Homeowners Insurance Protection Act of 2005

109th CONGRESS
1st Session

H. R. 4366

To establish a program to provide reinsurance for State natural catastrophe insurance programs to help the United States better prepare for and protect its citizens against the ravages of natural catastrophes, to encourage and promote mitigation and prevention for, and recovery and rebuilding from such catastrophes, and to better assist in the financial recovery from such catastrophes.

IN THE HOUSE OF REPRESENTATIVES

November 17, 2005

Ms. GINNY BROWN-WAITE of Florida (for herself and Mr. SHAW) introduced the following bill; which was referred to the Committee on Financial Services

A BILL

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

(a) Short Title- This Act may be cited as the `Homeowners Insurance Protection Act of 2005'.

(b) Table of Contents- The table of contents for this Act is as follows:

Sec. 1. Short title; table of contents.

Sec. 2. Congressional findings.

Sec. 3. National Commission on Catastrophe Preparation and Protection.

Sec. 4. Program authority.

Sec. 5. Qualified lines of coverage.

Sec. 6. Covered perils.

Sec. 7. Contracts for reinsurance coverage for eligible State programs.

Sec. 8. Minimum level of retained losses and maximum Federal liability.

Sec. 9. Consumer Hurricane, Earthquake, Loss Protection (HELP) Fund.

Sec. 10. Definitions.

Sec. 11. Regulations.

Sec. 12. Termination.

Sec. 13. Annual study concerning benefits of the Act.

Sec. 14. GAO study of the National Flood Insurance Program and hurricane-related flooding.

SEC. 2. CONGRESSIONAL FINDINGS.

The Congress finds that--

(1) America needs to take steps to be better prepared for and better protected from catastrophes;

(2) the hurricane seasons of 2004 and 2005 are startling reminders of both the human and economic devastation that hurricanes, flooding, and other natural disasters can cause;

(3) if a repeat of the deadly 1900 Galveston hurricane occurred again it could cause over $36 billion in loss;

(4) if the 1904 San Francisco earthquake occurred again it could cause over $400 billion in loss;

(5) if a Category 5 hurricane were to hit Miami it could cause over $50 billion in loss and devastate the insurance industry in the United States;

(6) if a repeat of the 1938 `Long Island Express' were to occur again it could cause over $30 billion in damage and if a hurricane that strong were to directly hit Manhattan it could cause over $150 billion in damage and cause irreparable harm to our Nation's economy;

(7) a more comprehensive and integrated approach to dealing with catastrophes is needed;

(8) using history as a guide, natural catastrophes will inevitably place a tremendous strain on homeowners' insurance markets in many areas, will raise costs for consumers, and will jeopardize the ability of many consumers to adequately insure their homes and possessions;

(9) the lack of sufficient insurance capacity and the inability of private insurers to build enough capital, in a short amount of time, threatens to increase the number of uninsured homeowners, which, in turn, increases the risk of mortgage defaults and the strain on the Nation's banking system;

(10) some States have intervened to ensure the continued availability and affordability of homeowners' insurance for all residents;

(11) it is appropriate that efforts to improve insurance availability be designed and implemented at the State level;

(12) while State insurance programs may be adequate to cover losses from most natural disasters, a small percentage of events are likely to exceed the financial capacity of these programs and the local insurance markets;

(13) limited Federal reinsurance will improve the effectiveness of State insurance programs and private insurance markets and will increase the likelihood that homeowners' insurance claims will be fully paid in the event of a large natural catastrophe and that routine claims that occur after a mega-catastrophe will also continue to be paid;

(14) it is necessary to provide a Federal reinsurance program that will provide more protection at an overall lower cost and that will promote stability in the homeowners' insurance market;

(15) it is the proper role of the Federal Government to prepare for and protect its citizens from catastrophes and to facilitate consumer protection, victim assistance, and recovery, including financial recovery; and

(16) any Federal reinsurance program must be founded upon sound actuarial principles and priced in a manner that encourages the creation of State funds and maximizes the buying potential of these State funds and encourages and promotes prevention and mitigation, recovery and rebuilding, and consumer education, and emphasizes continuous analysis and improvement.

SEC. 3. NATIONAL COMMISSION ON CATASTROPHE PREPARATION AND PROTECTION.

(a) Establishment- The Secretary of the Treasury shall establish a commission to be known as the National Commission on Catastrophe Preparation and Protection.

(b) Duties- The Commission shall meet for the purpose of advising the Secretary regarding the estimated loss costs associated with the contracts for reinsurance coverage available under this Act and carrying out the functions specified in this Act, including--

(1) the development and implementation of public education concerning the risks posed by natural catastrophes;

(2) the development and implementation of prevention, mitigation, recovery, and rebuilding standards that better prepare and protect the United States from catastrophes; and

(3) conducting continuous analysis of the effectiveness of this Act and recommending improvements to the Congress so that the costs of providing catastrophe protection are decreased and so that the United States is better prepared.

(1) APPOINTMENT AND QUALIFICATION- The Commission shall consist of 9 members, as follows:

(A) HOMELAND SECURITY MEMBER- The Secretary of Homeland Security or the Secretary's designee.

(B) APPOINTED MEMBERS- 8 members appointed by the Secretary, who shall consist of--

(i) one individual who is an actuary;

(ii) one individual who is employed in engineering;

(iii) one individual representing the scientific community;

(iv) one individual representing property and casualty insurers;

(v) one individual representing reinsurers;

(vi) one individual who is a member or former member of the National Association of Insurance Commissioners; and

(vii) two individuals who are consumers.

(2) PREVENTION OF CONFLICTS OF INTEREST- Members shall have no personal or financial interest at stake in the deliberations of the Commission.

(d) Treatment of Non-Federal Members- Each member of the Commission who is not otherwise employed by the Federal Government shall be considered a special Government employee for purposes of sections 202 and 208 of title 18, United States Code.

(e) Experts and Consultants- The Commission may procure temporary and intermittent services from individuals or groups recognized as experts in the fields of meteorology, seismology, vulcanlogy, geology, structural engineering, wind engineering, and hydrology, and other fields, under section 3109(b) of title 5, United States Code, but at a rate not in excess of the daily equivalent of the annual rate of basic pay payable for level V of the Executive Schedule, for each day during which the individual procured is performing such services for the Commission. The Commission may also procure, and the Congress encourages the Commission to procure, experts from universities, research centers, foundations, and other appropriate organizations who could study, research, and develop methods and mechanisms that could be utilized to strengthen structures to better withstand the perils covered by this Act.

(f) Compensation- Each member of the Commission who is not an officer or employee of the Federal Government shall be compensated at a rate of basic pay payable for level V of the Executive Schedule, for each day (including travel time) during which such member is engaged in the performance of the duties of the Commission. All members of the Commission who are officers or employees of the United States shall serve without compensation in addition to that received for their services as officers or employees of the United States.

(g) Obtaining Data- The Commission and the Secretary may solicit loss exposure data and such other information either deems necessary to carry out its responsibilities from governmental agencies and bodies and organizations that act as statistical agents for the insurance industry. The Commission and the Secretary shall take such actions as are necessary to ensure that information that either deems is confidential or proprietary is disclosed only to authorized individuals working for the Commission or the Secretary. No company which refuses to provide information requested by the Commission or the Secretary may participate in the program for reinsurance coverage authorized under this Act, nor may any State insurance or reinsurance program participate if any governmental agency within that State has refused to provide information requested by the Commission or the Secretary.

(h) Funding-

(1) AUTHORIZATION OF APPROPRIATIONS- There is authorized to be appropriated--

(A) $10,000,000 for fiscal year 2006 for the initial expenses in establishing the Commission and the initial activities of the Commission that cannot timely be covered by amounts obtained pursuant to section 7(b)(6)(B)(iii), as determined by the Secretary;

(B) such additional sums as may be necessary to carry out subsequent activities of the Commission;

(C) $10,000,000 for fiscal year 2006 for the initial expenses of the Secretary in carrying out the program authorized under section 4; and

(D) such additional sums as may be necessary to carry out subsequent activities of the Secretary under this Act.

(2) OFFSET- The Secretary shall provide, to the maximum extent practicable, that an amount equal to any amount appropriated under paragraph (1) is obtained from purchasers of reinsurance coverage under this Act and deposited in the Fund established under section 9. Such amounts shall be obtained by inclusion of a provision for the Secretary's and the Commission's expenses incorporated into the pricing of the contracts for such reinsurance coverage, pursuant to section 7(b)(6)(B)(iii).

(i) Termination- The Commission shall terminate upon the effective date of the repeal under section 12(c).

SEC. 4. PROGRAM AUTHORITY.

(a) In General- The Secretary of the Treasury, in consultation with the Secretary of Homeland Security, shall carry out a program under this Act to make homeowners protection coverage available through contracts for reinsurance coverage under section 7, which shall be made available for purchase only by eligible State programs.

(b) Purpose- The program shall be designed to make reinsurance coverage under this Act available--

(1) to improve the availability and affordability of homeowners' insurance for the purpose of facilitating the pooling, and spreading the risk, of catastrophic financial losses from natural catastrophes;

(2) to improve the solvency and capacity of homeowners' insurance markets;

(3) to encourage the development and implementation of mitigation, prevention, recovery, and rebuilding standards; and

(4) to recommend methods to continuously improve the way the United States reacts and responds to catastrophes, including improvements to the HELP Fund established under section 9.

(c) Contract Principles- Under the program under this Act, the Secretary shall offer reinsurance coverage through contracts with covered purchasers, which contracts shall--

(1) minimize the administrative costs of the Federal Government;

(2) provide coverage based solely on insured losses within the State for the eligible State program purchasing the contract.

SEC. 5. QUALIFIED LINES OF COVERAGE.

Each contract for reinsurance coverage made available under this Act shall provide insurance coverage against residential property losses to homes (including dwellings owned under condominium and cooperative ownership arrangements) and the contents of apartment buildings.

SEC. 6. COVERED PERILS.

Each contract for reinsurance coverage made available under this Act shall cover losses insured or reinsured by the eligible State program purchasing the contract that are proximately caused by--

(1) earthquakes;

(2) perils ensuing from earthquakes, including fire and tsunamis;

(3) tropical cyclones having maximum sustained winds of at least 74 miles per hour, including hurricanes and typhoons;

(4) tornadoes;

(5) volcanic eruptions;

(6) catastrophic winter storms; and

(7) any other natural catastrophe (not including any flood) insured or reinsured under the eligible State program for which reinsurance coverage under section 7 is provided.

The Secretary shall, by regulation, define the natural catastrophe perils under this section.

SEC. 7. CONTRACTS FOR REINSURANCE COVERAGE FOR ELIGIBLE STATE PROGRAMS.

(a) Eligible State Programs- A program shall be eligible to purchase a contract under this section for reinsurance coverage under this Act only if the State entity authorized to make such determinations certifies to the Secretary that the program complies with the following requirements:

(1) PROGRAM DESIGN- The program shall be a State-operated--

(A) insurance program that--

(i) offers coverage for homes (which may include dwellings owned under condominium and cooperative ownership arrangements) and the contents of apartments to State residents; and

(ii) is authorized by State law; or

(B) reinsurance program that is designed to improve private insurance markets that offer coverage for homes (which may include dwellings owned under condominium and cooperative ownership arrangements) and the contents of apartments.

(2) OPERATION- The program shall meet the following requirements:

(A) A majority of the members of the governing body of the program shall be public officials.

(B) The State shall have a financial interest in the program, which shall not include a program authorized by State law or regulation that requires insurers to pool resources to provide property insurance coverage for covered perils.

(C) The State shall not be eligible for consumer HELP Fund assistance if a State has appropriated money from the State fund and not paid it back to the State fund, with interest.

(3) TAX STATUS- The program shall be structured and carried out in a manner so that the program is exempt from all Federal taxation.

(4) COVERAGE- The program shall cover all perils enumerated in section 6.

(5) EARNINGS- The program may not provide for, nor shall have ever made, any redistribution of any part of any net profits of the program to any insurer that participates in the program.

(6) PREVENTION AND MITIGATION- The program shall include prevention and mitigation provisions that require that not less $10,000,000 and not more than 35 percent of the net investment income of the State insurance or reinsurance program be used for programs to mitigate losses from natural catastrophes for which the State insurance or reinsurance program was established. For purposes of this paragraph, prevention and mitigation shall include methods to reduce losses of life and property, including appropriate measures to adequately reflect--

(A) encouragement of awareness about the risk factors and what can be done to eliminate or reduce them;

(B) location of the risk, by giving careful consideration of the natural risks for the location of the property before allowing building and considerations if structures are allowed; and

(i) State mandated building codes appropriate for the risk;

(ii) adequate enforcement of the risk-appropriate building codes;

(iii) building materials that prevent or significantly lessen potential damage from the natural catastrophes;

(iv) building methods that prevent or significantly lessen potential damage from the natural catastrophes; and

(v) a focus on prevention and mitigation for any substantially damaged structure, with an emphasis on how structures can be retrofitted so as to make them building code compliant.

(7) REQUIREMENTS REGARDING COVERAGE-

(A) IN GENERAL- The program--

(i) may not, except for charges or assessments related to post-event financing or bonding, involve cross-subsidization between any separate property and casualty lines covered under the program unless the elimination of such activity in an existing program would negatively impact the eligibility of the program to purchase a contract for reinsurance coverage under this Act pursuant to paragraph (3);

(ii) shall include provisions that authorize the State insurance commissioner or other State entity authorized to make such a determination to terminate the program if the insurance commissioner or other such entity determines that the program is no longer necessary to ensure the availability of homeowners' insurance for all residents of the State; and

(iii) shall provide that, for any insurance coverage for homes (which may include dwellings owned under condominium and cooperative ownership arrangements) and the contents of apartments that is made available under the State insurance program and for any reinsurance coverage for such insurance coverage made available under the State reinsurance program, the premium rates charged shall be amounts that, at a minimum, are sufficient to cover the full actuarial costs of such coverage, based on consideration of the risks involved and accepted actuarial and rate making principles, anticipated administrative expenses, and loss and loss-adjustment expenses.

(B) APPLICABILITY- This paragraph shall apply--

(i) before the expiration of the 2-year period beginning on the date of the enactment of this Act, only to State programs which, after January 1, 2006, commence offering insurance or reinsurance coverage described in subparagraph (A) or (B), respectively, of paragraph (1); and

(ii) after the expiration of such period, to all State programs.

(8) OTHER QUALIFICATIONS-

(A) IN GENERAL- The State program shall (for the year for which the coverage is in effect) comply with regulations that shall be issued under this paragraph by the Secretary, in consultation with the National Commission on Catastrophe Preparation and Prevention established under section 3. The regulations shall establish criteria for State programs to qualify to purchase reinsurance under this section, which are in addition to the requirements under the other paragraphs of this subsection.

(B) CONTENTS- The regulations issued under this paragraph shall include requirements that--

(i) the State program shall have public members on its board of directors or have an advisory board with public members;

(ii) the State program provide adequate insurance or reinsurance protection, as applicable, for the peril covered, which shall include a range of deductibles and premium costs that reflect the applicable risk to eligible properties;

(iii) insurance or reinsurance coverage, as applicable, provided by the State program is made available on a nondiscriminatory basis to all qualifying residents;

(iv) any new construction, substantial rehabilitation, and renovation insured or reinsured by the program complies with applicable State or local government building, fire, and safety codes;

(v) the State, or appropriate local governments within the State, have in effect and enforce nationally recognized model building, fire, and safety codes and consensus-based standards that offer risk responsive resistance that is substantially equivalent or greater than the resistance to earthquakes or high winds;

(vi) the State has taken actions to establish an insurance rate structure that takes into account measures to mitigate insurance losses;

(vii) there are in effect, in such State, laws or regulations sufficient to prohibit price gouging, during the term of reinsurance coverage under this Act for the State program in any disaster area located within the State; and

(viii) the State program complies with such other requirements that the Secretary considers necessary to carry out the purposes of this Act.

(b) Terms of Contracts- Each contract under this section for reinsurance coverage under this Act shall be subject to the following terms and conditions:

(1) MATURITY- The term of the contract shall not exceed 1 year or such other term as the Secretary may determine.

(2) PAYMENT CONDITION- The contract shall authorize claims payments for eligible losses only to the eligible State program purchasing the coverage.

(3) RETAINED LOSSES REQUIREMENT- For each event of a covered peril, the contract shall make a payment for the event only if the total amount of insurance claims for losses, which are covered by qualified lines, occur to properties located within the State covered by the contract, and that result from events, exceeds the amount of retained losses provided under the contract (pursuant to section 8(a)) purchased by the eligible State program.

(4) MULTIPLE EVENTS- The contract shall cover any eligible losses from one or more covered events that may occur during the term of the contract and shall provide that if multiple events occur, the retained losses requirement under paragraph (3) shall apply on a calendar year basis, in the aggregate and not separately to each individual event.

(5) TIMING OF ELIGIBLE LOSSES- Eligible losses under the contract shall include only insurance claims for property covered by qualified lines that are reported to the eligible State program within the 3-year period beginning upon the event or events for which payment under the contract is provided.

(6) PRICING-

(A) DETERMINATION- The price of reinsurance coverage under the contract shall be an amount established by the Secretary as follows:

(i) RECOMMENDATIONS- The Secretary shall take into consideration the recommendations of the Commission in establishing the price, but the price may not be less than the amount recommended by the Commission.

(ii) FAIRNESS TO TAXPAYERS- The price shall be established at a level that is designed to reflect the risks and costs being borne under each reinsurance contract issued under this Act and that takes into consideration empirical models of natural disasters and the capacity of private markets to absorb insured losses from natural disasters.

(iii) SELF-SUFFICIENCY- The rates for reinsurance coverage shall be established at a level that annually produces expected premiums that shall be sufficient to pay the expected annualized cost of all claims, loss adjustment expenses, and all administrative costs of reinsurance coverage offered under this section.

(B) COMPONENTS- The price shall consist of the following components:

(i) 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.

(iii) ADMINISTRATIVE COSTS- A sum sufficient to provide for the operation of the Commission and the administrative expenses incurred by the Secretary in carrying out this Act.

(7) INFORMATION- The contract shall contain a condition providing that the Commission may require the State program that is covered under the contract to submit to the Commission all information on the State program relevant to the duties of the Commission, as determined by the Secretary.

(8) ADDITIONAL CONTRACT OPTION- The contract shall provide that the purchaser of the contract may, during the term of such original contract, purchase additional contracts from among those offered by the Secretary at the beginning of the term, subject to the limitations under section 8, at the prices at which such contracts were offered at the beginning of the term, prorated based upon the remaining term as determined by the Secretary. Such additional contracts shall provide coverage beginning on a date 15 days after the date of purchase but shall not provide coverage for losses for an event that has already occurred.

(9) OTHERS- The contract shall contain such other terms as the Secretary considers necessary to carry out this Act and to ensure the long-term financial integrity of the program under this Act.

(c) Participation by Multi-State Catastrophe Fund Programs- Nothing in this Act shall prohibit the creation of multi-State catastrophe insurance or reinsurance programs, or the participation by such programs in the program established pursuant to section 4. The Secretary shall, by regulation, apply the provisions of this Act to multi-State catastrophe insurance and reinsurance programs.

SEC. 8. MINIMUM LEVEL OF RETAINED LOSSES AND MAXIMUM 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 covered perils (as required under section 7(b)(3) for payment of eligible losses) in various amounts, as the Secretary, in consultation with the Commission, determines appropriate and subject to the requirements under subsection (b).

(b) Minimum Level of Retained Losses-

(1) CONTRACTS FOR STATE PROGRAMS- Subject to paragraphs (3) and (4) and notwithstanding any other provision of this Act, a contract for reinsurance coverage under section 7 for an eligible State program that offers insurance or reinsurance coverage described in subparagraph (A) or (B), respectively, of section 7(a)(1) may not be made available or sold unless the contract requires retained losses from covered perils in the following amount:

(A) IN GENERAL- The State program shall sustain an amount of retained losses of not less than--

(i) the claims-paying capacity of the eligible State program, as determined by the Secretary; and

(ii) an amount, determined by the Secretary in consultation with the Commission, that is the amount equal to the eligible losses projected to be incurred once every 50 years on an annual basis from covered perils.

(B) TRANSITION RULE FOR EXISTING PROGRAMS-

(i) CLAIMS-PAYING CAPACITY- Subject to clause (ii), in the case of any eligible State program that was offering insurance or reinsurance coverage on the date of the enactment of this Act and the claims-paying capacity of which is greater than the amount determined under subparagraph (A)(i) but less than an amount determined for the program under subparagraph (A)(ii), the minimum level of retained losses applicable under this paragraph shall be the claims-paying capacity of such State program.

(ii) AGREEMENT- Clause (i) shall apply to a State program only if the program enters into a written agreement with the Secretary providing a schedule for increasing the claims-paying capacity of the program to the amount determined for the program under subparagraph (A)(ii) over a period not to exceed 5 years. The Secretary may extend the 5-year period for not more than 5 additional one-year periods if the Secretary determines that losses incurred by the State program as a result of covered perils create excessive hardship on the State program. The Secretary shall consult with the appropriate officials of the State program regarding the required schedule and any potential one-year extensions.

(i) 50-YEAR EVENT- The Secretary may provide that, in the case of an eligible State program that, after January 1, 2006, commences offering insurance or reinsurance coverage, during the 7-year period beginning on the date that reinsurance coverage under section 7 is first made available, the minimum level of retained losses applicable under this paragraph shall be the amount determined for the State under subparagraph (A)(i), except that such minimum level shall be adjusted annually as provided in clause (ii) of this subparagraph.

(ii) ANNUAL ADJUSTMENT- Each annual adjustment under this clause shall increase the minimum level of retained losses applicable under this subparagraph to an eligible State program described in clause (i) in a manner such that--

(I) during the course of such 7-year period, the applicable minimum level of retained losses approaches the minimum level that, under subparagraph (A) (ii), will apply to the eligible State program upon the expiration of such period; and

(II) each such annual increase is a substantially similar amount, to the extent practicable.

(D) REDUCTION BECAUSE OF REDUCED CLAIMS-PAYING CAPACITY-

(i) AUTHORITY- Notwithstanding subparagraphs (A), (B), and (C) or the terms contained in a contract for reinsurance pursuant to such subparagraphs, if the Secretary determines that the claims-paying capacity of an eligible State program has been reduced because of payment for losses due to an event, the Secretary may reduce the minimum level of retained losses.

(ii) TERM OF REDUCTION- The Secretary may extend the 5-year period for not more than 5 additional one-year periods if the Secretary determines that losses incurred by the State program as a result of covered perils create excessive hardship on the State program. The Secretary shall consult with the appropriate officials of the State program regarding the required schedule and any potential one-year extensions.

(E) CLAIMS-PAYING CAPACITY- For purposes of this paragraph, the claims-paying capacity of a State-operated insurance or reinsurance program under section 7(a)(1) shall be determined by the Secretary, in consultation with the Commission, taking into consideration the claims-paying capacity as determined by the State program, retained losses to private insurers in the State in an amount assigned by the State insurance commissioner, the cash surplus of the program, and the lines of credit, reinsurance, and other financing mechanisms of the program established by law.

(1) IN GENERAL- Notwithstanding any other provision of law, the Secretary may sell only contracts for reinsurance coverage under this Act in various amounts that comply with the following requirements:

(A) ESTIMATE OF AGGREGATE LIABILITY- The aggregate liability for payment of claims under all such contracts in any single year is unlikely to exceed $200,000,000,000 (as such amount is adjusted under paragraph (2)).

(B) ELIGIBLE LOSS COVERAGE SOLD- Eligible losses covered by all contracts sold within a State 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 Commission):

(i) The amount equal to the eligible loss projected to be incurred once every 500 years from a single event in the State.

(ii) The amount equal to the eligible loss projected to be incurred once every 50 years from a single event in the State.

(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 appropriate.

(d) Limitation on Percentage of Risk in Excess of Retained Losses-

(1) IN GENERAL- The Secretary may not make available for purchase contracts for reinsurance coverage under this Act that would pay out more than 100 percent of eligible losses in excess of retained losses in the case of a contract under section 7 for an eligible State program, for such State.

(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 retained losses multiplied by the percentage under paragraph (1).

SEC. 9. CONSUMER HURRICANE, EARTHQUAKE, LOSS PROTECTION (HELP) FUND.

(a) Establishment- There is established within the Treasury of the United States a fund to be known as the Consumer HELP 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.

(1) CONTRACT PAYMENTS- For payments to covered purchasers under contracts for reinsurance coverage for eligible losses under such contracts.

(2) COMMISSION COSTS- To pay for the operating costs of the Commission.

(3) ADMINISTRATIVE EXPENSES- To pay for the administrative expenses incurred by the Secretary in carrying out the reinsurance program under this Act.

(4) TERMINATION- Upon termination under section 13, 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 purchase any such obligations issued.

(2) PUBLIC DEBT TRANSACTION- For the purpose of purchasing any such obligations, the Secretary may use as a public debt transaction the proceeds from the sale of any securities issued under chapter 31 of title 31, United States Code, and the purposes for which securities are issued under such chapter are hereby extended to include any purchase by the Secretary of such obligations under this subsection.

(3) CHARACTERISTICS OF OBLIGATIONS- Obligations 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 determine.

(4) TREATMENT- All redemptions, purchases, and sales by the Secretary of obligations under this subsection shall be treated as public debt transactions 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 premiums 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) and section 3(h), no further Federal funds shall be authorized or appropriated for the Fund or for carrying out the reinsurance program under this Act.

SEC. 10. DEFINITIONS.

For purposes of this Act, the following definitions shall apply:

(1) COMMISSION- The term `Commission' means the National Commission on Catastrophe Risks and Insurance Loss Costs established under section 3.

(2) COVERED PERILS- The term `covered perils' means the natural disaster perils under section 6.

(3) COVERED PURCHASER- The term `covered purchaser' means an eligible State-operated insurance or reinsurance program that purchases reinsurance coverage made available under a contract under section 7.

(4) DISASTER AREA- The term `disaster area' means a geographical area, with respect to which--

(A) a covered peril specified in section 6has occurred; and

(B) a declaration that a major disaster exists, as a result of the occurrence of such peril--

(i) has been made by the President of the United States; and

(ii) is in effect.

(5) ELIGIBLE LOSSES- The term `eligible losses' means losses in excess of the sustained and retained losses, as defined by the Secretary after consultation with the Commission.

(6) ELIGIBLE STATE PROGRAM- The term `eligible State program' means a State program that, pursuant to section 7(a), is eligible to purchase reinsurance coverage made available through contracts under section 7, or a multi-State program that is eligible to purchase such coverage pursuant to section 7(c).

(7) PRICE GOUGING- The term `price gouging' means the providing of any consumer good or service by a supplier related to repair or restoration of property damaged from a catastrophe for a price that the supplier knows or has reason to know is greater, by at least the percentage set forth in a State law or regulation prohibiting such act (notwithstanding any real cost increase due to any attendant business risk and other reasonable expenses that result from the major catastrophe involved), than the price charged by the supplier for such consumer good or service immediately before the disaster.

(8) QUALIFIED LINES- The term `qualified lines' means lines of insurance coverage for which losses are covered under section 5 by reinsurance coverage under this Act.

(9) REINSURANCE COVERAGE- The term `reinsurance coverage under this Act' means coverage under contracts made available under section 7.

(10) SECRETARY- The term `Secretary' means the Secretary of the Treasury.

(11) STATE- The term `State' means the States of the United States, the District of Columbia, the Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana Islands, Guam, the Virgin Islands, American Samoa, and any other territory or possession of the United States.

SEC. 11. REGULATIONS.

The Secretary, in consultation with the Secretary of the Department of Homeland Security, shall issue any regulations necessary to carry out the program for reinsurance coverage under this Act.

SEC. 12. TERMINATION.

(a) In General- Except as provided in subsection (b), the Secretary may not provide any reinsurance coverage under this Act covering any period after the expiration of the 20-year period beginning on the date of the enactment of this Act.

(b) Extension- If upon the expiration of the period under subsection (a) the Secretary, in consultation with the Commission, determines that continuation of the program for reinsurance coverage under this Act is necessary or appropriate to carry out the purpose of this Act under section 4(b) because of insufficient growth of capacity in the private homeowners' insurance market, the Secretary shall continue to provide reinsurance coverage under this Act until the expiration of the 5-year period beginning upon the expiration of the period under subsection (a).

(c) Repeal- Effective upon the date that reinsurance coverage under this Act is no longer available or in force pursuant to subsection (a) or (b), this Act (except for this section) is repealed.

(d) Deficit Reduction- The Secretary shall cover into the General Fund of the Treasury any amounts remaining in the Fund under section 9 upon the repeal of this Act.

SEC. 13. ANNUAL STUDY CONCERNING BENEFITS OF THE ACT.

(a) In General- The Secretary shall, on an annual basis, conduct a study and submit to the Congress a report that--

(1) analyzes the cost and availability of homeowners' insurance for losses resulting from catastrophic natural disasters covered by the reinsurance program under this Act;

(2) describes the efforts of the participating States in--

(A) enacting preparedness, prevention, mitigation, recovery, and rebuilding standards; and

(B) educating the public on the risks associated with natural catastrophe; and

(3) makes recommendations regarding ways to improve the program under this Act and its administration.

(b) Contents- Each annual study under this section shall also determine and identify, on an aggregate basis--

(1) for each State or region, the capacity of the private homeowners' insurance market with respect to coverage for losses from catastrophic natural disasters;

(2) for each State or region, the percentage of homeowners who have such coverage, the catastrophes covered, and the average cost of such coverage; and

(3) for each State or region, the effects this Act is having on the availability and affordability of such insurance.

(c) Timing- Each annual report under this section shall be submitted not later than March 30 of the year after the year for which the study was conducted.

(d) Commencement of Reporting Requirement- The Secretary shall first submit an annual report under this section not later than two years after the date of the enactment of this Act.

SEC. 14. GAO STUDY OF THE NATIONAL FLOOD INSURANCE PROGRAM AND HURRICANE-RELATED FLOODING.

(a) In General- In light of the flooding associated with Hurricane Katrina, the Comptroller General of the United States shall conduct a study of the availability and adequacy of flood insurance coverage for losses to residences and other properties caused by hurricane-related flooding.

(b) Contents- The study under this section shall determine and analyze--

(1) the frequency and severity of hurricane-related flooding during the last 20 years in comparison with flooding that is not hurricane-related;

(2) the differences between the risks of flood-related losses to properties located within the 100-year floodplain and those located outside of such floodplain;

(3) the extent to which insurance coverage referred to in subsection (a) is available for properties not located within the 100-year floodplain;

(4) the advantages and disadvantages of making such coverage for such properties available under the national flood insurance program;

(5) appropriate methods for establishing premiums for insurance coverage under such program for such properties that, based on accepted actuarial and rate making principles, cover the full costs of providing such coverage;

(6) appropriate eligibility criteria for making flood insurance coverage under such program available for properties that are not located within the 100-year floodplain or within a community participating in the national flood insurance program;

(7) the appropriateness of the existing deductibles for all properties eligible for insurance coverage under the national flood insurance program, including the standard and variable deductibles for pre-FIRM and post-FIRM properties, and whether a broader range of deductibles should be established;

(8) income levels of policyholders of insurance made available under the national flood insurance program whose properties are pre-FIRM subsidized properties;

(9) how the national flood program is marketed, if changes can be made so that more people are aware of flood coverage, and how take-up rates may be improved;

(10) the number of homes that are not primary residences that are insured under the national flood insurance program and are pre-FIRM subsidized properties; and

(11) suggestions and means on how the program under this Act can better meet its stated goals as well as the feasibility of expanding the NFIP to cover the perils covered by this Act.

(c) Consultation With FEMA- In conducting the study under this section, the Comptroller General shall consult with the Director of the Federal Emergency Management Agency.

(d) Report- The Comptroller General shall complete the study under this section and submit a report to the Congress regarding the findings of the study not later than 5 months after the date of the enactment of this Act.

END