SEC. 6. CONTRACTS FOR REINSURANCE COVERAGE FOR 
ELIGIBLE STATE PROGRAMS. 
(a) ELIGIBLE STATE PROGRAMS.—A program shall 
be eligible to purchase a contract under this section for 
reinsurance coverage under this Act only if the State enti-
ty authorized to make such determinations certifies to the 
Secretary that the program is a State-operated program 
that complies with the following requirements: 
(1) PROGRAM DESIGN.—The program shall be a 
State-operated— 
(A) insurance program that— 
(i) offers coverage for— 
(I) homes (which may include 
dwellings owned under condominium 
and cooperative ownership arrange-
ments) and the contents of apart-
ments to State residents because of a 
finding by the State insurance com-
missioner or other State entity au-
thorized to make such determination 
that such a program is necessary in 
order to provide for the continued 
availability of such residential cov-
erage for all residents; or 
(II) business properties and the 
contents of business properties to
businesses located in the State be-
cause of a finding by the State insur-
ance commissioner or other State en-
tity authorized to make such deter-
mination that such a program is nec-
essary in order to provide for the con-
tinued availability of such coverage for 
all such businesses; and 
(ii) is authorized by State law; or 
(B) reinsurance program that is designed 
to improve private insurance markets that offer 
coverage described in subclause (I) or (II) of 
clause (i) because of a finding described in sub-
clause (I) or (II), respectively, of clause (i). 
(2) OPERATION.—The program shall meet the 
following requirements: 
(A) A majority of the members of the gov-
erning body of the program shall be public offi-
cials. 
(B) The State shall have a financial inter-
est in the program, which shall not include a 
program authorized by State law or regulation 
that requires insurers to pool resources to pro-
vide property insurance coverage for covered 
perils.
(3) TAX STATUS.—The program shall be struc-
tured and carried out in a manner so that the pro-
gram is exempt from all Federal taxation. 
(4) COVERAGE.—The program shall cover only 
a single peril. 
(5) EARNINGS.—The program may not provide 
for, nor shall have ever made, any redistribution of 
any part of any net profits of the program to any 
insurer that participates in the program. 
(6) MITIGATION.— 
(A) IN
GENERAL.—The State operating 
the program shall, by law or regulation, have 
enacted— 
(i) a program to mitigate insurance 
losses from natural catastrophes; and 
(ii) a comprehensive, modern, and 
uniform statewide building code estab-
lishing minimum standards for the con-
struction and maintenance of buildings and 
other structures to mitigate against future 
disasters, increase public safety, and en-
hance the rebuilding of such States, with 
minimum standards at least as comprehen-
sive as the model building standards and
codes developed by the International Code 
Council. 
(B) REGULATIONS.—The Secretary shall 
issue regulations that establish the minimum 
standards for States to satisfy the mitigation 
requirements under subparagraph (A). 
(7) COVERAGE.— 
(A) IN GENERAL.—The program— 
(i) may not involve cross-subsidization 
between any separate property and cas-
ualty lines covered under the program un-
less the elimination of such activity in an 
existing program would negatively impact 
the eligibility of the program to purchase a 
contract for reinsurance coverage under 
this Act; 
(ii) shall include provisions that au-
thorize the State insurance commissioner 
or other State entity authorized to make 
such a determination to terminate the pro-
gram if the insurance commissioner or 
other such entity determines that the pro-
gram is no longer necessary to ensure the 
availability of homeowners’ insurance or
insurance for businesses, as appropriate, 
for all State residents or businesses; and 
(iii) shall provide that, for any insur-
ance coverage that is made available under 
the State insurance program and for any 
reinsurance coverage for such insurance 
coverage made available under the State 
reinsurance program, the premium rates 
charged shall be amounts that, at a min-
imum, are sufficient to cover the full actu-
arial costs of such coverage, based on con-
sideration of the risks involved and accept-
ed actuarial and rate making principles, 
anticipated administrative expenses, and 
loss and loss-adjustment expenses. 
(B) APPLICABILITY.—This paragraph shall 
apply— 
(i) before the expiration of the 2-year 
period beginning on the date of the enact-
ment of this Act, only to State programs 
which, after January 1, 2005, commence 
offering insurance or reinsurance coverage 
described in subparagraph (A) or (B), re-
spectively, of paragraph (1); and
(ii) after the expiration of such period, 
to all State programs. 
(8) STATE INSURANCE PRICING LAWS.— 
(A) REQUIREMENT TO ALLOW RISK-BASED 
PRICING.—Except as provided in subparagraph 
(B), the State operating such eligible State pro-
gram may not have in effect any law or regula-
tion that prohibits or prevents insurers (other 
than the State) from providing insurance cov-
erage for losses from covered perils to any risks 
located in such State at premium rates which 
are based on consideration of the risks involved 
and accepted actuarial rate-making principles. 
(B) EXCEPTION FOR CERTAIN STATE RE-
SIDUAL MARKETS.—In the case of a State oper-
ating a residual market insurance program for 
losses from covered perils to any risks located 
in the State, if the premium rates charged by 
the residual market insurance program are 
below the premium rates the private market 
would charge for similar coverage under the 
principles set forth in subparagraph (A), the re-
sidual market insurance program must make 
such coverage available to any person request-