I
104TH CONGRESS
2D SESSION
H. R. 4115
To require the Director of the Federal Emergency Management Agency to
study the feasibility of a Residential Windstorm Insurance Program
designed to provide windstorm insurance to residential property owners
unable to obtain coverage in the private market and to require a study
by the Comptroller General of the United States, the Secretary of the
Treasury, and the Secretary of Commerce to evaluate the public policy
issues associated with conferring favorable Federal tax treatment to
insurance reserves set aside by private insurers for future catastrophic
natural disasters.
IN THE HOUSE OF REPRESENTATIVES
SEPTEMBER 19, 1996
Mr. FRAZER (for himself, Ms. MCKINNEY, Mr. OWENS, Mr. LEWIS of Geor-
gia, Ms. WATERS, Mr. MORAN, Mr. RUSH, Mr. LAFALCE, Mrs. CLAYTON,
Mr. FALEOMAVAEGA, Ms. BROWN of Florida, Mr. GENE GREEN of Texas,
Mr. HINCHEY, Mr. BROWN of Ohio, Mr. HASTINGS of Florida, Mr. WATT
of North Carolina, Mr. SERRANO, Mr. RANGEL, Ms. KAPTUR, Mr. WARD,
Mr. MARKEY, Mr. STUPAK, Mr. WYNN, Mr. CUMMINGS, Mrs. MEEK of
Florida, Ms. JACKSON-LEE of Texas, and Mr. JEFFERSON) introduced
the following bill; which was referred to the Committee on Transportation
and Infrastructure, and in addition to the Committee on Banking and Fi-
nancial Services, for a period to be subsequently determined by the
Speaker, in each case for consideration of such provisions as fall within
the jurisdiction of the committee concerned
A BILL
To require the Director of the Federal Emergency Manage-
ment Agency to study the feasibility of a Residential
Windstorm Insurance Program designed to provide wind-
storm insurance to residential property owners unable
to obtain coverage in the private market and to require
a study by the Comptroller General of the United States,
the Secretary of the Treasury, and the Secretary of
Commerce to evaluate the public policy issues associated
with conferring favorable Federal tax treatment to insur-
ance reserves set aside by private insurers for future
catastrophic natural disasters.
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 ‘‘Residential Windstorm
Insurance Plan Act of 1996’’.
SEC. 2. CONGRESSIONAL FINDINGS.
Congress finds that—
(1) since the devastation of Hurricane Hugo on
September 17, 1989, insurance against windstorm
damage has been difficult to obtain at reasonable
premium rates for many residents of the United
States;
(2) an unusual number of other catastrophic
events, such as Hurricane Andrew in Florida, Hurri-
cane Iniki in Hawaii, the Northridge earthquake,
and more recently, Hurricanes Bertha and Fran in
Gulf and Atlantic Coast States, Puerto Rico, and
the Virgin Islands, have nearly collapsed the world-
wide reinsurance market, seriously limiting the abil-
ity of local insurance companies to meet existing de-
mands for continued coverage, much less expand
their capacity for additional coverage;
(3) major hurricanes and earthquakes pose sub-
stantial long-term consequences for the country;
(4) the National Hurricane Center reports that
60 percent of the United States population live in
coastal States or regions subject to natural disas-
ters, such as hurricanes and earthquakes;
(5) private sector insurance protection against
property damages caused by the peril of wind is gen-
erally excluded under standard homeowners insur-
ance policies sold in 7 States along the Gulf and At-
lantic Coast States, the Virgin Islands, and Puerto
Rico, and property and casualty insurers are with-
drawing underwriting capacity from the market by
refusing to issue new policies or renew existing poli-
cies, or by increasing premiums to unaffordable lev-
els; and
(6) new and innovative programs are required
to provide a limited program of property insurance
protection from windstorm.
SEC. 3. RESIDENTIAL WINDSTORM INSURANCE PROGRAM.
(a) IN GENERAL.—The Director of the Federal
Emergency Management Agency (hereinafter in this Act
referred to as the ‘‘Director’’) shall study the advisability
and feasibility of establishing a Residential Windstorm In-
surance Program designed to provide windstorm insurance
to residential property owners unable to obtain coverage
in the private market.
(b) PURPOSE OF PROGRAM.—The Residential Wind-
storm Insurance Program shall—
(1) amend the ‘‘Write Your Own’’ Program
under the National Flood Insurance Program to ex-
plicitly provide insurance protection against the
windstorm peril;
(2) allow residents in wind-exposed localities
across America and United States territories to pur-
chase federally subsidized insurance to supplement
standard homeowners insurance policies sold by pri-
vate insurers;
(3) provide windstorm insurance protection only
to residents in communities that have adopted and
enforced the land use and flood plain management
provisions of the National Flood Insurance Program;
(4) encourage the private insurance industry to
sell, service, and adjust Federal windstorm insurance
claims under their own corporate name under a
nonrisk bearing arrangement with the Federal In-
surance Administration; and
(5) outline requirements under which the pri-
vate sector, including insurance companies, banks,
and other financial sector firms, could become in-
volved in the Residential Windstorm Insurance Pro-
gram.
(c) CONTENTS.—The Residential Windstorm Insur-
ance Program required under subsection (a) shall be de-
signed—
(1) to supplement Federal disaster relief and
emergency assistance provided pursuant to the Rob-
ert T. Stafford Disaster Relief and Emergency As-
sistance Act and other laws for damage and loss
caused by hurricanes;
(2) to make affordable insurance coverage avail-
able to protect against losses resulting from physical
damage to, or loss of, residential structures arising
from the wind peril;
(3) to provide such insurance coverage for resi-
dential structures through a program that pro-
vides—
(A) insurance coverage for wind damage
caused by hurricanes, but not for water damage
arising from any such wind peril;
(B) insurance coverage at premium rates
affordable to homeowners in areas at risk for
such wind damage;
(C) appropriate building and structural re-
quirements and other wind damage mitigation
measures; and
(D) schedules of the amount of coverage
available for various residential structures;
(4) to provide incentives for private property
and casualty insurers to reenter markets from which
they have previously withdrawn; and
(5) to provide incentives for other private finan-
cial sector companies to enter the market for hazard
insurance.
(d) CONSIDERATIONS.—The Residential Windstorm
Insurance Program required under subsection (a) shall—
(1) provide for participation of the private in-
surance industry in carrying out the program;
(2) define—
(A) the areas in which such coverage is
made available by establishing requirements for
the eligibility or participation of communities;
and
(B) the types of residential properties for
which such coverage is made available;
(3) establish premium rates for coverage that
are actuarially based on the risk of wind-caused
damage or subsidized premium rates that are less
than such actuarially based rates; and
(4) provide community-based mitigation and
other initiatives for participation in the Program.
(e) CONSULTATION.—In developing the program re-
quired under subsection (a), the Director shall consult
with—
(1) the heads of any Federal agencies author-
ized to provide disaster relief;
(2) the chief executive officers of the States and
territories of the United States, that suffered signifi-
cant losses caused by windstorms occurring after the
beginning of 1989; and
(3) insurance and reinsurance companies, insur-
ance trade associations, consumer advocacy groups,
and taxpayer groups in developing actuarial rates
and underwriting guidelines used to cover damages
to property caused by the hurricane peril.
(f) COMPLETION OF STUDY.—Not later than the last
day of the 180-day period beginning on the date of the
enactment of this Act, the Director shall submit to the
Committee on Transportation and Infrastructure and the
Committee on Banking and Financial Services of the
House of Representatives and to the Committee on Envi-
ronment and Public Works and the Committee on Bank-
ing, Housing, and Urban Affairs of the Senate a study
containing—
(1) the written plan required under subsection
(a);
(2) a statement of the amount of disaster as-
sistance provided pursuant to the Robert T. Stafford
Disaster Relief and Emergency Assistance Act and
other Acts during each of fiscal years 1989 through
1996 for property damage caused by winds from
hurricanes, tornadoes, and other windstorms to resi-
dential properties, business properties, agricultural
properties, properties owned by private nonprofit or-
ganizations, and public infrastructure facilities and
properties owned by State and local governments;
(3) an estimate of the cost to the Federal Gov-
ernment of carrying out the Residential Windstorm
Insurance Program under the plan, by making cov-
erage available only for residential structures;
(4) an estimate of the cost to the Federal Gov-
ernment of carrying out the Residential Windstorm
Insurance Program under the plan, by making cov-
erage available for residential structures and for
public infrastructure and properties owned by State
and local governments, other residential properties,
business properties, agricultural properties, and
properties owned by private nonprofit organizations;
(5) an estimate of the effects that implementing
the national windstorm insurance program would
have on the amount of disaster assistance provided
by the Federal Government;
(6) an estimate of the effects that implementing
the national windstorm insurance program would
have on the private insurance industry and the avail-
ability of residential and other property insurance
and insurance against windstorm damage;
(7) a description of any amendments to the
Robert T. Stafford Disaster Relief and Emergency
Assistance Act and other laws relating to disaster
assistance that would be necessary or appropriate in
the event of the implementation of the Residential
Windstorm Insurance Program; and
(8) any other information that the Director
considers appropriate.
SEC. 4. EARTHQUAKE INSURANCE STUDY.
(a) IN GENERAL.—The Director shall enter into an
arrangement with the National Academy of Sciences to
conduct a study on the advisability and feasibility of estab-
lishing a Federal earthquake insurance program modeled
after the ‘‘Write Your Own’’ Program under the National
Flood Insurance Program.
(b) NATIONAL ACADEMY OF SCIENCES.—The study
described in subsection (c) shall be performed by a panel
of recognized experts appointed by the National Academy
of Sciences. The experts shall include representatives of
building contractors, real estate interests, consumer advo-
cacy groups, taxpayer groups, lending institutions, private
insurers and reinsurers, the model building code organiza-
tions, local government zoning and land use planning bod-
ies, and other experts deemed relevant by the National
Academy of Sciences.
(c) COMPLETION
OF STUDY.—The results of the
study described in subsection (c), with any recommenda-
tions, shall be transmitted by the National Academy of
Sciences to the Director and Congress not later than 18
months after the date of the enactment of this Act.
SEC. 5. STUDY ON TAX TREATMENT OF CATASTROPHIC RE-
SERVES.
(a) JOINT STUDY.—The Comptroller General of the
United States, the Secretary of the Treasury, and the Sec-
retary of Commerce shall conduct a joint study to evaluate
the public policy issues associated with conferring favor-
able Federal tax treatment to multiyear insurance reserves
set aside by private insurers for future catastrophic natu-
ral disasters.
(b) FACTORS TO BE STUDIED.—The study described
in subsection (a) shall evaluate the likelihood and mag-
nitude of the following public policy objectives:
(1) The increased financial capacity of private
insurers to respond to future natural disasters.
(2) The enhanced financial ability of private in-
surers to continue providing property coverages fol-
lowing catastrophic natural disasters.
(3) The overall benefit to the competitiveness of
United States business and private insurers in the
worldwide economy.
(4) The short- and long-term revenue impact on
the United States Treasury.
(c) LIMITATIONS.—The study of the favorable tax
treatment of catastrophic reserves shall be limited as fol-
lows:
(1) The study will not be limited to private in-
surer reserve funds but will also assess the ability of
the Federal and State governments to build such re-
serves.
(2) Any tax exemption given to catastrophic re-
serves will be done in a very limited and restricted
manner in order to protect reserves against being
used for other than catastrophe costs.
(3) A portion of the buildup from the tax-ex-
empt reserves will be used to fund statewide mitiga-
tion efforts.
(d) CONSULTATION.—The Comptroller General, the
Secretary of the Treasury, and the Secretary of Commerce
shall consult with recognized experts in preparing the
study described in subsection (a). The experts shall in-
clude representatives from State insurance departments,
private insurers, insurance agents, economists, natural
disaster risk modeling experts, insurance consumer advo-
cacy groups, and other experts deemed relevant.
(e) REPORT TO CONGRESS.—The results of the study
described in subsection (a), including any recommenda-
tions, shall be transmitted to Congress not later than 180
days after the date of enactment of this Act.
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