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‘‘(2) DEPOSITS.—Any income generated from
the investments described in paragraph (1) shall be
deposited, as appropriate, into the primary account
or the reinsurance account.
‘‘(d) FEDERAL LOANS.—
‘‘(1) LENDING AUTHORITY.—To the extent that
the accumulated assets of the Corporation’s trust ac-
counts described in subsection (a) or (b), or funds
raised by issuing obligations in the private market
pursuant to section 901(e)(3)(C), are insufficient to
pay claims and expenses resulting from the primary
insurance coverages or the reinsurance coverage, the
Secretary of Treasury shall provide direct loans from
the Private Loss Account established by section
1002 in sufficient amounts to cover such shortfall in
accordance with this subsection.
‘‘(2) CONDITIONS.—The following conditions
shall apply to any Federal loans provided to the Cor-
poration under this subsection:
‘‘(A) The total amount of outstanding
loans at any given time shall not exceed the ca-
pacity of the Corporation to repay those loans
within 20 years.
‘‘(B) All loans authorized by this sub-
section shall be made under terms and condi-
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tions so that the subsidy cost to the Federal
Government for purposes of title V of the Con-
gressional Budget Act of 1974 (2 U.S.C. 661 et
seq.) is zero at the time the loans are made.
‘‘(C) All loans are subject to such extent
and in such amounts as are provided in appro-
priations Acts.
‘‘(3) REPAYMENT.—
‘‘(A) IN GENERAL.—Consistent with para-
graph (2), any amounts borrowed from, and to
be repaid to, the Federal Government under
this subsection shall be recouped, including in-
terest on the borrowed funds, in addition to fu-
ture rates, respectively, for the primary insur-
ance coverages issued under section 911 and for
the reinsurance coverage provided under section
921.
‘‘(B) INTEREST RATES.—The borrowing by
the Corporation shall be at non-subsidized in-
terest rates determined by the Secretary, taking
into consideration the current average market
yield on outstanding marketable obligations of
the United States of comparable maturities.
‘‘(C) PRIMARY
COVERAGE
REPAYMENT
TERMS.—The Corporation shall require under
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its contractual terms and conditions with pri-
vate insurers acting as service providers of the
primary insurance coverages under section 912
that such private insurers which receive reim-
bursements for qualifying claims under section
914(d) that consist of monies loaned from the
Federal Government or from private sources
under this subsection shall either—
‘‘(i) continue acting as service provid-
ers of such primary insurance coverage at
levels which are at least as great as before
the receipt of such reimbursements until
such borrowed monies, including interest,
are repaid pursuant to subparagraph (A);
or
‘‘(ii) opt to discontinue acting as serv-
ice providers of such primary insurance
coverages, provided such private insurers
satisfy the conditions of withdrawal set by
the Board of the Corporation in the plan
of operation under section 902(a)(4)(D).
‘‘(D) REINSURANCE REPAYMENT TERMS.—
The Corporation shall require under its contrac-
tual terms and conditions with eligible entities
as defined in section 921(b) that such entities
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which receive payments for qualifying claims
under section 922(c) that consist of monies
loaned from the Federal Government or from
private sources under this subsection shall ei-
ther—
‘‘(i) continue to purchase the reinsur-
ance coverage provided under section 921
at levels which are at least as great as be-
fore the receipt of such payments until
such borrowed monies, including interest,
are repaid pursuant to subparagraph (A);
or
‘‘(ii) repay its portion of such bor-
rowed monies, including interest, within a
reasonable period established by the Cor-
poration.
‘‘(4) MITIGATION
PAYMENTS.—Failure of the
Corporation to pay natural disaster hazard mitiga-
tion funds and deposit such funds in the Mitigation
Account as provided in section 1004 shall render the
Corporation ineligible to obtain Federal loans under
this subsection.
‘‘(e) NO CO-MINGLING.—The amounts in the pri-
mary account established in subsection (a) and the rein-
surance account in subsection (b) shall be kept separate.
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The Corporation shall not permit borrowing of monies be-
tween the 2 accounts.
‘‘SEC. 907. NO FEDERAL FUNDS.
‘‘Except for section 906(d), no Federal funds shall
be authorized or appropriated to fund any activity of the
Corporation.
‘‘SEC. 908. GAO AUDIT.
‘‘(a) INITIAL AUDIT.—12 months after the Corpora-
tion starts issuing primary insurance coverages under sec-
tion 911 and providing reinsurance coverage under section
921 the Comptroller General of the United States shall
audit activities of the Corporation and the Natural Disas-
ter Insurance Board of Actuaries established by section
904 to ensure both entities are complying with the provi-
sions of this Act.
‘‘(b) FOLLOW-UP AUDITS.—Following the completion
of the audit described in subsection(a), the Comptroller
General of the United States shall conduct similar audits
at least every 3 years for as long as the Corporation issues
and provides insurance or reinsurance coverages.
‘‘(c) SUBMISSION TO CONGRESS.—The Comptroller
General of the United States shall submit reports of the
audits performed under this section to the Congress.
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‘‘Subtitle B—Primary Insurance
Coverages
‘‘SEC. 911. SCOPE OF COVERAGE.
‘‘(a) GENERAL AUTHORITY.—As a condition of re-
ceiving Federal loans under section 906(d), the Corpora-
tion shall issue primary insurance coverages which shall—
‘‘(1) cover losses to the eligible property de-
scribed in subsection (b) resulting from the natural
disaster perils described in subsection (c); and
‘‘(2) have the terms and conditions described in
section 914.
‘‘(b) ELIGIBILITY PROPERTY.—The primary insur-
ance coverages provided by the Corporation shall insure
against physical damages and losses to residential prop-
erty, including debris removal, additional living expense
incurred as a result of direct damage to the residential
property, and ordinance and law coverages.
‘‘(c) NATURAL DISASTER PERILS COVERED.—The
primary insurance coverages issued by the Corporation
shall cover any damage to the eligible property and related
coverages described in subsection (b) proximately caused
by—
‘‘(1) an earthquake, except for any fire proxi-
mately caused by an earthquake;
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‘‘(2) a volcanic eruption, including any fire
proximately caused by a volcanic eruption;
‘‘(3) a tsunami associated with an earthquake
or volcanic eruption; and
‘‘(4) a hurricane.
‘‘SEC. 912. PROVISION OF COVERAGE.
‘‘(a) TYPE OF POLICY.—The primary insurance cov-
erages described in section 911 shall be supplemental con-
tracts of insurance which shall be issued by the Corpora-
tion in conjunction with standard residential property in-
surance contracts issued by private insurers acting as
service providers.
‘‘(b) PRIVATE INSURERS ACTING AS SERVICE PRO-
VIDERS.—Private insurers which are participating as
members of the Corporation under section 901(b) may act
as service providers by offering the primary insurance cov-
erages described in section 911 according to the terms of
this subsection.
‘‘(1) SEISMIC PERILS.—Private insurers acting
as service providers shall offer the primary insurance
coverages on behalf of the Corporation for the earth-
quake, volcanic eruption, and tsunami perils, as de-
scribed in section 911(c), to all of its residential
property policyholders in earthquake, volcanic erup-