Residential Windstorm Insurance Plan Act of 1996

Summary: Residential Windstorm Insurance Plan Act of 1996 - Instructs the Director of the Federal Emergency Management Agency to study the advisability and feasibility of establishing a Residential Windstorm Insurance Program designed to provide windstorm insurance to residential property owners unable to obtain coverage in the private market.  Delineates Program contents and considerations. 
Requires the Director to:  (1) submit to specified congressional committees study conclusions and estimated Program costs; and (2) enter into an arrangement with the National Academy of Sciences to conduct a feasibility study regarding the establishment of a Federal earthquake insurance program modeled after the "Write Your Own" Program under the National Flood Insurance Program. 
Directs the Comptroller General, the Secretary of the Treasury, and the Secretary of Commerce to report to the Congress the results of a joint study evaluating the public policy issues associated with conferring favorable Federal tax treatment to multiyear insurance reserves set aside by private insurers for future catastrophic natural disasters.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Residential Windstorm Insurance Plan 
Act of 1996''.

SEC. 2. CONGRESSIONAL FINDINGS.

    Congress finds that--
            (1) since the devastation of Hurricane Hugo on September 
        17, 1989, insurance against windstorm damage has been difficult 
        to obtain at reasonable premium rates for many residents of the 
        United States;
            (2) an unusual number of other catastrophic events, such as 
        Hurricane Andrew in Florida, Hurricane Iniki in Hawaii, the 
        Northridge earthquake, and more recently, Hurricanes Bertha and 
        Fran in Gulf and Atlantic Coast States, Puerto Rico, and the 
        Virgin Islands, have nearly collapsed the worldwide reinsurance 
        market, seriously limiting the ability of local insurance 
        companies to meet existing demands for continued coverage, much 
        less expand their capacity for additional coverage;
            (3) major hurricanes and earthquakes pose substantial long-
        term consequences for the country;
            (4) the National Hurricane Center reports that 60 percent 
        of the United States population live in coastal States or 
        regions subject to natural disasters, such as hurricanes and 
        earthquakes;
            (5) private sector insurance protection against property 
        damages caused by the peril of wind is generally excluded under 
        standard homeowners insurance policies sold in 7 States along 
        the Gulf and Atlantic Coast States, the Virgin Islands, and 
        Puerto Rico, and property and casualty insurers are withdrawing 
        underwriting capacity from the market by refusing to issue new 
        policies or renew existing policies, or by increasing premiums 
        to unaffordable levels; and
            (6) new and innovative programs are required to provide a 
        limited program of property insurance protection from 
        windstorm.

SEC. 3. RESIDENTIAL WINDSTORM INSURANCE PROGRAM.

    (a) In General.--The Director of the Federal Emergency Management 
Agency (hereinafter in this Act referred to as the ``Director'') shall 
study the advisability and feasibility of establishing a Residential 
Windstorm Insurance Program designed to provide windstorm insurance to 
residential property owners unable to obtain coverage in the private 
market.
    (b) Purpose of Program.--The Residential Windstorm Insurance 
Program shall--
            (1) amend the ``Write Your Own'' Program under the National 
        Flood Insurance Program to explicitly provide insurance 
        protection against the windstorm peril;
            (2) allow residents in wind-exposed localities across 
        America and United States territories to purchase federally 
        subsidized insurance to supplement standard homeowners 
        insurance policies sold by private insurers;
            (3) provide windstorm insurance protection only to 
        residents in communities that have adopted and enforced the 
        land use and flood plain management provisions of the National 
        Flood Insurance Program;
            (4) encourage the private insurance industry to sell, 
        service, and adjust Federal windstorm insurance claims under 
        their own corporate name under a nonrisk bearing arrangement 
        with the Federal Insurance Administration; and
            (5) outline requirements under which the private sector, 
        including insurance companies, banks, and other financial 
        sector firms, could become involved in the Residential 
        Windstorm Insurance Program.
    (c) Contents.--The Residential Windstorm Insurance Program required 
under subsection (a) shall be designed--
            (1) to supplement Federal disaster relief and emergency 
        assistance provided pursuant to the Robert T. Stafford Disaster 
        Relief and Emergency Assistance Act and other laws for damage 
        and loss caused by hurricanes;
            (2) to make affordable insurance coverage available to 
        protect against losses resulting from physical damage to, or 
        loss of, residential structures arising from the wind peril;
            (3) to provide such insurance coverage for residential 
        structures through a program that provides--
                    (A) insurance coverage for wind damage caused by 
                hurricanes, but not for water damage arising from any 
                such wind peril;
                    (B) insurance coverage at premium rates affordable 
                to homeowners in areas at risk for such wind damage;
                    (C) appropriate building and structural 
                requirements and other wind damage mitigation measures; 
                and
                    (D) schedules of the amount of coverage available 
                for various residential structures;
            (4) to provide incentives for private property and casualty 
        insurers to reenter markets from which they have previously 
        withdrawn; and
            (5) to provide incentives for other private financial 
        sector companies to enter the market for hazard insurance.
    (d) Considerations.--The Residential Windstorm Insurance Program 
required under subsection (a) shall--
            (1) provide for participation of the private insurance 
        industry in carrying out the program;
            (2) define--
                    (A) the areas in which such coverage is made 
                available by establishing requirements for the 
                eligibility or participation of communities; and
                    (B) the types of residential properties for which 
                such coverage is made available;
            (3) establish premium rates for coverage that are 
        actuarially based on the risk of wind-caused damage or 
        subsidized premium rates that are less than such actuarially 
        based rates; and
            (4) provide community-based mitigation and other 
        initiatives for participation in the Program.
    (e) Consultation.--In developing the program required under 
subsection (a), the Director shall consult with--
            (1) the heads of any Federal agencies authorized to provide 
        disaster relief;
            (2) the chief executive officers of the States and 
        territories of the United States, that suffered significant 
        losses caused by windstorms occurring after the beginning of 
        1989; and
            (3) insurance and reinsurance companies, insurance trade 
        associations, consumer advocacy groups, and taxpayer groups in 
        developing actuarial rates and underwriting guidelines used to 
        cover damages to property caused by the hurricane peril.
    (f) Completion of Study.--Not later than the last day of the 180-
day period beginning on the date of the enactment of this Act, the 
Director shall submit to the Committee on Transportation and 
Infrastructure and the Committee on Banking and Financial Services of 
the House of Representatives and to the Committee on Environment and 
Public Works and the Committee on Banking, Housing, and Urban Affairs 
of the Senate a study containing--
            (1) the written plan required under subsection (a);
            (2) a statement of the amount of disaster assistance 
        provided pursuant to the Robert T. Stafford Disaster Relief and 
        Emergency Assistance Act and other Acts during each of fiscal 
        years 1989 through 1996 for property damage caused by winds 
        from hurricanes, tornadoes, and other windstorms to residential 
        properties, business properties, agricultural properties, 
        properties owned by private nonprofit organizations, and public 
        infrastructure facilities and properties owned by State and 
        local governments;
            (3) an estimate of the cost to the Federal Government of 
        carrying out the Residential Windstorm Insurance Program under 
        the plan, by making coverage available only for residential 
        structures;
            (4) an estimate of the cost to the Federal Government of 
        carrying out the Residential Windstorm Insurance Program under 
        the plan, by making coverage available for residential 
        structures and for public infrastructure and properties owned 
        by State and local governments, other residential properties, 
        business properties, agricultural properties, and properties 
        owned by private nonprofit organizations;
            (5) an estimate of the effects that implementing the 
        national windstorm insurance program would have on the amount 
        of disaster assistance provided by the Federal Government;
            (6) an estimate of the effects that implementing the 
        national windstorm insurance program would have on the private 
        insurance industry and the availability of residential and 
        other property insurance and insurance against windstorm 
        damage;
            (7) a description of any amendments to the Robert T. 
        Stafford Disaster Relief and Emergency Assistance Act and other 
        laws relating to disaster assistance that would be necessary or 
        appropriate in the event of the implementation of the 
        Residential Windstorm Insurance Program; and
            (8) any other information that the Director considers 
        appropriate.

SEC. 4. EARTHQUAKE INSURANCE STUDY.

    (a) In General.--The Director shall enter into an arrangement with 
the National Academy of Sciences to conduct a study on the advisability 
and feasibility of establishing a Federal earthquake insurance program 
modeled after the ``Write Your Own'' Program under the National Flood 
Insurance Program.
    (b) National Academy of Sciences.--The study described in 
subsection (c) shall be performed by a panel of recognized experts 
appointed by the National Academy of Sciences. The experts shall 
include representatives of building contractors, real estate interests, 
consumer advocacy groups, taxpayer groups, lending institutions, 
private insurers and reinsurers, the model building code organizations, 
local government zoning and land use planning bodies, and other experts 
deemed relevant by the National Academy of Sciences.
    (c) Completion of Study.--The results of the study described in 
subsection (c), with any recommendations, shall be transmitted by the 
National Academy of Sciences to the Director and Congress not later 
than 18 months after the date of the enactment of this Act.

SEC. 5. STUDY ON TAX TREATMENT OF CATASTROPHIC RESERVES.

    (a) Joint Study.--The Comptroller General of the United States, the 
Secretary of the Treasury, and the Secretary of Commerce shall conduct 
a joint study to evaluate the public policy issues associated with 
conferring favorable Federal tax treatment to multiyear insurance 
reserves set aside by private insurers for future catastrophic natural 
disasters.
    (b) Factors To Be Studied.--The study described in subsection (a) 
shall evaluate the likelihood and magnitude of the following public 
policy objectives:
            (1) The increased financial capacity of private insurers to 
        respond to future natural disasters.
            (2) The enhanced financial ability of private insurers to 
        continue providing property coverages following catastrophic 
        natural disasters.
            (3) The overall benefit to the competitiveness of United 
        States business and private insurers in the worldwide economy.
            (4) The short- and long-term revenue impact on the United 
        States Treasury.
    (c) Limitations.--The study of the favorable tax treatment of 
catastrophic reserves shall be limited as follows:
            (1) The study will not be limited to private insurer 
        reserve funds but will also assess the ability of the Federal 
        and State governments to build such reserves.
            (2) Any tax exemption given to catastrophic reserves will 
        be done in a very limited and restricted manner in order to 
        protect reserves against being used for other than catastrophe 
        costs.
            (3) A portion of the buildup from the tax-exempt reserves 
        will be used to fund statewide mitigation efforts.
    (d) Consultation.--The Comptroller General, the Secretary of the 
Treasury, and the Secretary of Commerce shall consult with recognized 
experts in preparing the study described in subsection (a). The experts 
shall include representatives from State insurance departments, private 
insurers, insurance agents, economists, natural disaster risk modeling 
experts, insurance consumer advocacy groups, and other experts deemed 
relevant.
    (e) Report to Congress.--The results of the study described in 
subsection (a), including any recommendations, shall be transmitted to 
Congress not later than 180 days after the date of enactment of this 
Act.