I 

113TH CONGRESS 

1ST SESSION H. R. 240 

To establish a program to provide reinsurance for State natural catastrophe 

insurance programs to help the United States better prepare for and 

protect its citizens against the ravages of natural catastrophes, to encourage and promote mitigation and prevention for, and recovery and rebuilding from such catastrophes, and to better assist in the financial recovery 

from such catastrophes. 

IN THE HOUSE OF REPRESENTATIVES 

JANUARY 14, 2013 

Mr. ROSS introduced the following bill; which was referred to the Committee 

on Financial Services 

A BILL 

To establish a program to provide reinsurance for State 

natural catastrophe insurance programs to help the 

United States better prepare for and protect its citizens 

against the ravages of natural catastrophes, to encourage 

and promote mitigation and prevention for, and recovery 

and rebuilding from such catastrophes, and to better 

assist in the financial recovery from such catastrophes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 


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1 SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 

2 (a) SHORT TITLE.—This Act may be cited as the 

3 ‘‘Homeowners Insurance Protection Act of 2013’’. 

4 (b) TABLE OF CONTENTS.—The table of contents for 

5 this Act is as follows: 

Sec. 1. Short title; table of contents. 

Sec. 2. Congressional findings. 

Sec. 3. National Commission on Catastrophe Preparation and Protection. 

Sec. 4. Program authority. 

Sec. 5. Qualified lines of coverage. 

Sec. 6. Covered perils. 

Sec. 7. Contracts for reinsurance coverage for eligible State programs. 

Sec. 8. Treatment of insured losses and maximum Federal liability. 

Sec. 9. Catastrophe capital reserve funds. 

Sec. 10. Consumer Hurricane, Earthquake, Loss Protection (HELP) Fund. 

Sec. 11. Annual study concerning benefits of reinsurance program. 

Sec. 12. Definitions. 

Sec. 13. Regulations. 

Sec. 14. Termination. 

6 SEC. 2. CONGRESSIONAL FINDINGS. 

7 The Congress finds that— 

8 (1) the United States needs to take actions to 

9 be better prepared for and better protected from ca10 tastrophes; 

11 (2) the hurricane seasons of 2004 and 2005 are 

12 startling reminders of both the human and economic 

13 devastation that hurricanes, flooding, and other nat14 ural disasters can cause; 

15 (3) if a hurricane similar to the deadly 1900 

16 Galveston hurricane occurred again it could cause 

17 over $36,000,000,000 in loss; 


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1 (4) if the 1904 San Francisco earthquake oc2 curred again it could cause over $400,000,000,000 

3 in loss; 

4 (5) if a Category 5 hurricane were to hit Miami 

5 it could cause over $50,000,000,000 in loss and dev6 astate the insurance industry in the United States; 

7 (6) if the 1938 ‘‘Long Island Express’’ were to 

8 occur again it could cause over $30,000,000,000 in 

9 damage and if a hurricane that strong were to di10 rectly hit Manhattan it could cause over 

11 $150,000,000,000 in damage and cause irreparable 

12 harm to our Nation’s economy; 

13 (7) a more comprehensive and integrated ap14 proach to dealing with catastrophes is needed; 

15 (8) using history as a guide, natural catas16 trophes will inevitably place a tremendous strain on 

17 homeowners’ insurance markets in many areas, will 

18 raise costs for consumers, and will jeopardize the 

19 ability of many consumers to adequately insure their 

20 homes and possessions; 

21 (9) the lack of sufficient insurance capacity and 

22 the inability of private insurers to build enough cap23 ital, in a short amount of time, threatens to increase 

24 the number of uninsured homeowners, which, in 


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1 turn, increases the risk of mortgage defaults and the 

2 strain on the Nation’s banking system; 

3 (10) some States have intervened to ensure the 

4 continued availability and affordability of home5 owners’ insurance for all residents; 

6 (11) it is appropriate that efforts to improve in7 surance availability be designed and implemented at 

8 the State level; 

9 (12) while State insurance programs may be 

10 adequate to cover losses from most natural disasters, 

11 a small percentage of events are likely to exceed the 

12 financial capacity of these programs and the local 

13 insurance markets; 

14 (13) making available limited Federal reinsur15 ance would improve the effectiveness of State insur16 ance programs and private insurance markets and 

17 would increase the likelihood that homeowners’ in18 surance claims will be fully paid in the event of a 

19 large natural catastrophe and that routine claims 

20 that occur after a mega-catastrophe will also con21 tinue to be paid; 

22 (14) it is necessary to provide a Federal rein23 surance program on a temporary basis that will pro24 vide more protection at an overall lower cost and 

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1 ance market in the short term and encourage growth 

2 of reinsurance capacity by the private and capital 

3 markets as soon as practical; 

4 (15) it is the proper role of the Federal Govern5 ment to prepare for and protect its citizens from ca6 tastrophes and to facilitate consumer protection, vic7 tim assistance, and recovery, including financial re8 covery; 

9 (16) any Federal reinsurance program must be 

10 founded upon sound actuarial principles and priced 

11 in a manner that minimizes the potential impact on 

12 the Treasury of the United States, encourages the 

13 creation of State funds and maximizes the buying 

14 potential of these State funds, encourages and pro15 motes prevention and mitigation, recovery and re16 building, and consumer education, and emphasizes 

17 continuous analysis and improvement; and 

18 (17) such a Federal reinsurance program 

19 should not remain in existence longer than necessary 

20 for the private entities or the capital markets, or 

21 both, to provide adequate reinsurance capacity to 

22 address the homeowners’ insurance market. 


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1 SEC. 3. NATIONAL COMMISSION ON CATASTROPHE PREPA2 RATION AND PROTECTION. 

3 (a) ESTABLISHMENT.—The Secretary of the Treas4 ury shall establish a commission to be known as the Na5 tional Commission on Catastrophe Preparation and Pro6 tection. 

7 (b) DUTIES.—The Commission shall meet for the 

8 purpose of advising the Secretary regarding the estimated 

9 loss costs associated with the contracts for reinsurance 

10 coverage available under this Act and carrying out the 

11 functions specified in this Act, including— 

12 (1) the development and implementation of 

13 public education concerning the risks posed by nat14 ural catastrophes; 

15 (2) the development and implementation of pre16 vention, mitigation, recovery, and rebuilding stand17 ards that better prepare and protect the United 

18 States from catastrophes; 

19 (3) the establishment of requirements under 

20 section 7(e) to ensure that cost savings resulting 

21 from this Act inure to the benefit of consumers; and 

22 (4) conducting continuous analysis of the effec23 tiveness of this Act and recommending improve24 ments to the Congress so that the costs of providing 

25 catastrophe protection are decreased and so that the 

26 United States is better prepared. 


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1 (c) MEMBERS.— 

2 (1) APPOINTMENT AND QUALIFICATION.—The 

3 Commission shall consist of 9 members, as follows: 

4 (A) HOMELAND SECURITY MEMBER.—The 

5 Secretary of Homeland Security or the Sec6 retary’s designee. 

7 (B) APPOINTED MEMBERS.—Eight mem8 bers appointed by the Secretary, who shall con9 sist of— 

10 (i) one individual who is an actuary; 

11 (ii) one individual who is employed in 

12 engineering; 

13 (iii) one individual representing the 

14 scientific community; 

15 (iv) one individual representing prop16 erty and casualty insurers; 

17 (v) one individual representing rein18 surers; 

19 (vi) one individual who is a member or 

20 former member of the National Association 

21 of Insurance Commissioners; and 

22 (vii) two individuals who are con23 sumers. 

24 (2) PREVENTION OF CONFLICTS OF INTER25 EST.—Members shall have no personal or financial 


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1 interest at stake in the deliberations of the Commis2 sion. 

3 (d) TREATMENT OF NON-FEDERAL MEMBERS.— 

4 Each member of the Commission who is not otherwise em5 ployed by the Federal Government shall be considered a 

6 special Government employee for purposes of sections 202 

7 and 208 of title 18, United States Code. 

8 (e) EXPERTS AND CONSULTANTS.—The Commission 

9 may procure temporary and intermittent services from in10 dividuals or groups recognized as experts in the fields of 

11 meteorology, seismology, vulcanology, geology, structural 

12 engineering, wind engineering, and hydrology, and other 

13 fields, under section 3109(b) of title 5, United States 

14 Code, but at a rate not in excess of the daily equivalent 

15 of the annual rate of basic pay payable for level V of the 

16 Executive Schedule, for each day during which the indi17 vidual procured is performing such services for the Com18 mission. The Commission may also procure, and the Con19 gress encourages the Commission to procure, experts from 

20 universities, research centers, foundations, and other ap21 propriate organizations who could study, research, and de22 velop methods and mechanisms that could be utilized to 

23 strengthen structures to better withstand the perils cov24 ered by this Act. 


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1 (f) COMPENSATION.—Each member of the Commis2 sion who is not an officer or employee of the Federal Gov3 ernment shall be compensated at a rate of basic pay pay4 able for level V of the Executive Schedule, for each day 

5 (including travel time) during which such member is en6 gaged in the performance of the duties of the Commission. 

7 All members of the Commission who are officers or em8 ployees of the United States shall serve without compensa9 tion in addition to that received for their services as offi10 cers or employees of the United States. 

11 (g) OBTAINING DATA.—The Commission and the 

12 Secretary may solicit loss exposure data and such other 

13 information either deems necessary to carry out its re14 sponsibilities from governmental agencies and bodies and 

15 organizations that act as statistical agents for the insur16 ance industry. The Commission and the Secretary shall 

17 take such actions as are necessary to ensure that informa18 tion that either deems is confidential or proprietary is dis19 closed only to authorized individuals working for the Com20 mission or the Secretary. No company which refuses to 

21 provide information requested by the Commission or the 

22 Secretary may participate in the program for reinsurance 

23 coverage authorized under this Act, nor may any State 

24 insurance or reinsurance program participate if any gov25 ernmental agency within that State has refused to provide 


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1 information requested by the Commission or the Sec2 retary. 

3 (h) FUNDING.— 

4 (1) AUTHORIZATION OF APPROPRIATIONS.— 

5 There is authorized to be appropriated— 

6 (A) $10,000,000 for fiscal year 2014 for 

7 the initial expenses in establishing the Commis8 sion and the initial activities of the Commission 

9 that cannot timely be covered by amounts ob10 tained pursuant to section 7(b)(6)(B)(iii), as 

11 determined by the Secretary; 

12 (B) such additional sums as may be nec13 essary to carry out subsequent activities of the 

14 Commission; 

15 (C) $10,000,000 for fiscal year 2014 for 

16 the initial expenses of the Secretary in carrying 

17 out the program authorized under section 4; 

18 and 

19 (D) such additional sums as may be nec20 essary to carry out subsequent activities of the 

21 Secretary under this Act. 

22 (2) OFFSET.—The Secretary shall provide, to 

23 the maximum extent practicable, that an amount 

24 equal to any amount appropriated under paragraph 

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1 erage under this Act and deposited in the Fund es2 tablished under section 10. Such amounts shall be 

3 obtained by inclusion of a provision for the Sec4 retary’s and the Commission’s expenses incorporated 

5 into the pricing of the contracts for such reinsurance 

6 coverage, pursuant to section 7(b)(6)(B)(iii). 

7 (i) TERMINATION.—The Commission shall terminate 

8 upon the effective date of the repeal under section 14(c). 

9 SEC. 4. PROGRAM AUTHORITY. 

10 (a) IN GENERAL.—The Secretary of the Treasury, in 

11 consultation with the Secretary of Homeland Security, 

12 shall carry out a program under this Act to improve the 

13 availability and affordability of homeowners protection 

14 coverage by making available for purchase, only by eligible 

15 State programs, contracts for reinsurance coverage under 

16 section 7. 

17 (b) PURPOSE.—The program shall be designed to 

18 make reinsurance coverage under this Act available— 

19 (1) to improve the availability and affordability 

20 of homeowners’ insurance for the purpose of facili21 tating the pooling, and spreading the risk, of cata22 strophic financial losses from natural catastrophes; 

23 (2) to improve the solvency and capacity of 

24 homeowners’ insurance markets; 


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1 (3) to encourage the development and imple2 mentation of mitigation, prevention, recovery, and 

3 rebuilding standards; and 

4 (4) to recommend methods to continuously im5 prove the way the United States reacts and responds 

6 to catastrophes, including improvements to the 

7 HELP Fund established under section 10. 

8 (c) CONTRACT PRINCIPLES.—Under the program 

9 under this Act, the Secretary shall offer reinsurance cov10 erage through contracts with covered purchasers, which 

11 contracts— 

12 (1) shall not displace or compete with the pri13 vate insurance or reinsurance markets or the capital 

14 market; 

15 (2) shall minimize the administrative costs of 

16 the Federal Government; and 

17 (3) shall provide coverage based solely on in18 sured losses within the State for the eligible State 

19 program purchasing the contract. 

20 SEC. 5. QUALIFIED LINES OF COVERAGE. 

21 Each contract for reinsurance coverage made avail22 able under this Act shall provide insurance coverage 

23 against residential property losses to homes (including 

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1 ership arrangements) and the contents of apartment 

2 buildings. 

3 SEC. 6. COVERED PERILS. 

4 Each contract for reinsurance coverage made avail5 able under this Act shall cover losses insured or reinsured 

6 by the eligible State program purchasing the contract that 

7 are proximately caused by— 

8 (1) earthquakes; 

9 (2) perils ensuing from earthquakes, including 

10 fire and tsunamis; 

11 (3) tropical cyclones having maximum sustained 

12 winds of at least 74 miles per hour, including hurri13 canes and typhoons; 

14 (4) tornadoes; 

15 (5) volcanic eruptions; 

16 (6) catastrophic winter storms; and 

17 (7) any other natural catastrophe (not including 

18 any flood) insured or reinsured under the eligible 

19 State program for which reinsurance coverage under 

20 section 7 is provided. 

21 The Secretary shall, by regulation, define the natural ca22 tastrophe perils under this section. 


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1 SEC. 7. CONTRACTS FOR REINSURANCE COVERAGE FOR 

2 ELIGIBLE STATE PROGRAMS. 

3 (a) ELIGIBLE STATE PROGRAMS.—A program shall 

4 be eligible to purchase a contract under this section for 

5 reinsurance coverage under this Act only if the State enti6 ty authorized to make such determinations certifies to the 

7 Secretary that the program complies with the following re8 quirements: 

9 (1) PROGRAM DESIGN.—The program shall be a 

10 State-operated— 

11 (A) insurance program that— 

12 (i) offers coverage for homes (which 

13 may include dwellings owned under condo14 minium and cooperative ownership ar15 rangements) and the contents of apart16 ments to State residents; and 

17 (ii) is authorized by State law; or 

18 (B) reinsurance program that is designed 

19 to improve private insurance markets that offer 

20 coverage for homes (which may include dwell21 ings owned under condominium and cooperative 

22 ownership arrangements) and the contents of 

23 apartments because of a finding by the State 

24 insurance commissioner or other State entity 

25 authorized to make such a determination that 

26 such program is necessary in order to provide 


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1 for the continued availability of such residential 

2 coverage for all residents. 

3 (2) OPERATION.—The program shall meet the 

4 following requirements: 

5 (A) A majority of the members of the gov6 erning body of the program shall be public offi7 cials. 

8 (B) The State shall have a financial inter9 est in the program, which shall not include a 

10 program authorized by State law or regulation 

11 that requires insurers to pool resources to pro12 vide property insurance coverage for covered 

13 perils. 

14 (C) If the State has at any time appro15 priated amounts from the State fund for the 

16 State program for any purpose other than pay17 ments under the program, the State shall have 

18 repaid such amounts to the State fund, together 

19 with interest on such amounts. 

20 (3) TAX STATUS.—The program shall be struc21 tured and carried out in a manner so that the pro22 gram is exempt from all Federal taxation. 

23 (4) COVERAGE.—The program shall cover all 

24 perils specified in section 6. 


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1 (5) EARNINGS.—The program may not provide 

2 for, nor shall have ever made, any redistribution of 

3 any part of any net profits of the program to any 

4 insurer that participates in the program. 

5 (6) PREVENTION AND MITIGATION.—The pro6 gram shall include prevention and mitigation provi7 sions that require that not less than $10,000,000 

8 and not more than 35 percent of the net investment 

9 income of the State insurance or reinsurance pro10 gram be used for programs to mitigate losses from 

11 natural catastrophes for which the State insurance 

12 or reinsurance program was established. For pur13 poses of this paragraph, prevention and mitigation 

14 shall include methods to reduce losses of life and 

15 property, including appropriate measures to ade16 quately reflect— 

17 (A) encouragement of awareness about the 

18 risk factors and what can be done to eliminate 

19 or reduce them; 

20 (B) location of the risk, by giving careful 

21 consideration of the natural risks for the loca22 tion of the property before allowing building 

23 and considerations if structures are allowed; 

24 and 


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1 (C) construction relative to the risk and 

2 hazards, which act upon— 

3 (i) State mandated building codes ap4 propriate for the risk; 

5 (ii) adequate enforcement of the risk6 appropriate building codes; 

7 (iii) building materials that prevent or 

8 significantly lessen potential damage from 

9 the natural catastrophes; 

10 (iv) building methods that prevent or 

11 significantly lessen potential damage from 

12 the natural catastrophes; and 

13 (v) a focus on prevention and mitiga14 tion for any substantially damaged struc15 ture, with an emphasis on how structures 

16 can be retrofitted so as to make them 

17 building code compliant. 

18 (7) REQUIREMENTS REGARDING COVERAGE.— 

19 (A) IN GENERAL.—The program— 

20 (i) may not, except for charges or as21 sessments related to post-event financing 

22 or bonding, involve cross-subsidization be23 tween any separate property and casualty 

24 lines covered under the program unless the 

25 elimination of such activity in an existing 


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1 program would negatively impact the eligi2 bility of the program to purchase a con3 tract for reinsurance coverage under this 

4 Act pursuant to paragraph (3); 

5 (ii) shall include provisions that au6 thorize the State insurance commissioner 

7 or other State entity authorized to make 

8 such a determination to terminate the pro9 gram if the insurance commissioner or 

10 other such entity determines that the pro11 gram is no longer necessary to ensure the 

12 availability of homeowners’ insurance for 

13 all residents of the State; and 

14 (iii) shall provide that, for any insur15 ance coverage for homes (which may in16 clude dwellings owned under condominium 

17 and cooperative ownership arrangements) 

18 and the contents of apartments that is 

19 made available under the State insurance 

20 program and for any reinsurance coverage 

21 for such insurance coverage made available 

22 under the State reinsurance program, the 

23 premium rates charged shall be amounts 

24 that, at a minimum, are sufficient to cover 

25 the full actuarial costs of such coverage, 


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1 based on consideration of the risks involved 

2 and accepted actuarial and rate making 

3 principles, anticipated administrative ex4 penses, and loss and loss-adjustment ex5 penses. 

6 (B) APPLICABILITY.—This paragraph shall 

7 apply after the expiration of the 2-year period 

8 beginning on the date of the enactment of this 

9 Act. 

10 (8) PROHIBITION OF COMPETITION WITH PRI11 VATE MARKET.—Any insurance or reinsurance cov12 erage, as applicable, made available through the 

13 State program shall not supplant coverage that is 

14 otherwise reasonably available and affordable in the 

15 private market. 

16 (9) OTHER QUALIFICATIONS.— 

17 (A) IN GENERAL.—The State program 

18 shall (for the year for which the coverage is in 

19 effect) comply with regulations that shall be 

20 issued under this paragraph by the Secretary, 

21 in consultation with the Commission. The regu22 lations shall establish criteria for State pro23 grams to qualify to purchase reinsurance under 

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1 quirements under the other paragraphs of this 

2 subsection. 

3 (B) CONTENTS.—The regulations issued 

4 under this paragraph shall include requirements 

5 that— 

6 (i) the State program shall have pub7 lic members on its board of directors or 

8 have an advisory board with public mem9 bers; 

10 (ii) the State program provide ade11 quate insurance or reinsurance protection, 

12 as applicable, for the perils covered, which 

13 shall include a range of deductibles and 

14 premium costs that reflect the applicable 

15 risks to eligible properties; 

16 (iii) insurance or reinsurance cov17 erage, as applicable, provided by the State 

18 program is made available on a non19 discriminatory basis to all qualifying resi20 dents; 

21 (iv) any new construction, substantial 

22 rehabilitation, and renovation insured or 

23 reinsured by the program complies with 

24 applicable State or local government build25 ing, fire, and safety codes; 


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1 (v) the State, or appropriate local gov2 ernments within the State, have in effect 

3 and enforce nationally recognized model 

4 building, fire, and safety codes and con5 sensus-based standards that offer risk re6 sponsive resistance that is substantially 

7 equivalent or greater than the resistance to 

8 earthquakes or high winds; 

9 (vi) the State has taken actions to es10 tablish an insurance rate structure that 

11 takes into account measures to mitigate in12 surance losses; 

13 (vii) there are in effect, in such State, 

14 laws or regulations sufficient to prohibit 

15 price gouging, during the term of reinsur16 ance coverage under this Act for the State 

17 program in any disaster area located with18 in the State; and 

19 (viii) the State program complies with 

20 such other requirements that the Secretary 

21 considers necessary to carry out the pur22 poses of this Act. 

23 (b) TERMS OF CONTRACTS.—Each contract under 

24 this section for reinsurance coverage under this Act shall 

25 be subject to the following terms and conditions: 


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1 (1) MATURITY.—The term of the contract shall 

2 not exceed 1 year or such other term as the Sec3 retary may determine. 

4 (2) PAYMENT CONDITION.—The contract shall 

5 authorize claims payments only for eligible losses to 

6 the eligible State program purchasing the coverage. 

7 (3) RETAINED LOSSES REQUIREMENT.—For 

8 each event of a covered peril, the contract shall 

9 make a payment for the event only if the total 

10 amount of insurance claims for losses, which are 

11 covered by qualified lines, occur to properties located 

12 within the State covered by the contract, and that 

13 result from insured losses (as defined in section 12) 

14 for the State program, exceeds the amount of re15 tained losses provided under the contract (pursuant 

16 to section 8(a)) purchased by the eligible State pro17 gram. 

18 (4) MULTIPLE EVENTS.—The contract shall 

19 cover any eligible losses from one or more covered 

20 events that may occur during the term of the con21 tract and shall provide that if multiple events occur, 

22 the retained losses requirement under paragraph (3) 

23 shall apply on a calendar year basis, in the aggre24 gate and not separately to each individual event. 


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1 (5) TIMING OF ELIGIBLE LOSSES.—Eligible 

2 losses under the contract shall include only insur3 ance claims for property covered by qualified lines 

4 that are reported to the eligible State program with5 in the 3-year period beginning upon the event or 

6 events for which payment under the contract is pro7 vided. 

8 (6) PRICING.— 

9 (A) DETERMINATION.—The price of rein10 surance coverage under the contract shall be an 

11 amount established by the Secretary as follows: 

12 (i) RECOMMENDATIONS.—The Sec13 retary shall take into consideration the rec14 ommendations of the Commission in estab15 lishing the price, but the price may not be 

16 less than the amount recommended by the 

17 Commission. 

18 (ii) FAIRNESS TO TAXPAYERS.—The 

19 price shall be established at a level that is 

20 designed to reflect the risks and costs 

21 being borne under each reinsurance con22 tract issued under this Act and that takes 

23 into consideration empirical models of nat24 ural disasters and the capacity of private 


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1 markets to absorb insured losses from nat2 ural disasters. 

3 (iii) SELF-SUFFICIENCY.—The rates 

4 for reinsurance coverage shall be estab5 lished at a level that annually produces ex6 pected premiums that shall be sufficient to 

7 pay the expected annualized cost of all 

8 claims, loss adjustment expenses, and all 

9 administrative costs of reinsurance cov10 erage offered under this section. 

11 (B) COMPONENTS.—The price shall consist 

12 of the following components: 

13 (i) RISK-BASED PRICE.—A risk-based 

14 price, which shall reflect the anticipated 

15 annualized payout of the contract accord16 ing to the actuarial analysis and rec17 ommendations of the Commission. 

18 (ii) RISK LOAD.—A risk load in an 

19 amount that is not less than the risk-based 

20 price under clause (i). In establishing risk 

21 loads under this clause, the Secretary shall 

22 take into consideration comparable private 

23 risk loads. 

24 (iii) ADMINISTRATIVE COSTS.—A sum 

25 sufficient to provide for the operation of 


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1 the Commission and the administrative ex2 penses incurred by the Secretary in car3 rying out this Act. 

4 (7) INFORMATION.—The contract shall contain 

5 a condition providing that the Commission may re6 quire the State program that is covered under the 

7 contract to submit to the Commission all informa8 tion on the State program relevant to the duties of 

9 the Commission, as determined by the Secretary. 

10 (8) ADDITIONAL CONTRACT OPTION.—The con11 tract shall provide that the purchaser of the contract 

12 may, during the term of such original contract, pur13 chase additional contracts from among those offered 

14 by the Secretary at the beginning of the term, sub15 ject to the limitations under section 8, at the prices 

16 at which such contracts were offered at the begin17 ning of the term, prorated based upon the remaining 

18 term as determined by the Secretary. Such addi19 tional contracts shall provide coverage beginning on 

20 a date 15 days after the date of purchase but shall 

21 not provide coverage for losses for an event that has 

22 already occurred. 

23 (9) OTHERS.—The contract shall contain such 

24 other terms as the Secretary considers necessary to 


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1 carry out this Act and to ensure the long-term fi2 nancial integrity of the program under this Act. 

3 (c) PRIVATE SECTOR RIGHT TO PARTICIPATE.— 

4 (1) ESTABLISHMENT OF COMPETITIVE PROCE5 DURE.—The Secretary shall establish, by regulation, 

6 a competitive procedure under this subsection that 

7 provides qualified entities an opportunity, on a basis 

8 consistent with the contract cycle established under 

9 this Act by the Secretary, to offer to provide, in lieu 

10 of reinsurance coverage under this section, reinsur11 ance coverage that is substantially similar to cov12 erage otherwise made available under this section. 

13 (2) COMPETITIVE PROCEDURE.—Under the 

14 procedure established under this subsection— 

15 (A) the Secretary shall establish criteria 

16 for private insurers, reinsurers, and capital 

17 market companies, and consortia of such enti18 ties to be treated as qualified entities for pur19 poses of this subsection, which criteria shall re20 quire such an entity to have at all times capital 

21 sufficient to satisfy the terms of the reinsurance 

22 contracts and shall include such other industry 

23 and credit rating standards as the Secretary 

24 considers appropriate; 


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1 (B) not less than 30 days before the begin2 ning of each contract cycle during which any re3 insurance coverage under this section is to be 

4 made available, the Secretary may request pro5 posals and shall publish in the Federal Register 

6 the rates and terms for contracts for reinsur7 ance coverage under this section that are to be 

8 made available during such contract cycle; 

9 (C) the Secretary shall provide qualified 

10 entities a period of not less than 10 days (which 

11 shall terminate not less than 20 days before the 

12 beginning of the contract cycle) to submit to 

13 the Secretary a written expression of interest in 

14 providing reinsurance coverage in lieu of the 

15 coverage otherwise to be made available under 

16 this section; 

17 (D) the Secretary shall provide any quali18 fied entity submitting an expression of interest 

19 during the period referred to in subparagraph 

20 (C) a period of not less than 20 days (which 

21 shall terminate before the beginning of the con22 tract cycle) to submit to the Secretary an offer 

23 to provide, in lieu of the reinsurance coverage 

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1 tion, coverage that is substantially similar to 

2 such coverage; 

3 (E) if the Secretary determines that an 

4 offer submitted during the period referred to in 

5 subparagraph (D) is a bona fide offer to pro6 vide reinsurance coverage during the contract 

7 cycle at rates and terms that are substantially 

8 similar to the rates and terms for reinsurance 

9 coverage otherwise to be provided under this 

10 section by the Secretary, the Secretary shall ac11 cept the offer (if still outstanding) and, not12 withstanding any other provision of this Act, 

13 provide for such entity to make reinsurance cov14 erage available in accordance with the offer; 

15 and 

16 (F) if the Secretary accepts an offer pur17 suant to subparagraph (E) to make reinsurance 

18 coverage available, notwithstanding any other 

19 provision of this Act, the Secretary shall reduce, 

20 to an equivalent extent, the amount of reinsur21 ance coverage available under this section dur22 ing the contract cycle to which the offer relates, 

23 unless and until the Secretary determines that 

24 the entity is not complying with the terms of 

25 the accepted offer. 


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1 (d) PARTICIPATION BY MULTI-STATE CATASTROPHE

2 FUND PROGRAMS.—Nothing in this Act shall prohibit the 

3 creation of multi-State catastrophe insurance or reinsur4 ance programs, or the participation by such programs in 

5 the program established pursuant to section 4. The Sec6 retary shall, by regulation, apply the provisions of this Act 

7 to multi-State catastrophe insurance and reinsurance pro8 grams. 

9 (e) REQUIREMENT FOR INSURERS TO PASS

10 THROUGH SAVINGS TO CONSUMERS.—Notwithstanding 

11 any other provision of this Act, a State program shall not 

12 be eligible to purchase a contract for reinsurance coverage 

13 made available under this Act unless such State has in 

14 effect such laws, regulations, or other requirements, as the 

15 Secretary shall by regulation require, that— 

16 (1) to the extent that reinsurance coverage 

17 made available under the program under this Act re18 sults in any cost savings in providing insurance cov19 erage for risks in such State, such cost savings be 

20 reflected in premium rates charged to consumers for 

21 such coverage; and 

22 (2) the State take such actions as the Secretary 

23 considers appropriate to ensure that the requirement 

24 under paragraph (1) is carried out and enforced. 


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1 SEC. 8. TREATMENT OF INSURED LOSSES AND MAXIMUM 

2 FEDERAL LIABILITY. 

3 (a) AVAILABLE LEVELS OF RETAINED LOSSES.—In 

4 making reinsurance coverage available under this Act, the 

5 Secretary shall make available for purchase contracts for 

6 such coverage that require the sustainment of retained 

7 losses from covered perils (as required under section 

8 7(b)(3) for payment of eligible losses) in various amounts, 

9 as the Secretary, in consultation with the Commission, de10 termines appropriate and subject to the requirements 

11 under subsection (b). 

12 (b) MINIMUM LEVEL OF RETAINED LOSSES.— 

13 (1) AMOUNT.—Subject to paragraph (2) and 

14 notwithstanding any other provision of this Act, a 

15 contract for reinsurance coverage under section 7 for 

16 an eligible State program that offers insurance or 

17 reinsurance coverage described in subparagraph (A) 

18 or (B), respectively, of section 7(a)(1) may not be 

19 made available or sold unless the contract requires 

20 that the State program sustain an amount of re21 tained losses from covered perils in the following 

22 amount: 

23 (A) IN GENERAL.—The State program 

24 shall sustain an amount of retained losses of 

25 not less than the greater of— 


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1 (i) the claims-paying capacity of the 

2 eligible State program, as determined by 

3 the Secretary; and 

4 (ii) an amount, determined by the 

5 Secretary in consultation with the Commis6 sion, that is the amount equal to the eligi7 ble losses projected to be incurred once 

8 every 200 years on an annual basis from 

9 covered perils. 

10 (B) TRANSITION RULE FOR NEW PRO11 GRAMS.— 

12 (i) 200-YEAR EVENT.—The Secretary 

13 may provide that, in the case of an eligible 

14 State program that, after the date of the 

15 enactment of this Act, commences offering 

16 insurance or reinsurance coverage, during 

17 the 7-year period beginning on the date 

18 that reinsurance coverage under section 7 

19 is first made available, the minimum level 

20 of retained losses applicable under this 

21 paragraph shall be the amount determined 

22 for the State under subparagraph (A)(i), 

23 except that such minimum level shall be 

24 adjusted annually as provided in clause (ii) 

25 of this subparagraph. 


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1 (ii) ANNUAL ADJUSTMENT.—Each an2 nual adjustment under this clause shall in3 crease the minimum level of retained losses 

4 applicable under this subparagraph to an 

5 eligible State program described in clause 

6 (i) in a manner such that— 

7 (I) during the course of such 7- 

8 year period, the applicable minimum 

9 level of retained losses approaches the 

10 minimum level that, under subpara11 graph (A)(ii), will apply to the eligible 

12 State program upon the expiration of 

13 such period; and 

14 (II) each such annual increase is 

15 a substantially similar amount, to the 

16 extent practicable. 

17 (C) REDUCTION BECAUSE OF REDUCED

18 CLAIMS-PAYING CAPACITY.— 

19 (i) AUTHORITY.—Notwithstanding 

20 subparagraphs (A), (B), and (C) or the 

21 terms contained in a contract for reinsur22 ance pursuant to such subparagraphs, if 

23 the Secretary determines that the claims24 paying capacity of an eligible State pro25 gram has been reduced because of payment 


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1 for losses due to an event, the Secretary 

2 may reduce the minimum level of retained 

3 losses. 

4 (ii) TERM OF REDUCTION.—The Sec5 retary may extend the 5-year period for 

6 not more than 5 additional 1-year periods 

7 if the Secretary determines that losses in8 curred by the State program as a result of 

9 covered perils create excessive hardship on 

10 the State program. The Secretary shall 

11 consult with the appropriate officials of the 

12 State program regarding the required 

13 schedule and any potential 1-year exten14 sions. 

15 (D) CLAIMS-PAYING CAPACITY.—For pur16 poses of this paragraph, the claims-paying ca17 pacity of a State-operated insurance or reinsur18 ance program under section 7(a)(1) shall be de19 termined by the Secretary, in consultation with 

20 the Commission, taking into consideration the 

21 claims-paying capacity as determined by the 

22 State program, retained losses to private insur23 ers in the State in an amount assigned by the 

24 State insurance commissioner, the cash surplus 

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1 ance, and other financing mechanisms of the 

2 program established by law. 

3 (2) INITIAL ADJUSTMENT BASED ON PRIVATE

4 MARKET.—The Secretary may, before making con5 tracts for reinsurance coverage under this Act ini6 tially available under section 7, raise the minimum 

7 level of retained losses from the amount required 

8 under paragraph (1) for an eligible State program to 

9 ensure, as determined by the Secretary, that such 

10 contracts comply with the principle under section 

11 4(c)(1). 

12 (c) 90 PERCENT COVERAGE OF INSURED LOSSES IN

13 EXCESS OF RETAINED LOSSES.—Each contract for rein14 surance coverage under this Act for a covered purchaser 

15 shall provide that the amount paid out under the contract 

16 shall, subject to subsection (d), be equal to 90 percent of 

17 the amount of insured losses of the eligible State program 

18 of the purchaser in excess of the amount of retained losses 

19 that the contract requires, pursuant to subsection (b), to 

20 be incurred by such program. 

21 (d) MAXIMUM FEDERAL LIABILITY.— 

22 (1) IN GENERAL.—Notwithstanding any other 

23 provision of law, the Secretary may sell only con24 tracts for reinsurance coverage under this Act in 


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1 various amounts that comply with the following re2 quirements: 

3 (A) ESTIMATE OF AGGREGATE LIABIL4 ITY.—The aggregate liability for payment of 

5 claims under all such contracts in any single 

6 year is unlikely to exceed $200,000,000,000 (as 

7 such amount is adjusted under paragraph (2)). 

8 (B) ELIGIBLE LOSS COVERAGE SOLD.—El9 igible losses covered by all contracts sold within 

10 a State during a 12-month period do not exceed 

11 the difference between the following amounts 

12 (each of which shall be determined by the Sec13 retary in consultation with the Commission): 

14 (i) The amount equal to the eligible 

15 loss projected to be incurred once every 

16 500 years from a single event in the State. 

17 (ii) The amount equal to the eligible 

18 loss projected to be incurred once every 

19 200 years from a single event in the State. 

20 (2) ANNUAL ADJUSTMENTS.—The Secretary 

21 shall annually adjust the amount under paragraph 

22 (1)(A) (as it may have been previously adjusted) to 

23 provide for inflation in accordance with an inflation 

24 index that the Secretary determines to be appro25 priate. 


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1 SEC. 9. CATASTROPHE CAPITAL RESERVE FUNDS. 

2 (a) ESTABLISHMENT.—Any insurer who participates 

3 in an eligible State program under section 7(a) may estab4 lish a Catastrophe Capital Reserve Fund (in this section 

5 referred to as a ‘‘reserve fund’’) in which it may hold 

6 funds in a fiduciary capacity on behalf of the Secretary. 

7 (b) FUNDING.—An insurer may fund a reserve fund 

8 by making an election, in advance, to treat some or all 

9 of the premiums received for such coverage as charges im10 posed by the Secretary for participation in, and operation 

11 of, the program for reinsurance coverage under this Act. 

12 Any such premiums for which such an election has been 

13 made shall be maintained in a segregated account in a 

14 fiduciary capacity on behalf of the Secretary. Such funds 

15 may be invested in any otherwise legally permissible man16 ner but all interest, dividends, and capital accumulations 

17 also shall be retained in such segregated account on behalf 

18 of the Secretary. 

19 (c) USE.—Amounts in a reserve fund established pur20 suant to this section shall be collected and used by the 

21 Secretary to offset, in whole or in part, the cost to the 

22 Secretary of claims paid under reinsurance coverage pro23 vided under the program, except that, in the case only of 

24 a single event that results in an amount of eligible losses 

25 to insurers that is equal to or greater than the amount 

26 of such losses projected to be incurred from a single event 


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1 having an extent of such losses such that the event has 

2 a 1.0 percent chance of occurring in any year, an insurer 

3 may first use the funds in a reserve fund of the insurer 

4 to satisfy any one or more of the following: 

5 (1) The retained losses for the insurer required 

6 under section 8(b). 

7 (2) The portion of the insurer’s losses that ex8 ceed the required retained losses but are not com9 pensated under a reinsurance contract made avail10 able under the Program pursuant to section 8(c). 

11 (3) The insurer’s obligations to pay for insured 

12 losses if any conditions precedent to payment under 

13 a contract for reinsurance made available under the 

14 Program are not met. 

15 (4) Any risk-sharing obligations that the in16 surer may have entered into. 

17 (d) TERMINATION.— 

18 (1) TERMINATION OF PROGRAM.—Upon termi19 nation under section 14 of the program under this 

20 Act, and subject to the continuing authority of the 

21 Secretary to adjust claims in satisfaction of con22 tracts for reinsurance in force under the Program, 

23 10 percent of each insurer’s reserve funds shall be 

24 remitted to the Secretary and the remainder shall be 

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1 mine the manner in which the remittance of such in2 come to the insurer shall be made. 

3 (2) ELIMINATION OF COVERAGE OF INSURED

4 LOSSES IN EXCESS OF RETAINED LOSSES.—If at any 

5 time the Program remains in effect but contracts for 

6 reinsurance under the Program do not provide any 

7 payment for insured losses in excess of retained 

8 losses, the reserve funds shall be retained and used 

9 for the purposes set forth in subsection (c) of this 

10 section. At such time as an insurer’s liability for in11 sured losses under the Program terminates, as a 

12 consequence of the insurer’s termination of its busi13 ness or otherwise, the insurer shall remit any 

14 amounts remaining in its reserve funds to the Sec15 retary. 

16 SEC. 10. CONSUMER HURRICANE, EARTHQUAKE, LOSS PRO17 TECTION (HELP) FUND. 

18 (a) ESTABLISHMENT.—There is established within 

19 the Treasury of the United States a fund to be known 

20 as the Consumer HELP Fund (in this section referred 

21 to as the ‘‘Fund’’). 

22 (b) CREDITS.—The Fund shall be credited with— 

23 (1) amounts received annually from the sale of 

24 contracts for reinsurance coverage under this Act; 


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1 (2) any amounts borrowed under subsection 

2 (d); 

3 (3) any amounts earned on investments of the 

4 Fund pursuant to subsection (e); and 

5 (4) such other amounts as may be credited to 

6 the Fund. 

7 (c) USES.—Amounts in the Fund shall be available 

8 to the Secretary only for the following purposes: 

9 (1) CONTRACT PAYMENTS.—For payments to 

10 covered purchasers under contracts for reinsurance 

11 coverage for eligible losses under such contracts. 

12 (2) COMMISSION COSTS.—To pay for the oper13 ating costs of the Commission. 

14 (3) ADMINISTRATIVE EXPENSES.—To pay for 

15 the administrative expenses incurred by the Sec16 retary in carrying out the reinsurance program 

17 under this Act. 

18 (4) TERMINATION.—Upon termination under 

19 section 14, as provided in such section. 

20 (d) BORROWING.— 

21 (1) AUTHORITY.—To the extent that the 

22 amounts in the Fund are insufficient to pay claims 

23 and expenses under subsection (c), the Secretary 

24 may issue such obligations of the Fund as may be 


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1 necessary to cover the insufficiency and shall pur2 chase any such obligations issued. 

3 (2) PUBLIC DEBT TRANSACTION.—For the pur4 pose of purchasing any such obligations, the Sec5 retary may use as a public debt transaction the pro6 ceeds from the sale of any securities issued under 

7 chapter 31 of title 31, United States Code, and the 

8 purposes for which securities are issued under such 

9 chapter are hereby extended to include any purchase 

10 by the Secretary of such obligations under this sub11 section. 

12 (3) CHARACTERISTICS OF OBLIGATIONS.—Obli13 gations issued under this subsection shall be in such 

14 forms and denominations, bear such maturities, bear 

15 interest at such rate, and be subject to such other 

16 terms and conditions, as the Secretary shall deter17 mine. 

18 (4) TREATMENT.—All redemptions, purchases, 

19 and sales by the Secretary of obligations under this 

20 subsection shall be treated as public debt trans21 actions of the United States. 

22 (5) REPAYMENT.—Any obligations issued under 

23 this subsection shall be repaid including interest, 

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1 miums charged for reinsurance coverage provided 

2 under this Act. 

3 (e) INVESTMENT.—If the Secretary determines that 

4 the amounts in the Fund are in excess of current needs, 

5 the Secretary may invest such amounts as the Secretary 

6 considers advisable in obligations issued or guaranteed by 

7 the United States. 

8 (f) PROHIBITION OF FEDERAL FUNDS.—Except for 

9 amounts made available pursuant to subsection (d) and 

10 section 3(h), no further Federal funds shall be authorized 

11 or appropriated for the Fund or for carrying out the rein12 surance program under this Act. 

13 SEC. 11. ANNUAL STUDY CONCERNING BENEFITS OF REIN14 SURANCE PROGRAM. 

15 (a) IN GENERAL.—The Secretary shall, on an annual 

16 basis, conduct a study and submit to the Congress a report 

17 that— 

18 (1) analyzes the cost and availability of home19 owners’ insurance for losses resulting from cata20 strophic natural disasters covered by the reinsurance 

21 program under this Act; 

22 (2) describes the efforts of the participating 

23 States in— 


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1 (A) enacting preparedness, prevention, 

2 mitigation, recovery, and rebuilding standards; 

3 and 

4 (B) educating the public on the risks asso5 ciated with natural catastrophe; and 

6 (3) makes recommendations regarding ways to 

7 improve the program under this Act and its adminis8 tration. 

9 (b) CONTENTS.—Each annual study under this sec10 tion shall also determine and identify, on an aggregate 

11 basis— 

12 (1) for each State or region, the capacity of the 

13 private homeowners’ insurance market with respect 

14 to coverage for losses from catastrophic natural dis15 asters; 

16 (2) for each State or region, the percentage of 

17 homeowners who have such coverage, the catas18 trophes covered, and the average cost of such cov19 erage; and 

20 (3) for each State or region, the effects this Act 

21 is having on the availability and affordability of such 

22 insurance. 

23 (c) TIMING.—Each annual report under this section 

24 shall be submitted not later than March 30 of the year 

25 after the year for which the study was conducted. 


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1 (d) COMMENCEMENT OF REPORTING REQUIRE2 MENT.—The Secretary shall first submit an annual report 

3 under this section not later than two years after the date 

4 of the enactment of this Act. 

5 SEC. 12. DEFINITIONS. 

6 For purposes of this Act, the following definitions 

7 shall apply: 

8 (1) COMMISSION.—The term ‘‘Commission’’ 

9 means the National Commission on Catastrophe 

10 Risks and Insurance Loss Costs established under 

11 section 3. 

12 (2) COVERED PERILS.—The term ‘‘covered per13 ils’’ means the natural disaster perils under section 

14 6. 

15 (3) COVERED PURCHASER.—The term ‘‘covered 

16 purchaser’’ means an eligible State-operated insur17 ance or reinsurance program that purchases reinsur18 ance coverage made available under a contract under 

19 section 7. 

20 (4) DISASTER AREA.—The term ‘‘disaster area’’ 

21 means a geographical area, with respect to which— 

22 (A) a covered peril specified in section 6 

23 has occurred; and 


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1 (B) a declaration that a major disaster ex2 ists, as a result of the occurrence of such 

3 peril— 

4 (i) has been made by the President of 

5 the United States; and 

6 (ii) is in effect. 

7 (5) ELIGIBLE LOSSES.—The term ‘‘eligible 

8 losses’’ means, with respect to a contract for rein9 surance coverage made available under this Act for 

10 a covered purchaser, the insured losses of the cov11 ered purchaser that exceed the amount of retained 

12 losses that the contract requires, pursuant to section 

13 8(b), to be incurred by the eligible State program of 

14 such purchaser, as defined by the Secretary after 

15 consultation with the Commission. 

16 (6) ELIGIBLE STATE PROGRAM.—The term ‘‘eli17 gible State program’’ means a State program that, 

18 pursuant to section 7(a), is eligible to purchase rein19 surance coverage made available through contracts 

20 under section 7, or a multi-State program that is eli21 gible to purchase such coverage pursuant to section 

22 7(c). 

23 (7) INSURED LOSS.—The term ‘‘insured loss’’ 

24 means, with respect to contract for reinsurance cov25 erage made available under this Act for a covered 


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1 purchaser, any loss resulting from a covered peril 

2 that is covered by insurance or reinsurance made 

3 available under the eligible State program of the 

4 covered purchaser. 

5 (8) PRICE GOUGING.—The term ‘‘price 

6 gouging’’ means the providing of any consumer good 

7 or service by a supplier related to repair or restora8 tion of property damaged from a catastrophe for a 

9 price that the supplier knows or has reason to know 

10 is greater, by at least the percentage set forth in a 

11 State law or regulation prohibiting such act (not12 withstanding any real cost increase due to any at13 tendant business risk and other reasonable expenses 

14 that result from the major catastrophe involved), 

15 than the price charged by the supplier for such con16 sumer good or service immediately before the dis17 aster. 

18 (9) QUALIFIED LINES.—The term ‘‘qualified 

19 lines’’ means lines of insurance coverage for which 

20 losses are covered under section 5 by reinsurance 

21 coverage under this Act. 

22 (10) REINSURANCE COVERAGE.—The term ‘‘re23 insurance coverage under this Act’’ means coverage 

24 under contracts made available under section 7. 


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1 (11) SECRETARY.—The term ‘‘Secretary’’ 

2 means the Secretary of the Treasury. 

3 (12) STATE.—The term ‘‘State’’ means the 

4 States of the United States, the District of Colum5 bia, the Commonwealth of Puerto Rico, the Com6 monwealth of the Northern Mariana Islands, Guam, 

7 the Virgin Islands, American Samoa, and any other 

8 territory or possession of the United States. 

9 SEC. 13. REGULATIONS. 

10 The Secretary, in consultation with the Secretary of 

11 the Department of Homeland Security, shall issue any 

12 regulations necessary to carry out the program for rein13 surance coverage under this Act. 

14 SEC. 14. TERMINATION. 

15 (a) IN GENERAL.—Except as provided in subsection 

16 (b), the Secretary may not provide any reinsurance cov17 erage under this Act covering any period after the expira18 tion of the 20-year period beginning on the date of the 

19 enactment of this Act. 

20 (b) EXTENSION.—If upon the expiration of the period 

21 under subsection (a) the Secretary, in consultation with 

22 the Commission, determines that continuation of the pro23 gram for reinsurance coverage under this Act is necessary 

24 or appropriate to carry out the purpose of the program 

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1 ity in the private homeowners’ insurance market, the Sec2 retary shall continue to provide reinsurance coverage 

3 under this Act until the expiration of the 5-year period 

4 beginning upon the expiration of the period under sub5 section (a). 

6 (c) REPEAL.—Effective upon the date that reinsur7 ance coverage under this Act is no longer available or in 

8 force pursuant to subsection (a) or (b), this Act (except 

9 for this section) is repealed. 

10 (d) DEFICIT REDUCTION.—The Secretary shall cover 

11 into the General Fund of the Treasury any amounts re12 maining in the Fund under section 9 upon the repeal of 

13 this Act under subsection (c). 

Æ 


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