by the Secretary at the beginning of the term, sub-
ject to the limitations under section 7, at the prices 
at which such contracts were offered at the begin-
ning of the term, prorated based upon the remaining 
term as determined by the Secretary. Such addi-
tional contracts shall provide coverage beginning on 
a date 15 days after the date of purchase but shall 
not provide coverage for losses for an event that has 
already occurred. 
(8) OTHERS.—The contract shall contain such 
other terms as the Secretary considers necessary to 
carry out this Act and to ensure the long-term fi-
nancial integrity of the program under this Act. 
(c) PRIVATE SECTOR RIGHT TO PARTICIPATE.— 
(1) ESTABLISHMENT OF COMPETITIVE PROCE-
DURE.—The Secretary shall establish, by regulation, 
a competitive procedure under this subsection that 
provides qualified entities an opportunity, on a basis 
consistent with the contract cycle established under 
this Act by the Secretary, to offer to provide, in lieu 
of reinsurance coverage under this section, reinsur-
ance coverage that is substantially similar to cov-
erage otherwise made available under this section. 
(2) COMPETITIVE
PROCEDURE.—Under the 
procedure established under this subsection—
(A) the Secretary shall establish criteria 
for private insurers, reinsurers, and capital 
market companies, and consortia of such enti-
ties to be treated as qualified entities for pur-
poses of this subsection, which criteria shall re-
quire such an entity to have at all times capital 
sufficient to satisfy the terms of the reinsurance 
contracts and shall include such other industry 
and credit rating standards as the Secretary 
considers appropriate; 
(B) not less than 30 days before the begin-
ning of each contract cycle during which any re-
insurance coverage under this section is to be 
made available, the Secretary may request pro-
posals and shall publish in the Federal Register 
the rates and terms for contracts for reinsur-
ance coverage under this section that are to be 
made available during such contract cycle; 
(C) the Secretary shall provide qualified 
entities a period of not less than 10 days (which 
shall terminate not less than 20 days before the 
beginning of the contract cycle) to submit to 
the Secretary a written expression of interest in 
providing reinsurance coverage in lieu of the
coverage otherwise to be made available under 
this section; 
(D) the Secretary shall provide any quali-
fied entity submitting an expression of interest 
during the period referred to in subparagraph 
(C) a period of not less than 20 days (which 
shall terminate before the beginning of the con-
tract cycle) to submit to the Secretary an offer 
to provide, in lieu of the reinsurance coverage 
otherwise to be made available under this sec-
tion, coverage that is substantially similar to 
such coverage; 
(E) if the Secretary determines that an 
offer submitted during the period referred to in 
subparagraph (D) is a bona fide offer to pro-
vide reinsurance coverage during the contract 
cycle at rates and terms that are substantially 
similar to the rates and terms for reinsurance 
coverage otherwise to be provided under this 
section by the Secretary, the Secretary shall ac-
cept the offer (if still outstanding) and, not-
withstanding any other provision of this Act, 
provide for such entity to make reinsurance cov-
erage available in accordance with the offer; 
and
(F) if the Secretary accepts an offer pur-
suant to subparagraph (E) to make reinsurance 
coverage available, notwithstanding any other 
provision of this Act, the Secretary shall reduce, 
to an equivalent extent, the amount of reinsur-
ance coverage available under this section dur-
ing the contract cycle to which the offer relates, 
unless and until the Secretary determines that 
the entity is not complying with the terms of 
the accepted offer. 
SEC. 7. MINIMUM LEVEL OF RETAINED LOSSES AND MAX-
IMUM FEDERAL LIABILITY. 
(a) AVAILABLE LEVELS OF RETAINED LOSSES.—In 
making reinsurance coverage available under this Act, the 
Secretary shall make available for purchase contracts for 
such coverage that require the sustainment of retained 
losses from a single event of a covered peril (as required 
under section 6(b)(3) for payment of eligible losses) in var-
ious amounts, as the Secretary determines appropriate 
and subject to the requirements under subsection (b). 
(b) MINIMUM LEVEL OF RETAINED LOSSES.— 
(1) IN GENERAL.—Subject to paragraphs (2) 
and (3) and notwithstanding any other provision of 
this Act, a contract for reinsurance coverage under 
section 6 for an eligible State program that offers
insurance or reinsurance coverage described in sub-
paragraph (A) or (B), respectively, of section 6(a)(1) 
may not be made available or sold unless the con-
tract requires that the State program shall sustain 
an amount of retained losses from a single event of 
a covered peril of not less than $50,000,000,000. 
(2) ANNUAL
ADJUSTMENT.—The Secretary 
may annually raise the minimum level of retained 
losses established under paragraph (1) for an eligible 
State program to reflect, as determined by the Sec-
retary— 
(A) changes to the claims-paying capacity 
of the program; 
(B) changes in the capacity of the private 
insurance and reinsurance market; 
(C) increases in the market value of prop-
erties; or 
(D) such other situations as the Secretary 
considers appropriate. 
The Secretary shall consider the minimum level of 
retained losses requirements in paragraphs (1) as a 
minimum requirement only and shall have full au-
thority, effective on the date of the enactment of this 
Act, to establish levels of required minimum retained 
losses in any amount greater than the amount speci-
fied in such paragraph. In making any determina-
tion under this paragraph in the minimum level of 
retained losses, the Secretary shall establish such 
level at an amount such that the program under this 
Act for making reinsurance coverage available does 
not displace or compete with the private insurance 
or reinsurance markets or capital markets, as deter-
mined by the Secretary after the Secretary has pro-
vided interested parties an opportunity to submit 
market information relevant to such determination. 
(3) OPTIONAL ANNUAL INFLATIONARY OR EX-
POSURE ADJUSTMENT.—The Secretary may, on an 
annual basis, raise the minimum level of retained 
losses established under paragraph (1) for each eligi-
ble State program to reflect the annual rate of infla-
tion or growth in exposures, whichever is greater. 
Any such raise shall be made in accordance with an 
inflation index or exposure index, as appropriate, 
that the Secretary determines to be appropriate. The 
first such raise may be made one year after con-
tracts for reinsurance coverage under this Act are 
first made available for purchase. 
(c) MAXIMUM FEDERAL LIABILITY.— 
(1) IN GENERAL.—Notwithstanding any other 
provision of law, the Secretary may sell only con-
tracts for reinsurance coverage under this Act in 
various amounts which comply with the following re-
quirements: 
(A) ESTIMATE
OF
AGGREGATE
LIABIL-
ITY.—The aggregate liability for payment of 
claims under all such contracts in any single 
year is unlikely to exceed $25,000,000,000 (as 
such amount is adjusted under paragraph (2)). 
(B) ELIGIBLE LOSS COVERAGE SOLD.—El-
igible losses covered by all contracts sold within 
a State during a 12-month period do not exceed 
a prescribed level of losses as determined by the 
Secretary: 
(2) ANNUAL
ADJUSTMENTS.—The Secretary 
shall annually adjust the amount under paragraph 
(1)(A) (as it may have been previously adjusted) to 
provide for inflation in accordance with an inflation 
index that the Secretary determines to be appro-
priate. 
(d) LIMITATION ON PERCENTAGE OF RISK IN EX-
CESS OF RETAINED LOSSES.— 
(1) IN
GENERAL.—The Secretary may not 
make available for purchase contracts for reinsur-
ance coverage under this Act that would pay out 
more than 50 percent of eligible losses in excess of
retained losses for the State of the program pur-
chasing the contract. 
(2) PAYOUT.—For purposes of this subsection, 
the amount of payout from a reinsurance contract 
shall be the amount of eligible losses in excess of re-
tained losses multiplied by the percentage under 
paragraph (1). 
SEC. 8. DISASTER REINSURANCE FUND. 
(a) ESTABLISHMENT.—There is established within 
the Treasury of the United States a fund to be known 
as the Disaster Reinsurance Fund (in this section referred 
to as the ‘‘Fund’’). 
(b) CREDITS.—The Fund shall be credited with— 
(1) amounts received annually from the sale of 
contracts for reinsurance coverage under this Act; 
(2) any amounts borrowed under subsection 
(d); 
(3) any amounts earned on investments of the 
Fund pursuant to subsection (e); and 
(4) such other amounts as may be credited to 
the Fund. 
(c) USES.—Amounts in the Fund shall be available 
to the Secretary only for the following purposes:
(1) CONTRACT PAYMENTS.—For payments to 
covered purchasers under contracts for reinsurance 
coverage for eligible losses under such contracts. 
(2) ADMINISTRATIVE EXPENSES.—To pay for 
the administrative expenses incurred by the Sec-
retary in carrying out the reinsurance program 
under this Act. 
(3) TERMINATION.—Upon termination under 
section 11, as provided in such section. 
(d) BORROWING.— 
(1) AUTHORITY.—To the extent that the 
amounts in the Fund are insufficient to pay claims 
and expenses under subsection (c), the Secretary 
may issue such obligations of the Fund as may be 
necessary to cover the insufficiency and shall pur-
chase any such obligations issued. 
(2) PUBLIC DEBT TRANSACTION.—For the pur-
pose of purchasing any such obligations, the Sec-
retary may use as a public debt transaction the pro-
ceeds from the sale of any securities issued under 
chapter 31 of title 31, United States Code, and the 
purposes for which securities are issued under such 
chapter are hereby extended to include any purchase 
by the Secretary of such obligations under this sub-
section.
(3) CHARACTERISTICS OF OBLIGATIONS.—Obli-
gations issued under this subsection shall be in such 
forms and denominations, bear such maturities, bear 
interest at such rate, and be subject to such other 
terms and conditions, as the Secretary shall deter-
mine. 
(4) TREATMENT.—All redemptions, purchases, 
and sales by the Secretary of obligations under this 
subsection shall be treated as public debt trans-
actions of the United States. 
(5) REPAYMENT.—Any obligations issued under 
this subsection shall be repaid, including interest, 
from the Fund and shall be recouped from pre-
miums charged for reinsurance coverage provided 
under this Act. 
(e) INVESTMENT.—If the Secretary determines that 
the amounts in the Fund are in excess of current needs, 
the Secretary may invest such amounts as the Secretary 
considers advisable in obligations issued or guaranteed by 
the United States. 
(f) PROHIBITION OF FEDERAL FUNDS.—Except for 
amounts made available pursuant to subsection (d) and 
section 9(h), no Federal funds shall be authorized or ap-
propriated for the Fund or for carrying out the reinsur-
ance program under this Act.
SEC. 9. DEFINITIONS. 
For purposes of this Act, the following definitions 
shall apply: 
(1) COVERED PERILS.—The term ‘‘covered per-
ils’’ means the perils under section 5. 
(2) COVERED PURCHASER.—The term ‘‘covered 
purchaser’’ means an eligible State-operated insur-
ance or reinsurance program that purchases reinsur-
ance coverage made available under a contract under 
section 6. 
(3) DISASTER AREA.—The term ‘‘disaster area’’ 
means a geographical area, with respect to which— 
(A) a covered peril specified in section 5 
has occurred; and 
(B) a declaration that a major disaster ex-
ists, as a result of the occurrence of such 
peril— 
(i) has been made by the President of 
the United States; and 
(ii) is in effect. 
(4) ELIGIBLE
LOSSES.—The term ‘‘eligible 
losses’’ means losses in excess of the sustained and 
retained losses, as defined by the Secretary. 
(5) ELIGIBLE STATE PROGRAM.—The term ‘‘eli-
gible State program’’ means a State program that, 
pursuant to section 6(a), is eligible to purchase rein-
surance coverage made available through contracts 
under section 6. 
(6) 
PRICE
GOUGING.—The 
term 
‘‘price 
gouging’’ means the providing of any consumer good 
or service by a supplier for a price that the supplier 
knows or has reason to know is greater, by at least 
the percentage set forth in a State law or regulation 
prohibiting such act (notwithstanding any real cost 
increase due to any attendant business risk and 
other reasonable expenses that result from the major 
disaster involved), than the price charged by the 
supplier for such consumer good or service imme-
diately before the disaster. 
(7) QUALIFIED
LINES.—The term ‘‘qualified 
lines’’ means lines of insurance coverage for which 
losses are covered under section 4 by reinsurance 
coverage under this Act. 
(8) REINSURANCE COVERAGE.—The term ‘‘re-
insurance coverage under this Act’’ means coverage 
under contracts made available under section 6. 
(9) SECRETARY.—The term ‘‘Secretary’’ means 
the Secretary of the Treasury. 
(10) STATE.—The term ‘‘State’’ means the 
States of the United States, the District of Colum-
bia, the Commonwealth of Puerto Rico, the Com-
monwealth of the Northern Mariana Islands, Guam, 
the Virgin Islands, American Samoa, and any other 
territory or possession of the United States. 
SEC. 10. REGULATIONS. 
The Secretary shall issue any regulations necessary 
to carry out the program for reinsurance coverage under 
this Act. 
SEC. 11. TERMINATION. 
(a) IN GENERAL.—Except as provided in subsection 
(b), the Secretary may not provide any reinsurance cov-
erage under this Act covering any period after the expira-
tion of the 10-year period beginning on the date of the 
enactment of this Act. 
(b) EXTENSION.—If, upon the expiration of the pe-
riod under subsection (a), the Secretary determines that 
continuation of the program for reinsurance coverage 
under this Act, or a portion of such program is necessary 
to carry out the purpose of this Act under section 3(b) 
because of insufficient growth of capacity in the private 
insurance market, the Secretary shall continue to provide 
reinsurance coverage under this Act or such portion of the 
program under this Act until the expiration of the 5-year 
period beginning upon the expiration of the period under 
subsection (a).