I
103D CONGRESS
1ST SESSION
H. R. 3298
To amend title XII of the National Housing Act to establish a national
property reinsurance program to ensure the availability and affordability
of property insurance in underserved areas.
IN THE HOUSE OF REPRESENTATIVES
OCTOBER 15, 1993
Ms. WATERS introduced the following bill; which was referred to the
Committee on Banking, Finance and Urban Affairs
A BILL
To amend title XII of the National Housing Act to establish
a national property reinsurance program to ensure the
availability and affordability of property insurance in un-
derserved areas.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘National Property
Reinsurance Act’’.
SEC. 2. PROGRAM AUTHORITY.
Section 1201(b) of the National Housing Act (12
U.S.C. 1749bbb(b)) is amended—
(1) in the matter preceding paragraph (1)—
(A) by striking ‘‘November 30, 1983, and’’
and inserting ‘‘September 30, 1999,’’; and
(B) by striking ‘‘September 30, 1985’’ and
inserting ‘‘September 30, 1999’’; and
(2) in paragraph (1)—
(A) by striking ‘‘1223(b)’’ and inserting
‘‘1222(f)’’; and
(B) by striking ‘‘September 30, 1985’’ and
inserting ‘‘September 30, 2000’’.
SEC. 3. STATEWIDE PLANS TO ASSURE FAIR ACCESS TO IN-
SURANCE REQUIREMENTS.
(a) TARGETING
OF UNDERSERVED AREAS.—The
first sentence of section 1211(b) of the National Housing
Act (12 U.S.C. 1749bbb–3(b)) is amended by inserting
‘‘and underserved areas designated under subsection (d)’’
before the period at the end.
(b) DETERMINATION OF UNDERSERVED AREAS.—
Section 1211 of the National Housing Act (12 U.S.C.
1749bbb–3) is amended by adding at the end the following
new subsection:
‘‘(d) DESIGNATION OF UNDERSERVED AREAS.—For
purposes of this section, the Director shall designate areas
in each State in which property insurance coverage of the
type that may be reinsured under part B is not available
or affordable (or not sufficiently available or affordable)
for residences or business and commercial properties.
Such areas shall include urban and rural areas that his-
torically have been subject to a lack of availability or af-
fordability of such insurance. In designating such areas
for a State, the Director shall consult with the Board
under section 1202, the relevant State insurance authority
for the State that supervises the plan under this part for
the State, the governing or advisory board or committee
referred to in subsection (c) for the plan in the State, in-
surers and pools in the State, and community and
consumer groups in the State. The Director shall from
time to time review and, if necessary, revise the designa-
tions of underserved areas under this subsection.’’.
(c) STUDIES.—Section 1246(a)(2) of the National
Housing Act (12 U.S.C. 1749bbb–16(a)(2)) is amended
by inserting ‘‘and underserved areas designated under sec-
tion 1211(d)’’ before the semicolon at the end.
SEC. 4. NATIONAL PROPERTY REINSURANCE PROGRAM.
Title XII of the National Housing Act (12 U.S.C.
1749bbb et seq.) is amended by striking part B and insert-
ing the following new part:
‘‘PART B—NATIONAL PROPERTY REINSURANCE
PROGRAM
‘‘SEC. 1221. NATURE AND AVAILABILITY OF REINSURANCE
COVERAGE.
‘‘(a) IN GENERAL.—The Director may establish and
carry out a national property reinsurance program under
this part. Under such program, the Director may offer to
insurers or pools reinsurance against physical loss of prop-
erty or damage to property in any one or more States,
subject to the conditions under section 1222.
‘‘(b) 
AVAILABILITY
ONLY
IN
UNDERSERVED
AREAS.—Reinsurance under this part shall be available
only with respect to property insurance for property lo-
cated in underserved areas designated under section
1211(d).
‘‘(c) ELIGIBILITY
OF
INSURANCE.—Reinsurance
under this part shall be available only with respect to
property insurance meeting requirements for reinsurance
under this part as the Director shall, by regulation, estab-
lish. Such requirements shall include provisions regard-
ing—
‘‘(1) the type and locational classification of eli-
gible properties that are covered by insurance that
may be reinsured, which shall include such residen-
tial properties and business and commercial prop-
erties that the Director considers appropriate;
‘‘(2) the specific types of property loss and
damage that are covered by insurance that may be
reinsured;
‘‘(3) appropriate premium rates for such insur-
ance, based on generally accepted actuarial prin-
ciples, which provide appropriate loss deductibles, in-
cluding variable deductibles, taking into consider-
ation the existence and extent of measures and ac-
tivities taken to reduce the risk of loss to the in-
sured property for which reinsurance is provided;
‘‘(4) appropriate limits of coverage for each
classification of eligible property; and
‘‘(5) any other terms, conditions, or limitations
of insurance coverage that the Director considers ap-
propriate to carry out the reinsurance program
under this part.
‘‘(d) AVAILABLE LINES.—Reinsurance under this
part shall be offered to an insurer or pool only on all of
the standard lines of property insurance specified in sub-
paragraphs (A) through (E) of section 1203(a)(13) to-
gether, and any insurer or pool purchasing such reinsur-
ance shall also be eligible to purchase reinsurance on any
one or more standard lines of property insurance specified
under section 1223 is made available (or in the case of
an insurer or pool that enters into a written binder under
section 1221(e), after the expiration of the binder) un-
less—
‘‘(1) there is in effect in such State a plan
meeting the requirements under part A;
‘‘(2) the insurer or pool is participating in such
plan; and
‘‘(3) in the case of an insurer in a State in
which a pool has been established pursuant to State
law, the insurer is participating in such pool.
‘‘(b) STATE REIMBURSEMENT.—The Director may
not offer reinsurance under this part in a State, and such
reinsurance shall not be applicable to insurance policies
written in the State by an insurer, unless the State has,
before the conclusion of the second full regular session of
the appropriate State legislative body beginning after the
date of the enactment of the National Property Reinsur-
ance Act, adopted appropriate legislation that—
‘‘(1) provides that the State and its political
subdivisions, or a governmental corporation or fund
established pursuant to State law, shall reimburse
the Director for any reinsured losses in the State in
any reinsurance agreement year in the amount or
according to such formula as the Director shall pre-
scribe by regulation; and
‘‘(2) is retroactive to the date of the enactment
of the National Property Reinsurance Act.
‘‘(c) STATE PROPERTY INSURANCE PROGRAM.—
After the expiration of the 30-day period beginning upon
notification to the insurer that the Director has made a
finding under this subsection, reinsurance under this part
shall not be applicable to insurance policies written by an
insurer in a State for which the Director finds (after con-
sultation with the State insurance authority) that—
‘‘(1) the State has not adopted a suitable pro-
gram or programs, in addition to plans under part
A, to make essential property insurance available
without regard to environmental hazards,
‘‘(2) the property insurance industry in the
State has not adopted such a program or programs,
and
‘‘(3) taking action under this subsection to
make reinsurance inapplicable to such insurance
policies is necessary to carry out the purposes of this
part.
‘‘(d) PARTICIPATION OF INSURERS.—After the expi-
ration of the 30-day period beginning upon notification to
the insurer or the applicable State insurance authority
that the Director has made a finding under this sub-
section, reinsurance under this part shall not be applicable
to insurance policies written in a State by an insurer that
the Director finds (after consultation with the State insur-
ance authority) is not fully participating—
‘‘(1) in the plan in the State,
‘‘(2) where it exists, in a pool, and
‘‘(3) where it exists, in any other program
found by the Director to aid in making essential
property insurance more readily available in the
State;
except that the Director may not make any such finding
with respect to any insurer unless (A) before making the
finding the Director has requested and considered the
views of the State insurance authority regarding whether
the finding should be made, or (B) the Director has made
such a request in writing to the State insurance authority
and such authority has failed to respond to the request
within a reasonable period of time after receiving the re-
quest.
‘‘(e) MERGER OR WITHDRAWAL OF INSURERS.—Re-
insurance under this part shall not be applicable to insur-
ance policies written in a State by an insurer—
‘‘(1) after such insurer participates in a merger,
acquisition, consolidation, or reorganization involving
1 or more insurers having lines of property insur-
ance in the State reinsured under this part and 1 or
more insurers with or without such reinsurance, un-
less the surviving company—
‘‘(A) meets the criteria of eligibility for re-
insurance; and
‘‘(B) within 10 days pays any reinsurance
premiums due; or
‘‘(2) after receipt by the Director of written no-
tice from the insurer or pool that it is canceling its
reinsurance agreement with the Director in the
State.
‘‘(f) CONTINUANCE
OF
EXISTING
REINSURANCE
POLICIES.—Notwithstanding any other provision of this
section, reinsurance pursuant to a policy written before
the date of termination or nonrenewal of reinsurance
under this section may be continued for the term of the
policy, for such time as the insurer annually pays reinsur-
ance premiums in such amounts as are established under
section 1223, based on the annual premiums earned on
such reinsured policies. For purposes of this subsection,
any policy renewed, extended, modified, or otherwise
changed, for which any additional premium is charged for
such change, shall be considered to be a policy written on
the date such change was made.
‘‘SEC. 1223. REINSURANCE AGREEMENTS, PREMIUMS, AND
RETAINED LOSSES.
‘‘(a) IN
GENERAL.—Reinsurance made available
under this part shall reimburse an insurer or pool for its
total proved and approved claims for covered physical loss
of property or damage to property during the term of the
reinsurance agreement under subsection (b) for the in-
surer or pool (and all direct expenses incurred in connec-
tion therewith, including expenses for processing, verify-
ing, and paying such claims) that are in excess of such
losses retained by the insurer or pool in accordance with
the regulations issued under subsection (d) and the rein-
surance agreement.
‘‘(b) REINSURANCE AGREEMENTS.—Such reinsur-
ance shall be made available pursuant to a reinsurance
agreement, which shall be a contract, agreement, treaty,
or other arrangement for reinsurance coverage entered
into by the Director with an insurer or pool, in consider-
ation of payment of premiums, fees, or other charges by
the insurer or pool.
‘‘(c) PREMIUMS.—The Director shall, by regulation,
establish the amount of premiums, fees, or other charges
to be charged under a reinsurance agreement, which shall
be the amount determined by the Director to be necessary
to cover the estimated amount of losses and other costs
of providing such reinsurance. The rates of the premiums,
fees, and other charges shall be established based upon
generally accepted actuarial principles and shall provide
for a minimum of cross-subsidization among classifica-
tions of reinsurance. In any single year, the rates under
contracts with insurers or pools throughout the States
shall be uniform. The Director may not change any pre-
miums, fees, or other charges except by regulations issued
in accordance with section 1247.
‘‘(d) RETAINED LOSSES.—The Director shall, by reg-
ulation, establish the amount of losses that, under each
reinsurance agreement, an insurer or pool shall retain be-
fore reinsurance coverage under this part applies to losses
of the insurer or pool. Such amount shall be adequate to
further the purposes of this part and consistent with the
objective of maintaining appropriate financial participa-
tion and risk sharing to the maximum extent practicable
on the part of ceding insurers and pools. In establishing
such amount the Director shall consult with the Advisory
Board.
‘‘(e) OTHER PROVISIONS.—Each reinsurance agree-
ment shall include terms and conditions similar to those
generally used in private catastrophe reinsurance con-
tracts, as the Director considers necessary or appropriate
to carry out the purposes of this part, and such other
terms and conditions as the Director considers necessary
or appropriate. Each reinsurance agreement shall provide
that any approved reinsurance claims payable under this
part shall be reduced by the amount of any reinsurance
collectible from sources other than the reinsurance pro-
gram under this part. In any single year, the terms and
conditions under reinsurance contracts with insurers or
pools throughout the States shall be uniform. The provi-
sions of section 1341(a) of title 31, United States Code,
shall not apply to reinsurance agreements under this sec-
tion.
‘‘(f) CONTRACT TERM.—Each reinsurance agreement
shall be for a 12-month term expiring on September 30.
‘‘SEC. 1224. SUITS FOR RECOVERY OF PREMIUMS.
‘‘(a) IN GENERAL.—The Director may bring a suit
in the appropriate United States district court to recover
from any insurer the amount of any unpaid premiums for
reinsurance under this part lawfully payable by such in-
surer to the Director.
‘‘(b) STATUTE OF LIMITATIONS.—
‘‘(1) IN
GENERAL.—No action or proceeding
shall be brought under subsection (a) or for the re-
covery of any premium paid to the Director in excess
of the amount due to the Director, after the expira-
tion of the 5-year period beginning upon the accrual
of the right for which the claim is made.