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[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[H.R. 21 Reported in House (RH)]

                                                 Union Calendar No. 292

106th CONGRESS

  2d Session

                                H. R. 21

                          [Report No. 106-526]

_______________________________________________________________________

                                 A BILL

    To establish a Federal program to provide reinsurance for State 
                      disaster insurance programs.

_______________________________________________________________________

                             March 15, 2000

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

                                                 Union Calendar No. 292
106th CONGRESS
  2d Session
                                 H. R. 21

                          [Report No. 106-526]

    To establish a Federal program to provide reinsurance for State 
                      disaster insurance programs.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                            January 6, 1999

  Mr. Lazio (for himself, Mr. McCollum, Mr. Bentsen, Mr. LaFalce, Mr. 
Baker, Mr. Weygand, Mr. Sherman, Mr. Leach, Mrs. Roukema, Mr. Campbell, 
   Mr. Metcalf, Mrs. Kelly, Mr. Weldon of Florida, Mr. Ackerman, Mr. 
Maloney of Connecticut, Ms. Hooley of Oregon, Mr. Cooksey, Mr. Dreier, 
 Mr. Young of Alaska, Mr. Frost, Mr. Farr of California, Mr. McCrery, 
 Mrs. Meek of Florida, Ms. Christian-Green, Mr. Canady of Florida, Mr. 
Calvert, Mr. Shaw, Mr. Cunningham, Mr. Ewing, Mr. Davis of Florida, Mr. 
  Price of North Carolina, Mr. McKeon, Mr. Bilirakis, Mr. Boyd, Mrs. 
Fowler, Mr. LoBiondo, Mr. Blunt, Mr. LaHood, Mrs. Thurman, Mr. Wexler, 
Ms. Ros-Lehtinen, Mr. Knollenberg, Mr. Mica, Mr. Deutsch, Mr. Stearns, 
Mr. Traficant, and Mr. Porter) introduced the following bill; which was 
      referred to the Committee on Banking and Financial Services

                             March 15, 2000

 Additional sponsors: Mr. Diaz-Balart, Mr. LaTourette, Mr. Hastings of 
  Florida, Mr. Foley, Mr. Weldon of Pennsylvania, Ms. Velazquez, Mr. 
  Martinez, Mr. Dickey, Mr. Radanovich, Mr. Pickett, Mr. Herger, Mr. 
Smith of Washington, Mr. Weller, Mr. Pallone, Mr. Dooley of California, 
  Mr. Ose, Mr. Lewis of Kentucky, Mr. Crane, Ms. Sanchez, Mr. Deal of 
Georgia, Mrs. Emerson, Mr. Gekas, Mr. Talent, Mr. Clyburn, Mr. Filner, 
  Mr. Quinn, Mr. Minge, Mr. Gary Miller of California, Mr. Wise, Mr. 
Riley, Mr. Pombo, Mr. Larson, Mr. Andrews, Mr. Callahan, Mr. Shows, Mr. 
   Rahall, Mr. Nethercutt, Mr. Thornberry, Mr. Cook, Mr. Matsui, Mr. 
 Spence, Mr. Sessions, Mr. Tanner, Mr. King, Mr. Berman, Mrs. Myrick, 
Mr. Scarborough, Mr. Mollohan, Mr. McIntyre, Mr. Etheridge, Mr. Doyle, 
   Mr. McIntosh, Mr. John, Ms. Brown of Florida, Mr. Jones of North 
   Carolina, Mr. Hulshof, Mr. Sandlin, Mr. Gordon, Mr. Vitter, Mrs. 
   Biggert, Mr. Manzullo, Mr. Franks of New Jersey, Mr. Forbes, Mr. 
                   Mascara, and Mr. Meeks of New York

                             March 15, 2000

  Reported with an amendment, committed to the Committee of the Whole 
       House on the State of the Union, and ordered to be printed
 [Strike out all after the enacting clause and insert the part printed 
                               in italic]
[For text of introduced bill, see copy of bill as introduced on January 
                                6, 1999]

_______________________________________________________________________

                                 A BILL

 
    To establish a Federal program to provide reinsurance for State 
                      disaster insurance programs.

    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 may be cited as the ``Homeowners' 
Insurance Availability Act of 2000''.
    (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title.
Sec. 2. Congressional findings.
Sec. 3. Program authority.
Sec. 4. Qualified lines of coverage.
Sec. 5. Covered perils.
Sec. 6. Contracts for reinsurance coverage for eligible State programs.
Sec. 7. Auction of contracts for reinsurance coverage.
Sec. 8. Anti-redlining requirement.
Sec. 9. Minimum level of retained losses and maximum Federal liability.
Sec. 10. Disaster Reinsurance Fund.
Sec. 11. National Commission on Catastrophe Risks and Insurance Loss 
                            Costs.
Sec. 12. Definitions.
Sec. 13. Regulations.
Sec. 14. Termination.
Sec. 15. Annual study of cost and availability of disaster insurance 
                            and program need.
Sec. 16. GAO study of hurricane related flooding.

SEC. 2. CONGRESSIONAL FINDINGS.

    The Congress finds that--
            (1) the rising costs resulting from natural disasters have 
        placed a strain on homeowners' insurance markets in many areas, 
        jeopardizing the ability of many consumers to adequately insure 
        their homes and possessions;
            (2) the lack of sufficient insurance capacity threatens to 
        increase the number of uninsured homeowners, which, in turn, 
        increases the risk of mortgage defaults and the strain on the 
        Nation's banking system;
            (3) some States have intervened to ensure the continued 
        availability of homeowners' insurance for all residents;
            (4) it is appropriate that efforts to improve insurance 
        availability be designed and implemented at the State level;
            (5) while State insurance programs may be adequate to cover 
        losses from most natural disasters, a small percentage of 
        events are likely to exceed the financial capacity of these 
        programs and the local insurance markets;
            (6) limited Federal reinsurance will improve the 
        effectiveness of State insurance programs and private insurance 
        markets and will increase the likelihood that homeowners' 
        insurance claims will be fully paid in the event of a large 
        natural catastrophe;
            (7) it is necessary to provide, on a temporary basis, a 
        Federal reinsurance program that will promote stability in the 
        homeowners' insurance market in the short term and encourage 
        the growth of reinsurance capacity by the private and capital 
        markets as soon as practicable;
            (8) such a Federal reinsurance program should not remain in 
        existence longer than necessary for the private entities or the 
        capital markets, or both, to provide adequate reinsurance 
        capacity to address the current homeowners' insurance market 
        dislocations caused by various disasters; and
            (9) any Federal reinsurance program must be founded upon 
        sound actuarial principles and priced in a manner that 
        minimizes the potential impact on the Treasury.

SEC. 3. PROGRAM AUTHORITY.

    (a) In General.--The Secretary of the Treasury shall carry out a 
program under this Act to make reinsurance coverage available through--
            (1) contracts for reinsurance coverage under section 6, 
        which shall be made available for purchase only by eligible 
        State programs; and
            (2) contracts for reinsurance coverage under section 7, 
        which shall be made available for purchase by purchasers under 
        section 7(a)(1) only through auctions under section 7(a).
    (b) Purpose.--The program shall be designed to make reinsurance 
coverage under this Act available to improve the availability of 
homeowners' insurance for the purpose of facilitating the pooling, and 
spreading the risk, of catastrophic financial losses from natural 
disasters and to improve the solvency of homeowners' insurance markets.
    (c) Contract Principles.--Under the program under this Act, the 
Secretary shall offer reinsurance coverage through contracts with 
covered purchasers, which contracts--
            (1) shall not displace or compete with the private 
        insurance or reinsurance markets or capital markets;
            (2) shall minimize the administrative costs of the Federal 
        Government;
            (3) shall, in the case of any contract under section 6 for 
        an eligible State program, provide coverage based solely on 
        insured losses within the State of the eligible State program 
        purchasing the contract; and
            (4) shall, in the case of any contract under section 7 for 
        purchase at auction, provide coverage based solely on insured 
        losses within the region established pursuant to section 7(a) 
        for which the auction is held.

SEC. 4. QUALIFIED LINES OF COVERAGE.

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

SEC. 5. COVERED PERILS.

    Each contract for reinsurance coverage made available under this 
Act shall cover losses that are--
            (1) proximately caused by--
                    (A) earthquakes;
                    (B) perils ensuing from earthquakes, including fire 
                and tsunamis;
                    (C) tropical cyclones having maximum sustained 
                winds of at least 74 miles per hour, including 
                hurricanes and typhoons;
                    (D) tornadoes; or
                    (E) volcanic eruptions; and
            (2) in the case only of a contract under section 6, insured 
        or reinsured by the eligible State program purchasing the 
        contract.
The Secretary shall, by regulation, define the natural disaster perils 
under paragraph (1).

SEC. 6. CONTRACTS FOR REINSURANCE COVERAGE FOR ELIGIBLE STATE PROGRAMS.

    (a) Eligible State Programs.--A program shall be eligible to 
purchase a contract under this section for reinsurance coverage under 
this Act only if the State entity authorized to make such 
determinations certifies to the Secretary that the program is a State-
operated program that complies with the following requirements:
            (1) Program design.--The program shall be a State-
        operated--
                    (A) insurance program that--
                            (i) offers coverage for homes (which may 
                        include dwellings owned under condominium and 
                        cooperative ownership arrangements) and the 
                        contents of apartments to State residents 
                        because of a finding by the State insurance 
                        commissioner or other State entity authorized 
                        to make such determination that such a program 
                        is necessary in order to provide for the 
                        continued availability of such residential 
                        coverage for all residents; and
                            (ii) is authorized by State law; or
                    (B) reinsurance program that is designed to improve 
                private insurance markets that offer coverage for homes 
                (which may include dwellings owned under condominium 
                and cooperative ownership arrangements) and the 
                contents of apartments because of a finding by the 
                State insurance commissioner or other State entity 
                authorized to make such determination that such a 
                program is necessary in order to provide for the 
                continued availability of such residential coverage for 
                all residents.
            (2) Operation.--The program shall meet the following 
        requirements:
                    (A) A majority of the members of the governing body 
                of the program shall be public officials.
                    (B) The State shall have a financial interest in 
                the program, which shall not include a program 
                authorized by State law or regulation that requires 
                insurers to pool resources to provide property 
                insurance coverage for covered perils.
            (3) Tax status.--The program shall be structured and 
        carried out in a manner so that the program is exempt from all 
        Federal taxation.
            (4) Coverage.--The program shall cover only a single peril.
            (5) Earnings.--The program may not provide for, nor shall 
        have ever made, any redistribution of any part of any net 
profits of the program to any insurer that participates in the program.
            (6) Mitigation.--
                    (A) In general.--The program shall include 
                mitigation provisions that require that not less than 
                10 percent of the net investment income of the State 
                insurance or reinsurance program be used for programs 
                to mitigate losses from natural disasters for which the 
                State insurance or reinsurance program was established. 
                For purposes of this paragraph, mitigation shall 
                include methods to reduce losses of life and property.
                    (B) Exception.--Notwithstanding subparagraph (A), 
                in the case of any State for which the Secretary has 
                determined, pursuant to a request by the State 
                insurance commissioner, that the 10 percent requirement 
                under subparagraph (A) will jeopardize the actuarial 
                soundness of the State program, subparagraph (A) shall 
                be applied by substituting ``5 percent'' for ``10 
                percent''.
            (7) Requirements regarding coverage.--
                    (A) In general.--The program--
                            (i) may not involve cross-subsidization 
                        between any separate property and casualty 
                        lines covered under the program unless the 
                        elimination of such activity in an existing 
                        program would negatively impact the eligibility 
                        of the program to purchase a contract for 
                        reinsurance coverage under this Act pursuant to 
                        paragraph (3);
                            (ii) shall include provisions that 
                        authorize the State insurance commissioner or 
                        other State entity authorized to make such a 
                        determination to terminate the program if the 
                        insurance commissioner or other such entity 
                        determines that the program is no longer 
                        necessary to ensure the availability of 
                        homeowners' insurance for all State residents; 
                        and
                            (iii) shall provide that, for any insurance 
                        coverage for homes (which may include dwellings 
                        owned under condominium and cooperative 
                        ownership arrangements) and the contents of 
                        apartments that is made available under the 
                        State insurance program and for any reinsurance 
                        coverage for such insurance coverage made 
                        available under the State reinsurance program, 
                        the premium rates charged shall be amounts 
                        that, at a minimum, are sufficient to cover the 
                        full actuarial costs of such coverage, based on 
                        consideration of the risks involved and 
                        accepted actuarial and rate making principles, 
                        anticipated administrative expenses, and loss 
                        and loss-adjustment expenses.
                    (B) Applicability.--This paragraph shall apply--
                            (i) before the expiration of the 2-year 
                        period beginning on the date of the enactment 
                        of this Act, only to State programs which, 
                        after January 1, 1999, commence offering 
                        insurance or reinsurance coverage described in 
                        subparagraph (A) or (B), respectively, of 
                        paragraph (1); and
                            (ii) after the expiration of such period, 
                        to all State programs.
            (8) Other qualifications.--
                    (A) In general.--The State program shall (for the 
                year for which the coverage is in effect) comply with 
                regulations that shall be issued under this paragraph 
                by the Secretary, in consultation with the National 
                Commission on Catastrophe Risks and Insurance Loss 
                Costs established under section 11. The regulations 
                shall establish criteria for State programs to qualify 
                to purchase reinsurance under this section, which are 
                in addition to the requirements under the other 
                paragraphs of this subsection.
                    (B) Contents.--The regulations issued under this 
                paragraph shall include requirements that--
                            (i) the State program have public members 
                        on its board of directors or have an advisory 
                        board with public members;
                            (ii) insurance or reinsurance coverage, as 
                        applicable, made available through the State 
                        program not supplant coverage that is otherwise 
                        reasonably available and affordable in the 
                        private market;
                            (iii) the State program provide adequate 
                        insurance or reinsurance protection, as 
                        applicable, for the peril covered, which shall 
                        include a range of deductibles and premium 
                        costs that reflect the applicable risk to 
                        eligible properties;
                            (iv) insurance or reinsurance coverage, as 
                        applicable, provided by the State program is 
                        made available on a nondiscriminatory basis to 
                        all qualifying residents;
                            (v) any new construction, substantial 
                        rehabilitation, and renovation insured or 
                        reinsured by the program complies with 
                        applicable State or local government building, 
                        fire, and safety codes;
                            (vi) the State, or appropriate local 
                        governments within the State, have in effect 
                        and enforce nationally recognized model 
                        building, fire, and safety codes and consensus-
                        based standards that offer disaster resistance 
                        that is substantially equivalent or greater 
                        than the resistance under any requirements for 
                        floods, earthquakes, or wind resistance issued 
                        by the Federal Emergency Management Agency;
                            (vii) the State has taken actions to 
                        establish an insurance rate structure that 
                        takes into account measures to mitigate 
                        insurance losses;
                            (viii) there are in effect, in such State, 
                        laws or regulations sufficient to prohibit 
                        price gouging, during the term of reinsurance 
                        coverage under this Act for the State program, 
in any disaster area located within the State; and
                            (ix) the State program complies with such 
                        other requirements that the Secretary considers 
                        necessary to carry out the purposes of this 
                        Act.
    (b) Terms of Contracts.--Each contract under this section for 
reinsurance coverage under this Act shall be subject to the following 
terms and conditions:
            (1) Maturity.--The term of the contract shall not exceed 1 
        year or such other term as the Secretary may determine.
            (2) Payment condition.--The contract shall authorize claims 
        payments for eligible losses only to the eligible State program 
        purchasing the coverage.
            (3) Retained losses requirement.--For each event of a 
        covered peril, the contract shall make a payment for the event 
        only if the total amount of insurance claims for losses, which 
        are covered by qualified lines, occur to properties located 
        within the State covered by the contract, and result from the 
        event, exceeds the amount of retained losses provided under the 
        contract (pursuant to section 9(a)) purchased by the eligible 
        State program.
            (4) Multiple events.--The contract shall cover any eligible 
        losses from one or more covered events that may occur during 
        the term of the contract and shall provide that if multiple 
        events occur, the retained losses requirement under paragraph 
        (3) shall apply to each event.
            (5) Timing of eligible losses.--Eligible losses under the 
        contract shall include only insurance claims for property 
        covered by qualified lines that are reported to the eligible 
        State program within the 3-year period beginning upon the event 
        or events for which payment under the contract is provided.
            (6) Pricing.--
                    (A) Determination.--The price of reinsurance 
                coverage under the contract shall be an amount 
                established by the Secretary as follows:
                            (i) Recommendations.--The Secretary shall 
                        take into consideration the recommendations of 
                        the Commission in establishing the price, but 
                        the price may not be less than the amount 
                        recommended by the Commission.
                            (ii) Fairness to taxpayers.--The price 
                        shall be established at a level that is 
                        designed to return to the Federal Government 
                        fair compensation for the risks and costs being 
                        borne by the people of the United States and 
                        that takes into consideration the developmental 
                        stage of empirical models of natural disasters 
                        and the capacity of private markets to absorb 
                        insured losses from natural disasters.
                            (iii) Self-sufficiency.--The rates for 
                        reinsurance coverage shall be established at a 
                        level that annually produces expected premiums 
                        which shall be sufficient to pay the expected 
                        annualized cost of all claims, loss adjustment 
                        expenses, and all administrative costs of 
                        reinsurance coverage offered under this 
                        section.
                    (B) Components.--The price shall consist of the 
                following components:
                            (i) Risk-based price.--A risk-based price, 
                        which shall reflect the anticipated annualized 
                        payout of the contract according to the 
                        actuarial analysis and recommendations of the 
                        Commission.
                            (ii) Risk load.--A risk load in an amount 
                        that is not less than the risk-based price 
                        under clause (i). In establishing risk loads 
                        under this clause, the Secretary shall take 
                        into consideration comparable private risk 
                        loads.
                            (iii) Administrative costs.--A sum 
                        sufficient to provide for the operation of the 
                        Commission and the administrative expenses 
                        incurred by the Secretary in carrying out this 
                        Act.
            (7) Information.--The contract shall contain a condition 
        providing that the Commission may require the State program 
        that is covered under the contract to submit to the Commission 
        all information on the State program relevant to the duties of 
        the Commission, as determined by the Secretary.
            (8) Additional contract option.--The contract shall provide 
        that the purchaser of the contract may, during the term of such 
        original contract, purchase additional contracts from among 
        those offered by the Secretary at the beginning of the term, 
        subject to the limitations under section 9, at the prices at 
        which such contracts were offered at the beginning of the term, 
        prorated based upon the remaining term as determined by the 
        Secretary. Such additional contracts shall provide coverage 
        beginning on a date 15 days after the date of purchase but 
        shall not provide coverage for losses for an event that has 
        already occurred.
            (9) Others.--The contract shall contain such other terms as 
        the Secretary considers necessary to carry out this Act and to 
        ensure the long-term financial integrity of the program under 
        this Act.
    (c) Private Sector Right To Participate.--
            (1) Establishment of competitive procedure.--The Secretary 
        shall establish, by regulation, a competitive procedure under 
        this subsection that provides qualified entities an 
        opportunity, on a basis consistent with the contract cycle 
        established under this Act by the Secretary, to offer to 
        provide, in lieu of reinsurance coverage under this section, 
        reinsurance coverage that is substantially similar to coverage 
        otherwise made available under this section.
            (2) Competitive procedure.--Under the procedure established 
        under this subsection--
                    (A) the Secretary shall establish criteria for 
                private insurers, reinsurers, and capital market 
                companies, and consortia of such entities to be treated 
                as qualified entities for purposes of this subsection, 
                which criteria shall require such an entity to have at 
                all times capital sufficient to satisfy the terms of 
                the reinsurance contracts and shall include such other 
industry and credit rating standards as the Secretary considers 
appropriate;
                    (B) not less than 30 days before the beginning of 
                each contract cycle during which any reinsurance 
                coverage under this section is to be made available, 
                the Secretary may request proposals and shall publish 
                in the Federal Register the rates and terms for 
                contracts for reinsurance coverage under this section 
                that are to be made available during such contract 
                cycle;
                    (C) the Secretary shall provide qualified entities 
                a period of not less than 10 days (which shall 
                terminate not less than 20 days before the beginning of 
                the contract cycle) to submit to the Secretary a 
                written expression of interest in providing reinsurance 
                coverage in lieu of the coverage otherwise to be made 
                available under this section;
                    (D) the Secretary shall provide any qualified 
                entity submitting an expression of interest during the 
                period referred to in subparagraph (C) a period of not 
                less than 20 days (which shall terminate before the 
                beginning of the contract cycle) to submit to the 
                Secretary an offer to provide, in lieu of the 
                reinsurance coverage otherwise to be made available 
                under this section, coverage that is substantially 
                similar to such coverage;
                    (E) if the Secretary determines that an offer 
                submitted during the period referred to in subparagraph 
                (D) is a bona fide offer to provide reinsurance 
                coverage during the contract cycle at rates and terms 
                that are substantially similar to the rates and terms 
                for reinsurance coverage otherwise to be provided under 
                this section by the Secretary, the Secretary shall 
                accept the offer (if still outstanding) and, 
                notwithstanding any other provision of this Act, 
                provide for such entity to make reinsurance coverage 
                available in accordance with the offer; and
                    (F) if the Secretary accepts an offer pursuant to 
                subparagraph (E) to make reinsurance coverage 
                available, notwithstanding any other provision of this 
                Act, the Secretary shall reduce, to an equivalent 
                extent, the amount of reinsurance coverage available 
                under this section during the contract cycle to which 
                the offer relates, unless and until the Secretary 
                determines that the entity is not complying with the 
                terms of the accepted offer.

SEC. 7. AUCTION OF CONTRACTS FOR REINSURANCE COVERAGE.

    (a) Auction Program Requirements.--The Secretary shall carry out a 
program to auction contracts for reinsurance coverage under this Act 
made available pursuant to section 3(a)(2), which shall comply with the 
following requirements:
            (1) Purchasers.--The auction program shall provide for 
        auctioning all contracts made available under this section to 
        private insurers and reinsurers, State insurance and 
        reinsurance programs, and other interested entities.
            (2) Regional auctions.--The auction program shall provide 
        for auctions on a regional basis. The Secretary shall divide 
        the States into not less than 6 regions for the purpose of 
        holding such regional auctions, which shall include separate 
        regions for all or part of the State of California and all or 
        part of the State of Florida. In determining the boundaries for 
        such regions, the Secretary shall consider which areas have 
        greater risks of losses from covered perils and which areas 
        have lesser risks of losses from covered perils, and shall 
        attempt not to combine those different types of areas. Auctions 
        for each region shall be conducted not less often than 
        annually.
            (3) Reserve price.--In auctioning contracts under this 
        section for reinsurance coverage, the Secretary shall set, for 
        each contract, a reserve price that is the minimum price at 
        which the contract may be sold, based upon the recommendations 
        of the Commission. The reserve price shall be determined on the 
        basis of the following components:
                    (A) Risk-based price.--A risk-based price, which 
                shall reflect the anticipated annualized payout of the 
                contract according to the actuarial analysis and 
                recommendations of the Commission.
                    (B) Risk load.--A risk load in an amount that is 
                not less than the risk-based price under subparagraph 
                (A).
                    (C) Administrative costs.--A sum sufficient to 
                provide for the operation of the Commission and the 
                administrative expenses incurred by the Secretary in 
                carrying out this section.
                    (D) Mitigation.--An adjustment based on an 
                actuarial analysis that takes into account any efforts 
                that are being made to reduce losses to property in the 
                region in which the contract is being sold.
            (4) Price gouging protections.--The auction program may 
        provide reinsurance coverage for losses incurred only for 
        property located in a State for which the State entity 
        authorized to make such determinations has certified to the 
        Secretary that there are in effect, in such State, laws or 
        regulations sufficient to prohibit price gouging, during the 
        term of such reinsurance coverage, in any disaster area located 
        within the State.
            (5) Mitigation requirements.--
                    (A) In general.--The auction program shall require 
                each purchaser of a contract that is not an eligible 
                State program, as a condition of such purchase, to 
                contribute an amount, that the Secretary (in 
                consultation with the Director of the Federal Emergency 
                Management Agency) shall establish and which shall not 
                exceed 5 percent of the price paid for the contract, to 
                communities that--
                            (i) are located in the State in which the 
                        reinsurance coverage under the contract is 
                        provided (or in the case of multiple States, 
among such States, as determined by the Secretary);
                            (ii) are designated by the Director of the 
                        Federal Emergency Management Agency and the 
                        appropriate emergency management agency for the 
                        State as Project Impact communities (for 
                        purposes of the pre-disaster mitigation program 
                        of such Agency); and
                            (iii) are participating in such programs or 
                        initiatives as the Secretary may require that 
                        provide incentives for construction of 
                        structures and communities that are resistant 
                        to damage from covered perils, which shall 
                        include the Building Code Effectiveness Grading 
                        Schedule of the Insurance Services Office.
                    (B) Use of contributions.--Amounts contributed to 
                communities pursuant to the requirement under 
                subparagraph (A) shall be used only--
                            (i) for activities to reduce losses from 
                        covered perils to properties covered under the 
                        reinsurance contract purchased under the 
                        auction program that are located in such 
                        communities; and
                            (ii) in accordance with such requirements 
                        as the Secretary, in consultation with the 
                        Director of the Federal Emergency Management 
                        Agency and appropriate State agencies, shall 
                        establish to ensure cost-effective use of such 
                        amounts.
                    (C) Allocation.--The Secretary, in consultation 
                with the Director of the Federal Emergency Management 
                Agency, shall establish requirements for allocation of 
                contributions among communities eligible under 
                subparagraph (A) to receive such contributions.
            (6) Other requirements.--The Secretary may establish such 
        other requirements for the auction program as the Secretary 
        considers necessary to carry out this Act.
    (b) Contract Terms and Conditions.--Each contract for reinsurance 
coverage auctioned under the program under this section shall include 
the following terms and conditions:
            (1) Maturity.--The term of each such contract shall not 
        exceed 1 year or such other term as the Secretary may 
        determine.
            (2) Transferability.--The contract shall at all times be 
        fully transferable, assignable, and divisible.
            (3) Threshold of coverage.--The contract shall provide that 
        the covered purchaser may receive a payment for losses covered 
        under the contract if, under a process specified in the 
        contract, the Secretary determines that the insurance industry 
        will, as a result of a single event of a covered peril, incur 
        losses within the coverage area for the region established 
        under subsection (a)(2) for which the contract was auctioned 
        that are covered by one or more lines of insurance under 
        section 5 in an aggregate amount, for such event, greater than 
        the level of retained losses specified in section 9.
            (4) Multiple events.--The contract shall contain the 
        provisions described in section 6(b)(4).
            (5) Additional contract option.--The contract shall contain 
        the provisions described in section 6(b)(8).
            (6) Submission of information.--The contract shall include 
        terms that--
                    (A) require the purchaser to notify the Secretary 
                of any sale, transfer, assignment, or division of the 
                contract or any interest in the contract, identify the 
                interest involved, and identify the price paid or 
                compensation provided; and
                    (B) authorize the disclosures required under 
                subsection (c)(2).
            (7) Others.--The contract shall contain such other terms as 
        the Secretary considers necessary to carry out this Act and to 
        ensure the long-term financial integrity of the program under 
        this Act.
    (c) GAO Audit.--
            (1) In general.--For each fiscal year, the Comptroller 
        General of the United States shall conduct an audit of prices 
        for contracts made available under the auction program under 
        this section during such fiscal year that determines--
                    (A) the reserve prices established for such 
                contracts;
                    (B) the prices paid for such contracts that are 
                purchased;
                    (C) the prices paid, or compensation provided, in 
                any sales, transfers, assignments, or divisions of any 
                such contracts (or any interests in such contracts) in 
                the secondary market or to any third party; and
                    (D) pursuant to the information obtained under 
                subparagraphs (A) through (C), the appropriate reserve 
                prices for such contracts that are to be made available 
                in the succeeding fiscal year.
            (2) Use of information.--The Secretary shall provide any 
        information referred to in subsection (b)(6) that is obtained 
        by the Secretary to the Comptroller General, the Director of 
        the Congressional Budget Office, and the Director of the Office 
        of Management and Budget, and shall make such information 
        publicly available. The Secretary, the Director of the 
        Congressional Budget Office, the Director of the Office of 
        Management and Budget shall each take such information into 
        consideration in preparing any budget, report, estimate, or 
        recommendation to the extent it relates to the auction program 
        under this section, and in any determinations relating to the 
        Budget of the United States or the concurrent resolution on the 
        budget (as such term is defined in section 3 of the 
        Congressional Budget Act of 1974). The Secretary shall take 
        such information into consideration in establishing reserve 
        prices for contracts made available under this section.

SEC. 8. ANTI-REDLINING REQUIREMENT.

    Notwithstanding sections 6(a) and 7(a), the Secretary may not make 
a contract for reinsurance coverage under this Act available for 
purchase unless the purchaser certifies to the Secretary--
            (1) in the case of a contract under section 6, that--
                    (A) no insurer (or affiliate of such insurer) 
                participating in the State-operated program of such 
                purchaser has been adjudicated in any Federal court, or 
                has entered, after the date of the enactment of this 
                Act, into a consent decree filed in a Federal court or 
                into a settlement agreement, premised upon a violation 
                of the Fair Housing Act for the activities involved in 
                making insurance coverage available; and
                    (B) if such insurer (or affiliate) has entered into 
                any such consent decree or settlement agreement, the 
                insurer (or affiliate) is not in violation of the 
                decree or settlement agreement as determined by a court 
                of competent jurisdiction or the agency with which the 
                decree or agreement was entered into; and
            (2) in the case of a contract under section 7, that--
                    (A)(i) in the case of a contract purchased by an 
                insurer or reinsurer, the insurer or reinsurer (or 
                affiliate of such insurer or reinsurer) has not been 
                adjudicated in any Federal court, and has not entered, 
                after the date of the enactment of this Act, into a 
                consent decree filed in a Federal court or into a 
                settlement agreement, premised upon a violation of the 
                Fair Housing Act for the activities involved in making 
                insurance coverage available; or
                    (ii) in the case of a contract purchased by a State 
                program, no insurer (or affiliate of such insurer) 
                participating in the State program has been adjudicated 
                in any Federal court, or has entered, after the date of 
                the enactment of this Act, into a consent decree filed 
                in a Federal court or into a settlement agreement, 
                premised upon a violation of the Fair Housing Act for 
                the activities involved in making insurance coverage 
                available; and
                    (B) if such an insurer or reinsurer (or affiliate 
                of such an insurer or reinsurer) has entered into any 
                such consent decree or settlement agreement, the 
                insurer or reinsurer (or affiliate) is not in violation 
                of the decree or settlement agreement as determined by 
                a court of competent jurisdiction or the agency with 
                which the decree or agreement was entered into.

SEC. 9. MINIMUM LEVEL OF RETAINED LOSSES AND MAXIMUM FEDERAL LIABILITY.

    (a) Available Levels of Retained Losses.--In making reinsurance 
coverage available under this Act, the Secretary shall make available 
for purchase contracts for such coverage that require the sustainment 
of retained losses from a single event of a covered peril (as required 
under sections 6(b)(3) and 7(b)(3) for payment of eligible losses) in 
various amounts, as the Secretary, in consultation with the Commission, 
determines appropriate and subject to the requirements under subsection 
(b).
    (b) Minimum Level of Retained Losses.--
            (1) Contracts for state programs.--Subject to paragraphs 
        (3) and (4) and notwithstanding any other provision of this 
        Act, a contract for reinsurance coverage under section 6 for an 
        eligible State program that offers insurance or reinsurance 
        coverage described in subparagraph (A) or (B), respectively, of 
        section 6(a)(1) may not be made available or sold unless the 
        contract requires retained losses from a single event of a 
        covered peril in the following amount:
                    (A) In general.--The State program shall sustain an 
                amount of retained losses of not less than the greater 
                of--
                            (i) an amount between $2,000,000,000 and 
                        $5,000,000,000, that is determined by the 
                        Secretary in accordance with the requirement 
                        under section 3(c)(1);
                            (ii) the claims-paying capacity of the 
                        eligible State program, as determined by the 
                        Secretary; and
                            (iii) an amount, determined by the 
                        Secretary in consultation with the Commission, 
                        that is in the range between the amount equal 
                        to the eligible loss projected to be incurred 
                        once every 100 years from a single event in the 
                        State and the amount equal to the eligible loss 
                        projected to be incurred once every 250 years 
                        from such an event.
                    (B) Transition rule for existing programs.--
                            (i) Claims-paying capacity.--Subject to 
                        clause (ii), in the case of any eligible State 
                        program that was offering insurance or 
                        reinsurance coverage on the date of the 
                        enactment of this Act and the claims-paying 
                        capacity of which is greater than the amount 
                        determined under subparagraph (A)(i) but less 
                        than an amount determined for the State under 
                        subparagraph (A)(iii), the minimum level of 
                        retained losses applicable under this paragraph 
                        shall be the claims-paying capacity of such 
                        State program.
                            (ii) Agreement.--Clause (i) shall apply to 
                        a State program only if the State program 
                        enters into a written agreement with the 
                        Secretary providing a schedule for increasing 
                        the claims-paying capacity of the State program 
                        to the amount determined for the State under 
                        subparagraph (A)(iii) over a period not to 
                        exceed 5 years. The Secretary may extend the 5-
                        year period for not more than 2 additional one-
                        year periods if the Secretary determines that 
                        losses incurred by the State program as a 
                        result of covered perils create excessive 
                        hardship on the State program. The Secretary 
                        shall consult with the appropriate officials of 
                        the State program regarding the required 
                        schedule and any potential one-year extensions.
                    (C) Transition rule for new programs.--
                            (i) 100-year event.--The Secretary may 
                        provide that, in the case of an eligible State 
program that, after January 1, 1999, commences offering insurance or 
reinsurance coverage, during the 5-year period beginning on the date 
that reinsurance coverage under section 6 is first made available, the 
minimum level of retained losses applicable under this paragraph shall 
be the amount determined for the State under subparagraph (A)(iii), 
except that such minimum level shall be adjusted annually as provided 
in clause (ii) of this subparagraph.
                            (ii) Annual adjustment.--Each annual 
                        adjustment under this clause shall increase the 
                        minimum level of retained losses applicable 
                        under this subparagraph to an eligible State 
                        program described in clause (i) in a manner 
                        such that--
                                    (I) during the course of such 5-
                                year period, the applicable minimum 
                                level of retained losses approaches the 
                                minimum level that, under subparagraph 
                                (A), will apply to the eligible State 
                                program upon the expiration of such 
                                period; and
                                    (II) each such annual increase is a 
                                substantially similar amount, to the 
                                extent practicable.
                    (D) Reduction because of reduced claims-paying 
                capacity.--
                            (i) Authority.--Notwithstanding 
                        subparagraphs (A), (B), and (C) or the terms 
                        contained in a contract for reinsurance 
                        pursuant to such subparagraphs, if the 
                        Secretary determines that the claims-paying 
                        capacity of an eligible State program has been 
                        reduced because of payment for losses due to an 
                        event, the Secretary may reduce the minimum 
                        level of retained losses for the State 
                        commensurate with the current capacity of the 
                        State program, as determined by the Secretary, 
                        but in no case may such minimum level be less 
                        than the amount determined under subparagraph 
                        (A)(i).
                            (ii) Term of reduction.--If the minimum 
                        level of retained losses for an eligible State 
                        program is reduced pursuant to clause (i), upon 
                        the expiration of the 5-year period beginning 
                        upon such reduction the minimum level of 
                        retained losses applicable to such State 
                        program under a contract for reinsurance 
                        coverage under section 6 shall be increased to 
                        an amount not less than the amount applicable 
                        to such State program immediately before such 
                        reduction.
                    (E) Claims-paying capacity.--For purposes of this 
                paragraph, the claims-paying capacity of a State-
                operated insurance or reinsurance program under section 
                6(a)(1) shall be determined by the Secretary, in 
                consultation with the Commission, taking into 
                consideration the claims-paying capacity as determined 
                by the State program, retained losses to private 
                insurers in the State in an amount assigned by the 
                State insurance commissioner, the cash surplus of the 
                program, and the lines of credit, reinsurance, and 
                other financing mechanisms of the program established 
                by law.
            (2) Auction contracts.--Subject to paragraphs (3) and (4) 
        and notwithstanding any other provision of this Act, a contract 
        for reinsurance coverage may not be made available or sold 
        under section 7 through a regional auction unless the contract 
        requires that the insurance industry in the region for which 
        the auction was conducted sustains a cumulative amount of 
        retained losses (in covered lines resulting from covered 
        perils) of not less than the greater of--
                    (A) an amount between $2,000,000,000 and 
                $5,000,000,000, that is determined by the Secretary in 
                accordance with the requirement under section 3(c)(1); 
                and
                    (B) an amount, determined by the Secretary in 
                consultation with the Commission, that is in the range 
                between the amount equal to the eligible loss projected 
                to be incurred once every 100 years from a single event 
                in the region and the amount equal to the eligible loss 
                projected to be incurred once every 250 years from such 
                an event.
            (3) Initial adjustment based on private market.--The 
        Secretary may, before making contracts for reinsurance coverage 
        under this Act initially available under section 6 or 7, raise 
        the minimum level of retained losses from the amount required 
        under paragraph (1) for an eligible State program or under 
        paragraph (2) for a region to ensure, as determined by the 
        Secretary, that such contracts comply with the principle under 
        section 3(c)(1).
            (4) Annual adjustment.--The Secretary may annually raise 
        the minimum level of retained losses established under 
        paragraph (1) for an eligible State program or under paragraph 
        (2) for a region to reflect, as determined by the Secretary--
                    (A) in the case of an eligible State program, 
                changes to the claims-paying capacity of the program;
                    (B) changes in the capacity of the private 
                insurance and reinsurance market;
                    (C) increases in the market value of properties; or
                    (D) such other situations as the Secretary 
                considers appropriate.
        The Secretary shall consider the minimum level of retained 
        losses requirements in paragraphs (1) and (2) as minimum 
        requirements only and shall have full authority, effective on 
        the date of the enactment of this Act, to establish levels of 
        required minimum retained losses in any amount greater than the 
        amounts specified in such paragraphs. In making any 
        determination under this paragraph in the minimum level of 
        retained losses, the Secretary shall establish such level at an 
        amount such that the program under this Act for making 
        reinsurance coverage available does not displace or compete 
with the private insurance or reinsurance markets or capital markets, 
as determined by the Secretary after the Secretary has provided 
interested parties an opportunity to submit to the Commission market 
information relevant to such determination and has provided the 
Commission with an opportunity to advise the Secretary regarding such 
information and determination.
            (5) Optional annual inflationary or exposure adjustment.--
        The Secretary may, on an annual basis, raise the minimum level 
        of retained losses established under paragraph (1) for each 
        eligible State program and under paragraph (2) for each region 
        to reflect the annual rate of inflation or growth in exposures, 
        whichever is greater. Any such raise shall be made in 
        accordance with an inflation index or exposure index, as 
        appropriate, that the Secretary determines to be appropriate. 
        The first such raise may be made one year after contracts for 
        reinsurance coverage under this Act are first made available 
        for purchase.
    (c) Maximum Federal Liability.--
            (1) In general.--Notwithstanding any other provision of 
        law, the Secretary may sell only contracts for reinsurance 
        coverage under this Act in various amounts which comply with 
        the following requirements:
                    (A) Estimate of aggregate liability.--The aggregate 
                liability for payment of claims under all such 
                contracts in any single year is unlikely to exceed 
                $25,000,000,000 (as such amount is adjusted under 
                paragraph (2)).
                    (B) Eligible loss coverage sold.--Eligible losses 
                covered by all contracts sold within a State or region 
                during a 12-month period do not exceed the difference 
                between the following amounts (each of which shall be 
                determined by the Secretary in consultation with the 
                Commission):
                            (i) The amount equal to the eligible loss 
                        projected to be incurred once every 500 years 
                        from a single event in the State or region.
                            (ii) The amount equal to the eligible loss 
                        projected to be incurred once every 100 years 
                        from a single event in the State or region.
            (2) Annual adjustments.--The Secretary shall annually 
        adjust the amount under paragraph (1)(A) (as it may have been 
        previously adjusted) to provide for inflation in accordance 
        with an inflation index that the Secretary determines to be 
        appropriate.
    (d) Limitation on Percentage of Risk in Excess of Retained 
Losses.--
            (1) In general.--The Secretary may not make available for 
        purchase contracts for reinsurance coverage under this Act that 
        would pay out more than 50 percent of eligible losses in excess 
        of retained losses--
                    (A) in the case of a contract under section 6 for 
                an eligible State program, for such State; and
                    (B) in the case of a contract made available 
                through a regional auction under section 7, for such 
                region.
            (2) Payout.--For purposes of this subsection, the amount of 
        payout from a reinsurance contract shall be the amount of 
        eligible losses in excess of retained losses multiplied by the 
        percentage under paragraph (1).

SEC. 10. DISASTER REINSURANCE FUND.

    (a) Establishment.--There is established within the Treasury of the 
United States a fund to be known as the Disaster Reinsurance Fund (in 
this section referred to as the ``Fund'').
    (b) Credits.--The Fund shall be credited with--
            (1) amounts received annually from the sale of contracts 
        for reinsurance coverage under this Act;
            (2) any amounts borrowed under subsection (d);
            (3) any amounts earned on investments of the Fund pursuant 
        to subsection (e); and
            (4) such other amounts as may be credited to the Fund.
    (c) Uses.--Amounts in the Fund shall be available to the Secretary 
only for the following purposes:
            (1) Contract payments.--For payments to covered purchasers 
        under contracts for reinsurance coverage for eligible losses 
        under such contracts.
            (2) Commission costs.--To pay for the operating costs of 
        the Commission.
            (3) Administrative expenses.--To pay for the administrative 
        expenses incurred by the Secretary in carrying out the 
        reinsurance program under this Act.
            (4) Termination.--Upon termination under section 14, as 
        provided in such section.
    (d) Borrowing.--
            (1) Authority.--To the extent that the amounts in the Fund 
        are insufficient to pay claims and expenses under subsection 
        (c), the Secretary may issue such obligations of the Fund as 
        may be necessary to cover the insufficiency and shall purchase 
        any such obligations issued.
            (2) Public debt transaction.--For the purpose of purchasing 
        any such obligations, the Secretary may use as a public debt 
        transaction the proceeds from the sale of any securities issued 
        under chapter 31 of title 31, United States Code, and the 
        purposes for which securities are issued under such chapter are 
        hereby extended to include any purchase by the Secretary of 
        such obligations under this subsection.
            (3) Characteristics of obligations.--Obligations issued 
        under this subsection shall be in such forms and denominations, 
        bear such maturities, bear interest at such rate, and be 
        subject to such other terms and conditions, as the Secretary 
        shall determine.
            (4) Treatment.--All redemptions, purchases, and sales by 
        the Secretary of obligations under this subsection shall be 
        treated as public debt transactions of the United States.
            (5) Repayment.--Any obligations issued under this 
        subsection shall be repaid, including interest, from the Fund 
        and shall be recouped from premiums charged for reinsurance 
        coverage provided under this Act.
    (e) Investment.--If the Secretary determines that the amounts in 
the Fund are in excess of current needs, the Secretary may invest such 
amounts as the Secretary considers advisable in obligations issued or 
guaranteed by the United States.
    (f) Prohibition of Federal Funds.--Except for amounts made 
available pursuant to subsection (d) and section 11(h), no Federal 
funds shall be authorized or appropriated for the Fund or for carrying 
out the reinsurance program under this Act.

SEC. 11. NATIONAL COMMISSION ON CATASTROPHE RISKS AND INSURANCE LOSS 
              COSTS.

    (a) Establishment.--The Secretary shall establish a commission to 
be known as the National Commission on Catastrophe Risks and Insurance 
Loss Costs.
    (b) Duties.--The Commission shall meet for the sole purpose of 
advising the Secretary regarding the estimated loss costs associated 
with the contracts for reinsurance coverage available under this Act 
and carrying out the functions specified in this Act.
    (c) Members.--The Commission shall consist of not more than 5 
members, who shall be appointed by the Secretary and shall be broadly 
representative of the public interest. Members shall have no personal, 
professional, or financial interest at stake in the deliberations of 
the Commission. The membership of the Commission shall at all times 
include at least 1 representative of a nationally recognized consumer 
organization.
    (d) Treatment of Non-Federal Members.--Each member of the 
Commission who is not otherwise employed by the Federal Government 
shall be considered a special Government employee for purposes of 
sections 202 and 208 of title 18, United States Code.
    (e) Experts and Consultants.--The Commission may procure temporary 
and intermittent services under section 3109(b) of title 5, United 
States Code, but at a rate not in excess of the daily equivalent of the 
annual rate of basic pay payable for level V of the Executive Schedule, 
for each day during which the individual procured is performing such 
services for the Commission.
    (f) Compensation.--Each member of the Commission who is not an 
officer or employee of the Federal Government shall be compensated at a 
rate of basic pay payable for level V of the Executive Schedule, for 
each day (including travel time) during which such member is engaged in 
the performance of the duties of the Commission. All members of the 
Commission who are officers or employees of the United States shall 
serve without compensation in addition to that received for their 
services as officers or employees of the United States.
    (g) Obtaining Data.--The Commission and the Secretary may solicit 
loss exposure data and such other information either deems necessary to 
carry out its responsibilities from governmental agencies and bodies 
and organizations that act as statistical agents for the insurance 
industry. The Commission and the Secretary shall take such actions as 
are necessary to ensure that information that either deems is 
confidential or proprietary is disclosed only to authorized individuals 
working for the Commission or the Secretary. No company which refuses 
to provide information requested by the Commission or the Secretary may 
participate in the program for reinsurance coverage authorized under 
this Act, nor may any State insurance or reinsurance program 
participate if any governmental agency within that State has refused to 
provide information requested by the Commission or the Secretary.
    (h) Funding.--
            (1) Authorization of appropriations.--There are authorized 
        to be appropriated--
                    (A) $1,000,000 for fiscal year 2000 for the initial 
                expenses in establishing the Commission and the initial 
                activities of the Commission that cannot timely be 
                covered by amounts obtained pursuant to sections 
                6(b)(6)(B)(iii) and 7(a)(3)(C), as determined by the 
                Secretary;
                    (B) such additional sums as may be necessary to 
                carry out subsequent activities of the Commission;
                    (C) $1,000,000 for fiscal year 2000 for the initial 
                expenses of the Secretary in carrying out the program 
                authorized under section 3; and
                    (D) such additional sums as may be necessary to 
                carry out subsequent activities of the Secretary under 
                this Act.
            (2) Offset.--The Secretary shall provide, to the maximum 
        extent practicable, that an amount equal to any amount 
        appropriated under paragraph (1) is obtained from purchasers of 
        reinsurance coverage under this Act and deposited in the Fund 
        established under section 10. Such amounts shall be obtained by 
        inclusion of a provision for the Secretary's and the 
        Commission's expenses incorporated into the pricing of the 
        contracts for such reinsurance coverage, pursuant to sections 
        6(b)(6)(B)(iii) and 7(a)(3)(C).
    (i) Termination.--The Commission shall terminate upon the effective 
date of the repeal under section 14(c).

SEC. 12. DEFINITIONS.

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

SEC. 13. REGULATIONS.

    The Secretary shall issue any regulations necessary to carry out 
the program for reinsurance coverage under this Act.

SEC. 14. TERMINATION.

    (a) In General.--Except as provided in subsection (b), the 
Secretary may not provide any reinsurance coverage under this Act 
covering any period after the expiration of the 10-year period 
beginning on the date of the enactment of this Act.
    (b) Extension.--If upon the expiration of the period under 
subsection (a) the Secretary, in consultation with the Commission, 
determines that continuation of the program for reinsurance coverage 
under this Act is necessary to carry out the purpose of this Act under 
section 3(b) because of insufficient growth of capacity in the private 
homeowners' insurance market, the Secretary shall continue to provide 
reinsurance coverage under this Act until the expiration of the 5-year 
period beginning upon the expiration of the period under subsection 
(a).
    (c) Repeal.--Effective upon the date that reinsurance coverage 
under this Act is no longer available or in force pursuant to 
subsection (a) or (b), this Act (except for this section) is repealed.
    (d) Deficit Reduction.--The Secretary shall cover into the General 
Fund of the Treasury any amounts remaining in the Fund under section 10 
upon the repeal of this Act.

SEC. 15. ANNUAL STUDY OF COST AND AVAILABILITY OF DISASTER INSURANCE 
              AND PROGRAM NEED.

    (a) In General.--The Secretary shall, on an annual basis, conduct a 
study and submit to the Congress a report on the cost and availability 
of homeowners' insurance for losses resulting from catastrophic natural 
disasters covered by the reinsurance program under this Act.
    (b) Contents.--Each annual study under this section shall determine 
and identify, on an aggregate basis--
            (1) for each State or region, the capacity of the private 
        homeowners' insurance market with respect to coverage for 
        losses from catastrophic natural disasters;
            (2) for each State or region, the percentage of homeowners 
        who have such coverage, the disasters covered, and the average 
        cost of such coverage;
            (3) for each State or region, the progress that private 
        reinsurers and capital markets have made in providing 
        reinsurance for such homeowners' insurance;
            (4) for each State or region, the effects of the Federal 
        reinsurance program under this Act on the availability and 
        affordability of such insurance; and
            (5) the appropriate time for termination of the Federal 
        reinsurance program under this Act.
    (c) Timing.--Each annual report under this section shall be 
submitted not later than March 30 of the year after the year for which 
the study was conducted.
    (d) Commencement of Reporting Requirement.--The Secretary shall 
first submit an annual report under this section 2 years after the date 
of the enactment of this Act.

SEC. 16. GAO STUDY OF HURRICANE RELATED FLOODING.

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