I 

112TH CONGRESS 

1ST SESSION H. R. 2582 

To ensure the availability and affordability of homeowners’ insurance coverage 

for catastrophic events. 

IN THE HOUSE OF REPRESENTATIVES 

JULY 19, 2011 

Ms. WILSON of Florida introduced the following bill; which was referred to 

the Committee on Financial Services 

A BILL 

To ensure the availability and affordability of homeowners’ 

insurance coverage for catastrophic events. 

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

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 

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

5 ‘‘Homeowners’ Defense Act of 2011’’. 

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

7 this Act is as follows: 

Sec. 1. Short title; table of contents. 

Sec. 2. Findings and purposes. 

TITLE I—NATIONAL CATASTROPHE RISK CONSORTIUM 

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

Sec. 102. Functions. 


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Sec. 103. Powers. 

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

Sec. 105. Management. 

Sec. 106. Staff; experts and consultants. 

Sec. 107. Federal liability. 

Sec. 108. Authorization of appropriations. 

TITLE II—CATASTROPHE OBLIGATION GUARANTEES 

Sec. 201. Purposes. 

Sec. 202. Establishment of debt guarantee program. 

Sec. 203. Effect of guarantee. 

Sec. 204. Full faith and credit. 

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

Sec. 206. Payment of losses. 

Sec. 207. Regulations. 

TITLE III—REINSURANCE COVERAGE FOR ELIGIBLE STATE 

PROGRAMS 

Sec. 301. Program authority. 

Sec. 302. Contract principles. 

Sec. 303. Terms of reinsurance contracts. 

Sec. 304. Maximum Federal liability. 

Sec. 305. Federal Natural Catastrophe Reinsurance Fund. 

Sec. 306. Regulations. 

TITLE IV—MITIGATION GRANT PROGRAM 

Sec. 401. Mitigation grant program. 

TITLE V—GENERAL PROVISIONS 

Sec. 501. Eligible State programs. 

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

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

Sec. 504. Definitions. 

Sec. 505. Regulations. 

1 SEC. 2. FINDINGS AND PURPOSES. 

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

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


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1 (2) although catastrophic natural disasters 

2 occur infrequently, they will continue to occur and 

3 are predictable; 

4 (3) such disasters generate large economic 

5 losses and a major component of those losses comes 

6 from damage and destruction to homes; 

7 (4) for the majority of Americans, their invest8 ment in their home represents their single biggest 

9 asset and the protection of that investment is para10 mount to economic and social stability; 

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

12 State actions to be better prepared for and better 

13 protected from catastrophes; 

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

15 do the risks that any premiums collected by private 

16 insurers for extending coverage will be insufficient to 

17 cover future catastrophes, and private insurers, in 

18 an effort to protect their shareholders and policy19 holders (in the case of mutually owned companies), 

20 have thus significantly raised premiums and cur21 tailed insurance coverage in States exposed to major 

22 catastrophes; 

23 (7) such effects on the insurance industry have 

24 been harmful to economic activity in States exposed 


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1 to major catastrophes and have placed significant 

2 burdens on residents of such States; 

3 (8) Hurricanes Katrina, Rita, and Wilma 

4 struck the United States in 2005, causing over 

5 $200,000,000,000 in total economic losses, and in6 sured losses to homeowners in excess of 

7 $50,000,000,000; 

8 (9) the Federal Government has provided and 

9 will continue to provide resources to pay for losses 

10 from future catastrophes; 

11 (10) when Federal assistance is provided to the 

12 States, accountability for Federal funds disbursed is 

13 paramount; 

14 (11) the Government Accountability Office or 

15 other appropriate agencies must have the means in 

16 place to confirm that Federal funds for catastrophe 

17 relief have reached the appropriate victims and have 

18 contributed to the recovery effort as efficiently as 

19 possible so that taxpayer funds are not misspent and 

20 citizens are enabled to rebuild and resume produc21 tive activities as quickly as possible; 

22 (12) States that are recipients of Federal funds 

23 must be responsible to account for and provide an 

24 efficient means for distribution of funds to home25 owners to enable the rapid rebuilding of local econoVerDate Mar 15 2010 02:35 Jul 20, 2011 Jkt 099200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H2582.IH H2582

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1 mies after a catastrophic event without unduly bur2 dening taxpayers who live in areas seldom affected 

3 by natural disasters; 

4 (13) State insurance and reinsurance programs 

5 can provide a mechanism for States to exercise that 

6 responsibility if they appropriately underwrite and 

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

8 established contractual terms; 

9 (14) making available Federal guarantees to en10 hance the capability of eligible State programs to 

11 issue debt will minimize the exposure of State and 

12 Federal taxpayers who otherwise may bear the con13 sequences of underfunded programs or under-in14 sured communities following catastrophic events, es15 pecially during today’s historic market turmoil; and 

16 (15) it is the proper role of the Federal Govern17 ment to prepare for and protect its citizens from ca18 tastrophes and to facilitate consumer protection, vic19 tim assistance, and recovery, including financial re20 covery. 

21 (b) PURPOSES.—The purposes of this Act are to es22 tablish a program to provide Federal support for State23 sponsored insurance programs to help homeowners pre24 pare for and recover from the damages caused by natural 

25 catastrophes, to encourage mitigation and prevention for 


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1 such catastrophes, to promote the use of private market 

2 capital as a means to insure against such catastrophes, 

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

4 financial recovery from such catastrophes. 

5 TITLE I—NATIONAL CATAS6 TROPHE RISK CONSORTIUM 

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

8 MEMBERSHIP. 

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

10 to be known as the ‘‘National Catastrophe Risk Consor11 tium’’ (in this title referred to as the ‘‘Consortium’’). 

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

13 agency, or instrumentality of the United States Govern14 ment. 

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

16 place of business of the Consortium shall be such location 

17 within the United States determined by the Board of Di18 rectors to be the most advantageous for carrying out the 

19 purpose and functions of the Consortium. 

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

21 reinsurance fund or has authorized the operation of a 

22 State residual insurance market entity, or State-sponsored 

23 provider of natural catastrophe insurance, shall be eligible 

24 to participate in the Consortium. 


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1 SEC. 102. FUNCTIONS. 

2 The Consortium shall— 

3 (1) work with all States, particularly those par4 ticipating in the Consortium, to gather and maintain 

5 an inventory of catastrophe risk obligations held by 

6 State reinsurance funds, State residual insurance 

7 market entities, and State-sponsored providers of 

8 natural catastrophe insurance; 

9 (2) at the discretion of the affected members 

10 and on a conduit basis, issue securities and other fi11 nancial instruments linked to the catastrophe risks 

12 insured or reinsured through members of the Con13 sortium in the capital markets; 

14 (3) coordinate reinsurance contracts between 

15 participating, qualified reinsurance funds and pri16 vate parties; 

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

18 information that can be accessed by private-market 

19 participants seeking to participate in the trans20 actions described in paragraphs (2) and (3) of this 

21 section; 

22 (5) establish a catastrophe risk database to per23 form research and analysis that encourages stand24 ardization of the risk-linked securities market; 

25 (6) perform any other functions, other than as26 suming risk or incurring debt, that are deemed necVerDate Mar 15 2010 02:35 Jul 20, 2011 Jkt 099200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H2582.IH H2582

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1 essary to aid in the transfer of catastrophe risk from 

2 participating States to private parties; and 

3 (7) submit annual reports to Congress describ4 ing the activities of the Consortium for the pre5 ceding year, and the first such annual report shall 

6 include an assessment of the costs to States and re7 gions associated with catastrophe risk and an anal8 ysis of the costs and benefits, for States not partici9 pating in the Consortium, of such nonparticipation. 

10 SEC. 103. POWERS. 

11 The Consortium— 

12 (1) may make and perform such contracts and 

13 other agreements with any individual or other pri14 vate or public entity however designated and wher15 ever situated, as may be necessary for carrying out 

16 the functions of the Consortium; and 

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

18 power to assume risk or incur debt, as may be nec19 essary and incident to carrying out this Act. 

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

21 AUDITS. 

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

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

24 Consortium shall inure to the benefit of any member, 

25 founder, contributor, or individual. 


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

2 or employee of the Consortium shall in any manner, di3 rectly or indirectly, participate in the deliberation upon or 

4 the determination of any question affecting his or her per5 sonal interests or the interests of any Consortium, part6 nership, or organization in which he or she is directly or 

7 indirectly interested. 

8 (c) AUDITS.— 

9 (1) ANNUAL AUDIT.—The financial statements 

10 of the Consortium shall be audited annually in ac11 cordance with generally accepted auditing standards 

12 by independent certified public accountants. 

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

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

15 annual report submitted in accordance with section 

16 102(7). 

17 (d) PROHIBITION ON ELECTION AND LOBBYING AC18 TIVITIES.— 

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

20 (A) make any contribution to a candidate 

21 for election for Federal office or to a political 

22 committee; 

23 (B) employ or retain— 


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1 (i) a registered lobbyist under the 

2 Lobbying Disclosure Act of 1995 (2 U.S.C. 

3 1601 et seq.); or 

4 (ii) an organization that employs one 

5 or more lobbyists and is registered under 

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

7 1603(a)(2)); or 

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

9 educational materials or information, to any 

10 elected official of the Federal Government. 

11 For purposes of this paragraph, the terms ‘‘con12 tribution’’, ‘‘candidate’’, ‘‘Federal office’’, and ‘‘po13 litical committee’’ have the meanings given such 

14 terms in section 301 of the Federal Election Cam15 paign Act of 1971 (2 U.S.C. 431). 

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

17 (A) make any contribution to a candidate 

18 for election for any State or local office or to 

19 any committee, club, association, or other group 

20 that receives contributions or makes expendi21 tures for the purpose of influencing any such 

22 election; 

23 (B) employ or retain any person who en24 gages in influencing legislating (as such term is 

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1 enue Code of 1986 (26 U.S.C. 4911(d))) of any 

2 State or local legislative body; or 

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

4 educational materials or information, to any 

5 elected official of any State or local government. 

6 SEC. 105. MANAGEMENT. 

7 (a) BOARD OF DIRECTORS; MEMBERSHIP; DESIGNA8 TION OF CHAIRPERSON.— 

9 (1) BOARD OF DIRECTORS.—The management 

10 of the Consortium shall be vested in a board of di11 rectors (referred to in this title as the ‘‘Board’’) 

12 composed of not less than 3 members. 

13 (2) CHAIRPERSON.—The Secretary of the 

14 Treasury, or the designee of the Secretary, shall 

15 serve as the chairperson of the Board. 

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

17 shall include— 

18 (A) the Secretary of Homeland Security 

19 and the Secretary of Commerce, or the des20 ignees of such Secretaries, respectively, but only 

21 during such times as there are fewer than two 

22 States participating in the Consortium; and 

23 (B) a member from each State partici24 pating in the Consortium, who shall be ap25 pointed by such State. 


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

2 repeal such bylaws as may be necessary for carrying out 

3 the functions of the Consortium. 

4 (c) COMPENSATION, ACTUAL, NECESSARY, AND

5 TRANSPORTATION EXPENSES.— 

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

7 the Board who is not otherwise employed by the 

8 Federal Government shall be entitled to receive the 

9 daily equivalent of the annual rate of basic pay pay10 able for level IV of the Executive Schedule under 

11 section 5315 of title 5, United States Code, as in ef12 fect from time to time, for each day (including travel 

13 time) during which such member is engaged in the 

14 actual performance of duties of the Consortium. 

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

16 Board who is an officer or employee of the Federal 

17 Government shall serve without additional pay (or 

18 benefits in the nature of compensation) for service 

19 as a member of the Consortium. 

20 (3) TRAVEL EXPENSES.—Members of the Con21 sortium shall be entitled to receive travel expenses, 

22 including per diem in lieu of subsistence, equivalent 

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

24 title 5, United States Code. 


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1 (d) QUORUM.—A majority of the Board shall con2 stitute a quorum. 

3 (e) EXECUTIVE DIRECTOR.—The Board shall ap4 point an executive director of the Consortium on such 

5 terms as the Board may determine. 

6 SEC. 106. STAFF; EXPERTS AND CONSULTANTS. 

7 (a) STAFF.— 

8 (1) APPOINTMENT.—The Board of the Consor9 tium may appoint and terminate such other staff as 

10 are necessary to enable the Consortium to perform 

11 its duties. 

12 (2) COMPENSATION.—The Board of the Con13 sortium may fix the compensation of the executive 

14 director and other staff. 

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

16 procure the services of experts and consultants as the 

17 Board considers appropriate. 

18 SEC. 107. FEDERAL LIABILITY. 

19 The Federal Government and the Consortium shall 

20 not bear any liabilities arising from the actions of the Con21 sortium. Participating States shall retain all catastrophe 

22 risk until the completion of a transaction described in 

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


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1 SEC. 108. AUTHORIZATION OF APPROPRIATIONS. 

2 There are authorized to be appropriated to carry out 

3 this title $20,000,000 for each of fiscal years 2012 

4 through 2016. 

5 TITLE II—CATASTROPHE 

6 OBLIGATION GUARANTEES 

7 SEC. 201. PURPOSES. 

8 The purposes of this title are to establish a pro9 gram— 

10 (1) to promote the availability of private capital 

11 to provide liquidity and capacity to State catas12 trophe insurance programs; and 

13 (2) to expedite the payment of claims under 

14 State catastrophe insurance programs and better as15 sist the financial recovery from significant natural 

16 catastrophes by authorizing the Secretary of the 

17 Treasury to guarantee debt for such purposes. 

18 SEC. 202. ESTABLISHMENT OF DEBT GUARANTEE PRO19 GRAM. 

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

21 the Treasury is authorized and shall have the powers and 

22 authorities necessary to guarantee, and to enter into com23 mitments to guarantee, holders of debt against loss of 

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

25 eligible State programs for purposes of this title, provided 


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1 that the total principal amount of debt obligations guaran2 teed by the Secretary— 

3 (1) for eligible State programs that cover earth4 quake peril shall not exceed $3,500,000,000; and 

5 (2) for eligible State programs that cover all 

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

7 (b) CONDITIONS FOR GUARANTEE ELIGIBILITY.—A 

8 debt guarantee under this section may be made only if 

9 the Secretary has issued a commitment to guarantee to 

10 an eligible State program. The commitment to guarantee 

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

12 the Secretary for a period of 1 year on each annual anni13 versary of the issuance of the commitment to guarantee. 

14 The commitment to guarantee and each extension of such 

15 commitment may be issued by the Secretary only if the 

16 following requirements are satisfied: 

17 (1) The eligible State program submits to the 

18 Secretary a report setting forth, in such form and 

19 including such information as the Secretary shall re20 quire, how the eligible State program plans to repay 

21 the debt. 

22 (2) Based upon the eligible State program’s re23 port submitted pursuant to paragraph (1), the Sec24 retary determines there is reasonable assurance that 


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1 the eligible State program can meet its repayment 

2 obligation under the debt. 

3 (3) The eligible State program enters into an 

4 agreement with the Secretary, as the Secretary shall 

5 require, that the eligible State program will not use 

6 Federal funds of any kind or from any Federal 

7 source (including any disaster or other financial as8 sistance, loan proceeds, and any other assistance or 

9 subsidy) to repay the debt. 

10 (4) The commitment to guarantee shall specify 

11 the fees for debt guarantee coverage. 

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

13 be specified in a commitment issued under this sec14 tion may not exceed 30 years. 

15 (6) The Secretary determines that the eligible 

16 State program does not cover losses arising from 

17 floods to properties located in areas having special 

18 flood hazards (as such term is defined for purposes 

19 of the National Flood Insurance Act of 1968 and 

20 the Flood Disaster Protection Act of 1973). 

21 (c) MANDATORY ASSISTANCE FOR ELIGIBLE STATE

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

23 eligible State program and pursuant to a commitment to 

24 guarantee issued under subsection (b), provide a guar25 antee under subsection (d) for such eligible State program 


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1 in the amount requested by such eligible State program, 

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

3 (d) CATASTROPHIC DEBT GUARANTEE.—A debt 

4 guarantee under this subsection for an eligible State pro5 gram shall be subject to the following requirements: 

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

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

10 commitment to guarantee are likely to exceed the eli11 gible State program’s available cash resources, as 

12 calculated on the date of the event. 

13 (2) AMOUNT.—The aggregate principal amount 

14 of the debt guaranteed following an event or events 

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

16 amount by which the insured losses expected to be 

17 sustained by the State program as a result of such 

18 event or events exceed 80 percent of the qualifying 

19 assets of the eligible State program as stated in the 

20 most recent quarterly financial statement filed with 

21 the domiciliary regulator of the program prior to the 

22 event or events, except that, for eligible State pro23 grams that are not required to file such quarterly fi24 nancial statements, the aggregate principal amount 

25 of the debt guaranteed may not exceed the amount 


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1 by which insured losses sustained by the State pro2 gram as a result of such event or events exceed 80 

3 percent of the unrestricted net assets as stated in 

4 the annual financial statement for the program’s fis5 cal year ending immediately prior to the event or 

6 events. 

7 (3) USE OF FUNDS.—Amounts of debt guaran8 teed under this section shall be used only to pay the 

9 costs of issuing debt and to pay the insured losses 

10 and loss adjustment expenses incurred by an eligible 

11 State program. Such amounts shall not be used for 

12 any other purpose. 

13 (e) FUNDING.—There are authorized to be appro14 priated such sums as may be necessary to carry out this 

15 section. 

16 SEC. 203. EFFECT OF GUARANTEE. 

17 The issuance of any guarantee by the Secretary 

18 under this title shall be conclusive evidence that— 

19 (1) the guarantee has been properly obtained; 

20 (2) the underlying debt qualified for such guar21 antee; and 

22 (3) the guarantee is valid, legal, and enforce23 able. 


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1 SEC. 204. FULL FAITH AND CREDIT. 

2 The full faith and credit of the United States is 

3 pledged to the payment of all guarantees issued under this 

4 title with respect to principal and interest. 

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

6 The Secretary shall charge and collect fees for each 

7 guarantee in amounts specified in the commitment to 

8 guarantee, which shall be in amounts sufficient in the 

9 judgment of the Secretary at the time of issuance of the 

10 commitment to guarantee to cover applicable administra11 tive costs and probable losses on the guaranteed obliga12 tions covered by the commitment to guarantee, but in any 

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

14 of the outstanding indebtedness covered by each guar15 antee. 

16 SEC. 206. PAYMENT OF LOSSES. 

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

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

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

20 program that portion of the principal and interest on any 

21 debt guaranteed under this title that shall become due for 

22 payment but shall be unpaid by the eligible State program 

23 as a result of such program having provided insufficient 

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

25 Secretary shall make such payments on the date such 

26 principal or interest becomes due for payment or on the 


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1 business day next following the day on which the Secretary 

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

3 State program to provide sufficient funds to the Fiscal 

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

5 making such payment, the Secretary shall be subrogated 

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

7 The Secretary shall be entitled to recover from the eligible 

8 State program the amount of any payments made pursu9 ant to any guarantee entered into under this title. 

10 (b) ROLE OF THE ATTORNEY GENERAL.—The Attor11 ney General shall take such action as may be appropriate 

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

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

14 (c) RIGHT OF THE SECRETARY.—Notwithstanding 

15 any other provision of law relating to the acquisition, han16 dling, or disposal of property by the United States, the 

17 Secretary shall have the right in the discretion of the Sec18 retary to complete, recondition, reconstruct, renovate, re19 pair, maintain, operate, or sell any property acquired by 

20 the Secretary pursuant to the provisions of this title. 

21 SEC. 207. REGULATIONS. 

22 The Secretary shall issue any regulations necessary 

23 to carry out the debt-guarantee program established under 

24 this title. 


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1 TITLE III—REINSURANCE COV2 ERAGE FOR ELIGIBLE STATE 

3 PROGRAMS 

4 SEC. 301. PROGRAM AUTHORITY. 

5 The Secretary of the Treasury, shall make available 

6 for purchase, only by eligible State programs, contracts 

7 for reinsurance coverage under this title. 

8 SEC. 302. CONTRACT PRINCIPLES. 

9 Contracts for reinsurance coverage made available 

10 under this title— 

11 (1) shall be priced on an actuarially sound 

12 basis; 

13 (2) shall minimize the administrative costs of 

14 the Federal Government; and 

15 (3) shall provide coverage based solely on in16 sured losses covered by the eligible State program 

17 purchasing the contract. 

18 SEC. 303. TERMS OF REINSURANCE CONTRACTS. 

19 (a) MINIMUM ATTACHMENT POINT AND LEVELS OF

20 COVERAGE.—The Secretary shall establish attachment 

21 points at which reinsurance coverage under this title is 

22 provided to eligible State programs. In setting attachment 

23 points and in determining the levels of reinsurance cov24 erage provided, the Secretary shall take into consider25 ation— 


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1 (1) the coverage available through eligible State 

2 programs; 

3 (2) the availability and accessibility of reinsur4 ance in the private market; and 

5 (3) other factors as deemed appropriate by the 

6 Secretary. 

7 (b) NINETY PERCENT COVERAGE OF INSURED

8 LOSSES IN EXCESS OF RETAINED LOSSES.—Each con9 tract for reinsurance coverage under this title shall provide 

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

11 to 90 percent of the amount of insured losses of the eligi12 ble State program in excess of the amount of retained 

13 losses that the contract requires, pursuant to subsection 

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

15 (c) MATURITY.—The term of each contract for rein16 surance coverage under this title shall not exceed 1 year 

17 or such other term as the Secretary may determine. 

18 (d) PAYMENT CONDITION.—Each contract for rein19 surance coverage under this title shall authorize claims 

20 payments to the eligible State program purchasing the 

21 coverage only for insured losses provided under the con22 tract. 

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

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

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


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1 multiple events occur, the retained losses requirement 

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

3 in the aggregate and not separately to each individual 

4 event. 

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

6 reinsurance coverage under this title shall include only in7 surance claims that are reported to the eligible State pro8 gram within the 3-year period beginning upon the event 

9 or events for which payment under the contract is pro10 vided. 

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

12 under a reinsurance contract under this title shall be an 

13 amount, established by the Secretary at a level that annu14 ally produces expected premiums that shall be sufficient 

15 to pay the reasonably anticipated cost of all claims (which 

16 may not be equal only to average annual costs), loss ad17 justment expenses, all administrative costs of reinsurance 

18 coverage offered under this title, and any such outwards 

19 reinsurance, as described in section 305(c)(3), as the Sec20 retary considers prudent taking into consideration the de21 mand for reinsurance coverage under this title. The antici22 pated cost of all claims shall be comparable to amounts 

23 being included in the price for similar layers of coverage 

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1 ciated with non-profit and tax-exempt status of the Fund 

2 established under section 305. 

3 (h) INFORMATION.—Each contract for reinsurance 

4 coverage under this title shall contain a condition pro5 viding that the Secretary may require the eligible State 

6 program that is covered under the contract to submit to 

7 the Secretary all information on the eligible State program 

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

9 (i) OTHERS.—Contracts for reinsurance coverage 

10 under this title shall contain such other terms as the Sec11 retary considers necessary to carry out this title and to 

12 ensure the long-term financial integrity of the program 

13 under this title. 

14 SEC. 304. MAXIMUM FEDERAL LIABILITY. 

15 (a) IN GENERAL.—Subject to subsection (b) and not16 withstanding any other provision of law, the aggregate po17 tential liability for payment of claims under all contracts 

18 for reinsurance coverage under this title sold in any single 

19 year shall be determined by the Secretary based on review 

20 of the market for reinsurance coverage under this title. 

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

22 enter into contracts for reinsurance coverage under this 

23 title shall be effective for any fiscal year only to such ex24 tent or in such amounts as are or have been provided in 

25 appropriation Acts for such fiscal year for the aggregate 


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1 potential liability for payment of claims under all contracts 

2 for reinsurance coverage under this title. 

3 SEC. 305. FEDERAL NATURAL CATASTROPHE REINSUR4 ANCE FUND. 

5 (a) ESTABLISHMENT.—There is established within 

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

7 as the Federal Natural Catastrophe Reinsurance Fund (in 

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

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

10 (1) amounts received annually from the sale of 

11 contracts for reinsurance coverage under this title; 

12 (2) any amounts appropriated for the aggregate 

13 potential liability for payment of claims under all 

14 contracts for reinsurance coverage under this title; 

15 and 

16 (3) any amounts earned on investments of the 

17 Fund pursuant to subsection (d). 

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

19 to the Secretary only for the following purposes: 

20 (1) CONTRACT PAYMENTS.—For payments to 

21 purchasers covered under contracts for reinsurance 

22 coverage for eligible losses under such contracts. 

23 (2) ADMINISTRATIVE EXPENSES.—To pay for 

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1 retary in carrying out the reinsurance program 

2 under this title. 

3 (3) OUTWARDS REINSURANCE.—To obtain 

4 retrocessional or other reinsurance coverage of any 

5 kind to cover risk reinsured under contracts for rein6 surance coverage made available under this title. 

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

8 amounts in the Fund as the Secretary considers advisable 

9 in obligations issued or guaranteed by the United States. 

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

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

12 investment income available not later than 60 days after 

13 the conclusion of such fiscal year and disperse appropriate 

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

15 fiscal year. 

16 SEC. 306. REGULATIONS. 

17 The Secretary shall issue any regulations necessary 

18 to carry out the program for reinsurance coverage under 

19 this title. 

20 TITLE IV—MITIGATION GRANT 

21 PROGRAM 

22 SEC. 401. MITIGATION GRANT PROGRAM. 

23 (a) ESTABLISHMENT.—The Secretary of Housing 

24 and Urban Development shall establish and carry out a 

25 program to provide grants to eligible entities to develop, 


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1 enhance, or maintain programs to prevent and mitigate 

2 losses from natural catastrophes. 

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

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

5 (1) encouraging awareness of risk factors and 

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

7 including public education campaigns to promote cit8 izen and community preparedness; 

9 (2) assisting in the determination of the loca10 tion of risk by giving careful consideration to the 

11 natural risks for the location of a property; 

12 (3) providing inspections of homes to identify 

13 areas to strengthen such homes and reduce exposure 

14 to natural catastrophes; 

15 (4) providing financial assistance to home16 owners to retrofit homes to reduce exposure to nat17 ural catastrophes; or 

18 (5) supporting disaster response readiness pro19 grams, including initiatives that develop, enhance ,or 

20 maintain the capacity of a public safety organization 

21 to be better prepared, equipped, and trained to re22 spond to natural catastrophes. 

23 (c) CONSULTATION WITH EXPERTS.—In carrying 

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1 retary of Housing and Urban Development shall consult 

2 with— 

3 (1) disaster preparedness and response organi4 zations; 

5 (2) homebuilders; 

6 (3) real estate professionals; 

7 (4) building code enforcement agencies; and 

8 (5) any other person that the Secretary con9 siders appropriate. 

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

11 the term ‘‘eligible entity’’ means a State or local govern12 ment, a part or program of a State or local government, 

13 or a nationally recognized, congressionally chartered dis14 aster response non-profit organization. 

15 (e) GRANT MANDATE.—The Secretary shall, to the 

16 extent provided in advance in appropriation Acts, use not 

17 less than 35 percent of the net investment income from 

18 the Federal Natural Catastrophe Reinsurance Fund 

19 earned in each fiscal year pursuant to section 305(d) for 

20 grants under this section. 

21 TITLE V—GENERAL PROVISIONS 

22 SEC. 501. ELIGIBLE STATE PROGRAMS. 

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

24 shall be considered an ‘‘eligible State program’’ for pur25 poses of this Act if the Secretary certifies, in accordance 


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

2 the State program complies with the following require3 ments: 

4 (1) STATE PROGRAM DESIGN.—The State pro5 gram is established and authorized by State law as 

6 an insurance program or a reinsurance program that 

7 is designed to improve private insurance markets 

8 and that offers residential property insurance cov9 erage for losses arising from any personal residential 

10 line of insurance, as defined in the Uniform Prop11 erty and Casualty Product Coding Matrix of the Na12 tional Association of Insurance Commissioners. 

13 (2) OPERATION.—The State program shall 

14 meet the following requirements: 

15 (A) A majority of the members of the gov16 erning body of the State program shall be pub17 lic officials or appointed by public officials. 

18 (B) The State shall have a financial inter19 est in the State program. 

20 (C) If the State has at any time appro21 priated amounts from the State program’s 

22 funds for any purpose other than payments for 

23 losses insured under the State program, or pay24 ments made in connection with any of the State 

25 program’s authorized activities, the State shall 


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1 have returned such amounts to the State fund, 

2 together with interest on such amounts. 

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

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

5 designee) a written determination, within the mean6 ing of section 6110(b) of the Internal Revenue Code 

7 of 1986, that the program either— 

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

9 State that has created it; or 

10 (B) is otherwise exempt from Federal in11 come taxation. 

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

13 provide for any distribution of any part of any net 

14 profits of the State program to any insurer that par15 ticipates in the State program. 

16 (5) PREVENTION AND MITIGATION.— 

17 (A) MITIGATION OF LOSSES.—The State 

18 program shall include provisions designed to en19 courage and support programs to mitigate 

20 losses from natural catastrophes for which the 

21 State insurance or reinsurance program was es22 tablished to provide insurance coverage. 

23 (B) OPERATIONAL REQUIREMENTS.—The 

24 State program shall operate in a State that— 


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1 (i) requires that an appropriate public 

2 body within the State shall have adopted 

3 adequate mitigation measures with effec4 tive enforcement provisions which the Sec5 retary finds are consistent with the criteria 

6 for construction described in the Inter7 national Code Council building codes; 

8 (ii) has taken actions to establish an 

9 insurance rate structure that takes into ac10 count measures to mitigate insured losses; 

11 and 

12 (iii) ensures, to the extent that rein13 surance coverage made available under the 

14 eligible State program results in any cost 

15 savings in providing insurance coverage for 

16 risks in such State, such cost savings are 

17 reflected in premium rates charged to con18 sumers for such coverage. 

19 (6) REQUIREMENTS REGARDING COVERAGE.— 

20 The State program— 

21 (A) may not, except for charges or assess22 ments related to post-event financing or bond23 ing, involve cross-subsidization between any 

24 separate property and casualty insurance lines 


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1 covered under the State program pursuant to 

2 paragraph (1); 

3 (B) shall be subject to a requirement 

4 under State law that for any insurance coverage 

5 made available under the State insurance pro6 gram or for any reinsurance coverage for such 

7 insurance coverage made available under the 

8 State reinsurance program, the premium rates 

9 charged shall cover the expected value of all fu10 ture costs associated with insurance policies or 

11 reinsurance contracts written by such program, 

12 in accordance with the principles under section 

13 303(g); 

14 (C) shall make available to all qualifying 

15 policyholders insurance or reinsurance coverage, 

16 as applicable, and mitigation services on a basis 

17 that is not unfairly discriminatory; and 

18 (D) publishes, and displays in a prominent 

19 location on a Web site for the State insurance 

20 program, information for the State insurance 

21 program of estimated assessments and sur22 charges on policyholders, in accordance with 

23 State laws, regulations, or other requirements, 

24 for a range of natural disaster or catastrophic 

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1 cluding an event projected to result in losses of 

2 such magnitude that they have a 1 percent 

3 chance of being equaled or exceeded in any sin4 gle year, based on the current year estimated 

5 aggregate funding capacity of the State insur6 ance program and State reinsurance program. 

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

11 include natural hazard mitigation. 

12 (8) RISK-BASED CAPITAL REQUIREMENTS.— 

13 The State program— 

14 (A) complies with such risk-based capital 

15 requirements as applicable State law may im16 pose and shall take into consideration asset 

17 risk, credit risk, underwriting risk, and such 

18 other relevant risk as determined by the Sec19 retary; and 

20 (B) for each calendar year, prepares and 

21 submits to the Secretary a report identifying its 

22 claim-paying capacity at such time after the 

23 conclusion of such year, and containing such in24 formation and in such form, as the Secretary 

25 shall require. 


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1 (9) OTHER REQUIREMENTS.—The State pro2 gram complies with such additional organizational, 

3 underwriting, and financial requirements as the Sec4 retary shall, by regulation, provide to carry out the 

5 purposes of this Act. 

6 (b) CERTIFICATION.—The Secretary shall establish 

7 procedures for initial certification and recertification as an 

8 eligible State program. 

9 (c) TRANSITIONAL MECHANISMS.—For the 5-year 

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

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

12 program for the State, a State residual insurance market 

13 entity, or State-sponsored provider of natural catastrophe 

14 insurance, for such State shall be considered to be an eligi15 ble State program, but only if such State residual insur16 ance market entity, or State-sponsored provider of natural 

17 catastrophe insurance, was in existence before such date 

18 of enactment. 

19 (d) REINSURANCE TO COVER EXPOSURE.—This sec20 tion may not be construed to limit or prevent any eligible 

21 State program from obtaining reinsurance coverage for in22 sured losses retained by insurers pursuant to this section. 


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1 SEC. 502. STUDY AND CONDITIONAL COVERAGE OF COM2 MERCIAL RESIDENTIAL LINES OF INSUR3 ANCE. 

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

5 need for and impact of expanding the programs estab6 lished by this Act to apply to insured losses of eligible 

7 State programs for losses arising from all commercial in8 surance policies which provide coverage for properties that 

9 are composed predominantly of residential rental units. 

10 The Secretary shall consider the catastrophic insurance 

11 and reinsurance market for commercial residential prop12 erties, and specifically the availability of adequate private 

13 insurance coverage when an insured event occurs, the im14 pact any such capacity restrictions have on housing afford15 ability for renters, and the likelihood that such an expan16 sion of the program would increase insurance capacity for 

17 this market segment. 

18 SEC. 503. STUDY OF RISK-BASED PRICING AND STATE PRO19 GRAM RATES. 

20 The Comptroller General of the United States shall 

21 conduct a study to analyze— 

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

23 of actuarially sound pricing for State insurance, re24 insurance, or residual market programs, including 

25 what measures States are taking to implement actu26 arially sound rates; and 


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1 (2) rates for State insurance, reinsurance, or 

2 residual market programs that fail to cover the ex3 pected value of all future costs, including the cost of 

4 capital, associated with insurance policies or reinsur5 ance contracts written by such programs or fail to 

6 have sufficient assets above their indebtedness to 

7 meet their obligations. 

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

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

10 to the Congress on the results of the study under this sec11 tion. 

12 SEC. 504. DEFINITIONS. 

13 In this Act: 

14 (1) COMMITMENT TO GUARANTEE.—The term 

15 ‘‘commitment to guarantee’’ means a commitment to 

16 make debt guarantees to an eligible State program 

17 pursuant to section 202(d). 

18 (2) ELIGIBLE STATE PROGRAM.—The term ‘‘eli19 gible State program’’ means a State program that 

20 the Secretary certifies as an eligible State program 

21 under section 501. 

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

23 means any loss that is determined by an eligible 

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1 insurance made available under that eligible State 

2 program. 

3 (4) QUALIFYING ASSETS.—The term ‘‘quali4 fying assets’’ means the policyholder surplus of the 

5 eligible State program as stated in the most recent 

6 quarterly financial statement filed by the program 

7 with the domiciliary regulator of the program in the 

8 last quarter ending prior to the event or events. 

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

10 the Secretary of the Treasury. 

11 (6) STATE.—The term ‘‘State’’ includes the 

12 several States, the District of Columbia, the Com13 monwealth of Puerto Rico, Guam, the Common14 wealth of the Northern Mariana Islands, the United 

15 States Virgin Islands, and American Samoa, and 

16 any other territory or possession of the United 

17 States. 

18 SEC. 505. REGULATIONS. 

19 The Secretary shall issue such regulations as may be 

20 necessary to carry out this Act. 

Æ 


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