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[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[S. 1350 Introduced in Senate (IS)]

103d CONGRESS
  1st Session
                                S. 1350

To amend the Earthquake Hazards Reduction Act of 1977 to provide for an 
expanded Federal program of hazard mitigation and insurance against the 
      risk of catastrophic natural disasters, such as hurricanes, 
      earthquakes, and volcanic eruptions, and for other purposes.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

               August 4 (legislative day, June 30), 1993

Mr. Inouye (for himself, Mr. Dodd, Mr. Stevens, Mr. Akaka, Mr. Gorton, 
Mr. Murkowski, and Mr. Simon) introduced the following bill; which was 
  read twice and referred to the Committee on Commerce, Science, and 
                             Transportation

_______________________________________________________________________

                                 A BILL

 
To amend the Earthquake Hazards Reduction Act of 1977 to provide for an 
expanded Federal program of hazard mitigation and insurance against the 
      risk of catastrophic natural disasters, such as hurricanes, 
      earthquakes, and volcanic eruptions, 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.

    This Act may be cited as the ``Natural Disaster Protection Act of 
1993''.

SEC. 2. FINDINGS.

    Section 2 of the Earthquake Hazards Reduction Act of 1977 (42 
U.S.C. 7701) is amended by adding at the end the following new 
paragraphs:
            ``(12) In addition to earthquakes, other catastrophic 
        natural disasters, such as major hurricanes and volcanic 
        eruptions, will strike the United States in the future and will 
        inflict substantial long-term consequences in terms of deaths, 
        injuries, property damages, and social and economic losses.
            ``(13) The country, and especially States, are ill-equipped 
        to respond to catastrophic natural disasters.
            ``(14) Billions of dollars in taxpayer-supported government 
        assistance will be paid to rebuild following catastrophic 
        natural disasters.
            ``(15) Hazard mitigation can significantly and cost-
        effectively reduce the long-term consequences of natural 
        disasters, especially for those least capable of helping 
        themselves, such as the elderly.
            ``(16) Hazard mitigation measures, such as building codes, 
        have proved effective in reducing deaths, injuries, and 
        property damage caused by catastrophic natural disasters.
            ``(17) Hazard mitigation measures, however, are not in 
        place in many high-hazard areas and are not adequately enforced 
        where they are in place.
            ``(18) First response capability, such as fire fighting, 
        emergency medical assistance, and search and rescue personnel, 
        is as important as hazard mitigation in lessening the impact of 
        natural disasters.
            ``(19) Millions of Americans do not have adequate insurance 
        coverage to protect their property from catastrophic natural 
        disasters.
            ``(20) Recent catastrophic disasters (e.g., Hurricanes 
        Andrew and Iniki) have inflicted substantial losses on private 
        insurance companies which has limited their ability to write 
        new coverages in the stricken regions and other parts of the 
        United States.
            ``(21) These recent natural disasters have also inflicted 
        substantial losses on State and local governments, severely 
        straining their budgets.
            ``(22) The recent flooding in the upper Mississippi River 
        system has underscored the need to improve the participation in 
        the National Flood Insurance Program, an existing Federal 
        insurance program that should be evaluated for possible 
        coordination with and inclusion in the multihazard program 
        created by the Natural Disaster Protection Act of 1993.''.

SEC. 3. PURPOSE.

    Section 3 of the Earthquake Hazards Reduction Act of 1977 (42 
U.S.C. 7702) is amended--
            (1) by inserting ``(a) Earthquake Hazard Reduction.--'' 
        before ``It is the purpose''; and
            (2) by adding at the end the following new subsection:
    ``(b) Natural Disaster, Relief, and Insurance.--It is the purpose 
of the Congress to reduce deaths, injuries, and property damage from 
natural disasters through a hazard mitigation program and to ensure 
that all Americans in all 50 States have adequate multihazard insurance 
coverage. The objectives of the program shall include--
            ``(1) the building of safer structures and the upgrading of 
        existing buildings and lifelines;
            ``(2) the enhancement of State and local community 
        emergency management;
            ``(3) the improvement of State and local emergency first 
        response capability, including the development of standards and 
        guidelines for staffing, operations, and training;
            ``(4) the forging of a partnership with the Federal 
        Government that makes the States and localities ultimately 
        responsible for implementing and enforcing multihazard 
        mitigation measures and emergency management;
            ``(5) the creation of a self-sustaining funding mechanism 
        to help States pay for mitigation efforts;
            ``(6) the provision of coverage for natural perils together 
        with standard insurance policies;
            ``(7) the establishment of premium rates based on risk so 
        that if the State or locality has no discernible hazard for a 
        particular peril, little or no premium would be collected for 
        that risk;
            ``(8) the assurance that the insurance industry makes a 
        substantial contribution in paying losses and continues to 
        provide coverage following a catastrophic natural disaster;
            ``(9) the employment of the insurance industry as part of a 
        private-sector partnership with the government to speed 
        rebuilding following a catastrophic natural disaster; and
            ``(10) the saving of taxpayer money through a self-funded 
        hazard mitigation and insurance program that will reduce 
        reliance on government disaster assistance.''.

SEC. 4. DEFINITIONS.

    Section 4 of the Earthquake Hazards Reduction Act of 1977 (42 
U.S.C. 7703) is amended by adding at the end the following new 
paragraphs:
            ``(8) The term `critical facilities' means schools and 
        structures essential to emergency services necessary for post-
        natural disaster recovery, including--
                    ``(A) hospitals;
                    ``(B) fire and police facilities;
                    ``(C) temporary shelters; and
                    ``(D) emergency operating and preparedness centers.
            ``(9) The term `Director' means the Director of the Federal 
        Emergency Management Agency.
            ``(10) The term `disaster-prone State' means a State 
        determined by the Director pursuant to section 201 to be a 
        hurricane-prone, windstorm-prone, earthquake-prone, volcanic 
        eruption-prone, or flood-prone State.
            ``(11) The term `earthquake' means any shaking or trembling 
        of the crust of the Earth caused by underground seismic forces 
        or by breaking and shifting of rock beneath the surface.
            ``(12) The term `earthquake-prone State' means a State 
        determined by the Director pursuant to section 201 to have an 
        exposure to the earthquake peril.
            ``(13) 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.
            ``(14) The term `Federal assistance' means any form of 
        financial aid, including grants, loans, loan-guarantees, 
        subsidies, insurance, and payments, provided by a Federal 
        agency.
            ``(15) The term `first responder' means fire fighting, 
        police, and emergency medical personnel with the statutory 
        authority to engage in, and provide immediate emergency 
        response services.
            ``(16) The term `flood' or `flooding' means a general and 
        temporary condition of partial or complete inundation of 
        normally dry land areas from the overflow of inland or tidal 
        waters or the unusual and rapid accumulation of runoff of 
        surface waters from any source.
            ``(17) The term `flood-prone State' means a State 
        determined by the Director pursuant to section 201 to have an 
        exposure to the flood peril.
            ``(18) The term `hurricane' means a non-frontal, warm core, 
        low pressure atmospheric system having a definite organized 
        circulation, including any associated windstorm events 
        occurring within 72 hours before and after the hurricane, with 
        sustained wind speeds of 74 miles per hour or greater and 
        officially declared to a be a hurricane by the National 
        Hurricane Center.
            ``(19) The term `hurricane-prone State' means a State 
        determined by the Director pursuant to section 201 to have an 
        exposure to the hurricane peril.
            ``(20) The term `hurricane zone' means an area within a 
        State identified by the Director as being subject to major risk 
        from the hurricane peril.
            ``(21) The term `insurance industry' means all private 
        insurers and private reinsurers.
            ``(22) The term `local community' means a political 
        subdivision of a State which has zoning and building code 
        jurisdiction over a particular area which is exposed to the 
        hurricane, windstorm, earthquake, volcanic eruption, or flood 
        peril.
            ``(23) The term `multihazard coverage' means policies, 
        riders, or endorsements of insurance issued on Federal paper 
        pursuant to subtitle A of title III that provide indemnity, in 
        whole or in part, for the loss, destruction, or damage of 
        residential property.
            ``(24) The term `ordinance or law coverage' means insurance 
        coverage for the increased cost of construction to repair or 
        rebuild structures and the cost of demolition due to the 
        enforcement of any ordinance or law, such as building codes.
            ``(25) The terms `private insurer' and `private reinsurer' 
        mean any insurer or reinsurer that is--
                    ``(A)(i) licensed or admitted to write property and 
                casualty insurance or reinsurance within a State; or
                    ``(ii) a branch of an insurer or reinsurer 
                organized or incorporated in a country other than the 
                United States that is entered through and licensed by a 
                State to conduct insurance or reinsurance business; or
                    ``(B) 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.
            ``(26) The term `residential property' means--
                    ``(A) a 1- to 4-family residential structure 
                (including a mobile or manufactured home) and the 
                personal property therein; and
                    ``(B) personal property of the occupants of a 
                residential structure (including a condominium, 
                cooperative, and apartment structure).
            ``(27) The term `seismic zone' means an area within a State 
        identified by the Director as being subject to major risk from 
        earthquake peril.
            ``(28) The term `State residual insurance pooling program' 
        means any State-authorized joint underwriting or joint 
        reinsurance association, risk pool, residual market mechanism, 
        or other type of State-sanctioned entity providing property 
        insurance coverage against hurricanes, earthquakes, volcanic 
        eruptions, or tsunamis.
            ``(29) The term `substantially modified building 
        construction' means an addition or improvement to an existing 
        structure that constitutes at least a 50 percent increase in 
        the overall value of the structure.
            ``(30) The term `supplemental losses' means claim and loss 
        adjustment expense payments for the multihazard coverage issued 
        pursuant to subtitle A of title III that exceed the accumulated 
        amounts in the Primary Insurance Program Fund.
            ``(31) The term `tsunami' means an ocean wave generated by 
        underwater disturbances in the crust of the Earth, primarily 
        earthquakes and submarine volcanic eruptions.
            ``(32) The term `volcanic eruption' means the expulsion, as 
        a result of natural causes, of molten rock, rock fragments, 
        gases, ashes, mud, lava flows, and other natural substances 
        through an opening in the crust of the Earth.
            ``(33) The term `volcanic eruption-prone State' means a 
        State determined by the Director pursuant to section 201 to 
        have an exposure to the volcanic eruption peril.
            ``(34) The term `volcanic zone' means an area within a 
        State identified by the Director as being subject to major risk 
        from the volcanic eruption peril.
            ``(35) The term `windstorm' means an atmospheric 
        disturbance marked by high velocity movements of air, such as a 
        tornado, but does not include a hurricane.
            ``(36) The term `windstorm-prone State' means a State 
        determined by the Director pursuant to section 201 to have an 
        exposure to the windstorm peril.''.

SEC. 5. CONFORMING AMENDMENTS.

    The Earthquake Hazards Reduction Act of 1977 (42 U.S.C. 7701 et 
seq.) is amended--
            (1) in section 4(2)--
                    (A) by inserting after ``The term `Program''' the 
                following: ``, as used in title I,''; and
                    (B) by striking ``section 5'' and inserting 
                ``section 101'';
            (2) by inserting after section 4 the following heading:

           ``TITLE I--EARTHQUAKE HAZARDS REDUCTION PROGRAM'';

            (3) by redesignating sections 5, 6, 7, 8, 9, 10, 11, and 12 
        as sections 101, 102, 103, 104, 105, 106, 107, and 108 
        respectively;
            (4) in sections 101, 103, 105, 106, and 108 (as 
        redesignated by paragraph (3)), by striking ``this Act'' each 
        place it appears and inserting ``this title''; and
            (5) in section 108 (as redesignated by paragraph (3))--
                    (A) by striking ``sections 5 and 6'' each place it 
                appears and inserting ``sections 101 and 102''; and
                    (B) by striking ``section 11'' and inserting 
                ``section 107''.

SEC. 6. MULTIHAZARD MITIGATION PROGRAM.

    The Earthquake Hazards Reduction Act of 1977 (42 U.S.C. 7701 et 
seq.) is amended by adding at the end the following new title:

               ``TITLE II--MULTIHAZARD MITIGATION PROGRAM

``SEC. 201. IDENTIFICATION AND DESIGNATION OF DISASTER-PRONE STATES.

    ``(a) Initial Identification.--The Director shall identify States 
that are prone to damages from--
            ``(1) hurricanes;
            ``(2) windstorms;
            ``(3) earthquakes;
            ``(4) volcanic eruptions; and
            ``(5) flooding.
    ``(b) Designation by Peril.--Not later than 1 year after the date 
of enactment of the Natural Disaster Protection Act of 1993, the 
Director shall--
            ``(1) designate the States identified pursuant to 
        subsection (a) as disaster-prone States;
            ``(2) separately designate States as hurricane-prone, 
        windstorm-prone, earthquake-prone, volcanic eruption-prone, or 
        flood-prone, as appropriate; and
            ``(3) publish a list of the designated States in the 
        Federal Register and in widely circulated local newspapers in 
        the applicable States.
    ``(c) Final Notification.--The designation for each State under 
subsection (b) shall become final for the purposes of this Act 6 months 
after the date on which the designations are published in the Federal 
Register. The Director shall notify the chief executive officer of each 
designated State, in writing, before the expiration of the 6-month 
period.
    ``(d) Ongoing Designation and Notification.--Based upon any 
additional hurricane, windstorm, seismic, volcanic, or flood 
information that from time-to-time becomes available, the Director may 
designate a State (not designated under subsection (b)) having an 
exposure to hurricane, windstorm, earthquake, volcanic eruption, or 
flood perils. Any such State shall be designated pursuant to the terms 
of subsection (b) and notified pursuant to terms of subsection (c).
    ``(e) Appeal.--
            ``(1) In general.--A State aggrieved by a final 
        determination as a disaster-prone State, pursuant to subsection 
        (c) or (d), may, after exhausting administrative remedies, 
        appeal the determination to any United States district court 
        for a district located within the State, not later than 60 days 
        after receipt of notice of such determination.
            ``(2) Scope of review.--The scope of review by the court 
        shall be as provided under chapter 7 of title 5, United States 
        Code.
            ``(3) Effect of determination during pendency of appeal.--
        During the pendency of an appeal under this subsection, a 
        determination of the Director shall be effective and final for 
        the purposes of this title unless stayed by the court for good 
        cause shown.

``SEC. 202. BUILDING AND SAFETY STANDARDS.

    ``(a) Multihazard Building and Safety Codes.--The Governor of each 
State designated as a hurricane-prone State, a windstorm-prone State, 
or an earthquake-prone State, shall--
            ``(1) for all new and substantially modified building 
        construction in that State, adopt the relevant natural disaster 
        hazard mitigation portions of the newest edition of the 
        National Building Code, the Standard Building Code, or the 
        Uniform Building Code, and other relevant building and housing 
        codes and standards, including the national consensus safety 
        codes of the National Fire Protection Association (the National 
        Electrical Code, the National Fuel Gas Code, the Flammable and 
        Combustible Liquids Code, and the Standard for the Storage and 
        Handling of Liquified Petroleum Gases); or
            ``(2) certify that the local communities of the State have 
        adopted and are enforcing building codes which meet or exceed 
        the minimum natural disaster hazard mitigation portions of any 
        of the 3 model building codes and other building and housing 
        codes and standards described in paragraph (1) for all new and 
        substantially modified building construction in that State.
    ``(b) Flood Performance Standards.--Each State designated as a 
flood-prone State shall--
            ``(1) adopt the relevant flood minimum performance 
        standards, flood-proofing, and other flood protection measures 
        authorized under the National Flood Insurance Act of 1968 (42 
        U.S.C. 4001 et seq.), that minimize flood damage for new and 
        substantially modified building construction located in flood-
        prone local communities; or
            ``(2) certify that the flood-prone local communities of the 
        State have adopted and are enforcing the minimum performance 
        standards described in paragraph (1) for new and substantially 
        modified building construction.

``SEC. 203. STATE MITIGATION PLANS.

    ``(a) General Authority.--Each State designated as a disaster-prone 
State shall--
            ``(1) develop a mitigation plan that establishes the plan 
        of the State with accompanying schedules for improving the 
        ability of the State to reduce the hazards of future natural 
        disasters, such as hurricanes, windstorms, earthquakes, 
        volcanic eruptions, or floods; or
            ``(2) designate an existing mitigation plan that includes 
        the processes described in subsection (b).
    ``(b) Content.--Each State mitigation plan shall include a process 
for--
            ``(1) verifying compliance with the multihazard building 
        and safety codes described in section 202(a) and the flood 
        performance standards described in section 202(b) to ensure the 
        building standards are being enforced;
            ``(2) identifying, consistent with the National Flood 
        Insurance Act of 1968 (42 U.S.C. 4001 et seq.), the areas 
        within the State that have some risk from the hazards of 
        natural disasters, including hurricanes, windstorms, 
        earthquakes, volcanic eruptions, and floods, and further 
        categorizing at-risk areas based on the degree of risk;
            ``(3) establishing priorities, by risk and location, of the 
        types of structures, including State buildings, lifelines, and 
        critical facilities, that may need hazard mitigation;
            ``(4) identifying the hazard mitigation measures, such as 
        building codes, nonstructural mitigation, and retrofitting, for 
        each of the natural disaster perils, that are most cost-
        effective and most likely to prevent personal injury and reduce 
        property loss;
            ``(5) improving the emergency response to natural 
        disasters, that shall include capabilities for fire fighting, 
        search and rescue, and the provision of shelters, 
        communications, and medical relief;
            ``(6) expediting the rebuilding of lifelines and recovery 
        by individuals and the business and commercial sectors of the 
        State;
            ``(7) encouraging the development of local community-based 
        hazard mitigation plans;
            ``(8) achieving compliance with, and enforcement of, the 
        Federal multihazard mitigation standards or requirements set 
        forth in regulations promulgated by the Director pursuant to 
        this Act; and
            ``(9) developing standards and guidelines for the safe 
        staffing, operation, and regular training of first responders 
        for disaster emergency mitigation.
    ``(c) Submission of State Mitigation Plans to FEMA.--Not later than 
2 years after being designated disaster-prone pursuant to section 201, 
each disaster-prone State shall submit a completed mitigation plan to 
the Director.

``SEC. 204. COMPLIANCE BY STATES.

    ``(a) Definition of Compliance State.--A disaster-prone State shall 
be considered a compliance State for purposes of this title, if--
            ``(1) not later than 5 years after the date of enactment of 
        the Natural Disaster Protection Act of 1993, the State is 
        certified under subsection (b)(3) as a compliance State; and
            ``(2) where appropriate, if the compliance status of the 
        State has been renewed pursuant to subsection (b)(4).
    ``(b) Determination of Compliance.--
            ``(1) State submission of certification.--Not later than 3 
        years after being designated disaster-prone pursuant to section 
        201, each disaster-prone State shall certify to the Director 
        that the State has--
                    ``(A) substantially complied with, and is 
                substantially enforcing, the multihazard building code 
                under section 202(a) and the flood performance 
                standards under section 202(b); and
                    ``(B) started implementing the mitigation plan of 
                the State, including the processes described in section 
                203(b).
            ``(2) Review by director.--The Director shall review each 
        certification submitted under paragraph (1) to determine 
        whether it is an accurate manifestation of substantial 
        compliance with, and enforcement of, the hazard mitigation 
        measures described in sections 202 and 203.
            ``(3) Compliance determination.--
                    ``(A) Substantial compliance.--If the Director 
                determines that the State certification is 
                substantially accurate and the State has substantially 
                adopted and is substantially enforcing and carrying out 
                the applicable hazard mitigation measures described in 
                sections 202 and 203, the Director shall promptly 
                certify the State as a compliance State for purposes of 
                subsection (a).
                    ``(B) Noncompliance.--If the Director determines 
                that the State certification is substantially 
                inaccurate, the Director shall promptly return the 
                certification submission to the State with suggested 
                changes for obtaining certification as a compliance 
                State.
            ``(4) Compliance renewal.--The Director shall review the 
        compliance with, and enforcement of, the applicable hazard 
        mitigation measures by each compliance State meeting the 
        requirements of subsection (a) not less often than once every 2 
        years and shall renew compliance certificates under the terms 
        of paragraph (3) as appropriate.
            ``(5) Regulations.--Not later than 18 months after the date 
        of the enactment of the Natural Disaster Protection Act of 
        1993, the Director shall issue final regulations describing the 
        criteria to be used in determining whether a State is a 
        compliance State.
    ``(c) Penalties for Noncompliance.--
            ``(1) State penalties.--On the date that is 5 years after 
        the date of enactment of the Natural Disaster Protection Act of 
        1993--
                    ``(A) funds from the Self-Sustaining Mitigation 
                Fund under section 206 shall not be made available to 
                any State that has not been certified as a compliance 
                State;
                    ``(B) premium rates and deductibles assessed under 
                the Primary Insurance Program of subtitle A of title 
                III shall be increased, as determined by the Director 
                pursuant to the plan of operation developed under 
                section 321 and consistent with actuarially sound 
                requirements of section 304, for all policyholders 
                residing in a State that has not been certified as a 
                compliance State; and
                    ``(C) no Federal assistance shall be provided to 
                any new Federal building or new Federally leased, 
                assisted, or regulated building covered under Executive 
                Order 11988 (`Floodplain Management', May 24, 1977) and 
                Executive Order 12699 (55 Fed. Reg. 835; relating to 
                seismic safety of Federal and federally assisted or 
                regulated new building construction), that is located 
                in a State that has not been certified as a compliance 
                State.
            ``(2) Local community penalty.--No public assistance 
        disaster funds under sections 405 and 406 of the Robert T. 
        Stafford Disaster Relief and Emergency Assistance Act (42 
        U.S.C. 5172, 5173), shall be provided to any local community 
        that has failed to comply with the multihazard building code 
        described in section 202(a) and the flood performance standards 
        described in section 202(b) on the date that is 5 years after 
        the date of enactment of the Natural Disaster Protection Act of 
        1993.

``SEC. 205. FEDERAL HAZARD MITIGATION AUTHORITIES.

    ``(a) Federal Emergency Management Agency.--The Director shall 
develop programs to carry out the following multihazard mitigation and 
emergency management initiatives:
            ``(1) The development of model building codes and other 
        hazard mitigation measures for catastrophic natural disasters, 
        such as hurricanes, windstorms, earthquakes, volcanic 
        eruptions, or floods, that are based on both preventing 
        personal injuries and mitigating property damage.
            ``(2) Adequate training and licensing of architects, 
        engineers, building inspectors, building code enforcement 
        personnel, planners, and similar professionals to ensure proper 
        compliance with hazard mitigation standards.
            ``(3) Expanded research to strengthen building codes and 
        promote development of cost-effective building technologies and 
        related hazard mitigation measures.
            ``(4) The transfer of hazard mitigation technology to 
        States, local communities, and other entities, such as private 
        building contractors, responsible for the implementation and 
        enforcement of hazard mitigation measures.
            ``(5) Aid for Federal, State, and local emergency response 
        operations following natural disasters that may include the 
        acquisition of additional facilities, equipment, personnel, and 
        resources for training and public assistance.
            ``(6) Education to enhance public awareness of the risk of 
        and hazards from natural disasters and ways to mitigate 
        personal, physical, and economic loss.
    ``(b) Federally Connected Buildings.--All new buildings owned or 
leased by any Federal agency or receiving Federal assistance shall meet 
the newest edition of the relevant building code requirements, 
including relevant building and housing codes and performance building 
standards.
    ``(c) Federal Regulations.--Not later than 18 months after the date 
of enactment of the Natural Disaster Protection Act of 1993, the 
Director, in coordination with other Federal agencies, shall issue 
final multihazard mitigation regulations necessary to carry out the 
hazard mitigation activities described in subsections (a) and (b). Such 
regulations shall be issued pursuant to the provisions of subchapter II 
of chapter 5 of title 5, United States Code.

``SEC. 206. SELF-SUSTAINING MITIGATION FUND.

    ``(a) Establishment.--
            ``(1) Source of funds.--A percentage of the annual 
        multihazard coverage premiums collected under the Primary 
        Insurance Program under subtitle A of title III and the excess 
        reinsurance premiums collected under the Reinsurance Program 
        under subtitle B of title III shall be deposited, on a 
        quarterly basis, in a separate fund to be known as the Self-
        Sustaining Mitigation Fund.
            ``(2) Percentage.--The Director shall set the percentage 
        described in paragraph (1) at a level that is at least 5 
        percent of the applicable funds, but not more than 10 percent, 
        unless the Director determines that the amounts in the Primary 
        Insurance Program Fund established under section 305 and the 
        Reinsurance Fund established under section 315 are sufficient 
        to provide for any probable expected losses from future 
        hurricanes, earthquakes, and volcanic eruptions.
            ``(3) Interest.--Interest on amounts in the Self-Sustaining 
        Mitigation Fund shall be credited to the Fund.
    ``(b) Use.--Amounts in the Self-Sustaining Mitigation Fund shall be 
available, to the extent provided in appropriations Acts, to the 
Director to use as follows:
            ``(1) State support.--The Director shall provide amounts in 
        the Fund to each disaster-prone State, unless the State has not 
        been certified as a compliance State under section 204 on the 
        date that is 5 years after the date of enactment of the Natural 
        Disaster Protection Act of 1993.
                    ``(A) Allocation.--Funds shall be made available to 
                a State under this section on a pro rata formula of the 
                Primary Insurance Program premiums collected pursuant 
                to subtitle A of title III from the policyholders 
                residing in the State.
                    ``(B) Use of funds.--Funds made available to a 
                State under this section shall be used to support 
                hazard mitigation activities described in sections 202 
                and 203 and any activities required by the Federal 
                regulations issued pursuant to section 205. Priority 
                shall be given to hazard mitigation activities that are 
                necessary to bring the State into compliance with the 
                building standards of section 202, including the 
                adequate enforcement of the standards.
                    ``(C) Transfer of funds.--Each disaster-prone State 
                shall transfer a percentage, as established in 
                regulations, of such financial assistance to local 
                communities to support activities necessary to ensure 
                State compliance with the hazard mitigation 
                requirements of this title.
                    ``(D) Audits.--The Director shall from time-to-time 
                conduct audits to ensure that disaster-prone States and 
                local communities are using such financial assistance 
                to support the hazard mitigation activities described 
                in subparagraphs (B) and (C).
            ``(2) Federal support.--A portion of the amounts in the 
        Self-Sustaining Mitigation Fund, as determined by the Director, 
        may be used to support Federal hazard mitigation and emergency 
        management activities described in section 205.
    ``(c) Federal Regulation.--Not later than 12 months after the date 
of enactment of the Natural Disaster Protection Act of 1993, the 
Director shall issue final Federal regulations, pursuant to subchapter 
II of chapter 5 of title 5, United States Code, necessary to carry out 
this section.

``SEC. 207. NATURAL DISASTER MITIGATION AND PLANNING ADVISORY 
              COMMITTEE.

    ``(a) Establishment.--There is established an independent advisory 
committee within the executive branch to be known as the Natural 
Disaster Mitigation and Planning Advisory Committee (in this section 
referred to as the `Committee'). The Committee shall be subject to the 
Federal Advisory Committee Act (5 U.S.C. Appendix 2), except as 
provided in this section. The establishment of the Committee shall not 
result in the creation of any new permanent staff or new office 
facilities.
    ``(b) Membership.--The Committee shall be composed of 20 members 
appointed by the Director. The members shall be chosen from among 
citizens of the United States and shall include--
            ``(1) 1 individual who is a metropolitan fire chief;
            ``(2) 1 individual who is a State fire marshal;
            ``(3) 1 individual who is a volunteer fire fighter;
            ``(4) 1 individual who is an organized labor representative 
        of the fire services;
            ``(5) 1 individual with search and rescue expertise;
            ``(6) 1 individual who is a State director of emergency 
        medical services;
            ``(7) 1 individual who represents the interests of the 
        model building code bodies;
            ``(8) 1 individual who is a State emergency manager;
            ``(9) 1 individual who is a local emergency manager;
            ``(10) 1 individual who is a flood plain manager;
            ``(11) 1 individual who represents the interests of law 
        enforcement;
            ``(12) 1 individual who is an architect;
            ``(13) 1 individual who is a builder;
            ``(14) 1 individual who is a structural engineer;
            ``(15) 1 individual who represents a building trades labor 
        union;
            ``(16) 1 individual who is a recognized seismic hazard 
        mitigation expert;
            ``(17) 1 individual who is a recognized wind hazard 
        mitigation expert;
            ``(18) 1 individual who represents the interests of 
        consumers;
            ``(19) 1 individual who represents the private insurers; 
        and
            ``(20) 1 individual who represents the insurance agents.
    ``(c) Vacancies.--A vacancy on the Committee shall be filled in the 
manner in which the original appointment was made.
    ``(d) Chairperson.--The Director shall designate a chairperson of 
the Committee from among members selected for appointment to the 
Committee.
    ``(e) Selection.--Not later than 180 days after the date of the 
enactment of the Natural Disaster Protection Act of 1993, after 
consultation with the State and local emergency management community, 
the Director shall appoint the members of the Committee.
    ``(f) Functions of the Committee.--The Committee shall advise the 
Director on hazard mitigation and disaster planning, including the 
development and implementation of the multihazard mitigation programs 
created pursuant to this title. The Committee shall review and comment 
on all draft Federal regulations issued by the Director pursuant to 
this title.
    ``(g) Responsibilities of the Director.--The Director shall fully 
cooperate with the 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 the operation of multihazard 
mitigation programs established under this title.''.

SEC. 7. FEDERAL INSURANCE PROGRAMS.

    The Earthquake Hazards Reduction Act of 1977 (42 U.S.C. 7701 et 
seq.) is amended by adding after title II, the following new title:

                ``TITLE III--FEDERAL INSURANCE PROGRAMS

                ``Subtitle A--Primary Insurance Program

``SEC. 301. BASIC AUTHORITY AND PROGRAM OPERATION.

    ``(a) Establishment.--To carry out this subtitle, the Director 
shall establish and carry out a national multihazard insurance program 
(in this title referred to as the `Primary Insurance Program') to 
provide insurance against loss resulting from physical damage to or 
loss of real or personal property in any State or States, resulting 
from an earthquake or volcanic eruption (including any fire proximately 
caused by a volcanic eruption).
    ``(b) Implementation.--To carry 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.
    ``(c) Authority of Director.--The Director may take any actions 
reasonably necessary and appropriate to carry out this subtitle, 
including the making of contracts, the employment and compensation of 
persons, the acquisition of real and personal property, and the 
reasonable auditing of private insurers participating in the Primary 
Insurance Program limited to matters directly related to their 
participation in such program.
    ``(d) Insurance Practices.--Actions of the Director under this 
subtitle shall be consistent with standard insurance practices and 
generally accepted accounting, actuarial, and underwriting principles.
    ``(e) Flood Insurance Study.--
            ``(1) Evaluation.--The Director shall evaluate the 
        feasibility and benefits of including flood as a covered peril 
        under the national multihazard insurance program. The 
        evaluation shall include an examination of whether to integrate 
        existing flood insurance policies issued under the National 
        Flood Insurance Act of 1968 (42 U.S.C. 4001 et seq.) into the 
        multihazard coverage policy issued under this subtitle.
            ``(2) Report.--Not later than 1 year after the date of 
        enactment of the Natural Disaster Protection Act of 1993, the 
        Director shall submit a report to Congress, including any 
        recommendations with respect to the evaluation undertaken 
        pursuant to this subsection.
    ``(f) Improved Participation in Federal Flood Insurance Program.--
            ``(1) Notification requirement.--Agents and brokers or 
        private insurers participating in the Federal flood insurance 
        program under the National Flood Insurance Act of 1968 (42 
        U.S.C. 4001 et seq.) shall promptly notify the Director of any 
        policyholder who refuses to purchase Federal flood insurance if 
        the policyholder is required under the National Flood Insurance 
        Act of 1968 to purchase such coverage as a condition of 
        receiving Federal assistance for acquisition or construction of 
        the insured property, and the agent, broker, or private insurer 
        knows of such requirement.
            ``(2) Obligation of federal emergency management agency.--
                    ``(A) General authority.--Not later than 180 days 
                after receiving notification of a policyholder under 
                paragraph (1), the Director shall take necessary and 
                appropriate steps to ensure that the policyholder 
                purchases the required Federal flood insurance coverage 
                in compliance with the National Flood Insurance Act of 
                1968 (42 U.S.C. 4001 et seq.).
                    ``(B) Report.--Not later than 180 days after the 
                enactment of the Natural Disaster Protection Act of 
                1993, the Director shall submit to Congress a report on 
                any additional sanctions, or other measures, that the 
                Director determines are necessary and appropriate to 
                ensure that policyholders are in compliance with the 
                National Flood Insurance Act of 1968 (42 U.S.C. 4001 et 
                seq.).
            ``(3) Regulations.--The Director shall promulgate such 
        regulations as are necessary to carry out this subsection.

``SEC. 302. SCOPE OF PROGRAM.

    ``(a) Eligible Properties.--In carrying out the Primary Insurance 
Program, the Director shall make multihazard coverage available only 
for residential properties that are located in earthquake and volcanic 
eruption-prone States as determined under section 201.
    ``(b) Additional Types of Properties.--If the Director makes a 
finding, in consultation with the Federal Insurance and Reinsurance 
Advisory Committee established pursuant to section 322, that the 
private insurance industry cannot adequately provide coverage to other 
types of properties, the Director may recommend to Congress that 
multihazard coverage under this subtitle be made available to cover 
other types of properties.

``SEC. 303. TERMS AND LIMITATIONS OF INSURANCE COVERAGE.

    ``(a) Terms.--Pursuant to the plan of operation established under 
section 321 and after consultation with the Federal Insurance and 
Reinsurance Advisory Committee established under section 322, the 
Director shall establish, by regulation, the general terms and 
conditions of insurability for properties eligible for multihazard 
coverage under section 302. Such regulations shall meet the 
requirements of this section and may include--
            ``(1) the type and locational classification of the 
        eligible properties;
            ``(2) specific insurability definitions for eligible 
        properties;
            ``(3) the specific types of damage that may be covered by 
        the insurance;
            ``(4) appropriate premium rates consistent with the 
        actuarial requirement of section 304;
            ``(5) appropriate loss-deductibles including variable 
        deductibles based on the existence of loss-reduction measures 
        that affect the risk of loss;
            ``(6) appropriate limits on coverage for each 
        classification of eligible properties;
            ``(7) appropriate minimum coverage amounts 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 (6), whichever is less; and
            ``(8) any other terms and limitations relating to 
        residential property insurance coverage that may be necessary 
        to carry out this subtitle.
    ``(b) Hazards Covered.--The multihazard coverage under this 
subtitle shall cover damage to covered eligible property, including 
debris removal, additional living expenses incurred as a result of 
direct damage to the premises, and ordinance and law coverage up to the 
policy limits set by subsection (a)(5) with additional ordinance and 
law coverage available pursuant to the plan of operation under section 
321, proximately caused by--
            ``(1) an earthquake, except for any fire proximately caused 
        by an earthquake;
            ``(2) a volcanic eruption, including any fire proximately 
        caused by a volcanic eruption; and
            ``(3) a tsunami associated with an earthquake or volcanic 
        eruption.
    ``(c) Program Participation.--Upon the issuance of regulations 
establishing the plan of operation under section 321, any private 
insurer may participate in the Primary Insurance Program without regard 
to whether such private insurer provides any insurance to residential 
property policyholders.
    ``(d) Obligations of Participating Insurers.--A private insurer 
electing to participate in the Primary Insurance Program shall provide 
to all its residential property policyholders for residential property 
determined to be eligible under subsection (a) and located in 
earthquake and volcanic eruption-prone States either--
            ``(1) the multihazard coverage under this subtitle; or
            ``(2) coverage on its own behalf that is equivalent to the 
        multihazard coverage provided under this subtitle at rates 
        established for the coverage under this subtitle.
    ``(e) Obligations of Nonparticipating Insurers.--Any private 
insurer electing not to participate in the Primary Insurance Program 
shall notify, pursuant to regulations adopted by the Director, all of 
its residential policyholders in earthquake and volcanic eruption-prone 
States of its nonparticipation in such program, and of the absence of 
insurance and reinsurance protection for multihazard coverage under 
this title.

``SEC. 304. ACTUARIALLY SOUND RATES.

    ``(a) Establishment of Rates.--The Director shall from time-to-time 
establish and prescribe by regulation on a State, risk zone, or other 
appropriate basis, actuarially sound rates for types or classes of 
property eligible for multihazard coverage and the terms and conditions 
under which the rates apply.
    ``(b) Consultation.--In carrying out this section, the Director 
shall consult with the Federal Insurance and Reinsurance Advisory 
Committee established under section 322 and may enter into contracts, 
agreements, or other arrangements to utilize the services of the United 
States Geological Survey, the National Oceanic and Atmospheric 
Administration, and other relevant Federal, State, and local 
governmental agencies, and other persons.
    ``(c) Considerations.--The Director shall establish actuarially 
sound rates under this section based on--
            ``(1) considerations of the risks involved, including an 
        examination of--
                    ``(A) the severity and frequency of earthquakes by 
                seismic zone and States in which the insured property 
                is located, including known differences in risks from 
                active faults and known susceptibility to landslide, 
                site amplification, and liquefaction;
                    ``(B) the risk of damage associated with a volcanic 
                eruption by volcanic zone and States in which the 
                insured property is located, including proximity to 
                known lava flows;
                    ``(C) the risk of damage associated with a tsunami 
                caused by an earthquake or volcanic eruption;
                    ``(D) the value of the insured property;
                    ``(E) the age of the structures located on the 
                insured property;
                    ``(F) the construction type of the structures 
                located on the insured property, including woodframe, 
                masonry, and masonry veneer;
                    ``(G) the architectural type of the structures 
                located on the insured property, including soft first 
                floor, box construction, and split level;
                    ``(H) hazard mitigation measures followed in the 
                construction or subsequent retrofitting of residential 
                property structures; and
                    ``(I) any other relevant criteria; 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, contributions from the 
        Self-Sustaining Mitigation Fund established under section 206, 
        and provision for adequate reserves.
    ``(d) Minimization of Cross-Subsidization.--To the extent 
practicable, the rates established under this section shall be 
actuarially sound and shall result in a minimum of cross-subsidization 
by reasonably reflecting the risk of damaging earthquakes, volcanic 
eruptions, and tsunamis, as appropriate, in total and for each 
subclassification of policyholders.
    ``(e) Actuarially Sound Requirement.--In setting and adjusting 
rates under this section, the Director shall provide that, over an 
extended period of time, expected expenditures from the Primary 
Insurance Program Fund under section 305(c) do not exceed expected 
receipts of the Primary Insurance Program Fund under section 305(b).
    ``(f) Limitations.--
            ``(1) Rate classification system.--To the extent 
        practicable, any rate classification system developed by the 
        Director to establish actuarially sound rates under this 
        section shall be--
                    ``(A) 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 insurance premiums 
                collected; and
                    ``(B) simple and easy to understand, identify, and 
                use by insurance agents and policyholders.
            ``(2) Limitation on use of premiums.--The premiums 
        collected under the Primary Insurance Program shall not be used 
        to establish highly specific geographic rating zones and micro-
        zonation maps for the earthquake, volcanic eruption, and 
        tsunami perils.

``SEC. 305. PRIMARY INSURANCE PROGRAM FUND.

    ``(a) Establishment.--There is established in the Treasury of the 
United States the Primary Insurance Program Fund (in this section 
referred to as the ``Insurance Fund'') for the purpose of carrying out 
the Primary Insurance Program under this subtitle.
    ``(b) Credits of Fund.--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 206) and interest 
        earned on premiums, as provided in subsection (e);
            ``(2) amounts borrowed under section 306;
            ``(3) amounts appropriated to the Insurance Fund; and
            ``(4) interest earned on amounts invested under subsection 
        (d).
    ``(c) Uses of Fund.--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) any and all administrative and operating expenses in 
        carrying out the Primary Insurance Program; and
            ``(4) principal and interest payments on amounts borrowed 
        under section 306 for supplemental losses, if any.
    ``(d) Investment of Amounts.--The Director may request the 
Secretary of the Treasury to invest any amount in the Primary Insurance 
Program Fund in obligations issued or guaranteed by the United States, 
as the Director considers appropriate.
    ``(e) Insurance Payments to Fund.--
            ``(1) In general.--Each private insurer issuing multihazard 
        coverage shall remit the premiums collected, less the expense 
        allowances of the insurer (as provided for in the plan of 
        operation under section 321), to the Director on a quarterly 
        basis 30 days after the end of the quarter, according to the 
        procedures prescribed in the plan of operation.
            ``(2) Accounts.--Each private insurer shall maintain a 
        separate, interest-bearing account for the premiums to be 
        submitted to the Director.
            ``(3) Interest.--The interest collected on the account 
        shall be forwarded to the Insurance Fund with the premiums on a 
        quarterly basis.
    ``(f) Reimbursement of Insurers.--
            ``(1) Requirement and procedure.--The Director shall 
        reimburse each private insurer providing multihazard coverage 
        pursuant to this subtitle from amounts made available from the 
        Insurance Fund. Reimbursement for all claim payments up to and 
        including the policy limits of coverage and for all loss 
        adjustment expenses paid as a result of an earthquake, volcanic 
        eruption, or tsunami, as appropriate, shall be made as follows:
                    ``(A) Not later than 30 days after the date on 
                which a claim payment or loss adjustment expense 
                payment is made pursuant to obligations of the Federal 
                Government, the Director shall reimburse the insurer.
                    ``(B) If the gross reimbursements exceed amounts 
                available in the Insurance Fund, amounts borrowed from 
                the Treasury of the United States under section 306 
                shall cover the supplemental losses.
            ``(2) Regulations.--
                    ``(A) Issuance.--The Director may 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 the multihazard 
                coverage issues under this subtitle.
                    ``(B) Conformance with state law.--The claim 
                practices of the Insurance Fund shall be subject to and 
                conform with any applicable State insurance unfair 
                trade practices statutes.
                    ``(C) Judicial review.--Judicial review of a 
                decision of the Director regarding reimbursement of a 
                private insurer shall be available pursuant to section 
                321(e).
    ``(g) Obligations.--All multihazard coverage provided through the 
Primary Insurance Program under this subtitle shall constitute 
obligations of the United States. The full faith and credit of the 
United States is pledged for the full payment and performance of such 
obligations. The private insurers participating in the program shall 
bear no risk and shall assume no liability for the multihazard coverage 
provided through the program.
    ``(h) Status of Fund.--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 to State insurance premium taxes.

``SEC. 306. BORROWING FROM TREASURY.

    ``(a) Authority.--
            ``(1) In general.--Subject to paragraph (2), to the extent 
        that the accumulated assets, including any return on 
        investments, in the Primary Insurance Program Fund established 
        under section 305 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.
            ``(2) Limitations on obligations.--The amounts of such 
        obligations outstanding at any one time shall not exceed such 
        sums as the Congress may provide acting upon the recommendation 
        of the Director.
    ``(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.--Amounts borrowed by the Director under this 
section shall be deposited in the Primary Insurance Program Fund 
established under section 305.
    ``(d) Repayment.--
            ``(1) In general.--Amounts borrowed under this section 
        shall be recouped, including interest on the borrowed funds, in 
        future premiums for multihazard coverage pursuant to the plan 
        of operation established under section 321.
            ``(2) Extensions.--The Secretary of the Treasury shall 
        grant extensions in repayment schedules that the Director 
        advises the Secretary are necessary.

``SEC. 307. INSURANCE MITIGATION INCENTIVES.

    ``In carrying out the Primary Insurance Program under this subtitle 
and pursuant to the plan of operation established under section 321, 
the Director shall provide for the following insurance mitigation 
incentives which shall conform with the actuarially sound rate 
requirements of section 304:
            ``(1) Charging lower premiums or deductible amounts for any 
        residential property located in an earthquake-prone State that 
        meets the seismic building standards under section 202(a).
            ``(2) Charging lower premium rates or deductible amounts 
        for any residential property located in an earthquake-prone 
        State that passes a seismic safety inspection and meets the 
        requirements of the seismic mitigation standards established in 
        title II.
            ``(3) Charging lower premium rates or deductible amounts 
        for new residential property not constructed in volcanic zones 
        in a volcanic eruption-prone State.

                   ``Subtitle B--Reinsurance Program

``SEC. 311. BASIC AUTHORITY AND PROGRAM OPERATION.

    ``(a) Eligibility.--
            ``(1) Provision of coverage.--Upon the issuance of 
        regulations establishing the plan of operation under section 
        321, the Director shall make available to eligible entities 
        excess reinsurance coverage for any direct and indirect losses 
        under the covered lines set forth in section 313 that arise 
        from a hurricane, earthquake, volcanic eruption, or tsunami.
            ``(2) Eligible entities.--The following entities are 
        eligible to purchase the excess reinsurance coverage:
                    ``(A) A private insurer participating in the 
                Primary Insurance Program under subtitle A.
                    ``(B) A private reinsurer that reinsures a private 
                insurer participating in the Primary Insurance Program 
                under subtitle A.
                    ``(C) A workers' compensation fund operated by a 
                State.
                    ``(D) A State residual insurance pooling program.
    ``(b) Terms.--The reinsurance contracts issued by the Federal 
Government pursuant to this subtitle shall contain terms and conditions 
similar to those generally used in private catastrophic reinsurance 
contracts.
    ``(c) Judicial Review.--Judicial review of a decision of the 
Director regarding payment of claims shall be made available pursuant 
to section 321(e).
    ``(d) Single Entities.--A private insurer and private reinsurer or 
United States affiliate under the same ownership or management or part 
of the same holding company system, as determined under the plan of 
operation established under section 321, shall be considered a single 
entity for purposes of this subtitle.

``SEC. 312. LEVELS OF RETAINED LOSSES.

    ``(a) Industrywide Eligibility.--Excess reinsurance under this 
subtitle shall be available to all private insurers and private 
reinsurers eligible for reinsurance pursuant to section 311(a)(2) in 
accordance with this subsection:
            ``(1) Industry retained losses.--
                    ``(A) In general.--The Reinsurance Fund established 
                under section 315 shall provide excess reinsurance 
                when, as determined by the Director pursuant to the 
                plan of operation under section 321, the insurance 
                industry is likely to incur gross losses in the lines 
                covered in section 313(a) arising from hurricane, 
                earthquake, volcanic eruption, and tsunami events 
                occurring during any 12-month period that exceed 15 
                percent of the consolidated industry surplus as regards 
                policyholders.
                    ``(B) Calculation.--Only such separate events that 
                will likely result in industry gross losses of at least 
                $1,500,000,000, adjusted annually in accordance with 
                the percentage change in the Consumer Price Index, 
                shall be aggregated to reach the 15 percent level for 
                gross losses described in subparagraph (A).
            ``(2) Individual company retained losses.--After the 
        insurance industry has sustained gross losses described in 
        paragraph (1), the Reinsurance Fund established under section 
        315 shall pay to an individual private insurer or private 
        reinsurer 95 percent of qualifying losses in excess of 15 
        percent of the consolidated surplus as regards policyholders of 
        the private insurer or private reinsurer.
    ``(b) Individual Insurer Eligibility.--
            ``(1) Individual insurer retained losses.--If subsection 
        (a) is not applicable, a private insurer or private reinsurer 
        shall be eligible for excess reinsurance coverage and 
        reimbursement from the Reinsurance Fund established under 
        section 315 if the insurer or reinsurer has incurred gross 
        losses from a single--
                    ``(A) earthquake, volcanic eruption, or tsunami 
                event that is included in the lines covered in section 
                313(a) and that exceeds 20 percent of the consolidated 
                surplus as regards policyholders of the private insurer 
                or private reinsurer; or
                    ``(B) hurricane event that is included in the lines 
                covered in section 313(a) and that exceeds 20 percent 
                of the consolidated surplus as regards policyholders of 
                the private insurer or private reinsurer, except that 
                the workers' compensation and earthquake lines of 
                coverage under section 313(a) shall be excluded.
            ``(2) Reinsurance fund payments.--After the private insurer 
        or private reinsurer has sustained gross losses described in 
        paragraph (1), the Reinsurance Fund established under section 
        315 shall pay 95 percent of qualifying losses, as defined in 
        subsection (d), in excess of 20 percent of the consolidated 
        surplus as regards policyholders of the private insurer or the 
        private reinsurer.
            ``(3) Limitation of reinsurance fund payments.--The 
        payments by the Reinsurance Fund under this subsection shall be 
        limited to 200 percent of the consolidated surplus as regards 
        policyholders of the private insurer or private reinsurer.
    ``(c) State Insurance Programs.--Excess reinsurance under this 
subtitle shall be available to each State workers' compensation program 
and State residual insurance pooling program eligible for reinsurance 
pursuant to section 311(a)(2) in accordance with the following:
            ``(1) Industry losses.--The Reinsurance Fund established 
        under section 315 shall provide excess reinsurance when, as 
        determined by the Director pursuant to the plan of operation 
        under section 321, the insurance industry is likely to incur 
        gross losses in the State served by the eligible State 
        insurance program arising from hurricane, earthquake, volcanic 
        eruption, and tsunami events occurring during any 12-month 
        period and exceed 10 times the sum of the direct earned 
        premiums for the lines of coverage described in sections 313(a) 
        (2), (3), (4), and (5) or $10,000,000,000, adjusted annually in 
        accordance with the percentage change in the Consumer Price 
        Index, whichever amount is less.
            ``(2) Minimum losses.--The lesser amount described in 
        paragraph (1) must equal at least $500,000,000, adjusted 
        annually in accordance with the percentage change in the 
        Consumer Price Index.
            ``(3) Retained losses.--After the insurance industry has 
        sustained gross losses described in paragraph (1), the 
        Reinsurance Fund established under section 315 shall pay to an 
        individual State workers' compensation program or State 
        residual insurance pooling program 95 percent of qualifying 
        losses in excess of the lessor amount described in paragraph 
        (1).
    ``(d) Qualifying Losses.--For the purposes of this subtitle, 
`qualifying losses' includes--
            ``(1) the losses and loss adjustment expenses incurred by a 
        private insurer, private reinsurer, State workers' compensation 
        fund, or State residual insurance pooling program; and
            ``(2) any assessments, surcharges, or other liabilities 
        imposed by any State residual insurance pooling program or 
        guaranty fund,
attributable to hurricanes, earthquakes, volcanic eruptions, and 
tsunamis occurring during any 12-month period encompassing the events 
described in subsections (a)(1) and (c)(1) or the event described in 
subsection (b)(1), reduced by--
            ``(1) any collectible reinsurance recoverable, and
            ``(2) an appropriate percentage of any uncollectible 
        reinsurance arising from the event as set in the plan of 
        operation to be issued by regulation under section 321.
    ``(e) Obligations.--All reinsurance contracts issued under this 
subtitle shall constitute obligations, in accordance with the terms of 
the reinsurance, of the United States. The full faith and credit of the 
United States is pledged for the full payment and performance of such 
obligations.
    ``(f) Definitions.--As used in this subtitle--
            ``(1) the term `consolidated industry surplus as regards 
        policyholders' means the consolidated surplus as regards 
        policyholders of the property and casualty insurance industry 
        (excluding life insurance) for the calendar year immediately 
        preceding the hurricane, earthquake, volcanic eruption, or 
        tsunami events described in subsection (a)(1) as determined by 
        the National Association of Insurance Commissioners or other 
        credible source and published annually in the Federal Register 
        by the Director;
            ``(2) the term `consolidated surplus as regards 
        policyholders' means the surplus as regards policyholders of 
        the private insurer, private reinsurer, or group of private 
        insurers and reinsurers (excluding life insurance) based on 
        financial data submitted to the National Association of 
        Insurance Commissioners or other credible source and published 
        annually in the Federal Register by the Director for the 
        calendar year immediately preceding the hurricane, earthquake, 
        volcanic eruption, or tsunami event or events described in 
        subsections (a)(1) and (b)(1);
            ``(3) the term `direct earned premiums' means the direct 
        earned premiums for certain lines of property and casualty 
        insurance coverage as published in the National Association of 
        Insurance Commissioners Fire and Casualty Annual Statement 
        filed with the applicable State department of insurance for the 
        most recent calendar year available preceding the hurricane, 
        earthquake, volcanic eruption, or tsunami events described in 
        subsection (c)(1);
            ``(4) the term `gross losses' means all losses and loss 
        adjustment expenses, prior to deducting any private reinsurance 
        recoverables;
            ``(5) 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 listed in section 313(a), except that 
        workers' compensation and earthquake lines of coverage shall be 
        excluded for the purposes of setting actuarially sound rates 
        for hurricanes; and
            ``(6) the term `uncollectible reinsurance' means 
        reinsurance proceeds due and payable in accordance with the 
        terms of the reinsurance contract that are not paid within 12 
        months of the due date.

``SEC. 313. LINES OF INSURANCE.

    ``(a) Covered Lines.--The Director shall provide reinsurance 
coverage to private insurers, State workers' compensation funds and 
State residual insurance pooling programs for all of the following 
lines of insurance appearing in the National Association of Insurance 
Commissioners Fire and Casualty Annual Statement:
            ``(1) Fire.
            ``(2) Allied Lines.
            ``(3) Farmowners Multiple Peril.
            ``(4) Homeowners Multiple Peril.
            ``(5) Commercial Multiple Peril.
            ``(6) Ocean Marine.
            ``(7) Inland Marine.
            ``(8) Earthquake.
            ``(9) Workers' Compensation.
            ``(10) Other Liability.
            ``(11) Products Liability.
            ``(12) Aircraft (All Perils).
            ``(13) Glass.
            ``(14) Burglary and Theft.
            ``(15) Boiler and Machinery.
            ``(16) Reinsurance.
Reinsurance coverage shall be purchased for all covered lines of 
insurance and in all affected hurricane, seismic, or volcanic rating 
zones in hurricane-prone, earthquake-prone, or volcanic eruption-prone 
States with the rates for such coverage set by the Director, pursuant 
to section 314.
    ``(b) Other Lines.--The Reinsurance Fund established under section 
315 shall provide 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 pursuant to section 321 and in 
consultation with the Federal Insurance and Reinsurance Advisory 
Committee established under section 322.

``SEC. 314. ACTUARIALLY SOUND RATES.

    ``(a) Establishment of Rates.--Using generally accepted actuarial 
principles, the Director shall establish the rates for the excess 
reinsurance coverage and adjust the rates when necessary. To the 
maximum extent practicable, such rates shall be actuarially sound and 
shall result in a minimum of cross-subsidization, consistent with the 
infrequency of catastrophic hurricanes, earthquakes, volcanic 
eruptions, and tsunamis. 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 315(c) shall not 
exceed expected receipts of the Reinsurance Fund under section 315(b).
    ``(b) Consultation.--In carrying out this section, the Director 
shall consult with the Federal Insurance and Reinsurance Advisory 
Committee established in section 322 and may enter into contracts, 
agreements, or other arrangements to utilize the services of the United 
States Geological Survey, the National Oceanic and Atmospheric 
Administration, and other relevant Federal, State, and local 
governmental agencies, and other persons.
    ``(c) Considerations.--In setting or adjusting the actuarially 
sound rates, the Director shall provide for a minimum degree of cross-
subsidization among classes of reinsured by reasonably reflecting the 
differences in risk of and vulnerability to loss from hurricanes, 
earthquakes, and volcanic eruptions that would be subject to payment 
from the Reinsurance Fund established under section 315, by giving due 
consideration to--
            ``(1) the premium rate volume of the reinsured by line of 
        insurance under section 313(a) by hurricane, seismic, or 
        volcanic zone or State in which the risks insured or reinsured 
        by the reinsurer are located;
            ``(2) the proportion of the total expected amount of 
        payments for qualifying losses and loss adjustment expenses by 
        line of insurance under section 313(a) by hurricane, seismic, 
        or volcanic zone or State expected for each reinsured;
            ``(3) the nature, scope, and adequacy of the private 
        reinsurance or retrocessional reinsurance purchased by the 
        private insurer, private reinsurer, State workers' compensation 
        fund, or State residual insurance pooling program in light of 
        its management expertise and the number, size, concentration, 
        and location of its risk exposures by lines of insurance under 
        section 313(a);
            ``(4) the payback of losses sustained by the Reinsurance 
        Fund established under section 315 due to payments made to a 
        private insurer, private reinsurer, State workers' compensation 
        fund, or State residual insurance pooling program;
            ``(5) the ratio between subject net written premium and 
        consolidated surplus as regards policyholders for each private 
        insurer and reinsurer during the most recent calendar year; and
            ``(6) the nature of the risk for each private insurer and 
        reinsurer insured under coverages reported in the National 
        Association of Insurance Commissioners Fire and Casualty Annual 
        Statement filed with the applicable State department of 
        insurance for the most recent calendar year and covering the 
        lines of businesses listed in section 313(a).
    ``(d) 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 insurance premiums collected.
    ``(e) Quarterly Payment.--Premiums paid to the Reinsurance Fund for 
reinsurance coverage under this subtitle shall be paid on a quarterly 
basis and shall be accumulated in the Reinsurance Fund, to be managed 
pursuant to section 315.

``SEC. 315. REINSURANCE FUND.

    ``(a) Establishment.--There is established in the Treasury of the 
United States the Reinsurance Fund for the purposes of carrying out the 
Reinsurance Program under this subtitle.
    ``(b) Credits to 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 316; 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 under the Reinsurance 
        Program under this subtitle;
            ``(2) administrative and operating expenses in carrying out 
        the Reinsurance Program; and
            ``(3) principal and interest payments on amounts borrowed 
        from the Treasury under section 316, 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.

``SEC. 316. BORROWING FROM TREASURY.

    ``(a) Authority.--
            ``(1) In general.--Subject to paragraph (2), 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.
            ``(2) Limitation.--The amounts of obligations outstanding 
        at any one time shall not exceed such sums as the Congress may 
        provide acting upon the recommendation of the Director.
    ``(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.--Any amounts borrowed pursuant to this section 
shall be recouped, including interest on the borrowed funds, in future 
rates for excess reinsurance coverage pursuant to the plan of operation 
established under section 321. The Secretary of the Treasury shall 
grant extensions in repayment schedules that the Director advises the 
Secretary are necessary.

                  ``Subtitle C--Program Administration

``SEC. 321. PLAN OF OPERATION.

    ``(a) Development.--The Director shall develop a plan of operation 
to ensure the fair, reasonable, and equitable administration of the 
Primary Insurance Program Fund established under section 305, the 
Reinsurance Fund established under section 315, and other activities 
under this title.
    ``(b) Contents.--The plan of operation shall set forth the specific 
policy and programmatic details for operating the Primary Insurance 
Program created under subtitle A and the Reinsurance Program created 
under subtitle B, including all guidelines, criteria, definitions, 
clarifications, and procedures necessary to carry out this title.
    ``(c) Establishment.--
            ``(1) Submission of draft to advisory committee.--Not later 
        than the expiration of the 12-month period beginning on the 
        date of the enactment of the Natural Disaster Protection Act of 
        1993, the Director shall submit a draft of the plan of 
        operation to the Federal Insurance and Reinsurance Advisory 
        Committee established under section 322. Before issuing any 
        regulations under paragraph (2), the Director shall consider 
        any recommendations made by the Advisory Committee regarding 
        the draft plan of operation.
            ``(2) Regulations.--
                    ``(A) In general.--Not later than 18 months after 
                the date of the enactment of the Natural Disaster 
                Protection Act of 1993, the Director shall issue final 
                regulations establishing the plan of operation under 
                this section, subject to the provisions of subchapter 
                II of chapter 5 of title 5, United States Code.
                    ``(B) Description of discrepancies.--In issuing 
                regulations under this paragraph, the Director shall 
                publish in the Federal Register a description of any 
                differences between the recommendations of the Federal 
                Insurance and Reinsurance Advisory Committee 
                established under section 322 and the regulations 
                (including the guidelines, criteria, definitions, 
                clarifications, and procedures under the plan) 
                developed by the Director. The description shall 
                contain, for each difference, an explanation of why the 
                recommendations of the Federal Insurance and 
                Reinsurance Advisory Committee were not included in the 
                proposed regulations.
            ``(3) Subsequent changes.--Any changes to the plan of 
        operation after the date of enactment of the Natural Disaster 
        Protection Act of 1993 shall be made in accordance with the 
        process described in paragraphs (1) and (2).
    ``(d) Additional Regulations.--In addition to the regulations 
establishing the plan of operation, the Director may issue any 
regulations necessary to carry out this title, pursuant to the 
provisions of subchapter II of chapter 5 of title 5, United States 
Code.
    ``(e) Suits.--Any lawsuits 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 district court of 
the United States with jurisdiction over the action, 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.

``SEC. 322. FEDERAL INSURANCE AND REINSURANCE ADVISORY COMMITTEE.

    ``(a) Establishment.--There is established an independent advisory 
committee within the executive branch to be known as the Federal 
Insurance and Reinsurance Advisory Committee (in this section referred 
to as the ``Committee''). To the extent not contradicted by the 
provisions of this section, the Committee shall be subject to the 
provisions of the Federal Advisory Committee Act (5 U.S.C. Appendix 2). 
The establishment of the Committee shall not result in the creation of 
any new permanent staff or new office facilities.
    ``(b) Membership.--The Committee shall be composed of 7 members 
appointed by the Director. The members shall be chosen from among 
citizens of the United States and shall include--
            ``(1) 1 individual who represents the interests of 
        consumers;
            ``(2) 1 individual who is a State emergency planner;
            ``(3) 1 individual who is a State insurance commissioner;
            ``(4) 1 individual who represents the interests of the 
        private insurers;
            ``(5) 1 individual who represents the interests of the 
        private reinsurers;
            ``(6) 1 individual who represents the interests of the 
        insurance agents; and
            ``(7) 1 individual who is a professional actuary.
    ``(c) Vacancies.--A vacancy in the Commission shall be filled in 
the manner in which the original appointment was made.
    ``(d) Chairperson.--The Director shall designate a chairperson of 
the Committee from among members selected for appointment to the 
Committee.
    ``(e) Selection.--Not later than 180 days after the date of the 
enactment of the Natural Disaster Protection Act of 1993 and after 
consulting with the insurance industry and the State and local 
emergency management community, the Director shall appoint the members 
of the Committee.
    ``(f) Functions of the Committee.--
            ``(1) Review of draft plan.--The Committee shall review the 
        draft plan of operation established under section 321.
            ``(2) Comments and recommendations.--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.
            ``(3) Reports.--After 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 operation of the 
        Federal insurance programs established under this title and 
        making recommendations for any actions relating to such 
        programs.
            ``(4) Guidance.--The Committee shall provide counsel to the 
        Director regarding actuarial and insurance related services 
        pursuant to sections 304(b) and 314(b). The Committee shall 
        respond as soon as practicable to all requests of the Director 
        made pursuant to subsection (g) or section 321(c).
    ``(g) Responsibilities of the Director.--The Director shall fully 
cooperate with the 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 Federal insurance 
programs established under this title.''.

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