HR 1856 IH
tion, and tsunami-prone States as determined by
section 804.
‘‘(2) HURRICANE PERIL.—Private insurers act-
ing as service providers may also elect to offer the
primary insurance coverage on behalf of the Cor-
poration for the hurricane peril, provided it is of-
fered to all of its residential property policyholders
in hurricane-prone States as determined by section
804.
‘‘(3) QUOTA-SHARE AMOUNTS.—Any private in-
surer acting as a service provider shall agree to ac-
cept the quota-share amounts for each coverage as
described in section 914(c).
‘‘SEC. 913. INSURANCE PURCHASE REQUIREMENT.
‘‘(a) COVERAGE REQUIRED WITH FEDERAL MORT-
GAGES.—No federally related mortgage loan secured by
residential property located in an earthquake, volcanic
eruption, tsuanami, or hurricane-prone State shall be
made, renewed unless the property securing the loan is
covered by—
‘‘(1) the primary insurance coverages insured
by the Corporation described in section 911, or
‘‘(2) coverage insured by a private insurer
which has at least equivalent terms, conditions, and
rates as the primary insurance coverages for seismic
HR 1856 IH
perils as described in section 912(b)(1) and which
has at least equivalent terms and conditions as the
primary insurance coverage for the hurricane peril
as described in section 912(b)(2).
‘‘(b) ESCROW INSURANCE PREMIUMS.—
‘‘(1) ESCROW REQUIREMENTS.—If the lender or
other servicer of residential property mortgage loans
requires the escrowing of taxes, insurance premiums,
or any other charges, any premiums from earth-
quake, volcanic eruption, tsunami, and hurricane in-
surance for residential property acting as security
for a federally related mortgage loan shall be paid
to such lender or servicer of the loan. Such pre-
miums shall be paid in a manner sufficient to make
payments as due for the duration of the loan.
‘‘(2) ESCROW ACCOUNT.—Upon receipt of the
premiums described in paragraph (1), the lender or
servicer of the residential property loan shall deposit
the premiums in an escrow account on behalf of the
borrower. Upon receipt of a notice from the private
issuer acting as a service provider or direct insurer
of the earthquake, volcanic eruption, tsunami, and
hurricane insurance that insurance premiums are
due, the lender or servicer shall pay from the escrow
HR 1856 IH
account to the provider of the insurance the amount
of the insurance premiums owed.
‘‘(c) ELIGIBILITY REQUIREMENTS.—
‘‘(1) 
RESIDENTIAL
PROPERTY.—Residential
property owners in natural disaster-prone States
shall be ineligible to receive any financial assistance
provided under sections 408 or 411 or any other
similar disaster assistance provided by any Federal
Agency if—
‘‘(A) the residential property was not in-
sured at the time of the natural disaster at cov-
erage levels which are at least as sufficient as—
‘‘(i) the primary insurance coverages
provided under section 911; and
‘‘(ii) the flood coverage provided
under the National Flood Insurance Act of
1968 (42 U.S.C. 4001 et seq.); provided
that the residential owner is required to
have such coverage under such Act; and
‘‘(B) the annual household income of the
residential property owner exceeds $60,000 in
1995 dollars, adjusted annually in accordance
with the percentage change in the Consumer
Price Index.
HR 1856 IH
‘‘(2) BUSINESS PROPERTIES.—Owners of busi-
ness properties in natural disaster-prone States shall
be ineligible to receive any financial assistance pro-
vided under sections 408 or 411 or any other similar
disaster assistance provided by the Small Business
Administration or any other Federal agency if the
business property was not insured at the time of the
natural disaster by disaster insurance that comports
with the coverages described in paragraph (1)(A).
‘‘(d) CONDITIONS.—The provisions of subsections
(a), (b), and (c) shall not take effect until—
‘‘(1) the Corporation described in section 901
has been established;
‘‘(2) the terms and conditions of the primary
insurance coverages issued by the Corporation under
section 911 satisfy the provisions of section 914; and
‘‘(3) the premiums written by the private insur-
ers participating as service providers of the Corpora-
tion described in section 912(b) represents, at any
given time, at least 51 percent of the private resi-
dential property insurance market in the natural dis-
aster-prone States.
‘‘SEC. 914. TERMS AND CONDITIONS.
‘‘(a) GENERAL AUTHORITY.—
HR 1856 IH
‘‘(1) SETTING THE TERMS AND CONDITIONS.—
The Board of the Corporation shall set the terms
and conditions of the primary insurance coverages
provided under this subtitle. Such terms and condi-
tions, as may be modified from time to time, shall
be included in the plan of operation pursuant to sec-
tion 902.
‘‘(2) GUIDING PRINCIPLE.—the terms and con-
ditions for the primary insurance coverage policies
shall be standardized and designed, to the maximum
extent practicable, to limit the financial exposure of
the primary account described in section 906(a) to
a manageable level given the probable maximum
losses for the natural disaster perils described in sec-
tion 911(c).
‘‘(3) CONSIDERATIONS.—In setting the terms
and conditions of the primary insurance coverages,
the Board of the Corporation should give due consid-
eration to the following:
‘‘(A) The rates, the scope and limits of
coverage, and the deductibles in the standard
residential property insurance contract for the
natural disaster perils described in section
911(c) available in the voluntary primary mar-
HR 1856 IH
ket on the date of enactment of Natural Disas-
ter Protection Partnership Act of 1995.
‘‘(B) the viability of the Corporation to
maintain a financially prudent level of risk in
protecting against the exposure caused, in part,
by the insurance purchase requirement de-
scribed in Section 913.
‘‘(b) SPECIFIC TERMS AND CONDITIONS.—The terms
and conditions for the primary insurance coverages shall
include the following:
‘‘(1) Limits on the amount of coverage avail-
able.
‘‘(2) Rates as determined under section 903.
‘‘(3) Deductibles which may vary based on the
type of peril, geographic areas, and the existence of
loss-reduction measures that affect the risk of loss.
‘‘(4) Any other terms and conditions that may
be necessary to carry out the purposes of the sub-
title.
‘‘(c) QUOTA-SHARE AMOUNTS.—
‘‘(1) IN GENERAL.—The primary insurance cov-
erages issued by the Corporation shall offer quota-
share amounts as described in this subsection that
private insurers participating as service providers
shall agree to retain, except that such private insur-
HR 1856 IH
ers have the option to retain higher quota-share
amounts.
‘‘(2) 
SEISMIC
PERILS.—The 
quota-share
amount offered by the Corporation for the earth-
quake, volcanic-eruption, and tsunami perils shall be
10 percent.
‘‘(3) HURRICANE
PERIL.—The quota-share
amount offered by the Corporation for the hurricane
peril shall be 50 percent.
‘‘(d) PAYMENT OF CLAIMS.—
‘‘(1) PAYING QUALIFYING LOSSES.—Private in-
surers acting as service providers of the primary in-
surance coverages under this subtitle shall pay quali-
fying losses to policyholders as determined by the
terms of the primary insurance coverage policies,
provided the Corporation certifies to the private in-
surers that sufficient amounts are available in the
primarily account, including any Federal loans avail-
able pursuant to section 906(d), to reimburse the
private insurers under the provisions of paragraph
(2).
‘‘(2) REIMBURSEMENT OF INSURERS.—The pri-
mary account described in section 906(a) shall reim-
burse a private insurer within 90 days of the date
for any claim payments made and loss adjustment