,i #aacth ,,congress #ast ,session ,h4 ,r4 #bdj ,,in ,,the ,,house ,,of ,,representatives ,january #ad1 #bjac ,mr4 ,ross introduced the following bill2 which was referred to the ,committee on ,financial ,services ,a ,,bill ,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 catastrophes1 to encourage and promote mitigation and prevention for1 and recovery and rebuilding from such catastrophes1 and to better assist in the financial recovery from such catastrophes4 #a4 ,short title2 table of contents 7a7 ,short title ,this ,act may be cited as the ,homeowners ,insurance ,protection ,act of #bjac4 7b7 ,table of contents ,the table of contents for this ,act is as follows3 ,sec4 #a4 ,short title2 table of contents4 ,sec4 #b4 ,congressional findings4 ,sec4 #c4 ,national ,commission on ,catastrophe ,preparation and ,protection4 ,sec4 #d4 ,program authority4 ,sec4 #e4 ,qualified lines of coverage4 ,sec4 #f4 ,covered perils4 ,sec4 #g4 ,contracts for reinsurance coverage for eligible ,state programs4 ,sec4 #h4 ,treatment of insured losses and maximum ,federal liability4 ,sec4 #i4 ,catastrophe capital reserve funds4 ,sec4 #aj4 ,consumer ,hurricane1 ,earthquake1 ,loss ,protection 7,,help7 ,fund4 ,sec4 #aa4 ,annual study concerning benefits of reinsurance program4 ,sec4 #ab4 ,definitions4 ,sec4 #ac4 ,regulations4 ,sec4 #ad4 ,termination4 #b4 ,congressional findings ,the ,congress finds that-- 7#a7 the ,united ,states needs to take actions to be better prepared for and better protected from catastrophes2 7#b7 the hurricane seasons of #bjjd and #bjje are startling reminders of both the human and economic devastation that hurricanes1 flooding1 and other natural disasters can cause2 7#c7 if a hurricane similar to the deadly #aijj ,galveston hurricane occurred again it could cause over #cf1jjj1jjj1jjj in loss2 7#d7 if the #aijd ,san ,francisco earthquake occurred again it could cause over #djj1jjj1jjj1jjj in loss2 7#e7 if a ,category #e hurricane were to hit ,miami it could cause over #ej1jjj1jjj1jjj in loss and devastate the insurance industry in the ,united ,states2 7#f7 if the #aich ,long ,island ,express were to occur again it could cause over #cj1jjj1jjj1jjj in damage and if a hurricane that strong were to directly hit ,manhattan it could cause over #aej1jjj1jjj1jjj in damage and cause irreparable harm to our ,nation's economy2 7#g7 a more comprehensive and integrated approach to dealing with catastrophes is needed2 7#h7 using history as a guide1 natural catastrophes will inevitably place a tremendous strain on homeowners' insurance markets in many areas1 will raise costs for consumers1 and will jeopardize the ability of many consumers to adequately insure their homes and possessions2 7#i7 the lack of sufficient insurance capacity and the inability of private insurers to build enough capital1 in a short amount of time1 threatens to increase the number of uninsured homeowners1 which1 in turn1 increases the risk of mortgage defaults and the strain on the ,nation's banking system2 7#aj7 some ,states have intervened to ensure the continued availability and affordability of homeowners' insurance for all residents2 7#aa7 it is appropriate that efforts to improve insurance availability be designed and implemented at the ,state level2 7#ab7 while ,state insurance programs may be adequate to cover losses from most natural disasters1 a small percentage of events are likely to exceed the financial capacity of these programs and the local insurance markets2 7#ac7 making available limited ,federal reinsurance would improve the effectiveness of ,state insurance programs and private insurance markets and would 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 paid2 7#ad7 it is necessary to provide a ,federal reinsurance program on a temporary basis that will provide more protection at an overall lower cost and that will promote stability in the homeowners' insurance market in the short term and encourage growth of reinsurance capacity by the private and capital markets as soon as practical2 7#ae7 it is the proper role of the ,federal ,government to prepare for and protect its citizens from catastrophes and to facilitate consumer protection1 victim assistance1 and recovery1 including financial recovery2 7#af7 any ,federal reinsurance program must be founded upon sound actuarial principles and priced in a manner that minimizes the potential impact on the ,treasury of the ,united ,states1 encourages the creation of ,state funds and maximizes the buying potential of these ,state funds1 encourages and promotes prevention and mitigation1 recovery and rebuilding1 and consumer education1 and emphasizes continuous analysis and improvement2 and 7#ag7 such a ,federal reinsurance program should not remain in existence longer than necessary for the private entities or the capital markets1 or both1 to provide adequate reinsurance capacity to address the homeowners' insurance market4 #c4 ,national ,commission on ,catastrophe ,preparation and ,protection 7a7 ,establishment ,the ,secretary of the ,treasury shall establish a commission to be known as the ,national ,commission on ,catastrophe ,preparation and ,protection4 7b7 ,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 ,act1 including-- 7#a7 the development and implementation of public education concerning the risks posed by natural catastrophes2 7#b7 the development and implementation of prevention1 mitigation1 recovery1 and rebuilding standards that better prepare and protect the ,united ,states from catastrophes2 7#c7 the establishment of requirements under section #g7;e7 to ensure that cost savings resulting from this ,act inure to the benefit of consumers2 and 7#d7 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 prepared4 7c7 ,members 7#a7 ,appointment and qualification ,the ,commission shall consist of #i members1 as follows3 7,a7 ,homeland security member ,the ,secretary of ,homeland ,security or the ,secretary's designee4 7,b7 ,appointed members ,eight members appointed by the ,secretary1 who shall consist of-- 7i7 one individual who is an actuary2 7ii7 one individual who is employed in engineering2 7iii7 one individual representing the scientific community2 7iv7 one individual representing property and casualty insurers2 7v7 one individual representing reinsurers2 7vi7 one individual who is a member or former member of the ,national ,association of ,insurance ,commissioners2 and 7vii7 two individuals who are consumers4 7#b7 ,prevention of conflicts of interest ,members shall have no personal or financial interest at stake in the deliberations of the ,commission4 7d7 ,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 #bjb and #bjh of title #ah1 ,united ,states ,code4 7e7 ,experts and consultants ,the ,commission may procure temporary and intermittent services from individuals or groups recognized as experts in the fields of meteorology1 seismology1 vulcanology1 geology1 structural engineering1 wind engineering1 and hydrology1 and other fields1 under section #caji7;b7 of title #e1 ,united ,states ,code1 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 ,schedule1 for each day during which the individual procured is performing such services for the ,commission4 ,the ,commission may also procure1 and the ,congress encourages the ,commission to procure1 experts from universities1 research centers1 foundations1 and other appropriate organizations who could study1 research1 and develop methods and mechanisms that could be utilized to strengthen structures to better withstand the perils covered by this ,act4 7f7 ,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 ,schedule1 for each day 7including travel time7 during which such member is engaged in the performance of the duties of the ,commission4 ,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 ,states4 7g7 ,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 industry4 ,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 ,secretary4 ,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 ,act1 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 ,secretary4 7h7 ,funding 7#a7 ,authorization of appropriations ,there is authorized to be appropriated-- 7,a7 #aj1jjj1jjj for fiscal year #bjad 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 #g7;b77#f77;,b77iii71 as determined by the ,secretary2 7,b7 such additional sums as may be necessary to carry out subsequent activities of the ,commission2 7,c7 #aj1jjj1jjj for fiscal year #bjad for the initial expenses of the ,secretary in carrying out the program authorized under section #d2 and 7,d7 such additional sums as may be necessary to carry out subsequent activities of the ,secretary under this ,act4 7#b7 ,offset ,the ,secretary shall provide1 to the maximum extent practicable1 that an amount equal to any amount appropriated under paragraph 7#a7 is obtained from purchasers of reinsurance coverage under this ,act and deposited in the ,fund established under section #aj4 ,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 coverage1 pursuant to section #g7;b77#f77;,b77iii74 7i7 ,termination ,the ,commission shall terminate upon the effective date of the repeal under section #ad7;c74 #d4 ,program authority 7a7 ,in general ,the ,secretary of the ,treasury1 in consultation with the ,secretary of ,homeland ,security1 shall carry out a program under this ,act to improve the availability and affordability of homeowners protection coverage by making available for purchase1 only by eligible ,state programs1 contracts for reinsurance coverage under section #g4 7b7 ,purpose ,the program shall be designed to make reinsurance coverage under this ,act available-- 7#a7 to improve the availability and affordability of homeowners' insurance for the purpose of facilitating the pooling1 and spreading the risk1 of catastrophic financial losses from natural catastrophes2 7#b7 to improve the solvency and capacity of homeowners' insurance markets2 7#c7 to encourage the development and implementation of mitigation1 prevention1 recovery1 and rebuilding standards2 and 7#d7 to recommend methods to continuously improve the way the ,united ,states reacts and responds to catastrophes1 including improvements to the ,,help ,fund established under section #aj4 7c7 ,contract principles ,under the program under this ,act1 the ,secretary shall offer reinsurance coverage through contracts with covered purchasers1 which contracts-- 7#a7 shall not displace or compete with the private insurance or reinsurance markets or the capital market2 7#b7 shall minimize the administrative costs of the ,federal ,government2 and 7#c7 shall provide coverage based solely on insured losses within the ,state for the eligible ,state program purchasing the contract4 #e4 ,qualified lines of coverage ,each contract for reinsurance coverage made available under this ,act shall provide insurance coverage against residential property losses to homes 7including dwellings owned under condominium and cooperative ownership arrangements7 and the contents of apartment buildings4 #f4 ,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-- 7#a7 earthquakes2 7#b7 perils ensuing from earthquakes1 including fire and tsunamis2 7#c7 tropical cyclones having maximum sustained winds of at least #gd miles per hour1 including hurricanes and typhoons2 7#d7 tornadoes2 7#e7 volcanic eruptions2 7#f7 catastrophic winter storms2 and 7#g7 any other natural catastrophe 7not including any flood7 insured or reinsured under the eligible ,state program for which reinsurance coverage under section #g is provided4 ,the ,secretary shall1 by regulation1 define the natural catastrophe perils under this section4 #g4 ,contracts for reinsurance coverage for eligible ,state programs 7a7 ,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 requirements3 7#a7 ,program design ,the program shall be a ,state-operated-- 7,a7 insurance program that-- 7i7 offers coverage for homes 7which may include dwellings owned under condominium and cooperative ownership arrangements7 and the contents of apartments to ,state residents2 and 7ii7 is authorized by ,state law2 or 7,b7 reinsurance program that is designed to improve private insurance markets that offer coverage for homes 7which may include dwellings owned under condominium and cooperative ownership arrangements7 and the contents of apartments because of a finding by the ,state insurance commissioner or other ,state entity authorized to make such a determination that such program is necessary in order to provide for the continued availability of such residential coverage for all residents4 7#b7 ,operation ,the program shall meet the following requirements3 7,a7 ,a majority of the members of the governing body of the program shall be public officials4 7,b7 ,the ,state shall have a financial interest in the program1 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 perils4 7,c7 ,if the ,state has at any time appropriated amounts from the ,state fund for the ,state program for any purpose other than payments under the program1 the ,state shall have repaid such amounts to the ,state fund1 together with interest on such amounts4 7#c7 ,tax status ,the program shall be structured and carried out in a manner so that the program is exempt from all ,federal taxation4 7#d7 ,coverage ,the program shall cover all perils specified in section #f4 7#e7 ,earnings ,the program may not provide for1 nor shall have ever made1 any redistribution of any part of any net profits of the program to any insurer that participates in the program4 7#f7 ,prevention and mitigation ,the program shall include prevention and mitigation provisions that require that not less than #aj1jjj1jjj and not more than #ce 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 established4 ,for purposes of this paragraph1 prevention and mitigation shall include methods to reduce losses of life and property1 including appropriate measures to adequately reflect-- 7,a7 encouragement of awareness about the risk factors and what can be done to eliminate or reduce them2 7,b7 location of the risk1 by giving careful consideration of the natural risks for the location of the property before allowing building and considerations if structures are allowed2 and 7,c7 construction relative to the risk and hazards1 which act upon-- 7i7 ,state mandated building codes appropriate for the risk2 7ii7 adequate enforcement of the risk-appropriate building codes2 7iii7 building materials that prevent or significantly lessen potential damage from the natural catastrophes2 7iv7 building methods that prevent or significantly lessen potential damage from the natural catastrophes2 and 7v7 a focus on prevention and mitigation for any substantially damaged structure1 with an emphasis on how structures can be retrofitted so as to make them building code compliant4 7#g7 ,requirements regarding coverage 7,a7 ,in general ,the program-- 7i7 may not1 except for charges or assessments related to post-event financing or bonding1 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 7#c72 7ii7 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 ,state2 and 7iii7 shall provide that1 for any insurance coverage for homes 7which may include dwellings owned under condominium and cooperative ownership arrangements7 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 program1 the premium rates charged shall be amounts that1 at a minimum1 are sufficient to cover the full actuarial costs of such coverage1 based on consideration of the risks involved and accepted actuarial and rate making principles1 anticipated administrative expenses1 and loss and loss-adjustment expenses4 7,b7 ,applicability ,this paragraph shall apply after the expiration of the #b-year period beginning on the date of the enactment of this ,act4 7#h7 ,prohibition of competition with private market ,any insurance or reinsurance coverage1 as applicable1 made available through the ,state program shall not supplant coverage that is otherwise reasonably available and affordable in the private market4 7#i7 ,other qualifications 7,a7 ,in general ,the ,state program shall 7for the year for which the coverage is in effect7 comply with regulations that shall be issued under this paragraph by the ,secretary1 in consultation with the ,commission4 ,the regulations shall establish criteria for ,state programs to qualify to purchase reinsurance under this section1 which are in addition to the requirements under the other paragraphs of this subsection4 7,b7 ,contents ,the regulations issued under this paragraph shall include requirements that-- 7i7 the ,state program shall have public members on its board of directors or have an advisory board with public members2 7ii7 the ,state program provide adequate insurance or reinsurance protection1 as applicable1 for the perils covered1 which shall include a range of deductibles and premium costs that reflect the applicable risks to eligible properties2 7iii7 insurance or reinsurance coverage1 as applicable1 provided by the ,state program is made available on a nondiscriminatory basis to all qualifying residents2 7iv7 any new construction1 substantial rehabilitation1 and renovation insured or reinsured by the program complies with applicable ,state or local government building1 fire1 and safety codes2 7v7 the ,state1 or appropriate local governments within the ,state1 have in effect and enforce nationally recognized model building1 fire1 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 winds2 7vi7 the ,state has taken actions to establish an insurance rate structure that takes into account measures to mitigate insurance losses2 7vii7 there are in effect1 in such ,state1 laws or regulations sufficient to prohibit price gouging1 during the term of reinsurance coverage under this ,act for the ,state program in any disaster area located within the ,state2 and 7viii7 the ,state program complies with such other requirements that the ,secretary considers necessary to carry out the purposes of this ,act4 7b7 ,terms of contracts ,each contract under this section for reinsurance coverage under this ,act shall be subject to the following terms and conditions3 7#a7 ,maturity ,the term of the contract shall not exceed #a year or such other term as the ,secretary may determine4 7#b7 ,payment condition ,the contract shall authorize claims payments only for eligible losses to the eligible ,state program purchasing the coverage4 7#c7 ,retained losses requirement ,for each event of a covered peril1 the contract shall make a payment for the event only if the total amount of insurance claims for losses1 which are covered by qualified lines1 occur to properties located within the ,state covered by the contract1 and that result from insured losses 7as defined in section #ab7 for the ,state program1 exceeds the amount of retained losses provided under the contract 7pursuant to section #h7;a77 purchased by the eligible ,state program4 7#d7 ,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 occur1 the retained losses requirement under paragraph 7#c7 shall apply on a calendar year basis1 in the aggregate and not separately to each individual event4 7#e7 ,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 #c-year period beginning upon the event or events for which payment under the contract is provided4 7#f7 ,pricing 7,a7 ,determination ,the price of reinsurance coverage under the contract shall be an amount established by the ,secretary as follows3 7i7 ,recommendations ,the ,secretary shall take into consideration the recommendations of the ,commission in establishing the price1 but the price may not be less than the amount recommended by the ,commission4 7ii7 ,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 disasters4 7iii7 ,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 claims1 loss adjustment expenses1 and all administrative costs of reinsurance coverage offered under this section4 7,b7 ,components ,the price shall consist of the following components3 7i7 ,risk-based price ,a risk-based price1 which shall reflect the anticipated annualized payout of the contract according to the actuarial analysis and recommendations of the ,commission4 7ii7 ,risk load ,a risk load in an amount that is not less than the risk-based price under clause 7i74 ,in establishing risk loads under this clause1 the ,secretary shall take into consideration comparable private risk loads4 7iii7 ,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 ,act4 7#g7 ,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 ,commission1 as determined by the ,secretary4 7#h7 ,additional contract option ,the contract shall provide that the purchaser of the contract may1 during the term of such original contract1 purchase additional contracts from among those offered by the ,secretary at the beginning of the term1 subject to the limitations under section #h1 at the prices at which such contracts were offered at the beginning of the term1 prorated based upon the remaining term as determined by the ,secretary4 ,such additional contracts shall provide coverage beginning on a date #ae days after the date of purchase but shall not provide coverage for losses for an event that has already occurred4 7#i7 ,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 ,act4 7c7 ,private sector right ,to participate 7#a7 ,establishment of competitive procedure ,the ,secretary shall establish1 by regulation1 a competitive procedure under this subsection that provides qualified entities an opportunity1 on a basis consistent with the contract cycle established under this ,act by the ,secretary1 to offer to provide1 in lieu of reinsurance coverage under this section1 reinsurance coverage that is substantially similar to coverage otherwise made available under this section4 7#b7 ,competitive procedure ,under the procedure established under this subsection-- 7,a7 the ,secretary shall establish criteria for private insurers1 reinsurers1 and capital market companies1 and consortia of such entities to be treated as qualified entities for purposes of this subsection1 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 appropriate2 7,b7 not less than #cj days before the beginning of each contract cycle during which any reinsurance coverage under this section is to be made available1 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 cycle2 7,c7 the ,secretary shall provide qualified entities a period of not less than #aj days 7which shall terminate not less than #bj days before the beginning of the contract cycle7 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 section2 7,d7 the ,secretary shall provide any qualified entity submitting an expression of interest during the period referred to in subparagraph 7,c7 a period of not less than #bj days 7which shall terminate before the beginning of the contract cycle7 to submit to the ,secretary an offer to provide1 in lieu of the reinsurance coverage otherwise to be made available under this section1 coverage that is substantially similar to such coverage2 7,e7 if the ,secretary determines that an offer submitted during the period referred to in subparagraph 7,d7 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 ,secretary1 the ,secretary shall accept the offer 7if still outstanding7 and1 notwithstanding any other provision of this ,act1 provide for such entity to make reinsurance coverage available in accordance with the offer2 and 7,f7 if the ,secretary accepts an offer pursuant to subparagraph 7,e7 to make reinsurance coverage available1 notwithstanding any other provision of this ,act1 the ,secretary shall reduce1 to an equivalent extent1 the amount of reinsurance coverage available under this section during the contract cycle to which the offer relates1 unless and until the ,secretary determines that the entity is not complying with the terms of the accepted offer4 7d7 ,participation by multi-,state catastrophe fund programs ,nothing in this ,act shall prohibit the creation of multi-,state catastrophe insurance or reinsurance programs1 or the participation by such programs in the program established pursuant to section #d4 ,the ,secretary shall1 by regulation1 apply the provisions of this ,act to multi-,state catastrophe insurance and reinsurance programs4 7e7 ,requirement for insurers ,to pass through savings to consumers ,notwithstanding any other provision of this ,act1 a ,state program shall not be eligible to purchase a contract for reinsurance coverage made available under this ,act unless such ,state has in effect such laws1 regulations1 or other requirements1 as the ,secretary shall by regulation require1 that-- 7#a7 to the extent that reinsurance coverage made available under the program under this ,act results in any cost savings in providing insurance coverage for risks in such ,state1 such cost savings be reflected in premium rates charged to consumers for such coverage2 and 7#b7 the ,state take such actions as the ,secretary considers appropriate to ensure that the requirement under paragraph 7#a7 is carried out and enforced4 #h4 ,treatment of insured losses and maximum ,federal liability 7a7 ,available levels of retained losses ,in making reinsurance coverage available under this ,act1 the ,secretary shall make available for purchase contracts for such coverage that require the sustainment of retained losses from covered perils 7as required under section #g7;b77#c7 for payment of eligible losses7 in various amounts1 as the ,secretary1 in consultation with the ,commission1 determines appropriate and subject to the requirements under subsection 7b74 7b7 ,minimum level of retained losses 7#a7 ,amount ,subject to paragraph 7#b7 and notwithstanding any other provision of this ,act1 a contract for reinsurance coverage under section #g for an eligible ,state program that offers insurance or reinsurance coverage described in subparagraph 7,a7 or 7,b71 respectively1 of section #g7;a77#a7 may not be made available or sold unless the contract requires that the ,state program sustain an amount of retained losses from covered perils in the following amount3 7,a7 ,in general ,the ,state program shall sustain an amount of retained losses of not less than the greater of-- 7i7 the claims-paying capacity of the eligible ,state program1 as determined by the ,secretary2 and 7ii7 an amount1 determined by the ,secretary in consultation with the ,commission1 that is the amount equal to the eligible losses projected to be incurred once every #bjj years on an annual basis from covered perils4 7,b7 ,transition rule for new programs 7i7 #bjj-year event ,the ,secretary may provide that1 in the case of an eligible ,state program that1 after the date of the enactment of this ,act1 commences offering insurance or reinsurance coverage1 during the #g-year period beginning on the date that reinsurance coverage under section #g is first made available1 the minimum level of retained losses applicable under this paragraph shall be the amount determined for the ,state under subparagraph 7,a77i71 except that such minimum level shall be adjusted annually as provided in clause 7ii7 of this subparagraph4 7ii7 ,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 7i7 in a manner such that-- 7,i7 during the course of such #g-year period1 the applicable minimum level of retained losses approaches the minimum level that1 under subparagraph 7,a77ii71 will apply to the eligible ,state program upon the expiration of such period2 and 7,,ii7 each such annual increase is a substantially similar amount1 to the extent practicable4 7,c7 ,reduction because of reduced claims-paying capacity 7i7 ,authority ,notwithstanding subparagraphs 7,a71 7,b71 and 7,c7 or the terms contained in a contract for reinsurance pursuant to such subparagraphs1 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 event1 the ,secretary may reduce the minimum level of retained losses4 7ii7 ,term of reduction ,the ,secretary may extend the #e-year period for not more than #e additional #a-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 program4 ,the ,secretary shall consult with the appropriate officials of the ,state program regarding the required schedule and any potential #a-year extensions4 7,d7 ,claims-paying capacity ,for purposes of this paragraph1 the claims-paying capacity of a ,state-operated insurance or reinsurance program under section #g7;a77#a7 shall be determined by the ,secretary1 in consultation with the ,commission1 taking into consideration the claims-paying capacity as determined by the ,state program1 retained losses to private insurers in the ,state in an amount assigned by the ,state insurance commissioner1 the cash surplus of the program1 and the lines of credit1 reinsurance1 and other financing mechanisms of the program established by law4 7#b7 ,initial adjustment based on private market ,the ,secretary may1 before making contracts for reinsurance coverage under this ,act initially available under section #g1 raise the minimum level of retained losses from the amount required under paragraph 7#a7 for an eligible ,state program to ensure1 as determined by the ,secretary1 that such contracts comply with the principle under section #d7;c77#a74 7c7 #ij percent coverage of insured losses in excess of retained losses ,each contract for reinsurance coverage under this ,act for a covered purchaser shall provide that the amount paid out under the contract shall1 subject to subsection 7d71 be equal to #ij percent of the amount of insured losses of the eligible ,state program of the purchaser in excess of the amount of retained losses that the contract requires1 pursuant to subsection 7b71 to be incurred by such program4 7d7 ,maximum ,federal liability 7#a7 ,in general ,notwithstanding any other provision of law1 the ,secretary may sell only contracts for reinsurance coverage under this ,act in various amounts that comply with the following requirements3 7,a7 ,estimate of aggregate liability ,the aggregate liability for payment of claims under all such contracts in any single year is unlikely to exceed #bjj1jjj1jjj1jjj 7as such amount is adjusted under paragraph 7#b774 7,b7 ,eligible loss coverage sold ,eligible losses covered by all contracts sold within a ,state during a #ab-month period do not exceed the difference between the following amounts 7each of which shall be determined by the ,secretary in consultation with the ,commission73 7i7 ,the amount equal to the eligible loss projected to be incurred once every #ejj years from a single event in the ,state4 7ii7 ,the amount equal to the eligible loss projected to be incurred once every #bjj years from a single event in the ,state4 7#b7 ,annual adjustments ,the ,secretary shall annually adjust the amount under paragraph 7#a77;,a7 7as it may have been previously adjusted7 to provide for inflation in accordance with an inflation index that the ,secretary determines to be appropriate4 #i4 ,catastrophe capital reserve funds 7a7 ,establishment ,any insurer who participates in an eligible ,state program under section #g7;a7 may establish a ,catastrophe ,capital ,reserve ,fund 7in this section referred to as a reserve fund7 in which it may hold funds in a fiduciary capacity on behalf of the ,secretary4 7b7 ,funding ,an insurer may fund a reserve fund by making an election1 in advance1 to treat some or all of the premiums received for such coverage as charges imposed by the ,secretary for participation in1 and operation of1 the program for reinsurance coverage under this ,act4 ,any such premiums for which such an election has been made shall be maintained in a segregated account in a fiduciary capacity on behalf of the ,secretary4 ,such funds may be invested in any otherwise legally permissible manner but all interest1 dividends1 and capital accumulations also shall be retained in such segregated account on behalf of the ,secretary4 7c7 ,use ,amounts in a reserve fund established pursuant to this section shall be collected and used by the ,secretary to offset1 in whole or in part1 the cost to the ,secretary of claims paid under reinsurance coverage provided under the program1 except that1 in the case only of a single event that results in an amount of eligible losses to insurers that is equal to or greater than the amount of such losses projected to be incurred from a single event having an extent of such losses such that the event has a #a4j percent chance of occurring in any year1 an insurer may first use the funds in a reserve fund of the insurer to satisfy any one or more of the following3 7#a7 ,the retained losses for the insurer required under section #h7;b74 7#b7 ,the portion of the insurer's losses that exceed the required retained losses but are not compensated under a reinsurance contract made available under the ,program pursuant to section #h7;c74 7#c7 ,the insurer's obligations to pay for insured losses if any conditions precedent to payment under a contract for reinsurance made available under the ,program are not met4 7#d7 ,any risk-sharing obligations that the insurer may have entered into4 7d7 ,termination 7#a7 ,termination of program ,upon termination under section #ad of the program under this ,act1 and subject to the continuing authority of the ,secretary to adjust claims in satisfaction of contracts for reinsurance in force under the ,program1 #aj percent of each insurer's reserve funds shall be remitted to the ,secretary and the remainder shall be remitted to the insurer4 ,the ,secretary shall determine the manner in which the remittance of such income to the insurer shall be made4 7#b7 ,elimination of coverage of insured losses in excess of retained losses ,if at any time the ,program remains in effect but contracts for reinsurance under the ,program do not provide any payment for insured losses in excess of retained losses1 the reserve funds shall be retained and used for the purposes set forth in subsection 7c7 of this section4 ,at such time as an insurer's liability for insured losses under the ,program terminates1 as a consequence of the insurer's termination of its business or otherwise1 the insurer shall remit any amounts remaining in its reserve funds to the ,secretary4 #aj4 ,consumer ,hurricane1 ,earthquake1 ,loss ,protection 7,,help7 ,fund 7a7 ,establishment ,there is established within the ,treasury of the ,united ,states a fund to be known as the ,consumer ,,help ,fund 7in this section referred to as the ,fund74 7b7 ,credits ,the ,fund shall be credited with-- 7#a7 amounts received annually from the sale of contracts for reinsurance coverage under this ,act2 7#b7 any amounts borrowed under subsection 7d72 7#c7 any amounts earned on investments of the ,fund pursuant to subsection 7e72 and 7#d7 such other amounts as may be credited to the ,fund4 7c7 ,uses ,amounts in the ,fund shall be available to the ,secretary only for the following purposes3 7#a7 ,contract payments ,for payments to covered purchasers under contracts for reinsurance coverage for eligible losses under such contracts4 7#b7 ,commission costs ,to pay for the operating costs of the ,commission4 7#c7 ,administrative expenses ,to pay for the administrative expenses incurred by the ,secretary in carrying out the reinsurance program under this ,act4 7#d7 ,termination ,upon termination under section #ad1 as provided in such section4 7d7 ,borrowing 7#a7 ,authority ,to the extent that the amounts in the ,fund are insufficient to pay claims and expenses under subsection 7c71 the ,secretary may issue such obligations of the ,fund as may be necessary to cover the insufficiency and shall purchase any such obligations issued4 7#b7 ,public debt transaction ,for the purpose of purchasing any such obligations1 the ,secretary may use as a public debt transaction the proceeds from the sale of any securities issued under chapter #ca of title #ca1 ,united ,states ,code1 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 subsection4 7#c7 ,characteristics of obligations ,obligations issued under this subsection shall be in such forms and denominations1 bear such maturities1 bear interest at such rate1 and be subject to such other terms and conditions1 as the ,secretary shall determine4 7#d7 ,treatment ,all redemptions1 purchases1 and sales by the ,secretary of obligations under this subsection shall be treated as public debt transactions of the ,united ,states4 7#e7 ,repayment ,any obligations issued under this subsection shall be repaid including interest1 from the ,fund and shall be recouped from premiums charged for reinsurance coverage provided under this ,act4 7e7 ,investment ,if the ,secretary determines that the amounts in the ,fund are in excess of current needs1 the ,secretary may invest such amounts as the ,secretary considers advisable in obligations issued or guaranteed by the ,united ,states4 7f7 ,prohibition of ,federal funds ,except for amounts made available pursuant to subsection 7d7 and section #c7;h71 no further ,federal funds shall be authorized or appropriated for the ,fund or for carrying out the reinsurance program under this ,act4 #aa4 ,annual study concerning benefits of reinsurance program 7a7 ,in general ,the ,secretary shall1 on an annual basis1 conduct a study and submit to the ,congress a report that-- 7#a7 analyzes the cost and availability of homeowners' insurance for losses resulting from catastrophic natural disasters covered by the reinsurance program under this ,act2 7#b7 describes the efforts of the participating ,states in-- 7,a7 enacting preparedness1 prevention1 mitigation1 recovery1 and rebuilding standards2 and 7,b7 educating the public on the risks associated with natural catastrophe2 and 7#c7 makes recommendations regarding ways to improve the program under this ,act and its administration4 7b7 ,contents ,each annual study under this section shall also determine and identify1 on an aggregate basis-- 7#a7 for each ,state or region1 the capacity of the private homeowners' insurance market with respect to coverage for losses from catastrophic natural disasters2 7#b7 for each ,state or region1 the percentage of homeowners who have such coverage1 the catastrophes covered1 and the average cost of such coverage2 and 7#c7 for each ,state or region1 the effects this ,act is having on the availability and affordability of such insurance4 7c7 ,timing ,each annual report under this section shall be submitted not later than ,march #cj of the year after the year for which the study was conducted4 7d7 ,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 ,act4 #ab4 ,definitions ,for purposes of this ,act1 the following definitions shall apply3 7#a7 ,commission ,the term ,commission means the ,national ,commission on ,catastrophe ,risks and ,insurance ,loss ,costs established under section #c4 7#b7 ,covered perils ,the term covered perils means the natural disaster perils under section #f4 7#c7 ,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 #g4 7#d7 ,disaster area ,the term disaster area means a geographical area1 with respect to which-- 7,a7 a covered peril specified in section #f has occurred2 and 7,b7 a declaration that a major disaster exists1 as a result of the occurrence of such peril-- 7i7 has been made by the ,president of the ,united ,states2 and 7ii7 is in effect4 7#e7 ,eligible losses ,the term eligible losses means1 with respect to a contract for reinsurance coverage made available under this ,act for a covered purchaser1 the insured losses of the covered purchaser that exceed the amount of retained losses that the contract requires1 pursuant to section #h7;b71 to be incurred by the eligible ,state program of such purchaser1 as defined by the ,secretary after consultation with the ,commission4 7#f7 ,eligible ,state program ,the term eligible ,state program means a ,state program that1 pursuant to section #g7;a71 is eligible to purchase reinsurance coverage made available through contracts under section #g1 or a multi-,state program that is eligible to purchase such coverage pursuant to section #g7;c74 7#g7 ,insured loss ,the term insured loss means1 with respect to contract for reinsurance coverage made available under this ,act for a covered purchaser1 any loss resulting from a covered peril that is covered by insurance or reinsurance made available under the eligible ,state program of the covered purchaser4 7#h7 ,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 greater1 by at least the percentage set forth in a ,state law or regulation prohibiting such act 7notwithstanding any real cost increase due to any attendant business risk and other reasonable expenses that result from the major catastrophe involved71 than the price charged by the supplier for such consumer good or service immediately before the disaster4 7#i7 ,qualified lines ,the term qualified lines means lines of insurance coverage for which losses are covered under section #e by reinsurance coverage under this ,act4 7#aj7 ,reinsurance coverage ,the term reinsurance coverage under this ,act means coverage under contracts made available under section #g4 7#aa7 ,secretary ,the term ,secretary means the ,secretary of the ,treasury4 7#ab7 ,state ,the term ,state means the ,states of the ,united ,states1 the ,district of ,columbia1 the ,commonwealth of ,puerto ,rico1 the ,commonwealth of the ,northern ,mariana ,islands1 ,guam1 the ,virgin ,islands1 ,american ,samoa1 and any other territory or possession of the ,united ,states4 #ac4 ,regulations ,the ,secretary1 in consultation with the ,secretary of the ,department of ,homeland ,security1 shall issue any regulations necessary to carry out the program for reinsurance coverage under this ,act4 #ad4 ,termination 7a7 ,in general ,except as provided in subsection 7b71 the ,secretary may not provide any reinsurance coverage under this ,act covering any period after the expiration of the #bj-year period beginning on the date of the enactment of this ,act4 7b7 ,extension ,if upon the expiration of the period under subsection 7a7 the ,secretary1 in consultation with the ,commission1 determines that continuation of the program for reinsurance coverage under this ,act is necessary or appropriate to carry out the purpose of the program under section #d7;b7 because of insufficient growth of capacity in the private homeowners' insurance market1 the ,secretary shall continue to provide reinsurance coverage under this ,act until the expiration of the #e-year period beginning upon the expiration of the period under subsection 7a74 7c7 ,repeal ,effective upon the date that reinsurance coverage under this ,act is no longer available or in force pursuant to subsection 7a7 or 7b71 this ,act 7except for this section7 is repealed4 7d7 ,deficit reduction ,the ,secretary shall cover into the ,general ,fund of the ,treasury any amounts remaining in the ,fund under section #i upon the repeal of this ,act under subsection 7c74