I
106TH CONGRESS
1ST SESSION
H. R. 481
To provide for a Federal program of insurance against the risk of catastrophic
earthquakes, volcanic eruptions, and hurricanes, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
FEBRUARY 2, 1999
Mrs. MINK of Hawaii introduced the following bill; which was referred to the
Committee on Banking and Financial Services, and in addition to the
Committee on Science, for a period to be subsequently determined by the
Speaker, in each case for consideration of such provisions as fall within
the jurisdiction of the committee concerned
A BILL
To provide for a Federal program of insurance against the
risk of catastrophic earthquakes, volcanic eruptions, and
hurricanes, and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act shall be cited as the
‘‘Earthquake, Volcanic Eruption, and Hurricane Hazards
Insurance Act of 1999’’.
(b) TABLE OF CONTENTS.—
Sec. 1. Short title and table of contents.
Sec. 2. Findings.
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Sec. 3. Definitions.
TITLE I—PARTICIPATION BY STATES IN ADOPTION OF HAZARD
REDUCTION MEASURES
Sec. 101. Identification of earthquake-prone, volcanic eruption-prone, and hur-
ricane-prone States.
Sec. 102. Earthquake, Volcanic Eruption, and Hurricane Loss Mitigation Advi-
sory Committee.
Sec. 103. Establishment of criteria for loss-reduction measures.
Sec. 104. Self-Sustaining Mitigation Fund.
Sec. 105. State implementation of loss-reduction measures.
Sec. 106. Requirement to purchase primary insurance.
Sec. 107. Effect of noncompliance with State mitigation program.
Sec. 108. Coordination with other programs.
Sec. 109. Report to Congress.
Sec. 110. Regulations.
TITLE II—PRIMARY INSURANCE PROGRAM
Sec. 201. Basic authority and program organization.
Sec. 202. Scope of program.
Sec. 203. Terms and limitations of insurance coverage.
Sec. 204. Establishment of actuarial premium rates.
Sec. 205. Chargeable premium rates.
Sec. 206. Insurance mitigation incentives.
Sec. 207. Earthquake, Volcanic Eruption, and Hurricane Insurance and Rein-
surance Advisory Committee.
Sec. 208. Residential Property Insurance Fund.
Sec. 209. Borrowing from Treasury.
TITLE III—NATIONAL EARTHQUAKE, VOLCANIC ERUPTION, AND
HURRICANE EXCESS LOSS REINSURANCE PROGRAM
Sec. 301. Reinsurance program.
Sec. 302. Lines of insurance.
Sec. 303. Rates.
Sec. 304. Reinsurance contracts.
Sec. 305. Reinsurance Fund.
Sec. 306. Borrowing from Treasury.
SEC. 2. FINDINGS.
The Congress finds that—
(1) the catastrophic and unpredictable nature
of earthquakes, volcanic eruptions, and hurricanes
prevent individual private insurers from offering the
necessary insurance against these perils without the
participation of the Federal Government;
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(2) in the absence of an adequate system for in-
suring against losses from earthquakes, volcanic
eruptions, and hurricanes, the Federal Government
and State governments will bear excessive and avoid-
able costs of disaster relief and the commerce and
economy of the Nation would be seriously desta-
bilized;
(3) the existing systems of private insurance,
reinsurance, and government disaster relief are inad-
equate and should be improved and better coordi-
nated;
(4) a reasonable method of providing insurance
against such losses is to create a Federal earth-
quake, volcanic eruption, and hurricane insurance
and reinsurance program, to assist in making insur-
ance against such disasters widely available and af-
fordable to the general public; and
(5) in providing such insurance, the Federal
Government should work constructively with the
States and localities to assist and require, if appro-
priate, the development, adoption, and enforcement
of hazard reduction measures, including building
codes, land-use planning, and strengthening of new
and existing structures.
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SEC. 3. DEFINITIONS.
For purposes of this Act:
(1) The term ‘‘additional losses’’ means claim
and loss adjustment expense payments for earth-
quake, volcanic eruption, and hurricane coverage
issued pursuant to title II that exceed the accumu-
lated amounts in the Residential Property Insurance
Fund.
(2) The term ‘‘alien insurer’’ means an insurer
or reinsurer organized or incorporated in a country
other than the United States.
(3) The term ‘‘critical facilities vulnerable to
hurricanes’’ means schools and structures essential
to emergency services necessary for post hurricane
recovery (including hospitals, fire and policy facili-
ties, temporary shelters, and emergency operating
and preparedness centers) that—
(A) have unreinforced masonry bearing
walls, tilt-up construction, nonductile concrete
frame construction, or other construction, as
determined by the Director, that makes them
susceptible to damage from hurricanes; and
(B) are located in hurricane zones within
hurricane-prone States.
(4) The term ‘‘Director’’ means the Director of
the Federal Emergency Management Agency.
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(5) The term ‘‘earthquake’’ means any shaking
or trembling of the crust of the earth caused by un-
derground seismic forces or by breaking and shifting
of rock beneath the surface.
(6) The term ‘‘earthquake, volcanic eruption,
and hurricane coverage’’ means insurance issued
pursuant to title II.
(7) The term ‘‘earthquake-prone State’’ means
a State determined by the Director pursuant to sec-
tion 101 to have an exposure to the earthquake
peril.
(8) The term ‘‘Federal agency’’ means any de-
partment, agency, corporation, or other instrumen-
tality of the executive branch of the Federal Govern-
ment, and includes the Federal National Mortgage
Association and the Federal Home Loan Mortgage
Corporation.
(9) The term ‘‘federally related mortgage loan’’
has the meaning given the term in section 3(1) of
the Real Estate Settlement Procedures Act of 1974,
except that the term does not include any loan de-
scribed in subparagraph (B)(iv) of such section.
(10) The term ‘‘fires associated with an earth-
quake’’ means any fire proximately caused by an
earthquake.
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(11) The term ‘‘fires associated with a volcanic
eruption’’ means any fire proximately caused by a
volcanic eruption.
(12) The term ‘‘hurricane-prone State’’ means
a State determined by the Director pursuant to sec-
tion 101 to have an exposure to hurricane peril.
(13) The term ‘‘hurricane zone’’ means an area
within a State identified and classified by the Direc-
tor under section 101(a) as subject to major hurri-
cane risk.
(14) The term ‘‘Insurance and Reinsurance Ad-
visory Committee’’ means the Earthquake, Volcanic
Eruption, and Hurricane Insurance and Reinsurance
Advisory Committee established under section 207.
(15) The term ‘‘Insurance Fund’’ means the
Residential Property Insurance Fund established
under section 208.
(16) The term ‘‘insurance industry’’ means all
private insurers and private reinsurers.
(17) The term ‘‘large building’’ means any non-
residential structure that has more than 1 story or
more than 5,000 square feet per story.
(18) The term ‘‘Loss Mitigation Advisory Com-
mittee’’ means the Earthquake, Volcanic Eruption,
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and Hurricane Loss Mitigation Advisory Committee
established under section 102.
(19) The term ‘‘loss-reduction criteria’’ means
the criteria for earthquake, volcanic eruption, and
hurricane loss mitigation established by the Director
under section 103.
(20) The term ‘‘Primary Insurance Program’’
means the national earthquake, volcanic eruption,
and hurricane insurance program under title II.
(21) The terms ‘‘private insurer’’ and ‘‘private
reinsurer’’ mean any insurer or reinsurer that is (A)
licensed or admitted to write property and casualty
insurance or reinsurance within a State, or (B) is a
branch of an alien insurer or reinsurer that is en-
tered through and licensed by a State to conduct in-
surance or reinsurance business. In the case of an
insurance exchange or group of unincorporated un-
derwriters, the term means an underwriting syn-
dicate, notwithstanding the licensed or admitted sta-
tus of the insurance exchange or group of unincor-
porated underwriters.
(22) The term ‘‘Reinsurance Fund’’ means the
Reinsurance Fund established under section 305.
(23) The term ‘‘Reinsurance Program’’ means
the national earthquake, volcanic eruption, and hur-
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ricane excess loss reinsurance program under title
III.
(24) The term ‘‘residential property’’ means
any (A) 1- to 4-family residential structure (includ-
ing mobile or manufactured homes) and the personal
property therein, and (B) personal property of occu-
pants of residential structures (including condomin-
iums, cooperatives, and apartment structures).
(25) The term ‘‘residential property insurance
coverage’’ means policies, riders, or endorsements of
insurance that provide indemnity, in whole or in
part, for the loss, destruction, or damage of residen-
tial property and other eligible property as deter-
mined by the Director.
(26) The term ‘‘seismically hazardous critical
facilities’’ means schools and structures essential to
emergency services necessary for post earthquake re-
covery (including hospitals, fire and policy facilities,
temporary shelters, and emergency operating and
preparedness centers) that—
(A) have unreinforced masonry bearing
walls, tilt-up construction, or nonductile con-
crete frame construction; and
(B) are located in seismic zones within
earthquake-prone States.
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(27) The term ‘‘Self-Sustaining Mitigation
Fund’’ means the Fund established under section
104.
(28) The term ‘‘seismic zone’’ means an area
within a State identified and classified by the Direc-
tor under section 101(a) as subject to major seismic
risk.
(29) The term ‘‘tsunami’’ means an ocean wave
generated by underwater disturbances in the Earth’s
crust, primarily earthquakes and submarine volcanic
eruptions.
(30) The term ‘‘volcanic eruption’’ means the
expulsion, as a result of natural causes, of molten
rock, rock fragments, gases, ashes, mud, lava flows,
and other natural substances through an opening in
the crust of the Earth.
(31) The term ‘‘volcanic eruption-prone State’’
means a State determined by the Director pursuant
to section 101 to have an exposure to the volcanic
eruption peril.
(32) The term ‘‘volcanic zone’’ means an area
within a State identified and classified by the Direc-
tor under section 101(a) as subject to major volcanic
eruption risk.
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TITLE 
I—PARTICIPATION 
BY
STATES IN ADOPTION OF HAZ-
ARD REDUCTION MEASURES
SEC. 101. IDENTIFICATION OF EARTHQUAKE-PRONE, VOL-
CANIC ERUPTION-PRONE, AND HURRICANE-
PRONE STATES.
(a) INITIAL IDENTIFICATION OF STATES.—The Di-
rector, in consultation with the United States Geological
Survey, other relevant Federal entities, and seismic, vol-
canic, and meteorological experts in the private sector,
shall identify States having an exposure to earthquake
perils, States having an exposure to volcanic eruption
peril, and States having an exposure to hurricane peril,
which shall include any State subject to major or moderate
seismic, volcanic eruption, or hurricane risk, as appro-
priate. The Director shall also identify and establish any
areas, within such States, that are subject to major seis-
mic, volcanic eruption, or hurricane risk as seismic zones,
volcanic zones, or hurricane zones, as appropriate. The Di-
rector shall identify such States and zones before the expi-
ration of the 1-year period beginning on the date of the
enactment of this Act, and shall cause a listing of such
States and zones to be published in the Federal Register
and in widely circulated local newspapers in the applicable
States before the expiration of such 1-year period.
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(b) FINAL NOTIFICATION.—Each State identified
under subsection (a) shall be considered for purposes of
this Act to be an earthquake-prone, volcanic eruption-
prone, or hurricane-prone State, as appropriate, upon the
expiration of the 6-month period beginning upon the expi-
ration of the period under subsection (a). The Director
shall notify the chief executive officer of each State identi-
fied under subsection (a) in writing, before the expiration
of such 6-month period, that the State is an earthquake-
prone, volcanic eruption-prone, or hurricane-prone State,
as appropriate, for purposes of this Act.
(c) ONGOING IDENTIFICATION AND NOTIFICATION.—
Based upon any additional seismic, volcanic, and meteoro-
logical information that from time to time becomes avail-
able, the Director may identify States (not identified
under subsection (a)) having an exposure to earthquake,
volcanic eruption, or hurricane perils. Any such States
shall be considered to be an earthquake-prone, volcanic
eruption-prone, or hurricane-prone State, as appropriate,
for purposes of this Act upon the notification of the chief
executive officer of the State, in writing, of the identifica-
tion of the State as such a State.
(d) APPEAL.—Any State aggrieved by a final deter-
mination as an earthquake-prone, volcanic eruption-prone,
or hurricane-prone State pursuant to subsection (b) or (c),
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may, after exhausting administrative remedies, appeal
such determination to any United States district court for
a district located within the State, not more than 60 days
after receipt of notice of such determination. The scope
of review by the court shall be as provided under chapter
7 of title 5, United States Code. During the pendency of
any such litigation, all determinations of the Director shall
be effective and final for the purposes of this title unless
stayed by the court for good cause shown.
SEC. 102. EARTHQUAKE, VOLCANIC ERUPTION, AND HURRI-
CANE LOSS MITIGATION ADVISORY COMMIT-
TEE.
(a) ESTABLISHMENT.—There is established an inde-
pendent advisory committee within the executive branch
to be known as the Earthquake, Volcanic Eruption, and
Hurricane Loss Mitigation Advisory Committee (in this
section referred to as the ‘‘Committee’’). The Committee,
its members, and its functions shall be separate from the
Insurance and Reinsurance Advisory Committee estab-
lished under section 207. To the extent not contradicted
by the provisions of this section, the Committee shall be
subject to the provisions of the Federal Advisory Commit-
tee Act.
(b) MEMBERSHIP.—
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(1) APPOINTED
MEMBERS.—The Committee
shall be composed of 7 members appointed by the
President, by and with the advice and consent of the
Senate. The members shall be chosen from among
citizens of the United States who are respected ex-
perts in the fields of earthquake, volcanic eruption,
and hurricane loss mitigation, who shall include—
(A) 1 individual who is employed by a
State government as an emergency planner;
(B) 1 individual who is knowledgeable re-
garding local community building codes;
(C) 1 individual who is employed as a seis-
mic engineer;
(D) 1 individual who is employed as an ex-
pert in the field of volcanic eruptions; and
(E) 1 individual who is employed as an ex-
pert in the field of hurricanes.
(2) EX
OFFICIO
MEMBER.—Notwithstanding
paragraph (1), the Chairman of the Insurance and
Reinsurance Advisory Committee under section 207
shall serve as an ex officio member of the Committee
under this section.
(c) VACANCIES.—A vacancy in the Committee shall
be filled in the manner in which the original appointment
was made.
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(d) CHAIRPERSON.—The President shall designate a
chairperson of the Committee from among members se-
lected for appointment to the Committee.
(e) SELECTION.—Not later than 180 days after the
date of the enactment of this Act, the President shall sub-
mit to the Senate nominations for appointment to the
Committee.
(f) FUNCTIONS OF THE COMMITTEE.—The Commit-
tee shall review the loss reduction criteria (including the
specific loss-reduction measures) established under section
103. Not later than 180 days after receiving the draft of
the loss-reduction criteria under section 103(a)(3), the
Committee shall submit to the Director written comments
and recommendations for any changes to the criteria.
(g) RESPONSIBILITIES OF DIRECTOR.—The Director
shall fully cooperate with the Committee and provide the
Committee with access to personnel and information and
may request assistance from relevant Federal agencies (in-
cluding the National Institute of Standards and Tech-
nology) as the Committee considers necessary to carry out
its functions.
SEC. 103. ESTABLISHMENT OF CRITERIA FOR LOSS-REDUC-
TION MEASURES.
(a) DEVELOPMENT OF CRITERIA.—
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(1) IN GENERAL.—On the basis of research car-
ried out under this title, the Director shall develop
comprehensive loss-reduction criteria for State and
local land use and management ordinances, building
codes, and other loss-reduction measures consistent
with the requirements under subsection (b). The Di-
rector shall periodically update such criteria to re-
flect technical advances designed to reduce losses
from earthquakes, volcanic eruptions, and hurri-
canes.
(2) COORDINATION.—The Director shall de-
velop the loss-reduction criteria in coordination and
consistent with the earthquake hazards reduction
program under title I of this Act and the Robert T.
Stafford Disaster Relief and Emergency Assistance
Act (and Executive Order 12699 of January 5,
1990). In developing the loss reduction criteria, the
Director shall consult other affected Federal entities
(including the National Institute of Standards and
Technology), the Building Seismic Safety Council,
the Interagency Committee on Seismic Safety in
Construction, the National Oceanic and Atmospheric
Administration, representatives of State and local
governments, regional earthquake, volcanic eruption,
and hurricane preparedness organizations, model
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building code organizations, and insurance industry
groups.
(3) SUBMISSION OF DRAFT TO ADVISORY COM-
MITTEE.—Not later than the expiration of the 9-
month period beginning on the date of the enact-
ment of this Act, the Director shall submit a draft
of the loss-reduction criteria to the Loss Mitigation
Advisory Committee established under section 102.
Before issuing any final regulations under para-
graph (4), the Director shall consider any rec-
ommendations made by such Advisory Committee re-
garding the draft criteria.
(4) REGULATIONS.—Not later than the expira-
tion of the 18-month period beginning on the date
of the enactment of this Act, the Director shall issue
regulations establishing the loss-reduction criteria
under this section, subject to the provisions of sub-
chapter II of chapter 5 of title 5, United States
Code. In issuing final regulations under this para-
graph, the Director shall cause to be published in
the Federal Register a description of any differences
between the recommendations of the Loss Mitigation
Advisory Committee and the final regulations (in-
cluding the applicability of loss-reduction measures
to States and localities) developed by the Director.
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The description shall contain, for each such dif-
ference, an explanation of why the recommendations
of the Advisory Committee were not included in the
final regulations.
(b) CONTENT OF CRITERIA.—The Federal loss-re-
duction criteria established under this section shall include
measures for the reduction of losses from future earth-
quakes, volcanic eruptions, and hurricanes, as follows:
(1) MANDATORY
INCLUSION.—The Director
shall include in the loss-reduction criteria the follow-
ing loss-reduction measures:
(A) Minimum seismic and hurricane build-
ing standards applicable to new residential
property and other buildings located in earth-
quake-prone States and hurricane-prone States.
(B) Community-based building codes appli-
cable to new residential property, which shall
meet or exceed any minimum provisions relat-
ing to seismic or hurricane hazards contained in
(i) the most recent edition of the National
Building Code, (ii) the most recent edition of
the Standard Building Code, or (iii) the most
recent edition of the Uniform Building Code.
(C) Community-based plumbing codes or
standards applicable to new residential property
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which shall meet or exceed any minimum provi-
sions contained in (i) the National Standard
Plumbing Code and the A40 Safety Standards
of the American National Standards Institute,
or (ii) such other similar codes or standards as
may be appropriate, as determined by the Di-
rector.
(2) DISCRETIONARY
INCLUSION.—Consistent
with reports submitted to Congress pursuant to sec-
tion 8(a)(2) of the Earthquake Hazards Reduction
Act of 1977 and section 947 of the Cranston-Gon-
zalez National Affordable Housing Act, the Director
shall consider and may include in the loss-reduction
criteria established under this section, any of the fol-
lowing additional loss-reduction measures:
(A) Community-based building codes which
contain minimum seismic or hurricane provi-
sions 
(including 
restrictions 
on 
new
unreinforced masonry construction) for new res-
idential property that is located in a seismic or
hurricane zone, as appropriate, not currently
covered by any of the building codes referred to
in paragraph (1)(B) but identified by the Direc-
tor as being located in earthquake-prone or hur-
ricane-prone States, as appropriate.
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(B) Geotechnical techniques to minimize
the effects of ground failures for new large
buildings in high-risk fault, landslide, site am-
plification, and liquefaction zones identified in
earthquake-prone States and, to the extent
practicable and cost-effective, application of the
same geotechnical techniques to existing large
buildings in the same zones.
(C) Measures to control construction of
buildings in high-risk fault, landslide, site am-
plification, liquefaction zones, and volcanic
zones identified in earthquake-prone or volcanic
eruption-prone States.
(D) To the extent practicable, retrofitting
of seismically hazardous critical facilities and
critical facilities vulnerable to hurricanes.
(E) Securing of building parapets and ex-
ternal ornamentations of existing buildings lo-
cated in earthquake-prone States or hurricane-
prone States.
(F) Bracing of gas water heaters and other
measures to reduce the risk of earthquake-in-
duced fires in residential property located in
earthquake-prone States.
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(G) Inspections before transfer of residen-
tial property in earthquake-prone States and
hurricane-prone States (and provision to buyers
of inspection reports) regarding the adequacy of
the anchoring of the residential structure to the
foundation, the presence of unbraced or braced
cripple walls for woodframe structures, and the
bracing of gas water heaters to the walls for all
structures, as appropriate based on risk of
damage by earthquakes or hurricanes.
(3) RECOMMENDED MEASURES.—The Director
may recommend, in the loss-reduction criteria, any
of the following earthquake and hurricane prepared-
ness and planning measures:
(A) Expanded research and development
by the National Institute of Standards and
Technology and other government and private
sector entities of new cost-effective building
technologies for new construction and retro-
fitting of existing buildings.
(B) Educational and promotional cam-
paigns to encourage additional voluntary miti-
gation.
(C) Reward-based fiscal incentives, such as
lower property tax assessments, no reassess-
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ments for retrofitting which results in increased
property values, or other tax incentives to en-
courage use of state-of-the-art mitigation tech-
nology.
(D) State or community-based efforts to
assist low- and moderate-income households to
purchase needed earthquake, volcanic eruption,
or hurricane insurance and to adopt cost-effec-
tive loss-reduction measures.
(E) Improvements in long-term earthquake
and hurricane construction practices, including
the training and licensing of earthquake and
hurricane design professionals as well as public
and private building inspectors.
(F) Institutional support, training in
earthquake and hurricane engineering tech-
nology and other disciplines, and staffing to en-
sure compliance with the community-based
building codes.
(G) Minimizing damage to public utilities,
including sewer, gas, electrical and water sys-
tems, and other lifelines.
(c) STANDARD.—Any mitigation measures included
in the loss-reduction criteria established under this section
shall be practical, cost-effective, workable, and directly re-
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lated to the risk of loss from earthquakes, volcanic erup-
tions, or hurricanes in areas where residential property is
located.
(d) TECHNICAL ASSISTANCE.—The Director, in con-
sultation with the National Institute of Standards and
Technology, shall coordinate with and provide technical
assistance to States, interstate, and local officials and
agencies to encourage adoption and enforcement of State
and local actions that incorporate and support the loss-
reduction measures and preparedness goals developed by
the Director under this section.
SEC. 104. SELF-SUSTAINING MITIGATION FUND.
(a) IN GENERAL.—A percentage of the annual earth-
quake, volcanic eruption, and hurricane insurance and ex-
cess reinsurance premiums collected under the Primary
Insurance program under title II, as the Director shall
designate, shall be deposited in a separate fund to be
known as the Self-Sustaining Mitigation Fund. The per-
centage may not exceed 5 percent, unless the Director de-
termines that the amounts in the Insurance Fund are suf-
ficient to provide for any probable expected losses from
future earthquakes, volcanic eruptions, or hurricanes. In-
terest on amounts in the Fund shall be credited to the
Fund.
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(b) USE.—Amounts in the Self-Sustaining Mitigation
Fund shall be available, to the extent provided in appro-
priations Acts, to the Director to provide assistance to
support the earthquake, volcanic eruption, and hurricane
hazard reduction activities, as follows:
(1) Assistance to States under section 105(c).
(2) Assistance to provide earthquake, volcanic
eruption, and hurricane education pursuant to sub-
section (c).
(3) Assistance for research and development
supported by the National Institute of Standards
and Technology on construction techniques to reduce
costs of new construction and retrofitting of existing
buildings.
(4) Low-interest loans or grants for the retro-
fitting of seismically hazardous critical facilities and
critical facilities vulnerable to hurricanes.
(c) EDUCATION PROGRAM.—In coordination with the
educational programs authorized under title I, the Direc-
tor shall provide assistance under this section to support
programs educating the general public on the national di-
mensions of the seismic, volcanic eruption, and hurricane
risk and on methods for homeowners to reduce the haz-
ards resulting from future earthquakes and hurricanes.
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SEC. 105. STATE IMPLEMENTATION OF LOSS-REDUCTION
MEASURES.
(a) DEFINITION OF COMPLIANCE STATE.—An earth-
quake-prone, volcanic eruption-prone, or hurricane-prone
State shall be considered a compliance State for purposes
of this title if—
(1) before the expiration of the 2-year period
beginning upon the promulgation of final regulations
under 
section 
103 
establishing 
loss-reduction
criteria—
(A) the counties and municipalities located
in all seismic, volcanic, and hurricane zones
within the State have adopted and are enforcing
minimum applicable mitigation measures re-
quired under the loss-reduction criteria; and
(B) the chief executive officer of the State
has designated an administrative authority to
coordinate the development and enforcement of
earthquake, volcanic eruption, and hurricane
implementation plans for the State, which plans
are equivalent to or exceed the loss-reduction
criteria; and
(2) the State is certified under subsection (b)
as a compliance State.
(b) DETERMINATION OF COMPLIANCE.—
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(1) STATE SUBMISSION OF CERTIFICATION.—
Before the expiration of the 2-year period referred
to in subsection (a)(1), each earthquake-prone, vol-
canic eruption-prone, or hurricane-prone State shall
submit a certification to the Director stating wheth-
er the State has substantially adopted and is sub-
stantially enforcing the applicable mitigation meas-
ures under the loss-reduction criteria. In providing
such certification, each State may consult with rel-
evant private-sector accreditation and rating organi-
zations approved by the Director. The Director shall
issue regulations not later than 18 months after the
date of the enactment of this Act describing the cri-
teria to be used in making and reviewing such State
certifications.
(2) REVIEW BY DIRECTOR.—The Director shall
review each certification submitted under paragraph
(1) to determine whether it is an accurate mani-
festation of the submitting State’s substantial com-
pliance with, and enforcement of, the applicable
mitigation measures under the loss-reduction cri-
teria. If the Director determines that the State cer-
tification is substantially accurate and the State has
adopted and is enforcing the applicable mitigation
measures, the Director shall certify the State for
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purposes of subsection (a). Using the criteria estab-
lished under paragraph (1), the Director shall review
the compliance with, and enforcement of, the appli-
cable mitigation measures by each compliance State
meeting the requirements of subsection (a) not less
than once every 2 years and shall renew compliance
certificates as appropriate.
(3) NONCOMPLIANCE
STATES.—If an earth-
quake-prone, volcanic eruption-prone, or hurricane-
prone State fails to submit a certification under
paragraph (1) or the Director determines under
paragraph (1) or (2) that the State has submitted
an inaccurate certification, has not adopted or en-
forced minimum applicable mitigation measures, or
has failed to have its compliance certification re-
newed, the Director shall certify the State as a non-
compliance State for purposes of this title and shall
promptly prepare and publish proposed regulations
setting forth the minimum mitigation measures ap-
plicable to the State.
(4) REVIEW OF NONCOMPLIANCE.—A State cer-
tified as a noncompliance State pursuant to para-
graph (3) may at any time after such certification
request the Director to revoke its noncompliance cer-
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tification and to certify the State pursuant to para-
graph (2).
(c) ASSISTANCE TO PROMOTE COMPLIANCE.—The
Director shall provide assistance to each compliance State
from amounts in the Self-Sustaining Mitigation Fund
under section 104, to the extent that amounts for such
assistance are made available under appropriations Acts.
The amount of such assistance provided to each State
shall be based on the State’s need for hazard reduction
as measured by the State’s lack of preparedness efforts,
the amount of earthquake, volcanic eruption, and hurri-
cane insurance premiums collected in that State under the
Primary Insurance Program, and the State’s risk of fu-
ture earthquakes, volcanic eruptions, and hurricanes. Such
financial assistance shall be used to support the State’s
development and implementation of its mitigation plan, in-
cluding education, enforcement, and mitigation economic
incentives, such as low-interest loans for seismic retro-
fitting.
SEC. 
106. 
REQUIREMENT 
TO 
PURCHASE 
PRIMARY
INSURANCE.
(a) CONNECTION TO FEDERALLY RELATED MORT-
GAGE LOANS.—After the expiration of the 2-year period
beginning upon the promulgation of final regulations
under section 103 establishing loss-reduction criteria, no
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federally related mortgage loan secured by residential
property located in an earthquake-prone, volcanic erup-
tion-prone, or hurricane-prone State may be made, in-
creased, extended, or renewed unless the property securing
the loan is covered by earthquake, volcanic eruption, and
hurricane insurance coverage available under title II or
equivalent insurance from a private insurer, in the amount
required under section 203(a)(6). The Director shall de-
termine, in cooperation with the appropriate Federal agen-
cies, the methods by which such mortgagors shall be re-
quired to present proof that they have obtained an insur-
ance policy consistent with the provisions of this title.
(b) EXEMPTION FOR STATE PROPERTIES.—Notwith-
standing the other provisions of this section, earthquake,
volcanic eruption, and hurricane insurance coverage shall
not be required on any State-owned property that is cov-
ered under a State policy of self-insurance adequate in the
determination of the Director. The Director shall publish
and periodically revise a list of States to which this sub-
section applies.
SEC. 107. EFFECT OF NONCOMPLIANCE WITH STATE MITI-
GATION PROGRAM.
Each Federal agency or instrumentality responsible
for the supervision, approval, regulation, or insuring any
banks, savings and loans associations, or similar institu-
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tions shall, by regulation, prohibit such institutions from
making, increasing, extending, or renewing a federally re-
lated mortgage loan secured by improved real estate or
a mobile home located or to be located in an earthquake-
prone, volcanic eruption-prone, or hurricane-prone State,
if—
(1) the State has been determined to be a non-
compliance State pursuant to section 105; and
(2) a presale inspection of the property securing
the loan—
(A) indicates that the property does not
meet the minimum mitigation measures applica-
ble to the property under the loss-reduction cri-
teria; or
(B) has not been conducted.
SEC. 108. COORDINATION WITH OTHER PROGRAMS.
In carrying out this Act, the Director shall consult
with other departments and agencies of the Federal Gov-
ernment, and with interstate, State, and local agencies
having responsibilities regarding earthquakes, volcanic
eruptions, and hurricanes to ensure that the programs of
such agencies and the Primary Insurance Program under
title II are mutually consistent.
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SEC. 109. REPORT TO CONGRESS.
The Director shall submit an annual report under
this section to the Congress, within 90 days after the end
of each fiscal year. The report shall describe the activities
carried out under this title and evaluate any progress
achieved in such activities during the preceding fiscal year.
SEC. 110. REGULATIONS.
(a) DIRECTOR.—The Director may issue any regula-
tions necessary to carry out this Act, pursuant to the pro-
visions of subchapter II of chapter 5 of title 5, United
States Code.
(b) FEDERAL AGENCIES.—Each Federal agency or
instrumentality responsible for the supervision, approval,
regulation, or insuring of banks, savings and loan associa-
tions, or similar institutions, shall, in cooperation with the
Director, issue any regulations necessary to implement the
responsibilities of such agency under this Act, pursuant
to the provisions of subchapter II of chapter 5 of title 5,
United States Code.
TITLE II—PRIMARY INSURANCE
PROGRAM
SEC. 201. BASIC AUTHORITY AND PROGRAM ORGANIZA-
TION.
(a) ESTABLISHMENT.—To carry out the purposes of
this Act, the Director shall establish and carry out a na-
tional earthquake, volcanic eruption, and hurricane insur-
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ance program to provide insurance against loss resulting
from physical damage to or loss of real property or per-
sonal property related thereto, in the United States, aris-
ing from any earthquake, volcanic eruption, or hurricane,
including any fire associated with a volcanic eruption.
(b) IMPLEMENTATION.—In carrying out the Primary
Insurance Program under this title, the Director shall ar-
range for participation, on other than a risk-sharing basis,
by private insurers, insurance agents and brokers, insur-
ance adjustment organizations, and other persons. The
Director may take any actions reasonably necessary and
appropriate to carry out this title, including the making
of contracts, the employment and compensation of per-
sons, and the acquisition of real and personal property.
(c) INSURANCE PRACTICES.—Any actions of the Di-
rector under this title shall be consistent with standard
insurance practices and generally accepted accounting, ac-
tuarial, and underwriting principles.
(d) SUITS.—Any lawsuits by or against the Director
(or employees of the Federal Emergency Management
Agency) in connection with activities under this title shall
be brought in the district court of the United States with
jurisdiction over the action, except that any action by an
insurer or reinsurer against the Director (or employees of
the Federal Emergency Management Agency) shall be
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brought in the United States District Court for the
District of Columbia.
(e) PLAN OF OPERATION.—
(1) DEVELOPMENT.—The Director shall de-
velop a plan of operation under this subsection to
ensure the fair, reasonable, and equitable adminis-
tration of the Insurance Fund, the Reinsurance
Fund, and other activities under this title and title
III.
(2) CONTENTS.—The plan of operation shall set
forth the specific policy and programmatic details
for operating the Primary Insurance Program and
the Reinsurance Program, and shall include—
(A) all guidelines, criteria, definitions,
clarifications, and procedures necessary to carry
out this title;
(B) procedures for implementing the miti-
gation incentives under section 206; and
(C) standards for insurers to retain ex-
pense allowances from premiums collected
under this title.
(3) STUDY OF LOW-INCOME RATES.—In devel-
oping the plan of operation, the Director shall con-
sider options for charging less than actuarial rates
for residential property occupied by low-income pol-
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published in the Federal Register a description
of any differences between the recommendations
of the Insurance and Reinsurance Advisory
Committee and the final regulations (including
the guidelines, criteria, definitions, clarifica-
tions, and procedures under the plan) developed
by the Director. The description shall contain,
for each such difference, an explanation of why
the recommendations of the Advisory Commit-
tee were not included in the proposed regula-
tions.
(C) COMMENTS.—After the regulations
have been issued under subparagraph (B), the
Director shall request comments from the In-
surance and Reinsurance Advisory Committee
regarding any changes to the regulations.
(D) 
SUBSEQUENT
CHANGES.—Any
changes to the plan of operation contained in
final regulations shall be made pursuant to reg-
ulations issued in the manner provided in sub-
paragraphs (B) and (C).
SEC. 202. SCOPE OF PROGRAM.
(a) RESIDENTIAL PROPERTIES.—In carrying out the
Primary Insurance Program, the Director shall make
earthquake, volcanic eruption, and hurricane coverage
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available only for residential property. The Director shall
make such coverage available in earthquake-prone States,
volcanic eruption-prone States, and hurricane-prone
States.
(b) ADDITIONAL TYPES OF PROPERTIES.—If, on the
basis of studies and investigations undertaken and carried
out and information received or exchanged under section
204, and such other information as may be necessary, the
Director determines that it would be feasible to extend the
Primary Insurance Program to cover other properties, the
Director may recommend to Congress that earthquake,
volcanic eruption, and hurricane coverage under this title
be made available to cover any types and classes of—
(1) other properties in residential areas;
(2) small business properties that are owned or
leased and operated by small business concerns;
(3) religious properties;
(4) agricultural properties;
(5) properties occupied by primary nonprofit or-
ganizations; and
(6) properties owned by State and local govern-
ments and agencies thereof.
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SEC. 203. TERMS AND LIMITATIONS OF INSURANCE COV-
ERAGE.
(a) TERMS.—Pursuant to the plan of operation es-
tablished under section 201 and after consultation with
the Insurance and Reinsurance Advisory Committee, the
Director shall establish, by regulation, the general terms
and conditions of insurability for properties eligible for
residential property insurance coverage under section 202.
Such regulations shall meet the requirements of this sec-
tion and may include—
(1) the type and locational classification of such
eligible properties;
(2) the nature of damage that may be covered
by such insurance;
(3) appropriate minimum premiums;
(4) appropriate loss-deductibles including vari-
able deductibles based on the existence of loss-reduc-
ing measures that affect the risk of loss;
(5) appropriate limits on coverage for each clas-
sification of eligible properties;
(6) appropriate minimum coverage amounts
pursuant to section 106(a) for each classification of
eligible properties, which may not be less than the
outstanding principal balance of the mortgage loan
securing the property or the maximum coverage
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limit for the property under paragraph (5), which-
ever is less; and
(7) any other terms and limitations relating to
such residential property insurance coverage that
may be necessary to carry out the purposes of this
title.
(b) LIMITATIONS.—Earthquake, volcanic eruption,
and hurricane coverage under this title shall cover—
(1) any damage to covered eligible property
proximately caused by—
(A) an earthquake, volcanic eruption, or
hurricane;
(B) a tsunami associated with an earth-
quake, volcanic eruption, or hurricane;
(C) a fire associated with a volcanic erup-
tion; and
(2) coverage for debris removal and additional
living expenses incurred as a result of direct damage
to the premises by—
(A) earthquake, volcanic eruption, or hur-
ricane;
(B) a tsunami associated with an earth-
quake, volcanic eruption, or hurricane; and
(C) a fire associated with a volcanic erup-
tion.
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The coverage shall not include coverage for any fires asso-
ciated with an earthquake.
(c) ELIGIBILITY OF COVERAGE.—Any private insurer
issuing residential property insurance coverage in any
earthquake-prone, volcanic eruption-prone, or hurricane-
prone State may provide the coverage under this title, on
behalf of the Federal Government, to residential property
policyholders of the insurer. Any private insurer electing
to participate in the Primary Insurance Program shall
make coverage available to all residential property policy-
holders of the insurer in earthquake-prone, volcanic erup-
tion-prone, or hurricane-prone States. Any private insurer
electing to purchase the excess reinsurance coverage pur-
suant to title III shall make the coverage available, on be-
half of the Federal Government, or at equivalent coverage
and rates on their own behalf, to all residential property
policyholders of the insurer.
SEC. 
204. 
ESTABLISHMENT 
OF 
ACTUARIAL 
PREMIUM
RATES.
(a) STUDIES AND ESTABLISHMENT OF RATES.—The
Director may undertake and carry out such studies and
investigations and receive and exchange such information
as may be necessary to establish, and shall from time to
time establish and prescribe, by regulation, on a State,
territorial, or other appropriate basis, actuarial premium
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rates for types of classes of property eligible for residential
property insurance coverage and the terms and conditions
under which such rates apply.
(b) ARRANGEMENTS FOR SERVICES.—In carrying out
such studies, the Director shall consult with the Loss Miti-
gation Advisory Committee and the Insurance and Rein-
surance Advisory Committee and may enter into contracts,
agreements, or other arrangements to utilize the services
of the United States Geological Survey and other relevant
Federal, State, and local governmental agencies, and other
persons.
(c) CONSIDERATIONS.—The Director shall establish
actuarial rates under this section based on—
(1) 
considerations 
of 
the 
risks 
involved,
including—
(A) the severity and frequency of earth-
quakes by seismic zone and States in which the
insured property is located, including known
differences in risks from active faults and
known susceptibility to landslide, site amplifi-
cation, and liquefaction;
(B) the risk of damage associated with a
volcanic eruption by volcanic zone and States in
which the insured property is located, including
proximity to known lava flows;
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(C) the severity and frequency of hurri-
canes by hurricane zone and States in which
the insured property is located;
(D) the value of the insured property;
(E) the age of the structures located on
the insured property;
(F) the construction type of the structures
located on the insured property, including
woodframe, masonry, and masonry veneer;
(G) the architectural type of the structures
located on the insured property, including soft
first floor, box construction, and split level;
(H) earthquake or hurricane loss-reduction
measures, including measures described in sec-
tion 103, followed in the construction or subse-
quent retrofitting of residential property struc-
tures; and
(I) any other relevant criteria; and
(2) application of accepted actuarial and rate-
making principles that reflect the risks involved, an-
ticipated insurance related administrative and oper-
ating costs and loss and loss-adjustment expense
payments, and provide for adequate reserves.
(d) LIMITATION.—Any rate classification system
used by the Director to establish actuarial rates under this
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section shall be cost-effective and shall not impose costs
for the initial establishment or the subsequent administra-
tion of the rate plan that are disproportionate to the size
of the insurance premiums.
SEC. 205. CHARGEABLE PREMIUM RATES.
(a) ESTABLISHMENT.—On the basis of actuarial
rates established under section 204 and such other infor-
mation as may be necessary, the Director shall from time
to time, and after consultation with the Loss Mitigation
Advisory Committee and the Insurance and Reinsurance
Advisory 
Committee, 
establish 
and 
prescribe, 
by
regulation—
(1) chargeable premium rates for any types and
classes of properties eligible for earthquake, volcanic
eruption, and hurricane coverage; and
(2) the terms and conditions under which such
rates shall apply.
(b) MINIMIZATION
OF CROSS-SUBSIDIZATION.—To
the maximum extent practicable, such chargeable rates
shall be actuarial rates over an extended period of time
and shall result in a minimum of cross-subsidization by
reasonably reflecting the risk of damaging earthquakes,
volcanic eruptions, and hurricanes in total and for each
subclassification of policyholders. In setting and adjusting
chargeable rates under this section, the Director shall pro-
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vide that, over an extended period of time, expected ex-
penditures from the Insurance Fund under section 208(c)
do not exceed expected receipts of the Fund under section
208(b).
(c) LOW-INCOME RATES AND MITIGATION INCEN-
TIVES.—The Director may, pursuant to the plan of oper-
ation under section 201, establish chargeable rates under
this section for (1) residential property occupied by low-
income residents, and (2) residential properties described
in section 206(4), that are less than the actuarial rates
established under section 204, but only to the extent that
such rates do not prevent compliance with the last sen-
tence of subsection (b).
SEC. 206. INSURANCE MITIGATION INCENTIVES.
In carrying out the Primary Insurance Program
under this title pursuant to the plan of operation, the Di-
rector shall provide for the following insurance mitigation
incentives:
(1) Charging lower deductible amounts for any
residential property meeting the seismic and hurri-
cane building standards under the loss-reduction cri-
teria.
(2) Requiring under earthquake, volcanic erup-
tion, and hurricane coverage that repairs to residen-
tial property sustaining earthquake damage in ex-
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cess of the deductible include, at a minimum, an-
choring the dwelling to the foundation and the addi-
tion of bracing to cripple walls.
(3) Requiring under earthquake, volcanic erup-
tion, and hurricane coverage that repairs to residen-
tial property sustaining hurricane damage in excess
of the deductible include such structural or other re-
pairs as the Director considers appropriate to miti-
gate against future hurricane damage.
(4) Requiring under earthquake, volcanic erup-
tion, and hurricane coverage that residential prop-
erty suffering damage in an amount greater than 50
percent of the replacement value of the property
shall be rebuilt to at least the minimum standards
under the loss-reduction criteria under section 103
and applicable to the State.
(5) Charging lower premiums or deductible
amounts for any residential property located in a
seismic zone in an earthquake-prone State, or in a
hurricane zone in a hurricane-prone State that
passes an earthquake or hurricane inspection that is
required as a condition of sale, paid for by the seller,
and meets the requirements of section 103(b)(2)(G).
(6) Charging lower premiums or deductible
amounts for new residential property not con-
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structed in volcanic zones in a volcanic eruption-
prone State.
SEC. 207. EARTHQUAKE, VOLCANIC ERUPTION, AND HURRI-
CANE INSURANCE AND REINSURANCE ADVI-
SORY COMMITTEE.
(a) ESTABLISHMENT.—There is established an inde-
pendent advisory committee within the executive branch
to be known as the Earthquake, Volcanic Eruption, and
Hurricane Insurance and Reinsurance Advisory Commit-
tee (in this section referred to as the ‘‘Committee’’). The
Committee, its members, and its functions shall be sepa-
rate from the Loss Mitigation Advisory Committee estab-
lished under section 102. To the extent not contradicted
by the provisions of this section, the Committee shall be
subject to the provisions of the Federal Advisory Commit-
tee Act.
(b) MEMBERSHIP.—
(1) APPOINTED
MEMBERS.—The Committee
shall be composed of 5 members appointed by the
President, by and with the advice and consent of the
Senate. The members shall be chosen from among
citizens of the United States and shall include—
(A) 2 individuals who represent the inter-
ests of private insurers;
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(B) 1 individual who represents the inter-
ests of private reinsurers;
(C) 1 individual who represents the inter-
ests of insurance agents; and
(D) 1 individual who is a State insurance
regulator.
(2) EX
OFFICIO
MEMBER.—Notwithstanding
paragraph (1), the Chairman of the Loss Mitigation
Advisory Committee under section 102 shall serve as
an ex officio member of the Committee under this
section.
(c) VACANCIES.—A vacancy in the Commission shall
be filled in the manner in which the original appointment
was made.
(d) CHAIRMAN.—The President shall designate a
chairman of the Committee from among members selected
for appointment to the Committee.
(e) SELECTION.—Not later than 180 days after the
date of the enactment of this Act, the President shall sub-
mit to the Senate nominations for appointment to the
Committee.
(f) FUNCTIONS OF THE COMMITTEE.—The Commit-
tee shall review the draft plan of operation established
under section 201. Within 120 days after receiving the
draft plan of operation, the Committee shall submit to the