109th CONGRESS
1st Session
H. R. 4507
To establish a Federal program to provide reinsurance for State
natural disaster insurance programs.
IN THE HOUSE OF REPRESENTATIVES
December 13, 2005
Mrs. MALONEY introduced the following bill; which was referred to the Committee
on Financial Services
A BILL
To establish a Federal program to provide reinsurance for State
natural disaster insurance programs.
Be it enacted by the Senate and House of Representatives 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 `Natural Catastrophe Insurance
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. Congressional findings.
Sec. 3. Program authority.
Sec. 4. Qualified lines of coverage.
Sec. 6. Contracts for reinsurance coverage for eligible State programs.
Sec. 7. Minimum level of retained losses and maximum Federal liability.
Sec. 8. Disaster Reinsurance Fund.
Sec. 12. Annual study of cost and availability of disaster insurance and
program need.
Sec. 13. GAO study of Federal program for reinsurance for all solvency-threatening
events.
SEC. 2. CONGRESSIONAL FINDINGS.
The Congress finds that --
(1) in the last quarter-century, multiple significant natural disasters
have severely impacted the nation and caused major insured losses;
(2) in 2004, four major hurricanes hit the United States, and each was
among the 10 most costly hurricanes in the Nation's history;
(3) in 2005, the United States sustained the most costly storm in its
history, Hurricane Katrina, which caused insured losses estimated at between
$40 billion and $60 billion, and suffered two other storms, Wilma and
Rita;
(4) the rising costs resulting from natural disasters have placed a strain
on the market for homeowners and commercial insurance in many areas, jeopardizing
the ability of consumers adequately to insure their homes and businesses;
(5) the threat of insufficient insurance capacity threatens to increase
the number of uninsured homes and businesses, which in turn increases
the risk of mortgage or business defaults and the adverse impact such
default can have on the Nation's financial system;
(6) in order to ensure capacity at a reasonable price, a national plan
needs to be implemented that allows the private market to operate at full
capacity while at the same time supporting that market through State and
Federal resources;
(7) the risk of catastrophes may best be addressed by a public-private
partnership involving private industry, State and local governments, and
the Federal Government, each playing their appropriate role;
(8) it is appropriate that efforts to improve insurance availability be
designed and implemented at the State level;
(9) some States have created State catastrophe funds to ensure the continued
availability of homeowners or business insurance against a particular
peril or to spread the costs of such insurance;
(10) while existing State programs have to date been adequate to cover
losses from natural disasters, it is foreseeable that a small percentage
of such events may exceed the financial capacity of these programs;
(11) providing Federal reinsurance for such State funds, at the highest
levels of insured losses, will improve the effectiveness of State programs
and will increase the likelihood that claims will be paid in the event
of a natural mega-catastrophe--that is, a natural event which threatens
the solvency of the insurance industry as a whole;
(12) it is necessary to provide a Federal reinsurance program that will
promote stability in the homeowners and business insurance markets and
encourage the continued growth of capacity by the private and capital
markets;
(13) such a Federal program should not displace the ability of the private
entities or the capital markets to provide adequate reinsurance capacity
to address insurance market dislocations caused by natural disasters,
nor should it discourage risk-spreading by individual insurers in accordance
with sound business practices; and
(14) any Federal program must be founded upon sound actuarial principles
and structured in a manner that minimizes bureaucracy and the potential
impact on the Treasury.
SEC. 3. PROGRAM AUTHORITY.
(a) In General- The Secretary of the Treasury shall carry out a program
under this Act to make reinsurance coverage available through contracts
for reinsurance coverage under section 6, 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 to improve the availability of homeowners' insurance
and insurance for businesses for the purpose of facilitating the pooling,
and spreading the risk, of catastrophic financial losses from natural disasters
and to improve the solvency of the markets for homeowners' insurance and
business insurance.
(c) Contract Principles- Under the program under this Act, the Secretary
shall offer reinsurance coverage through contracts with covered purchasers,
which contracts--
(1) shall not displace or compete with the private 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 insured losses within the State
of the eligible State program purchasing the contract.
SEC. 4. QUALIFIED LINES OF COVERAGE.
A contract for reinsurance coverage made available under this Act shall
provide insurance coverage against--
(1) residential property losses to homes (including dwellings owned under
condominium and cooperative ownership arrangements) and the contents of
apartment buildings; and
(2) real property losses to businesses and the contents of business properties.
SEC. 5. COVERED PERILS.
A contract for reinsurance coverage made available under this Act shall
cover losses that are insured or reinsured by the eligible State program
purchasing the contract, that are proximately caused by--
(1) windstorm (hurricane, cyclone, or tornado);
(2) earthquake (including any fire following);
(3) winter catastrophe (snow, ice, or freezing);
(7) volcanic eruption; or
and the Secretary shall, by regulation, define the natural disaster perils
under this section.
SEC. 6. 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 is a State-operated program that complies with the following
requirements:
(1) PROGRAM DESIGN- The program shall be a State-operated--
(A) insurance program that--
(i) offers coverage for--
(I) homes (which may include dwellings owned under condominium and
cooperative ownership arrangements) and the contents of apartments
to State residents because of a finding by the State insurance commissioner
or other State entity authorized to make such determination that
such a program is necessary in order to provide for the continued
availability of such residential coverage for all residents; or
(II) business properties and the contents of business properties
to businesses located in the State because of a finding by the State
insurance commissioner or other State entity authorized to make
such determination that such a program is necessary in order to
provide for the continued availability of such coverage for all
such businesses; and
(ii) is authorized by State law; or
(B) reinsurance program that is designed to improve private insurance
markets that offer coverage described in subclause (I) or (II) of clause
(i) because of a finding described in subclause (I) or (II), respectively,
of clause (i).
(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.
(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 only a single peril.
(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.
(A) IN GENERAL- The State operating the program shall, by law or regulation,
have enacted--
(i) a program to mitigate insurance losses from natural catastrophes;
and
(ii) a comprehensive, modern, and uniform statewide building code
establishing minimum standards for the construction and maintenance
of buildings and other structures to mitigate against future disasters,
increase public safety, and enhance the rebuilding of such States,
with minimum standards at least as comprehensive as the model building
standards and codes developed by the International Code Council.
(B) REGULATIONS- The Secretary shall issue regulations that establish
the minimum standards for States to satisfy the mitigation requirements
under subparagraph (A).
(A) IN GENERAL- The program--
(i) may not 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;
(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 or insurance for businesses, as appropriate,
for all State residents or businesses; and
(iii) shall provide that, for any insurance coverage 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, 2005, 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) STATE INSURANCE PRICING LAWS-
(A) REQUIREMENT TO ALLOW RISK-BASED PRICING- Except as provided in subparagraph
(B), the State operating such eligible State program may not have in
effect any law or regulation that prohibits or prevents insurers (other
than the State) from providing insurance coverage for losses from covered
perils to any risks located in such State at premium rates which are
based on consideration of the risks involved and accepted actuarial
rate-making principles.
(B) EXCEPTION FOR CERTAIN STATE RESIDUAL MARKETS- In the case of a State
operating a residual market insurance program for losses from covered
perils to any risks located in the State, if the premium rates charged
by the residual market insurance program are below the premium rates
the private market would charge for similar coverage under the principles
set forth in subparagraph (A), the residual market insurance program
must make such coverage available to any person requesting such coverage
who pays the applicable premium charged for such coverage.
(9) 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. 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 have public members on its board of directors
or have an advisory board with public members;
(ii) insurance or reinsurance coverage, as applicable, made available
through the State program not supplant coverage that is otherwise
reasonably available and affordable in the private market;
(iii) 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;
(iv) insurance or reinsurance coverage, as applicable, provided by
the State program is made available on a nondiscriminatory basis to
all qualifying residents or businesses;
(v) 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;
(vi) 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 disaster
resistance that is substantially equivalent or greater than the resistance
under any requirements for floods, earthquakes, or wind resistance
issued by the Federal Emergency Management Agency;
(vii) the State has taken actions to establish an insurance rate structure
that takes into account measures to mitigate insurance losses;
(viii) 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
(ix) 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 result
from the event, exceeds the amount of retained losses provided under the
contract (pursuant to section 7(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 to each 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- The price of reinsurance coverage under the contract for
an eligible State program shall be an amount established by the Secretary
for the contract, as follows:
(A) 1 PERCENT ABOVE MARKET RATE- Except as provided in subparagraph
(B), the price of reinsurance coverage under the contract shall be the
amount that is one percent greater than the lowest amount for which
such State program can obtain equivalent coverage in the private reinsurance
market, as demonstrated to the Secretary by the eligible State program.
(B) MARKET COVERAGE UNAVAILABLE- In the event that an eligible State
program can not demonstrate a price for equivalent coverage in the private
reinsurance market for purposes of subparagraph (A), the price of reinsurance
coverage under the contract for such State program shall be the amount
that is one percent greater than the lowest amount for which a private
insurer with an equivalent risk portfolio can obtain equivalent coverage
in the private reinsurance market, as demonstrated to the Secretary
by the eligible State program.
(7) 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 7, 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.
(8) 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) Private Sector Right to Participate-
(1) ESTABLISHMENT OF COMPETITIVE PROCEDURE- The Secretary shall establish,
by regulation, a competitive procedure under this subsection that provides
qualified entities an opportunity, on a basis consistent with the contract
cycle established under this Act by the Secretary, to offer to provide,
in lieu of reinsurance coverage under this section, reinsurance coverage
that is substantially similar to coverage otherwise made available under
this section.
(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 entities to be treated
as qualified entities for purposes of this subsection, which criteria
shall require 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 beginning of each contract cycle
during which any reinsurance coverage under this section is to be made
available, the Secretary may request proposals and shall publish in
the Federal Register the rates and terms for contracts for reinsurance
coverage under this section that are to be made available during such
contract cycle;
(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 contract cycle) to submit to the Secretary a written
expression of interest in providing reinsurance coverage in lieu of
the coverage otherwise to be made available under this section;
(D) the Secretary shall provide any qualified 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 beginning
of the contract cycle) to submit to the Secretary an offer to provide,
in lieu of the reinsurance coverage otherwise to be made available 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 provide reinsurance
coverage during the contract cycle at rates and terms that are substantially
similar to the rates and terms for reinsurance coverage otherwise to
be provided under this section by the Secretary, the Secretary shall
accept the offer (if still outstanding) and, notwithstanding any other
provision of this Act, provide for such entity to make reinsurance coverage
available in accordance with the offer; and
(F) if the Secretary accepts an offer pursuant to subparagraph (E) to
make reinsurance coverage available, notwithstanding any other provision
of this Act, the Secretary shall reduce, to an equivalent extent, the
amount of reinsurance coverage available under this section during the
contract cycle to which the offer relates, unless and until the Secretary
determines that the entity is not complying with the terms of the accepted
offer.
SEC. 7. 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 a single event of a covered peril (as required under section 6(b)(3)
for payment of eligible losses) in various amounts, as the Secretary determines
appropriate and subject to the requirements under subsection (b).
(b) Minimum Level of Retained Losses-
(1) IN GENERAL- Subject to paragraphs (2) and (3) and notwithstanding
any other provision of this Act, a contract for reinsurance coverage under
section 6 for an eligible State program that offers insurance or reinsurance
coverage described in subparagraph (A) or (B), respectively, of section
6(a)(1) may not be made available or sold unless the contract requires
that the State program shall sustain an amount of retained losses from
a single event of a covered peril of not less than $50,000,000,000.
(2) ANNUAL ADJUSTMENT- The Secretary may annually raise the minimum level
of retained losses established under paragraph (1) for an eligible State
program to reflect, as determined by the Secretary--
(A) changes to the claims-paying capacity of the program;
(B) changes in the capacity of the private insurance and reinsurance
market;
(C) increases in the market value of properties; or
(D) such other situations as the Secretary considers appropriate.
The Secretary shall consider the minimum level of retained losses requirements
in paragraphs (1) as a minimum requirement only and shall have full authority,
effective on the date of the enactment of this Act, to establish levels
of required minimum retained losses in any amount greater than the amount
specified in such paragraph. In making any determination 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 determined by
the Secretary after the Secretary has provided interested parties an opportunity
to submit market information relevant to such determination.
(3) OPTIONAL ANNUAL INFLATIONARY OR EXPOSURE ADJUSTMENT- The Secretary
may, on an annual basis, raise the minimum level of retained losses established
under paragraph (1) for each eligible State program 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 reinsurance
coverage under this Act are first made available for purchase.
(c) Maximum Federal Liability-
(1) IN GENERAL- Notwithstanding any other provision of law, the Secretary
may sell only contracts for reinsurance coverage under this Act in various
amounts which 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 $25,000,000,000 (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 a prescribed
level of losses as determined by the Secretary:
(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 50
percent of eligible losses in excess of retained losses for the State
of the program purchasing the contract.
(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. 8. 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 for eligible losses under such contracts.
(2) ADMINISTRATIVE EXPENSES- To pay for the administrative expenses incurred
by the Secretary in carrying out the reinsurance program under this Act.
(3) TERMINATION- Upon termination under section 11, as provided in such
section.
(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 9(h), no Federal funds shall be authorized
or appropriated for the Fund or for carrying out the reinsurance program
under this Act.
SEC. 9. DEFINITIONS.
For purposes of this Act, the following definitions shall apply:
(1) COVERED PERILS- The term `covered perils' means the perils under section
5.
(2) 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 6.
(3) DISASTER AREA- The term `disaster area' means a geographical area,
with respect to which--
(A) a covered peril specified in section 5 has 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
(4) ELIGIBLE LOSSES- The term `eligible losses' means losses in excess
of the sustained and retained losses, as defined by the Secretary.
(5) ELIGIBLE STATE PROGRAM- The term `eligible State program' means a
State program that, pursuant to section 6(a), is eligible to purchase
reinsurance coverage made available through contracts under section 6.
(6) PRICE GOUGING- The term `price gouging' means the providing of any
consumer good or service by a supplier 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 disaster involved), than the price
charged by the supplier for such consumer good or service immediately
before the disaster.
(7) QUALIFIED LINES- The term `qualified lines' means lines of insurance
coverage for which losses are covered under section 4 by reinsurance coverage
under this Act.
(8) REINSURANCE COVERAGE- The term `reinsurance coverage under this Act'
means coverage under contracts made available under section 6.
(9) SECRETARY- The term `Secretary' means the Secretary of the Treasury.
(10) 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. 10. REGULATIONS.
The Secretary shall issue any regulations necessary to carry out the program
for reinsurance coverage under this Act.
SEC. 11. 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 10-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 determines that continuation of the program for reinsurance
coverage under this Act, or a portion of such program is necessary to carry
out the purpose of this Act under section 3(b) because of insufficient growth
of capacity in the private insurance market, the Secretary shall continue
to provide reinsurance coverage under this Act or such portion of the program
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 8 upon the
repeal of this Act.
SEC. 12. ANNUAL STUDY OF COST AND AVAILABILITY OF DISASTER INSURANCE AND
PROGRAM NEED.
(a) In General- The Secretary shall, on an annual basis, conduct a study
and submit to the Congress a report on the cost and availability of insurance
for losses resulting from catastrophic disasters covered by the reinsurance
program under this Act.
(b) Contents- Each annual study under this section shall determine and identify,
on an aggregate basis--
(1) for each State, the capacity of the private insurance market with
respect to coverage for losses from catastrophic disasters;
(2) for each State, the percentage of homeowners and businesses who have
such coverage, the disasters covered, and the average cost of such coverage;
(3) for each State, the progress that private reinsurers and capital markets
have made in providing reinsurance for such homeowners' and business insurance;
(4) for each State, the effects of the Federal reinsurance program under
this Act on the availability and affordability of such insurance; and
(5) the appropriate time for termination of the Federal reinsurance program
under this Act.
(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 2 years after the date of the enactment
of this Act.
SEC. 13. GAO STUDY OF FEDERAL PROGRAM FOR REINSURANCE FOR ALL SOLVENCY-THREATENING
EVENTS.
The Comptroller General of the United States shall conduct a study of the
need for a Federal program to provide reinsurance for insured losses resulting
from any catastrophic event that may threaten the solvency of any segment
of the catastrophe insurance industry, including all naturally and non-naturally
occurring events, regardless of cause, and the appropriateness of such a
program to stabilize financial and insurance markets and to ensure the availability
and affordability of insurance in the United States for losses from such
events. The Comptroller General shall submit to the Congress a report regarding
the conclusions of such study not later than the expiration of the 6-month
period beginning on the date of the enactment of this Act.
END
