Taxpayer Exposure Mitigation Act

I 117TH CONGRESS 1ST SESSION H. R. 3417 To provide for greater transfer of risk under the National Flood Insurance Program to private capital and reinsurance markets, and for other purposes. IN THE HOUSE OF REPRESENTATIVES MAY 20, 2021 Mr. LUETKEMEYER introduced the following bill; which was referred to the Committee on Financial Services A BILL To provide for greater transfer of risk under the National Flood Insurance Program to private capital and reinsur- ance markets, and for other purposes. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Taxpayer Exposure 4 Mitigation Act’’. 5 SEC. 2. RISK TRANSFER REQUIREMENT. 6 Subsection (e) of section 1345 of the National Flood 7 Insurance Act of 1968 (42 U.S.C. 4081(e)) is amended— 8 (1) by striking ‘‘(e) RISK TRANSFER.—The Ad- 9 ministrator’’ and inserting the following: 10 VerDate Sep 11 2014 05:22 Jun 22, 2021 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H3417.IH H3417 kjohnson on DSK79L0C42PROD with BILLS 2 •HR 3417 IH ‘‘(e) RISK TRANSFER.— 1 ‘‘(1) AUTHORITY.—The Administrator’’; and 2 (2) by adding at the end the following new 3 paragraph: 4 ‘‘(2) REQUIRED RISK TRANSFER COVERAGE.— 5 ‘‘(A) REQUIREMENT.—Not later than the 6 expiration of the 18-month period beginning 7 upon the date of the enactment of this para- 8 graph and at all times thereafter, the Adminis- 9 trator shall annually cede a portion of the risk 10 of the flood insurance program under this title 11 to the private reinsurance or capital markets, or 12 any combination thereof, and at rates and 13 terms that the Administrator determines to be 14 reasonable and appropriate, in an amount 15 that— 16 ‘‘(i) is sufficient to maintain the abil- 17 ity of the program to pay claims; and 18 ‘‘(ii) manages and limits the annual 19 exposure of the flood insurance program to 20 flood losses in accordance with the prob- 21 able maximum loss target established for 22 such year under subparagraph (B). 23 ‘‘(B) PROBABLE MAXIMUM LOSS TAR- 24 GET.—The Administrator shall for each fiscal 25 VerDate Sep 11 2014 05:22 Jun 22, 2021 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H3417.IH H3417 kjohnson on DSK79L0C42PROD with BILLS 3 •HR 3417 IH year, establish a probable maximum loss target 1 for the national flood insurance program that 2 shall be the maximum probable loss under the 3 national flood insurance program that is ex- 4 pected to occur in such fiscal year. 5 ‘‘(C) CONSIDERATIONS.—In establishing 6 the probable maximum loss target under sub- 7 paragraph (B) for each fiscal year and carrying 8 out subparagraph (A), the Administrator shall 9 consider— 10 ‘‘(i) the probable maximum loss tar- 11 gets for other United States public natural 12 catastrophe insurance programs, including 13 as State wind pools and earthquake pro- 14 grams; 15 ‘‘(ii) the probable maximum loss tar- 16 gets of other risk management organiza- 17 tions, including the Federal National Mort- 18 gage Association and the Federal Home 19 Loan Mortgage Corporation; 20 ‘‘(iii) catastrophic, actuarial, and 21 other appropriate data modeling results of 22 the national flood insurance program port- 23 folio; 24 VerDate Sep 11 2014 05:22 Jun 22, 2021 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H3417.IH H3417 kjohnson on DSK79L0C42PROD with BILLS 4 •HR 3417 IH ‘‘(iv) the availability of funds in the 1 National Flood Insurance Fund established 2 under section 1310 (42 U.S.C. 4017); 3 ‘‘(v) the availability of funds in the 4 National Flood Insurance Reserve Fund 5 established under section 1310A (42 6 U.S.C. 4017a); 7 ‘‘(vi) the availability of borrowing au- 8 thority under section 1309 (42 U.S.C. 9 4016); 10 ‘‘(vii) the ability of the Administrator 11 to repay outstanding debt; 12 ‘‘(viii) amounts appropriated to the 13 Administrator to carry out the national 14 flood insurance program; 15 ‘‘(ix) reinsurance, capital markets, ca- 16 tastrophe bonds, collateralized reinsurance, 17 resilience bonds, and other insurance- 18 linked securities, and other risk transfer 19 opportunities; and 20 ‘‘(x) any other factor the Adminis- 21 trator determines appropriate. 22 ‘‘(D) MULTI-YEAR CONTRACTS.—Nothing 23 in this paragraph may be construed to prevent 24 or prohibit the Administrator from complying 25 VerDate Sep 11 2014 05:22 Jun 22, 2021 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H3417.IH H3417 kjohnson on DSK79L0C42PROD with BILLS 5 •HR 3417 IH with the requirement under subparagraph (A) 1 regarding ceding risk through contracts having 2 a duration longer than one year.’’. 3 Æ VerDate Sep 11 2014 05:22 Jun 22, 2021 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6301 E:\BILLS\H3417.IH H3417 kjohnson on DSK79L0C42PROD with BILLS