(21) The term ‘‘residential property’’ means—
(A) any 1- to 4-family residential structure
(including mobile or manufactured homes) and
the personal property therein;
(B) any residential structure (including
condominiums, cooperatives, and apartment
structures) containing more than 4 dwelling
units; and
(C) the personal property of occupants of
residential structures containing more than 4
dwelling units.
(22) The term ‘‘residential property insurance
coverage’’ means policies, riders, or endorsements of
insurance that provide indemnity, in whole or in
part, for the loss, destruction, or damage of residen-
tial property and other eligible property as deter-
mined by the Director.
(23) The term ‘‘Self-Sustaining Mitigation
Fund’’ means the Fund established under section
104.
TITLE 
I—PARTICIPATION 
BY
STATES IN ADOPTION OF HAZ-
ARD REDUCTION MEASURES
SEC. 101. IDENTIFICATION OF HURRICANE-PRONE STATES.
(a) INITIAL IDENTIFICATION OF STATES.—
(1) IN GENERAL.—The Director, in consulta-
tion with the National Oceanographic and Atmos-
pheric Administration, other relevant Federal enti-
ties, and meteorological and hurricane experts in the
private sector, shall identify States having an expo-
sure to hurricane perils. The Director shall identify
any areas that are subject to major or moderate
hurricane risks and shall establish such areas as
hurricane zones.
(2) TIMING AND PUBLICATION.—The Director
shall identify such States and zones before the expi-
ration of the 1-year period beginning on the date of
the enactment of this Act, and shall cause a listing
of such States and zones to be published in the Fed-
eral Register and in widely circulated local news-
papers in the applicable States before the expiration
of the 1-year period.
(b) FINAL NOTIFICATION.—Each State identified
under subsection (a) shall be considered to be an hurri-
cane-prone State for purposes of this Act upon the expira-
tion of the 18-month period beginning upon the date of
the enactment of this Act. The Director shall notify the
chief executive officer of each State containing a hurricane
zone established under subsection (a) in writing, before
the expiration of such 18-month period, that the State is
an hurricane-prone State for purposes of this Act.
(c) ONGOING IDENTIFICATION AND NOTIFICATION.—
Based upon any additional meteorological and hurricane
information that from time to time becomes available, the
Director may identify additional areas subject to major
or moderate hurricane risk (not identified under sub-
section (a)) and shall establish any such areas as hurri-
cane zones. Any States containing such zones (that did
not contain any hurricane zones established under sub-
section (a)) shall be considered to be an hurricane-prone
State for purposes of this Act upon the notification of the
chief executive officer of the State, in writing, of the iden-
tification of the State as an hurricane-prone State.
(d) APPEAL.—Any State aggrieved by a final deter-
mination as a hurricane-prone State pursuant to sub-
section (b) or (c), may, after exhausting administrative
remedies, appeal such determination to any United States
district court for a district located within the State, not
more than 60 days after receipt of notice of such deter-
mination. The scope of review by the court shall be as pro-
vided under chapter 7 of title 5, United States Code. Dur-
ing the pendency of any such litigation, all determinations
of the Director shall be effective and final for the purposes
of this Act unless stayed by the court for good cause
shown.
SEC. 102. CRITERIA FOR LOSS-REDUCTION MEASURES.
(a) DEVELOPMENT.—
(1) IN GENERAL.—The Director shall develop
comprehensive loss-reduction criteria for State and
local land use and management ordinances, building
codes, and other loss-reduction measures consistent
with the requirements under subsection (b). The Di-
rector shall periodically update such criteria to re-
flect technical advances designed to reduce losses
from hurricanes.
(2) COORDINATION.—The Director shall de-
velop the loss-reduction criteria in coordination and
consistent with the Robert T. Stafford Disaster Re-
lief and Emergency Assistance Act and any other
relevant Federal laws. In developing the loss reduc-
tion criteria, the Director shall consult other affected
Federal entities, including the National Institute of
Standards and Technology, the National Oceanic
and Atmospheric Administration, representatives of
State and local governments, regional hurricane pre-
paredness organizations, model building code organi-
zations, and insurance industry groups.
(3) SUBMISSION OF DRAFT TO LOSS MITIGA-
TION COMMITTEE.—Not later than the expiration of
the 12-month period beginning on the date of the
enactment of this Act, the Director shall submit a
draft of the loss-reduction criteria to the Loss Miti-
gation Committee established under section 103. Be-
fore issuing any final regulations under paragraph
(4), the Director shall consider any recommenda-
tions made by the Loss Mitigation Committee re-
garding the draft criteria.
(4) REGULATIONS.—Not later than the expira-
tion of the 18-month period beginning on the date
of the enactment of this Act, the Director shall issue
regulations establishing the loss-reduction criteria
under this section, subject to the provisions of sub-
chapter II of chapter 5 of title 5, United States
Code. In issuing final regulations under this para-
graph, the Director shall cause to be published in
the Federal Register a description of any differences
between the recommendations of the Loss Mitigation
Committee and the final regulations (including the
applicability of loss-reduction measures to States
and localities) developed by the Director. The de-
scription shall contain, for each such difference, an
explanation of why the recommendations of the Loss
Mitigation Committee were not included in the final
regulations.
(b) CONTENT.—The comprehensive loss-reduction
criteria established under this section shall include meas-
ures for the reduction of losses from future hurricanes,
as follows:
(1) MANDATORY
INCLUSION.—The Director
shall include in the loss-reduction criteria the follow-
ing loss-reduction measures:
(A) Minimum building standards sufficient
to reduce losses from hurricanes applicable to
new residential property and other buildings lo-
cated in hurricane zones.
(B) Community-based building codes appli-
cable to new residential property, which shall
meet or exceed any minimum hurricane provi-
sions contained in (i) the most recent edition of
the National Building Code, (ii) the most recent
edition of the Standard Building Code, or (iii)
the most recent edition of the Uniform Building
Code.
(2) DISCRETIONARY INCLUSION.—The Director
shall consider and may include in the loss-reduction
criteria established under this section any of the fol-
lowing additional loss-reduction measures:
(A) Community-based building codes which
contain minimum requirements for construction
of new residential property that is located in a
hurricane zone not currently covered by any of
the building codes referred to in paragraph
(1)(B) but identified by the Director as being
located in hurricane-prone States.
(B) Measures to control construction of
buildings in high-risk areas within hurricane
zones.
(C) To the extent practicable, retrofitting
of critical facilities vulnerable to hurricanes.
(D) Inspections before transfer of residen-
tial property (and provision to buyers of inspec-
tion reports) regarding the adequacy of mitiga-
tion measures to reduce damage by hurricanes.
(E) Hurricane preparedness and planning
measures, including—
(i) expanded research and develop-
ment by government and private sector en-
tities of new cost-effective building tech-
nologies for new construction and retro-
fitting of existing buildings;
(ii) educational and promotional cam-
paigns to encourage additional voluntary
mitigation;
(iii) reward-based fiscal incentives,
such as lower property tax assessments,
prohibiting reassessments for retrofitting
which results in increased property values,
or other tax incentives to encourage use of
the most advanced mitigation technology;
(iv) State or community-based efforts
to assist low- and moderate-income house-
holds to purchase needed hurricane insur-
ance and to adopt cost-effective loss-reduc-
tion measures;
(v) improvements in long-term hurri-
cane construction practices, including the
training and licensing of hurricane design
professionals as well as public and private
building inspectors;
(vi) institutional support, training in
hurricane engineering technology and other
disciplines, and staffing to ensure compli-
ance with the community-based building
codes; and
(vii) minimizing damage to public util-
ities, including sewer, gas, electrical and
water systems, and other lifelines, consist-
ent with section 104(b).
(F) Any other mitigation measures, includ-
ing measures suggested by the Loss Mitigation
Committee, that the Director considers appro-
priate.
(c) STANDARD.—The Director may not include any
mitigation measure included in the loss-reduction criteria
established under this section unless the Director deter-
mines that the measure is—
(1) directly related to the risk of loss from hur-
ricanes in areas where residential property is lo-
cated;
(2) sufficiently effective in reducing the risk of
loss from hurricanes to justify any costs to the Fed-
eral Government, State and local governments, and
individual property owners in carrying out or com-
plying with the measure;
(3) practical and workable with respect to the
areas or property to which the measure relates.
(d) TECHNICAL ASSISTANCE.—The Director shall co-
ordinate with and provide technical assistance to States,
interstate, and local officials and agencies to encourage
adoption and enforcement of State and local actions that
incorporate and support the loss-reduction measures de-
veloped by the Director under this section.
SEC. 103. HURRICANE LOSS MITIGATION ADVISORY COM-
MITTEE.
(a) ESTABLISHMENT.—There is hereby established
an independent advisory committee within the executive
branch to be known as the hurricane Loss Mitigation Ad-
visory Committee (in this section referred to as the ‘‘Com-
mittee’’). The Committee, its members, and its functions
shall be separate from the Hurricane Insurance and Rein-
surance Advisory Committee established under section
207. Except as otherwise provided in this section, the
Committee shall be subject to the provisions of the Federal
Advisory Committee Act.
(b) MEMBERSHIP.—
(1) APPOINTED
MEMBERS.—The Committee
shall be composed of 10 members appointed by the
President. The members shall be chosen from among
citizens of the United States who are respected ex-
perts in the field of hurricane loss mitigation, who
shall include—
(A) not less than 2 individuals who are
employed by a State government as an emer-
gency planners;
(B) not less than 2 individuals who are
knowledgeable regarding local community build-
ing codes; and
(C) not less than 2 individuals who is em-
ployed as hurricane engineers.
The President shall provide for geographic diversity
among the members of the Committee and not less
than 5 members shall be individuals who are resi-
dents of hurricane-prone States.
(2) EX
OFFICIO
MEMBER.—Notwithstanding
paragraph (1), the Chairman of the Insurance Com-
mittee shall serve as an ex officio member of the
Loss Mitigation Committee.
(c) VACANCIES.—A vacancy in the Commission shall
be filled in the manner in which the original appointment
was made.
(d) CHAIRMAN.—The President shall designate a
chairman of the Committee from among members selected
for appointment to the Committee.
(e) TIMING.—The President shall appoint the mem-
bers of the Committee not later than 180 days after the
date of the enactment of this Act.
(f) FUNCTIONS.—The Committee shall review the
loss reduction criteria (including the specific loss-reduction
measures) established under section 102. Not later than
90 days after receiving the draft of the loss-reduction cri-
teria under section 102(a)(3), the Committee shall submit
to the Director written comments and recommendations
for any changes to the criteria.
(g) RESPONSIBILITIES OF DIRECTOR.—The Director
shall fully cooperate with the Committee and provide the
Committee with access to personnel and information. The
Committee may request assistance from relevant Federal
agencies as the Committee considers necessary to carry
out its functions.
SEC. 104. SELF-SUSTAINING MITIGATION FUND.
(a) IN GENERAL.—A percentage of the premiums for
hurricane insurance collected under the Primary Insur-
ance Program under title II, as the Director shall des-
ignate, shall be deposited annually in a separate fund to
be known as the Self-Sustaining Mitigation Fund. The
percentage may not exceed 5 percent, unless the Director
determines that the amounts in the Insurance Fund are
sufficient to provide for any probable expected losses from
future hurricanes. Interest on amounts in the Fund shall
be credited to the Fund.
(b) USE.—Amounts in the Self-Sustaining Mitigation
Fund shall be available, to the extent provided in appro-
priation Acts, to the Director to provide assistance to sup-
port the hurricane hazard reduction activities, as follows:
(1) Assistance to States under section 105(c).
(2) Assistance to provide hurricane education
pursuant to subsection (c).
(3) Assistance for research and development on
construction techniques to reduce costs of new con-
struction and retrofitting of existing buildings.
(4) Low-interest loans or grants for the retro-
fitting of critical facilities vulnerable to hurricanes.
(c) HURRICANE EDUCATION PROGRAM.—The Direc-
tor shall provide assistance under this section to support
programs educating the general public on the national di-
mensions of hurricane risk and on methods for home-
owners to reduce the hazards resulting from future hurri-
canes.
SEC. 105. STATE IMPLEMENTATION OF LOSS-REDUCTION
MEASURES.
(a) REQUIREMENTS
FOR COMPLIANCE STATES.—
The Director may certify a hurricane-prone State as a
compliance State for purposes of this Act only if—
(1) before the expiration of the 2-year period
beginning upon the promulgation of final regulations
under section 103 establishing the loss-reduction cri-
teria—
(A) each county and municipality located
in each hurricane zone within the State have
adopted and are enforcing the applicable miti-
gation measures required under the loss-reduc-
tion criteria; and
(B) the chief executive officer of the State
has designated an administrative authority to
coordinate the development and enforcement of
hurricane implementation plans for the State,
which plans comply with the requirements of
the loss-reduction criteria; and
(2) the State submits a certification to the Di-
rector under subsection (b)(1) before the expiration
of such 2-year period and the Director approves
such certification under subsection (c).
(b) STATE CERTIFICATION.—The certification re-
ferred to in subsection (a)(2) shall state that the State
has substantially adopted and is substantially enforcing
the applicable mitigation measures required under the
loss-reduction criteria. In providing the certification, each
State may consult with any relevant private accreditation
and rating organizations approved by the Director.
(c) DETERMINATION OF COMPLIANCE.—
(1) CRITERIA.—The Director shall issue regula-
tions not later than 18 months after the date of the
enactment of this Act establishing criteria for mak-
ing, reviewing, and approving State certifications
under subsection (b).
(2) INITIAL REVIEW.—The Director shall re-
view each certification submitted under subsection
(b) to determine whether it is accurate and whether
the State submitting the certification is substantially
complying with, and enforcing, the applicable mitiga-
tion measures required under the loss-reduction cri-
teria. If, using the criteria established under para-
graph (1), the Director determines that the State
certification is substantially accurate and the State
has adopted and is enforcing the applicable mitiga-
tion measures, the Director shall certify the State as
a compliance State for purposes of this Act.
(3) NONCOMPLIANCE
STATES.—If an hurri-
cane-prone State fails to submit a certification under
subsection (a)(2) or the Director determines under
paragraph (2) or (5) that the State has submitted
an inaccurate certification, has not adopted or en-
forced minimum applicable mitigation measures, or
has failed to acquire recertification as a compliance
State, the Director shall certify the State as a non-
compliance State for purposes of this Act.
(4) REVIEW OF NONCOMPLIANCE.—A State cer-
tified as a noncompliance State pursuant to para-
graph (3) may at any time after such certification
request the Director to review its certification and
compliance, pursuant to which the Director may cer-
tify the States as a compliance State in accordance
with paragraph (2).
(5) PERIODIC REVIEW.—Using the criteria es-
tablished under subsection (1), the Director shall re-
view the compliance with, and enforcement of, the
applicable mitigation measures by each compliance
State not less than once every 2 years and shall
recertify States as compliance States or certify
States as noncompliance States, as appropriate.
(d) ASSISTANCE TO PROMOTE COMPLIANCE.—The
Director shall provide assistance to each compliance State
from amounts in the Self-Sustaining Mitigation Fund
under section 104, to the extent that amounts for such
assistance are made available under appropriation Acts.
The amount of such assistance provided to each State
shall be based on the State’s need for hazard reduction
as measured by the State’s lack of preparedness efforts,
the amount of hurricane insurance premiums collected in
that State under the Primary Insurance Program, and the
State’s risk of future hurricanes. The State shall use any
such financial assistance to support development and im-
plementation of the State’s mitigation plan, including edu-
cation, enforcement, and mitigation economic incentives,
such as low-interest loans for retrofitting.
SEC. 106. INCENTIVE TO PURCHASE HURRICANE COV-
ERAGE IN HURRICANE ZONES.
(a) AVAILABILITY OF FEDERALLY RELATED MORT-
GAGE LOANS.—After the expiration of the 2-year period
beginning upon the promulgation of final regulations
under section 102 establishing the loss-reduction criteria,
no federally related mortgage loan secured by residential
property located in an hurricane zone may be made, in-
creased, extended, or renewed unless the property securing
the loan is insured by hurricane coverage or equivalent in-
surance from a private insurer, in the amount required
under section 203(a)(6). The Director shall determine, in
cooperation with the appropriate Federal agencies, the
methods by which such mortgagors shall be required to
present proof of compliance with the provisions of this
subsection.
(b) EXEMPTION FOR STATE PROPERTIES.—Notwith-
standing subsection (a), hurricane coverage (or equivalent
private coverage) shall not be required for any State-
owned property that is covered under a State policy of self-
insurance adequate in the determination of the Director.
The Director shall publish and periodically revise a list
of States to which this subsection applies.
SEC. 107. EFFECT OF NONCOMPLIANCE WITH STATE MITI-
GATION PROGRAM.
Each Federal agency or instrumentality responsible
for the supervision, approval, regulation, or insuring any
banks, savings and loans associations, or similar institu-
tions shall, by regulation, prohibit such institutions from
making, increasing, extending, or renewing a federally re-
lated mortgage loan secured by improved real estate or
a mobile home located or to be located in a hurricane-
prone State, if—
(1) the State in which the property is located
has been certified as a noncompliance State under
section 105; and
(2) a presale inspection of the property securing
the loan—
(A) indicates that the property does not
meet the mitigation measures under the loss-re-
duction criteria that would apply to the prop-
erty if the State were a compliance State; or
(B) has not been conducted.
SEC. 108. COORDINATION WITH OTHER PROGRAMS.
In carrying out this Act, the Director shall consult
with other departments and agencies of the Federal Gov-
ernment, and with interstate, State and local agencies hav-
ing responsibilities regarding hurricanes, to ensure that
the programs of such agencies and the Primary Insurance
Program are mutually consistent.
SEC. 109. ANNUAL REPORT.
The Director shall include in the annual report sub-
mitted to the President and the Congress pursuant to sec-
tion 2–105 of Executive Order No. 12148 (50 U.S.C. App.
2251; relating to the Federal Emergency Management
Agency), a description of the activities carried out under
this Act and an evaluation of any progress achieved in
such activities during the preceding year.
SEC. 110. REGULATIONS.
(a) DIRECTOR.—The Director may issue any regula-
tions necessary to carry out this Act, pursuant to the pro-
visions of subchapter II of chapter 5 of title 5, United
States Code.
(b) FEDERAL AGENCIES.—Each Federal agency or
instrumentality responsible for the supervision, approval,
regulation, or insuring of banks, savings and loan associa-
tions, or similar institutions, shall, in consultation with the
Director, issue any regulations necessary to carry out the
responsibilities of the agency under this Act, pursuant to
the provisions of subchapter II of chapter 5 of title 5,
United States Code.
TITLE 
II—NATIONAL 
HURRI-
CANE INSURANCE PROGRAM
SEC. 201. AUTHORITY AND ORGANIZATION.
(a) ESTABLISHMENT.—To carry out the purposes of
this Act, the Director shall establish and carry out a na-
tional hurricane insurance program to provide insurance
against loss resulting from physical damage to or loss of
real property or personal property related thereto, in the
United States, arising from any hurricane.
(b) IMPLEMENTATION.—In carrying out the Primary
Insurance Program, the Director shall arrange for partici-
pation, on other than a risk-sharing basis, by private in-
surers, insurance agents and brokers, insurance adjust-
ment organizations, and other persons. The Director may
take any actions reasonably necessary and appropriate to
carry out this title, including the making of contracts, the
employment and compensation of persons, and the acquisi-
tion of real and personal property.
(c) INSURANCE PRACTICES.—Any actions of the Di-
rector under this title shall be consistent with standard
insurance practices and generally accepted accounting, ac-
tuarial, and underwriting principles.
(d) JURISDICTION OF COURTS.—Any actions by or
against the Director (or employees of the Federal Emer-
gency Management Agency) in connection with activities
under this title shall be brought in the appropriate district
court of the United States, except that any action by an
insurer or reinsurer against the Director (or employees of
the Federal Emergency Management Agency) shall be
brought in the United States District Court for the Dis-
trict of Columbia.
(e) PLAN OF OPERATION.—
(1) DEVELOPMENT.—The Director shall de-
velop a plan of operation under this subsection to
ensure the fair, reasonable, and equitable adminis-
tration of the Insurance Fund, the Reinsurance
Fund, and other activities under this Act.
(2) CONTENTS.—The plan of operation shall set
forth the specific policy and programmatic details
for operating the Primary Insurance Program and
the Reinsurance Program, and shall include (A) all
guidelines, criteria, definitions, clarifications, and
procedures necessary to carry out this Act, (B) pro-
cedures for implementing the mitigation incentives
under section 206, and (C) standards for insurers to
retain expense allowances from premiums collected
under this title.
(3) STUDY OF LOW-INCOME RATES.—In devel-
oping the plan of operation, the Director shall con-
sider options for charging less than actuarial rates
for residential property occupied by low-income pol-
icyholders and may include in the plan any option
the Director considers necessary, appropriate, and
practicable, subject to the requirements under sec-
tion 205(b).
(4) SUBMISSION OF DRAFT TO INSURANCE COM-
MITTEE.—Not later than the expiration of the 12-
month period beginning on the date of the enact-
ment of this Act, the Director shall submit a draft
of the plan of operation to the Insurance Committee
established under section 207. Before issuing any
proposed regulations under paragraph (5), the Di-
rector shall consider any recommendations made by
the Insurance Committee regarding the draft plan of
operation.
(5) REGULATIONS.—
(A) PROPOSED REGULATIONS.—Not later
than the expiration of the 18-month period be-
ginning on the date of the enactment of this
Act, the Director shall issue proposed regula-
tions establishing the plan of operation under
this subsection, subject to the provisions of sub-
chapter II of chapter 5 of title 5, United States
Code. In issuing proposed regulations under
this paragraph, the Director shall cause to be
published in the Federal Register a description
of any differences between the recommendations
of the Insurance Committee and the proposed
regulations (including the guidelines, criteria,
definitions, clarifications, and procedures under
the plan) developed by the Director. The de-
scription shall contain, for each such difference,
an explanation of why the recommendations of
the Insurance Committee were not included in
the proposed regulations.
(B) COMMENTS.—Upon issuance of the
proposed regulations under subparagraph (A),
the Director shall request comments from the
Insurance Committee regarding any changes to
the regulations.
(C) FINAL REGULATIONS.—Not later than
6 months after issuance of the proposed regula-
tions, the Director shall issue final regulations
establishing the plan of action.
(D) 
SUBSEQUENT
CHANGES.—Any
changes to the plan of operation after issuance
of the final regulations containing the plan
under subparagraph (C) shall be made pursu-
ant to regulations issued in the manner pro-
vided in subparagraphs (B) through (C).
SEC. 202. SCOPE OF PROGRAM.
(a) RESIDENTIAL PROPERTIES.—In carrying out the
Primary Insurance Program, the Director shall make hur-
ricane coverage available only for residential property. The
Director shall make such coverage available in hurricane-
prone States.
(b) ADDITIONAL TYPES OF PROPERTIES.—If, on the
basis of studies and investigations undertaken and carried
out and information received or exchanged under section
204, and such other information as may be necessary, the
Director determines that it would be feasible to extend the
Primary Insurance Program to cover property other than
residential property, the Director may recommend to Con-
gress that hurricane coverage under this title be made
available to cover any types and classes of—
(1) other properties in residential areas;
(2) small business properties that are owned or
leased and operated by small business concerns;
(3) religious properties;
(4) agricultural properties;
(5) properties occupied by primary nonprofit or-
ganizations; and
(6) properties owned by State and local govern-
ments and agencies thereof.
SEC. 203. TERMS AND LIMITATIONS OF INSURANCE COV-
ERAGE.
(a) TERMS.—Pursuant to the plan of operation es-
tablished under section 201(e) and after consultation with
the Insurance Committee, the Director shall establish, by
regulation, the general terms and conditions of insurability
for properties eligible for residential property insurance
coverage under section 202. Such regulations shall meet
the requirements of this section and may include—
(1) the type and locational classification of such
eligible properties;
(2) the nature of damage that may be covered
by such insurance;
(3) appropriate minimum premiums;
(4) appropriate loss-deductibles including vari-
able deductibles based on the existence of loss-reduc-
ing measures that affect the risk of loss;
(5) appropriate limits on coverage for each clas-
sification of eligible properties;
(6) appropriate minimum coverage amounts
pursuant to section 106(a) for each classification of
eligible properties, which may not be less than the
outstanding principal balance of the mortgage loan
securing the property or the maximum coverage
limit for the property under paragraph (5), which-
ever is less; and
(7) any other terms and limitations relating to
such residential property insurance coverage that
may be necessary to carry out the purposes of this
title.
(b) LIMITATIONS.—Hurricane coverage under this
title shall cover any damage to covered eligible property
proximately caused by an hurricane and shall include cov-
erage for debris removal and additional living expenses in-
curred as a result of direct damage to the premises by
hurricane.
(c) ELIGIBILITY OF COVERAGE.—Any private insurer
issuing residential property insurance coverage in hurri-
cane-prone States may provide the coverage under this
title, on behalf of the Federal Government, to residential
property policyholders of the insurer. Any private insurer
electing to participate in the Primary Insurance Program
shall make coverage available to all residential property
policyholders of the insurer in hurricane-prone States. Any
private insurer electing to purchase the excess reinsurance
coverage pursuant to title III shall make the coverage
available, on behalf of the Federal Government, or at
equivalent coverage and rates on their own behalf, to all
residential property policyholders of the insurer.
SEC. 
204. 
ESTABLISHMENT 
OF 
ACTUARIAL 
PREMIUM
RATES.
(a) DETERMINATION
AND
ESTABLISHMENT
OF
RATES.—The Director may undertake and carry out any
studies and investigations and receive and exchange any
information necessary to establish, and shall from time to
time establish and prescribe, by regulation, on a State,
territorial, or other appropriate basis, actuarial premium
rates for types of classes of property eligible for residential
property insurance coverage and the terms and conditions
under which such rates apply.
(b) ARRANGEMENTS FOR SERVICES.—In carrying out
such studies, the Director shall consult with the Loss Miti-
gation Committee and the Insurance Committee and may
enter into contracts, agreements, or other arrangements
to utilize the services of the National Oceanic and Atmos-
pheric Administration and other relevant Federal, State,
and local governmental agencies, and other persons.
(c) CONSIDERATIONS.—The Director shall establish
actuarial rates under this section based on—
(1) considerations of the risks involved, includ-
ing—
(A) the severity and frequency of hurri-
canes by hurricane zone and States in which
the insured property is located, including known
differences in meteorological conditions;
(B) the value of the insured property;
(C) the age of the structures located on
the insured property;
(D) the construction type of the structures
located on the insured property;
(E) the architectural type of the structures
located on the insured property;
(F) hurricane loss-reduction measures (in-
cluding measures described in section 102) em-
ployed in the construction or retrofitting of resi-
dential property structures; and
(G) any other criteria the Director consid-
ers appropriate; 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, and that provide for adequate reserves.
(d) LIMITATION.—Any rate classification system
used by the Director to establish actuarial rates under this
section shall be cost-effective and shall not impose costs
for the initial establishment or the subsequent administra-
tion of the rate plan that are disproportionate to the size
of the insurance premiums.
SEC. 205. CHARGEABLE PREMIUM RATES.
(a) ESTABLISHMENT.—On the basis of actuarial
rates established under section 204 and any other infor-
mation available to the Director, the Director shall from
time to time, and after consultation with the Loss Mitiga-
tion Committee and the Insurance Committee, establish
and prescribe, by regulation—
(1) chargeable premium rates for any types and
classes of properties eligible for hurricane coverage;
and
(2) the terms and conditions under which such
rates shall apply.
(b) MINIMIZATION
OF CROSS-SUBSIDIZATION.—To
the maximum extent practicable and except as provided
in subsection (c), chargeable premium rates shall be actu-
arial rates over an extended period of time and shall result
in a minimum of cross-subsidization by reasonably reflect-
ing the risk of damaging hurricanes in total and for each
subclassification of policyholders. In setting and adjusting
chargeable rates under this section, the Director shall pro-
vide that, over an extended period of time, expected ex-
penditures from the Insurance Fund under section 208(c)
do not exceed expected receipts of the Fund under section
208(b).
(c) LOW-INCOME RATES AND MITIGATION INCEN-
TIVES.—Pursuant to the plan of operation established
under section 201(e), the Director may establish charge-
able rates under this section for residential property occu-
pied by low-income residents and residential property de-
scribed in section 206(4), that are less than the actuarial
rates established under section 204, but only to the extent
that such rates do not prevent compliance with the last
sentence of subsection (b).
SEC. 206. MITIGATION INCENTIVES.
In providing hurricane coverage pursuant to the plan
of operation, the Director shall provide for the following
mitigation incentives:
(1) Charging lower deductible amounts for such
coverage for any residential property meeting the
hurricane building standards established under the
loss-reduction criteria.
(2) Requiring under such coverage that repairs
to residential property sustaining hurricane damage
in excess of the deductible include, at a minimum,
such mitigation measures as the Director determines
appropriate to protect against further damage by
hurricanes.
(3) Requiring under such coverage that residen-
tial property suffering damage in an amount greater
than 50 percent the replacement value of the prop-
erty shall be rebuilt to at least the minimum stand-
ards required under the loss-reduction criteria under
section 102 and applicable to the State.
(4) Charging lower premiums or deductible
amounts for such coverage for any residential prop-
erty located in a hurricane zone in an hurricane-
prone State that passes an hurricane inspection that
is required as a condition of sale, paid for by the
seller, and meets the requirements of section
102(b)(2)(F).
SEC. 207. HURRICANE INSURANCE AND REINSURANCE AD-
VISORY COMMITTEE.
(a) ESTABLISHMENT.—There is hereby established
an independent advisory committee within the executive
branch to be known as the Hurricane Insurance and Rein-
surance Advisory Committee. The Insurance Committee,
its members, and its functions shall be separate from the
Loss Mitigation Committee established under section 103.
Except as otherwise provided in this section, the Commit-
tee shall be subject to the provisions of the Federal Advi-
sory Committee Act.
(b) MEMBERSHIP.—
(1) APPOINTED
MEMBERS.—The Insurance
Committee shall be composed of 5 members ap-
pointed by the President. The members shall be cho-
sen from among citizens of the United States and
shall include—
(A) 2 individuals who represent the inter-
ests of private insurers;
(B) 1 individual who represents the inter-
ests of private reinsurers;
(C) 1 individual who represents the inter-
ests of insurance agents; and
(D) 1 individual who is a State insurance
regulator.
(2) EX
OFFICIO
MEMBER.—Notwithstanding
paragraph (1), the Chairman of the Loss Mitigation
Committee under section 103 shall serve as an ex
officio member of the Insurance Committee.
(c) VACANCIES.—A vacancy in the Insurance Com-
mittee shall be filled in the manner in which the original
appointment was made.
(d) CHAIRMAN.—The President shall designate a
chairman of the Insurance Committee from among mem-
bers selected for appointment to the Committee.
(e) TIMING.—The President shall appoint the mem-
bers of the Insurance Committee not later than 180 days
after the date of the enactment of this Act.
(f) FUNCTIONS.—The Insurance Committee shall re-
view the draft plan of operation established under section
201(e). Not later than 120 days after receiving the draft
plan of operation, the Committee shall submit to the Di-
rector written comments and recommendations for any
changes to the plan. After final regulations establishing
the plan of operation have been issued, the Committee
shall submit a written report not less than once every 180
days to the Director and the Congress evaluating the oper-
ations of the Primary Insurance Program and the Rein-
surance Program and making recommendations for any
actions relating to such programs. The Committee shall
respond as soon as practicable to all requests of the Direc-
tor made pursuant to subsection (g) or section
201(e)(5)(B).
(g) RESPONSIBILITIES OF THE DIRECTOR.—The Di-
rector shall fully cooperate with the Insurance Committee
and provide the Committee with access to personnel and
information as the Committee considers necessary to carry
out its functions. The Director shall request comments
from the Committee on any questions regarding operation
of the Primary Insurance Program or Reinsurance Pro-
gram.
SEC. 208. RESIDENTIAL PROPERTY INSURANCE FUND.
(a) ESTABLISHMENT.—There is hereby established in
the Treasury of the United States the Residential Prop-
erty Insurance Fund for the purpose of carrying out the
Primary Insurance Program.
(b) CREDITS.—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 104) and interest earned on pre-
miums, as provided in subsection (e) of this section;
(2) any amounts borrowed under section 209;
(3) any amounts appropriated to the Insurance
Fund; and
(4) any interest earned on amounts invested
under subsection (d).
(c) USES.—Amounts in the Insurance Fund shall be
available for—
(1) payments for losses and loss adjustment ex-
penses under subsection (f);
(2) payments for insurance company expense
allowances paid (including agents’ commissions,
State premium taxes, and companies’ administration
expenses);
(3) administrative expenses of the Primary In-
surance Program; and
(4) interest payments on amounts borrowed
under section 209 for additional losses, if any.
(d) INVESTMENT.—The Director may request the
Secretary of Treasury to invest any amount in the Insur-
ance Fund in obligations issued or guaranteed by the
United States, as the Director considers appropriate.
(e) INSURANCE PAYMENTS.—Private insurers issuing
hurricane coverage shall remit the premiums collected, less
the insurers’ expense allowances, to the Director on a
quarterly basis not later than 30 days after the end of
the calendar quarter, in accordance with procedures pre-
scribed in the plan of operation. Any premiums collected
and to be submitted to the Director shall be deposited in
a separate, interest-bearing account established by the in-
surer and any interest collected on any such account shall
be remitted to the Director with the premiums on a quar-
terly basis.
(f) REIMBURSEMENT OF INSURERS.—
(1) REQUIREMENT AND PROCEDURE.—The Di-
rector shall reimburse private insurers providing
hurricane coverage from amounts made available
from the Insurance Fund. Reimbursement shall be
made for all claim payments in an amount up to and
including the policy limits of coverage and for all
loss adjustment expenses paid as a result of hurri-
canes, as follows:
(A) The Director shall reimburse insurers
for all claim payments and loss adjustment ex-
pense payments made pursuant to obligations
of the Federal Government. To the extent that
reimbursement is obtained by private insurers
for losses also covered under the Excess Rein-
surance Program, the insurer shall reimburse
the Insurance Fund accordingly.
(B) If the gross reimbursements exceed
amounts available in the Insurance Fund, a
combination of amounts borrowed from the in-
dustry under subparagraph (C) and amounts
borrowed from the Treasury of the United
States under section 209 shall cover the addi-
tional losses.
(C) The industry share under subpara-
graph (B) shall be equivalent to 20 percent of
the additional losses. Each private insurer issu-
ing hurricane coverage shall be assessed for the
industry participation in the additional losses
based upon the proportion that such insurer’s
written premiums for hurricane coverage in
each State in which the hurricane events oc-
curred bear to the total written premiums for
hurricane coverage from all insurers in each
State in which the same events occurred, based
on the most recently published annual report of
the Federal Emergency Management Agency.
Assessments under this subparagraph may be
reinsured under title III.
(2) REGULATIONS.—The Director shall 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
hurricane coverage. The claim practices of the Insur-
ance Fund shall be subject to, and conform with,
any applicable State insurance unfair trade practices
statutes. Judicial review of a decision of the Director
regarding reimbursement of a private insurer shall
be available pursuant to section 201(d).
(g) OBLIGATIONS.—Any hurricane insurance cov-
erage provided under the Primary Insurance Program
shall constitute an obligation, in accordance with the pro-
visions of this title, of the United States. The full faith
and credit of the United States is hereby pledged for the
full payment and performance of such obligations, subject
to the provisions of subsection (f)(1)(C). The private in-
surers participating in the program shall bear no risk and
shall assume no liability for the hurricane coverage pro-
vided through the program except as provided in sub-
section (f)(1)(C).
(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
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. 209. BORROWING FROM TREASURY.
(a) AUTHORITY.—To the extent that the accumulated
assets, including any return on investments, in the Insur-
ance Fund are insufficient to pay claims and expenses,
the Director shall issue, from time to time, to the Sec-
retary of the Treasury, notes and other obligations to
cover the insufficiency. The amounts of such obligations
outstanding 
at 
any 
one 
time 
shall 
not 
exceed
$25,000,000,000 (or such greater amount as may be ap-
proved by the President).
(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-