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dits to be conducted for each loan made under this title 
and shall make the results of such audits publicly avail-
able. 
SEC. 204. FUNDING. 
(a) PROGRAM FEE.— 
(1) IN GENERAL.—The Secretary may establish 
and collect, from qualified reinsurance programs 
that are precertified pursuant to section 401(d), a 
reasonable fee, as may be necessary to offset the ex-
penses of the Secretary in connection with carrying 
out the responsibilities of the Secretary under this 
title, including— 
(A) costs of developing, implementing, and 
carrying out the program under this title; and 
(B) costs of providing for precertification 
pursuant to section 401(d) of State and re-
gional reinsurance programs as qualified rein-
surance programs. 
(2) ADJUSTMENT.—The Secretary may, from 
time to time, adjust the fee under paragraph (1) as 
appropriate based on expenses of the Secretary re-
ferred to in such paragraph. 
(3) USE.—Any fees collected pursuant to this 
subsection shall be credited as offsetting collections 
of the Department of the Treasury and shall be 
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available to the Secretary only for expenses referred 
to in paragraph (1). 
(b) COSTS OF LOANS; ADMINISTRATIVE COSTS.—To 
the extent that amounts of negative credit subsidy are re-
ceived by the Secretary in any fiscal year pursuant to 
loans made under this title, such amounts shall be avail-
able for costs (as such term is defined in section 502 of 
the Federal Credit Reform Act of 1990 (2 U.S.C. 661a)) 
of such loans and for costs of carrying out the program 
under this title for such loans. 
(c) FULL TAXPAYER REPAYMENT.—The Secretary 
shall require the full repayment of all loans made under 
this title. If the Secretary determines at any time that 
such full repayment will not be made, or is likely not to 
be made, the Secretary shall promptly submit a report to 
the Congress explaining why such full repayment will not 
be made or is likely not to be made. The Secretary may 
not accept any repayment of any loan made under this 
title that does not comply with the agreement for such 
loan entered into in accordance with section 202(b)(1)(C). 
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TITLE III—REINSURANCE COV-
ERAGE FOR QUALIFIED REIN-
SURANCE PROGRAMS 
SEC. 301. PROGRAM AUTHORITY. 
Subject to section 304(c), the Secretary of the Treas-
ury, shall make available for purchase, only by qualified 
reinsurance programs (as such term is defined in section 
401), contracts for reinsurance coverage under this title. 
SEC. 302. CONTRACT PRINCIPLES. 
Contracts for reinsurance coverage made available 
under this title— 
(1) shall not displace or compete with the pri-
vate insurance or reinsurance markets or the capital 
market; 
(2) shall minimize the administrative costs of 
the Federal Government; and 
(3) shall provide coverage based solely on in-
sured losses covered by the qualified reinsurance 
program purchasing the contract. 
SEC. 303. TERMS OF REINSURANCE CONTRACTS. 
(a) 
MINIMUM
ATTACHMENT
POINT.—Notwith-
standing any other provision of this title, a contract for 
reinsurance coverage under this title for a qualified rein-
surance program may not be made available or sold unless 
the contract requires that the qualified reinsurance pro-
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gram sustain an amount of retained losses from events 
in an amount, as determined by the Secretary, that is 
equal to the amount of losses projected to be incurred 
from a single event of such magnitude that it has a 0.5 
percent chance of being equaled or exceeded in any year. 
(b) NINETY
PERCENT
COVERAGE
OF
INSURED 
LOSSES IN EXCESS OF RETAINED LOSSES.—Each con-
tract for reinsurance coverage under this title shall provide 
that the amount paid out under the contract shall, subject 
to section 304, be equal to 90 percent of the amount of 
insured losses of the qualified reinsurance program in ex-
cess of the amount of retained losses that the contract 
requires, pursuant to subsection (a), to be incurred by 
such program. 
(c) MATURITY.—The term of each contract for rein-
surance coverage under this title shall not exceed 1 year 
or such other term as the Secretary may determine. 
(d) PAYMENT CONDITION.—Each contract for rein-
surance coverage under this title shall authorize claims 
payments to the qualified reinsurance program purchasing 
the coverage only for insured losses provided under the 
contract. 
(e) MULTIPLE EVENTS.—The contract shall cover 
any insured losses from one or more events that may occur 
during the term of the contract and shall provide that if 
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multiple events occur, the retained losses requirement 
under subsection (a) shall apply on a calendar year basis, 
in the aggregate and not separately to each individual 
event. 
(f) TIMING OF CLAIMS.—Claims under a contract for 
reinsurance coverage under this title shall include only in-
surance claims that are reported to the qualified reinsur-
ance program within the 3-year period beginning upon the 
event or events for which payment under the contract is 
provided. 
(g) ACTUARIAL PRICING.—The price of coverage 
under a reinsurance contract under this title shall be an 
amount, established by the Secretary at a level that annu-
ally produces expected premiums that shall be sufficient 
to pay the reasonably anticipated cost of all claims, loss 
adjustment expenses, all administrative costs of reinsur-
ance coverage offered under this title, and any such out-
wards reinsurance, as described in section 305(c)(3), as 
the Secretary considers prudent taking into consideration 
the demand for reinsurance coverage under this title and 
the limits specified in section 304. 
(h) INFORMATION.—Each contract for reinsurance 
coverage under this title shall contain a condition pro-
viding that the Secretary may require the qualified rein-
surance program that is covered under the contract to 
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submit to the Secretary all information on the qualified 
reinsurance program relevant to the duties of the Sec-
retary under this title. 
(i) OTHERS.—Contracts for reinsurance coverage 
under this title shall contain such other terms as the Sec-
retary considers necessary to carry out this title and to 
ensure the long-term financial integrity of the program 
under this title. 
SEC. 304. MAXIMUM FEDERAL LIABILITY. 
(a) IN GENERAL.—Subject to subsection (b) and not-
withstanding any other provision of law, the aggregate po-
tential liability for payment of claims under all contracts 
for reinsurance coverage under this title sold in any single 
year by the Secretary shall not exceed $200,000,000,000 
or such lesser amount as is determined by the Secretary 
based on review of the market for reinsurance coverage 
under this title. 
(b) LIMITATION.—The authority of the Secretary to 
enter into contracts for reinsurance coverage under this 
title shall be effective for any fiscal year only to such ex-
tent or in such amounts as are or have been provided in 
appropriation Acts for such fiscal year for the aggregate 
potential liability for payment of claims under all contracts 
for reinsurance coverage under this title. 
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SEC. 305. FEDERAL NATURAL CATASTROPHE REINSUR-
ANCE FUND. 
(a) ESTABLISHMENT.—There is established within 
the Treasury of the United States a fund to be known 
as the Federal Natural Catastrophe 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 title; 
(2) any amounts appropriated under section 
304; and 
(3) any amounts earned on investments of the 
Fund pursuant to subsection (d). 
(c) USES.—Amounts in the Fund shall be available 
to the Secretary only for the following purposes: 
(1) CONTRACT PAYMENTS.—For payments to 
purchasers covered under contracts for reinsurance 
coverage for eligible losses under such contracts. 
(2) ADMINISTRATIVE EXPENSES.—To pay for 
the administrative expenses incurred by the Sec-
retary in carrying out the reinsurance program 
under this title. 
(3) 
OUTWARDS
REINSURANCE.—To 
obtain 
retrocessional or other reinsurance coverage of any 
kind to cover risk reinsured under contracts for rein-
surance coverage made available under this title. 
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(d) 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. 
SEC. 306. REGULATIONS. 
The Secretary shall issue any regulations necessary 
to carry out the program for reinsurance coverage under 
this title. 
TITLE IV—GENERAL 
PROVISIONS 
SEC. 401. QUALIFIED REINSURANCE PROGRAMS. 
(a) IN GENERAL.—For purposes of this Act only, a 
program shall be considered to be a qualified reinsurance 
program if the program— 
(1) is authorized by State law for the purposes 
described in this section; 
(2) is an entity in which the authorizing State 
maintains a material, financial interest; 
(3) provides reinsurance or retrocessional cov-
erage to underlying primary insurers or reinsurers 
for losses arising from all personal residential lines 
of insurance, as defined in the Uniform Property & 
Casualty Product Coding Matrix published and 
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maintained by the National Association of Insurance 
Commissioners; 
(4) has a governing body, a majority of whose 
members are public officials; 
(5) provides reinsurance or retrocessional cov-
erage to underlying primary insurers or reinsurers 
for losses in excess of such amount that the Sec-
retary has determined represents a catastrophic 
event in that particular State; 
(6) is authorized by a State that has in effect 
such laws, regulations, or other requirements, as the 
Secretary shall by regulation provide, that— 
(A) ensure, to the extent that reinsurance 
coverage made available under the qualified re-
insurance program results in any cost savings 
in providing insurance coverage for risks in 
such State, such cost savings are reflected in 
premium rates charged to consumers for such 
coverage; 
(B) require that an appropriate public 
body within the State shall have adopted ade-
quate mitigation measures (with effective en-
forcement provisions) which the Secretary finds 
are consistent with the criteria for construction 
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described in the International Code Council 
building codes; 
(C) require State authorized insurance en-
tities within that State to establish an insur-
ance rate structure that takes into account 
measures to mitigate insurance losses; 
(D) require State authorized insurance and 
reinsurance entities within that State to estab-
lish rates at a level that annually produces ex-
pected premiums that shall be sufficient to pay 
the reasonably anticipated cost of all claims, 
loss adjustment expenses, and all administrative 
costs of the insurance or reinsurance coverage 
offered by such entities, and any such outwards 
reinsurance as the program administrator 
deems prudent; and 
(E) discourage price gouging in any dis-
aster area located within the State; 
(7) to the extent possible, seeks to encourage 
appropriate State and local government units to de-
velop comprehensive land use and zoning plans that 
include natural hazard mitigation; 
(8) to the extent possible, seeks to avoid cross- 
subsidization between any separate property and 
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casualty lines covered under the State authorized in-
surance or reinsurance entity; 
(9) complies with the risk-based capital require-
ments under subsection (b); 
(10) complies with such additional organiza-
tional, underwriting, and financial requirements as 
the Secretary shall, by regulation, provide to carry 
out the purposes of this Act; and 
(11) has been certified by the Secretary, for 
such year, in accordance with an annual certification 
process established by the Secretary for such pur-
pose, as being in compliance with the requirements 
under paragraphs (1) through (10). 
(b) RISK-BASED CAPITAL REQUIREMENTS.— 
(1) IN GENERAL.—Except for programs deemed 
to be qualified reinsurance programs pursuant to 
subsection (c), each qualified reinsurance program 
shall maintain risk-based capital in accordance with 
requirements established by the Secretary, in con-
sultation with the National Association of Insurance 
Commissioners and consistent with the Risk-Based 
Capital Model Act of the National Association of In-
surance Commissioners, and take into consideration 
asset risk, credit risk, underwriting risk, and such 
other relevant risk as determined by the Secretary. 
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(2) TREATMENT
OF
ACCESS
TO
LIQUIDITY 
LOANS.— 
(A) IN GENERAL.—To the extent that a 
qualified reinsurance program is deficient in 
complying with any aspect of the risk-based 
capital requirements established pursuant to 
this subsection, the Secretary shall recognize 
and give credit for the ability of such qualified 
reinsurance program to access capital through 
the liquidity loan program established under 
section 202(d). 
(B) ANNUAL DIMINUTION.—The extent of 
credit recognized and given for a qualified rein-
surance program pursuant to subparagraph (A) 
shall diminish annually in a proportion equal to 
the earned premium for the program for the 
prior calendar year. 
(C) RESET UPON OCCURRENCE OF CATAS-
TROPHE.—To the extent that a qualified rein-
surance program is obligated to pay losses as a 
result of the occurrence of a catastrophe, the 
Secretary shall increase the credit recognized 
and given for the program pursuant to subpara-
graph (A) by an amount equal to the losses 
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paid by the program as a result of the catas-
trophe. 
(D) RESUMPTION AFTER CATASTROPHE.— 
After a reset occurs pursuant to subparagraph 
(C) for a qualified reinsurance program, the 
diminution described in subparagraph (B) shall 
resume and continue until the program has ac-
cumulated capital sufficient to satisfy the risk- 
based capital requirement determined by the 
Secretary to be appropriate given the ceiling 
coverage level of that particular qualified rein-
surance program. 
(3) REPORT.—For each calendar year, each 
qualified reinsurance program shall prepare and sub-
mit to the Secretary a report identifying its risk 
based capital, at such time after the conclusion of 
such year, and containing such information and in 
such form, as the Secretary shall require. 
(c) TRANSITIONAL MECHANISMS.—For the five-year 
period beginning on the date of the enactment of this Act, 
in the case of a State that does not have a qualified rein-
surance program for the State, a State residual insurance 
market entity, or State-sponsored provider of natural ca-
tastrophe insurance, for such State shall be considered to 
be a qualified reinsurance program, but only if such State 
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residual insurance market entity, or State-sponsored pro-
vider of natural catastrophe insurance, was in existence 
before such date of enactment. 
(d) PRECERTIFICATION.—The Secretary shall estab-
lish procedures and standards for State and regional rein-
surance programs and the State residual insurance market 
entities described in section (b) to apply to the Secretary 
at any time for certification (and recertification) as quali-
fied reinsurance programs. 
(e) REINSURANCE TO COVER EXPOSURE.—This sec-
tion may not be construed to limit or prevent any insurer 
from obtaining reinsurance coverage for insured losses re-
tained by insurers pursuant to this section, nor shall the 
obtaining of such coverage affect the calculation of the 
amount of any loan under this title. 
SEC. 402. STUDY AND CONDITIONAL COVERAGE OF COM-
MERCIAL RESIDENTIAL LINES OF INSUR-
ANCE. 
(a) STUDY.—The Secretary shall study, on an expe-
dited basis, the need for and impact of expanding the pro-
grams established by this Act to apply to insured losses 
of qualified reinsurance programs for losses arising from 
all commercial insurance policies which provide coverage 
for properties that are composed predominantly of residen-
tial rental units. The Secretary shall consider the cata-
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strophic insurance and reinsurance market for commercial 
residential properties, and specifically the availability of 
adequate private insurance coverage when an insured 
event occurs, the impact any such capacity restrictions has 
on housing affordability for renters, and the likelihood 
that such an expansion of the program would increase in-
surance capacity for this market segment. 
(b) CONDITIONAL COVERAGE.—To the extent that 
the Secretary determines that there is such a need to ex-
pand such programs and such expansion will be effective 
in increasing insurance capacity for the commercial resi-
dential insurance market, the Secretary shall, in consulta-
tion with the National Association of Insurance Commis-
sioners— 
(1) apply the provisions of this Act, as appro-
priate, to insured losses of a qualified reinsurance 
program for losses arising from commercial insur-
ance policies which provide coverage for properties 
that are composed predominantly of residential rent-
al units, as described in paragraph (a); and 
(2) provide such restrictions, limitations, or 
conditions with respect to the programs under this 
Act that the Secretary deems appropriate, based on 
the study under subsection (a). 
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SEC. 403. DEFINITIONS. 
For purposes of this Act, the following definitions 
shall apply: 
(1) CEILING
COVERAGE
LEVEL.—The term 
‘‘ceiling coverage level’’ means, with respect to a 
qualified reinsurance program, the maximum liabil-
ity that could be incurred at any time by the quali-
fied reinsurance program. 
(2) INSURED LOSS.—The term ‘‘insured loss’’ 
means any loss insured by a qualified reinsurance 
program. 
(3) 
PRICE
GOUGING.—The 
term 
‘‘price 
gouging’’ means the providing of any consumer good 
or service by a supplier related to repair or restora-
tion of property damaged from a catastrophe 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 (not 
withstanding any real cost increase due to any at-
tendant business risk and other reasonable expenses 
that result from the major catastrophe involved), 
than the price charged by the supplier for such con-
sumer good or service immediately before the dis-
aster. 
(4) QUALIFIED REINSURANCE PROGRAM.—The 
term ‘‘qualified reinsurance program’’ means a State 
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