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[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[S. 3117 Introduced in Senate (IS)]

109th CONGRESS
  2d Session
                                S. 3117

To establish a program to provide more protection at lower cost through 
a national backstop 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, to better assist in the financial recovery from such 
     catastrophes, and to develop a rigorous process of continuous 
                              improvement.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

                              May 25, 2006

  Mr. Nelson of Florida introduced the following bill; which was read 
  twice and referred to the Committee on Banking, Housing, and Urban 
                                Affairs

_______________________________________________________________________

                                 A BILL

 
To establish a program to provide more protection at lower cost through 
a national backstop 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, to better assist in the financial recovery from such 
     catastrophes, and to develop a rigorous process of continuous 
                              improvement.

    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 
Protection Act of 2006''.
    (b) Table of Contents.--The table of contents for 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. Minimum level of retained losses and maximum Federal liability.
Sec. 9. Consumer Hurricane, Earthquake, Loss Protection (HELP) Fund.
Sec. 10. Regulations.
Sec. 11. Termination.
Sec. 12. Annual study concerning benefits of the Act.
Sec. 13. GAO study of the National Flood Insurance Program and 
                            hurricane-related flooding.
Sec. 14. Definitions.

SEC. 2. FINDINGS.

    Congress finds that--
            (1) America needs to take steps to be better prepared for 
        and better protected from catastrophes;
            (2) the hurricane seasons of 2004 and 2005 are startling 
        reminders of both the human and economic devastation that 
        hurricanes, flooding, and other natural disasters can cause;
            (3) if a repeat of the deadly 1900 Galveston hurricane 
        occurred again it could cause thousands of deaths and over 
        $36,000,000,000 in loss;
            (4) if the 1906 San Francisco earthquake occurred again it 
        could cause thousands of deaths, displace millions of 
        residents, destroy thousands of businesses, and cause over 
        $400,000,000,000 in loss;
            (5) if a Category 5 hurricane were to hit Miami it could 
        cause thousands of deaths and over $50,000,000,000 in loss and 
        devastate the local and national economy;
            (6) if a repeat of the 1938 ``Long Island Express'' were to 
        occur again it could cause thousands of deaths and over 
        $30,000,000,000 in damage, and if a hurricane that strong were 
        to directly hit Manhattan it could cause over $150,000,000,000 
        in damage and cause irreparable harm to our Nation's economy;
            (7) a more comprehensive and integrated approach to dealing 
        with catastrophes is needed;
            (8) using history as a guide, natural catastrophes will 
        inevitably place a tremendous strain on homeowners' insurance 
        markets in many areas, will raise costs for consumers, and will 
        jeopardize the ability of many consumers to adequately insure 
        their homes and possessions;
            (9) the lack of sufficient insurance capacity and the 
        inability of private insurers to build enough capital, in a 
        short amount of time, threatens to increase the number of 
        uninsured homeowners, which, in turn, increases the risk of 
        mortgage defaults and the strain on the Nation's banking 
        system;
            (10) some States have exercised leadership through 
        reasonable action to ensure the continued availability and 
        affordability of homeowners' insurance for all residents;
            (11) it is appropriate that efforts to improve insurance 
        availability be designed and implemented at the State level;
            (12) while State insurance programs may be adequate to 
        cover losses from most natural disasters, a small percentage of 
        events is likely to exceed the financial capacity of these 
        programs and the local insurance markets;
            (13) a limited national insurance backstop will improve the 
        effectiveness of State insurance programs and private insurance 
        markets and will increase the likelihood that homeowners' 
        insurance claims will be fully paid in the event of a large 
        natural catastrophe and that routine claims that occur after a 
        mega-catastrophe will also continue to be paid;
            (14) it is necessary to provide a national insurance 
        backstop program that will provide more protection at an 
        overall lower cost and that will promote stability in the 
        homeowners' insurance market;
            (15) it is the proper role of the Federal Government to 
        prepare for and protect its citizens from catastrophes and to 
        facilitate consumer protection, victim assistance, and 
        recovery, including financial recovery; and
            (16) any Federal reinsurance program must be founded upon 
        sound actuarial principles and priced in a manner that 
        encourages the creation of State funds and maximizes the buying 
        potential of these State funds and encourages and promotes 
        prevention and mitigation, recovery and rebuilding, and 
        consumer education, and emphasizes continuous analysis and 
        improvement.

SEC. 3. NATIONAL COMMISSION ON CATASTROPHE PREPARATION AND PROTECTION.

    (a) Establishment.--The Secretary of the Treasury shall establish a 
commission to be known as the National Commission on Catastrophe 
Preparation and Protection.
    (b) Duties.--The Commission shall meet for the purpose of advising 
the Secretary regarding the estimated loss costs associated with the 
contracts for reinsurance coverage available under this Act and 
carrying out the functions specified in this Act, including--
            (1) the development and implementation of public education 
        concerning the risks posed by natural catastrophes;
            (2) the development and implementation of prevention, 
        mitigation, recovery, and rebuilding standards that better 
        prepare and protect the United States from catastrophes; and
            (3) conducting continuous analysis of the effectiveness of 
        this Act and recommending improvements to the Congress so 
        that--
                    (A) the costs of providing catastrophe protection 
                are decreased; and
                    (B) the United States is better prepared.
    (c) Members.--
            (1) Appointment and qualification.--The Commission shall 
        consist of 9 members, as follows:
                    (A) Homeland security member.--The Secretary of 
                Homeland Security or the Secretary's designee.
                    (B) Appointed members.--8 members appointed by the 
                Secretary, who shall consist of--
                            (i) 1 individual who is an actuary;
                            (ii) 1 individual who is employed in 
                        engineering;
                            (iii) 1 individual representing the 
                        scientific community;
                            (iv) 1 individual representing property and 
                        casualty insurers;
                            (v) 1 individual representing reinsurers;
                            (vi) 1 individual who is a member or former 
                        member of the National Association of Insurance 
                        Commissioners; and
                            (vii) 2 individuals who are consumers.
            (2) Prevention of conflicts of interest.--Members shall 
        have no personal or financial interest at stake in the 
        deliberations of the Commission.
    (d) Treatment of Non-Federal Members.--Each member of the 
Commission who is not otherwise employed by the Federal Government 
shall be considered a special Government employee for purposes of 
sections 202 and 208 of title 18, United States Code.
    (e) Experts and Consultants.--
            (1) In general.--The Commission may procure temporary and 
        intermittent services from individuals or groups recognized as 
        experts in the fields of meteorology, seismology, vulcanlogy, 
        geology, structural engineering, wind engineering, and 
        hydrology, and other fields, under section 3109(b) of title 5, 
        United States Code, but at a rate not in excess of the daily 
        equivalent of the annual rate of basic pay payable for level V 
        of the Executive Schedule, for each day during which the 
        individual procured is performing such services for the 
        Commission.
            (2) Other experts.--The Commission may also procure, and 
        the Congress encourages the Commission to procure, experts from 
        universities, research centers, foundations, and other 
        appropriate organizations who could study, research, and 
        develop methods and mechanisms that could be utilized to 
        strengthen structures to better withstand the perils covered by 
        this Act.
    (f) Compensation.--
            (1) In general.--Each member of the Commission who is not 
        an officer or employee of the Federal Government shall be 
        compensated at a rate of basic pay payable for level V of the 
        Executive Schedule, for each day (including travel time) during 
        which such member is engaged in the performance of the duties 
        of the Commission.
            (2) Federal employees.--All members of the Commission who 
        are officers or employees of the United States shall serve 
        without compensation in addition to that received for their 
        services as officers or employees of the United States.
    (g) Obtaining Data.--
            (1) In general.--The Commission and the Secretary may 
        solicit loss exposure data and such other information as either 
        the Commission or the Secretary deems necessary to carry out 
        its responsibilities from governmental agencies and bodies and 
        organizations that act as statistical agents for the insurance 
        industry.
            (2) Obligation to keep confidential.--The Commission and 
        the Secretary shall take such actions as are necessary to 
        ensure that information that either deems confidential or 
        proprietary is disclosed only to authorized individuals working 
        for the Commission or the Secretary.
            (3) Failure to comply.--No State insurance or reinsurance 
        program may participate if any governmental agency within that 
        State has refused to provide information requested by the 
        Commission or the Secretary.
    (h) Funding.--
            (1) Authorization of appropriations.--There is authorized 
        to be appropriated--
                    (A) $10,000,000 for fiscal year 2007 for the--
                            (i) initial expenses in establishing the 
                        Commission; and
                            (ii) initial activities of the Commission 
                        that cannot timely be covered by amounts 
                        obtained pursuant to section 7(b)(6)(B)(iii), 
                        as determined by the Secretary;
                    (B) such additional sums as may be necessary to 
                carry out subsequent activities of the Commission;
                    (C) $10,000,000 for fiscal year 2007 for the 
                initial expenses of the Secretary in carrying out the 
                program authorized under section 4; and
                    (D) such additional sums as may be necessary to 
                carry out subsequent activities of the Secretary under 
                this Act.
            (2) Offset.--
                    (A) Obtained from purchasers.--The Secretary shall 
                provide, to the maximum extent practicable, that an 
                amount equal to any amount appropriated under paragraph 
                (1) is obtained from purchasers of reinsurance coverage 
                under this Act and deposited in the Fund established 
                under section 9.
                    (B) Inclusion in pricing contracts.--Any offset 
                obtained under subparagraph (A) shall be obtained by 
                inclusion of a provision for the Secretary's and the 
                Commission's expenses incorporated into the pricing of 
                the contracts for such reinsurance coverage, pursuant 
                to section 7(b)(6)(B)(iii).
    (i) Termination.--The Commission shall terminate upon the effective 
date of the repeal under section 11(c).

SEC. 4. PROGRAM AUTHORITY.

    (a) In General.--The Secretary, in consultation with the Secretary 
of Homeland Security, shall carry out a program under this Act to make 
homeowners protection coverage available through contracts for 
reinsurance coverage under section 7, which shall be made available for 
purchase only by eligible State programs.
    (b) Purpose.--The program shall be designed to make reinsurance 
coverage under this Act available--
            (1) to improve the availability and affordability of 
        homeowners' insurance for the purpose of facilitating the 
        pooling, and spreading the risk, of catastrophic financial 
        losses from natural catastrophes;
            (2) to improve the solvency and capacity of homeowners' 
        insurance markets;
            (3) to encourage the development and implementation of 
        mitigation, prevention, recovery, and rebuilding standards; and
            (4) to recommend methods to continuously improve the way 
        the United States reacts and responds to catastrophes, 
        including improvements to the HELP Fund established under 
        section 9.
    (c) Contract Principles.--Under the program established under this 
Act, the Secretary shall offer reinsurance coverage through contracts 
with covered purchasers, which contracts shall--
            (1) minimize the administrative costs of the Federal 
        Government; and
            (2) provide coverage based solely on insured losses within 
        a State for the eligible State program purchasing the contract.

SEC. 5. QUALIFIED LINES OF COVERAGE.

    Each contract for reinsurance coverage made available under this 
Act shall provide insurance coverage against residential property 
losses to--
            (1) homes (including dwellings owned under condominium and 
        cooperative ownership arrangements); and
            (2) the contents of apartment buildings.

SEC. 6. COVERED PERILS.

    (a) In General.--Each contract for reinsurance coverage made 
available under this Act shall cover losses insured or reinsured by an 
eligible State program purchasing the contract that are proximately 
caused by--
            (1) earthquakes;
            (2) perils ensuing from earthquakes, including fire and 
        tsunamis;
            (3) tropical cyclones having maximum sustained winds of at 
        least 74 miles per hour, including hurricanes and typhoons;
            (4) tornadoes;
            (5) volcanic eruptions;
            (6) catastrophic winter storms; and
            (7) any other natural catastrophe peril (not including any 
        flood) insured or reinsured under the eligible State program 
        for which reinsurance coverage under section 7 is provided.
    (b) Rulemaking.--The Secretary shall, by regulation, define the 
natural catastrophe perils described in subsection (a)(7).

SEC. 7. CONTRACTS FOR REINSURANCE COVERAGE FOR ELIGIBLE STATE PROGRAMS.

    (a) Eligible State Programs.--A program shall be eligible to 
purchase a contract under this section for reinsurance coverage under 
this Act only if the State entity authorized to make such 
determinations certifies to the Secretary that the program complies 
with the following requirements:
            (1) Program design.--The program shall be a State-
        operated--
                    (A) insurance program that--
                            (i) offers coverage for--
                                    (I) homes (which may include 
                                dwellings owned under condominium and 
                                cooperative ownership arrangements); 
                                and
                                    (II) the contents of apartments to 
                                State residents; and
                            (ii) is authorized by State law; or
                    (B) reinsurance program that is designed to improve 
                private insurance markets that offer coverage for--
                            (i) homes (which may include dwellings 
                        owned under condominium and cooperative 
                        ownership arrangements); and
                            (ii) the contents of apartments.
            (2) Operation.--
                    (A) In general.--The program shall meet the 
                following requirements:
                            (i) A majority of the members of the 
                        governing body of the program shall be public 
                        officials.
                            (ii) The State shall have a financial 
                        interest in the program, which shall not 
                        include a program authorized by State law or 
                        regulation that requires insurers to pool 
                        resources to provide property insurance 
                        coverage for covered perils.
                            (iii) The State shall not be eligible for 
                        Consumer HELP Fund assistance under section 9 
                        if a State has appropriated money from the 
                        State fund and not paid it back to the State 
                        fund, with interest.
                            (iv) Upon receipt of assistance from the 
                        Consumer HELP Fund, each reimbursement contract 
                        sold by a State shall provide for 
                        reimbursements at 100 percent of eligible 
                        losses.
                            (v) A State shall be required to utilize 
                        either--
                                    (I) an open rating system that 
                                permits insurers to set homeowners' 
                                insurance rates without prior approval 
                                of the State; or
                                    (II) a rate approval process that 
                                requires actuarially sound, risk-based, 
                                self-sufficient homeowners' insurance 
                                rates.
                    (B) Certification.--A State shall not be eligible 
                for Consumer HELP Fund assistance unless the Secretary 
                can certify that such State is in compliance with the 
                requirement described in clause (v).
            (3) Tax status.--The program shall be structured and 
        carried out in a manner so that the program is exempt from all 
        Federal taxation.
            (4) Coverage.--The program shall cover perils enumerated in 
        section 6.
            (5) Earnings.--The program may not provide for, nor shall 
        have ever made, any redistribution of any part of any net 
        profits of the program to any insurer that participates in the 
        program.
            (6) Prevention and mitigation.--
                    (A) In general.--The program shall include 
                prevention and mitigation provisions that require that 
                not less $10,000,000 and not more than 35 percent of 
                the net investment income of the State insurance or 
                reinsurance program be used for programs to mitigate 
                losses from natural catastrophes for which the State 
                insurance or reinsurance program was established.
                    (B) Rule of construction.--For purposes of this 
                paragraph, prevention and mitigation shall include 
                methods to reduce losses of life and property, 
                including appropriate measures to adequately reflect--
                            (i) encouragement of awareness about the 
                        risk factors and what can be done to eliminate 
                        or reduce them;
                            (ii) location of the risk, by giving 
                        careful consideration of the natural risks for 
                        the location of the property before allowing 
                        building and considerations if structures are 
                        allowed; and
                            (iii) construction relative to the risk and 
                        hazards, which act upon--
                                    (I) State mandated building codes 
                                appropriate for the risk;
                                    (II) adequate enforcement of the 
                                risk-appropriate building codes;
                                    (III) building materials that 
                                prevent or significantly lessen 
                                potential damage from the natural 
                                catastrophes;
                                    (IV) building methods that prevent 
                                or significantly lessen potential 
                                damage from the natural catastrophes; 
                                and
                                    (V) a focus on prevention and 
                                mitigation for any substantially 
                                damaged structure, with an emphasis on 
                                how structures can be retrofitted so as 
                                to make them building code compliant.
            (7) Requirements regarding coverage.--
                    (A) In general.--The program--
                            (i) may not, except for charges or 
                        assessments related to post-event financing or 
                        bonding, involve cross-subsidization between 
                        any separate property and casualty lines 
                        covered under the program unless the 
                        elimination of such activity in an existing 
                        program would negatively impact the eligibility 
                        of the program to purchase a contract for 
                        reinsurance coverage under this Act pursuant to 
                        paragraph (3);
                            (ii) shall include provisions that 
                        authorize the State insurance commissioner or 
                        other State entity authorized to make such a 
                        determination to terminate the program if the 
                        insurance commissioner or other such entity 
                        determines that the program is no longer 
                        necessary to ensure the availability of 
                        homeowners' insurance for all residents of the 
                        State; and
                            (iii) shall provide that, for any insurance 
                        coverage for homes (which may include dwellings 
                        owned under condominium and cooperative 
                        ownership arrangements) and the contents of 
                        apartments that is made available under the 
                        State insurance program and for any reinsurance 
                        coverage for such insurance coverage made 
                        available under the State reinsurance program, 
                        the premium rates charged shall be amounts 
                        that, at a minimum, are sufficient to cover the 
                        full actuarial costs of such coverage, based on 
                        consideration of the risks involved and 
                        accepted actuarial and rate making principles, 
                        anticipated administrative expenses, and loss 
                        and loss-adjustment expenses.
                    (B) Applicability.--This paragraph shall apply--
                            (i) before the expiration of the 2-year 
                        period beginning on the date of the enactment 
                        of this Act, only to State programs which, 
                        after January 1, 2007, commence offering 
                        insurance or reinsurance coverage described in 
                        subparagraph (A) or (B), respectively, of 
                        paragraph (1); and
                            (ii) after the expiration of such period, 
                        to all State programs.
            (8) Other qualifications.--
                    (A) Regulations.--
                            (i) Compliance.--The State program shall 
                        (for the year for which the coverage is in 
                        effect) comply with regulations that shall be 
                        issued under this paragraph by the Secretary, 
                        in consultation with the National Commission on 
                        Catastrophe Preparation and Protection 
                        established under section 3.
                            (ii) Criteria.--The regulations issued 
                        under clause (i) shall establish criteria for 
                        State programs to qualify to purchase 
                        reinsurance under this section, which are in 
                        addition to the requirements under the other 
                        paragraphs of this subsection.
                    (B) Contents.--The regulations issued under 
                subparagraph (A)(i) shall include requirements that--
                            (i) the State program shall have public 
                        members on its board of directors or have an 
                        advisory board with public members;
                            (ii) the State program provide adequate 
                        insurance or reinsurance protection, as 
                        applicable, for the peril covered, which shall 
                        include a range of deductibles and premium 
                        costs that reflect the applicable risk to 
                        eligible properties;
                            (iii) insurance or reinsurance coverage, as 
                        applicable, provided by the State program is 
                        made available on a nondiscriminatory basis to 
                        all qualifying residents;
                            (iv) 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;
                            (v) the State, or appropriate local 
                        governments within the State, have in effect 
                        and enforce nationally recognized model 
                        building, fire, and safety codes and consensus-
                        based standards that offer risk responsive 
                        resistance that is substantially equivalent or 
                        greater than the resistance to earthquakes or 
                        high winds;
                            (vi) the State has taken actions to 
                        establish an insurance rate structure that 
                        takes into account measures to mitigate 
                        insurance losses;
                            (vii) there are in effect, in such State, 
                        laws or regulations sufficient to prohibit 
                        price gouging, during the term of reinsurance 
                        coverage under this Act for the State program 
                        in any disaster area located within the State; 
                        and
                            (viii) the State program complies with such 
                        other requirements that the Secretary considers 
                        necessary to carry out the purposes of this 
                        Act.
    (b) Terms of Contracts.--Each contract under this section for 
reinsurance coverage under this Act shall be subject to the following 
terms and conditions:
            (1) Maturity.--The term of the contract shall not exceed 1 
        year or such longer term as the Secretary may determine.
            (2) Payment condition.--The contract shall authorize claims 
        payments for eligible losses only to the eligible State program 
        purchasing the coverage.
            (3) Retained losses requirement.--For each event of a 
        covered peril, the contract shall make a payment for the event 
        only if the total amount of insurance claims for losses, which 
        are covered by qualified lines, occur to properties located 
        within the State covered by the contract, and that result from 
        events, exceeds the amount of retained losses provided under 
        the contract (pursuant to section 8(a)) purchased by the 
        eligible State program.
            (4) Multiple events.--The contract shall--
                    (A) cover any eligible losses from 1 or more 
                covered events that may occur during the term of the 
                contract; and
                    (B) provide that if multiple events occur, the 
                retained losses requirement under paragraph (3) shall 
                apply on a calendar year basis, in the aggregate and 
                not separately to each individual event.
            (5) Timing of eligible losses.--Eligible losses under the 
        contract shall include only insurance claims for property 
        covered by qualified lines that are reported to the eligible 
        State program within the 3-year period beginning upon the event 
        or events for which payment under the contract is provided.
            (6) Pricing.--
                    (A) Determination.--The price of reinsurance 
                coverage under the contract shall be an amount 
                established by the Secretary as follows:
                            (i) Recommendations.--The Secretary shall 
                        take into consideration the recommendations of 
                        the Commission in establishing the price, but 
                        the price may not be less than the amount 
                        recommended by the Commission.
                            (ii) Fairness to taxpayers.--The price 
                        shall be established at a level that--
                                    (I) is designed to reflect the 
                                risks and costs being borne under each 
                                reinsurance contract issued under this 
                                Act; and
                                    (II) takes into consideration 
                                empirical models of natural disasters 
                                and the capacity of private markets to 
                                absorb insured losses from natural 
                                disasters.
                            (iii) Self-sufficiency.--The rates for 
                        reinsurance coverage shall be established 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 under this 
                        section.
                    (B) Components.--The price shall consist of the 
                following components:
                            (i) Risk-based price.--A risk-based price, 
                        which shall reflect the anticipated annualized 
                        payout of the contract according to the 
                        actuarial analysis and recommendations of the 
                        Commission.
                            (ii) Administrative costs.--A sum 
                        sufficient to provide for the operation of the 
                        Commission and the administrative expenses 
                        incurred by the Secretary in carrying out this 
                        Act.
            (7) Information.--The contract shall contain a condition 
        providing that the Commission may require a State program that 
        is covered under the contract to submit to the Commission all 
        information on the State program relevant to the duties of the 
        Commission, as determined by the Secretary.
            (8) Additional contract option.--
                    (A) In general.--The contract shall provide that 
                the purchaser of the contract may, during a term of 
                such original contract, purchase additional contracts 
                from among those offered by the Secretary at the 
                beginning of the term, subject to the limitations under 
                section 8, at the prices at which such contracts were 
                offered at the beginning of the term, prorated based 
                upon the remaining term as determined by the Secretary.
                    (B) Timing.--An additional contract purchased under 
                subparagraph (A) shall provide coverage beginning on a 
                date 15 days after the date of purchase but shall not 
                provide coverage for losses for an event that has 
                already occurred.
            (9) Others.--The contract shall contain such other terms as 
        the Secretary considers necessary--
                    (A) to carry out this Act; and
                    (B) to ensure the long-term financial integrity of 
                the program under this Act.
    (c) Participation by Multi-State Catastrophe Fund Programs.--
            (1) In general.--Nothing in this Act shall prohibit, and 
        this Act shall be construed to facilitate and encourage, the 
        creation of multi-State catastrophe insurance or reinsurance 
        programs, or the participation by such programs in the program 
        established pursuant to section 4.
            (2) Regulations.--The Secretary shall, by regulation, apply 
        the provisions of this Act to multi-State catastrophe insurance 
        and reinsurance programs.

SEC. 8. MINIMUM LEVEL OF RETAINED LOSSES AND MAXIMUM FEDERAL LIABILITY.

    (a) Available Levels of Retained Losses.--In making reinsurance 
coverage available under this Act, the Secretary shall make available 
for purchase contracts for such coverage that require the sustainment 
of retained losses from covered perils (as required under section 
7(b)(3) for payment of eligible losses) in various amounts, as the 
Secretary, in consultation with the Commission, determines appropriate 
and subject to the requirements under subsection (b).
    (b) Minimum Level of Retained Losses.--
            (1) Contracts for state programs.--Subject to paragraphs 
        (3) and (4) and notwithstanding any other provision of this 
        Act, a contract for reinsurance coverage under section 7 for an 
        eligible State program that offers insurance or reinsurance 
        coverage described in subparagraph (A) or (B), respectively, of 
        section 7(a)(1), may not be made available or sold unless the 
        contract requires retained losses from covered perils in the 
        following amount:
                    (A) In general.--The State program shall sustain an 
                amount of retained losses of not less than--
                            (i) the claims-paying capacity of the 
                        eligible State program, as determined by the 
                        Secretary; and
                            (ii) an amount, determined by the Secretary 
                        in consultation with the Commission, that is 
                        the amount equal to the eligible losses 
                        projected to be incurred at least once every 50 
                        years on an annual basis from covered perils.
                    (B) Transition rule for existing programs.--
                            (i) Claims-paying capacity.--Subject to 
                        clause (ii), in the case of any eligible State 
                        program that was offering insurance or 
                        reinsurance coverage on the date of the 
                        enactment of this Act and the claims-paying 
                        capacity of which is greater than the amount 
                        determined under subparagraph (A)(i) but less 
                        than an amount determined for the program under 
                        subparagraph (A)(ii), the minimum level of 
                        retained losses applicable under this paragraph 
                        shall be the claims-paying capacity of such 
                        State program.
                            (ii) Agreement.--
                                    (I) In general.--Clause (i) shall 
                                apply to a State program only if the 
                                program enters into a written agreement 
                                with the Secretary providing a schedule 
                                for increasing the claims-paying 
                                capacity of the program to the amount 
                                determined for the program under 
                                subparagraph (A)(ii) over a period not 
                                to exceed 5 years.
                                    (II) Extension.--The Secretary may 
                                extend the 5-year period under 
                                subclause (I) for not more than 5 
                                additional 1-year periods if the 
                                Secretary determines that losses 
                                incurred by the State program as a 
                                result of covered perils create 
                                excessive hardship on the State 
                                program.
                                    (III) Consultation.--The Secretary 
                                shall consult with the appropriate 
                                officials of the State program 
                                regarding the required schedule and any 
                                potential 1-year extensions.
                    (C) Transition rule for new programs.--
                            (i) 50-year event.--The Secretary may 
                        provide that, in the case of an eligible State 
                        program that, after January 1, 2007, commences 
                        offering insurance or reinsurance coverage, 
                        during the 7-year period beginning on the date 
                        that reinsurance coverage under section 7 is 
                        first made available, the minimum level of 
                        retained losses applicable under this paragraph 
                        shall be the amount determined for the State 
                        under subparagraph (A)(i), except that such 
                        minimum level shall be adjusted annually as 
                        provided in clause (ii) of this subparagraph.
                            (ii) Annual adjustment.--Each annual 
                        adjustment under this clause shall increase the 
                        minimum level of retained losses applicable 
                        under this subparagraph to an eligible State 
                        program described in clause (i) in a manner 
                        such that--
                                    (I) during the course of such 7-
                                year period, the applicable minimum 
                                level of retained losses approaches the 
                                minimum level that, under subparagraph 
                                (A)(ii), will apply to the eligible 
                                State program upon the expiration of 
                                such period; and
                                    (II) each such annual increase is a 
                                substantially similar amount, to the 
                                extent practicable.
                    (D) Reduction because of reduced claims-paying 
                capacity.--
                            (i) Authority.--Notwithstanding 
                        subparagraphs (A), (B), and (C) or the terms 
                        contained in a contract for reinsurance 
                        pursuant to such subparagraphs, if the 
                        Secretary determines that the claims-paying 
                        capacity of an eligible State program has been 
                        reduced because of payment for losses due to an 
                        event, the Secretary may reduce the minimum 
                        level of retained losses.
                            (ii) Term of reduction.--
                                    (I) Extension.--The Secretary may 
                                extend the 5-year period for not more 
                                than 5 additional 1-year periods if the 
                                Secretary determines that losses 
                                incurred by the State program as a 
                                result of covered perils create 
                                excessive hardship on the State 
                                program.
                                    (II) Consultation.--The Secretary 
                                shall consult with the appropriate 
                                officials of the State program 
                                regarding the required schedule and any 
                                potential 1-year extensions.
                    (E) Claims-paying capacity.--For purposes of this 
                paragraph, the claims-paying capacity of a State-
                operated insurance or reinsurance program under section 
                7(a)(1) shall be determined by the Secretary, in 
                consultation with the Commission, taking into 
                consideration the claims-paying capacity as determined 
                by the State program, retained losses to private 
                insurers in the State in an amount assigned by the 
                State insurance commissioner, the cash surplus of the 
                program, and the lines of credit, reinsurance, and 
                other financing mechanisms of the program established 
                by law.
    (c) Maximum Federal Liability.--
            (1) In general.--Notwithstanding any other provision of 
        law, the Secretary may sell only contracts for reinsurance 
        coverage under this Act in various amounts that comply with the 
        following requirements:
                    (A) Estimate of aggregate liability.--The aggregate 
                liability for payment of claims under all such 
                contracts in any single year is unlikely to exceed 
                $200,000,000,000 (as such amount is adjusted under 
                paragraph (2)).
                    (B) Eligible loss coverage sold.--Eligible losses 
                covered by all contracts sold within a State during a 
                12-month period do not exceed the difference between 
                the following amounts (each of which shall be 
                determined by the Secretary in consultation with the 
                Commission):
                            (i) The amount equal to the eligible loss 
                        projected to be incurred once every 500 years 
                        from a single event in the State.
                            (ii) The amount equal to the eligible loss 
                        projected to be incurred once every 50 years 
                        from a single event in the State.
            (2) Annual adjustments.--The Secretary shall annually 
        adjust the amount under paragraph (1)(A) (as it may have been 
        previously adjusted) to provide for inflation in accordance 
        with an inflation index that the Secretary determines to be 
        appropriate.
    (d) Limitation on Percentage of Risk in Excess of Retained 
Losses.--
            (1) In general.--The Secretary may not make available for 
        purchase contracts for reinsurance coverage under this Act that 
        would pay out more than 100 percent of eligible losses in 
        excess of retained losses in the case of a contract under 
        section 7 for an eligible State program, for such State.
            (2) Payout.--For purposes of this subsection, the amount of 
        payout from a reinsurance contract shall be the amount of 
        eligible losses in excess of retained losses multiplied by the 
        percentage under paragraph (1).

SEC. 9. CONSUMER HURRICANE, EARTHQUAKE, LOSS PROTECTION (HELP) FUND.

    (a) Establishment.--There is established within the Treasury of the 
United States a fund to be known as the Consumer HELP 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 Act;
            (2) any amounts borrowed under subsection (d);
            (3) any amounts earned on investments of the Fund pursuant 
        to subsection (e); and
            (4) such other amounts as may be credited to the Fund.
    (c) Uses.--Amounts in the Fund shall be available to the Secretary 
only for the following purposes:
            (1) Contract payments.--For payments to covered purchasers 
        under contracts for reinsurance coverage for eligible losses 
        under such contracts.
            (2) Commission costs.--To pay for the operating costs of 
        the Commission.
            (3) Administrative expenses.--To pay for the administrative 
        expenses incurred by the Secretary in carrying out the 
        reinsurance program under this Act.
            (4) Termination.--Upon termination under section 11, as 
        provided in such section.
    (d) Borrowing.--
            (1) Authority.--To the extent that the amounts in the Fund 
        are insufficient to pay claims and expenses under subsection 
        (c), the Secretary--
                    (A) may issue such obligations of the Fund as may 
                be necessary to cover the insufficiency; and
                    (B) shall purchase any such obligations issued.
            (2) Public debt transaction.--For the purpose of purchasing 
        any such obligations under paragraph (1)--
                    (A) the Secretary may use as a public debt 
                transaction the proceeds from the sale of any 
                securities issued under chapter 31 of title 31, United 
                States Code; and
                    (B) the purposes for which such securities are 
                issued under such chapter are hereby extended to 
                include any purchase by the Secretary of such 
                obligations under this subsection.
            (3) Characteristics of obligations.--Obligations issued 
        under this subsection shall be in such forms and denominations, 
        bear such maturities, bear interest at such rate, and be 
        subject to such other terms and conditions, as the Secretary 
        shall determine.
            (4) Treatment.--All redemptions, purchases, and sales by 
        the Secretary of obligations under this subsection shall be 
        treated as public debt transactions of the United States.
            (5) Repayment.--Any obligations issued under this 
        subsection shall be--
                    (A) repaid including interest, from the Fund; and
                    (B) recouped from premiums charged for reinsurance 
                coverage provided under this Act.
    (e) 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.
    (f) Prohibition of Federal Funds.--Except for amounts made 
available pursuant to subsection (d) and section 3(h), no further 
Federal funds shall be authorized or appropriated for the Fund or for 
carrying out the reinsurance program under this Act.

SEC. 10. REGULATIONS.

    The Secretary, in consultation with the Secretary of the Department 
of Homeland Security, shall issue any regulations necessary to carry 
out the program for reinsurance coverage under this Act.

SEC. 11. TERMINATION.

    (a) In General.--Except as provided in subsection (b), the 
Secretary may not provide any reinsurance coverage under this Act 
covering any period after the expiration of the 20-year period 
beginning on the date of the enactment of this Act.
    (b) Extension.--If upon the expiration of the period under 
subsection (a) the Secretary, in consultation with the Commission, 
determines that continuation of the program for reinsurance coverage 
under this Act is necessary or appropriate to carry out the purpose of 
this Act under section 4(b) because of insufficient growth of capacity 
in the private homeowners' insurance market, the Secretary shall 
continue to provide reinsurance coverage under this Act until the 
expiration of the 5-year period beginning upon the expiration of the 
period under subsection (a).
    (c) Repeal.--Effective upon the date that reinsurance coverage 
under this Act is no longer available or in force pursuant to 
subsection (a) or (b), this Act (except for this section) is repealed.
    (d) Deficit Reduction.--The Secretary shall cover into the General 
Fund of the Treasury any amounts remaining in the Fund under section 9 
upon the repeal of this Act.

SEC. 12. ANNUAL STUDY CONCERNING BENEFITS OF THE ACT.

    (a) In General.--The Secretary shall, on an annual basis, conduct a 
study and submit to the Congress a report that--
            (1) analyzes the cost and availability of homeowners' 
        insurance for losses resulting from catastrophic natural 
        disasters covered by the reinsurance program under this Act;
            (2) describes the efforts of the participating States in--
                    (A) enacting preparedness, prevention, mitigation, 
                recovery, and rebuilding standards; and
                    (B) educating the public on the risks associated 
                with natural catastrophe; and
            (3) makes recommendations regarding ways to improve the 
        program under this Act and its administration.
    (b) Contents.--Each annual study under this section shall also 
determine and identify, on an aggregate basis--
            (1) for each State or region, the capacity of the private 
        homeowners' insurance market with respect to coverage for 
        losses from catastrophic natural disasters;
            (2) for each State or region, the percentage of homeowners 
        who have such coverage, the catastrophes covered, and the 
        average cost of such coverage; and
            (3) for each State or region, the effects this Act is 
        having on the availability and affordability of such insurance.
    (c) Timing.--Each annual report under this section shall be 
submitted not later than March 30 of the year after the year for which 
the study was conducted.
    (d) Commencement of Reporting Requirement.--The Secretary shall 
first submit an annual report under this section not later than 2 years 
after the date of the enactment of this Act.

SEC. 13. GAO STUDY OF THE NATIONAL FLOOD INSURANCE PROGRAM AND 
              HURRICANE-RELATED FLOODING.

    (a) In General.--In light of the flooding associated with Hurricane 
Katrina, the Comptroller General of the United States shall conduct a 
study of the availability and adequacy of flood insurance coverage for 
losses to residences and other properties caused by hurricane-related 
flooding.
    (b) Contents.--The study under this section shall determine and 
analyze--
            (1) the frequency and severity of hurricane-related 
        flooding during the last 20 years in comparison with flooding 
        that is not hurricane-related;
            (2) the differences between the risks of flood-related 
        losses to properties located within the 100-year floodplain and 
        those located outside of such floodplain;
            (3) the extent to which insurance coverage referred to in 
        subsection (a) is available for properties not located within 
        the 100-year floodplain;
            (4) the advantages and disadvantages of making such 
        coverage for such properties available under the national flood 
        insurance program;
            (5) appropriate methods for establishing premiums for 
        insurance coverage under such program for such properties that, 
        based on accepted actuarial and rate making principles, cover 
        the full costs of providing such coverage;
            (6) appropriate eligibility criteria for making flood 
        insurance coverage under such program available for properties 
        that are not located within the 100-year floodplain or within a 
        community participating in the national flood insurance 
        program;
            (7) the appropriateness of the existing deductibles for all 
        properties eligible for insurance coverage under the national 
        flood insurance program, including the standard and variable 
        deductibles for pre-FIRM and post-FIRM properties, and whether 
        a broader range of deductibles should be established;
            (8) income levels of policyholders of insurance made 
        available under the national flood insurance program whose 
        properties are pre-FIRM subsidized properties;
            (9) how the national flood program is marketed, if changes 
        can be made so that more people are aware of flood coverage, 
        and how take-up rates may be improved;
            (10) the number of homes that are not primary residences 
        that are insured under the national flood insurance program and 
        are pre-FIRM subsidized properties; and
            (11) suggestions and means on how the program under this 
        Act can better meet its stated goals as well as the feasibility 
        of expanding the national flood insurance program to cover the 
        perils covered by this Act.
    (c) Consultation With FEMA.--In conducting the study under this 
section, the Comptroller General shall consult with the Director of the 
Federal Emergency Management Agency.
    (d) Report.--The Comptroller General shall complete the study under 
this section and submit a report to the Congress regarding the findings 
of the study not later than 5 months after the date of the enactment of 
this Act.

SEC. 14. DEFINITIONS.

    For purposes of this Act, the following definitions shall apply:
            (1) Commission.--The term ``Commission'' means the National 
        Commission on Catastrophe Preparation and Protection 
        established under section 3.
            (2) Covered perils.--The term ``covered perils'' means the 
        natural disaster perils under section 6.
            (3) Covered purchaser.--The term ``covered purchaser'' 
        means an eligible State-operated insurance or reinsurance 
        program that purchases reinsurance coverage made available 
        under a contract under section 7.
            (4) Disaster area.--The term ``disaster area'' means a 
        geographical area, with respect to which--
                    (A) a covered peril specified in section 6 has 
                occurred; and
                    (B) a declaration that a major disaster exists, as 
                a result of the occurrence of such peril--
                            (i) has been made by the President of the 
                        United States; and
                            (ii) is in effect.
            (5) Eligible losses.--The term ``eligible losses'' means 
        losses in excess of the sustained and retained losses, as 
        defined by the Secretary after consultation with the 
        Commission.
            (6) Eligible state program.--The term ``eligible State 
        program'' means--
                    (A) a State program that, pursuant to section 7(a), 
                is eligible to purchase reinsurance coverage made 
                available through contracts under section 7; or
                    (B) a multi-State program that is eligible to 
                purchase such coverage pursuant to section 7(c).
            (7) Price gouging.--The term ``price gouging'' means the 
        providing of any consumer good or service by a supplier related 
        to repair or restoration of property damaged from a catastrophe 
        for a price that the supplier knows or has reason to know is 
        greater, by at least the percentage set forth in a State law or 
        regulation prohibiting such act (notwithstanding any real cost 
        increase due to any attendant business risk and other 
        reasonable expenses that result from the major catastrophe 
        involved), than the price charged by the supplier for such 
        consumer good or service immediately before the disaster.
            (8) Qualified lines.--The term ``qualified lines'' means 
        lines of insurance coverage for which losses are covered under 
        section 5 by reinsurance coverage under this Act.
            (9) Reinsurance coverage.--The term ``reinsurance coverage 
        under this Act'' means coverage under contracts made available 
        under section 7.
            (10) Secretary.--The term ``Secretary'' means the Secretary 
        of the Treasury.
            (11) State.--The term ``State'' means the States of the 
        United States, the District of Columbia, the Commonwealth of 
        Puerto Rico, the Commonwealth of the Northern Mariana Islands, 
        Guam, the Virgin Islands, American Samoa, and any other 
        territory or possession of the United States.
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