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[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1302 Introduced in House (IH)]

103d CONGRESS
  1st Session
                                H. R. 1302

To provide for a national insurance and reinsurance program against the 
              risk of hurricanes, and for other purposes.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                             March 10, 1993

Mr. Shaw (for himself, Mr. Goss, Mr. Hastings, Mr. McCollum, Mrs. Meek, 
   Mr. Johnston of Florida, and Ms. Brown of Florida) introduced the 
following bill; which was referred to the Committee on Banking, Finance 
                           and Urban Affairs

_______________________________________________________________________

                                 A BILL

 
To provide for a national insurance and reinsurance program against the 
              risk of hurricanes, and for other purposes.

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

SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.

    (a) Short Title.--This Act shall be cited as the ``Hurricane Hazard 
Reduction Act''.
    (b) Table of Contents.--

Sec. 1. Short title and table of contents.
Sec. 2. Findings.
Sec. 3. Definitions.
   TITLE I--PARTICIPATION BY STATES IN ADOPTION OF HAZARD REDUCTION 
                                MEASURES

Sec. 101. Identification of hurricane-prone States.
Sec. 102. Criteria for loss-reduction measures.
Sec. 103. Hurricane Loss Mitigation Advisory Committee.
Sec. 104. Self-Sustaining Mitigation Fund.
Sec. 105. State implementation of loss-reduction measures.
Sec. 106. Incentive to purchase hurricane coverage in hurricane zones.
Sec. 107. Effect of noncompliance with State mitigation program.
Sec. 108. Coordination with other programs.
Sec. 109. Annual report.
Sec. 110. Regulations.
             TITLE II--NATIONAL HURRICANE INSURANCE PROGRAM

Sec. 201. Authority and organization.
Sec. 202. Scope of program.
Sec. 203. Terms and limitations of insurance coverage.
Sec. 204. Establishment of actuarial premium rates.
Sec. 205. Chargeable premium rates.
Sec. 206. Mitigation incentives.
Sec. 207. Hurricane Insurance and Reinsurance Advisory Committee.
Sec. 208. Residential Property Insurance Fund.
Sec. 209. Borrowing from Treasury.
     TITLE III--NATIONAL HURRICANE EXCESS LOSS REINSURANCE PROGRAM

Sec. 301. Establishment and terms of coverage.
Sec. 302. Lines of insurance.
Sec. 303. Premium rates.
Sec. 304. Reinsurance contracts.
Sec. 305. Reinsurance Fund.
Sec. 306. Borrowing from Treasury.

SEC. 2. DEFINITIONS.

    For purposes of this Act:
            (1) The term ``additional losses'' means claim and loss 
        adjustment expense payments for hurricane coverage issued 
        pursuant to title II that exceed the accumulated amounts in the 
        Residential Property Insurance Fund.
            (2) The term ``alien insurer'' means an insurer or 
        reinsurer organized or incorporated in a country other than the 
        United States.
            (3) The term ``compliance State'' means any hurricane-prone 
        State that has been certified by the Director as a compliance 
        State under section 105.
            (4) The term ``critical facilities vulnerable to 
        hurricanes'' means schools and structures essential to 
        emergency services necessary for posthurricane recovery 
        (including hospitals, fire and policy facilities, temporary 
        shelters, and emergency operating and preparedness centers) 
        that--
                    (A) have any form of construction or design that 
                the Director determines is vulnerable to hurricane 
                hazards; and
                    (B) are located in hurricane zones within 
                hurricane-prone States.
            (5) The term ``Director'' means the Director of the Federal 
        Emergency Management Agency.
            (6) The term ``Federal agency'' means any department, 
        agency, corporation, or other instrumentality of the executive 
        branch of the Federal Government, and includes the Federal 
        National Mortgage Association and the Federal Home Loan 
        Mortgage Corporation.
            (7) The term ``federally related mortgage loan'' has the 
        meaning given the term in section 3(1) of the Real Estate 
        Settlement Procedures Act of 1974, except that the term does 
        not include any loan described in subparagraph (B)(iv) of such 
        section.
            (8) The term ``hurricane coverage'' means hurricane 
        insurance issued pursuant to title II.
            (9) The term ``hurricane-prone State'' means a State 
        determined by the Director pursuant to section 101 to have an 
        exposure to the hurricane perils.
            (10) The term ``hurricane zone'' means an area within a 
        State identified and classified by the Director under section 
        101(a) as subject to major or moderate hurricane risk.
            (11) The term ``Insurance Committee'' means the Hurricane 
        Insurance and Reinsurance Advisory Committee established under 
        section 207.
            (12) The term ``Insurance Fund'' means the Residential 
        Property Insurance Fund established under section 208.
            (13) The term ``insurance industry'' means all private 
        insurers and private reinsurers.
            (14) The term ``Loss Mitigation Committee'' means the 
        hurricane Loss Mitigation Advisory Committee established under 
        section 103.
            (15) The term ``loss-reduction criteria'' means the 
        comprehensive criteria for hurricane loss mitigation 
        established by the Director under section 102.
            (16) The term ``new residential property'' means 
        residential property constructed or substantially improved 
        after the expiration of the 24-month period beginning on the 
        date of the enactment of this Act.
            (17) The term ``Primary Insurance Program'' means the 
        national hurricane insurance program established under title 
        II.
            (18) The terms ``private insurer'' and ``private 
        reinsurer'' mean any insurer or reinsurer that is (A) licensed 
        or admitted to write property and casualty insurance or 
        reinsurance within a State, or (B) is a branch of an alien 
        insurer or reinsurer that is entered through and licensed by a 
        State to conduct insurance or reinsurance business. In the case 
        of an insurance exchange or group of unincorporated 
        underwriters, the term means an underwriting syndicate, 
        notwithstanding the licensed or admitted status of the 
        insurance exchange or group of unincorporated underwriters.
            (19) The term ``Reinsurance Fund'' means the Reinsurance 
        Fund established under section 305.
            (20) The term ``Reinsurance Program'' means the national 
        hurricane excess loss reinsurance program established under 
        title III.
            (21) The term ``residential property'' means--
                    (A) any 1- to 4-family residential structure 
                (including mobile or manufactured homes) and the 
                personal property therein;
                    (B) any residential structure (including 
                condominiums, cooperatives, and apartment structures) 
                containing more than 4 dwelling units; and
                    (C) the personal property of occupants of 
                residential structures containing more than 4 dwelling 
                units.
            (22) The term ``residential property insurance coverage'' 
        means policies, riders, or endorsements of insurance that 
        provide indemnity, in whole or in part, for the loss, 
        destruction, or damage of residential property and other 
        eligible property as determined by the Director.
            (23) The term ``Self-Sustaining Mitigation Fund'' means the 
        Fund established under section 104.

   TITLE I--PARTICIPATION BY STATES IN ADOPTION OF HAZARD REDUCTION 
                                MEASURES

SEC. 101. IDENTIFICATION OF HURRICANE-PRONE STATES.

    (a) Initial Identification of States.--
            (1) In general.--The Director, in consultation with the 
        National Oceanographic and Atmospheric Administration, other 
        relevant Federal entities, and meteorological and hurricane 
        experts in the private sector, shall identify States having an 
        exposure to hurricane perils. The Director shall identify any 
        areas that are subject to major or moderate hurricane risks and 
        shall establish such areas as hurricane zones.
            (2) Timing and publication.--The Director shall identify 
        such States and zones before the expiration of the 1-year 
        period beginning on the date of the enactment of this Act, and 
        shall cause a listing of such States and zones to be published 
        in the Federal Register and in widely circulated local 
        newspapers in the applicable States before the expiration of 
        the 1-year period.
    (b) Final Notification.--Each State identified under subsection (a) 
shall be considered to be an hurricane-prone State for purposes of this 
Act upon the expiration of the 18-month period beginning upon the date 
of the enactment of this Act. The Director shall notify the chief 
executive officer of each State containing a hurricane zone established 
under subsection (a) in writing, before the expiration of such 18-month 
period, that the State is an hurricane-prone State for purposes of this 
Act.
    (c) Ongoing Identification and Notification.--Based upon any 
additional meteorological and hurricane information that from time to 
time becomes available, the Director may identify additional areas 
subject to major or moderate hurricane risk (not identified under 
subsection (a)) and shall establish any such areas as hurricane zones. 
Any States containing such zones (that did not contain any hurricane 
zones established under subsection (a)) shall be considered to be an 
hurricane-prone State for purposes of this Act upon the notification of 
the chief executive officer of the State, in writing, of the 
identification of the State as an hurricane-prone State.
    (d) Appeal.--Any State aggrieved by a final determination as a 
hurricane-prone State pursuant to subsection (b) or (c), may, after 
exhausting administrative remedies, appeal such determination to any 
United States district court for a district located within the State, 
not more than 60 days after receipt of notice of such determination. 
The scope of review by the court shall be as provided under chapter 7 
of title 5, United States Code. During the pendency of any such 
litigation, all determinations of the Director shall be effective and 
final for the purposes of this Act unless stayed by the court for good 
cause shown.

SEC. 102. CRITERIA FOR LOSS-REDUCTION MEASURES.

    (a) Development.--
            (1) In general.--The Director shall develop comprehensive 
        loss-reduction criteria for State and local land use and 
        management ordinances, building codes, and other loss-reduction 
        measures consistent with the requirements under subsection (b). 
        The Director shall periodically update such criteria to reflect 
        technical advances designed to reduce losses from hurricanes.
            (2) Coordination.--The Director shall develop the loss-
        reduction criteria in coordination and consistent with the 
        Robert T. Stafford Disaster Relief and Emergency Assistance Act 
        and any other relevant Federal laws. In developing the loss 
        reduction criteria, the Director shall consult other affected 
        Federal entities, including the National Institute of Standards 
        and Technology, the National Oceanic and Atmospheric 
        Administration, representatives of State and local governments, 
        regional hurricane preparedness organizations, model building 
        code organizations, and insurance industry groups.
            (3) Submission of draft to loss mitigation committee.--Not 
        later than the expiration of the 12-month period beginning on 
        the date of the enactment of this Act, the Director shall 
        submit a draft of the loss-reduction criteria to the Loss 
        Mitigation Committee established under section 103. Before 
        issuing any final regulations under paragraph (4), the Director 
        shall consider any recommendations made by the Loss Mitigation 
        Committee regarding the draft criteria.
            (4) Regulations.--Not later than the expiration of the 18-
        month period beginning on the date of the enactment of this 
        Act, the Director shall issue regulations establishing the 
        loss-reduction criteria under this section, subject to the 
        provisions of subchapter II of chapter 5 of title 5, United 
        States Code. In issuing final regulations under this paragraph, 
        the Director shall cause to be published in the Federal 
        Register a description of any differences between the 
        recommendations of the Loss Mitigation Committee and the final 
        regulations (including the applicability of loss-reduction 
        measures to States and localities) developed by the Director. 
        The description shall contain, for each such difference, an 
        explanation of why the recommendations of the Loss Mitigation 
        Committee were not included in the final regulations.
    (b) Content.--The comprehensive loss-reduction criteria established 
under this section shall include measures for the reduction of losses 
from future hurricanes, as follows:
            (1) Mandatory inclusion.--The Director shall include in the 
        loss-reduction criteria the following loss-reduction measures:
                    (A) Minimum building standards sufficient to reduce 
                losses from hurricanes applicable to new residential 
                property and other buildings located in hurricane 
                zones.
                    (B) Community-based building codes applicable to 
                new residential property, which shall meet or exceed 
                any minimum hurricane provisions contained in (i) the 
                most recent edition of the National Building Code, (ii) 
                the most recent edition of the Standard Building Code, 
                or (iii) the most recent edition of the Uniform 
                Building Code.
            (2) Discretionary inclusion.--The Director shall consider 
        and may include in the loss-reduction criteria established 
        under this section any of the following additional loss-
        reduction measures:
                    (A) Community-based building codes which contain 
                minimum requirements for construction of new 
                residential property that is located in a hurricane 
                zone not currently covered by any of the building codes 
                referred to in paragraph (1)(B) but identified by the 
                Director as being located in hurricane-prone States.
                    (B) Measures to control construction of buildings 
                in high-risk areas within hurricane zones.
                    (C) To the extent practicable, retrofitting of 
                critical facilities vulnerable to hurricanes.
                    (D) Inspections before transfer of residential 
                property (and provision to buyers of inspection 
                reports) regarding the adequacy of mitigation measures 
                to reduce damage by hurricanes.
                    (E) Hurricane preparedness and planning measures, 
                including--
                            (i) expanded research and development by 
                        government and private sector entities of new 
                        cost-effective building technologies for new 
                        construction and retrofitting of existing 
                        buildings;
                            (ii) educational and promotional campaigns 
                        to encourage additional voluntary mitigation;
                            (iii) reward-based fiscal incentives, such 
                        as lower property tax assessments, prohibiting 
                        reassessments for retrofitting which results in 
                        increased property values, or other tax 
                        incentives to encourage use of the most 
                        advanced mitigation technology;
                            (iv) State or community-based efforts to 
                        assist low- and moderate-income households to 
                        purchase needed hurricane insurance and to 
                        adopt cost-effective loss-reduction measures;
                            (v) improvements in long-term hurricane 
                        construction practices, including the training 
                        and licensing of hurricane design professionals 
                        as well as public and private building 
                        inspectors;
                            (vi) institutional support, training in 
                        hurricane engineering technology and other 
                        disciplines, and staffing to ensure compliance 
                        with the community-based building codes; and
                            (vii) minimizing damage to public 
                        utilities, including sewer, gas, electrical and 
                        water systems, and other lifelines, consistent 
                        with section 104(b).
                    (F) Any other mitigation measures, including 
                measures suggested by the Loss Mitigation Committee, 
                that the Director considers appropriate.
    (c) Standard.--The Director may not include any mitigation measure 
included in the loss-reduction criteria established under this section 
unless the Director determines that the measure is--
            (1) directly related to the risk of loss from hurricanes in 
        areas where residential property is located;
            (2) sufficiently effective in reducing the risk of loss 
        from hurricanes to justify any costs to the Federal Government, 
        State and local governments, and individual property owners in 
        carrying out or complying with the measure;
            (3) practical and workable with respect to the areas or 
        property to which the measure relates.
    (d) Technical Assistance.--The Director shall coordinate with and 
provide technical assistance to States, interstate, and local officials 
and agencies to encourage adoption and enforcement of State and local 
actions that incorporate and support the loss-reduction measures 
developed by the Director under this section.

SEC. 103. HURRICANE LOSS MITIGATION ADVISORY COMMITTEE.

    (a) Establishment.--There is hereby established an independent 
advisory committee within the executive branch to be known as the 
hurricane Loss Mitigation Advisory Committee (in this section referred 
to as the ``Committee''). The Committee, its members, and its functions 
shall be separate from the Hurricane Insurance and Reinsurance Advisory 
Committee established under section 207. Except as otherwise provided 
in this section, the Committee shall be subject to the provisions of 
the Federal Advisory Committee Act.
    (b) Membership.--
            (1) Appointed members.--The Committee shall be composed of 
        10 members appointed by the President. The members shall be 
        chosen from among citizens of the United States who are 
        respected experts in the field of hurricane loss mitigation, 
        who shall include--
                    (A) not less than 2 individuals who are employed by 
                a State government as an emergency planners;
                    (B) not less than 2 individuals who are 
                knowledgeable regarding local community building codes; 
                and
                    (C) not less than 2 individuals who is employed as 
                hurricane engineers.
        The President shall provide for geographic diversity among the 
        members of the Committee and not less than 5 members shall be 
        individuals who are residents of hurricane-prone States.
            (2) Ex officio member.--Notwithstanding paragraph (1), the 
        Chairman of the Insurance Committee shall serve as an ex 
        officio member of the Loss Mitigation Committee.
    (c) Vacancies.--A vacancy in the Commission shall be filled in the 
manner in which the original appointment was made.
    (d) Chairman.--The President shall designate a chairman of the 
Committee from among members selected for appointment to the Committee.
    (e) Timing.--The President shall appoint the members of the 
Committee not later than 180 days after the date of the enactment of 
this Act.
    (f) Functions.--The Committee shall review the loss reduction 
criteria (including the specific loss-reduction measures) established 
under section 102. Not later than 90 days after receiving the draft of 
the loss-reduction criteria under section 102(a)(3), the Committee 
shall submit to the Director written comments and recommendations for 
any changes to the criteria.
    (g) Responsibilities of Director.--The Director shall fully 
cooperate with the Committee and provide the Committee with access to 
personnel and information. The Committee may request assistance from 
relevant Federal agencies as the Committee considers necessary to carry 
out its functions.

SEC. 104. SELF-SUSTAINING MITIGATION FUND.

    (a) In General.--A percentage of the premiums for hurricane 
insurance collected under the Primary Insurance Program under title II, 
as the Director shall designate, shall be deposited annually in a 
separate fund to be known as the Self-Sustaining Mitigation Fund. The 
percentage may not exceed 5 percent, unless the Director determines 
that the amounts in the Insurance Fund are sufficient to provide for 
any probable expected losses from future hurricanes. Interest on 
amounts in the Fund shall be credited to the Fund.
    (b) Use.--Amounts in the Self-Sustaining Mitigation Fund shall be 
available, to the extent provided in appropriation Acts, to the 
Director to provide assistance to support the hurricane hazard 
reduction activities, as follows:
            (1) Assistance to States under section 105(c).
            (2) Assistance to provide hurricane education pursuant to 
        subsection (c).
            (3) Assistance for research and development on construction 
        techniques to reduce costs of new construction and retrofitting 
        of existing buildings.
            (4) Low-interest loans or grants for the retrofitting of 
        critical facilities vulnerable to hurricanes.
    (c) Hurricane Education Program.--The Director shall provide 
assistance under this section to support programs educating the general 
public on the national dimensions of hurricane risk and on methods for 
homeowners to reduce the hazards resulting from future hurricanes.

SEC. 105. STATE IMPLEMENTATION OF LOSS-REDUCTION MEASURES.

    (a) Requirements for Compliance States.--The Director may certify a 
hurricane-prone State as a compliance State for purposes of this Act 
only if--
            (1) before the expiration of the 2-year period beginning 
        upon the promulgation of final regulations under section 103 
        establishing the loss-reduction criteria--
                    (A) each county and municipality located in each 
                hurricane zone within the State have adopted and are 
                enforcing the applicable mitigation measures required 
                under the loss-reduction criteria; and
                    (B) the chief executive officer of the State has 
                designated an administrative authority to coordinate 
                the development and enforcement of hurricane 
                implementation plans for the State, which plans comply 
                with the requirements of the loss-reduction criteria; 
                and
            (2) the State submits a certification to the Director under 
        subsection (b)(1) before the expiration of such 2-year period 
        and the Director approves such certification under subsection 
        (c).
    (b) State Certification.--The certification referred to in 
subsection (a)(2) shall state that the State has substantially adopted 
and is substantially enforcing the applicable mitigation measures 
required under the loss-reduction criteria. In providing the 
certification, each State may consult with any relevant private 
accreditation and rating organizations approved by the Director.
    (c) Determination of Compliance.--
            (1) Criteria.--The Director shall issue regulations not 
        later than 18 months after the date of the enactment of this 
        Act establishing criteria for making, reviewing, and approving 
        State certifications under subsection (b).
            (2) Initial review.--The Director shall review each 
        certification submitted under subsection (b) to determine 
        whether it is accurate and whether the State submitting the 
        certification is substantially complying with, and enforcing, 
        the applicable mitigation measures required under the loss-
        reduction criteria. If, using the criteria established under 
        paragraph (1), the Director determines that the State 
        certification is substantially accurate and the State has 
        adopted and is enforcing the applicable mitigation measures, 
        the Director shall certify the State as a compliance State for 
        purposes of this Act.
            (3) Noncompliance states.--If an hurricane-prone State 
        fails to submit a certification under subsection (a)(2) or the 
        Director determines under paragraph (2) or (5) that the State 
        has submitted an inaccurate certification, has not adopted or 
        enforced minimum applicable mitigation measures, or has failed 
        to acquire recertification as a compliance State, the Director 
        shall certify the State as a noncompliance State for purposes 
        of this Act.
            (4) Review of noncompliance.--A State certified as a 
        noncompliance State pursuant to paragraph (3) may at any time 
        after such certification request the Director to review its 
        certification and compliance, pursuant to which the Director 
        may certify the States as a compliance State in accordance with 
        paragraph (2).
            (5) Periodic review.--Using the criteria established under 
        subsection (1), the Director shall review the compliance with, 
        and enforcement of, the applicable mitigation measures by each 
        compliance State not less than once every 2 years and shall 
        recertify States as compliance States or certify States as 
        noncompliance States, as appropriate.
    (d) Assistance to Promote Compliance.--The Director shall provide 
assistance to each compliance State from amounts in the Self-Sustaining 
Mitigation Fund under section 104, to the extent that amounts for such 
assistance are made available under appropriation Acts. The amount of 
such assistance provided to each State shall be based on the State's 
need for hazard reduction as measured by the State's lack of 
preparedness efforts, the amount of hurricane insurance premiums 
collected in that State under the Primary Insurance Program, and the 
State's risk of future hurricanes. The State shall use any such 
financial assistance to support development and implementation of the 
State's mitigation plan, including education, enforcement, and 
mitigation economic incentives, such as low-interest loans for 
retrofitting.

SEC. 106. INCENTIVE TO PURCHASE HURRICANE COVERAGE IN HURRICANE ZONES.

    (a) Availability of Federally Related Mortgage Loans.--After the 
expiration of the 2-year period beginning upon the promulgation of 
final regulations under section 102 establishing the loss-reduction 
criteria, no federally related mortgage loan secured by residential 
property located in an hurricane zone may be made, increased, extended, 
or renewed unless the property securing the loan is insured by 
hurricane coverage or equivalent insurance from a private insurer, in 
the amount required under section 203(a)(6). The Director shall 
determine, in cooperation with the appropriate Federal agencies, the 
methods by which such mortgagors shall be required to present proof of 
compliance with the provisions of this subsection.
    (b) Exemption for State Properties.--Notwithstanding subsection 
(a), hurricane coverage (or equivalent private coverage) shall not be 
required for any State-owned property that is covered under a State 
policy of self-insurance adequate in the determination of the Director. 
The Director shall publish and periodically revise a list of States to 
which this subsection applies.

SEC. 107. EFFECT OF NONCOMPLIANCE WITH STATE MITIGATION PROGRAM.

    Each Federal agency or instrumentality responsible for the 
supervision, approval, regulation, or insuring any banks, savings and 
loans associations, or similar institutions shall, by regulation, 
prohibit such institutions from making, increasing, extending, or 
renewing a federally related mortgage loan secured by improved real 
estate or a mobile home located or to be located in a hurricane-prone 
State, if--
            (1) the State in which the property is located has been 
        certified as a noncompliance State under section 105; and
            (2) a presale inspection of the property securing the 
        loan--
                    (A) indicates that the property does not meet the 
                mitigation measures under the loss-reduction criteria 
                that would apply to the property if the State were a 
                compliance State; or
                    (B) has not been conducted.

SEC. 108. COORDINATION WITH OTHER PROGRAMS.

    In carrying out this Act, the Director shall consult with other 
departments and agencies of the Federal Government, and with 
interstate, State and local agencies having responsibilities regarding 
hurricanes, to ensure that the programs of such agencies and the 
Primary Insurance Program are mutually consistent.

SEC. 109. ANNUAL REPORT.

    The Director shall include in the annual report submitted to the 
President and the Congress pursuant to section 2-105 of Executive Order 
No. 12148 (50 U.S.C. App. 2251; relating to the Federal Emergency 
Management Agency), a description of the activities carried out under 
this Act and an evaluation of any progress achieved in such activities 
during the preceding year.

SEC. 110. REGULATIONS.

    (a) Director.--The Director may issue any regulations necessary to 
carry out this Act, pursuant to the provisions of subchapter II of 
chapter 5 of title 5, United States Code.
    (b) Federal Agencies.--Each Federal agency or instrumentality 
responsible for the supervision, approval, regulation, or insuring of 
banks, savings and loan associations, or similar institutions, shall, 
in consultation with the Director, issue any regulations necessary to 
carry out the responsibilities of the agency under this Act, pursuant 
to the provisions of subchapter II of chapter 5 of title 5, United 
States Code.

             TITLE II--NATIONAL HURRICANE INSURANCE PROGRAM

SEC. 201. AUTHORITY AND ORGANIZATION.

    (a) Establishment.--To carry out the purposes of this Act, the 
Director shall establish and carry out a national hurricane insurance 
program to provide insurance against loss resulting from physical 
damage to or loss of real property or personal property related 
thereto, in the United States, arising from any hurricane.
    (b) Implementation.--In carrying out the Primary Insurance Program, 
the Director shall arrange for participation, on other than a risk-
sharing basis, by private insurers, insurance agents and brokers, 
insurance adjustment organizations, and other persons. The Director may 
take any actions reasonably necessary and appropriate to carry out this 
title, including the making of contracts, the employment and 
compensation of persons, and the acquisition of real and personal 
property.
    (c) Insurance Practices.--Any actions of the Director under this 
title shall be consistent with standard insurance practices and 
generally accepted accounting, actuarial, and underwriting principles.
    (d) Jurisdiction of Courts.--Any actions by or against the Director 
(or employees of the Federal Emergency Management Agency) in connection 
with activities under this title shall be brought in the appropriate 
district court of the United States, except that any action by an 
insurer or reinsurer against the Director (or employees of the Federal 
Emergency Management Agency) shall be brought in the United States 
District Court for the District of Columbia.
    (e) Plan of Operation.--
            (1) Development.--The Director shall develop a plan of 
        operation under this subsection to ensure the fair, reasonable, 
        and equitable administration of the Insurance Fund, the 
        Reinsurance Fund, and other activities under this Act.
            (2) Contents.--The plan of operation shall set forth the 
        specific policy and programmatic details for operating the 
        Primary Insurance Program and the Reinsurance Program, and 
        shall include (A) all guidelines, criteria, definitions, 
        clarifications, and procedures necessary to carry out this Act, 
        (B) procedures for implementing the mitigation incentives under 
        section 206, and (C) standards for insurers to retain expense 
        allowances from premiums collected under this title.
            (3) Study of low-income rates.--In developing the plan of 
        operation, the Director shall consider options for charging 
        less than actuarial rates for residential property occupied by 
        low-income policyholders and may include in the plan any option 
        the Director considers necessary, appropriate, and practicable, 
        subject to the requirements under section 205(b).
            (4) Submission of draft to insurance committee.--Not later 
        than the expiration of the 12-month period beginning on the 
        date of the enactment of this Act, the Director shall submit a 
        draft of the plan of operation to the Insurance Committee 
        established under section 207. Before issuing any proposed 
        regulations under paragraph (5), the Director shall consider 
        any recommendations made by the Insurance Committee regarding 
        the draft plan of operation.
            (5) Regulations.--
                    (A) Proposed regulations.--Not later than the 
                expiration of the 18-month period beginning on the date 
                of the enactment of this Act, the Director shall issue 
                proposed regulations establishing the plan of operation 
                under this subsection, subject to the provisions of 
                subchapter II of chapter 5 of title 5, United States 
                Code. In issuing proposed regulations under this 
                paragraph, the Director shall cause to be published in 
                the Federal Register a description of any differences 
                between the recommendations of the Insurance Committee 
                and the proposed regulations (including the guidelines, 
                criteria, definitions, clarifications, and procedures 
                under the plan) developed by the Director. The 
                description shall contain, for each such difference, an 
                explanation of why the recommendations of the Insurance 
                Committee were not included in the proposed 
                regulations.
                    (B) Comments.--Upon issuance of the proposed 
                regulations under subparagraph (A), the Director shall 
                request comments from the Insurance Committee regarding 
                any changes to the regulations.
                    (C) Final regulations.--Not later than 6 months 
                after issuance of the proposed regulations, the 
                Director shall issue final regulations establishing the 
                plan of action.
                    (D) Subsequent changes.--Any changes to the plan of 
                operation after issuance of the final regulations 
                containing the plan under subparagraph (C) shall be 
                made pursuant to regulations issued in the manner 
                provided in subparagraphs (B) through (C).

SEC. 202. SCOPE OF PROGRAM.

    (a) Residential Properties.--In carrying out the Primary Insurance 
Program, the Director shall make hurricane coverage available only for 
residential property. The Director shall make such coverage available 
in hurricane-prone States.
    (b) Additional Types of Properties.--If, on the basis of studies 
and investigations undertaken and carried out and information received 
or exchanged under section 204, and such other information as may be 
necessary, the Director determines that it would be feasible to extend 
the Primary Insurance Program to cover property other than residential 
property, the Director may recommend to Congress that hurricane 
coverage under this title be made available to cover any types and 
classes of--
            (1) other properties in residential areas;
            (2) small business properties that are owned or leased and 
        operated by small business concerns;
            (3) religious properties;
            (4) agricultural properties;
            (5) properties occupied by primary nonprofit organizations; 
        and
            (6) properties owned by State and local governments and 
        agencies thereof.

SEC. 203. TERMS AND LIMITATIONS OF INSURANCE COVERAGE.

    (a) Terms.--Pursuant to the plan of operation established under 
section 201(e) and after consultation with the Insurance Committee, the 
Director shall establish, by regulation, the general terms and 
conditions of insurability for properties eligible for residential 
property insurance coverage under section 202. Such regulations shall 
meet the requirements of this section and may include--
            (1) the type and locational classification of such eligible 
        properties;
            (2) the nature of damage that may be covered by such 
        insurance;
            (3) appropriate minimum premiums;
            (4) appropriate loss-deductibles including variable 
        deductibles based on the existence of loss-reducing measures 
        that affect the risk of loss;
            (5) appropriate limits on coverage for each classification 
        of eligible properties;
            (6) appropriate minimum coverage amounts pursuant to 
        section 106(a) for each classification of eligible properties, 
        which may not be less than the outstanding principal balance of 
        the mortgage loan securing the property or the maximum coverage 
        limit for the property under paragraph (5), whichever is less; 
        and
            (7) any other terms and limitations relating to such 
        residential property insurance coverage that may be necessary 
        to carry out the purposes of this title.
    (b) Limitations.--Hurricane coverage under this title shall cover 
any damage to covered eligible property proximately caused by an 
hurricane and shall include coverage for debris removal and additional 
living expenses incurred as a result of direct damage to the premises 
by hurricane.
    (c) Eligibility of Coverage.--Any private insurer issuing 
residential property insurance coverage in hurricane-prone States may 
provide the coverage under this title, on behalf of the Federal 
Government, to residential property policyholders of the insurer. Any 
private insurer electing to participate in the Primary Insurance 
Program shall make coverage available to all residential property 
policyholders of the insurer in hurricane-prone States. Any private 
insurer electing to purchase the excess reinsurance coverage pursuant 
to title III shall make the coverage available, on behalf of the 
Federal Government, or at equivalent coverage and rates on their own 
behalf, to all residential property policyholders of the insurer.

SEC. 204. ESTABLISHMENT OF ACTUARIAL PREMIUM RATES.

    (a) Determination and Establishment of Rates.--The Director may 
undertake and carry out any studies and investigations and receive and 
exchange any information necessary to establish, and shall from time to 
time establish and prescribe, by regulation, on a State, territorial, 
or other appropriate basis, actuarial premium rates for types of 
classes of property eligible for residential property insurance 
coverage and the terms and conditions under which such rates apply.
    (b) Arrangements for Services.--In carrying out such studies, the 
Director shall consult with the Loss Mitigation Committee and the 
Insurance Committee and may enter into contracts, agreements, or other 
arrangements to utilize the services of the National Oceanic and 
Atmospheric Administration and other relevant Federal, State, and local 
governmental agencies, and other persons.
    (c) Considerations.--The Director shall establish actuarial rates 
under this section based on--
            (1) considerations of the risks involved, including--
                    (A) the severity and frequency of hurricanes by 
                hurricane zone and States in which the insured property 
                is located, including known differences in 
                meteorological conditions;
                    (B) the value of the insured property;
                    (C) the age of the structures located on the 
                insured property;
                    (D) the construction type of the structures located 
                on the insured property;
                    (E) the architectural type of the structures 
                located on the insured property;
                    (F) hurricane loss-reduction measures (including 
                measures described in section 102) employed in the 
                construction or retrofitting of residential property 
                structures; and
                    (G) any other criteria the Director considers 
                appropriate; and
            (2) application of accepted actuarial and rate-making 
        principles that reflect the risks involved, anticipated 
        insurance related administrative and operating costs, and loss 
        and loss-adjustment expense payments, and that provide for 
        adequate reserves.
    (d) Limitation.--Any rate classification system used by the 
Director to establish actuarial rates under this section shall be cost-
effective and shall not impose costs for the initial establishment or 
the subsequent administration of the rate plan that are 
disproportionate to the size of the insurance premiums.

SEC. 205. CHARGEABLE PREMIUM RATES.

    (a) Establishment.--On the basis of actuarial rates established 
under section 204 and any other information available to the Director, 
the Director shall from time to time, and after consultation with the 
Loss Mitigation Committee and the Insurance Committee, establish and 
prescribe, by regulation--
            (1) chargeable premium rates for any types and classes of 
        properties eligible for hurricane coverage; and
            (2) the terms and conditions under which such rates shall 
        apply.
    (b) Minimization of Cross-Subsidization.--To the maximum extent 
practicable and except as provided in subsection (c), chargeable 
premium rates shall be actuarial rates over an extended period of time 
and shall result in a minimum of cross-subsidization by reasonably 
reflecting the risk of damaging hurricanes in total and for each 
subclassification of policyholders. In setting and adjusting chargeable 
rates under this section, the Director shall provide that, over an 
extended period of time, expected expenditures from the Insurance Fund 
under section 208(c) do not exceed expected receipts of the Fund under 
section 208(b).
    (c) Low-Income Rates and Mitigation Incentives.--Pursuant to the 
plan of operation established under section 201(e), the Director may 
establish chargeable rates under this section for residential property 
occupied by low-income residents and residential property described in 
section 206(4), that are less than the actuarial rates established 
under section 204, but only to the extent that such rates do not 
prevent compliance with the last sentence of subsection (b).

SEC. 206. MITIGATION INCENTIVES.

    In providing hurricane coverage pursuant to the plan of operation, 
the Director shall provide for the following mitigation incentives:
            (1) Charging lower deductible amounts for such coverage for 
        any residential property meeting the hurricane building 
        standards established under the loss-reduction criteria.
            (2) Requiring under such coverage that repairs to 
        residential property sustaining hurricane damage in excess of 
        the deductible include, at a minimum, such mitigation measures 
        as the Director determines appropriate to protect against 
        further damage by hurricanes.
            (3) Requiring under such coverage that residential property 
        suffering damage in an amount greater than 50 percent the 
        replacement value of the property shall be rebuilt to at least 
        the minimum standards required under the loss-reduction 
        criteria under section 102 and applicable to the State.
            (4) Charging lower premiums or deductible amounts for such 
        coverage for any residential property located in a hurricane 
        zone in an hurricane-prone State that passes an hurricane 
        inspection that is required as a condition of sale, paid for by 
        the seller, and meets the requirements of section 102(b)(2)(F).

SEC. 207. HURRICANE INSURANCE AND REINSURANCE ADVISORY COMMITTEE.

    (a) Establishment.--There is hereby established an independent 
advisory committee within the executive branch to be known as the 
Hurricane Insurance and Reinsurance Advisory Committee. The Insurance 
Committee, its members, and its functions shall be separate from the 
Loss Mitigation Committee established under section 103. Except as 
otherwise provided in this section, the Committee shall be subject to 
the provisions of the Federal Advisory Committee Act.
    (b) Membership.--
            (1) Appointed members.--The Insurance Committee shall be 
        composed of 5 members appointed by the President. The members 
        shall be chosen from among citizens of the United States and 
        shall include--
                    (A) 2 individuals who represent the interests of 
                private insurers;
                    (B) 1 individual who represents the interests of 
                private reinsurers;
                    (C) 1 individual who represents the interests of 
                insurance agents; and
                    (D) 1 individual who is a State insurance 
                regulator.
            (2) Ex officio member.--Notwithstanding paragraph (1), the 
        Chairman of the Loss Mitigation Committee under section 103 
        shall serve as an ex officio member of the Insurance Committee.
    (c) Vacancies.--A vacancy in the Insurance Committee shall be 
filled in the manner in which the original appointment was made.
    (d) Chairman.--The President shall designate a chairman of the 
Insurance Committee from among members selected for appointment to the 
Committee.
    (e) Timing.--The President shall appoint the members of the 
Insurance Committee not later than 180 days after the date of the 
enactment of this Act.
    (f) Functions.--The Insurance Committee shall review the draft plan 
of operation established under section 201(e). Not later than 120 days 
after receiving the draft plan of operation, the Committee shall submit 
to the Director written comments and recommendations for any changes to 
the plan. After final regulations establishing the plan of operation 
have been issued, the Committee shall submit a written report not less 
than once every 180 days to the Director and the Congress evaluating 
the operations of the Primary Insurance Program and the Reinsurance 
Program and making recommendations for any actions relating to such 
programs. The Committee shall respond as soon as practicable to all 
requests of the Director made pursuant to subsection (g) or section 
201(e)(5)(B).
    (g) Responsibilities of the Director.--The Director shall fully 
cooperate with the Insurance Committee and provide the Committee with 
access to personnel and information as the Committee considers 
necessary to carry out its functions. The Director shall request 
comments from the Committee on any questions regarding operation of the 
Primary Insurance Program or Reinsurance Program.

SEC. 208. RESIDENTIAL PROPERTY INSURANCE FUND.

    (a) Establishment.--There is hereby established in the Treasury of 
the United States the Residential Property Insurance Fund for the 
purpose of carrying out the Primary Insurance Program.
    (b) Credits.--The Insurance Fund shall be credited with--
            (1) insurance premiums received by the Director under the 
        Primary Insurance Program (less any amounts credited to the 
        Self-Sustaining Mitigation Fund under section 104) and interest 
        earned on premiums, as provided in subsection (e) of this 
        section;
            (2) any amounts borrowed under section 209;
            (3) any amounts appropriated to the Insurance Fund; and
            (4) any interest earned on amounts invested under 
        subsection (d).
    (c) Uses.--Amounts in the Insurance Fund shall be available for--
            (1) payments for losses and loss adjustment expenses under 
        subsection (f);
            (2) payments for insurance company expense allowances paid 
        (including agents' commissions, State premium taxes, and 
        companies' administration expenses);
            (3) administrative expenses of the Primary Insurance 
        Program; and
            (4) interest payments on amounts borrowed under section 209 
        for additional losses, if any.
    (d) Investment.--The Director may request the Secretary of Treasury 
to invest any amount in the Insurance Fund in obligations issued or 
guaranteed by the United States, as the Director considers appropriate.
    (e) Insurance Payments.--Private insurers issuing hurricane 
coverage shall remit the premiums collected, less the insurers' expense 
allowances, to the Director on a quarterly basis not later than 30 days 
after the end of the calendar quarter, in accordance with procedures 
prescribed in the plan of operation. Any premiums collected and to be 
submitted to the Director shall be deposited in a separate, interest-
bearing account established by the insurer and any interest collected 
on any such account shall be remitted to the Director with the premiums 
on a quarterly basis.
    (f) Reimbursement of Insurers.--
            (1) Requirement and procedure.--The Director shall 
        reimburse private insurers providing hurricane coverage from 
        amounts made available from the Insurance Fund. Reimbursement 
        shall be made for all claim payments in an amount up to and 
        including the policy limits of coverage and for all loss 
        adjustment expenses paid as a result of hurricanes, as follows:
                    (A) The Director shall reimburse insurers for all 
                claim payments and loss adjustment expense payments 
                made pursuant to obligations of the Federal Government. 
                To the extent that reimbursement is obtained by private 
                insurers for losses also covered under the Excess 
                Reinsurance Program, the insurer shall reimburse the 
                Insurance Fund accordingly.
                    (B) If the gross reimbursements exceed amounts 
                available in the Insurance Fund, a combination of 
                amounts borrowed from the industry under subparagraph 
                (C) and amounts borrowed from the Treasury of the 
                United States under section 209 shall cover the 
                additional losses.
                    (C) The industry share under subparagraph (B) shall 
                be equivalent to 20 percent of the additional losses. 
                Each private insurer issuing hurricane coverage shall 
                be assessed for the industry participation in the 
                additional losses based upon the proportion that such 
                insurer's written premiums for hurricane coverage in 
                each State in which the hurricane events occurred bear 
                to the total written premiums for hurricane coverage 
                from all insurers in each State in which the same 
                events occurred, based on the most recently published 
                annual report of the Federal Emergency Management 
                Agency. Assessments under this subparagraph may be 
                reinsured under title III.
            (2) Regulations.--The Director shall issue regulations 
        establishing the general method or methods by which proved and 
        approved claims for losses may be adjusted and paid for damages 
        covered by hurricane coverage. The claim practices of the 
        Insurance Fund shall be subject to, and conform with, any 
        applicable State insurance unfair trade practices statutes. 
        Judicial review of a decision of the Director regarding 
        reimbursement of a private insurer shall be available pursuant 
        to section 201(d).
    (g) Obligations.--Any hurricane insurance coverage provided under 
the Primary Insurance Program shall constitute an obligation, in 
accordance with the provisions of this title, of the United States. The 
full faith and credit of the United States is hereby pledged for the 
full payment and performance of such obligations, subject to the 
provisions of subsection (f)(1)(C). The private insurers participating 
in the program shall bear no risk and shall assume no liability for the 
hurricane coverage provided through the program except as provided in 
subsection (f)(1)(C).
    (h) Status of Fund.--Any premiums collected for deposit in the 
Insurance Fund shall be exempt from all taxation now or hereafter 
imposed by the United States, by any territory, dependency or 
possession thereof, or by the State, county, municipality, or local 
taxing authority, except that the insurance policies issued by or in 
conjunction with the Federal Government pursuant to this title shall be 
subject, where applicable, to State insurance premium taxes.

SEC. 209. BORROWING FROM TREASURY.

    (a) Authority.--To the extent that the accumulated assets, 
including any return on investments, in the Insurance Fund are 
insufficient to pay claims and expenses, the Director shall issue, from 
time to time, to the Secretary of the Treasury, notes and other 
obligations to cover the insufficiency. The amounts of such obligations 
outstanding at any one time shall not exceed $25,000,000,000 (or such 
greater amount as may be approved by the President).
    (b) Interest Rate.--Obligations under subsection (a) shall bear 
interest at a rate determined by the Secretary of the Treasury, taking 
into consideration the current average market yield on outstanding 
marketable obligations of the United States of comparable maturities.
    (c) Deposits.--Any amounts borrowed under this section shall be 
deposited in the Insurance Fund.
    (d) Repayment.--The Director shall provide for the recovery of any 
amounts that are borrowed under this section and repaid, including 
interest on the borrowed funds, through future chargeable premium rates 
for hurricane coverage, pursuant to the plan of operation. The 
Secretary of the Treasury may grant extensions in repayment schedules 
that the Director determines are necessary.

     TITLE III--NATIONAL HURRICANE EXCESS LOSS REINSURANCE PROGRAM

SEC. 301. ESTABLISHMENT AND TERMS OF COVERAGE.

    (a) Establishment.--
            (1) Initial availability.--Upon the issuance of final 
        regulations establishing the plan of operation under section 
        201(e), the Director shall establish and carry out a national 
        hurricane excess loss insurance program to make available, to 
        any private insurer participating in the Primary Insurance 
        Program or any private reinsurer which reinsures any such 
        private insurer, reinsurance coverage for direct and indirect 
        losses that are not eligible for hurricane coverage under title 
        II and arise from a hurricane.
            (2) Expanded availability.--Upon the expiration of the 2-
        year period beginning upon issuance of the regulations referred 
        to in paragraph (1), the Director shall make available, to any 
        private insurer or private reinsurer, excess reinsurance 
        coverage for direct and indirect losses that are not eligible 
        for hurricane coverage under title II and arise from an 
        hurricane. Any private insurer or reinsurer participating in 
        the Primary Insurance Program under title II shall purchase the 
        excess reinsurance coverage under this title.
    (b) Liability.--Excess reinsurance under this title shall be made 
available subject to the following requirements:
            (1) Industry.--The Reinsurance Fund under section 305 shall 
        be liable with respect to such reinsurance in the event of an 
        hurricane after, as determined by the Director, the insurance 
        industry has incurred losses and loss adjustment expenses from 
        the single event that are covered under the lines described in 
        section 302(a) and that exceed 8 percent of the industry 
        countrywide subject net written premium.
            (2) Federal government.--After the insurance industry has 
        sustained losses described in paragraph (1), the Federal 
        Government shall be liable to an individual private insurer or 
        private reinsurer for 95 percent of qualifying losses in excess 
        of 8 percent of the private insurer's or private reinsurer's 
        countrywide subject net written premium.
    (c) Qualifying Losses.--For the purposes of subsection (b), the 
term ``qualifying losses'' means losses and loss adjustment expenses 
incurred by a private insurer or private reinsurer from an hurricane 
event, reduced--
            (1) by any collectible reinsurance recoverable; and
            (2) by a factor for uncollectible reinsurance recoverable 
        determined as follows:
                    (A) If the percentage of unrecoverable reinsurance 
                arising from the event to total reinsurance (not 
                including hurricane excess loss reinsurance purchased 
                under this title) with respect to the event is over 0 
                percent but not over 5 percent, 0 percent of 
                unrecoverable reinsurance.
                    (B) If the percentage of unrecoverable reinsurance 
                arising from the event to total reinsurance (not 
                including hurricane excess loss reinsurance purchased 
                under this title) with respect to the event is over 5 
                percent but not over 15 percent, 33.33 percent of 
                unrecoverable reinsurance over 5 percent but not over 
                15 percent.
                    (C) If the percentage of unrecoverable reinsurance 
                arising from the event to total reinsurance (not 
                including hurricane excess loss reinsurance purchased 
                under this title) with respect to the event is over 15 
                percent but not over 25 percent, the amount determined 
                under subparagraph (B) plus 66.66 percent of 
                unrecoverable reinsurance over 15 percent but not over 
                25 percent.
                    (D) If the percentage of unrecoverable reinsurance 
                arising from the event to total reinsurance (not 
                including hurricane excess loss reinsurance purchased 
                under this title) with respect to the event is over 25 
                percent, the amount determined under subparagraph (C) 
                plus 100 percent of unrecoverable reinsurance over 25 
                percent.
    (d) Eligibility of Individual Insurers.--
            (1) In general.--Notwithstanding the provisions of 
        subsections (b) and (c), a private insurer or private reinsurer 
        shall be eligible for excess loss reinsurance coverage and 
        reimbursement from the Federal Government if the insurer or 
        reinsurer has incurred losses, prior to any reinsurance 
        coverage, from a single event that are included in the lines 
        described in section 302(a) and that exceed 50 percent of the 
        insurer's countrywide subject direct written premium or the 
        insurer's countrywide subject net written premium, whichever is 
        greater.
            (2) Liability.--After a private insurer or private 
        reinsurer covered under the Reinsurance Program has sustained 
        losses described in paragraph (1), the Federal Government shall 
        be liable for 95 percent of qualifying losses, as defined in 
        subsection (c), in excess of 20 percent of the private 
        insurer's or reinsurer's countrywide subject net written 
        premium.
            (3) Limitation on liability.--Notwithstanding paragraphs 
        (1) and (2), the Federal Government shall not be liable under 
        this subsection in excess of 200 percent of a private insurer's 
        countrywide subject direct net written premium and 600 percent 
        of a private reinsurer's countrywide subject assumed net 
        written premium. In the event a company is both a private 
        insurer and a private reinsurer, the Federal Government shall 
        not be liable under this subsection in excess of 200 percent of 
        the company's subject direct net written premium and 600 
        percent of the company's subject assumed net written premium. 
        Intracompany or intragroup reinsurance arrangements or 
        contracts shall not be considered as reinsurance in the 
        calculation of insurance and reinsurance subject direct or 
        subject assumed net written premium under this subsection.
    (e) Definitions.--For purposes of this title:
            (1) The term ``subject assumed net written premium'' means 
        premiums received from other insurance companies for 
        reinsurance less ceded reinsurance, for all lines of coverage 
        described in section 302.
            (2) The term ``subject direct net written premium'' means 
        the aggregate amount of recorded originated premiums, other 
        than reinsurance, issued during the year whether collected or 
        not at the close of the year (plus retrospective audit premium 
        collections) after deducting all return premiums and ceded 
        reinsurance premiums, for all lines of coverage described in 
        section 302.
            (3) The term ``subject net written premium'' means direct 
        and reinsurance premiums received by private insurers and 
        private reinsurers, less premiums paid for ceded reinsurance, 
        for all lines of coverage described in section 302.
            (4) The term ``unrecoverable reinsurance'' means 
        reinsurance proceeds due and payable in accordance with the 
        terms of a reinsurance contract that are not paid within 12 
        months of the due date.

SEC. 302. LINES OF INSURANCE.

    (a) Covered Lines for Insurers.--The Director shall provide excess 
loss reinsurance coverage under this title for all of the following 
lines of insurance appearing in the National Association of Insurance 
Commissioners Fire and Casualty Annual Statement filed with the 
applicable State department of insurance:
            (1) Fire.
            (2) Allied Lines.
            (3) Farmowner's Multiple Peril.
            (4) Homeowner's Multiple Peril.
            (5) Commercial Multiple Peril.
            (6) Ocean Marine.
            (7) Inland Marine.
            (8) Earthquake.
            (9) Workers Compensation.
            (10) Other Liability.
            (11) Aircraft (All Perils).
            (12) Glass.
            (13) Burglary and Theft.
            (14) Boiler and Machinery.
            (15) Reinsurance.
The Director shall provide that any private insurer or reinsurer 
purchasing excess loss reinsurance coverage under this title purchase 
coverage for all of covered lines of insurance described in this 
subsection and in all affected hurricane zones within a hurricane-prone 
State.
    (b) Covered Lines for Reinsurers.--The Federal Government shall 
provide excess loss reinsurance coverage to private reinsurers for all 
of the lines of insurance referred to in subsection (a) as well as 
other lines of insurance appearing in the National Association of 
Insurance Commissioners Fire and Casualty Annual Statement, as 
determined by the Director in the plan of operation and in consultation 
with the Insurance Committee.

SEC. 303. PREMIUM RATES.

    (a) Establishment.--The Director shall establish the rates for 
excess loss reinsurance coverage and adjust the rates when necessary, 
using generally accepted actuarial principles. To the maximum extent 
practicable, such rates shall be actuarial rates that produce a minimum 
degree of cross-subsidization over an extended period of time 
consistent with the infrequency of catastrophic hurricanes. In setting 
and adjusting the rates, the Director shall provide that, over an 
extended period of time, expected expenditures from the Reinsurance 
Fund under section 305(c) do not exceed expected receipts of the 
Reinsurance Fund under section 305(b).
    (b) Considerations.--In setting or adjusting such rates, the 
Director shall provide for a minimum degree of cross-subsidization 
among classes of reinsureds by reasonably reflecting the differences in 
risk of and vulnerability to loss from hurricanes that would be subject 
to payment from the Reinsurance Fund, giving consideration to--
            (1) the premium volume of the reinsured by line of 
        insurance described in section 302(a) by hurricane zone or 
        State in which the risks insured or reinsured by the reinsured 
        are located; and
            (2) the proportion of the total expected amount of payments 
        for qualifying losses and loss adjustment expenses by line of 
        insurance described in section 302(a) by hurricane zone or 
        State expected for each reinsured.
    (c) Limitation.--Any rate classification system used by the 
Director under this section shall be cost-effective and shall not 
impose costs for the initial establishment or the subsequent 
administration of the rating plan that are disproportionate to the size 
of the premiums.
    (d) Quarterly Payment.--Premiums for excess loss reinsurance 
coverage under this title shall be paid to the Reinsurance Fund on a 
quarterly basis.

SEC. 304. REINSURANCE CONTRACTS.

    (a) Terms.--Contracts for excess loss reinsurance coverage issued 
by the Director under this title shall contain terms and conditions 
similar to those generally used in private catastrophic reinsurance 
contracts.
    (b) Judicial Review.--Judicial review of a decision of the Director 
regarding payment of claims under a contract for excess loss 
reinsurance coverage under this title shall be made available pursuant 
to section 201(d).
    (c) Obligations.--All contracts for excess loss reinsurance 
coverage issued under this title shall constitute obligations, in 
accordance with the terms of such reinsurance, of the United States. 
The full faith and credit of the United States is hereby pledged for 
the full payment and performance of such obligations.
    (d) Single Entities.--Any private insurance and reinsurance 
companies under the same ownership or management, as determined under 
the plan of operation, shall be considered a single entity for purposes 
of this title.

SEC. 305. REINSURANCE FUND.

    (a) Establishment.--There is hereby established in the Treasury of 
the United States the Reinsurance Fund for the purposes of carrying out 
the Reinsurance Program.
    (b) Credits of Fund.--The Reinsurance Fund shall be credited with--
            (1) any reinsurance premiums received by the Director under 
        the Reinsurance Program;
            (2) any amounts borrowed under section 306; and
            (3) any amounts earned under subsection (d).
    (c) Use of Fund--The Reinsurance Fund shall be available to the 
Director for--
            (1) payments for qualifying losses and loss adjustment 
        expenses under the Reinsurance Program under this title;
            (2) administrative expenses of carrying out the Reinsurance 
        Program; and
            (3) interest payments on amounts borrowed under section 
        306, if any.
    (d) Investment.--The Director shall request the Secretary of the 
Treasury to invest any amounts in the Reinsurance Fund in obligations 
issued or guaranteed by the United States, as the Director considers 
appropriate.
    (e) Status of Funds.--Any reinsurance premiums collected for 
deposit in the Reinsurance Fund shall be exempt from all taxation now 
or hereafter imposed by the United States, by any territory, dependency 
or possession thereof, or by any State, county, municipality, or local 
taxing authority, except that the reinsurance policies issued by or in 
conjunction with the Federal Government pursuant to this title shall be 
subject, where applicable, to State insurance premium taxes.

SEC. 306. BORROWING FROM TREASURY.

    (a) Authority.--To the extent that the accumulated assets, 
including any return on investments, in the Reinsurance Fund are 
insufficient to pay claims and expenses, the Director shall issue, from 
time to time, to the Secretary of the Treasury, notes and other 
obligations to cover the insufficiency. The amounts of such obligations 
outstanding at any one time shall not exceed $25,000,000,000 (or such 
greater amount as may be approved by the President).
    (b) Interest Rate.--Obligations under subsection (a) shall bear 
interest at a rate determined by the Secretary of the Treasury, taking 
into consideration the current average market yield on outstanding 
marketable obligations of the United States of comparable maturities.
    (c) Deposits.--Any amounts borrowed by the Director under this 
section shall be deposited in the Reinsurance Fund.
    (d) Repayment.--The Director shall provide for the recovery of any 
amounts that are borrowed under this section and repaid, including 
interest on the borrowed funds, through future chargeable premium rates 
for excess loss reinsurance coverage under this title, pursuant to the 
plan of operation. The Secretary of the Treasury may grant extensions 
in repayment schedules that the Director determines are necessary.

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