I 
109TH CONGRESS 
1ST SESSION 
H. R. 846 
To establish a Federal program to provide reinsurance to improve the 
availability of homeowners’ insurance. 
IN THE HOUSE OF REPRESENTATIVES 
FEBRUARY 16, 2005 
Ms. GINNY BROWN-WAITE of Florida (for herself, Mr. DAVIS of Florida, Mr. 
SHERMAN, Ms. ROS-LEHTINEN, Mr. LARSEN
of Washington, Ms. 
BORDALLO, Mr. LEWIS of Georgia, Mr. WELDON of Florida, Ms. 
HOOLEY, Mr. WOLF, Ms. WASSERMAN SCHULTZ, Mr. BILIRAKIS, Mr. 
GENE GREEN of Texas, and Mr. FEENEY) introduced the following bill; 
which was referred to the Committee on Financial Services 
A BILL 
To establish a Federal program to provide reinsurance to 
improve the availability of homeowners’ insurance. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE AND TABLE OF CONTENTS. 
(a) SHORT TITLE.—This Act may be cited as the 
‘‘Homeowners’ Insurance Availability Act of 2005’’. 
(b) TABLE OF CONTENTS.—The table of contents for 
this Act is as follows: 
Sec. 1. Short title and table of contents. 
Sec. 2. Program authority. 
Sec. 3. Qualified lines of coverage.
Sec. 4. Covered perils. 
Sec. 5. Auction of contracts for reinsurance coverage. 
Sec. 6. Minimum level of retained losses and maximum Federal liability. 
Sec. 7. Disaster Reinsurance Fund. 
Sec. 8. National Commission on Catastrophe Risks and Insurance Loss Costs. 
Sec. 9. Definitions. 
Sec. 10. Regulations. 
Sec. 11. Termination. 
Sec. 12. Annual study of cost and availability of disaster insurance and pro-
gram need. 
SEC. 2. PROGRAM AUTHORITY. 
(a) IN GENERAL.—The Secretary of the Treasury 
shall carry out a program under this Act to make reinsur-
ance coverage available through contracts for reinsurance 
coverage under section 5, which shall be made available 
for purchase by purchasers under section 5(a)(1) only 
through auctions under section 5(a). 
(b) PURPOSE.—The program shall be designed to 
make reinsurance coverage under this Act available to im-
prove the availability of homeowners’ insurance for the 
purpose of facilitating the pooling, and spreading the risk, 
of catastrophic financial losses from disasters and to im-
prove the solvency of homeowners’ insurance markets. 
(c) CONTRACT PRINCIPLES.—Under the program 
under this Act, the Secretary shall offer reinsurance cov-
erage through contracts with covered purchasers, which 
contracts— 
(1) shall not displace or compete with the pri-
vate insurance or reinsurance markets or capital 
markets;
(2) shall minimize the administrative costs of 
the Federal Government; and 
(3) shall provide coverage based solely on in-
sured losses within the region established pursuant 
to section 5(a) for which the auction is held. 
SEC. 3. QUALIFIED LINES OF COVERAGE. 
Each contract for reinsurance coverage made avail-
able under this Act shall provide insurance coverage 
against residential property losses to homes (including 
dwellings owned under condominium and cooperative own-
ership arrangements) and the contents of apartment 
buildings. 
SEC. 4. COVERED PERILS. 
Each contract for reinsurance coverage made avail-
able under this Act shall cover losses that are proximately 
caused by— 
(1) earthquakes; 
(2) perils ensuing from earthquakes, including 
fire and tsunamis; and 
(3) tropical cyclones having maximum sustained 
winds of at least 74 miles per hour, including hurri-
canes and typhoons. 
The Secretary shall, by regulation, define the disaster per-
ils under this section.
SEC. 5. AUCTION OF CONTRACTS FOR REINSURANCE COV-
ERAGE. 
(a) AUCTION PROGRAM REQUIREMENTS.—The Sec-
retary shall carry out a program to auction contracts for 
reinsurance coverage under this Act made available pursu-
ant to section 2(a), which shall comply with the following 
requirements: 
(1) PURCHASERS.—The auction program shall 
provide for auctioning all contracts made available 
under this section to private insurers and reinsurers, 
State insurance and reinsurance programs, and 
other interested entities. 
(2) REGIONAL
AUCTIONS.—The auction pro-
gram shall provide for auctions on a regional basis. 
The Secretary shall divide the States into not less 
than 6 regions for the purpose of holding such re-
gional auctions, which shall include separate regions 
for all or part of the State of California and all or 
part of the State of Florida. In determining the 
boundaries for such regions, the Secretary shall con-
sider which areas have greater risks of losses from 
covered perils and which areas have lesser risks of 
losses from covered perils, and shall attempt not to 
combine those different types of areas. Auctions for 
each region shall be conducted not less often than 
annually.
(3) RESERVE PRICE.—In auctioning contracts 
under this section for reinsurance coverage, the Sec-
retary shall set, for each contract, a reserve price 
that is the minimum price at which the contract may 
be sold, based upon the recommendations of the 
Commission. The reserve price shall be determined 
on the basis of the following components: 
(A) RISK-BASED
PRICE.—A risk-based 
price, which shall reflect the anticipated 
annualized payout of the contract according to 
the actuarial analysis and recommendations of 
the Commission. 
(B) RISK
LOAD.—A risk load in an 
amount that is not less than the risk-based 
price under subparagraph (A). 
(C) ADMINISTRATIVE COSTS.—A sum suf-
ficient to provide for the operation of the Com-
mission and the administrative expenses in-
curred by the Secretary in carrying out this sec-
tion. 
(D) MITIGATION.—An adjustment based 
on an actuarial analysis that takes into account 
any efforts that are being made to reduce losses 
to property in the region in which the contract 
is being sold.
(4) PRICE GOUGING PROTECTIONS.—The auc-
tion program may provide reinsurance coverage for 
losses incurred only for property located in a State 
for which the State entity authorized to make such 
determinations has certified to the Secretary that 
there are in effect, in such State, laws or regulations 
sufficient to prohibit price gouging, during the term 
of such reinsurance coverage, in any disaster area 
located within the State. 
(5) MITIGATION REQUIREMENTS.— 
(A) IN GENERAL.—The auction program 
shall require each purchaser of a contract, as a 
condition of such purchase, to contribute an 
amount, that the Secretary (in consultation 
with the Director of the Federal Emergency 
Management Agency) shall establish and which 
shall not exceed 5 percent of the price paid for 
the contract, to communities that— 
(i) are located in the State in which 
the reinsurance coverage under the con-
tract is provided (or in the case of multiple 
States, among such States, as determined 
by the Secretary); 
(ii) are designated by the Director of 
the 
Federal 
Emergency 
Management
Agency and the appropriate emergency 
management agency for the State as 
Project Impact communities (for purposes 
of the pre-disaster mitigation program of 
such Agency); and 
(iii) are participating in such pro-
grams or initiatives as the Secretary may 
require that provide incentives for con-
struction of structures and communities 
that are resistant to damage from covered 
perils, which shall include the Building 
Code Effectiveness Grading Schedule of 
the Insurance Services Office. 
(B) USE
OF
CONTRIBUTIONS.—Amounts 
contributed to communities pursuant to the re-
quirement under subparagraph (A) shall be 
used only— 
(i) for activities to reduce losses from 
covered perils to properties covered under 
the reinsurance contract purchased under 
the auction program that are located in 
such communities; and 
(ii) in accordance with such require-
ments as the Secretary, in consultation 
with the Director of the Federal Emer-
gency Management Agency and appro-
priate State agencies, shall establish to en-
sure cost-effective use of such amounts. 
(C) ALLOCATION.—The Secretary, in con-
sultation with the Director of the Federal 
Emergency Management Agency, shall establish 
requirements for allocation of contributions 
among communities eligible under subpara-
graph (A) to receive such contributions. 
(6) OTHER
REQUIREMENTS.—The Secretary 
may establish such other requirements for the auc-
tion program as the Secretary considers necessary to 
carry out this Act. 
(b) CONTRACT TERMS AND CONDITIONS.—Each con-
tract for reinsurance coverage under this Act shall include 
the following terms and conditions: 
(1) MATURITY.—The term of each such con-
tract shall not exceed 1 year or such other term as 
the Secretary may determine. 
(2) TRANSFERABILITY.—The contract shall at 
all times be fully transferable, assignable, and divis-
ible. 
(3) THRESHOLD OF COVERAGE.—The contract 
shall provide that the covered purchaser may receive 
a payment for losses covered under the contract if,
under a process specified in the contract, the Sec-
retary determines that the insurance industry will, 
as a result of a single event of a covered peril, incur 
losses within the coverage area for the region estab-
lished under subsection (a)(2) for which the contract 
was auctioned that are covered by one or more lines 
of insurance under section 4 in an aggregate 
amount, for such event, greater than the level of re-
tained losses specified in section 6. 
(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 (3) 
shall apply to each event. 
(5) 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 section 6, at the prices 
at which such contracts were offered at the begin-
ning of the term, prorated based upon the remaining 
term as determined by the Secretary. Such addi-
tional 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. 
(6) SUBMISSION OF INFORMATION.—The con-
tract shall include terms that— 
(A) require the purchaser to notify the 
Secretary of any sale, transfer, assignment, or 
division of the contract or any interest in the 
contract, identify the interest involved, and 
identify the price paid or compensation pro-
vided; and 
(B) authorize the disclosures required 
under subsection (c)(2). 
(7) OTHER TERMS.—The contract shall contain 
such other terms as the Secretary considers nec-
essary to carry out this Act and to ensure the long- 
term financial integrity of the program under this 
Act. 
(c) GAO AUDIT.— 
(1) IN
GENERAL.—For each fiscal year, the 
Comptroller General of the United States shall con-
duct an audit of prices for contracts made available 
under the auction program under this section during 
such fiscal year that determines—
(A) the reserve prices established for such 
contracts; 
(B) the prices paid for such contracts that 
are purchased; 
(C) the prices paid, or compensation pro-
vided, in any sales, transfers, assignments, or 
divisions of any such contracts (or any interests 
in such contracts) in the secondary market or 
to any third party; and 
(D) pursuant to the information obtained 
under subparagraphs (A) through (C), the ap-
propriate reserve prices for such contracts that 
are to be made available in the succeeding fiscal 
year. 
(2) USE
OF
INFORMATION.—The Secretary 
shall provide any information referred to in sub-
section (b)(6) that is obtained by the Secretary to 
the Comptroller General, the Director of the Con-
gressional Budget Office, and the Director of the Of-
fice of Management and Budget, and shall make 
such information publicly available. The Secretary, 
the Director of the Congressional Budget Office, the 
Director of the Office of Management and Budget 
shall each take such information into consideration 
in preparing any budget, report, estimate, or rec-
ommendation to the extent it relates to the auction 
program under this section, and in any determina-
tions relating to the Budget of the United States or 
the concurrent resolution on the budget (as such 
term is defined in section 3 of the Congressional 
Budget Act of 1974). The Secretary shall take such 
information into consideration in establishing reserve 
prices for contracts made available under this sec-
tion. 
(d) PRIVATE SECTOR RIGHT TO PARTICIPATE.— 
(1) ESTABLISHMENT OF COMPETITIVE PROCE-
DURE.—The Secretary shall establish, by regulation, 
a competitive procedure under this subsection that 
provides qualified entities an opportunity, on a basis 
consistent with the regional auction procedure and 
contract cycle established under this section by the 
Secretary, to offer to provide, in lieu of reinsurance 
coverage under this Act made available by the Sec-
retary, reinsurance coverage that is substantially 
similar to such coverage. 
(2) COMPETITIVE
PROCEDURE.—Under the 
procedure established under this subsection— 
(A) the Secretary shall establish criteria 
for private insurers, reinsurers, and capital 
market companies, and consortia of such enti-
ties to be treated as qualified entities for pur-
poses of this subsection, which criteria shall re-
quire 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 credit rating standards as the Secretary 
considers appropriate; 
(B) not less than 30 days before the begin-
ning of each regional auction during which any 
reinsurance coverage under this Act is to be 
made available, the Secretary shall publish in 
the Federal Register the reserve prices and 
terms for contracts for such reinsurance cov-
erage that are to be made available during the 
auction; 
(C) the Secretary shall provide qualified 
entities a period of not less than 10 days (which 
shall terminate not less than 20 days before the 
beginning of the auction) to submit to the Sec-
retary a written expression of interest in pro-
viding reinsurance coverage in lieu of the cov-
erage otherwise to be made available under this 
Act by the Secretary; 
(D) the Secretary shall provide any quali-
fied entity submitting an expression of interest
during the period referred to in subparagraph 
(C) a period of not less than 20 days (which 
shall terminate before the commencement of the 
auction) to submit to the Secretary an offer to 
provide, in lieu of the reinsurance coverage 
under this Act otherwise to be made available 
under an auction under this section, coverage 
that is substantially similar to such coverage; 
(E) if the Secretary determines that an 
offer submitted during the period referred to in 
subparagraph (D) is a bona fide offer to pro-
vide reinsurance coverage to be made available 
during the auction for the same contract cycle 
and at a reserve price and terms that are sub-
stantially similar to the reserve price and terms 
for reinsurance coverage otherwise to be made 
available at the auction under this section by 
the Secretary, the Secretary shall accept the 
offer (if still outstanding) and, notwithstanding 
any other provision of this Act, provide that the 
reinsurance coverage provided by such entity in 
accordance with the offer shall be made avail-
able at the auction; and 
(F) if the Secretary accepts an offer pur-
suant to subparagraph (E) to make reinsurance
coverage available at the auction, notwith-
standing any other provision of this Act, the 
Secretary shall reduce, to an equivalent extent, 
the amount of reinsurance coverage otherwise 
to be made available under this Act by the Sec-
retary at the auction, unless and until the Sec-
retary determines that the entity is not com-
plying with the terms of the accepted offer. 
SEC. 6. MINIMUM LEVEL OF RETAINED LOSSES AND MAX-
IMUM FEDERAL LIABILITY. 
(a) AVAILABLE LEVELS OF RETAINED LOSSES.—In 
making reinsurance coverage available under this Act, the 
Secretary shall make available for purchase contracts for 
such coverage that require the sustainment of retained 
losses from a single event of a covered peril (as required 
under section 5(b)(3) for payment of eligible losses) in var-
ious amounts, as the Secretary, in consultation with the 
Commission, determines appropriate and subject to the re-
quirements under subsection (b) of this section. 
(b) MINIMUM LEVEL OF RETAINED LOSSES.— 
(1) CUMULATIVE
AMOUNT.—Subject to para-
graphs (2), (3), and (4) and notwithstanding any 
other provision of this Act, a contract for reinsur-
ance coverage may not be made available or sold 
under section 5 through a regional auction unless
the contract requires that the insurance industry in 
the region for which the auction was conducted sus-
tains a cumulative amount of retained losses (in cov-
ered lines resulting from covered perils) of not less 
than an amount, determined by the Secretary in 
consultation with the Commission, that is in the 
range between the amount equal to the eligible loss 
projected to be incurred once every 100 years from 
a single event in the region and the amount equal 
to the eligible loss projected to be incurred once 
every 250 years from such an event. 
(2) INITIAL ADJUSTMENT BASED ON PRIVATE 
MARKET.—The Secretary may, before making con-
tracts for reinsurance coverage under this Act ini-
tially available under section 5, raise the minimum 
level of retained losses from the amount required 
under paragraph (1) for a region to ensure, as de-
termined by the Secretary, that such contracts com-
ply with the principle under section 2(c)(1). 
(3) ANNUAL
ADJUSTMENT.—The Secretary 
may annually raise the minimum level of retained 
losses established under paragraph (1) for a region 
to reflect, as determined by the Secretary—
(A) changes in the capacity of public rein-
surance programs or the private insurance and 
reinsurance market; 
(B) increases in the market value of prop-
erties; or 
(C) such other situations as the Secretary 
considers appropriate. 
The Secretary shall consider the minimum level of 
retained losses requirement in paragraph (1) as a 
minimum requirement only and shall have full au-
thority, effective on the date of the enactment of this 
Act, to establish levels of required minimum retained 
losses in any amount greater than the amounts spec-
ified in such paragraph. In making any determina-
tion under this paragraph in the minimum level of 
retained losses, the Secretary shall establish such 
level at an amount such that the program under this 
Act for making reinsurance coverage available does 
not displace or compete with the private insurance 
or reinsurance markets or capital markets, as deter-
mined by the Secretary after the Secretary has pro-
vided interested parties an opportunity to submit to 
the Commission market information relevant to such 
determination and has provided the Commission
with an opportunity to advise the Secretary regard-
ing such information and determination. 
(4) OPTIONAL ANNUAL INFLATIONARY OR EX-
POSURE ADJUSTMENT.—The Secretary may, on an 
annual basis, raise the minimum level of retained 
losses established under paragraph (1) for each re-
gion to reflect the annual rate of inflation or growth 
in exposures, whichever is greater. Any such raise 
shall be made in accordance with an inflation index 
or exposure index, as appropriate, that the Secretary 
determines to be appropriate. The first such raise 
may be made one year after contracts for reinsur-
ance coverage under this Act are first made avail-
able for purchase. 
(c) MAXIMUM FEDERAL LIABILITY.— 
(1) IN GENERAL.—Notwithstanding any other 
provision of law, the Secretary may sell only con-
tracts for reinsurance coverage under this Act in 
various amounts which comply with the following re-
quirements: 
(A) ESTIMATE
OF
AGGREGATE
LIABIL-
ITY.—The aggregate liability for payment of 
claims under all such contracts in any single 
year is unlikely to exceed $25,000,000,000 (as 
such amount is adjusted under paragraph (2)).
(B) ELIGIBLE LOSS COVERAGE SOLD.—El-
igible losses covered by all contracts sold within 
a State or region during a 12-month period do 
not exceed the difference between the following 
amounts (each of which shall be determined by 
the Secretary in consultation with the Commis-
sion): 
(i) The amount equal to the eligible 
loss projected to be incurred once every 
500 years from a single event in the State 
or region. 
(ii) The amount equal to the eligible 
loss projected to be incurred once every 
100 years from a single event in the State 
or region. 
(2) ANNUAL
ADJUSTMENTS.—The Secretary 
shall annually adjust the amount under paragraph 
(1)(A) (as it may have been previously adjusted) to 
provide for inflation in accordance with an inflation 
index that the Secretary determines to be appro-
priate. 
(d) LIMITATION ON PERCENTAGE OF RISK IN EX-
CESS OF RETAINED LOSSES.— 
(1) IN
GENERAL.—The Secretary may not 
make available for purchase contracts for reinsur-
ance coverage under this Act that would pay out 
more than 50 percent of eligible losses in excess of 
retained losses for the region for which the contract 
was made available. 
(2) PAYOUT.—For purposes of this subsection, 
the amount of payout from a reinsurance contract 
shall be the amount of eligible losses in excess of re-
tained losses multiplied by the percentage under 
paragraph (1). 
SEC. 7. DISASTER REINSURANCE FUND. 
(a) ESTABLISHMENT.—There is established within 
the Treasury of the United States a fund to be known 
as the Disaster Reinsurance Fund (in this section referred 
to as the ‘‘Fund’’). 
(b) CREDITS.—The Fund shall be credited with— 
(1) amounts received annually from the sale of 
contracts for reinsurance coverage under this Act; 
(2) any amounts borrowed under subsection 
(d); 
(3) any amounts earned on investments of the 
Fund pursuant to subsection (e); and 
(4) such other amounts as may be credited to 
the Fund. 
(c) USES.—Amounts in the Fund shall be available 
to the Secretary only for the following purposes:
(1) CONTRACT PAYMENTS.—For payments to 
covered purchasers under contracts for reinsurance 
coverage under this Act for eligible losses under such 
contracts. 
(2) COMMISSION COSTS.—To pay for the oper-
ating costs of the Commission. 
(3) ADMINISTRATIVE EXPENSES.—To pay for 
the administrative expenses incurred by the Sec-
retary in carrying out the reinsurance program 
under this Act. 
(4) TERMINATION.—Upon termination under 
section 11, as provided in such section. 
(d) BORROWING.— 
(1) AUTHORITY.—To the extent that the 
amounts in the Fund are insufficient to pay claims 
and expenses under subsection (c), the Secretary 
may issue such obligations of the Fund as may be 
necessary to cover the insufficiency and shall pur-
chase any such obligations issued. 
(2) PUBLIC DEBT TRANSACTION.—For the pur-
pose of purchasing any such obligations, the Sec-
retary may use as a public debt transaction the pro-
ceeds from the sale of any securities issued under 
chapter 31 of title 31, United States Code, and the 
purposes for which securities are issued under such
chapter are hereby extended to include any purchase 
by the Secretary of such obligations under this sub-
section. 
(3) CHARACTERISTICS OF OBLIGATIONS.—Obli-
gations issued under this subsection 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 deter-
mine. 
(4) TREATMENT.—All redemptions, purchases, 
and sales by the Secretary of obligations under this 
subsection shall be treated as public debt trans-
actions of the United States. 
(5) REPAYMENT.—Any obligations issued under 
this subsection shall be repaid, including interest, 
from the Fund and shall be recouped from pre-
miums charged for reinsurance coverage provided 
under this Act. 
(e) INVESTMENT.—If the Secretary determines that 
the amounts in the Fund are in excess of current needs, 
the Secretary may invest such amounts as the Secretary 
considers advisable in obligations issued or guaranteed by 
the United States. 
(f) PROHIBITION OF FEDERAL FUNDS.—Except for 
amounts made available pursuant to subsection (d) of this
section and section 8(h), no Federal funds shall be author-
ized or appropriated for the Fund or for carrying out the 
reinsurance program under this Act. 
SEC. 8. NATIONAL COMMISSION ON CATASTROPHE RISKS 
AND INSURANCE LOSS COSTS. 
(a) ESTABLISHMENT.—The Secretary shall establish 
a commission to be known as the National Commission 
on Catastrophe Risks and Insurance Loss Costs. 
(b) DUTIES.—The Commission shall meet for the sole 
purpose of advising the Secretary regarding the estimated 
loss costs associated with the contracts for reinsurance 
coverage under this Act and carrying out the functions 
specified in this Act. 
(c) MEMBERS.—The Commission shall consist of not 
more than 5 members, who shall be appointed by the Sec-
retary and shall be broadly representative of the public 
interest. Members shall have no personal, professional, or 
financial interest at stake in the deliberations of the Com-
mission. The membership of the Commission shall at all 
times include at least 1 representative of a nationally rec-
ognized consumer organization. 
(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