rent average market yield on outstanding marketable obli-
gations of the United States of comparable maturities.
(c) DEPOSITS.—Any amounts borrowed under this
section shall be deposited in the Insurance Fund.
(d) REPAYMENT.—The Director shall provide for the
recovery of any amounts that are borrowed under this sec-
tion and repaid, including interest on the borrowed funds,
through future chargeable premium rates for hurricane
coverage, pursuant to the plan of operation. The Secretary
of the Treasury may grant extensions in repayment sched-
ules that the Director determines are necessary.
TITLE 
III—NATIONAL 
HURRI-
CANE EXCESS LOSS REINSUR-
ANCE PROGRAM
SEC. 301. ESTABLISHMENT AND TERMS OF COVERAGE.
(a) ESTABLISHMENT.—
(1) INITIAL AVAILABILITY.—Upon the issuance
of final regulations establishing the plan of operation
under section 201(e), the Director shall establish
and carry out a national hurricane excess loss insur-
ance program to make available, to any private in-
surer participating in the Primary Insurance Pro-
gram or any private reinsurer which reinsures any
such private insurer, reinsurance coverage for direct
and indirect losses that are not eligible for hurricane
coverage under title II and arise from a hurricane.
(2) EXPANDED AVAILABILITY.—Upon the expi-
ration of the 2-year period beginning upon issuance
of the regulations referred to in paragraph (1), the
Director shall make available, to any private insurer
or private reinsurer, excess reinsurance coverage for
direct and indirect losses that are not eligible for
hurricane coverage under title II and arise from an
hurricane. Any private insurer or reinsurer partici-
pating in the Primary Insurance Program under
title II shall purchase the excess reinsurance cov-
erage under this title.
(b) LIABILITY.—Excess reinsurance under this title
shall be made available subject to the following require-
ments:
(1) INDUSTRY.—The Reinsurance Fund under
section 305 shall be liable with respect to such rein-
surance in the event of an hurricane after, as deter-
mined by the Director, the insurance industry has
incurred losses and loss adjustment expenses from
the single event that are covered under the lines de-
scribed in section 302(a) and that exceed 8 percent
of the industry countrywide subject net written pre-
mium.
(2) FEDERAL GOVERNMENT.—After the insur-
ance industry has sustained losses described in para-
graph (1), the Federal Government shall be liable to
an individual private insurer or private reinsurer for
95 percent of qualifying losses in excess of 8 percent
of the private insurer’s or private reinsurer’s coun-
trywide subject net written premium.
(c) QUALIFYING LOSSES.—For the purposes of sub-
section (b), the term ‘‘qualifying losses’’ means losses and
loss adjustment expenses incurred by a private insurer or
private reinsurer from an hurricane event, reduced—
(1) by any collectible reinsurance recoverable;
and
(2) by a factor for uncollectible reinsurance re-
coverable determined as follows:
(A) If the percentage of unrecoverable re-
insurance arising from the event to total rein-
surance (not including hurricane excess loss re-
insurance purchased under this title) with re-
spect to the event is over 0 percent but not over
5 percent, 0 percent of unrecoverable reinsur-
ance.
(B) If the percentage of unrecoverable re-
insurance arising from the event to total rein-
surance (not including hurricane excess loss re-
insurance purchased under this title) with re-
spect to the event is over 5 percent but not over
15 percent, 33.33 percent of unrecoverable rein-
surance over 5 percent but not over 15 percent.
(C) If the percentage of unrecoverable re-
insurance arising from the event to total rein-
surance (not including hurricane excess loss re-
insurance purchased under this title) with re-
spect to the event is over 15 percent but not
over 25 percent, the amount determined under
subparagraph (B) plus 66.66 percent of unre-
coverable reinsurance over 15 percent but not
over 25 percent.
(D) If the percentage of unrecoverable re-
insurance arising from the event to total rein-
surance (not including hurricane excess loss re-
insurance purchased under this title) with re-
spect to the event is over 25 percent, the
amount determined under subparagraph (C)
plus 100 percent of unrecoverable reinsurance
over 25 percent.
(d) ELIGIBILITY OF INDIVIDUAL INSURERS.—
(1) IN GENERAL.—Notwithstanding the provi-
sions of subsections (b) and (c), a private insurer or
private reinsurer shall be eligible for excess loss rein-
surance coverage and reimbursement from the Fed-
eral Government if the insurer or reinsurer has in-
curred losses, prior to any reinsurance coverage,
from a single event that are included in the lines de-
scribed in section 302(a) and that exceed 50 percent
of the insurer’s countrywide subject direct written
premium or the insurer’s countrywide subject net
written premium, whichever is greater.
(2) LIABILITY.—After a private insurer or pri-
vate reinsurer covered under the Reinsurance Pro-
gram has sustained losses described in paragraph
(1), the Federal Government shall be liable for 95
percent of qualifying losses, as defined in subsection
(c), in excess of 20 percent of the private insurer’s
or reinsurer’s countrywide subject net written pre-
mium.
(3) LIMITATION ON LIABILITY.—Notwithstand-
ing paragraphs (1) and (2), the Federal Government
shall not be liable under this subsection in excess of
200 percent of a private insurer’s countrywide sub-
ject direct net written premium and 600 percent of
a private reinsurer’s countrywide subject assumed
net written premium. In the event a company is both
a private insurer and a private reinsurer, the Fed-
eral Government shall not be liable under this sub-
section in excess of 200 percent of the company’s
subject direct net written premium and 600 percent
of the company’s subject assumed net written pre-
mium. Intracompany or intragroup reinsurance ar-
rangements or contracts shall not be considered as
reinsurance in the calculation of insurance and rein-
surance subject direct or subject assumed net writ-
ten premium under this subsection.
(e) DEFINITIONS.—For purposes of this title:
(1) The term ‘‘subject assumed net written pre-
mium’’ means premiums received from other insur-
ance companies for reinsurance less ceded reinsur-
ance, for all lines of coverage described in section
302.
(2) The term ‘‘subject direct net written pre-
mium’’ means the aggregate amount of recorded
originated premiums, other than reinsurance, issued
during the year whether collected or not at the close
of the year (plus retrospective audit premium collec-
tions) after deducting all return premiums and ceded
reinsurance premiums, for all lines of coverage de-
scribed in section 302.
(3) The term ‘‘subject net written premium’’
means direct and reinsurance premiums received by
private insurers and private reinsurers, less pre-
miums paid for ceded reinsurance, for all lines of
coverage described in section 302.
(4) The term ‘‘unrecoverable reinsurance’’
means reinsurance proceeds due and payable in ac-
cordance with the terms of a reinsurance contract
that are not paid within 12 months of the due date.
SEC. 302. LINES OF INSURANCE.
(a) COVERED LINES FOR INSURERS.—The Director
shall provide excess loss reinsurance coverage under this
title for all of the following lines of insurance appearing
in the National Association of Insurance Commissioners
Fire and Casualty Annual Statement filed with the appli-
cable State department of insurance:
(1) Fire.
(2) Allied Lines.
(3) Farmowner’s Multiple Peril.
(4) Homeowner’s Multiple Peril.
(5) Commercial Multiple Peril.
(6) Ocean Marine.
(7) Inland Marine.
(8) Earthquake.
(9) Workers Compensation.
(10) Other Liability.
(11) Aircraft (All Perils).
(12) Glass.
(13) Burglary and Theft.
(14) Boiler and Machinery.
(15) Reinsurance.
The Director shall provide that any private insurer or re-
insurer purchasing excess loss reinsurance coverage under
this title purchase coverage for all of covered lines of in-
surance described in this subsection and in all affected
hurricane zones within a hurricane-prone State.
(b) COVERED LINES FOR REINSURERS.—The Fed-
eral Government shall provide excess loss reinsurance cov-
erage to private reinsurers for all of the lines of insurance
referred to in subsection (a) as well as other lines of insur-
ance appearing in the National Association of Insurance
Commissioners Fire and Casualty Annual Statement, as
determined by the Director in the plan of operation and
in consultation with the Insurance Committee.
SEC. 303. PREMIUM RATES.
(a) ESTABLISHMENT.—The Director shall establish
the rates for excess loss reinsurance coverage and adjust
the rates when necessary, using generally accepted actuar-
ial principles. To the maximum extent practicable, such
rates shall be actuarial rates that produce a minimum de-
gree of cross-subsidization over an extended period of time
consistent with the infrequency of catastrophic hurricanes.
In setting and adjusting the rates, the Director shall pro-
vide that, over an extended period of time, expected ex-
penditures from the Reinsurance Fund under section
305(c) do not exceed expected receipts of the Reinsurance
Fund under section 305(b).
(b) CONSIDERATIONS.—In setting or adjusting such
rates, the Director shall provide for a minimum degree
of cross-subsidization among classes of reinsureds by rea-
sonably reflecting the differences in risk of and vulner-
ability to loss from hurricanes that would be subject to
payment from the Reinsurance Fund, giving consideration
to—
(1) the premium volume of the reinsured by line
of insurance described in section 302(a) by hurri-
cane zone or State in which the risks insured or re-
insured by the reinsured are located; and
(2) the proportion of the total expected amount
of payments for qualifying losses and loss adjust-
ment expenses by line of insurance described in sec-
tion 302(a) by hurricane zone or State expected for
each reinsured.
(c) LIMITATION.—Any rate classification system used
by the Director under this section shall be cost-effective
and shall not impose costs for the initial establishment or
the subsequent administration of the rating plan that are
disproportionate to the size of the premiums.
(d) QUARTERLY PAYMENT.—Premiums for excess
loss reinsurance coverage under this title shall be paid to
the Reinsurance Fund on a quarterly basis.
SEC. 304. REINSURANCE CONTRACTS.
(a) TERMS.—Contracts for excess loss reinsurance
coverage issued by the Director under this title shall con-
tain terms and conditions similar to those generally used
in private catastrophic reinsurance contracts.
(b) JUDICIAL REVIEW.—Judicial review of a decision
of the Director regarding payment of claims under a con-
tract for excess loss reinsurance coverage under this title
shall be made available pursuant to section 201(d).
(c) OBLIGATIONS.—All contracts for excess loss rein-
surance coverage issued under this title shall constitute
obligations, in accordance with the terms of such reinsur-
ance, of the United States. The full faith and credit of
the United States is hereby pledged for the full payment
and performance of such obligations.
(d) SINGLE ENTITIES.—Any private insurance and
reinsurance companies under the same ownership or man-
agement, as determined under the plan of operation, shall
be considered a single entity for purposes of this title.
SEC. 305. REINSURANCE FUND.
(a) ESTABLISHMENT.—There is hereby established in
the Treasury of the United States the Reinsurance Fund
for the purposes of carrying out the Reinsurance Program.
(b) CREDITS
OF FUND.—The Reinsurance Fund
shall be credited with—
(1) any reinsurance premiums received by the
Director under the Reinsurance Program;
(2) any amounts borrowed under section 306;
and
(3) any amounts earned under subsection (d).
(c) USE OF FUND—The Reinsurance Fund shall be
available to the Director for—
(1) payments for qualifying losses and loss ad-
justment expenses under the Reinsurance Program
under this title;
(2) administrative expenses of carrying out the
Reinsurance Program; and
(3) interest payments on amounts borrowed
under section 306, if any.
(d) INVESTMENT.—The Director shall request the
Secretary of the Treasury to invest any amounts in the
Reinsurance Fund in obligations issued or guaranteed by
the United States, as the Director considers appropriate.
(e) STATUS OF FUNDS.—Any reinsurance premiums
collected for deposit in the Reinsurance Fund shall be ex-
empt from all taxation now or hereafter imposed by the
United States, by any territory, dependency or possession
thereof, or by any State, county, municipality, or local tax-
ing authority, except that the reinsurance policies issued
by or in conjunction with the Federal Government pursu-
ant to this title shall be subject, where applicable, to State
insurance premium taxes.
SEC. 306. BORROWING FROM TREASURY.
(a) AUTHORITY.—To the extent that the accumulated
assets, including any return on investments, in the Rein-
surance Fund are insufficient to pay claims and expenses,
the Director shall issue, from time to time, to the Sec-
retary of the Treasury, notes and other obligations to
cover the insufficiency. The amounts of such obligations
outstanding 
at 
any 
one 
time 
shall 
not 
exceed
$25,000,000,000 (or such greater amount as may be ap-
proved by the President).
(b) INTEREST RATE.—Obligations under subsection
(a) shall bear interest at a rate determined by the Sec-
retary of the Treasury, taking into consideration the cur-
rent average market yield on outstanding marketable obli-
gations of the United States of comparable maturities.
(c) DEPOSITS.—Any amounts borrowed by the Direc-
tor under this section shall be deposited in the Reinsur-
ance Fund.