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date of the enactment of the Natural Disaster Pro-
tection Act of 1993 describing the criteria to be used
in determining whether a State is a compliance
State.
(c) PENALTIES FOR NON-COMPLIANCE.—The follow-
ing penalties shall become effective 5 years from the date
of enactment of the Natural Disaster Protection Act of
1993:
‘‘(1) NO MITIGATION FUNDS.—Funds from the
Self-Sustaining Mitigation Fund under section 705
shall not be made available to any State which has
not been certified as a compliance State.
‘‘(2) HIGHER PREMIUMS AND DEDUCTIBLES.—
Premium rates and deductibles assessed under the
Primary Insurance Program of subtitle A of title
VIII shall be increased, as determined by the Direc-
tor under the plan of operation of section 821 and
consistent with actuarially sound requirements of
section 804, for all policyholders residing in a State
which has not been certified as a compliance State.
‘‘(3) NO
ASSISTANCE
OR
FEDERAL
BUILD-
INGS.—No Federal assistance shall be provided to
any new Federal building or new Federally leased,
assisted, or regulated building covered under Execu-
tive Order 11988 (‘‘Floodplain Management’’, May
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24, 1977) and Executive Order 12699 (‘‘Seismic
Safety of Federal and Federally Assisted or Regu-
lated New Building Construction’’, January 5, 1990)
which is located in a State which has not been cer-
tified as a compliance State.
‘‘SEC. 705. SELF-SUSTAINING MITIGATION FUND.
‘‘(a) ESTABLISHMENT.—
‘‘(1) A percentage of the annual multi-hazard
coverage premiums collected under the Primary In-
surance Program under subtitle A of title VIII and
the excess reinsurance premiums collected under the
Reinsurance Program under subtitle B of title VIII
shall be deposited, on a quarterly basis, in a sepa-
rate fund to be known as the Self-Sustaining Mitiga-
tion Fund.
‘‘(2) The Director shall set the percentage de-
scribed in paragraph (1) which shall be at least 5
percent, but shall not exceed 10 percent, unless the
Director determines that the amounts in the Pri-
mary Insurance Program Fund established under
section 805 and the Reinsurance Fund established
under section 815 are sufficient to provide for any
probable expected losses from future hurricanes,
earthquakes, and volcanic eruptions.
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‘‘(3) Interest on amounts in the Self-Sustaining
Mitigation Fund shall be credited to the Fund.
‘‘(b) USE.—Amounts in the Self-Sustaining Mitiga-
tion Fund shall be available, to the extent provided in ap-
propriations Acts, to the Director to use as follows:
‘‘(1) STATE SUPPORT.—The Director shall pro-
vide amounts in the Fund as financial assistance to
each disaster-prone State, unless 5 years from the
date of enactment of the Natural Disaster Protec-
tion Act of 1993 has passed and that State has not
been certified as a compliance State under section
704.
‘‘(A) Each State’s share of such financial
assistance shall be based solely on a pro rata
formula of the Primary Insurance Program pre-
miums collected pursuant to subtitle A of title
VIII from the policyholders residing in that
State.
‘‘(B) Such financial assistance shall be
used by disaster-prone States to support hazard
mitigation activities described in sections 702
and 703 and any activities required by the Fed-
eral regulations issued pursuant to section 404.
Priority shall be given to those hazard mitiga-
tion activities necessary to bring the State into
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compliance with the building standards of sec-
tion 702, including the adequate enforcement of
such standards.
‘‘(C) Disaster-prone States shall transfer a
percentage, as established in Federal regula-
tions, of such financial assistance to local com-
munities to support activities necessary to en-
sure State compliance with the hazard mitiga-
tion requirements of this title.
‘‘(D) The Director shall from time-to-time
conduct audits to ensure that disaster-prone
States and local communities are using such fi-
nancial assistance to support the hazard mitiga-
tion activities described in subparagraphs (B)
and (C).
‘‘(2) FEDERAL
SUPPORT.—A portion of the
amounts in the Self-Sustaining Mitigation Fund, as
determined by the Director, may be used to support
Federal hazard mitigation and emergency manage-
ment activities described in section 404.
‘‘(c) FEDERAL REGULATION.—Within 12 months of
the date of enactment of the Natural Disaster Protection
Act of 1993, the Director shall issue final Federal regula-
tions, pursuant to the provisions of subchapter II of chap-
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ter 5 of title 5, United States Code, necessary to carry
out this section.
‘‘SEC. 706. NATURAL DISASTER MITIGATION AND PLANNING
ADVISORY COMMITTEE.
‘‘(a) ESTABLISHMENT.—There is established an inde-
pendent advisory committee within the executive branch
to be known as the Natural Disaster Mitigation and Plan-
ning Advisory Committee (in this section referred to as
the ‘Committee’). To the extent not contradicted by the
provisions of this section, the Committee shall be subject
to the provisions of the Federal Advisory Committee Act
(5 U.S.C. Appendix 2). The establishment of the Commit-
tee shall not result in the creation of any new permanent
staff or new office facilities.
‘‘(b) MEMBERSHIP.—The Committee shall be com-
posed of 20 members appointed by the Director. The
members shall be chosen from among citizens of the
United States and shall include—
‘‘(1) 1 individual who is a metropolitan fire
chief;
‘‘(2) 1 individual who is a State fire marshal;
‘‘(3) 1 individual who is a volunteer fire fighter;
‘‘(4) 1 individual who is an organized labor rep-
resentative of the fire services;
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‘‘(5) 1 individual who is a search and rescue
expert;
‘‘(6) 1 individual who is a State director of
emergency medical services;
‘‘(7) 1 individual who represents the interests of
the model building code bodies;
‘‘(8) 1 individual who is a State emergency
manager;
‘‘(9) 1 individual who is a local emergency
manager;
‘‘(10) 1 individual who is a flood plain
manager;
‘‘(11) 1 individual who represents the interests
of law enforcement;
‘‘(12) 1 individual who is an architect;
‘‘(13) 1 individual who is a builder;
‘‘(14) 1 individual who is a structural engineer;
‘‘(15) 1 individual who represents a building
trades labor union;
‘‘(16) 1 individual who is a recognized seismic
hazard mitigation expert;
‘‘(17) 1 individual who is a recognized wind
hazard mitigation expert;
‘‘(18) 1 individual who represents the interests
of consumers;
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tion as the Committee considers necessary to carry out
its functions. The Director shall request comments from
the Committee on any questions regarding operation of
multi-hazard mitigation programs established under this
title.’’.
SEC. 6. FEDERAL INSURANCE PROGRAMS.
The Robert T. Stafford Disaster Relief and Emer-
gency Assistance Act (42 U.S.C. 5121 et seq.) is amended
by adding after title VII as set forth above, the following
new title:
‘‘TITLE VIII—FEDERAL INSURANCE
PROGRAMS
‘‘Subtitle A—Primary Insurance Program
‘‘SEC. 801. BASIC AUTHORITY AND PROGRAM OPERATION.
‘‘(a) ESTABLISHMENT.—To carry out the purposes of
this subtitle, the Director shall establish and carry out a
national multi-hazard insurance program (in this title re-
ferred to as the ‘Primary Insurance Program’) to provide
insurance against loss resulting from physical damage to
or loss of real property or personal property related there-
to, in any State or States, arising from any earthquake
and volcanic eruption (including any fire proximately
caused by such volcanic eruption).
‘‘(b) IMPLEMENTATION.—In carrying out the Pri-
mary Insurance Program, the Director shall arrange for
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participation, on other than a risk-sharing basis, by pri-
vate insurers, insurance agents and brokers, insurance
adjustment organizations, and other persons. The Direc-
tor may take any actions reasonably necessary and appro-
priate to carry out this subtitle, including the making of
contracts, the employment and compensation of persons,
the acquisition of real and personal property, and the rea-
sonable auditing of private insurers participating in the
Primary Insurance Program limited to matters directly re-
lated to their participation in such program.
‘‘(c) INSURANCE PRACTICES.—Any actions of the
Director under this subtitle shall be consistent with stand-
ard insurance practices and generally accepted accounting,
actuarial, and underwriting principles.
‘‘(d) FLOOD INSURANCE STUDY.—The Director shall
evaluate the feasibility and benefits of including flood as
a covered peril under the national multi-hazard insurance
program. Such evaluation shall include an examination of
whether to integrate existing flood insurance policies is-
sued under the National Flood Insurance Act of 1968, as
amended (42 U.S.C. 4001 et seq.), into the multi-hazard
coverage policy issued under this subtitle. The Director
shall submit a report, including any recommendations, to
the Congress within 1 year of the date of enactment of
the Natural Disaster Protection Act of 1993.
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‘‘(e) IMPROVED PARTICIPATION IN FEDERAL FLOOD
INSURANCE PROGRAM.—
‘‘(1) NOTIFICATION
REQUIREMENT.—Agents
and brokers or private insurers participating in the
Federal flood insurance program pursuant to the
National Flood Insurance Act, as amended (42
U.S.C. 4001 et seq.), shall promptly notify the Di-
rector of any policyholder who refuses to purchase
Federal flood insurance if such policyholder is re-
quired pursuant to such Act to purchase such cov-
erage as a condition of receiving any Federal assist-
ance for acquisition or construction of the insured
property and the agent, broker, or private insurer
knows of such requirement.
‘‘(2) FEMA OBLIGATION.—
(A) GENERAL
AUTHORITY.—Within 180
days of receiving a notification of any non-com-
pliant policholder as described in paragraph (1),
the Director shall take necessary and appro-
priate steps consistent with the National Flood
Insurance Act, as amended (42 U.S.C. 4001 et
seq.), to assure said policyholder purchases the
required Federal flood insurance coverage.
‘‘(B) REPORT TO CONGRESS.—Within 180
days of enactment of the Natural Disaster Pro-
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tection Act of 1993, the Director shall submit
a report to Congress of any additional sanc-
tions, or other measures, deemed necessary and
appropriate to assure policyholders purchase
the required Federal insurance coverage under
subparagraph (A).
‘‘(3) REGULATIONS.—Pursuant to the provi-
sions of subchapter II of chapter 5 of title 5, United
States Code, the Director shall issue any regulations
necessary to carry out this subsection.’’.
‘‘SEC. 802. SCOPE OF PROGRAM.
‘‘(a) ELIGIBLE PROPERTIES.—In carrying out the
Primary Insurance Program, the Director shall make
multi-hazard coverage available only for residential prop-
erties that are located in earthquake and volcanic erup-
tion-prone States as determined by section 701.
‘‘(b) ADDITIONAL TYPES OF PROPERTIES.—If the
Director makes an affirmative finding, in consultation
with the Federal Insurance and Reinsurance Advisory
Committee established pursuant to section 822, that the
private insurance industry cannot adequately provide cov-
erage to other types of properties, the Director may rec-
ommend to Congress that multi-hazard coverage under
this subtitle be made available to cover other types of
properties.
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‘‘SEC. 803. TERMS AND LIMITATIONS OF INSURANCE
COVERAGE.
‘‘(a) TERMS.—Pursuant to the plan of operation es-
tablished under section 821 and after consultation with
the Federal Insurance and Reinsurance Advisory Commit-
tee established under section 822, the Director shall estab-
lish, by regulation, the general terms and conditions of
insurability for properties eligible for multi-hazard cov-
erage under section 802. Such regulations shall meet the
requirements of this section and may include—
‘‘(1) the type and locational classification of
such eligible properties;
‘‘(2) specific insurability definitions for eligible
properties;
‘‘(3) the specific types of damage that may be
covered by such insurance;
‘‘(4) appropriate premium rates consistent with
the actuarial requirement of section 804;
‘‘(5) appropriate loss-deductibles including vari-
able deductibles based on the existence of loss-reduc-
tion measures that affect the risk of loss;
‘‘(6) appropriate limits on coverage for each
classification of eligible properties;
‘‘(7) appropriate minimum coverage amounts
for each classification of eligible properties, which
may not be less than the outstanding principal bal-
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ance of the mortgage loan securing the property or
the maximum coverage limit for the property under
paragraph (6), whichever is less; and
‘‘(8) any other terms and limitations relating to
such residential property insurance coverage that
may be necessary to carry out the purposes of this
subtitle.
‘‘(b) HAZARDS COVERED.—The multi-hazard cov-
erage under this subtitle shall cover any damage to cov-
ered eligible property, including debris removal, additional
living expenses incurred as a result of direct damage to
the premises, and ordinance and law coverage up to the
policy limits set by subsection (a)(5) with additional ordi-
nance and law coverage available pursuant to the plan of
operation under section 821, proximately caused by—
‘‘(1) an earthquake, except for any fire proxi-
mately caused by an earthquake;
‘‘(2) a volcanic eruption, including any fire
proximately caused by a volcanic eruption; and
‘‘(3) a tsunami associated with an earthquake
or volcanic eruption.
‘‘(c) PROGRAM PARTICIPATION.—Upon the issuance
of regulations establishing the plan of operation under sec-
tion 821, any private insurer may participate in the Pri-
mary Insurance Program regardless of whether such pri-
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tion on a State, risk zone, or other appropriate basis, actu-
arially sound rates for types or classes of property eligible
for multi-hazard coverage and the terms and conditions
under which such rates apply.
‘‘(b) CONSULTATION.—In carrying out this section,
the Director shall consult with the Federal Insurance and
Reinsurance Advisory Committee established under sec-
tion 822 and may enter into contracts, agreements, or
other arrangements to utilize the services of the United
States Geological Survey, the National Oceanic and At-
mospheric Administration, and other relevant Federal,
State, and local governmental agencies, and other persons.
‘‘(c) CONSIDERATIONS.—The Director shall establish
actuarially sound rates under this section based on—
‘‘(1) considerations of the risks involved, includ-
ing an examination of any of the following factors
which are deemed relevant—
‘‘(A) the severity and frequency of earth-
quakes by seismic zone and States in which the
insured property is located, including known
differences in risks from active faults and
known susceptibility to landslide, site amplifi-
cation, and liquefaction;
‘‘(B) the risk of damage associated with a
volcanic eruption by volcanic zone and States in
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which the insured property is located, including
proximity to known lava flows;
‘‘(C) the risk of damage associated with a
tsunami caused by an earthquake or volcanic
eruption;
‘‘(D) the value of the insured property;
‘‘(E) the age of the structures located on
the insured property;
‘‘(F) the construction type of the struc-
tures located on the insured property, including
woodframe, masonry, and masonry veneer;
‘‘(G) the architectural type of the struc-
tures located on the insured property, including
soft first floor, box construction, and split level;
‘‘(H) hazard mitigation measures followed
in the construction or subsequent retrofitting of
residential property structures; and
‘‘(I) any other relevant criteria; and
‘‘(2) application of accepted actuarial and rate-
making principles that reflect the risks involved, an-
ticipated insurance-related administrative and oper-
ating costs and loss and loss-adjustment expense
payments, contributions from the Self-Sustaining
Mitigation Fund established under section 705, and
provision for adequate reserves.
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‘‘(d) MINIMIZATION OF CROSS-SUBSIDIZATION.—To
the maximum extent practicable, the rates established
under this section shall be actuarially sound and shall re-
sult in a minimum of cross-subsidization by reasonably re-
flecting the risk of damaging earthquakes, volcanic erup-
tions, and tsunamis, as appropriate, in total and for each
subclassification of policyholders.
‘‘(e) ACTUARIALLY SOUND REQUIREMENT.—In set-
ting and adjusting rates under this section, the Director
shall provide that, over an extended period of time, ex-
pected expenditures from the Primary Insurance Program
Fund under section 805(c) do not exceed expected receipts
of the Primary Insurance Program Fund under section
805(b).
‘‘(f) LIMITATIONS.—
‘‘(1) To the maximum extent practicable, any
rate classification system developed by the Director
to establish actuarially sound rates under this sec-
tion shall be—
‘‘(A) cost effective and shall not impose
costs for the initial establishment or the subse-
quent administration of the rating plan that are
disproportionate to the size of the insurance
premiums collected; and
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‘‘(B) simple and easy to understand, iden-
tify, and use by insurance agents and policy-
holders.
‘‘(2) The premiums collected under the Primary
Insurance Program shall not be used to establish
highly specific geographic rating zones and micro-
zonation maps for the earthquake, volcanic eruption,
and tsunami perils.
‘‘SEC. 805. PRIMARY INSURANCE PROGRAM FUND.
‘‘(a) ESTABLISHMENT.—There is established in the
Treasury of the United States the Primary Insurance Pro-
gram Fund (in this section referred to as the ‘Insurance
Fund’) for the purpose of carrying out the Primary Insur-
ance Program under this subtitle.
‘‘(b) CREDITS OF FUND.—The Insurance Fund shall
be credited with—
‘‘(1) insurance premiums received by the Direc-
tor under the Primary Insurance Program (less any
amounts credited to the Self-Sustaining Mitigation
Fund under section 705) and interest earned on pre-
miums, as provided in subsection (e);
‘‘(2) any amounts borrowed under section 806;
‘‘(3) any amounts appropriated to the Insur-
ance Fund; and
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‘‘(4) any interest earned on amounts invested
under subsection (d).
‘‘(c) USES OF FUND.—Amounts in the Insurance
Fund shall be available for—
‘‘(1) payments for losses and loss adjustment
expenses under subsection (f);
‘‘(2) payments for insurance company expense
allowances paid (including agents’ commissions,
State premium taxes, and companies’ administration
expenses);
‘‘(3) any and all administrative and operating
expenses in carrying out the Primary Insurance Pro-
gram; and
‘‘(4) principal and interest payments on
amounts borrowed under section 806 for supple-
mental losses, if any.
‘‘(d) INVESTMENT OF AMOUNTS.—The Director may
request the Secretary of the Treasury to invest any
amount in the Primary Insurance Program Fund in obli-
gations issued or guaranteed by the United States, as the
Director considers appropriate.
‘‘(e) INSURANCE PAYMENTS TO FUND.—Private in-
surers issuing multi-hazard coverage shall remit the pre-
miums collected, less the insurers’ expense allowances (as
provided for in the plan of operation under section 821),
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to the Director on a quarterly basis 30 days after the end
of the quarter, according to the procedures prescribed in
the plan of operation. Such private insurers shall maintain
a separate, interest-bearing account for the premiums to
be submitted to the Director. The interest collected on this
account shall be forwarded to the Insurance Fund with
the premiums on a quarterly basis.
‘‘(f) REIMBURSEMENT OF INSURERS.—
‘‘(1) REQUIREMENT
AND
PROCEDURE.—The
Director shall reimburse private insurers providing
multi-hazard coverage pursuant to this subtitle from
amounts made available from the Insurance Fund.
Reimbursement for all claim payments up to and in-
cluding the policy limits of coverage and for all loss
adjustment expenses paid as a result of an earth-
quake, volcanic eruption, or tsunami, as appropriate,
shall be made as follows:
‘‘(A) The Director shall reimburse insurers
within 30 days of the date any claim payments
and loss adjustment expense payments are
made pursuant to the Federal Government’s
obligations.
‘‘(B) If the gross reimbursements exceed
amounts available in the Insurance Fund,
amounts borrowed from the Treasury of the