What This Bill Does
This bill requires the head of the National Flood Insurance Program (a government program that provides flood insurance) to transfer some of the program's financial risk to private insurance companies and investment markets. The goal is to reduce how much money taxpayers might have to contribute if there are major flood losses.
Who It Affects
The Administrator of the National Flood Insurance Program is directly responsible for carrying out this bill's requirements.
Key Provisions
• The Administrator must transfer some of the flood insurance program's risk to private reinsurance (insurance that insurance companies buy for themselves) or capital markets within 18 months of the bill becoming law and every year after that (Sec. 2(2)(A))
• The amount of risk transferred must be enough to keep the program able to pay flood insurance claims (Sec. 2(2)(A)(i))
• The Administrator must set a "probable maximum loss target" each fiscal year, which is the largest flood loss amount expected to happen that year (Sec. 2(2)(B))
• When deciding how much risk to transfer, the Administrator must consider other government insurance programs, available money in flood insurance funds, borrowing authority, ability to repay debt, and types of insurance-linked securities available (Sec. 2(2)(C))
• The Administrator can use contracts longer than one year to transfer risk as long as the yearly requirement is met (Sec. 2(2)(D))
What Changes
The law changes how the National Flood Insurance Program manages financial risk by requiring it to move some risk from taxpayers to private markets every year instead of only when the Administrator chooses to do so.
Important Definitions
"Probable maximum loss target" means the largest flood loss amount the program is expected to experience in a given fiscal year.
Effective Date
The requirement to transfer risk begins 18 months after the bill becomes law (Sec. 2(2)(A)).
I
118TH CONGRESS
1ST SESSION H. R. 1306
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
MARCH 1, 2023
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’’.
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SEC. 2. RISK TRANSFER REQUIREMENT.
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Subsection (e) of section 1345 of the National Flood
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Insurance Act of 1968 (42 U.S.C. 4081(e)) is amended—
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(1) by striking ‘‘(e) RISK TRANSFER.—The Ad-
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ministrator’’ and inserting the following:
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•HR 1306 IH
‘‘(e) RISK TRANSFER.—
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‘‘(1) AUTHORITY.—The Administrator’’; and
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(2) by adding at the end the following new
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paragraph:
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‘‘(2) REQUIRED RISK TRANSFER COVERAGE.—
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‘‘(A) REQUIREMENT.—Not later than the
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expiration of the 18-month period beginning
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upon the date of the enactment of this para-
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graph and at all times thereafter, the Adminis-
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trator shall annually cede a portion of the risk
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of the flood insurance program under this title
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to the private reinsurance or capital markets, or
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any combination thereof, and at rates and
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terms that the Administrator determines to be
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reasonable and appropriate, in an amount
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that—
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‘‘(i) is sufficient to maintain the abil-
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ity of the program to pay claims; and
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‘‘(ii) manages and limits the annual
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exposure of the flood insurance program to
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flood losses in accordance with the prob-
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able maximum loss target established for
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such year under subparagraph (B).
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‘‘(B) PROBABLE
MAXIMUM
LOSS
TAR-
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GET.—The Administrator shall for each fiscal
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•HR 1306 IH
year, establish a probable maximum loss target
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for the national flood insurance program that
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shall be the maximum probable loss under the
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national flood insurance program that is ex-
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pected to occur in such fiscal year.
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‘‘(C) CONSIDERATIONS.—In establishing
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the probable maximum loss target under sub-
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paragraph (B) for each fiscal year and carrying
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out subparagraph (A), the Administrator shall
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consider—
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‘‘(i) the probable maximum loss tar-
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gets for other United States public natural
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catastrophe insurance programs, including
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as State wind pools and earthquake pro-
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grams;
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‘‘(ii) the probable maximum loss tar-
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gets of other risk management organiza-
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tions, including the Federal National Mort-
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gage Association and the Federal Home
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Loan Mortgage Corporation;
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‘‘(iii)
catastrophic,
actuarial,
and
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other appropriate data modeling results of
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the national flood insurance program port-
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folio;
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•HR 1306 IH
‘‘(iv) the availability of funds in the
1
National Flood Insurance Fund established
2
under section 1310 (42 U.S.C. 4017);
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‘‘(v) the availability of funds in the
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National Flood Insurance Reserve Fund
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established under section 1310A (42
6
U.S.C. 4017a);
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‘‘(vi) the availability of borrowing au-
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thority under section 1309 (42 U.S.C.
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4016);
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‘‘(vii) the ability of the Administrator
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to repay outstanding debt;
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‘‘(viii) amounts appropriated to the
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Administrator to carry out the national
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flood insurance program;
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‘‘(ix) reinsurance, capital markets, ca-
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tastrophe bonds, collateralized reinsurance,
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resilience bonds, and other insurance-
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linked securities, and other risk transfer
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opportunities; and
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‘‘(x) any other factor the Adminis-
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trator determines appropriate.
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‘‘(D) MULTI-YEAR
CONTRACTS.—Nothing
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in this paragraph may be construed to prevent
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or prohibit the Administrator from complying
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•HR 1306 IH
with the requirement under subparagraph (A)
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regarding ceding risk through contracts having
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a duration longer than one year.’’.
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Æ
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