(B) provides insurance or reinsurance pro-
tection to address natural catastrophe prepared-
ness and protection, and in the case of a plan 
described in subparagraph (A)(ii), provides such 
protection as part of a program covering mul-
tiple States. 
TITLE 
I—TAXPAYER 
PROTEC-
TION, 
PRE-FUNDED 
CATAS-
TROPHE 
RECOVERY, 
AND 
MARKET STABILIZATION 
SEC. 101. NATIONAL COMMISSION ON NATURAL CATAS-
TROPHE PREPARATION AND PROTECTION. 
(a) ESTABLISHMENT.—To effectuate a stronger pub-
lic-private partnership at the local, State, and national lev-
els regarding natural catastrophe preparation and protec-
tion, the Secretary of the Treasury, in consultation with 
the Secretary of Homeland Security, shall establish a com-
mission to be known as the National Commission on Nat-
ural Catastrophe Preparation and Protection (in this title 
referred to as the ‘‘Commission’’). 
(b) DUTIES.—The Commission shall meet for the 
purpose of advising the Secretary regarding the estimated 
loss costs associated with the contracts for reinsurance 
protection made available under this title and carrying out 
the functions specified in this Act, including— 
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(1) the development and implementation of 
public education concerning the risks posed by nat-
ural catastrophes; 
(2) the establishment of a research priority for 
the development and implementation of prevention, 
mitigation, recovery, and rebuilding standards, and 
prudent land-use policies, that better prepare and 
protect the United States from natural catastrophes; 
(3) the establishment of a process for members 
of the Commission to deploy following every major 
catastrophe to inspect and evaluate the handling of 
such catastrophes; 
(4) conducting continuous analysis of the effec-
tiveness of this Act and recommending improve-
ments to the Congress so that the costs of providing 
natural catastrophe protection are decreased and so 
that the United States is better prepared; and 
(5) ensuring that the programs under this title 
are operated in a financially prudent manner and on 
an actuarially sound basis consistent with the provi-
sions of this title and is not dependent on subsidy 
from taxpayers or consumers in areas that do not 
reside in areas that have a high-risk to natural ca-
tastrophe loss, including by monitoring the expendi-
ture of funds for administrative purposes to promote 
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efficiency and economy in the operation and admin-
istration of the program and to minimize the cost 
for participating States. 
(c) MEMBERS.—The Commission shall consist of 11 
members, as follows: 
(1) HOMELAND SECURITY MEMBER.—The Sec-
retary of Homeland Security or the Secretary’s des-
ignee. 
(2) APPOINTED
MEMBERS.—Eleven members 
appointed by the Secretary of the Treasury, who 
shall consist of— 
(A) one individual who is an actuary; 
(B) one individual who is employed in engi-
neering; 
(C) one individual representing the sci-
entific community; 
(D) one individual representing property 
and casualty insurers; 
(E) one individual representing reinsurers; 
(F) one individual representing the Federal 
Insurance Office of the Department of the 
Treasury; 
(G) one individual who is a member or 
former member of the National Association of 
Insurance Commissioners; 
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(H) two individuals who are consumers, in-
cluding one consumer who is a homeowner who 
resides in an area with relatively high exposure 
to natural catastrophe risk and one consumer 
who resides in an area with relatively low expo-
sure to natural catastrophe risk; 
(I) one individual who is an emergency re-
sponse expert; and 
(J) one individual with expertise regarding 
capital markets. 
(d) TREATMENT
OF NON-FEDERAL MEMBERS.— 
Each member of the Commission who is not otherwise em-
ployed by the Federal Government shall be considered a 
special Government employee for purposes of sections 202 
and 208 of title 18, United States Code. 
(e) EXPERTS AND CONSULTANTS.—The Commission 
may procure temporary and intermittent services from in-
dividuals or groups recognized as experts in the fields of 
actuarial science, meteorology, seismology, vulcanology, 
geology, structural engineering, wind engineering, seismic 
engineering and hydrology, emergency response, and other 
fields, under section 3109(b) of title 5, United States 
Code, but at rates not in excess of the daily equivalent 
of the annual rate of basic pay payable for level V of the 
Executive Schedule, for each day during which the indi-
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vidual procured is performing such services for the Com-
mission. The Commission may also procure, and the Con-
gress encourages the Commission to procure, experts from 
universities, research centers, foundations, and other ap-
propriate organizations that could study, research, and de-
velop methods and mechanisms that could be utilized to 
strengthen structures to better withstand the perils cov-
ered by this Act. 
(f) COMPENSATION.—Each member of the Commis-
sion who is not an officer or employee of the Federal Gov-
ernment shall be compensated at a rate of basic pay pay-
able for level V of the Executive Schedule, for each day 
(including travel time) during which such member is en-
gaged in the performance of the duties of the Commission. 
All members of the Commission who are officers or em-
ployees of the United States shall serve without compensa-
tion in addition to that received for their services as offi-
cers or employees of the United States. 
(g) OBTAINING DATA.— 
(1) AUTHORITY.—The Commission and the 
Secretary may solicit loss and exposure data and 
such other information that they deem necessary to 
carry out their responsibilities under this Act from 
eligible State plans, other governmental agencies, 
and bodies and organizations that act as statistical 
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agents for the insurance industry. The Commission 
and the Secretary shall take such actions as are nec-
essary to ensure that confidential or proprietary in-
formation is disclosed only to authorized individuals 
working for the Commission or the Secretary. 
(2) CONFIDENTIALITY.— 
(A) IN
GENERAL.—Information obtained 
by the Commission and the Secretary pursuant 
to this Act with reference to which a request for 
confidential treatment is made by the person 
furnishing such information— 
(i) shall be exempt from disclosure 
under section 552 of title 5, United States 
Code; and 
(ii) shall not be published or disclosed. 
(B) EXCEPTION.—Subparagraph (A) shall 
not apply with respect to the publication or dis-
closure of any data aggregated in a manner 
that ensures protection of the identity of the 
person furnishing such data. 
(h) AUTHORIZATION OF APPROPRIATIONS.—There is 
authorized to be appropriated— 
(1) $10,000,000 for fiscal year 2013 for the ini-
tial expenses in establishing the Commission and the 
initial activities of the Commission during such fiscal 
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year that cannot timely be covered by amounts that 
are deposited in the Fund pursuant to section 
102(e)(5)(D); and 
(2) for fiscal year 2014 and each fiscal year 
thereafter, such sums as may be necessary to carry 
out the activities of the Commission during each 
such fiscal year that cannot timely be covered by 
amounts that are deposited in the Fund pursuant to 
section 102(e)(5)(D). 
(i) TERMINATION.—The Commission shall terminate 
upon the date specified in section 104(c). 
SEC. 102. PRE-FUNDED AND PRIVATELY FINANCED CATAS-
TROPHE RECOVERY PROGRAM. 
(a) PROGRAM AUTHORITY.— 
(1) IN GENERAL.—The Secretary of the Treas-
ury, in consultation with the Secretary of Homeland 
Security, shall carry out a program under this sec-
tion that utilizes premiums from eligible State plans 
to provide additional capacity and stability in the 
homeowners insurance market and improve the 
availability and affordability of homeowners protec-
tion coverage to pre-fund future natural catastrophe 
recovery by making available for purchase, only by 
eligible State plans, contracts for reinsurance cov-
erage under this section. 
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(2) PURPOSE.—The program shall make avail-
able privately funded reinsurance coverage under 
this section— 
(A) to protect taxpayers from financing the 
cost of bailouts after natural catastrophes; 
(B) to diversify and spread risk more effi-
ciently and leverage the economies of pooling 
reinsurance arrangements from different geo-
graphical areas of the country covering the per-
ils specified in subsection (c); 
(C) to generate additional capacity and 
provide stability to the homeowners insurance 
market by encouraging States to develop or ex-
pand plans that address current market chal-
lenges and assist homeowners in securing need-
ed protection; 
(D) to improve the availability and afford-
ability of homeowners insurance for the purpose 
of privately financing post-catastrophe recovery 
by facilitating the pooling and spreading the 
risk of catastrophic financial losses from nat-
ural catastrophes; 
(E) to improve the solvency, capacity, and 
stability of homeowners insurance markets; 
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(F) to encourage the development and im-
plementation of mitigation, prevention, recov-
ery, and rebuilding standards to reduce future 
catastrophe losses; and 
(G) to analyze and recommend methods to 
continuously improve the way the United States 
prepares for, reacts to, and responds to catas-
trophes, including improvements to the Catas-
trophe Preparedness Fund established under 
section 102(g). 
(3) CONTRACT
PRINCIPLES.—Under the pro-
gram under this section, the Secretary shall offer re-
insurance coverage through contracts with eligible 
State plans, which contracts shall— 
(A) be priced on an actuarially sound basis 
as specified in this section; and 
(B) provide coverage based solely on in-
sured losses within the State or States partici-
pating in the eligible State plan purchasing the 
contract. 
(b) QUALIFIED LINES OF COVERAGE.—Each con-
tract for reinsurance coverage made available under this 
section shall provide coverage for insured property losses 
covered under primary insurance contracts to home-
owners, mobile home owners, renters, and condominium 
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owners for covered perils. Nothing in this Act shall be in-
terpreted to expand the terms, conditions, or scope of cov-
erage or perils covered under insurance policies issued by 
insurers or eligible State plans. 
(c) COVERED PERILS.— 
(1) IN GENERAL.—Each contract for reinsur-
ance coverage made available under this section shall 
cover losses insured or reinsured by the eligible 
State plan purchasing the contract that are proxi-
mately caused by— 
(A) earthquakes; 
(B) perils ensuing from earthquakes, in-
cluding fire and tsunami-related flood; 
(C) catastrophic wildfires unrelated to 
earthquakes; 
(D) tropical cyclones having maximum sus-
tained winds of at least 74 miles per hour, in-
cluding hurricanes and typhoons; 
(E) tornadoes; 
(F) volcanic eruptions; 
(G) catastrophic winter storms; and 
(H) any other natural catastrophe insured 
or reinsured under the eligible State plan pur-
chasing the contract. 
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(2) DEFINITIONS.—The Secretary shall, by reg-
ulation, define the natural catastrophe perils identi-
fied under this subsection. 
(d) ELIGIBLE STATE PLANS.—A State plan shall be 
an eligible State plan for purposes of this section only if 
the State plan meets all of the following requirements: 
(1) PROGRAM DESIGN.—The entity for the cov-
ered State or States that is authorized to make such 
determinations certifies to the Secretary that the 
State plan is a program, established by the covered 
State or States, that provides— 
(A) insurance coverage for insured prop-
erty losses covered under primary insurance 
contracts for residential property located in any 
covered State; or 
(B) reinsurance coverage that is designed 
to improve availability or affordability, or both, 
in the private insurance markets that offers 
coverage for insured property losses covered 
under primary insurance contracts for residen-
tial property located in any covered State. 
(2) OPERATION.—The entity for the covered 
State or States that is authorized to make such de-
terminations certifies to the Secretary that the State 
plan complies with the following requirements: 
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(A) ESTABLISHMENT; GOVERNING BODY.— 
The State plan shall be established by the cov-
ered State or States and a majority of the 
members of the governing body of the State 
plan shall be public officials or appointed by 
public officials. 
(B) REPAYMENT.—If any covered State 
has at any time appropriated amounts from the 
fund of the State plan for any purpose other 
than payments made in connection with the ac-
tivities authorized under the State plan, the 
State shall have repaid such amounts to the 
State fund, together with interest on such 
amounts. 
(C) NONDISCRIMINATION IN COVERAGE.— 
Insurance or reinsurance coverage, as applica-
ble, provided under the eligible State plan shall 
be made available on a nondiscriminatory basis 
to all qualifying residents of any covered State. 
(D) PROHIBITION
OF
CROSS-SUBSIDIZA-
TION.—The State plan may not, except for 
charges or assessments related to post-event fi-
nancing or bonding, involve cross-subsidization 
between any separate property and casualty 
lines covered under the plan. 
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(E) REINSURANCE
PREMIUMS.—In the 
case of State plans providing reinsurance cov-
erage, the plan or the law in effect in each cov-
ered State shall require that to the extent that 
reinsurance coverage made available under the 
program under this section results in cost sav-
ings in providing insurance coverage for risks in 
such State, such cost savings be reflected in 
premium rates charged to consumers for such 
coverage. 
(F) TERMINATION.—The State plan shall 
include provisions that authorize the entity for 
the covered State or States that is authorized 
to make such a determination to terminate the 
State plan or, in the case of a multi-State plan, 
membership in such Plan, if such entity deter-
mines that the State plan is no longer necessary 
to ensure the availability or affordability of resi-
dential property insurance for all residents of 
any covered State. 
(G) ACTUARIAL
SOUNDNESS.—Insurance 
or reinsurance coverage, as applicable, made 
available by the State plan shall be provided at 
actuarially sound rates. 
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(3) TREATMENT OF EARNINGS.—The entity for 
the covered State or States that is authorized to 
make such determinations certifies to the Secretary 
that the State plan does not provide for redistribu-
tion of any part of any net profits under the State 
plan to any insurer that participates in the State 
plan. 
(4) SUPPORT FOR MITIGATION AND PREVEN-
TION.— 
(A) REQUIREMENTS.—Except as provided 
in subparagraph (B), the Secretary determines 
that, for any year for which the coverage is in 
effect, the provision of reinsurance coverage 
under the program under this section to the 
State plan supports mitigation and prevention 
of risk associated with covered events and that 
the State plan meets all of the following re-
quirements: 
(i) BUILDING, FIRE, AND
SAFETY 
CODES.—Each covered State has in effect, 
or appropriate local governments within 
each covered State have in effect, and en-
force building, fire, and safety codes and 
standards that offer risk responsive resist-
ance to earthquakes or high winds. 
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(ii) MITIGATION.—Each covered State 
has taken actions to mitigate losses caused 
by natural disasters. 
(iii) 
PROHIBITION
OF
PRICE 
GOUGING.—Each covered State has in ef-
fect laws or regulations sufficient to pro-
hibit price gouging, during the term of re-
insurance coverage provided under the pro-
gram under this section for the State plan 
in any disaster area located within the cov-
ered State. 
(iv) 
HOMEOWNERS
INSURANCE 
RATES.—For any covered State that has in 
effect laws that require insurers providing 
homeowners insurance to file their rates 
for review or regulatory approval, the cov-
ered State has certified that homeowners 
insurance rates associated with catastrophe 
coverage for covered perils are actuarially 
sound. 
(v) LAND USE AND ZONING PLANS.— 
Each covered State, to the extent feasible, 
shall encourage State and local government 
units to develop, implement, and enforce 
comprehensive land use and zoning plans 
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that are designed to limit additional nat-
ural hazard exposure and promote natural 
hazard mitigation. 
(vi) EMERGENCY PREPAREDNESS AC-
TIONS.—Each covered State, in consulta-
tion and cooperation with localities in the 
State, the Administrator of the Federal 
Emergency 
Management 
Agency, 
and 
other appropriate agencies and organiza-
tions, shall have taken actions to continu-
ously improve emergency preparedness. 
(B) TRANSITION PERIOD.—To provide suf-
ficient time for adoption of the provisions of 
this subsection and to support implementation 
of prevention and mitigation measures set forth 
in subparagraph (A) of this paragraph, during 
the 5-year period that begins on the date of the 
enactment of this Act, a State plan shall not be 
precluded from qualifying as an eligible State 
plan because the Secretary is unable to make 
any of the determinations required under sub-
paragraph (A). 
(e) TERMS
OF REINSURANCE CONTRACTS.—Each 
contract for reinsurance coverage under this section shall 
be subject to the following terms and conditions: 
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(1) MATURITY.—The contract shall have a min-
imum term of 1 year or such longer duration as the 
Secretary may determine. 
(2) PAYMENT CONDITION.—The contract shall 
authorize claims payments only for eligible losses to 
the eligible State plan purchasing the coverage. 
(3) RETAINED
LOSSES
REQUIREMENT.—For 
each covered event, the contract shall not reimburse 
any losses until the total incurred covered losses ex-
ceeds the applicable attachment point established 
pursuant to subsection (f)(2). 
(4) MULTIPLE
EVENTS.—The contract shall 
cover any eligible losses from one or more covered 
events that may occur during the term of the con-
tract and shall provide that if multiple events occur, 
the retained losses requirement under paragraph (f) 
shall apply in the aggregate and not separately to 
each individual event. 
(5) PRICING.—The price of reinsurance cov-
erage under the contract shall be an amount estab-
lished by the Secretary as follows: 
(A) RECOMMENDATIONS.—The Secretary 
shall take into consideration the recommenda-
tions of the Commission in establishing the 
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price, but the price may not be less than the 
amount recommended by the Commission. 
(B) FAIRNESS TO TAXPAYERS.—The price 
shall be established at an actuarially sound level 
that protects taxpayers from liability and takes 
into consideration models that estimate losses 
from covered events. 
(C) SELF-SUFFICIENCY.—The rates for re-
insurance coverage for an eligible State plan 
shall be established at an actuarially sound level 
that produces expected premiums sufficient to 
pay— 
(i) the expected annualized cost of all 
claims; 
(ii) loss adjustment expenses; 
(iii) the cost of funding emergency 
preparedness and mitigation efforts; and 
(iv) the costs of operating the Com-
mission and all administrative costs of re-
insurance coverage offered under this sub-
section. 
The expected annualized cost of all claims shall 
be comparable to amounts being included in the 
price for similar layers of coverage in the pri-
vate sector, taking into account the savings as-
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sociated with the funding mechanisms and the 
non-profit and tax-exempt status of the Fund. 
(D) OFFSET.—The Secretary shall ensure, 
to the maximum extent practicable, that in each 
fiscal year an amount equal to any amount ap-
propriated pursuant to section 101(h) for such 
fiscal year is obtained from purchasers of rein-
surance coverage under this section by incor-
porating the costs described in subparagraph 
(C)(iv) of this paragraph into the pricing of the 
contracts for such coverage. 
(6) 
TAXPAYER
PROTECTION, 
RAPID
CASH 
BUILD-UP, 
AND
POST-EVENT
PRICING
ADJUST-
MENTS.— 
(A) FIRST 5 YEARS.—Notwithstanding any 
other provision of this section, during the first 
five years of the program under this section, 
the Secretary shall increase the price that is 
charged for reinsurance coverage provided 
under the program under this section by at 
least five percent, or such higher amount as the 
Secretary deems, above the actuarially sound 
price calculated under paragraph (5), to facili-
tate and accelerate the accumulation of reserves 
and to support the creation of the readiness, 
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preparedness, and mitigation grant program 
under section 201. 
(B) POST-EVENT.—Notwithstanding any 
other provision of this section, after any covered 
event triggering any payment under a contract 
for reinsurance coverage that requires the Fund 
to issue obligations under subsection (g)(4) to 
make such payment and to provide additional 
taxpayer protection and ensure that the pro-
gram under this section is fully funded on an 
ongoing basis, the Secretary shall require the 
inclusion of an additional amount in the price 
that is charged for reinsurance coverage pro-
vided under the program equal to at least five 
percent of the actuarially sound price calculated 
under paragraph (5) to ensure that the pro-
gram collects all revenue necessary— 
(i) to provide the reinsurance coverage 
authorized under this section; 
(ii) to administer the program under 
this section, and 
(iii) to account for any losses paid 
with funds acquired from obligations 
issued under subsection (g)(4) during a pe-
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riod having a duration not longer than five 
years, if feasible. 
Any such obligations issued under subsection 
(g)(4) shall be repaid in full from the sur-
charges assessed under this paragraph. 
(7) ECONOMIC FAIRNESS.—The Secretary may 
establish criteria and include provisions in the con-
tract that limit the pricing benefits under the pro-
gram under this section for properties that exceed a 
value determined by the Secretary to represent afflu-
ent property owners who do not need the benefit of 
the program. 
(8) INFORMATION.—The contract shall contain 
a condition providing that the Commission may re-
quire the eligible State plan that is covered under 
the contract to submit to the Commission all infor-
mation regarding the eligible State plan relevant to 
the duties of the Commission, as determined by the 
Secretary. 
(9) ADDITIONAL CONTRACT OPTION.—The con-
tract shall provide that the purchaser of the contract 
may, during the term of such original contract, pur-
chase additional contracts from among those offered 
by the Secretary at the beginning of the term, sub-
ject to the limitations under subsection (f), at the 
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prices at which such contracts were offered at the 
beginning of the term, prorated based upon the re-
maining term as determined by the Secretary. Such 
additional contracts shall provide coverage beginning 
on a date 15 days after the date of purchase, but 
shall not provide coverage for losses for an event 
that has already occurred. Eligible State plans may 
arrange for prospective contracts for planning pur-
poses and to enhance stability and predictability in 
managing risk and accounting for costs associated 
with risk transfer. 
(10) OTHER TERMS.—The contract shall con-
tain such other terms as the Secretary considers 
necessary to carry out this Act and to ensure the 
long-term financial integrity of the program under 
this section. The contract shall also specify how pay-
outs shall be administered if multiple events occur 
that affect more than one eligible State plan. 
(11) PRIVATE
SECTOR
RIGHT
TO
PARTICI-
PATE.— 
(A) ESTABLISHMENT
OF
COMPETITIVE 
PROCEDURE.—The Secretary shall establish, by 
regulation, a competitive procedure under this 
paragraph that provides qualified entities an 
opportunity, on a basis consistent with the con-
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tract cycle established under this section by the 
Secretary, to offer to provide, in lieu of reinsur-
ance coverage under this section, reinsurance 
coverage that is substantially similar to cov-
erage otherwise made available under this sec-
tion. 
(B) COMPETITIVE
PROCEDURE.—Under 
the procedure established under this para-
graph— 
(i) the Secretary shall establish cri-
teria for private insurers, reinsurers, and 
capital market companies, and consortia of 
such entities to be treated as qualified en-
tities for purposes of this paragraph, which 
criteria shall require such an entity to have 
at all times capital sufficient to satisfy the 
terms of the reinsurance contracts and 
shall include such other industry and cred-
it rating standards as the Secretary con-
siders appropriate; 
(ii) not less than 30 days before the 
beginning of each contract cycle during 
which any reinsurance coverage under this 
section is to be made available, the Sec-
retary may request proposals and shall 
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(12) PARTICIPATION BY MULTI-STATE PLANS.— 
The Congress hereby explicitly encourages States to 
create and maintain catastrophe funds for their 
States or with other States, and nothing in this Act 
may be interpreted to prohibit or discourage the cre-
ation of multi-State plans, or the participation by 
such plans in the program established pursuant to 
subsection (a). The Secretary shall, by regulation, 
provide for the application of the provisions of this 
Act to multi-State catastrophe insurance and rein-
surance plans. The Commission shall develop a proc-
ess to evaluate and encourage the creation of re-
gional programs and approaches to advance the pur-
poses of this Act through the establishment of multi- 
State plans. 
(f) TREATMENT OF INSURED LOSSES AND MAXIMUM 
FEDERAL LIABILITY.— 
(1) 
AVAILABLE
LEVELS
OF
RETAINED 
LOSSES.—In making reinsurance coverage available 
under this section, the Secretary shall make avail-
able for purchase contracts for such coverage that 
require the sustainment of retained losses from cov-
ered events (as required under subsection (e)(3) for 
payment of eligible losses) in various amounts, as 
the Secretary, in consultation with the Commission, 
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determines appropriate and subject to the require-
ments under paragraph (2). 
(2) STANDARD ATTACHMENT POINT.— 
(A) ESTABLISHMENT.—The Secretary, in 
consultation with the Commission, shall estab-
lish a standard attachment point at which cov-
erage is provided to eligible State plans for all 
contracts. 
(B) CONSIDERATIONS.—In setting a stand-
ard attachment point, the Secretary and the 
Commission shall take into consideration— 
(i) how many and which eligible State 
plans are seeking contracts for reinsurance 
coverage under this section; 
(ii) the capital and surplus positions 
of the eligible State plans; 
(iii) the coverage preferences of eligi-
ble State plans; 
(iv) the availability and price of rein-
surance in the private market; 
(v) that pooling reinsurance from dif-
ferent geographic locations and covering 
different perils is more efficient than 
stand-alone programs; 
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(vi) affordability of homeowners insur-
ance; and 
(vii) other factors deemed appropriate 
to operating a long-term national reinsur-
ance backstop program. 
(C) USE.—The standard attachment point 
established pursuant to this paragraph shall be 
used in establishing reinsurance contracts for 
each eligible State plan, unless the Secretary, in 
consultation with the Commission, determines 
that market conditions or the financial position 
of an eligible State plan warrants a lower at-
tachment point in a contract for such eligible 
State plan in a given year. 
(D) LOWER ATTACHMENT POINTS.—If a 
reinsurance contract is contemplated for an eli-
gible State plan having an attachment point 
lower than the standard attachment point, the 
cost of such contract shall include or otherwise 
take into account the additional costs associated 
with such additional layer of protection. 
(3) 
CEILING
COVERAGE
LEVEL.—Notwith-
standing any other provision of law and subject to 
any limitations in future appropriations Acts, the 
aggregate potential liability for payment of claims 
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under all contracts for reinsurance coverage sold 
under this title to any single eligible State plan dur-
ing a 12-month period shall not exceed the dif-
ference between— 
(A) the amount equal to the covered loss 
projected to be incurred once every 600 years 
from a single event by the eligible State plan; 
and 
(B) the amount equal to the cash available 
in the eligible State plan to pay covered losses. 
(g) CATASTROPHE PREPAREDNESS FUND FOR PRE- 
FUNDING PREPAREDNESS AND RECOVERY.— 
(1) ESTABLISHMENT.—There is established 
within the Treasury of the United States a fund to 
be known as the ‘‘Catastrophe Preparedness Fund’’. 
(2) CREDITS.—The Fund shall be credited 
with— 
(A) amounts received from the sale of con-
tracts for reinsurance coverage under this sec-
tion; 
(B) any amounts borrowed under para-
graph (4); 
(C) any amounts earned on investments of 
the Fund pursuant to paragraph (5); and 
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(D) such other amounts as may be cred-
ited to the Fund. 
(3) USES.—Amounts in the Fund shall be 
available to the Secretary only for the following pur-
poses: 
(A) CONTRACT PAYMENTS.—For payments 
to covered purchasers under contracts for rein-
surance coverage under this section for eligible 
losses under such contracts. 
(B) COMMISSION
COSTS.—For the oper-
ating costs of the Commission. 
(C) ADMINISTRATIVE EXPENSES.—For the 
administrative expenses incurred by the Sec-
retary in carrying out the reinsurance program 
under this Act. 
(D) COST OF NATIONAL READINESS, PRE-
PAREDNESS, AND
MITIGATION
COMMITTEE.— 
For the operating costs of the National Readi-
ness, Preparedness, and Mitigation Committee 
established under section 201 and for disburse-
ments under section 201(f)(2) for disaster read-
iness, preparedness, prevention, and mitigation. 
(E) 
TERMINATION.—Upon 
termination 
under section 104, as provided in such section. 
(4) LIQUIDITY.— 
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(A) AUTHORITY.—To the extent that the 
amounts in the Fund are insufficient to pay 
claims and expenses under paragraph (3), the 
Secretary may issue such obligations of the 
Fund as may be necessary to cover the insuffi-
ciency and shall purchase any such obligations 
issued. 
(B) PUBLIC DEBT TRANSACTION.—For the 
purpose of purchasing any such obligations, the 
Secretary may use as a public debt transaction 
the proceeds from the sale of any securities 
issued under chapter 31 of title 31, United 
States Code, and the purposes for which securi-
ties are issued under such chapter are hereby 
extended to include any purchase by the Sec-
retary of such obligations under this paragraph. 
(C) CHARACTERISTICS OF OBLIGATIONS.— 
Obligations issued under this paragraph shall 
be in such forms and denominations, bear such 
maturities, bear interest at such rate and be 
subject to such other terms and conditions as 
the Secretary shall determine. 
(D) TREATMENT.—All redemptions, pur-
chases, and sales by the Secretary of obligations 
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under this paragraph shall be treated as public 
debt transactions of the United States. 
(E) REPAYMENT.—Any obligations issued 
under this paragraph shall be repaid, including 
interest, from the Fund and shall be recouped 
from surcharges under subsection (e)(6)(B) on 
premiums for reinsurance coverage provided 
under this section. 
(5) INVESTMENT.—The Secretary shall invest 
accumulated amounts in the Fund as the Secretary 
considers advisable in obligations issued or guaran-
teed by the United States. 
(6) PROHIBITION
ON
FEDERAL
APPROPRIA-
TIONS.—Except for amounts made available pursu-
ant to paragraph (4)(A) of this subsection and sec-
tion 101(h), no Federal funds shall be authorized or 
appropriated for the Fund or for carrying out the 
reinsurance liquidity protection program under this 
section. 
SEC. 103. POST-CATASTROPHE MARKET STABILIZATION 
PROGRAM FOR LIQUIDITY LOANS. 
(a) PURPOSES.—The purposes of this section are to 
establish a program— 
(1) to expedite the payment of claims under 
State catastrophe insurance programs and better as-
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sist the financial recovery from significant natural 
catastrophes by authorizing the Secretary to issue 
loans for such purposes; and 
(2) to promote the availability of private capital 
to provide liquidity and capacity to State catas-
trophe insurance programs and to augment the ef-
forts of such programs. 
(b) LIQUIDITY LOANS.—The Secretary may make li-
quidity loans under this section to State plans for the pur-
poses of this section, and shall have the powers and au-
thorities necessary to make such loans, subject to the re-
quirements of this section. 
(c) CONDITIONS FOR LOAN ELIGIBILITY.—A loan 
under this section may be made to a State plan only if— 
(1) the plan has a capital liquidity shortage, in 
accordance with regulations that the Secretary shall 
establish, such that the obligations of the plan re-
sulting from a covered event exceed the amount of 
cash available to the plan to pay covered losses; 
(2) the plan cannot access capital in the private 
market at a cost lower and for similar duration than 
that provided under a loan under this section, as de-
termined by the Secretary; and 
(3)(A) the plan is an eligible State plan; or 
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(B) the loan complies with the requirements 
under subsection (e). 
The Secretary may not require an eligible State plan to 
purchase reinsurance coverage made available under the 
program under section 102 to be eligible for a liquidity 
loan under this section. 
(d) STATES WITH ELIGIBLE STATE PLANS.— 
(1) CONTRACTS.—The Secretary may enter into 
contracts with eligible State plans to carry out the 
purposes of this section by providing for liquidity 
loans for such plans, as the Secretary may deem ap-
propriate. 
(2) 
ELIGIBLE
STATE
PLAN
PRE-CERTIFI-
CATION.—The Secretary shall establish procedures 
and standards for State plans to apply to the Sec-
retary at any time for pre-certification (and recertifi-
cation) as eligible State plans, which procedures and 
standards shall provide as follows: 
(A) The Secretary shall administer the 
pre-certification (and recertification) of State 
plans as eligible State plans. 
(B) State plans that are pre-certified as el-
igible State plans may enter into contracts de-
scribed in paragraph (1). 
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(3) INTEREST
RATE.—Subject to subsection 
(h), a liquidity loan made under this section to an 
eligible State plan shall bear interest at an annual 
rate to be established by the Secretary, in consulta-
tion with the Commission, which shall be equal to 
the rate of interest on State and local government 
series securities have the same duration as the li-
quidity loan outstanding as of the date the loan is 
made. 
(4) MANDATORY
ASSISTANCE
FOR
ELIGIBLE 
STATE PLANS.—The Secretary shall, upon the re-
quest of an eligible State plan and subject to para-
graphs (1) and (2) of subsection (c), make a loan for 
such plan in the amount requested by such plan 
(subject to the limitations under subsection (f)). 
(e) STATES WITHOUT ELIGIBLE STATE PLANS.— 
(1) AUTHORITY.—Subject to subsection (c), the 
Secretary may make a liquidity loan under this sec-
tion to a State plan that is not an eligible State 
plan, but only if the Secretary determines that— 
(A) the loan is necessary to avoid a capital 
shortfall; and 
(B) the provisions providing for repayment 
of the loan are comparable in providing protec-
tion to taxpayers as provisions providing for re-
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payment of liquidity loans under this section by 
eligible State plans. 
(2) INTEREST
RATE.—Subject to subsection 
(h), a liquidity loan made under this section to a 
State plan that is not an eligible State plan shall 
bear interest at an annual rate that exceeds the rate 
required under subsection (d)(3) for a loan made to 
an eligible State plan. Such rate shall be determined 
in accordance with a schedule of interest rates, 
which shall be established by the Secretary and shall 
provide lower rates for loans to State plans that 
comply with more of the requirements for eligible 
State plans under section 102(d) and higher rates 
for loans to State plans that comply with fewer of 
such requirements. 
(f) AMOUNT.—The principal amount of a liquidity 
loan under this subsection may not exceed the difference 
between the applicable attachment point as determined by 
the Secretary in section 102(f)(2) and the amount of 
funds the eligible State plan had to pay losses at the time 
of the covered event for which the loan is made. 
(g) USE.—Amounts from a liquidity loan under this 
section may be used only to pay losses covered by the State 
plan to which the loan is made. 
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(h) EXCEPTION TO INTEREST RATE LIMITATION.— 
In the case of liquidity loan under this section made pur-
suant to a large covered event that occurs early in the 
existence of a State plan, the Secretary may charge an 
interest rate for the loan that allows the State plan to 
repay the loan and interest without causing significant in-
creases in the cost of insurance for covered perils in the 
covered State or States. 
(i) PREMIUMS UNDER STATE PLAN.— 
(1) DETERMINATION OF ACTUARIALLY SOUND 
PREMIUMS.—In making a request for a liquidity 
loan under this section, a State plan shall determine, 
and the Secretary, in consultation with the Commis-
sion, shall approve, a premium amount for the cov-
erage layer under the State plan for which the li-
quidity loan is sought that is actuarially sound. 
(2) CHARGEABLE
PREMIUMS.—Unless other-
wise provided by the Secretary, a State plan shall 
charge, for the coverage layer under the State plan 
for which the liquidity loan is made an annual pre-
mium, for coverage during the period that begins 
upon the making of the liquidity loan and ends upon 
full repayment of the loan, in an amount that is not 
less than 150 percent of the actuarially sound pre-
mium determined pursuant to paragraph (1). 
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