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United States under section 806 shall cover the
supplemental losses.
‘‘(2) REGULATIONS.—The Director may issue
regulations establishing the general method or meth-
ods by which proved and approved claims for losses
may be adjusted and paid for damages covered by
the multi-hazard coverage issued under this subtitle.
The claim practices of the Insurance Fund shall be
subject to and conform with any applicable State in-
surance unfair trade practices statutes. Judicial re-
view of a decision of the Director regarding reim-
bursement of a private insurer shall be available
pursuant to section 821(e).
‘‘(g) OBLIGATIONS.—All multi-hazard coverage pro-
vided through the Primary Insurance Program under this
subtitle shall constitute obligations of the United States.
The full faith and credit of the United States is pledged
for the full payment and performance of such obligations.
The private insurers participating in the program shall
bear no risk and shall assume no liability for the multi-
hazard coverage provided through the program.
‘‘(h) STATUS OF FUND.—Any premiums collected for
deposit in the Insurance Fund shall be exempt from all
taxation now or hereafter imposed by the United States,
by any territory, dependency or possession thereof, or by
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the State, county, municipality, or local taxing authority,
except that the insurance policies issued by or in conjunc-
tion with the Federal Government pursuant to this title
shall be subject, where applicable, to State insurance pre-
mium taxes.
‘‘SEC. 806. BORROWING FROM TREASURY.
‘‘(a) AUTHORITY.—To the extent that the accumu-
lated assets, including any return on investments, in the
Primary Insurance Program Fund established under sec-
tion 805 are insufficient to pay claims and expenses, the
Director shall issue, from time-to-time, to the Secretary
of the Treasury, notes and other obligations to cover the
insufficiency; except that the amounts of such obligations
outstanding at any one time shall not exceed such sums
as the Congress may provide acting upon the rec-
ommendation of the Director.
‘‘(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 Di-
rector under this section shall be deposited in the Primary
Insurance Program Fund established under section 805.
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‘‘(d) REPAYMENT.—Any amounts borrowed under
this section shall be recouped, including interest on the
borrowed funds, in future premiums for multi-hazard cov-
erage pursuant to the plan of operation established under
section 821. The Secretary of the Treasury shall grant ex-
tensions in repayment schedules that the Director advises
the Secretary are necessary.
‘‘SEC. 807. INSURANCE MITIGATION INCENTIVES.
‘‘In carrying out the Primary Insurance Program
under this subtitle and pursuant to the plan of operation
established under section 821, the Director shall provide
for the following insurance mitigation incentives which
shall conform with the actuarially sound rate requirements
of section 804:
‘‘(1) Charging lower premiums or deductible
amounts for any residential property located in an
earthquake-prone State which meets the seismic
building standards under section 702(a).
‘‘(2) Charging lower premium rates or deduct-
ible amounts for any residential property located in
an earthquake-prone State that passes a seismic
safety inspection and meets the requirements of the
seismic mitigation standards established in title VII.
‘‘(3) Charging lower premium rates or deduct-
ible amounts for new residential property not con-
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structed in volcanic zones in a volcanic eruption-
prone State.
‘‘Subtitle B—Reinsurance Program
‘‘SEC. 811. BASIC AUTHORITY AND PROGRAM OPERATION.
‘‘(a) ELIGIBILITY.—
‘‘(1) PROVISION OF COVERAGE.—Upon the is-
suance of regulations establishing the plan of oper-
ation under section 821, the Director shall make
available to eligible entities excess reinsurance cov-
erage for any direct and indirect losses under the
covered lines set forth in section 813 that arise from
a hurricane, earthquake, volcanic eruption, or tsu-
nami.
‘‘(2) ELIGIBLE ENTITIES.—The following enti-
ties are eligible to purchase the excess reinsurance
coverage:
‘‘(A) Any private insurer participating in
the Primary Insurance Program under subtitle
A.
‘‘(B) Any private reinsurer which reinsures
any private insurer participating in the Primary
Insurance Program under subtitle A.
‘‘(C) Any workers’ compensation fund op-
erated by a State.
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‘‘(D) Any State residual insurance pooling
program.
‘‘(b) TERMS.—The reinsurance contracts issued by
the Federal Government pursuant to this subtitle shall
contain terms and conditions similar to those generally
used in private catastrophic reinsurance contracts.
‘‘(c) JUDICIAL REVIEW.—Judicial review of a deci-
sion of the Director regarding payment of claims shall be
made available pursuant to section 821(e).
‘‘(d) SINGLE ENTITIES.—Any private insurer and re-
insurer companies or United States affiliates under the
same ownership or management or part of the same hold-
ing company system, as determined under the plan of op-
eration established under section 821, shall be considered
a single entity for purposes of this subtitle.
‘‘SEC. 812. LEVELS OF RETAINED LOSSES.
‘‘(a) INDUSTRY-WIDE ELIGIBILITY.—Excess reinsur-
ance under this subtitle shall be available to all private
insurers and private reinsurers eligible for reinsurance
pursuant to section 811(a)(2) as follows:
‘‘(1) INDUSTRY RETAINED LOSSES.—The Rein-
surance Fund established under section 815 shall
provide excess reinsurance when, as determined by
the Director pursuant to the plan of operation under
section 821, the insurance industry is likely to incur
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gross losses in the lines covered in section 813(a)
arising from hurricane, earthquake, volcanic erup-
tion, and tsunami events occurring during any 12-
month period that exceed 15 percent of the consoli-
dated industry surplus as regards policyholders; pro-
vided that, only such separate events which will like-
ly result in industry gross losses of at least
$1,500,000,000, adjusted annually in accordance
with the percentage change in the Consumer Price
Index, shall be aggregated to reach the 15-percent
level.
‘‘(2) 
INDIVIDUAL
COMPANY
RETAINED
LOSSES.—After the insurance industry has sustained
gross losses described in paragraph (1), the Reinsur-
ance Fund established under section 815 shall pay
to an individual private insurer or private reinsurer
95 percent of qualifying losses in excess of 15 per-
cent of the consolidated surplus as regards policy-
holders of the private insurer or private reinsurer.
‘‘(b) INDIVIDUAL INSURER ELIGIBILITY.—
‘‘(1) 
INDIVIDUAL
INSURER
RETAINED
LOSSES.—If subsection (a) is not applicable, a pri-
vate insurer or private reinsurer shall be eligible for
excess reinsurance coverage and reimbursement from
the Reinsurance Fund established under section 815
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if the insurer or reinsurer has incurred gross losses
from a single—
‘‘(A) earthquake, volcanic eruption, or tsu-
nami event that is included in the lines covered
in section 813(a) and that exceeds 20 percent
of the consolidated surplus as regards policy-
holders of the private insurer or private rein-
surer; or
‘‘(B) hurricane event that is included in
the lines covered in section 813(a) and that ex-
ceeds 20 percent of the consolidated surplus as
regards policyholders of the private insurer or
private reinsurer, except that the workers’ com-
pensation and earthquake lines of coverage
under section 813(a) shall be excluded.
‘‘(2) REINSURANCE
FUND
PAYMENTS.—After
the private insurer or private reinsurer has sustained
gross losses described in paragraph (1), the Reinsur-
ance Fund established under section 815 shall pay
95 percent of qualifying losses, as defined in sub-
section (d), in excess of 20 percent of the consoli-
dated surplus as regards policyholders of the private
insurer or the private reinsurer.
‘‘(3) LIMITATION OF REINSURANCE FUND PAY-
MENTS.—The payments by the Reinsurance Fund
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under this subsection shall be limited to 200 percent
of the consolidated surplus as regards policyholders
of the private insurer or private reinsurer.
‘‘(c) STATE INSURANCE PROGRAMS.—Excess rein-
surance under this subtitle shall be available to each State
workers’ compensation program and State residual insur-
ance pooling program eligible for reinsurance pursuant to
section 811(a)(2) as follows:
‘‘(1) INDUSTRY
LOSSES.—The Reinsurance
Fund established under section 815 shall provide ex-
cess reinsurance when, as determined by the Direc-
tor pursuant to the plan of operation under section
821, the insurance industry is likely to incur gross
losses in the State served by the eligible State insur-
ance program arising from hurricane, earthquake,
volcanic eruption, and tsunami events occurring dur-
ing any 12-month period that exceed 10 times the
sum of the direct earned premiums for the lines of
coverage described in sections 813(a) (2), (3), (4),
and (5) or $10,000,000,000, adjusted annually in
accordance with the percentage change in the
Consumer Price Index, whichever amount is less.
‘‘(2) MINIMUM
LOSSES.—Such lessor amount
described in paragraph (1) must equal at least
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$500,000,000, adjusted annually in accordance with
the percentage change in the Consumer Price Index.
‘‘(3) RETAINED LOSSES.—After the insurance
industry has sustained gross losses described in
paragraph (1), the Reinsurance Fund established
under section 815 shall pay to an individual State
workers’ compensation program or State residual in-
surance pooling program 95 percent of qualifying
losses in excess of the lessor amount described in
paragraph (1).
‘‘(d) QUALIFYING LOSSES.—For the purpose of this
subtitle, ‘‘qualifying losses’’ includes—
‘‘(1) the losses and loss adjustment expenses in-
curred by a private insurer, private reinsurer, State
workers’ compensation fund, or State residual insur-
ance pooling program, and
‘‘(2) any assessments, surcharges, or other li-
abilities imposed by any State residual insurance
pooling program or guaranty fund,
attributable to hurricanes, earthquakes, volcanic erup-
tions, and tsunamis occurring during any 12-month period
encompassing the events described in subsections (a)(1)
and (c)(1) or the event described in subsection (b)(1)
reduced by—
‘‘(1) any collectible reinsurance recoverable, and
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‘‘(2) 
an 
appropriate 
percentage 
of 
any
uncollectible reinsurance arising from the event as
set in the plan of operation to be issued by regula-
tion under section 821.
‘‘(e) OBLIGATIONS.—All reinsurance contracts issued
under this subtitle shall constitute obligations, in accord-
ance with the terms of such reinsurance, of the United
States. The full faith and credit of the United States is
pledged for the full payment and performance of such
obligations.
‘‘(f) DEFINITIONS.—For purposes of this subtitle:
‘‘(1) The term ‘consolidated industry surplus as
regards policyholders’ means the consolidated sur-
plus as regards policyholders of the property and
casualty insurance industry (excluding life insur-
ance) for the calendar year immediately preceding
the hurricane, earthquake, volcanic eruption, or tsu-
nami events described in subsection (a)(1) as deter-
mined by the National Association of Insurance
Commissioners or other credible source and pub-
lished annually in the Federal Register by the
Director.
‘‘(2) The term ‘consolidated surplus as regards
policyholders’ means the surplus as regards policy-
holders of the private insurer, private reinsurer, or
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group of private insurers and/or reinsurers (exclud-
ing life insurance) based on financial data submitted
to the National Association of Insurance Commis-
sioners or other credible source and published annu-
ally in the Federal Register by the Director for the
calendar year immediately preceding the hurricane,
earthquake, volcanic eruption, or tsunami event or
events described in subsections (a)(1) and (b)(1).
‘‘(3) The term ‘direct earned premiums’ means
the direct earned premiums for certain lines of prop-
erty and casualty insurance coverage as published in
the National Association of Insurance Commis-
sioners Fire and Casualty Annual Statement filed
with the applicable State department of insurance
for the most recent calendar year available preceding
the hurricane, earthquake, volcanic eruption, or tsu-
nami events described in subsection (c)(1).
‘‘(4) The term ‘gross losses’ means all losses
and loss adjustment expenses, prior to deducting any
private reinsurance recoverables.
‘‘(5) 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 listed in section 313(a), except the workers’
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compensation and earthquake lines of coverage shall
be excluded for the purposes of setting actuarially
sound rates for hurricanes.
‘‘(6) The term ‘uncollectible reinsurance’ means
reinsurance proceeds due and payable in accordance
with the terms of the reinsurance contract which are
not paid within 12 months of the due date.
‘‘SEC. 813. LINES OF INSURANCE.
‘‘(a) COVERED LINES.—The Director shall provide
reinsurance coverage to private insurers, State workers’
compensation funds and State residual insurance pooling
programs for all of the following lines of insurance appear-
ing in the National Association of Insurance Commis-
sioners Fire and Casualty Annual Statement:
‘‘(1) Fire.
‘‘(2) Allied Lines.
‘‘(3) Farmowners Multiple Peril.
‘‘(4) Homeowners Multiple Peril.
‘‘(5) Commercial Multiple Peril.
‘‘(6) Ocean Marine.
‘‘(7) Inland Marine.
‘‘(8) Earthquake.
‘‘(9) Workers’ Compensation.
‘‘(10) Other Liability.
‘‘(11) Products Liability.
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‘‘(12) Aircraft (All Perils).
‘‘(13) Glass.
‘‘(14) Burglary and Theft.
‘‘(15) Boiler and Machinery.
‘‘(16) Reinsurance.
Reinsurance coverage must be purchased for all covered
lines of insurance and in all affected hurricane, seismic,
or volcanic rating zones in hurricane-prone, earthquake-
prone, or volcanic eruption-prone States with the rates for
such coverage set by the Director, pursuant to section
814.
‘‘(b) OTHER LINES.—The Reinsurance Fund estab-
lished under section 815 shall provide 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 pursu-
ant to section 821 and in consultation with the Federal
Insurance and Reinsurance Advisory Committee estab-
lished under section 822.
‘‘SEC. 814. ACTUARIALLY SOUND RATES.
‘‘(a) ESTABLISHMENT.—Using generally accepted ac-
tuarial principles, the Director shall establish the rates for
the excess reinsurance coverage and adjust the rates when