``and''.
       Page 22, after line 17, insert the following new paragraph:
       (7) develops, maintains, and enforces best practices in 
     building codes that the Secretary deems adequate to address 
     the natural disaster exposures of the State, taking into 
     consideration the geography, catastrophe risk, and building 
     patterns in the State; and
       Page 22, line 18, strike ``(7)'' and insert ``(8)''.

  The Acting CHAIRMAN. The gentleman from Illinois is recognized for 5 
minutes.
  Mr. ROSKAM. Thank you, Mr. Chairman.
  Today I offer an amendment essential to stopping this Congress from 
running down a road that I've expressed caution about earlier today, 
and that is causing further government involvement in self-sufficient, 
available, and reliable private markets.
  Congress recently passed the National Flood Insurance Reform; and 
while I didn't agree with the wind provision inclusion, it made crucial 
strides in reducing damage from flooding and storms, especially in 
areas suffering repeat events. However, H.R. 3355 does not specifically 
prescribe mitigation guidelines. In title II, it merely alludes to 
Treasury providing a general directive; and, in my view, that's not 
good enough.
  Currently, H.R. 3355 only requires the reinsurance fund receiving the 
loan to provide coverage for properties that adhere to applicable State 
building codes, leaving open the possibility that States with 
substandard codes, or even lacking codes, can still access the loans.
  Instead, Treasury should be required to certify that the State has 
implemented best practices building codes for the applicable exposures, 
taking into account the State's geography, catastrophe risk and 
building patterns, which is what my amendment does here today.
  This would not be a national building code, but rather, a regionally 
specific criteria for program participation.
  The language in my amendment also gives broad flexibility to the 
Treasury to certify whether State building codes are appropriate for 
the types of risks they face. It doesn't apply specific, bureaucratic 
and unreachable one-size-fits-all standards for the Treasury to abide 
by.
  The language is necessary because the current language in the bill 
would create an implicit guarantee that would result in an inequitable 
Federal subsidy for certain State insurance programs and policyholders, 
thus creating no need for local municipalities and developers to stop 
development in risk-prone areas. This was made very clear during the 
testimony that we heard in the hearings several weeks ago.
  The further subsidization of rates would undermine economic 
incentives to mitigate risks. Individuals facing subsidized rates would 
be encouraged to take on risks that are inappropriate, specifically 
putting themselves in harm's way because they don't bear the full 
weight of the potential damages.
  Now, I represent citizens from Illinois, and we would never choose to 
participate in this program. And let me tell you, the view from 
Lombard, Illinois, is very different from Key West, and God bless the 
folks that live in Key West, but I don't think that the residents I 
represent should be in a position to subsidize someone else's view.
  Why should Illinois bail out States that can't address their own 
problems? While I'm sensitive and I admire my colleagues from Florida, 
I do believe that some of this is simply an exacerbation of government 
programs that have completely failed. Many other States have taken into 
account and addressed market issues based on increasing private market 
participation.
  South Carolina introduced policyholder or catastrophe savings 
accounts to assist consumers and address cost

[[Page 30643]]

issues. Louisiana and South Carolina addressed rating and regulatory 
matters by encouraging greater competition among insurers rather than 
rate controls that discourage private market competition. Louisiana has 
committed financial incentives for insurers to underwrite or take 
policies from the residual market and write-in coastal areas. Several 
States have also improved building codes and their enforcement as part 
of the long-term solution to catastrophic risk.
  Floods are the majority of disasters that my congressional district 
faces, and we haven't sat by and waited for the government to help. The 
State of Illinois has one of the strongest floodplain management 
programs in the country. Illinois leads all Midwest States for the 
number of NFIP-participating communities, flood insurance policies, and 
flood insurance claims. Illinois outpaces the other States in local 
floodplain assistance, mitigation activities, and flood control 
projects.
  Specifically, two cities in my district, Des Plaines and Mt. 
Prospect, were badly hurt by floods in August of this year. But they 
didn't suffer as much as they could have, because they are moving 
forward on major flood mitigation efforts by building levees on the Des 
Plaines River. This project will move hundreds of homes and businesses 
out of the floodplain, thus reducing the amount of damage during flood 
season and lowering insurance rates for homeowners.
  There's been an unprecedented population growth and significant 
development in coastal and disaster-prone areas in recent decades, and 
total property exposures have increased dramatically.
  We certainly cannot anticipate what storms will be like in the 
future, but we can and should take steps to reduce and lessen these 
risks.
  I urge my colleagues to support this important amendment.
  Mr. Chairman, I yield back the balance of my time.
  Mr. KLEIN of Florida. Mr. Chairman, I move to strike the last word.
  The Acting CHAIRMAN. The gentleman is recognized for 5 minutes.
  Mr. KLEIN of Florida. Mr. Chairman, with all due respect to my 
friend, and all of us are freshmen here, Mr. Mahoney and Mr. Roskam, 
we're all new to this process, but with all due respect to his approach 
here, the problem with the amendment is that this takes the Federal 
Government and puts its stamp of approval on local building codes.
  And from my perspective, I don't think we want the U.S. Treasury or 
FEMA or anybody else to be responsible for making decisions on local 
building codes. These are very localized functions, certainly will 
encourage mitigation, and we've got some standards in place and our 
colleague from Connecticut (Mr. Murphy) in a few minutes I understand 
is going to be offering a very good amendment which deals with some 
Federal standards that are outside the Federal Government's role, but 
some trade industry standards on building code which relate to 
mitigation and reducing the hazard and reducing the potential exposure.
  So while I do appreciate the fact that Illinois may have different 
issues than Iowa, that has different issues than California, there's 
different issues in Florida, we certainly, in my view, don't want to 
federalize, if you will, the building code process. And it's something 
that I believe that we should allow local governments, within the 
confines of standards that are adopted by the industry, to reduce 
exposure to natural disasters. I think that's a better way to do it.
  So I would suggest that this amendment be opposed and that the 
Members of the House vote against it.
  Mr. Chairman, I yield back my time.
  Mr. BAKER. Mr. Chairman, I move to strike the last word.
  The Acting CHAIRMAN. The gentleman from Louisiana is recognized for 5 
minutes.
  Mr. BAKER. Mr. Chairman, I want to make clear my motivations here for 
the purposes of debate.
  I certainly am in support of the Roskam amendment, but with or 
without its adoption, even the underlying bill, without the manager's 
amendment, is problematic. However, the manager's amendment presents an 
additional level of concern above those raised at the committee 
consideration.
  Insurance is in the business of pricing risk, and I can honestly say 
as a Louisianan we are really adjusting in a significant way to the new 
risk now identified for our exposure along our coastal area.
  Our legislature has responded with the adoption of a building code 
that really is leading the class in the United States, and to suggest 
that free markets should not price the risk and provide insurance where 
they know they will lose money is not a policy that makes a great deal 
of sense.
  Hence, the underlying bill will provide a mechanism for the United 
States Treasury to provide a security backstop to the consortium that 
now is issuing insurance to Florida residents at a below-market rate.
  I can recall in great detail the criticisms by many in this House by 
those of us in Louisiana who are the beneficiaries of a flood insurance 
program that provides coverage at a governmentally subsidized rate. For 
the record, I'm for raising those premiums on Louisiana citizens to get 
that program in actuarial soundness because I know without that the 
program is eventually doomed.
  The underlying manager's amendment, although requiring risk-based 
capital, goes to great steps to avert the requirement, first by 
exempting companies who now exist from the consortium for the next 5 
years. Secondly, there is no full faith and credit of the beneficiary 
State on the loan that's made by the United States taxpayer and 
virtually no guarantee of repayment.
  Let's call this what it is. It is a way to provide stability in the 
Florida insurance market by accessing taxpayer money without guarantees 
of repayment. What can we do to improve this?
  Well, the Roskam amendment now pending is at least the most meager 
step one should take who is concerned about proprietary action in the 
insurance world. It does not say the Treasury Secretary will establish 
the building codes. It merely says the Treasury will examine whether 
there are even codes in place that are reasonable for the risks that 
are presented to the occupants of low-lying coastal areas before you 
extend taxpayer assistance.
  It's sort of like making sure that you've taken appropriate action to 
protect your family and that there's not a likelihood of probable loss, 
and then you're going to sell insurance on the assumption that the risk 
is low. In this case, rebuilding is taking place in low-lying areas at 
a rapid pace, and there is an absolute certainty there will be a repeat 
of significant storms and unquestioned amounts of loss.
  At least we should say that those who are building in exposures of 
great risk should exercise the highest level of construction standards 
before having access to taxpayer money to pay off the loss.
  Think about your constituents. How many times are we going to ask 
them to pay for the decisions of others to build in low-lying coastal 
areas when the coastal area residents themselves are not paying 
actuarial rates for coverage they are provided.
  I wish I could say it more clearly, but this is not a balanced 
approach; and certainly without the Roskam amendment we are opening 
this Congress and the American taxpayer to enormous financial risk 
without taking the first meager steps for rational self-protection.
  I urge the adoption of the Roskam amendment.
  Mr. Chairman, I yield back my time.
  The Acting CHAIRMAN. The question is on the amendment offered by the 
gentleman from Illinois (Mr. Roskam).
  The question was taken; and the Acting Chairman announced that the 
noes appeared to have it.
  Mr. ROSKAM. Mr. Chairman, I demand a recorded vote.
  The Acting CHAIRMAN. Pursuant to clause 6 of rule XVIII, further 
proceedings on the amendment offered by the gentleman from Illinois 
will be postponed.

[[Page 30644]]




         Amendment No. 14 Offered by Mr. Murphy of Connecticut

  Mr. MURPHY of Connecticut. Mr. Chairman, I offer an amendment.
  The Acting CHAIRMAN. The Clerk will designate the amendment.
  The text of the amendment is as follows:

       Amendment No. 14 offered by Mr. Murphy of Connecticut:
       Page 21, strike lines 21 through 25 and insert the 
     following new subparagraph:
       (B) require 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.
       Page 22, line 12, insert:
       (7) 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.
       Page 22, after line 21, insert the following new paragraph:
       (8) has been certified by the Secretary, for such year, in 
     accordance with an annual certification process established 
     by the Secretary for such purpose, as being in compliance 
     with the requirements under paragraphs (1) through (7).

  The Acting CHAIRMAN. The gentleman is recognized for 5 minutes.
  Mr. MURPHY of Connecticut. Mr. Chairman, I'd like to applaud my 
colleagues, Representative Klein, Representative Mahoney and 
Representative Ginny Brown-Waite, for bringing this measure before us 
today.
  The rising premiums in the insurance world, the instability that this 
recent rash of natural catastrophes have brought to the insurance 
industry mandate a response from this Congress; and it's time, as Mr. 
Klein and Mr. Mahoney have said, to stop closing our eyes and pretend 
that the solution is to just continue to have a policy of crisis 
reaction, where we put Federal dollars after Federal dollars on top of 
these disasters.
  This measure before us, very carefully considered and brought to the 
floor on a bipartisan basis, is a planful and market-based approach to 
the issue of crisis mediation, especially on the eastern seaboard.
  But to the extent that we are setting up a new Federal role, to the 
extent that we're contemplating potentially committing Federal dollars 
through loans, frankly as Mr. Klein has said in a much more responsible 
way than we have done in previous situations, we need to make sure that 
these dollars are being used wisely.
  Now, the manager's amendment before us right now goes a very long way 
towards that goal in making sure that the programs themselves at the 
State level are fiscally sound or actuarially sound.
  The amendment before us, brought to the floor today by myself, 
Representative Matsui, Representative Bean and Representative Larson, 
seeks to build on that duty of fiscal responsibility that we have as we 
potentially commit, in a planful way, Federal dollars through loans to 
coastal areas.
  Therefore, this amendment that we're offering today would require 
that before a State insurance program qualifies to borrow from the 
Federal Government, the Treasury Department will ensure that the State 
has taken adequate steps to mitigate future losses. It's a pretty 
common sense measure.
  To do this, the amendment simply requires that the Secretary of the 
Treasury certify that participating States, entities, these State 
insurance funds, have implemented internationally recognized building 
codes to ensure that the new homes that are being built in these States 
can withstand severe natural catastrophes like earthquakes and floods 
and hurricanes.

                              {time}  1630

  These State programs have also developed land use plans to further 
mitigate the risk and losses stemming from natural disasters. This 
amendment doesn't provide for new Federal building codes. It doesn't 
provide for new Federal land use requirements or Federal risk 
mitigation regulations. It just merely seeks to assure that before we 
are putting Federal tax dollars in State programs that these States 
have done everything that they can to reduce future risks from natural 
catastrophe.
  I would like to thank my colleagues, Mr. Mahoney and Mr. Klein, for 
working with me and the staffs for working with my staff on this issue. 
I think it addresses many of the issues that Mr. Roskam and others on 
the other side of the aisle have and will raise today. I think it 
assures that this very positive step forward that has been introduced 
by Mr. Mahoney and Mr. Klein will be made even safer and sounder if it 
comes to the point of using Federal taxpayer dollars in these programs.
  Mr. Chairman, I yield back the balance of my time.
  Mr. KLEIN of Florida. Mr. Chairman, I move to strike the last word.
  The Acting CHAIRMAN. The gentleman is recognized for 5 minutes.
  Mr. KLEIN of Florida. I would like to thank the gentleman from 
Connecticut for coming up to a response to what I think the gentleman 
from Illinois was raising; that is, we want to encourage mitigation. We 
want to encourage reduction of the scope of the hazard.
  I think all of us understand that the more you can do to protect your 
home in terms of the roof, if it's an earthquake zone, the foundation, 
lots of different kinds of risks out there, but the more we can do to 
solidify that, the less deductible you are going to pay as a homeowner, 
which is good for you as a homeowner, the less risk you are creating 
for the insurance underwriter, the less payout, the less the State is 
going to have to take responsibility if there is a State risk 
catastrophe fund. With a Federal system to back it up, beyond that, in 
terms of the State catastrophe bonds, it reduces that as well.
  The whole purpose of this is to reduce that. What the gentleman from 
Connecticut has come up with in a broad-based way is to bring in the 
international code, council building codes, which is an organized 
effort, well thought out, well designed. Instead of having the 
secretary of the Treasury, which I am not quite sure who or what 
qualifications he or she would have to make an independent judgment of 
whether a building code makes sense or not, let's put professionals, 
the experts, the people who understand building codes, let's put them 
in the middle of this thing and say this is the standard by which we 
will judge whether a State is doing what it is supposed to do to reduce 
that risk.
  I think that's a very sound, logical way of solving the problem, 
encouraging the mitigation, reducing the hazard. I think it's something 
that deserves to be supported.
  I would like to thank the gentleman from Connecticut. Hopefully the 
gentlewoman from West Virginia and the gentleman from Illinois will 
join us in what I think is something that addresses their concern, and 
probably we can all come together and say this is a solid way of doing 
it.
  Mr. Chairman, I yield back the balance of my time.
  Ms. MATSUI. Mr. Chairman, I move to strike the last word.
  The Acting CHAIRMAN. The gentlewoman from California is recognized 
for 5 minutes.
  Ms. MATSUI. Mr. Chairman, I rise today to ask my colleagues to 
support the Murphy, Matsui, Bean and Larson amendment.
  I am sponsoring this amendment because it carries forward important 
public policy initiatives. It encourages local governments to develop 
comprehensive land use and zoning plans that include natural hazard 
mitigation. It also requires participating States to adopt 
internationally recognized building code standards.
  I applaud the overall goal of this bill to provide access to 
insurance coverage for homeowners and disaster-prone communities. Our 
amendment today is about public safety.
  As a representative from Sacramento, the Nation's most at-risk river 
city for catastrophic flooding, I am all too familiar with risk and 
vulnerability. Preparedness is a first step toward public safety. 
Strong building codes are key to being prepared and to reducing the 
damage caused by catastrophic events. This amendment ensures that 
States take steps to minimize risk.
  Last week, I introduced the Safe Building Code Incentive Act of 2007 
to

[[Page 30645]]

encourage States to adopt stronger building codes. Our communities and 
homeowners should be better prepared, and Congress should be setting 
high standards for public safety.
  Over the last few weeks, residents of my home State of California 
experienced devastating wildfires and an earthquake. We know that 
another event will occur and that it is only a matter of time.
  To rapidly growing regions around the country such as Sacramento, the 
building standards we adopt now will ensure a safer future for our 
communities and property owners.
  In January 2006, a Louisiana State University Hurricane Center study 
concluded that wind-related damage to homes by Katrina could have been 
reduced by 65 percent if current building code standards had been used. 
In short, we should be elevating public policy standards before 
disaster impacts our communities, not after.
  Our amendment today raises the standard for public safety and 
encourages smarter planning to mitigate risk. I ask my colleagues to 
support this amendment.
  Mr. Chairman, I yield back the balance of my time.
  Mr. LARSON of Connecticut. Mr. Chairman, I move to strike the last 
word.
  The Acting CHAIRMAN. The gentleman is recognized for 5 minutes.
  Mr. LARSON of Connecticut. Mr. Chairman, let me associate myself with 
the remarks earlier today of Mr. Inslee and commend two of our 
colleagues for an extraordinary job they have done in putting together 
this thoughtful piece of legislation, one that I think we all 
understand and recognize is much needed throughout the country because 
of the natural catastrophes we are bound to face.
  I also want to commend them for being willing to work with everyone 
on both sides of the aisle and reach out on what are some thoughtful 
questions that have been posed to them and the continued manner in 
which they embrace a solid piece of legislation and make it stronger. 
To those ends I rise in strong support of the Murphy, Matsui, Bean and 
Larson amendment that I think goes a long way towards doing that.
  I commend Mr. Klein and, again, Mr. Mahoney for working to make sure 
that a good bill becomes even stronger.
  Mr. Chairman, I yield back the balance of my time.
  The Acting CHAIRMAN. The question is on the amendment offered by the 
gentleman from Connecticut (Mr. Murphy).
  The amendment was agreed to.


                 Amendment No. 13 Offered by Mr. Roskam

  Mr. ROSKAM. Mr. Chairman, I offer an amendment.
  The Acting CHAIRMAN. The Clerk will designate the amendment.
  The text of the amendment is as follows:

       Amendment No. 13 offered by Mr. Roskam:
       Page 17, line 2, strike ``and'' and insert a comma.
       Page 17, line 8, before the period insert the following: 
     ``, and that the qualified reinsurance program has retained 
     losses in excess of the amount of losses that would result 
     from a single event of a catastrophic peril covered by the 
     program of such magnitude that it has a one percent chance of 
     being equaled or exceeded in any year, as determined by the 
     Secretary''.

  The Acting CHAIRMAN. The gentleman from Illinois is recognized for 5 
minutes.
  Mr. ROSKAM. Mr. Chairman, this is what I characterize as the skin-in-
the-game amendment.
  The bill currently has no retained loss requirement for participating 
State reinsurance funds before they can get a catastrophic loan from 
the Treasury. Once the trigger is met, a fund may qualify for a loan 
without having any skin in the game.
  To improve fiscal accountability, States should be required to first 
sustain a loss before receiving a loan from Treasury, similar to paying 
deductible in an insurance policy. The loans could be better put to use 
helping States manage their losses above the retained loss requirement.
  This amendment says that before a State insurance fund can access one 
of the loans created in the bill, it must first retain sufficient 
losses amounting to a 1-in-100-year event with respect to State 
catastrophe perils. This amendment will encourage State funds to handle 
a predictable level of loss before putting Federal taxpayers on the 
hook for billions of dollars in catastrophic loans.
  With no retained loss requirements, State insurance funds will have 
no incentives to price their risk with a catastrophe factor but, 
instead, rely on post-event debt financing from the Federal Government 
and Federal taxpayers. Adding the retained loss requirement in this 
bill will also encourage States to utilize the global reinsurance 
market instead of turning directly to the Federal Government to 
capitalize their funds.
  Currently, Florida is the only State with a reinsurance fund that 
would qualify under this bill. The bill would undoubtedly spur the 
creation of other State funds, and requiring States to have skin in the 
game will encourage these new funds to properly capitalize instead of 
taking out a huge loan from the Feds after every natural catastrophe.
  Without loss requirements, State insurance funds will have no 
incentives to actuarially price their risk since they will be getting 
cheap loans to assist them in paying their claims.
  I urge the adoption of the amendment and yield to the gentleman from 
Louisiana.
  Mr. BAKER. I thank the gentleman for yielding.
  Mr. Chairman, I just want to make sure I am understanding the effect 
of the gentleman's amendment properly. If I am a homeowner and I am 
paying a premium for my coverage and I have a loss, there generally is 
some sort of deductible, maybe $500 or $1,000, depends on what kind of 
policy I will have to buy. But I am going to have to put my premium 
money up, and then I am going to have to have a personal loss to get 
the benefit of the insurance coverage that I bought for my home.
  What you are suggesting with this amendment is that the States who 
are going to avail themselves of the advantage of the Treasury extended 
loan are going to have to have their own money in the game. They can't 
just call up and say, Mr. Secretary, send me a few billion dollars. I 
am kind of short right now. They are going to have to have their own 
State losses in their own insurance pool before they can get access to 
the United States Treasury extension of credit; is that correct?
  Mr. ROSKAM. The gentleman has an incredible gift of clarity and 
insight, and that is exactly it.
  Mr. BAKER. My point here is in speaking, in asking the gentleman the 
question, is it is absolutely essential, no matter what the government 
program or service, did you know, that whoever is the beneficiary 
always makes some contribution to his own well-being or else the 
program will run amok. There will be no reason to exercise constraint.
  You are absolutely correct. Premiums charged will never be 
actuarially sound. The gentleman's amendment, which in my opinion is, 
by the way, insightful and articulate, has drafted a constructive 
amendment which I hope others will find beneficial.
  Mr. ROSKAM. Reclaiming my time, I think part of the reason we are in 
this state today and one of the reasons we are having this conversation 
is because of, really, a lack of some of those commonsense approaches 
towards their problem in the past, which is now why Representative 
Klein and Representative Mahoney feel in good faith that they have got 
to come here on behalf of their constituents, and I understand that.
  I would submit that this amendment brings some clarity, brings a 
little bit of pause, brings some reality to this so that over a period 
of time a future Congress doesn't have to come in and request an 
abundance from the Federal Treasury due to mismanagement and squander.
  Mrs. CAPITO. Mr. Chairman, I move to strike the last word.
  The Acting CHAIRMAN. The gentlewoman from West Virginia is recognized 
for 5 minutes.
  Mrs. CAPITO. Mr. Chairman, I rise in support of Mr. Roskam's very 
thoughtful amendment. I feel that it helps to

[[Page 30646]]

work this bill, which I have obviously voiced some questions about, 
because it would simply require States to pay their fair share before 
tapping into a Federal line of credit. This will encourage State funds 
to handle a predictable level of loss before putting Federal dollars 
and Federal taxpayers on the hook for what could be billions of dollars 
in catastrophic loans.
  Very briefly, I would like to say, without loss requirements, State 
reinsurance funds will have no incentive to actuarially price their 
risk since they will be getting cheap loans to assist them in paying 
their claims. I would like to voice support for the Roskam amendment.
  Mr. Chairman, I yield back the balance of my time.
  Mr. KLEIN of Florida. Mr. Chairman, I move to strike the last word.
  The Acting CHAIRMAN. The gentleman is recognized for 5 minutes.
  Mr. KLEIN of Florida. Mr. Chairman, let's get down to the bottom of 
what we are trying to accomplish here. There is a problem in the United 
States, in certain parts of the United States, where the insurance 
market, unfortunately, cannot deal with a very large disaster.
  Now, some of our colleagues may not have been exposed to this problem 
because in their markets they haven't had any large-scale natural 
disasters, but the more time that passes, the more communities are 
affected by large-scale natural disasters.
  The impact of a very large-scale natural disaster is that the 
insurance industry in these areas retrenches, pulls back, cancels 
policies or they call them nonrenewal.
  I have to tell you, one of the most frustrating things after living 
through some hurricanes in Florida was members of my communities 
calling me up, as a State Senator, saying, I paid my premium for 15 
years straight, and now I am afraid to make a claim because I have had 
some damage, never made a claim before, but I am afraid to make a claim 
because the insurance company is going to cancel me.
  Something is wrong with the market, free market, as we like to think 
of it, if that is happening. People want to know the bargain is if I 
have paid my premium my insurance company is going be there and there 
is some stability behind it.
  What we have tried to do is recognize that in some cases, not many, 
but in some cases, and the very high scale of large-scale natural 
disasters, there is some reaction that has to be provided. What we have 
done, instead of putting the government in the middle of it, which is 
exactly where it is right night now, no matter how you slice it, every 
time there is a large-scale natural disaster that the insurance company 
can't deal with, the States can't deal with, then the Federal 
Government comes rushing in, from Washington, with a big check.
  What we have been trying to do is something proactive, up front. We 
have come up with some plans from experts in the insurance industry and 
the consumer side and everything else to balance this out.
  What this amendment does is it arbitrarily limits the ability of 
programs to meet the reinsurance needs of the respective States not 
provided for by the private sector. The limit shows, and it is a 100-
year event. Why 100? Why 1 in 100? Why not 1 in 50? Why not 1 in 250? 
As you can imagine, a 1-in-250-year event really changes the dynamics 
of the equation of what will have to be paid in reserves and make sure 
that the money is there.
  They have chosen 100 years. That is consistent with the way we have 
very carefully, with a lot of input, chosen to work on this formula. We 
have chosen events where the losses have exceeded 150 percent of the 
aggregate amount of direct premium over the prior year.

                              {time}  1645

  That is a direct reflection of what's going on in that local market, 
how much premium's been paid. It's a 1.5 factor over and above that. 
It's very well thought out. It may not be perfect. It may be over time 
there's a better way to do it, but this is a very consistent approach 
we've taken throughout the bill.
  If you adopt this amendment, we are now creating two inconsistent 
measures which I don't think will ever work together. So I would 
suggest that this amendment not be adopted.
  I believe that we have come up with something that is logical, it's 
common sense, it reacts to the fact that there is a need here.
  And again, for those folks who live in parts of the country that 
don't have natural disasters up to this point, let's all continue to 
pray and hope that we don't have many natural disasters.
  But we're a country that's in this together. Certainly our insurance 
is something that we want to make sure everyone has the ability to have 
private homeowners insurance. But more importantly, every taxpayer is 
part of a bail out. We're trying to avoid that for the future.
  So I would suggest the amendment should not be supported.
  I yield back my time, Mr. Chairman.
  Mr. MAHONEY of Florida. Mr. Chairman, I move to strike the last word.
  The Acting CHAIRMAN. The gentleman is recognized for 5 minutes.
  Mr. MAHONEY of Florida. I'd like to join in support of my friend here 
from Florida (Mr. Klein) in opposing this amendment.
  The point I'd like to make is very simple, and that is, the whole 
purpose of the bill is to stabilize the private homeowners insurance 
marketplace. And the goal of the bill is to work with the industry to 
continually find ways to expand the market so that the market takes the 
responsibility.
  Right now, the problem that we're facing in the homeowners insurance 
market is unfunded liability, where we have the opportunity or the 
specter of a disaster, where the combination of States and the 
insurance industry do not have the financial wherewithal to pay claims.
  The purpose of this bill in the first title is to try to work with 
States to consolidate risk in order to expand the private market's 
activity so that it can handle these claims.
  So when the gentleman from Illinois proposes to arbitrarily set a 1-
in-100-year mark, what it's doing is it's running counter to the goal 
of the legislation, which is to get the private insurance companies to 
take on more and more of the responsibility.
  So with that, I think that the bill that we have right now recognizes 
that there needs to be some variability in some cases. One in 100 
years, depending on States, might be too little; and in some cases it 
might be too much.
  So, therefore, I would urge that this amendment be defeated.
  I yield back the balance of my time.
  Mr. BAKER. Mr. Chairman, I move to strike the last word.
  The Acting CHAIRMAN. The gentleman from Louisiana is recognized for 5 
minutes.
  Mr. BAKER. Mr. Chairman, I wish to make clear that my interest in 
this matter is based on my representation of a portion of coastal 
Louisiana, so I get the problem. And we are struggling, even today, 2 
years after Katrina, in trying to restore our State to what it once 
used to be. So I do not come to the floor in opposition to this matter 
in a cavalier manner.
  The statement that this bill is intended to keep the American 
taxpayers from being responsible financially for future natural 
disasters is in direct contravention with the effect of the bill, if it 
ever does become law.
  Let's start with the basics. People didn't like the fact that some 
Louisianans built at the water's edge. How can we be more responsible 
and elevate structures and build them to a certain code?
  I support Mr. Roskam's amendment, which provides that the Secretary 
of the Treasury, before making such a loan, shall certify that the 
recipient entity in question has such safe and sound building codes. 
Sounds logical to most taxpayers, I would think.
  The pending amendment simply says that the recipient entity getting 
the benefit of the Treasury loan shall have its own money at risk, and 
shall have suffered some monetary loss.
  One-in-100 event. Some have suggested this is just a number pulled 
out of the air. It is a typical actuarial

[[Page 30647]]

number of risk used by the insurance industry in rating the likelihood 
of recovery of loss in policies nationwide. It's not something that one 
can say was simply grabbed out of the air.
  The risk-based capital provisions in the manager's amendment are 
completely obliterated for the first 5 years for companies now in 
existence in the program who would qualify for such loans. And in the 
event a loan would be made, there's a specific prohibition that the 
full faith and credit of the State getting the benefit of the credit 
would not be placed on that note. Translation: they don't have to pay 
this back.
  Now, the bigger point is that when you look at the applicability of 
where NATCAT, national catastrophe funds, would likely be made 
operational, Florida, yes, California, maybe, and ladies and gentlemen 
of the Congress, not anywhere else.
  Our insurance commissioner in our State has carefully evaluated the 
advantages and possibility of a NATCAT structure being utilized in 
Louisiana. It will not work. The applicability of this program will be 
for a narrow, narrow slice of the insurance market at risk on coastal 
Louisiana.
  There are much better ways to do this. But do not support this 
measure on the assumption that the American taxpayer will not be put at 
risk.
  In fact, if you really dig into the bill, you find a little provision 
that says commercial residential may be covered if the Secretary of the 
Treasury determines that the benefits are appropriate, without any 
conditions as to the requirement, style, nature or manner of repayment. 
We're going to be taking care of Hilton and their golf courses.
  Really, really take a careful look at this. I am troubled to be 
opposed to a bill that could potentially be beneficial to my own State 
and my own constituents. But I have arrived at the conclusion that this 
is not the right way to perform this task. And not enough careful 
thought from varied interests has been taken into consideration in this 
matter.
  I urge you, please adopt the Roskam amendment.
  I yield back the balance of my time.
  The Acting CHAIRMAN. The question is on the amendment offered by the 
gentleman from Illinois (Mr. Roskam).
  The question was taken; and the Acting Chairman announced that the 
noes appeared to have it.
  Mr. ROSKAM. Mr. Chairman, I demand a recorded vote.
  The Acting CHAIRMAN. Pursuant to clause 6 of rule XVIII, further 
proceedings on the amendment offered by the gentleman from Illinois 
will be postponed.


                 Amendment No. 2 Offered by Ms. Castor

  Ms. CASTOR. Mr. Chairman, I offer an amendment.
  The Acting CHAIRMAN. The Clerk will designate the amendment.
  The text of the amendment is as follows:

       Amendment No. 2 offered by Ms. Castor:
       Page 21, after line 25, insert the following new 
     subparagraphs:
       (C) limit new development and increases in density, 
     intensity, or range of use allowances in zoning and planning 
     programs in coastal and other areas subject to a higher risk 
     of catastrophic financial loss from natural disasters and 
     catastrophic events, as such areas are determined in 
     accordance with standards established by the Secretary, in 
     consultation with the Administrator of the Federal Emergency 
     Management Agency and other appropriate agency heads;
       (D) limit rebuilding of substantially demolished structures 
     after catastrophic events to current density, intensity, use, 
     and structural limits;
       Page 22, line 1, strike ``(C)'' and insert ``(E)''.
       Page 22, line 5, strike ``(D)'' and insert ``(F)''.
       Page 22, line 12, strike ``(E)'' and insert ``(G)''.

  The Acting CHAIRMAN. The gentlewoman from Florida is recognized for 5 
minutes.
  Ms. CASTOR. Mr. Chairman, I rise to offer an amendment that, over 
time, will keep insurance rates down by directing that State and local 
governments not approve intensified development in high-risk areas like 
our coastal high-hazard areas.
  Insurance premiums are on the rise for many reasons, but one of the 
most significant reasons for skyrocketing costs of insurance is 
developer overbuilding in high-risk areas.
  Developers and homebuilders have crowded on to the coasts and into 
the flood plains, fire zones, and other high-risk areas, without 
considering the consequences. The subsequent consequences to the folks 
that we represent have been very expensive.
  These developers set up homeowners and businesses for financial ruin 
and personal tragedy when they locate in areas that are at high risk of 
natural disasters, and the developers are profiting at the expense of 
every policyholder whose premiums continue to rise without relief once 
another disaster hits.
  Unfortunately, State and local governments have been too often 
complicit in this irresponsible behavior.
  The amendment I offer today requires that States that participate in 
this innovative risk pool adopt policies to limit development in high-
risk areas. It would also end the practice of rebuilding properties 
after a catastrophe with development that is of a greater size or a 
greater density or intensity, because the right to rebuild in high-risk 
areas is not the right to expand.
  Now, this bill, carefully crafted by my thoughtful colleagues from 
Florida, provides States with an innovative tool to tackle the property 
insurance crisis. And my amendment improves the bill by preventing any 
greater problems down the road. The amendment aims to stop developer 
overbuilding that will lead to even greater disasters in the future and 
higher property insurance rates.
  Now, I do appreciate the suggestion from the chairman of the 
Financial Services Committee that this amendment can be improved still, 
and I'll yield to the gentleman, because I am interested in your advice 
and assurance that maybe down the road, if I happen to withdraw the 
amendment, that we can work to improve.
  Mr. FRANK of Massachusetts. Mr. Chairman, will the gentlewoman yield?
  Ms. CASTOR. I yield to the gentleman from Massachusetts.
  Mr. FRANK of Massachusetts. I thank the gentlewoman. I appreciate the 
initiative, and she's clearly right in concept.
  We would say that this bill, we hope, will pass today, but it's not 
going to pass the Senate until we come back early next year. We do 
obviously hope to get this bill in place before the next hurricane 
season so we could get started. But that would give us time to work on 
this before our final passage was done.
  And as the gentlewoman understands, because she's been involved 
herself, the State-Federal issue can become complicated. So while we 
very much agree on the substance, we don't want to engender a kind of 
State-Federal issue which could go beyond Florida. This is obviously 
something for all the States.
  So with that in mind, it's a common objective, indeed. We think the 
gentleman from Connecticut's amendment goes in that general direction. 
But we really want to be very careful about the State-Federal-local 
interactions here.
  So if the gentlewoman is agreeable, we would be working with her 
between now and some time in March or April when we finally hope to get 
this bill done so we can improve these kinds of requirements, but in a 
way that isn't going to jeopardize the whole thing by a big Federal-
State dispute.
  Ms. CASTOR. I greatly appreciate the assurances by the chairman; and 
with those assurances, I'd like to thank my colleagues again from 
Florida for this very innovative, thoughtful tool to reduce property 
insurance rates. And at this time I will withdraw my amendment.
  Mr. FRANK of Massachusetts. I appreciate that. I also appreciate the 
fact that today no Republicans object to you withdrawing the amendment.
  The Acting CHAIRMAN. Without objection, the amendment is withdrawn.
  There was no objection.


                Amendment No. 1 Offered by Mr. Manzullo

  Mr. MANZULLO. Mr. Chairman, I offer an amendment.

[[Page 30648]]

  The Acting CHAIRMAN. The Clerk will designate the amendment.
  The text of the amendment is as follows:

       Amendment No. 1 offered by Mr. Manzullo:
       Page 15, line 2, strike ``and''.
       Page 15, line 5, strike the period and insert ``; and''.
       Page 15, after line 5, insert the following new paragraph:
       (6) the qualified resinsurance program and the State 
     authorizing the program are not delinquent, as determined by 
     the Secretary, with respect to any payment due under any loan 
     previously made under this Act or under any other loan 
     provided by any agency or establishment of the Federal 
     Government to the program or the State for assistance in 
     connection with a natural or other major disaster.

  The Acting CHAIRMAN. The gentleman from Illinois is recognized for 5 
minutes.
  Mr. MANZULLO. Mr. Chairman, H.R. 3355 requires the Treasury 
Department to offer low-cost subsidized Federal loans to State 
reinsurance funds. This bill employs the lesser used loan approach for 
States, rather than block grants or emergency funding, the usual 
methods of Federal assistance.
  The concept of the loan is unique from a block grant, as a loan 
implies a temporary extension of funds with agreed-upon terms of 
repayment. The concept of a loan also implies that there are 
consequences for those who do not abide by the terms of the loan, such 
as ineligibility to receive additional loans should one become 
delinquent on a current loan. It is not in the lender's interest to 
lend money to someone who has proven that he or she will not pay it 
back according to the contracted terms.
  This bill contains no prohibition on continued lending to States that 
are delinquent on loans authorized under this bill or extended through 
other Federal entities as found in other Federal loan programs. This 
consequence free-lending program will also allow States that choose to 
ignore the repayment responsibility to treat the loans as being in a 
state of eternal deferral, and expose the taxpayer to a tremendous 
amount of risk.
  My amendment seeks to protect the taxpayer by insuring that Federal 
loans go only to States with a proven track record of fiscal 
responsibility. Specifically, this fiscally responsible amendment will 
disqualify States that are delinquent on any Federal disaster loans 
from receiving additional loans under this program.
  H.R. 3355 already entitles these States to subsidized loans at below-
market rates from the Federal Government. It only makes sense that they 
should be held to the same responsible standard that applies in the 
private market and elsewhere in the Federal Government. Without this 
standard, the loan program becomes no different than a block grant or a 
taxpayer-financed giveaway.

                              {time}  1700

  H.R. 3355 requires very little of the States in the way of mitigation 
to reduce the cost to taxpayers. By ensuring that States act 
responsibly before receiving another subsidized loan, my amendment is a 
small but important step towards protecting the interest of the tax-
paying Americans that will be funding this bill.
  I urge support for this amendment and would cite as precedent TANF 
funds, for example, under title 42, chapter 7, a failure to timely 
repay a Federal loan fund for State welfare programs, if the Secretary 
determines that a State has failed to repay any amounts borrowed from 
the Federal loan program, then they become ineligible or that the 
amounts they receive in the future are deducted to pay the prior 
amounts that are due.
  I would urge support of this amendment. This makes sure that this is 
a loan program and not a grant program.
  Mr. Chairman, I yield back the balance of my time.
  Mr. KLEIN of Florida. Mr. Chairman, I move to strike the last word.
  The Acting CHAIRMAN. The gentleman is recognized for 5 minutes.
  Mr. KLEIN of Florida. Mr. Chairman, I appreciate the gentleman from 
Illinois' proposition that if you are in default, you probably 
shouldn't be able to get anything further because maybe you haven't 
acted responsibly. But there are two faults that make this amendment 
unnecessary.
  Number one, if a State is a recipient of a loan and it has defaulted 
or hasn't made the terms of payback, that has nothing to do with a 
State risk catastrophe fund, which is independent of the State. Most 
State risk catastrophe funds are not backed by the full faith and 
credit of the State. They're separate, independent organizations. So 
one has really nothing to do with the other. The fact that the State of 
Illinois may not have paid back something that it had received from the 
Federal Government should have nothing to do with an Illinois risk 
catastrophe fund if it has been doing whatever it's supposed to do. So 
I think that's number one.
  Number two, the notion of the one disaster and then the Illinois risk 
catastrophe fund defaulting or not paying back, we have already taken 
care of that problem in terms of a future disaster that hits Chicago. 
And that is the Treasury who would be responsible for authorizing the 
second loan would not grant that. It is already provided in the content 
of our bill.
  So I do support the proposition that if you are in default, you 
probably shouldn't be a continued further drag. And I think that we 
have taken care of that in the bill, and I think it's not necessary to 
pass this amendment.
  Mr. MANZULLO. Mr. Chairman, will the gentleman yield?
  Mr. KLEIN of Florida. I yield to the gentleman from Illinois.
  Mr. MANZULLO. It's obvious that the gentleman agrees with me on the 
absolute necessity of making sure that this is a loan program and not a 
grant program. This amendment simply gives more teeth to the assurance 
that the gentleman gave us as to the language that is in the bill. 
Therefore, I would suggest that he agree with the amendment.
  Mr. KLEIN of Florida. Reclaiming my time, Mr. Chairman, I don't agree 
with the amendment because what it does is it creates an unnecessary 
regulatory burden. You already have in place the Treasury. Our Treasury 
Department in Washington would look at it. There's a default. Under the 
current language of the bill. Take a look at the language of the bill. 
It specifically says they would not be entitled to another loan, so 
we've already taken care of that problem.
  As it relates to the State itself being in default, the State is 
independent of a State risk catastrophe fund. So the fact that the 
State of Illinois doesn't repay something to the Federal Government 
doesn't necessarily or should not necessarily put a burden on an 
independent organization that has a State risk catastrophe fund that 
does not operate under the full faith and credit of the State of 
Illinois.
  So, again, I support the notion that a deadbeat should not receive 
more. But, again, we are dealing with States and organizations where 
we've already taken care of the problem or that we are looking to solve 
a problem that really isn't there.
  So I would suggest that this amendment should be opposed. It's 
unnecessary and duplicative, and I think we've already addressed the 
problem very clearly in the legislation.
  Mr. MAHONEY of Florida. Mr. Chairman, will the gentleman yield?
  Mr. KLEIN of Florida. I yield to the gentleman from Florida.
  Mr. MAHONEY of Florida. I would just like to also point out, too, 
that after an event of a natural catastrophe, I don't think it's in 
anybody's best interest in terms of getting people back in their homes 
and preserving communities to get into an administrative argument as to 
whether or not a particular loan has been paid or repaid based on 
what's going on between the State and a particular community that's in 
need of funding.
  So although I appreciate the gentleman's point, I think that the 
danger here is that there could be a lot of ways that people could look 
at this issue and determine that there is a conflict between the way a 
State looks at a particular loan.
  And it's not just catastrophe loans, as the gentleman's amendment 
talks about. It's any loan where there might be a conflict between the 
State and the Federal Government. And all I can tell you is that I 
don't think you would

[[Page 30649]]

want to put your citizens in a bureaucratic mess when they are out of 
their homes and they need to get back in and that we need to save their 
communities.
  Mrs. CAPITO. Mr. Chairman, I move to strike the last word.
  The Acting CHAIRMAN. The gentlewoman from West Virginia is recognized 
for 5 minutes.
  Mrs. CAPITO. Thank you, Mr. Chairman.
  I yield to the gentleman from Illinois.
  Mr. MANZULLO. Thank you.
  I actually concur with what the gentleman from Florida said. But what 
he was talking about was in terms of the traditional FEMA emergency 
funds. That's not the topic of this bill. Those funds are totally 
separate and independent of the topic that we have here.
  What we are talking about is making loans to the reinsurance fund of 
the State. We're not talking about emergency grants under FEMA, nor are 
we talking about emergency loans under the Small Business 
Administration for purpose of reconstruction or for loss of business, 
et cetera. This is an entirely separate program to make sure that the 
reinsurance fund of each State remains solvent.
  What we are saying here is that we want to make this as ironclad as 
possible that this not become a grant program but that it is a loan 
program. And the only way to make sure that that is the case is that 
those States that are delinquent as to repayment on these funds simply 
do not qualify to accept any more funds. What that does is it places 
the responsibility upon the States to come up with a plan themselves in 
order to make sure that their reinsurance fund would remain solvent.
  Mr. KLEIN of Florida. Mr. Chairman, will the gentlewoman yield?
  Mrs. CAPITO. I yield to the gentleman from Florida.
  Mr. KLEIN of Florida. I'm looking back at the amendment. And the 
point I was trying to make, which I think is pretty clear here, is that 
it says ``under any loan previously made under this Act or any loan 
provided by any agency or establishment of the Federal Government to 
the program,'' that's the risk catastrophe fund, ``or the State for 
assistance in connection with a natural or other major disaster.''
  First of all, a question for you is the money that goes to a State, 
are you talking about FEMA money?
  Mr. MANZULLO. Is it FEMA money?
  Mr. KLEIN of Florida. You're saying ``the State for assistance in 
connection with a natural or other major disaster.'' To the State. 
You're saying if there's a default in money that went to the State.
  Mr. MANZULLO. Right. FEMA doesn't lend money to the States.
  Mr. KLEIN of Florida. Then what are you referring to? What is the 
default you're speaking of, then?
  Mr. MANZULLO. Under this program. If you are in default under this 
program, then you are not eligible to receive further moneys.
  Mr. KLEIN of Florida. There is no money that under this program goes 
to the State. It goes to the participants of the risk catastrophe 
funds. Those are independent.
  Mr. MANZULLO. But it is set up under the State. What reassurance can 
you give that these loans will be paid and paid on time? That's what I 
am trying to get at.
  Mr. KLEIN of Florida. The way this is designed is that the loans are 
structured between the risk catastrophe fund and the Treasury under 
terms and conditions that are acceptable to the Treasury. Now, if there 
is a default under those terms and conditions, it's already clear in 
our bill that the Treasury will not lend under any future natural 
disaster, if that's what you are concerned about, and I think it says 
here. It's already part of the bill, and I think that answers the 
question.
  Mr. MANZULLO. I think the gentleman and I agree on the fact that the 
loan should be repaid and not be a grant, but I think we disagree 
fundamentally on how it would be administered. That's why this 
amendment is a backup amendment to make sure that the loans are repaid.
  Mrs. CAPITO. Reclaiming my time, Mr. Chairman, I would like to ask 
the gentleman if he could show us where in the bill it states that the 
Treasury has that kind of discretion in this particular case.
  Mr. KLEIN of Florida. The good news is that we are in agreement that 
we certainly want to make sure this is fiscally sound and responsible. 
I think we all agree on that.
  The only thing I'm suggesting, as we pull up this language, is that 
it's already in the bill. The intention is that the Treasury have this 
authority. If it isn't clear, we would be glad to fix it. But I think 
it is crystal clear and we'll just pull it up.
  The Acting CHAIRMAN. The time of the gentlewoman from West Virginia 
has expired.
  (By unanimous consent, Mrs. Capito was allowed to proceed for 1 
additional minute.)
  Mrs. CAPITO. I yield to the gentleman from Florida.
  Mr. KLEIN of Florida. I thank the gentlewoman for yielding.
  The Full Taxpayer Repayment section of the bill, page 20, line 6: 
``The Secretary shall require the full repayment of all loans made 
under this title. If the Secretary determines at any time that such 
full repayment will not be made, or is likely not to be made, the 
Secretary shall promptly submit a report to the Congress explaining why 
such full repayment will not be made or is likely not to be made.''
  Mrs. CAPITO. Did you say page 20, section c?
  Mr. KLEIN of Florida. Line 6, section c.
  Mrs. CAPITO. Thank you.
  The Acting CHAIRMAN. The question is on the amendment offered by the 
gentleman from Illinois (Mr. Manzullo).
  The question was taken; and the Acting Chairman announced that the 
noes appeared to have it.
  Mr. MANZULLO. Mr. Chairman, I demand a recorded vote.
  The Acting CHAIRMAN. Pursuant to clause 6 of rule XVIII, further 
proceedings on the amendment offered by the gentleman from Illinois 
will be postponed.


                Amendment No. 4 Offered by Mr. Matheson

  Mr. MATHESON. Mr. Chairman, I offer an amendment.
  The Acting CHAIRMAN. The Clerk will designate the amendment.
  The text of the amendment is as follows:

       Amendment No. 4 offered by Mr. Matheson:
       Page 8, line 24, before the period insert the following: 
     ``, 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.''

  The Acting CHAIRMAN. The gentleman from Utah is recognized for 5 
minutes.
  Mr. MATHESON. Mr. Chairman I rise today, first of all, in strong 
support of H.R. 3355, the Homeowners' Defense Act, and I offer an 
amendment that I believe will further support the intent of this 
legislation, namely to better enable State-sponsored reinsurance 
programs to protect themselves by transferring catastrophic risk into 
capital markets.
  I should first commend Congressman Klein and Congressman Mahoney for 
their proactive approach in this legislation, which allows States to 
responsibly plan for disasters ahead of time by pooling risk. By 
accessing capital markets to transfer risk, State-sponsored insurance 
funds will be better protected in the event of future disaster and will 
be increasingly able to provide affordable services for homeowners.
  This legislation will provide an important backstop for many of the 
larger State-sponsored insurance plans but will also provide States 
like my home State of Utah with an opportunity to prepare for future 
catastrophes. The State of Utah does not currently have a State-
sponsored catastrophic insurance plan but is considering developing 
one.
  Utah has been ranked as one of the top ten U.S. earthquake States in 
the United States, and in some areas of the State, catastrophe risks 
also include wildfires, flooding, and mudslides. Of course many of 
these risks are unique to Utah, but many of these risks,

[[Page 30650]]

things like fault lines or forest ranges, are spread over many States. 
I believe that States should be assessing many of these risks on a 
regional basis given the nature of those risks.
  Very simply, Mr. Chairman, my amendment would require that the first 
annual report of the consortium that's established by this legislation 
should include an assessment of the costs associated with catastrophic 
risk for States and regions and an analysis of the costs and benefits 
of participation in the program for States that are not part of the 
consortium.
  It is my hope that in providing States with an assessment of the 
catastrophic risks posed to their respective State and region and the 
costs associated with trying to address those risks, those States could 
evaluate and consider developing a State-sponsored catastrophic 
insurance plan if they do not already have one. I believe this 
legislation provides an important mechanism for States to protect 
themselves in the event of catastrophe, and I urge support of this 
amendment so that States can make a more informed decision going 
forward.
  Mr. Chairman, I yield back the balance of my time.
  Mrs. CAPITO. Mr. Chairman, I move to strike the last word.
  The Acting CHAIRMAN. The gentlewoman from West Virginia is recognized 
for 5 minutes.
  Mrs. CAPITO. Mr. Chairman, I have no opposition to Mr. Matheson's 
amendment.
  I just want to go back to the last point we were taking about with 
Mr. Manzullo, the gentleman from Illinois. His amendment was putting 
forth the fact that if there is a loan to the State under these 
provisions that if they were in default or were not repaying their loan 
that there shouldn't be any further loans.

                              {time}  1715

  And the gentleman offered me a clarification by reading me some text.
  On further looking at the text, yes, the text does say that the 
Secretary of the Treasury requires full payment of the loan; but it 
also says that the Secretary can then determine that if full repayment 
is not made or is unlikely to be made, that the only punishment or the 
only enforcement mechanism is the Secretary will then submit a report 
to the Congress explaining why repayment is not being made. It does not 
state in here, at least to my mind in the way I read it, that that 
State would be precluded from being able to attain another or further 
loan under the provisions of this bill.
  I appreciate the opportunity to make that clarification. I think it 
strengthens Mr. Manzullo's amendment, which I fully support. And, 
again, I thank the gentleman for his indulgence.
  Mr. KLEIN of Florida. Mr. Chairman, I move to strike the last word.
  The Acting CHAIRMAN. The gentleman is recognized for 5 minutes.
  Mr. KLEIN of Florida. I want to thank the gentleman from Utah for an 
excellent amendment which really adds some good value to the bill. And 
basically what it does is it creates a metric by which States can 
determine whether joining the consortium in the future would provide a 
benefit. It's information. The more information the States have, the 
better, the more consumers will benefit. I think that's the kind of 
ongoing accountability, both to the taxpayers and to the States 
themselves, in terms of whether this is something that a particular 
State should join.
  So I appreciate the suggestion. We didn't think of it. It's another 
good example of us all coming together and trying to put something 
together that makes some sense. So I would like to support the 
amendment, and I thank the gentleman.
  Mr. Chairman, I yield back the balance of my time.
  The Acting CHAIRMAN. The question is on the amendment offered by the 
gentleman from Utah (Mr. Matheson).
  The amendment was agreed to.
  The Acting CHAIRMAN. The Committee will rise informally.
  The Speaker pro tempore (Mr. Mahoney of Florida) assumed the chair.

                          ____________________