IB 

Union Calendar No. 306 

111TH CONGRESS 

2D SESSION H. R. 2555 

[Report No. 111–534] 

To ensure the availability and affordability of homeowners’ insurance coverage 

for catastrophic events. 

IN THE HOUSE OF REPRESENTATIVES 

MAY 21, 2009 

Mr. KLEIN of Florida (for himself, Mr. FRANK of Massachusetts, Mr. GRAYSON, Ms. KOSMAS, Mr. LARSON of Connecticut, Mr. CLYBURN, Mr. 

CROWLEY, Mrs. TAUSCHER, Mr. HARE, Mr. MEEK of Florida, Mr. 

WELCH, Ms. CASTOR of Florida, Mr. WEXLER, Mr. DELAHUNT, Mr. 

KENNEDY, Ms. GINNY BROWN-WAITE of Florida, Mr. ABERCROMBIE, 

Mr. POSEY, Ms. ROS-LEHTINEN, Mr. BUCHANAN, Mr. GRIFFITH, Mr. 

MELANCON, Mr. SCHIFF, Mr. WALZ, Ms. BERKLEY, Ms. JACKSON-LEE

of Texas, Mr. HASTINGS of Florida, Mr. BRALEY of Iowa, Mr. BOYD, Mr. 

RYAN of Ohio, Ms. WASSERMAN SCHULTZ, Mr. BERMAN, Mr. 

CRENSHAW, Mr. INSLEE, Mr. KAGEN, Mr. MCNERNEY, Mr. 

PERLMUTTER, Ms. CORRINE BROWN of Florida, Ms. HARMAN, Mr. LINCOLN DIAZ-BALART of Florida, Mr. ACKERMAN, Mr. YARMUTH, Mr. 

ROONEY, and Mr. DONNELLY of Indiana) introduced the following bill; 

which was referred to the Committee on Financial Services 

JULY 13, 2010 

Additional sponsors: Mr. JOHNSON of Georgia, Mr. CAPUANO, Mr. ELLISON, 

Ms. HIRONO, Mr. MORAN of Virginia, Mr. PIERLUISI, Mr. MARIO DIAZBALART of Florida, Ms. GIFFORDS, Mr. HILL, Mr. SIRES, Mr. CONYERS, 

Mr. COHEN, Ms. DEGETTE, Mr. CAMPBELL, Mr. MOORE of Kansas, Ms. 

WOOLSEY, Mr. CHILDERS, Ms. LORETTA SANCHEZ of California, Mr. 

PAYNE, Mr. ANDREWS, Mr. WEINER, Mr. JACKSON of Illinois, Mr. 

CUMMINGS, Mr. CLAY, Mr. MEEKS of New York, Mr. COSTA, Mr. BACA, 

Mr. MILLER of Florida, Mr. YOUNG of Florida, Mr. DAVIS of Illinois, Mr. 

FILNER, Mr. MICA, Mr. DEUTCH, Mr. BISHOP of Georgia, Ms. RICHARDSON, and Ms. ESHOO


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JULY 13, 2010 

Deleted sponsor: Mr. SHULER (added September 9, 2009; deleted July 1, 

2010) 

JULY 13, 2010 

Reported with an amendment, committed to the Committee of the Whole 

House on the State of the Union, and ordered to be printed 

[Strike out all after the enacting clause and insert the part printed in italic] 

[For text of introduced bill, see copy of bill as introduced on May 21, 2009] 

A BILL 

To ensure the availability and affordability of homeowners’ 

insurance coverage for catastrophic events. 


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

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 

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

5 ‘‘Homeowners’ Defense Act of 2010’’. 

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

7 this Act is as follows: 

Sec. 1. Short title; table of contents. 

Sec. 2. Findings and purposes. 

TITLE I—NATIONAL CATASTROPHE RISK CONSORTIUM 

Sec. 101. Establishment; status; principal office; membership. 

Sec. 102. Functions. 

Sec. 103. Powers. 

Sec. 104. Nonprofit entity; conflicts of interest; audits. 

Sec. 105. Management. 

Sec. 106. Staff; experts and consultants. 

Sec. 107. Federal liability. 

Sec. 108. Authorization of appropriations. 

TITLE II—CATASTROPHE OBLIGATION GUARANTEES 

Sec. 201. Purposes. 

Sec. 202. Establishment of debt guarantee program. 

Sec. 203. Effect of guarantee. 

Sec. 204. Full faith and credit. 

Sec. 205. Fees for guarantees; amount; collection. 

Sec. 206. Payment of losses. 

Sec. 207. Regulations. 

TITLE III—REINSURANCE COVERAGE FOR ELIGIBLE STATE 

PROGRAMS 

Sec. 301. Program authority. 

Sec. 302. Contract principles. 

Sec. 303. Terms of reinsurance contracts. 

Sec. 304. Maximum Federal liability. 

Sec. 305. Federal Natural Catastrophe Reinsurance Fund. 

Sec. 306. Regulations. 

TITLE IV—MITIGATION GRANT PROGRAM 

Sec. 401. Mitigation grant program. 

TITLE V—GENERAL PROVISIONS 

Sec. 501. Eligible State programs. 


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Sec. 502. Study and conditional coverage of commercial residential lines of insurance. 

Sec. 503. Study of risk-based pricing and State program rates. 

Sec. 504. Definitions. 

Sec. 505. Regulations. 

1 SEC. 2. FINDINGS AND PURPOSES. 

2 (a) FINDINGS.—The Congress finds that— 

3 (1) the United States has a history of cata4 strophic natural disasters, including hurricanes, tor5 nadoes, flood, fire, earthquakes, and volcanic erup6 tions; 

7 (2) although catastrophic natural disasters occur 

8 infrequently, they will continue to occur and are pre9 dictable; 

10 (3) such disasters generate large economic losses 

11 and a major component of those losses comes from 

12 damage and destruction to homes; 

13 (4) for the majority of Americans, their invest14 ment in their home represents their single biggest 

15 asset and the protection of that investment is para16 mount to economic and social stability; 

17 (5) the United States needs to take and support 

18 State actions to be better prepared for and better pro19 tected from catastrophes; 

20 (6) as the risk of catastrophic losses grows, so do 

21 the risks that any premiums collected by private in22 surers for extending coverage will be insufficient to 

23 cover future catastrophes, and private insurers, in an 


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1 effort to protect their shareholders and policyholders 

2 (in the case of mutually owned companies), have thus 

3 significantly raised premiums and curtailed insur4 ance coverage in States exposed to major catastrophes; 

5 (7) such effects on the insurance industry have 

6 been harmful to economic activity in States exposed 

7 to major catastrophes and have placed significant 

8 burdens on residents of such States; 

9 (8) Hurricanes Katrina, Rita, and Wilma struck 

10 the United States in 2005, causing over 

11 $200,000,000,000 in total economic losses, and in12 sured losses to homeowners in excess of 

13 $50,000,000,000; 

14 (9) the Federal Government has provided and 

15 will continue to provide resources to pay for losses 

16 from future catastrophes; 

17 (10) when Federal assistance is provided to the 

18 States, accountability for Federal funds disbursed is 

19 paramount; 

20 (11) the Government Accountability Office or 

21 other appropriate agencies must have the means in 

22 place to confirm that Federal funds for catastrophe 

23 relief have reached the appropriate victims and have 

24 contributed to the recovery effort as efficiently as pos25 sible so that taxpayer funds are not misspent and 


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1 citizens are enabled to rebuild and resume productive 

2 activities as quickly as possible; 

3 (12) States that are recipients of Federal funds 

4 must be responsible to account for and provide an ef5 ficient means for distribution of funds to homeowners 

6 to enable the rapid rebuilding of local economies after 

7 a catastrophic event without unduly burdening tax8 payers who live in areas seldom affected by natural 

9 disasters; 

10 (13) State insurance and reinsurance programs 

11 can provide a mechanism for States to exercise that 

12 responsibility if they appropriately underwrite and 

13 price risk, and if they pay claims quickly and within 

14 established contractual terms; 

15 (14) making available Federal guarantees to en16 hance the capability of eligible State programs to 

17 issue debt will minimize the exposure of State and 

18 Federal taxpayers who otherwise may bear the con19 sequences of underfunded programs or under-insured 

20 communities following catastrophic events, especially 

21 during today’s historic market turmoil; and 

22 (15) it is the proper role of the Federal Govern23 ment to prepare for and protect its citizens from ca24 tastrophes and to facilitate consumer protection, vicVerDate Mar 15 2010 22:57 Jul 13, 2010 Jkt 089200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6203 E:\BILLS\H2555.RH H2555

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1 tim assistance, and recovery, including financial re2 covery. 

3 (b) PURPOSES.—The purposes of this Act are to estab4 lish a program to provide Federal support for State-spon5 sored insurance programs to help homeowners prepare for 

6 and recover from the damages caused by natural catas7 trophes, to encourage mitigation and prevention for such 

8 catastrophes, to promote the use of private market capital 

9 as a means to insure against such catastrophes, to expedite 

10 the payment of claims and better assist in the financial 

11 recovery from such catastrophes. 

12 TITLE I—NATIONAL CATAS13 TROPHE RISK CONSORTIUM 

14 SEC. 101. ESTABLISHMENT; STATUS; PRINCIPAL OFFICE; 

15 MEMBERSHIP. 

16 (a) ESTABLISHMENT.—There is established an entity 

17 to be known as the ‘‘National Catastrophe Risk Consor18 tium’’ (in this title referred to as the ‘‘Consortium’’). 

19 (b) STATUS.—The Consortium is not a department, 

20 agency, or instrumentality of the United States Govern21 ment. 

22 (c) PRINCIPAL OFFICE.—The principal office and 

23 place of business of the Consortium shall be such location 

24 within the United States determined by the Board of DirecVerDate Mar 15 2010 22:57 Jul 13, 2010 Jkt 089200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6203 E:\BILLS\H2555.RH H2555

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1 tors to be the most advantageous for carrying out the pur2 pose and functions of the Consortium. 

3 (d) MEMBERSHIP.—Any State that has established a 

4 reinsurance fund or has authorized the operation of a State 

5 residual insurance market entity, or State-sponsored pro6 vider of natural catastrophe insurance, shall be eligible to 

7 participate in the Consortium. 

8 SEC. 102. FUNCTIONS. 

9 The Consortium shall— 

10 (1) work with all States, particularly those par11 ticipating in the Consortium, to gather and maintain 

12 an inventory of catastrophe risk obligations held by 

13 State reinsurance funds, State residual insurance 

14 market entities, and State-sponsored providers of nat15 ural catastrophe insurance; 

16 (2) at the discretion of the affected members and 

17 on a conduit basis, issue securities and other finan18 cial instruments linked to the catastrophe risks in19 sured or reinsured through members of the Consor20 tium in the capital markets; 

21 (3) coordinate reinsurance contracts between 

22 participating, qualified reinsurance funds and pri23 vate parties; 

24 (4) act as a centralized repository of State risk 

25 information that can be accessed by private-market 


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1 participants seeking to participate in the transactions 

2 described in paragraphs (2) and (3) of this section; 

3 (5) establish a catastrophe risk database to per4 form research and analysis that encourages standard5 ization of the risk-linked securities market; 

6 (6) perform any other functions, other than as7 suming risk or incurring debt, that are deemed nec8 essary to aid in the transfer of catastrophe risk from 

9 participating States to private parties; and 

10 (7) submit annual reports to Congress describing 

11 the activities of the Consortium for the preceding 

12 year, and the first such annual report shall include 

13 an assessment of the costs to States and regions asso14 ciated with catastrophe risk and an analysis of the 

15 costs and benefits, for States not participating in the 

16 Consortium, of such nonparticipation. 

17 SEC. 103. POWERS. 

18 The Consortium— 

19 (1) may make and perform such contracts and 

20 other agreements with any individual or other private 

21 or public entity however designated and wherever sit22 uated, as may be necessary for carrying out the func23 tions of the Consortium; and 


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1 (2) shall have such other powers, other than the 

2 power to assume risk or incur debt, as may be nec3 essary and incident to carrying out this Act. 

4 SEC. 104. NONPROFIT ENTITY; CONFLICTS OF INTEREST; 

5 AUDITS. 

6 (a) NONPROFIT ENTITY.—The Consortium shall be a 

7 nonprofit entity and no part of the net earnings of the Con8 sortium shall inure to the benefit of any member, founder, 

9 contributor, or individual. 

10 (b) CONFLICTS OF INTEREST.—No director, officer, or 

11 employee of the Consortium shall in any manner, directly 

12 or indirectly, participate in the deliberation upon or the 

13 determination of any question affecting his or her personal 

14 interests or the interests of any Consortium, partnership, 

15 or organization in which he or she is directly or indirectly 

16 interested. 

17 (c) AUDITS.— 

18 (1) ANNUAL AUDIT.—The financial statements of 

19 the Consortium shall be audited annually in accord20 ance with generally accepted auditing standards by 

21 independent certified public accountants. 

22 (2) REPORTS.—The report of each annual audit 

23 pursuant to paragraph (1) shall be included in the 

24 annual report submitted in accordance with section 

25 102(7). 


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1 (d) PROHIBITION ON ELECTION AND LOBBYING AC2 TIVITIES.— 

3 (1) FEDERAL.—The Consortium may not— 

4 (A) make any contribution to a candidate 

5 for election for Federal office or to a political 

6 committee; 

7 (B) employ or retain— 

8 (i) a registered lobbyist under the Lob9 bying Disclosure Act of 1995 (2 U.S.C. 1601 

10 et seq.); or 

11 (ii) an organization that employs one 

12 or more lobbyists and is registered under 

13 section 4(a)(2) of such Act (2 U.S.C. 

14 1603(a)(2)); or 

15 (C) provide any thing of value, other than 

16 educational materials or information, to any 

17 elected official of the Federal Government. 

18 For purposes of this paragraph, the terms ‘‘contribu19 tion’’, ‘‘candidate’’, ‘‘Federal office’’, and ‘‘political 

20 committee’’ have the meanings given such terms in 

21 section 301 of the Federal Election Campaign Act of 

22 1971 (2 U.S.C. 431). 

23 (2) CONSORTIUM.—The Consortium may not— 

24 (A) make any contribution to a candidate 

25 for election for any State or local office or to any 


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1 committee, club, association, or other group that 

2 receives contributions or makes expenditures for 

3 the purpose of influencing any such election; 

4 (B) employ or retain any person who en5 gages in influencing legislating (as such term is 

6 defined in section 4911(d) of the Internal Rev7 enue Code of 1986 (26 U.S.C. 4911(d))) of any 

8 State or local legislative body; or 

9 (C) provide any thing of value, other than 

10 educational materials or information, to any 

11 elected official of any State or local government. 

12 SEC. 105. MANAGEMENT. 

13 (a) BOARD OF DIRECTORS; MEMBERSHIP; DESIGNA14 TION OF CHAIRPERSON.— 

15 (1) BOARD OF DIRECTORS.—The management of 

16 the Consortium shall be vested in a board of directors 

17 (referred to in this title as the ‘‘Board’’) composed of 

18 not less than 3 members. 

19 (2) CHAIRPERSON.—The Secretary of the Treas20 ury, or the designee of the Secretary, shall serve as the 

21 chairperson of the Board. 

22 (3) MEMBERSHIP.—The members of the Board 

23 shall include— 

24 (A) the Secretary of Homeland Security 

25 and the Secretary of Commerce, or the designees 


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1 of such Secretaries, respectively, but only during 

2 such times as there are fewer than two States 

3 participating in the Consortium; and 

4 (B) a member from each State partici5 pating in the Consortium, who shall be ap6 pointed by such State. 

7 (b) BYLAWS.—The Board may prescribe, amend, and 

8 repeal such bylaws as may be necessary for carrying out 

9 the functions of the Consortium. 

10 (c) COMPENSATION, ACTUAL, NECESSARY, AND TRANS11 PORTATION EXPENSES.— 

12 (1) NON-FEDERAL EMPLOYEES.—A member of 

13 the Board who is not otherwise employed by the Fed14 eral Government shall be entitled to receive the daily 

15 equivalent of the annual rate of basic pay payable for 

16 level IV of the Executive Schedule under section 5315 

17 of title 5, United States Code, as in effect from time 

18 to time, for each day (including travel time) during 

19 which such member is engaged in the actual perform20 ance of duties of the Consortium. 

21 (2) FEDERAL EMPLOYEES.—A member of the 

22 Board who is an officer or employee of the Federal 

23 Government shall serve without additional pay (or 

24 benefits in the nature of compensation) for service as 

25 a member of the Consortium. 


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1 (3) TRAVEL EXPENSES.—Members of the Consor2 tium shall be entitled to receive travel expenses, in3 cluding per diem in lieu of subsistence, equivalent to 

4 those set forth in subchapter I of chapter 57 of title 

5 5, United States Code. 

6 (d) QUORUM.—A majority of the Board shall con7 stitute a quorum. 

8 (e) EXECUTIVE DIRECTOR.—The Board shall appoint 

9 an executive director of the Consortium on such terms as 

10 the Board may determine. 

11 SEC. 106. STAFF; EXPERTS AND CONSULTANTS. 

12 (a) STAFF.— 

13 (1) APPOINTMENT.—The Board of the Consor14 tium may appoint and terminate such other staff as 

15 are necessary to enable the Consortium to perform its 

16 duties. 

17 (2) COMPENSATION.—The Board of the Consor18 tium may fix the compensation of the executive direc19 tor and other staff. 

20 (b) EXPERTS AND CONSULTANTS.—The Board shall 

21 procure the services of experts and consultants as the Board 

22 considers appropriate. 

23 SEC. 107. FEDERAL LIABILITY. 

24 The Federal Government and the Consortium shall not 

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1 tium. Participating States shall retain all catastrophe risk 

2 until the completion of a transaction described in para3 graphs (2) and (3) of section 102. 

4 SEC. 108. AUTHORIZATION OF APPROPRIATIONS. 

5 There are authorized to be appropriated to carry out 

6 this title $20,000,000 for each of fiscal years 2010 through 

7 2014. 

8 TITLE II—CATASTROPHE 

9 OBLIGATION GUARANTEES 

10 SEC. 201. PURPOSES. 

11 The purposes of this title are to establish a program— 

12 (1) to promote the availability of private capital 

13 to provide liquidity and capacity to State catastrophe 

14 insurance programs; and 

15 (2) to expedite the payment of claims under 

16 State catastrophe insurance programs and better as17 sist the financial recovery from significant natural 

18 catastrophes by authorizing the Secretary of the 

19 Treasury to guarantee debt for such purposes. 

20 SEC. 202. ESTABLISHMENT OF DEBT GUARANTEE PROGRAM. 

21 (a) AUTHORITY OF SECRETARY.—The Secretary of the 

22 Treasury is authorized and shall have the powers and au23 thorities necessary to guarantee, and to enter into commit24 ments to guarantee, holders of debt against loss of principal 

25 or interest, or both, on any such debt issued by eligible State 


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1 programs for purposes of this title, provided that the total 

2 principal amount of debt obligations guaranteed by the Sec3 retary— 

4 (1) for eligible State programs that cover earth5 quake peril shall not exceed $3,500,000,000; and 

6 (2) for eligible State programs that cover all 

7 other perils shall not exceed $17,000,000,000. 

8 (b) CONDITIONS FOR GUARANTEE ELIGIBILITY.—A 

9 debt guarantee under this section may be made only if the 

10 Secretary has issued a commitment to guarantee to an eligi11 ble State program. The commitment to guarantee shall be 

12 for a period of 3 years and may be extended by the Sec13 retary for a period of 1 year on each annual anniversary 

14 of the issuance of the commitment to guarantee. The com15 mitment to guarantee and each extension of such commit16 ment may be issued by the Secretary only if the following 

17 requirements are satisfied: 

18 (1) The eligible State program submits to the 

19 Secretary a report setting forth, in such form and in20 cluding such information as the Secretary shall re21 quire, how the eligible State program plans to repay 

22 the debt. 

23 (2) Based upon the eligible State program’s re24 port submitted pursuant to paragraph (1), the Sec25 retary determines there is reasonable assurance that 


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1 the eligible State program can meet its repayment ob2 ligation under the debt. 

3 (3) The eligible State program enters into an 

4 agreement with the Secretary, as the Secretary shall 

5 require, that the eligible State program will not use 

6 Federal funds of any kind or from any Federal source 

7 (including any disaster or other financial assistance, 

8 loan proceeds, and any other assistance or subsidy) to 

9 repay the debt. 

10 (4) The commitment to guarantee shall specify 

11 the fees for debt guarantee coverage. 

12 (5) The maximum term of the debt that shall be 

13 specified in a commitment issued under this section 

14 may not exceed 30 years. 

15 (6) The Secretary determines that the eligible 

16 State program does not cover losses arising from 

17 floods to properties located in areas having special 

18 flood hazards (as such term is defined for purposes of 

19 the National Flood Insurance Act of 1968 and the 

20 Flood Disaster Protection Act of 1973). 

21 (c) MANDATORY ASSISTANCE FOR ELIGIBLE STATE

22 PROGRAMS.—The Secretary shall upon the request of an eli23 gible State program and pursuant to a commitment to 

24 guarantee issued under subsection (b), provide a guarantee 

25 under subsection (d) for such eligible State program in the 


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1 amount requested by such eligible State program, subject 

2 to the limitation under subsection (d)(2). 

3 (d) CATASTROPHIC DEBT GUARANTEE.—A debt guar4 antee under this subsection for an eligible State program 

5 shall be subject to the following requirements: 

6 (1) PRECONDITIONS.—The eligible State pro7 gram shows to the satisfaction of the Secretary that 

8 insured losses in the State to the eligible State pro9 gram arising from the event or events covered by the 

10 commitment to guarantee are likely to exceed the eli11 gible State program’s available cash resources, as cal12 culated on the date of the event. 

13 (2) AMOUNT.—The aggregate principal amount 

14 of the debt guaranteed following an event or events re15 ferred to in paragraph (1) may not exceed the 

16 amount by which the insured losses expected to be sus17 tained by the State program as a result of such event 

18 or events exceed 80 percent of the qualifying assets of 

19 the eligible State program as stated in the most recent 

20 quarterly financial statement filed with the domi21 ciliary regulator of the program prior to the event or 

22 events, except that, for eligible State programs that 

23 are not required to file such quarterly financial state24 ments, the aggregate principal amount of the debt 

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1 sured losses sustained by the State program as a re2 sult of such event or events exceed 80 percent of the 

3 unrestricted net assets as stated in the annual finan4 cial statement for the program’s fiscal year ending 

5 immediately prior to the event or events. 

6 (3) USE OF FUNDS.—Amounts of debt guaran7 teed under this section shall be used only to pay the 

8 costs of issuing debt and to pay the insured losses and 

9 loss adjustment expenses incurred by an eligible State 

10 program. Such amounts shall not be used for any 

11 other purpose. 

12 (e) FUNDING.—There are authorized to be appro13 priated such sums as may be necessary to carry out this 

14 section. 

15 SEC. 203. EFFECT OF GUARANTEE. 

16 The issuance of any guarantee by the Secretary under 

17 this title shall be conclusive evidence that— 

18 (1) the guarantee has been properly obtained; 

19 (2) the underlying debt qualified for such guar20 antee; and 

21 (3) the guarantee is valid, legal, and enforceable. 

22 SEC. 204. FULL FAITH AND CREDIT. 

23 The full faith and credit of the United States is pledged 

24 to the payment of all guarantees issued under this title with 

25 respect to principal and interest. 


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1 SEC. 205. FEES FOR GUARANTEES; AMOUNT; COLLECTION. 

2 The Secretary shall charge and collect fees for each 

3 guarantee in amounts specified in the commitment to guar4 antee, which shall be in amounts sufficient in the judgment 

5 of the Secretary at the time of issuance of the commitment 

6 to guarantee to cover applicable administrative costs and 

7 probable losses on the guaranteed obligations covered by the 

8 commitment to guarantee, but in any event not to exceed 

9 one-half of 1 per centum per annum of the outstanding in10 debtedness covered by each guarantee. 

11 SEC. 206. PAYMENT OF LOSSES. 

12 (a) IN GENERAL.—The Secretary agrees to pay to the 

13 duly appointed paying agent or trustee (in this section re14 ferred to as the ‘‘Fiscal Agent’’) for the eligible State pro15 gram that portion of the principal and interest on any debt 

16 guaranteed under this title that shall become due for pay17 ment but shall be unpaid by the eligible State program as 

18 a result of such program having provided insufficient funds 

19 to the Fiscal Agent to make such payments. The Secretary 

20 shall make such payments on the date such principal or 

21 interest becomes due for payment or on the business day 

22 next following the day on which the Secretary shall receive 

23 notice of failure on the part of the eligible State program 

24 to provide sufficient funds to the Fiscal Agent to make such 

25 payments, whichever is later. Upon making such payment, 

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1 mate recipient of the payment. The Secretary shall be enti2 tled to recover from the eligible State program the amount 

3 of any payments made pursuant to any guarantee entered 

4 into under this title. 

5 (b) ROLE OF THE ATTORNEY GENERAL.—The Attor6 ney General shall take such action as may be appropriate 

7 to enforce any right accruing to the United States as a re8 sult of the issuance of any guarantee under this title. 

9 (c) RIGHT OF THE SECRETARY.—Notwithstanding 

10 any other provision of law relating to the acquisition, han11 dling, or disposal of property by the United States, the Sec12 retary shall have the right in the discretion of the Secretary 

13 to complete, recondition, reconstruct, renovate, repair, 

14 maintain, operate, or sell any property acquired by the Sec15 retary pursuant to the provisions of this title. 

16 SEC. 207. REGULATIONS. 

17 The Secretary shall issue any regulations necessary to 

18 carry out the debt-guarantee program established under this 

19 title. 


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1 TITLE III—REINSURANCE COV2 ERAGE FOR ELIGIBLE STATE 

3 PROGRAMS 

4 SEC. 301. PROGRAM AUTHORITY. 

5 The Secretary of the Treasury, shall make available 

6 for purchase, only by eligible State programs, contracts for 

7 reinsurance coverage under this title. 

8 SEC. 302. CONTRACT PRINCIPLES. 

9 Contracts for reinsurance coverage made available 

10 under this title— 

11 (1) shall be priced on an actuarially sound basis; 

12 (2) shall minimize the administrative costs of the 

13 Federal Government; and 

14 (3) shall provide coverage based solely on insured 

15 losses covered by the eligible State program pur16 chasing the contract. 

17 SEC. 303. TERMS OF REINSURANCE CONTRACTS. 

18 (a) MINIMUM ATTACHMENT POINT AND LEVELS OF

19 COVERAGE.—The Secretary shall establish attachment 

20 points at which reinsurance coverage under this title is pro21 vided to eligible State programs. In setting attachment 

22 points and in determining the levels of reinsurance coverage 

23 provided, the Secretary shall take into consideration— 

24 (1) the coverage available through eligible State 

25 programs; 


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1 (2) the availability and accessibility of reinsur2 ance in the private market; and 

3 (3) other factors as deemed appropriate by the 

4 Secretary. 

5 (b) NINETY PERCENT COVERAGE OF INSURED LOSSES

6 IN EXCESS OF RETAINED LOSSES.—Each contract for rein7 surance coverage under this title shall provide that the 

8 amount paid out under the contract shall be equal to 90 

9 percent of the amount of insured losses of the eligible State 

10 program in excess of the amount of retained losses that the 

11 contract requires, pursuant to subsection (a), to be incurred 

12 by such program. 

13 (c) MATURITY.—The term of each contract for reinsur14 ance coverage under this title shall not exceed 1 year or 

15 such other term as the Secretary may determine. 

16 (d) PAYMENT CONDITION.—Each contract for reinsur17 ance coverage under this title shall authorize claims pay18 ments to the eligible State program purchasing the coverage 

19 only for insured losses provided under the contract. 

20 (e) MULTIPLE EVENTS.—The contract shall cover any 

21 insured losses from one or more events that may occur dur22 ing the term of the contract and shall provide that if mul23 tiple events occur, the retained losses requirement under 

24 subsection (a) shall apply on a calendar year basis, in the 

25 aggregate and not separately to each individual event. 


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1 (f) TIMING OF CLAIMS.—Claims under a contract for 

2 reinsurance coverage under this title shall include only in3 surance claims that are reported to the eligible State pro4 gram within the 3-year period beginning upon the event 

5 or events for which payment under the contract is provided. 

6 (g) ACTUARIAL PRICING.—The price of coverage under 

7 a reinsurance contract under this title shall be an amount, 

8 established by the Secretary at a level that annually pro9 duces expected premiums that shall be sufficient to pay the 

10 reasonably anticipated cost of all claims (which may not 

11 be equal only to average annual costs), loss adjustment ex12 penses, all administrative costs of reinsurance coverage of13 fered under this title, and any such outwards reinsurance, 

14 as described in section 305(c)(3), as the Secretary considers 

15 prudent taking into consideration the demand for reinsur16 ance coverage under this title. The anticipated cost of all 

17 claims shall be comparable to amounts being included in 

18 the price for similar layers of coverage in the private sector, 

19 taking into account the savings associated with non-profit 

20 and tax-exempt status of the Fund established under section 

21 305. 

22 (h) INFORMATION.—Each contract for reinsurance cov23 erage under this title shall contain a condition providing 

24 that the Secretary may require the eligible State program 

25 that is covered under the contract to submit to the Secretary 


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1 all information on the eligible State program relevant to 

2 the duties of the Secretary under this title. 

3 (i) OTHERS.—Contracts for reinsurance coverage 

4 under this title shall contain such other terms as the Sec5 retary considers necessary to carry out this title and to en6 sure the long-term financial integrity of the program under 

7 this title. 

8 SEC. 304. MAXIMUM FEDERAL LIABILITY. 

9 (a) IN GENERAL.—Subject to subsection (b) and not10 withstanding any other provision of law, the aggregate po11 tential liability for payment of claims under all contracts 

12 for reinsurance coverage under this title sold in any single 

13 year shall be determined by the Secretary based on review 

14 of the market for reinsurance coverage under this title. 

15 (b) LIMITATION.—The authority of the Secretary to 

16 enter into contracts for reinsurance coverage under this title 

17 shall be effective for any fiscal year only to such extent or 

18 in such amounts as are or have been provided in appropria19 tion Acts for such fiscal year for the aggregate potential 

20 liability for payment of claims under all contracts for rein21 surance coverage under this title. 

22 SEC. 305. FEDERAL NATURAL CATASTROPHE REINSURANCE 

23 FUND. 

24 (a) ESTABLISHMENT.—There is established within the 

25 Treasury of the United States a fund to be known as the 


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1 Federal Natural Catastrophe Reinsurance Fund (in this 

2 section referred to as the ‘‘Fund’’). 

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

4 (1) amounts received annually from the sale of 

5 contracts for reinsurance coverage under this title; 

6 (2) any amounts appropriated for the aggregate 

7 potential liability for payment of claims under all 

8 contracts for reinsurance coverage under this title; 

9 and 

10 (3) any amounts earned on investments of the 

11 Fund pursuant to subsection (d). 

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

13 to the Secretary only for the following purposes: 

14 (1) CONTRACT PAYMENTS.—For payments to 

15 purchasers covered under contracts for reinsurance 

16 coverage for eligible losses under such contracts. 

17 (2) ADMINISTRATIVE EXPENSES.—To pay for the 

18 administrative expenses incurred by the Secretary in 

19 carrying out the reinsurance program under this title. 

20 (3) OUTWARDS REINSURANCE.—To obtain 

21 retrocessional or other reinsurance coverage of any 

22 kind to cover risk reinsured under contracts for rein23 surance coverage made available under this title. 

24 (d) INVESTMENT.—The Secretary shall invest such 

25 amounts in the Fund as the Secretary considers advisable 


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1 in obligations issued or guaranteed by the United States. 

2 For purposes of the grant mandate in section 401(e) for 

3 a fiscal year, the Secretary shall disclose the annual net 

4 investment income available not later than 60 days after 

5 the conclusion of such fiscal year and disperse appropriate 

6 funds not later than 90 days after the conclusion of such 

7 fiscal year. 

8 SEC. 306. REGULATIONS. 

9 The Secretary shall issue any regulations necessary to 

10 carry out the program for reinsurance coverage under this 

11 title. 

12 TITLE IV—MITIGATION GRANT 

13 PROGRAM 

14 SEC. 401. MITIGATION GRANT PROGRAM. 

15 (a) ESTABLISHMENT.—The Secretary of Housing and 

16 Urban Development shall establish and carry out a pro17 gram to provide grants to eligible entities to develop, en18 hance, or maintain programs to prevent and mitigate losses 

19 from natural catastrophes. 

20 (b) GRANTS.—A grant provided under subsection (a) 

21 shall be used to reduce loss of life and property by— 

22 (1) encouraging awareness of risk factors and 

23 what steps can be taken to eliminate or reduce them, 

24 including public education campaigns to promote cit25 izen and community preparedness; 


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1 (2) assisting in the determination of the location 

2 of risk by giving careful consideration to the natural 

3 risks for the location of a property; 

4 (3) providing inspections of homes to identify 

5 areas to strengthen such homes and reduce exposure 

6 to natural catastrophes; 

7 (4) providing financial assistance to homeowners 

8 to retrofit homes to reduce exposure to natural catas9 trophes; or 

10 (5) supporting disaster response readiness pro11 grams, including initiatives that develop, enhance ,or 

12 maintain the capacity of a public safety organization 

13 to be better prepared, equipped, and trained to re14 spond to natural catastrophes. 

15 (c) CONSULTATION WITH EXPERTS.—In carrying out 

16 the program established under subsection (a), the Secretary 

17 of Housing and Urban Development shall consult with— 

18 (1) disaster preparedness and response organiza19 tions; 

20 (2) homebuilders; 

21 (3) real estate professionals; 

22 (4) building code enforcement agencies; and 

23 (5) any other person that the Secretary considers 

24 appropriate. 


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1 (d) ELIGIBLE ENTITY DEFINED.—In this section, the 

2 term ‘‘eligible entity’’ means a State or local government, 

3 a part or program of a State or local government, or a 

4 nationally recognized, congressionally chartered disaster re5 sponse non-profit organization. 

6 (e) GRANT MANDATE.—The Secretary shall, to the ex7 tent provided in advance in appropriation Acts, use not 

8 less than 35 percent of the net investment income from the 

9 Federal Natural Catastrophe Reinsurance Fund earned in 

10 each fiscal year pursuant to section 305(d) for grants under 

11 this section. 

12 TITLE V—GENERAL PROVISIONS 

13 SEC. 501. ELIGIBLE STATE PROGRAMS. 

14 (a) ELIGIBLE STATE PROGRAMS.—A State program 

15 shall be considered an ‘‘eligible State program’’ for purposes 

16 of this Act if the Secretary certifies, in accordance with the 

17 procedures established under subsection (c), that the State 

18 program complies with the following requirements: 

19 (1) STATE PROGRAM DESIGN.—The State pro20 gram is established and authorized by State law as 

21 an insurance program or a reinsurance program that 

22 is designed to improve private insurance markets and 

23 that offers residential property insurance coverage for 

24 losses arising from any personal residential line of in25 surance, as defined in the Uniform Property and CasVerDate Mar 15 2010 22:57 Jul 13, 2010 Jkt 089200 PO 00000 Frm 00029 Fmt 6652 Sfmt 6203 E:\BILLS\H2555.RH H2555

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1 ualty Product Coding Matrix of the National Associa2 tion of Insurance Commissioners. 

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

4 the following requirements: 

5 (A) A majority of the members of the gov6 erning body of the State program shall be public 

7 officials or appointed by public officials. 

8 (B) The State shall have a financial interest 

9 in the State program. 

10 (C) If the State has at any time appro11 priated amounts from the State program’s funds 

12 for any purpose other than payments for losses 

13 insured under the State program, or payments 

14 made in connection with any of the State pro15 gram’s authorized activities, the State shall have 

16 returned such amounts to the State fund, to17 gether with interest on such amounts. 

18 (3) TAX STATUS.—The State program shall have 

19 received from the Secretary (or the Secretary’s des20 ignee) a written determination, within the meaning 

21 of section 6110(b) of the Internal Revenue Code of 

22 1986, that the program either— 

23 (A) constitutes an ‘‘integral part’’ of the 

24 State that has created it; or 


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1 (B) is otherwise exempt from Federal in2 come taxation. 

3 (4) EARNINGS.—The State program may not 

4 provide for any distribution of any part of any net 

5 profits of the State program to any insurer that par6 ticipates in the State program. 

7 (5) PREVENTION AND MITIGATION.— 

8 (A) MITIGATION OF LOSSES.—The State 

9 program shall include provisions designed to en10 courage and support programs to mitigate losses 

11 from natural catastrophes for which the State in12 surance or reinsurance program was established 

13 to provide insurance coverage. 

14 (B) OPERATIONAL REQUIREMENTS.—The 

15 State program shall operate in a State that— 

16 (i) requires that an appropriate public 

17 body within the State shall have adopted 

18 adequate mitigation measures with effective 

19 enforcement provisions which the Secretary 

20 finds are consistent with the criteria for 

21 construction described in the International 

22 Code Council building codes; 

23 (ii) has taken actions to establish an 

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1 count measures to mitigate insured losses; 

2 and 

3 (iii) ensures, to the extent that reinsur4 ance coverage made available under the eli5 gible State program results in any cost sav6 ings in providing insurance coverage for 

7 risks in such State, such cost savings are re8 flected in premium rates charged to con9 sumers for such coverage. 

10 (6) REQUIREMENTS REGARDING COVERAGE.— 

11 The State program— 

12 (A) may not, except for charges or assess13 ments related to post-event financing or bonding, 

14 involve cross-subsidization between any separate 

15 property and casualty insurance lines covered 

16 under the State program pursuant to paragraph 

17 (1); 

18 (B) shall be subject to a requirement under 

19 State law that for any insurance coverage made 

20 available under the State insurance program or 

21 for any reinsurance coverage for such insurance 

22 coverage made available under the State reinsur23 ance program, the premium rates charged shall 

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1 tracts written by such program, in accordance 

2 with the principles under section 303(g); 

3 (C) shall make available to all qualifying 

4 policyholders insurance or reinsurance coverage, 

5 as applicable, and mitigation services on a basis 

6 that is not unfairly discriminatory; and 

7 (D) publishes, and displays in a prominent 

8 location on a Website for the State insurance 

9 program, information for the State insurance 

10 program of estimated assessments and surcharges 

11 on policyholders, in accordance with State laws, 

12 regulations, or other requirements, for a range of 

13 natural disaster or catastrophic events having a 

14 varying magnitude of losses, including an event 

15 projected to result in losses of such magnitude 

16 that they have a 1 percent chance of being 

17 equaled or exceeded in any single year, based on 

18 the current year estimated aggregate funding ca19 pacity of the State insurance program and State 

20 reinsurance program. 

21 (7) LAND USE AND ZONING.—The State pro22 gram, to the extent possible, seeks to encourage appro23 priate State and local government units to develop 

24 comprehensive land use and zoning plans that include 

25 natural hazard mitigation. 


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1 (8) RISK-BASED CAPITAL REQUIREMENTS.—The 

2 State program— 

3 (A) complies with such risk-based capital 

4 requirements as applicable State law may im5 pose and shall take into consideration asset risk, 

6 credit risk, underwriting risk, and such other 

7 relevant risk as determined by the Secretary; and 

8 (B) for each calendar year, prepares and 

9 submits to the Secretary a report identifying its 

10 claim-paying capacity at such time after the 

11 conclusion of such year, and containing such in12 formation and in such form, as the Secretary 

13 shall require. 

14 (9) OTHER REQUIREMENTS.—The State program 

15 complies with such additional organizational, under16 writing, and financial requirements as the Secretary 

17 shall, by regulation, provide to carry out the purposes 

18 of this Act. 

19 (b) CERTIFICATION.—The Secretary shall establish 

20 procedures for initial certification and recertification as an 

21 eligible State program. 

22 (c) TRANSITIONAL MECHANISMS.—For the 5-year pe23 riod beginning on the date of the enactment of this Act, 

24 in the case of a State that does not have an eligible State 

25 program for the State, a State residual insurance market 


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1 entity, or State-sponsored provider of natural catastrophe 

2 insurance, for such State shall be considered to be an eligi3 ble State program, but only if such State residual insurance 

4 market entity, or State-sponsored provider of natural catas5 trophe insurance, was in existence before such date of enact6 ment. 

7 (d) REINSURANCE TO COVER EXPOSURE.—This sec8 tion may not be construed to limit or prevent any eligible 

9 State program from obtaining reinsurance coverage for in10 sured losses retained by insurers pursuant to this section. 

11 SEC. 502. STUDY AND CONDITIONAL COVERAGE OF COM12 MERCIAL RESIDENTIAL LINES OF INSUR13 ANCE. 

14 The Secretary shall study, on an expedited basis, the 

15 need for and impact of expanding the programs established 

16 by this Act to apply to insured losses of eligible State pro17 grams for losses arising from all commercial insurance poli18 cies which provide coverage for properties that are composed 

19 predominantly of residential rental units. The Secretary 

20 shall consider the catastrophic insurance and reinsurance 

21 market for commercial residential properties, and specifi22 cally the availability of adequate private insurance cov23 erage when an insured event occurs, the impact any such 

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1 gram would increase insurance capacity for this market 

2 segment. 

3 SEC. 503. STUDY OF RISK-BASED PRICING AND STATE PRO4 GRAM RATES. 

5 The Comptroller General of the United States shall 

6 conduct a study to analyze— 

7 (1) risk-based rate pricing, to determine the use 

8 of actuarially sound pricing for State insurance, re9 insurance, or residual market programs, including 

10 what measures States are taking to implement actu11 arially sound rates; and 

12 (2) rates for State insurance, reinsurance, or re13 sidual market programs that fail to cover the expected 

14 value of all future costs, including the cost of capital, 

15 associated with insurance policies or reinsurance con16 tracts written by such programs or fail to have suffi17 cient assets above their indebtedness to meet their ob18 ligations. 

19 Not later than 6 months after the date of the enactment 

20 of this Act, the Comptroller General shall submit a report 

21 to the Congress on the results of the study under this section. 

22 SEC. 504. DEFINITIONS. 

23 In this Act: 

24 (1) COMMITMENT TO GUARANTEE.—The term 

25 ‘‘commitment to guarantee’’ means a commitment to 


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1 make debt guarantees to an eligible State program 

2 pursuant to section 202(c). 

3 (2) ELIGIBLE STATE PROGRAM.—The term ‘‘eli4 gible State program’’ means a State program that the 

5 Secretary certifies as an eligible State program under 

6 section 501. 

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

8 means any loss that is determined by an eligible 

9 State program as being covered by insurance or rein10 surance made available under that eligible State pro11 gram. 

12 (4) QUALIFYING ASSETS.—The term ‘‘qualifying 

13 assets’’ means the policyholder surplus of the eligible 

14 State program as stated in the most recent quarterly 

15 financial statement filed by the program with the 

16 domiciliary regulator of the program in the last quar17 ter ending prior to the event or events. 

18 (5) SECRETARY.—The term ‘‘Secretary’’ means 

19 the Secretary of the Treasury. 

20 (6) STATE.—The term ‘‘State’’ includes the sev21 eral States, the District of Columbia, the Common22 wealth of Puerto Rico, Guam, the Commonwealth of 

23 the Northern Mariana Islands, the United States Vir24 gin Islands, and American Samoa, and any other ter25 ritory or possession of the United States. 


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1 SEC. 505. REGULATIONS. 

2 The Secretary shall issue such regulations as may be 

3 necessary to carry out this Act. 


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Union Calendar No. 306 

111TH CONGRESS 

2D SESSION H. R. 2555 

[Report No. 111–534] 

A BILL 

To ensure the availability and affordability of 

events. homeowners’ insurance coverage for catastrophic 

JULY 13, 2010 

Reported with an amendment, committed to the Comand ordered to be printed mittee of the Whole House on the State of the Union, 


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