I 

111TH CONGRESS 

1ST SESSION H. R. 2555 

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 

A BILL 

To ensure the availability and affordability of homeowners’ 

insurance coverage for catastrophic events. 

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

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1 SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 

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

3 ‘‘Homeowners’ Defense Act of 2009’’. 

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

5 this Act is as follows: 

Sec. 1. Short title; table of contents. 

Sec. 2. 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. 

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

Sec. 503. Definitions. 

Sec. 504. Regulations. 

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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 

8 occur infrequently, they will continue to occur and 

9 are predictable; 

10 (3) such disasters generate large economic 

11 losses and a major component of those losses comes 

12 from 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 

19 protected from catastrophes; 

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

21 do the risks that any premiums collected by private 

22 insurers for extending coverage will be insufficient to 

23 cover future catastrophes, and private insurers, in 

24 an effort to protect their shareholders and policy25 holders (in the case of mutually owned companies), 

26 have thus significantly raised premiums and curmstockstill@gpo.gov on PROD1PC66 with BILLS

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1 tailed insurance coverage in States exposed to major 

2 catastrophes; 

3 (7) such effects on the insurance industry have 

4 been harmful to economic activity in States exposed 

5 to major catastrophes and have placed significant 

6 burdens on residents of such States; 

7 (8) Hurricanes Katrina, Rita, and Wilma 

8 struck the United States in 2005, causing over 

9 $200,000,000,000 in total economic losses, and in10 sured losses to homeowners in excess of 

11 $50,000,000,000; 

12 (9) the Federal Government has provided and 

13 will continue to provide resources to pay for losses 

14 from future catastrophes; 

15 (10) when Federal assistance is provided to the 

16 States, accountability for Federal funds disbursed is 

17 paramount; 

18 (11) the Government Accountability Office or 

19 other appropriate agencies must have the means in 

20 place to confirm that Federal funds for catastrophe 

21 relief have reached the appropriate victims and have 

22 contributed to the recovery effort as efficiently as 

23 possible so that taxpayer funds are not misspent and 

24 citizens are enabled to rebuild and resume produc25 tive activities as quickly as possible; 

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1 (12) States that are recipients of Federal funds 

2 must be responsible to account for and provide an 

3 efficient means for distribution of funds to home4 owners to enable the rapid rebuilding of local econo5 mies after a catastrophic event without unduly bur6 dening taxpayers who live in areas seldom affected 

7 by natural disasters; 

8 (13) State insurance and reinsurance programs 

9 can provide a mechanism for States to exercise that 

10 responsibility if they appropriately underwrite and 

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

12 established contractual terms; 

13 (14) making available Federal guarantees to en14 hance the capability of eligible State programs to 

15 issue debt will minimize the exposure of State and 

16 Federal taxpayers who otherwise may bear the con17 sequences of underfunded programs or under-in18 sured communities following catastrophic events, es19 pecially during today’s historic market turmoil; and 

20 (15) it is the proper role of the Federal Govern21 ment to prepare for and protect its citizens from ca22 tastrophes and to facilitate consumer protection, vic23 tim assistance, and recovery, including financial re24 covery. 

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1 (b) PURPOSES.—The purposes of this Act are to es2 tablish a program to provide Federal support for State3 sponsored insurance programs to help homeowners pre4 pare for and recover from the damages caused by natural 

5 catastrophes, to encourage mitigation and prevention for 

6 such catastrophes, to promote the use of private market 

7 capital as a means to insure against such catastrophes, 

8 to expedite the payment of claims and better assist in the 

9 financial recovery from such catastrophes. 

10 TITLE I—NATIONAL CATAS11 TROPHE RISK CONSORTIUM 

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

13 MEMBERSHIP. 

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

15 to be known as the ‘‘National Catastrophe Risk Consor16 tium’’ (in this title referred to as the ‘‘Consortium’’). 

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

18 agency, or instrumentality of the United States Govern19 ment. 

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

21 place of business of the Consortium shall be such location 

22 within the United States determined by the Board of Di23 rectors to be the most advantageous for carrying out the 

24 purpose and functions of the Consortium. 

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

2 reinsurance fund or has authorized the operation of a 

3 State residual insurance market entity, or State-sponsored 

4 provider of natural catastrophe insurance, shall be eligible 

5 to participate in the Consortium. 

6 SEC. 102. FUNCTIONS. 

7 The Consortium shall— 

8 (1) work with all States, particularly those par9 ticipating in the Consortium, to gather and maintain 

10 an inventory of catastrophe risk obligations held by 

11 State reinsurance funds, State residual insurance 

12 market entities, and State-sponsored providers of 

13 natural catastrophe insurance; 

14 (2) at the discretion of the affected members 

15 and on a conduit basis, issue securities and other fi16 nancial instruments linked to the catastrophe risks 

17 insured or reinsured through members of the Con18 sortium in the capital markets; 

19 (3) coordinate reinsurance contracts between 

20 participating, qualified reinsurance funds and pri21 vate parties; 

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

23 information that can be accessed by private-market 

24 participants seeking to participate in the transmstockstill@gpo.gov on PROD1PC66 with BILLS

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1 actions described in paragraphs (2) and (3) of this 

2 section; 

3 (5) establish a catastrophe risk database to per4 form research and analysis that encourages stand5 ardization 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 describ11 ing the activities of the Consortium for the pre12 ceding year, and the first such annual report shall 

13 include an assessment of the costs to States and re14 gions associated with catastrophe risk and an anal15 ysis of the costs and benefits, for States not partici16 pating in the 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 pri21 vate or public entity however designated and wher22 ever situated, as may be necessary for carrying out 

23 the functions 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 

7 a nonprofit entity and no part of the net earnings of the 

8 Consortium shall inure to the benefit of any member, 

9 founder, contributor, or individual. 

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

11 or employee of the Consortium shall in any manner, di12 rectly or indirectly, participate in the deliberation upon or 

13 the determination of any question affecting his or her per14 sonal interests or the interests of any Consortium, part15 nership, or organization in which he or she is directly or 

16 indirectly interested. 

17 (c) AUDITS.— 

18 (1) ANNUAL AUDIT.—The financial statements 

19 of the Consortium shall be audited annually in ac20 cordance with generally accepted auditing standards 

21 by 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 SEC. 105. MANAGEMENT. 

2 (a) BOARD OF DIRECTORS; MEMBERSHIP; DESIGNA3 TION OF CHAIRPERSON.— 

4 (1) BOARD OF DIRECTORS.—The management 

5 of the Consortium shall be vested in a board of di6 rectors (referred to in this title as the ‘‘Board’’) 

7 composed of not less than 3 members. 

8 (2) CHAIRPERSON.—The Secretary of the 

9 Treasury, or the designee of the Secretary, shall 

10 serve as the chairperson of the Board. 

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

12 shall include— 

13 (A) the Secretary of Homeland Security 

14 and the Secretary of Commerce, or the des15 ignees of such Secretaries, respectively, but only 

16 during such times as there are fewer than two 

17 States participating in the Consortium; and 

18 (B) a member from each State partici19 pating in the Consortium, who shall be ap20 pointed by such State. 

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

22 repeal such bylaws as may be necessary for carrying out 

23 the functions of the Consortium. 

24 (c) COMPENSATION, ACTUAL, NECESSARY, AND

25 TRANSPORTATION EXPENSES.— 

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

2 the Board who is not otherwise employed by the 

3 Federal Government shall be entitled to receive the 

4 daily equivalent of the annual rate of basic pay pay5 able for level IV of the Executive Schedule under 

6 section 5315 of title 5, United States Code, as in ef7 fect from time to time, for each day (including travel 

8 time) during which such member is engaged in the 

9 actual performance of duties of the Consortium. 

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

11 Board who is an officer or employee of the Federal 

12 Government shall serve without additional pay (or 

13 benefits in the nature of compensation) for service 

14 as a member of the Consortium. 

15 (3) TRAVEL EXPENSES.—Members of the Con16 sortium shall be entitled to receive travel expenses, 

17 including per diem in lieu of subsistence, equivalent 

18 to those set forth in subchapter I of chapter 57 of 

19 title 5, United States Code. 

20 (d) QUORUM.—A majority of the Board shall con21 stitute a quorum. 

22 (e) EXECUTIVE DIRECTOR.—The Board shall ap23 point an executive director of the Consortium on such 

24 terms as the Board may determine. 

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1 SEC. 106. STAFF; EXPERTS AND CONSULTANTS. 

2 (a) STAFF.— 

3 (1) APPOINTMENT.—The Board of the Consor4 tium may appoint and terminate such other staff as 

5 are necessary to enable the Consortium to perform 

6 its duties. 

7 (2) COMPENSATION.—The Board of the Con8 sortium may fix the compensation of the executive 

9 director and other staff. 

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

11 procure the services of experts and consultants as the 

12 Board considers appropriate. 

13 SEC. 107. FEDERAL LIABILITY. 

14 The Federal Government and the Consortium shall 

15 not bear any liabilities arising from the actions of the Con16 sortium. Participating States shall retain all catastrophe 

17 risk until the completion of a transaction described in 

18 paragraphs (2) and (3) of section 102. 

19 SEC. 108. AUTHORIZATION OF APPROPRIATIONS. 

20 There are authorized to be appropriated to carry out 

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

22 through 2014. 

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1 TITLE II—CATASTROPHE 

2 OBLIGATION GUARANTEES 

3 SEC. 201. PURPOSES. 

4 The purposes of this title are to establish a pro5 gram— 

6 (1) to promote the availability of private capital 

7 to provide liquidity and capacity to State catas8 trophe insurance programs; and 

9 (2) to expedite the payment of claims under 

10 State catastrophe insurance programs and better as11 sist the financial recovery from significant natural 

12 catastrophes by authorizing the Secretary of the 

13 Treasury to guarantee debt for such purposes. 

14 SEC. 202. ESTABLISHMENT OF DEBT GUARANTEE PRO15 GRAM. 

16 (a) AUTHORITY OF SECRETARY.—The Secretary of 

17 the Treasury is authorized and shall have the powers and 

18 authorities necessary to guarantee, and to enter into com19 mitments to guarantee, holders of debt against loss of 

20 principal or interest, or both, on any such debt issued by 

21 eligible State programs for purposes of this title, provided 

22 that the total principal amount of debt obligations guaran23 teed by the Secretary— 

24 (1) for eligible State programs that cover earth25 quake peril shall not exceed $5,000,000,000; and 

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1 (2) for eligible State programs that cover all 

2 other perils shall not exceed $20,000,000,000. 

3 (b) CONDITIONS FOR GUARANTEE ELIGIBILITY.—A 

4 debt guarantee under this section may be made only if 

5 the Secretary has issued a commitment to guarantee to 

6 an eligible State program. The commitment to guarantee 

7 shall be for a period of 3 years and may be extended by 

8 the Secretary for a period of 1 year on each annual anni9 versary of the issuance of the commitment to guarantee. 

10 The commitment to guarantee and each extension of such 

11 commitment may be issued by the Secretary only if the 

12 following requirements are satisfied: 

13 (1) The eligible State program submits to the 

14 Secretary a report setting forth, in such form and 

15 including such information as the Secretary shall re16 quire, how the eligible State program plans to repay 

17 the debt. 

18 (2) Based upon the eligible State program’s re19 port submitted pursuant to paragraph (1), the Sec20 retary determines there is reasonable assurance that 

21 the eligible State program can meet its repayment 

22 obligation under the debt. 

23 (3) The eligible State program enters into an 

24 agreement with the Secretary, as the Secretary shall 

25 require, that the eligible State program will not use 

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1 Federal funds of any kind or from any Federal 

2 source (including any disaster or other financial as3 sistance, loan proceeds, and any other assistance or 

4 subsidy) to repay the debt. 

5 (4) The commitment to guarantee shall specify 

6 the fees for debt guarantee coverage. 

7 (5) The maximum term of the debt that shall 

8 be specified in a commitment issued under this sec9 tion may not exceed 30 years. 

10 (c) MANDATORY ASSISTANCE FOR ELIGIBLE STATE

11 PROGRAMS.—The Secretary shall upon the request of an 

12 eligible State program and pursuant to a commitment to 

13 guarantee issued under subsection (b), provide a guar14 antee under subsection (d) for such eligible State program 

15 in the amount requested by such eligible State program, 

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

17 (d) CATASTROPHIC DEBT GUARANTEE.—A debt 

18 guarantee under this subsection for an eligible State pro19 gram shall be subject to the following requirements: 

20 (1) PRECONDITIONS.—The eligible State pro21 gram shows to the satisfaction of the Secretary that 

22 insured losses in the State to the eligible State pro23 gram arising from the event or events covered by the 

24 commitment to guarantee are likely to exceed the elimstockstill@gpo.gov on PROD1PC66 with BILLS

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1 gible State program’s available cash resources, as 

2 calculated on the date of the event. 

3 (2) AMOUNT.—The aggregate principal amount 

4 of the debt guaranteed following an event or events 

5 referred to in paragraph (1) may not exceed the 

6 amount by which the insured losses expected to be 

7 sustained by the State program as a result of such 

8 event or events exceed 80 percent of the qualifying 

9 assets of the eligible State program as stated in the 

10 most recent quarterly financial statement filed with 

11 the domiciliary regulator of the program prior to the 

12 event or events, except that, for eligible State pro13 grams that are not required to file such quarterly fi14 nancial statements, the aggregate principal amount 

15 of the debt guaranteed may not exceed the amount 

16 by which insured losses sustained by the State pro17 gram as a result of such event or events exceed 80 

18 percent of the unrestricted net assets as stated in 

19 the annual financial statement for the program’s fis20 cal year ending immediately prior to the event or 

21 events. 

22 (3) USE OF FUNDS.—Amounts of debt guaran23 teed under this section shall be used only to pay the 

24 costs of issuing debt and to pay the insured losses 

25 and loss adjustment expenses incurred by an eligible 

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1 State program. Such amounts shall not be used for 

2 any other purpose. 

3 (e) FUNDING.—There are authorized to be appro4 priated such sums as may be necessary to carry out this 

5 section. 

6 SEC. 203. EFFECT OF GUARANTEE. 

7 The issuance of any guarantee by the Secretary 

8 under this title shall be conclusive evidence that— 

9 (1) the guarantee has been properly obtained; 

10 (2) the underlying debt qualified for such guar11 antee; and 

12 (3) the guarantee is valid, legal, and enforce13 able. 

14 SEC. 204. FULL FAITH AND CREDIT. 

15 The full faith and credit of the United States is 

16 pledged to the payment of all guarantees issued under this 

17 title with respect to principal and interest. 

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

19 The Secretary shall charge and collect fees for each 

20 guarantee in amounts specified in the commitment to 

21 guarantee, which shall be in amounts sufficient in the 

22 judgment of the Secretary at the time of issuance of the 

23 commitment to guarantee to cover applicable administra24 tive costs and probable losses on the guaranteed obliga25 tions covered by the commitment to guarantee, but in any 

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1 event not to exceed one-half of 1 per centum per annum 

2 of the outstanding indebtedness covered by each guar3 antee. 

4 SEC. 206. PAYMENT OF LOSSES. 

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

6 the duly appointed paying agent or trustee (in this section 

7 referred to as the ‘‘Fiscal Agent’’) for the eligible State 

8 program that portion of the principal and interest on any 

9 debt guaranteed under this title that shall become due for 

10 payment but shall be unpaid by the eligible State program 

11 as a result of such program having provided insufficient 

12 funds to the Fiscal Agent to make such payments. The 

13 Secretary shall make such payments on the date such 

14 principal or interest becomes due for payment or on the 

15 business day next following the day on which the Secretary 

16 shall receive notice of failure on the part of the eligible 

17 State program to provide sufficient funds to the Fiscal 

18 Agent to make such payments, whichever is later. Upon 

19 making such payment, the Secretary shall be subrogated 

20 to all the rights of the ultimate recipient of the payment. 

21 The Secretary shall be entitled to recover from the eligible 

22 State program the amount of any payments made pursu23 ant to any guarantee entered into under this title. 

24 (b) ROLE OF THE ATTORNEY GENERAL.—The Attor25 ney General shall take such action as may be appropriate 

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1 to enforce any right accruing to the United States as a 

2 result of the issuance of any guarantee under this title. 

3 (c) RIGHT OF THE SECRETARY.—Notwithstanding 

4 any other provision of law relating to the acquisition, han5 dling, or disposal of property by the United States, the 

6 Secretary shall have the right in the discretion of the Sec7 retary to complete, recondition, reconstruct, renovate, re8 pair, maintain, operate, or sell any property acquired by 

9 the Secretary pursuant to the provisions of this title. 

10 SEC. 207. REGULATIONS. 

11 The Secretary shall issue any regulations necessary 

12 to carry out the debt-guarantee program established under 

13 this title. 

14 TITLE III—REINSURANCE COV15 ERAGE FOR ELIGIBLE STATE 

16 PROGRAMS 

17 SEC. 301. PROGRAM AUTHORITY. 

18 The Secretary of the Treasury, shall make available 

19 for purchase, only by eligible State programs, contracts 

20 for reinsurance coverage under this title. 

21 SEC. 302. CONTRACT PRINCIPLES. 

22 Contracts for reinsurance coverage made available 

23 under this title— 

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1 (1) shall not displace or compete with the pri2 vate insurance or reinsurance markets or the capital 

3 market; 

4 (2) shall minimize the administrative costs of 

5 the Federal Government; and 

6 (3) shall provide coverage based solely on in7 sured losses covered by the eligible State program 

8 purchasing the contract. 

9 SEC. 303. TERMS OF REINSURANCE CONTRACTS. 

10 (a) MINIMUM ATTACHMENT POINT.—Notwith11 standing any other provision of this title, a contract for 

12 reinsurance coverage under this title for an eligible State 

13 program may not be made available or sold unless the con14 tract requires that the eligible State program sustain an 

15 amount of retained losses from events in an amount, as 

16 determined by the Secretary, that is equal to the amount 

17 of losses projected to be incurred from a single event of 

18 such magnitude that it has a 0.5 percent chance of being 

19 equaled or exceeded in any year. 

20 (b) NINETY PERCENT COVERAGE OF INSURED

21 LOSSES IN EXCESS OF RETAINED LOSSES.—Each con22 tract for reinsurance coverage under this title shall provide 

23 that the amount paid out under the contract shall be equal 

24 to 90 percent of the amount of insured losses of the eligi25 ble State program in excess of the amount of retained 

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1 losses that the contract requires, pursuant to subsection 

2 (a), to be incurred by such program. 

3 (c) MATURITY.—The term of each contract for rein4 surance coverage under this title shall not exceed 1 year 

5 or such other term as the Secretary may determine. 

6 (d) PAYMENT CONDITION.—Each contract for rein7 surance coverage under this title shall authorize claims 

8 payments to the eligible State program purchasing the 

9 coverage only for insured losses provided under the con10 tract. 

11 (e) MULTIPLE EVENTS.—The contract shall cover 

12 any insured losses from one or more events that may occur 

13 during the term of the contract and shall provide that if 

14 multiple events occur, the retained losses requirement 

15 under subsection (a) shall apply on a calendar year basis, 

16 in the aggregate and not separately to each individual 

17 event. 

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

19 reinsurance coverage under this title shall include only in20 surance claims that are reported to the eligible State pro21 gram within the 3-year period beginning upon the event 

22 or events for which payment under the contract is pro23 vided. 

24 (g) ACTUARIAL PRICING.—The price of coverage 

25 under a reinsurance contract under this title shall be an 

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1 amount, established by the Secretary at a level that annu2 ally produces expected premiums that shall be sufficient 

3 to pay the reasonably anticipated cost of all claims, loss 

4 adjustment expenses, all administrative costs of reinsur5 ance coverage offered under this title, and any such out6 wards reinsurance, as described in section 305(c)(3), as 

7 the Secretary considers prudent taking into consideration 

8 the demand for reinsurance coverage under this title. 

9 (h) INFORMATION.—Each contract for reinsurance 

10 coverage under this title shall contain a condition pro11 viding that the Secretary may require the eligible State 

12 program that is covered under the contract to submit to 

13 the Secretary all information on the eligible State program 

14 relevant to the duties of the Secretary under this title. 

15 (i) OTHERS.—Contracts for reinsurance coverage 

16 under this title shall contain such other terms as the Sec17 retary considers necessary to carry out this title and to 

18 ensure the long-term financial integrity of the program 

19 under this title. 

20 SEC. 304. MAXIMUM FEDERAL LIABILITY. 

21 (a) IN GENERAL.—Subject to subsection (b) and not22 withstanding any other provision of law, the aggregate po23 tential liability for payment of claims under all contracts 

24 for reinsurance coverage under this title sold in any single 

25 year by the Secretary shall not exceed $200,000,000,000 

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1 or such lesser amount as is determined by the Secretary 

2 based on review of the market for reinsurance coverage 

3 under this title. 

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

5 enter into contracts for reinsurance coverage under this 

6 title shall be effective for any fiscal year only to such ex7 tent or in such amounts as are or have been provided in 

8 appropriation Acts for such fiscal year for the aggregate 

9 potential liability for payment of claims under all contracts 

10 for reinsurance coverage under this title. 

11 SEC. 305. FEDERAL NATURAL CATASTROPHE REINSUR12 ANCE FUND. 

13 (a) ESTABLISHMENT.—There is established within 

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

15 as the Federal Natural Catastrophe Reinsurance Fund (in 

16 this section referred to as the ‘‘Fund’’). 

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

18 (1) amounts received annually from the sale of 

19 contracts for reinsurance coverage under this title; 

20 (2) any amounts appropriated for the aggregate 

21 potential liability for payment of claims under all 

22 contracts for reinsurance coverage under this title; 

23 and 

24 (3) any amounts earned on investments of the 

25 Fund pursuant to subsection (d). 

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

2 to the Secretary only for the following purposes: 

3 (1) CONTRACT PAYMENTS.—For payments to 

4 purchasers covered under contracts for reinsurance 

5 coverage for eligible losses under such contracts. 

6 (2) ADMINISTRATIVE EXPENSES.—To pay for 

7 the administrative expenses incurred by the Sec8 retary in carrying out the reinsurance program 

9 under this title. 

10 (3) OUTWARDS REINSURANCE.—To obtain 

11 retrocessional or other reinsurance coverage of any 

12 kind to cover risk reinsured under contracts for rein13 surance coverage made available under this title. 

14 (d) INVESTMENT.—If the Secretary determines that 

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

16 the Secretary may invest such amounts as the Secretary 

17 considers advisable in obligations issued or guaranteed by 

18 the United States. 

19 SEC. 306. REGULATIONS. 

20 The Secretary shall issue any regulations necessary 

21 to carry out the program for reinsurance coverage under 

22 this title. 

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1 TITLE IV—MITIGATION GRANT 

2 PROGRAM 

3 SEC. 401. MITIGATION GRANT PROGRAM. 

4 (a) ESTABLISHMENT.—The Secretary of Housing 

5 and Urban Development shall establish and carry out a 

6 program to provide grants to eligible entities to develop, 

7 enhance, or maintain programs to prevent and mitigate 

8 losses from natural catastrophes. 

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

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

11 (1) encouraging awareness of risk factors and 

12 what steps can be taken to eliminate or reduce them; 

13 (2) assisting in the determination of the loca14 tion of risk by giving careful consideration to the 

15 natural risks for the location of a property; 

16 (3) providing inspections of homes to identify 

17 areas to strengthen such homes and reduce exposure 

18 to natural catastrophes; or 

19 (4) providing financial assistance to home20 owners to retrofit homes to reduce exposure to nat21 ural catastrophes. 

22 (c) CONSULTATION WITH EXPERTS.—In carrying 

23 out the program established under subsection (a), the Sec24 retary of Housing and Urban Development shall consult 

25 with— 

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1 (1) disaster preparedness and response organi2 zations; 

3 (2) homebuilders; 

4 (3) real estate professionals; 

5 (4) building code enforcement agencies; and 

6 (5) any other person that the Secretary con7 siders appropriate. 

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

9 the term ‘‘eligible entity’’ means a State or local govern10 ment, or a part or program of a State or local government. 

11 (e) AUTHORIZATION OF APPROPRIATIONS.—There 

12 are authorized to be appropriated to carry out this section 

13 $15,000,000 for each of fiscal years 2010 through 2014. 

14 TITLE V—GENERAL PROVISIONS 

15 SEC. 501. ELIGIBLE STATE PROGRAMS. 

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

17 shall be considered an ‘‘eligible State program’’ for pur18 poses of this Act if the Secretary certifies, in accordance 

19 with the procedures established under subsection (c), that 

20 the State program complies with the following require21 ments: 

22 (1) STATE PROGRAM DESIGN.—The State pro23 gram is established and authorized by State law as 

24 an insurance program or a reinsurance program that 

25 is designed to improve private insurance markets 

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1 and that offers residential property insurance cov2 erage for losses arising from any personal residential 

3 line of insurance, as defined in the Uniform Prop4 erty and Casualty Product Coding Matrix of the Na5 tional Association of Insurance Commissioners. 

6 (2) OPERATION.—The State program shall 

7 meet the following requirements: 

8 (A) A majority of the members of the gov9 erning body of the State program shall be pub10 lic officials or appointed by public officials. 

11 (B) The State shall have a financial inter12 est in the State program. 

13 (C) If the State has at any time appro14 priated amounts from the State program’s 

15 funds for any purpose other than payments for 

16 losses insured under the State program, or pay17 ments made in connection with any of the State 

18 program’s authorized activities, the State shall 

19 have returned such amounts to the State fund, 

20 together with interest on such amounts. 

21 (3) TAX STATUS.—The State program shall 

22 have received from the Secretary (or the Secretary’s 

23 designee) a written determination, within the mean24 ing of section 6110(b) of the Internal Revenue Code 

25 of 1986, that the program either— 

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

2 State that has created it; or 

3 (B) is otherwise exempt from Federal in4 come taxation. 

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

6 provide for any distribution of any part of any net 

7 profits of the State program to any insurer that par8 ticipates in the State program. 

9 (5) PREVENTION AND MITIGATION.— 

10 (A) MITIGATION OF LOSSES.—The State 

11 program shall include provisions designed to en12 courage and support programs to mitigate 

13 losses from natural catastrophes for which the 

14 State insurance or reinsurance program was es15 tablished to provide insurance coverage. 

16 (B) OPERATIONAL REQUIREMENTS.—The 

17 State program shall operate in a State that— 

18 (i) requires that an appropriate public 

19 body within the State shall have adopted 

20 adequate mitigation measures (with effec21 tive enforcement provisions) which the Sec22 retary finds are consistent with the criteria 

23 for construction described in the Inter24 national Code Council building codes; 

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1 (ii) has taken actions to establish an 

2 insurance rate structure that takes into ac3 count measures to mitigate insured losses; 

4 and 

5 (iii) ensures, to the extent that rein6 surance coverage made available under the 

7 eligible State program results in any cost 

8 savings in providing insurance coverage for 

9 risks in such State, such cost savings are 

10 reflected in premium rates charged to con11 sumers for such coverage; 

12 (6) REQUIREMENTS REGARDING COVERAGE.— 

13 The State program— 

14 (A) may not, except for charges or assess15 ments related to post-event financing or bond16 ing, involve cross-subsidization between any 

17 separate property and casualty insurance lines 

18 covered under the State program pursuant to 

19 paragraph (1); 

20 (B) shall be subject to a requirement 

21 under State law that for any insurance coverage 

22 made available under the State insurance pro23 gram or for any reinsurance coverage for such 

24 insurance coverage made available under the 

25 State reinsurance program, the premium rates 

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1 charged shall be actuarially sound or actuarially 

2 indicated; and 

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. 

7 (7) LAND USE AND ZONING.—The State pro8 gram, to the extent possible, seeks to encourage ap9 propriate State and local government units to de10 velop comprehensive land use and zoning plans that 

11 include natural hazard mitigation. 

12 (8) RISK-BASED CAPITAL REQUIREMENTS.— 

13 The State program complies with the risk-based cap14 ital requirements under subsection (b); 

15 (9) OTHER REQUIREMENTS.—The State pro16 gram complies with such additional organizational, 

17 underwriting, and financial requirements as the Sec18 retary shall, by regulation, provide to carry out the 

19 purposes of this Act. 

20 (b) RISK-BASED CAPITAL REQUIREMENTS.— 

21 (1) IN GENERAL.—Except for programs deemed 

22 to be eligible State programs pursuant to subsection 

23 (d), each eligible State program shall maintain risk24 based capital in accordance with requirements estab25 lished by the Secretary, in consultation with the Namstockstill@gpo.gov on PROD1PC66 with BILLS

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1 tional Association of Insurance Commissioners and 

2 consistent with the Risk-Based Capital Model Act of 

3 the National Association of Insurance Commis4 sioners, and take into consideration asset risk, credit 

5 risk, underwriting risk, and such other relevant risk 

6 as determined by the Secretary. 

7 (2) REPORT.—For each calendar year, each eli8 gible State program shall prepare and submit to the 

9 Secretary a report identifying its risk based capital, 

10 at such time after the conclusion of such year, and 

11 containing such information and in such form, as 

12 the Secretary shall require. 

13 (c) CERTIFICATION.—The Secretary shall establish 

14 procedures for initial certification and recertification as an 

15 eligible State program. 

16 (d) TRANSITIONAL MECHANISMS.—For the 5-year 

17 period beginning on the date of the enactment of this Act, 

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

19 program for the State, a State residual insurance market 

20 entity, or State-sponsored provider of natural catastrophe 

21 insurance, for such State shall be considered to be an eligi22 ble State program, but only if such State residual insur23 ance market entity, or State-sponsored provider of natural 

24 catastrophe insurance, was in existence before such date 

25 of enactment. 

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1 (e) REINSURANCE TO COVER EXPOSURE.—This sec2 tion may not be construed to limit or prevent any eligible 

3 State program from obtaining reinsurance coverage for in4 sured losses retained by insurers pursuant to this section. 

5 SEC. 502. STUDY AND CONDITIONAL COVERAGE OF COM6 MERCIAL RESIDENTIAL LINES OF INSUR7 ANCE. 

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

9 need for and impact of expanding the programs estab10 lished by this Act to apply to insured losses of eligible 

11 State programs for losses arising from all commercial in12 surance policies which provide coverage for properties that 

13 are composed predominantly of residential rental units. 

14 The Secretary shall consider the catastrophic insurance 

15 and reinsurance market for commercial residential prop16 erties, and specifically the availability of adequate private 

17 insurance coverage when an insured event occurs, the im18 pact any such capacity restrictions have on housing afford19 ability for renters, and the likelihood that such an expan20 sion of the program would increase insurance capacity for 

21 this market segment. 

22 SEC. 503. 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 

5 the Secretary certifies as an eligible State program 

6 under 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 re10 insurance made available under that eligible State 

11 program. 

12 (4) QUALIFYING ASSETS.—The term ‘‘quali13 fying assets’’ means the policyholder surplus of the 

14 eligible State program as stated in the most recent 

15 quarterly financial statement filed by the program 

16 with the domiciliary regulator of the program in the 

17 last quarter 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 

21 several States, the District of Columbia, the Com22 monwealth of Puerto Rico, Guam, the Common23 wealth of the Northern Mariana Islands, the United 

24 States Virgin Islands, and American Samoa, and 

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1 any other territory or possession of the United 

2 States. 

3 SEC. 504. REGULATIONS. 

4 The Secretary shall issue such regulations as may be 

5 necessary to carry out this Act. 

Æ 

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