Natural Disaster Risk Reinsurance Program Act of 2023

I 118TH CONGRESS 1ST SESSION H. R. 3525 To establish a Natural Disaster Risk Reinsurance Program, and for other purposes. IN THE HOUSE OF REPRESENTATIVES MAY 18, 2023 Mr. MOSKOWITZ introduced the following bill; which was referred to the Committee on Financial Services A BILL To establish a Natural Disaster Risk Reinsurance Program, 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 ‘‘Natural Disaster Risk 4 Reinsurance Program Act of 2023’’. 5 SEC. 2. NATURAL DISASTER RISK REINSURANCE PROGRAM. 6 (a) ESTABLISHMENT OF PROGRAM.— 7 (1) IN GENERAL.—There is established in the 8 Department of the Treasury the Natural Disaster 9 Risk Reinsurance Program, which shall apply only 10 VerDate Sep 11 2014 03:46 Jun 06, 2023 Jkt 039200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H3525.IH H3525 kjohnson on DSK79L0C42PROD with BILLS 2 •HR 3525 IH to covered events occurring on or after January 1, 1 2024. 2 (2) GOAL.—The goal of the Program shall be 3 to protect insurers from insolvency resulting from 4 covered events of a significant magnitude in a man- 5 ner that provides for affordability of coverage in the 6 marketplace for losses from such covered events. 7 (3) AUTHORITY OF SECRETARY.—Notwith- 8 standing any other provision of State or Federal 9 law, the Secretary shall administer the Program, in 10 consultation with the Director of the Federal Insur- 11 ance Office, and shall make payments to States in 12 accordance with subsection (b) to cover insured 13 losses. 14 (4) VOLUNTARY PARTICIPATION.— 15 (A) IN GENERAL.—Participation in the 16 Program shall be voluntary on the part of a 17 State, subject to the requirements under para- 18 graph (4). 19 (B) ELECTION.—The Secretary shall pro- 20 vide a procedure by which States may elect to 21 participate in the Program. 22 (C) TERMINATION OF PARTICIPATION.— 23 The Secretary shall provide a procedure by 24 which States may elect to terminate participa- 25 VerDate Sep 11 2014 03:46 Jun 06, 2023 Jkt 039200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H3525.IH H3525 kjohnson on DSK79L0C42PROD with BILLS 3 •HR 3525 IH tion in the Program, which shall require ad- 1 vance notice to the Secretary of not less than 2 180 days before such termination is effective. 3 (5) REQUIRED STATE PLAN.—To be eligible to 4 participate in the Program a State shall have in ef- 5 fect a plan, approved by the Secretary, that provides 6 such assurances to the Secretary as the Secretary 7 considers necessary— 8 (A) to ensure that insurers will cover 9 claims for insured losses occurring in the State 10 during the participation of the State in the Pro- 11 gram not exceeding the trigger amount for the 12 State under subsection (b)(2); 13 (B) to ensure that insurers submit to the 14 State insurance regulator and the State insur- 15 ance regulator submits to the Secretary, in ac- 16 cordance with such reasonable procedures as 17 the Secretary may establish, information suffi- 18 cient for administration of the Program, includ- 19 ing information regarding claims for insured 20 losses occurring in the State, insured losses in- 21 curred, and direct written premium for covered 22 insurance in the State; 23 (C) to distribute Federal payments under 24 the Program appropriately among insurers 25 VerDate Sep 11 2014 03:46 Jun 06, 2023 Jkt 039200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H3525.IH H3525 kjohnson on DSK79L0C42PROD with BILLS 4 •HR 3525 IH based on insured losses suffered by insurers 1 and insurers’ market shares; 2 (D) to pledge the State’s full faith and 3 credit toward full repayment to the Secretary, 4 within 10 years of receipt, of any Federal pay- 5 ment amounts provided under subsection (b) 6 and to provide a regular payment schedule over 7 such 10-year period; and 8 (E) to provide appropriate treatment under 9 the program for any insurer that is a State re- 10 sidual market insurance entity. 11 (6) TREATMENT OF EXISTING POLICIES.—This 12 Act may not be construed to affect any policy for 13 covered insurance in force on the date of the com- 14 mencement of participation in the Program by the 15 State in which the dwelling covered by such insur- 16 ance is located, but the Program shall apply to poli- 17 cies renewed after such date. 18 (b) FEDERAL PAYMENTS FOR EXCESSIVE INSURED 19 LOSSES.— 20 (1) FEDERAL PAYMENT.—Pursuant to the oc- 21 currence of a covered event, the Secretary shall pay 22 to each participating State an amount equal to the 23 amount by which the aggregate industry-wide in- 24 sured losses within such participating State resulting 25 VerDate Sep 11 2014 03:46 Jun 06, 2023 Jkt 039200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H3525.IH H3525 kjohnson on DSK79L0C42PROD with BILLS 5 •HR 3525 IH from such covered event exceed the trigger amount 1 in effect at such time under paragraph (2) for such 2 participating State for the type of covered event that 3 occurred. The Secretary shall provide for payments 4 under this subsection for a participating State for a 5 covered event to be made in installments of approxi- 6 mately 25 percent of the estimated total amount to 7 be provided for such State in connection with such 8 disaster, as best determined by the Secretary after 9 consideration of the information regarding insured 10 losses provided to the Secretary pursuant to para- 11 graph (2)(D). 12 (2) STATE TRIGGER AMOUNTS.— 13 (A) NAS AUTHORITY.—The Secretary 14 shall enter into an agreement with the National 15 Academy of Sciences (in this paragraph re- 16 ferred to as the ‘‘Academy’’) under which the 17 Academy shall propose to the Secretary, for 18 each participating State and for each different 19 type of covered event, a trigger amount under 20 this paragraph. A trigger amount proposed for 21 a State shall be effective for purposes of the 22 Program only upon review, adjustment if nec- 23 essary, and approval by the Secretary. 24 VerDate Sep 11 2014 03:46 Jun 06, 2023 Jkt 039200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H3525.IH H3525 kjohnson on DSK79L0C42PROD with BILLS 6 •HR 3525 IH (B) CONSIDERATIONS.—The trigger 1 amount proposed by the Academy for a partici- 2 pating State for a type of covered event shall be 3 the lesser of— 4 (i) the total direct written premiums 5 for covered insurance in the participating 6 State; and 7 (ii) the amount, as determined by the 8 Academy, that when applied under the 9 Program, protects insurers from insolvency 10 in the case of covered event of such type 11 of a severity equal to or exceeding that of 12 a covered event of such type having a two 13 percent chance of occurring in any given 14 year. 15 (C) REVISION.—The agreement pursuant 16 to subparagraph (A) shall provide for the Acad- 17 emy to review and revise the proposed trigger 18 amounts for each participating State not less 19 frequently than once every 24 months, and 20 more frequently at the request of the Secretary. 21 Any revised trigger amount may not take effect 22 under the Program before the expiration of the 23 180-day period beginning upon the provision by 24 the Secretary to such participating State of 25 VerDate Sep 11 2014 03:46 Jun 06, 2023 Jkt 039200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H3525.IH H3525 kjohnson on DSK79L0C42PROD with BILLS 7 •HR 3525 IH written notification of such revised trigger 1 amount. 2 (D) ASSESSMENT OF INSURED LOSSES.— 3 The agreement pursuant to subparagraph (A) 4 shall provide that following the occurrence of a 5 covered event, the Academy shall, for each par- 6 ticipating State affected, make assessments of 7 the insured losses for each such State and pro- 8 vide such information to the Secretary. Such 9 assessments shall be made on an ongoing basis 10 as necessary to make an accurate determination 11 of such insured losses. 12 (E) EXPERTS.— 13 (i) AUTHORITY.—The agreement pur- 14 suant to subparagraph (A) shall provide 15 that, in establishing proposed trigger 16 amounts under this paragraph and assess- 17 ing insured losses pursuant to subpara- 18 graph (D), the Academy may contract with 19 such experts and consultants, including ex- 20 perts in disaster modeling, as it considers 21 appropriate. 22 (ii) AUTHORIZATION OF APPROPRIA- 23 TIONS.—There is authorized to be appro- 24 priated to the National Academy of 25 VerDate Sep 11 2014 03:46 Jun 06, 2023 Jkt 039200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H3525.IH H3525 kjohnson on DSK79L0C42PROD with BILLS 8 •HR 3525 IH Sciences such sums as may be necessary 1 for costs of hiring experts and consultants 2 pursuant to clause (i). 3 (3) AUTHORITY TO ISSUE BONDS TO FUND 4 FEDERAL PAYMENTS.— 5 (A) ISSUANCE.—In connection with a cov- 6 ered event for which the Secretary is required 7 to make a payment under paragraph (1) to a 8 participating State, the Secretary shall issue 9 bonds under this paragraph, the proceeds of 10 which shall be used for making such payment. 11 (B) TERMS.—Bonds issued under this 12 paragraph shall be in such form and denomina- 13 tions, and shall be subject to such terms and 14 conditions of issue, conversion, redemption, 15 maturation, and payment as the Secretary may 16 prescribe and shall be fully and unconditionally 17 guaranteed both as to interest and principal by 18 the United States, and such guaranty shall be 19 expressed on the face of each bond. 20 (C) INTEREST.—Bonds issued under this 21 paragraph shall bear interest at a rate not less 22 than the current average yield on outstanding 23 market obligations of the United States of com- 24 parable maturity during the month preceding 25 VerDate Sep 11 2014 03:46 Jun 06, 2023 Jkt 039200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H3525.IH H3525 kjohnson on DSK79L0C42PROD with BILLS 9 •HR 3525 IH the issuance of the obligation as determined by 1 the Secretary. 2 (D) AMOUNT.—The aggregate amount of 3 bonds issued under this paragraph in connec- 4 tion with a covered event shall be equal to the 5 aggregate amount of payments made by the 6 Secretary pursuant to paragraph (1) in connec- 7 tion with such covered event and such addi- 8 tional amount as the Secretary considers appro- 9 priate to cover any administrative costs in- 10 curred by the State in connection with bor- 11 rowing under this paragraph in connection with 12 such covered event. 13 (E) TREATMENT.—All bonds issued under 14 this paragraph, and the interest on or credits 15 with respect to such obligations, shall not be 16 subject to taxation by any State, county, mu- 17 nicipality, or local taxing authority. 18 (4) RECOUPMENT OF FEDERAL AMOUNTS.— 19 Each participating State that receives a payment 20 pursuant to paragraph (1) shall repay the Secretary, 21 pursuant to its pledge made in accordance with sub- 22 section (a)(4)(D) and within 10 years of such re- 23 ceipt, an amount equal to such payment, together 24 with interest on such amount sufficient to cover the 25 VerDate Sep 11 2014 03:46 Jun 06, 2023 Jkt 039200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H3525.IH H3525 kjohnson on DSK79L0C42PROD with BILLS 10 •HR 3525 IH costs to the Secretary of borrowing such amounts 1 pursuant to this paragraph. The Secretary shall 2 cover any amounts repaid pursuant to this para- 3 graph into the general fund of the Treasury. 4 SEC. 3. REPORTING. 5 (a) BY STATES.— 6 (1) ANNUAL REPORTS.—The Secretary shall re- 7 quire the State insurance regulator for each partici- 8 pating State to submit a report annually to the Sec- 9 retary regarding each covered event resulting in pay- 10 ment under section 2(b)(1), during the period that 11 any payment amounts for such event have not been 12 fully repaid in accordance with section 2(b)(4), re- 13 garding insured losses in the State resulting from 14 such covered event, additional such insured losses 15 expected to be incurred, including the timing of such 16 losses, and any progress in repayment to the Sec- 17 retary for the Federal payments made. 18 (2) FINAL REPORT.—The Secretary shall re- 19 quire the State insurance regulator for each partici- 20 pating State receiving a payment under section 21 2(b)(1) in connection with a covered event to submit 22 to the Secretary, upon full repayment of all such 23 payments made in connection with such covered 24 VerDate Sep 11 2014 03:46 Jun 06, 2023 Jkt 039200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H3525.IH H3525 kjohnson on DSK79L0C42PROD with BILLS 11 •HR 3525 IH event, a final report containing such information as 1 the Secretary shall require. 2 SEC. 4. GENERAL AUTHORITY. 3 (a) GENERAL AUTHORITY.—The Secretary shall have 4 the powers and authorities necessary to carry out the Pro- 5 gram, including authority— 6 (1) to investigate and audit all claims for a cov- 7 ered event in a State for which payments have been 8 made by the Secretary under the Program; and 9 (2) to prescribe regulations and procedures to 10 effectively administer and implement the Program. 11 (b) CONSULTATION.—The Secretary shall consult 12 with the National Association of Insurance Commis- 13 sioners, as the Secretary determines appropriate, con- 14 cerning the Program. 15 (c) CONTRACTS FOR SERVICES.—The Secretary may 16 employ persons or contract for services as may be nec- 17 essary to implement the Program. 18 (d) SUBMISSION OF PREMIUM INFORMATION.— 19 (1) IN GENERAL.—The Secretary shall annually 20 compile information on the premium rates of insur- 21 ers for covered insurance for the preceding year. 22 (2) ACCESS TO INFORMATION.—To the extent 23 that such information is not otherwise available to 24 the Secretary, the Secretary may require each in- 25 VerDate Sep 11 2014 03:46 Jun 06, 2023 Jkt 039200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H3525.IH H3525 kjohnson on DSK79L0C42PROD with BILLS 12 •HR 3525 IH surer to submit to the National Association of Insur- 1 ance Commissioners premium rates for covered in- 2 surance, as necessary to carry out paragraph (1), 3 and the National Association of Insurance Commis- 4 sioners shall make such information available to the 5 Secretary. 6 (3) AVAILABILITY TO CONGRESS.—The Sec- 7 retary shall make information compiled under this 8 subsection available to the Congress, upon request. 9 (e) ADMINISTRATIVE EXPENSES.—There are hereby 10 appropriated, out of funds in the Treasury not otherwise 11 appropriated, such sums as may be necessary to pay rea- 12 sonable costs of administering the Program. 13 SEC. 5. DEFINITIONS. 14 In this Act, the following definitions shall apply: 15 (1) AFFILIATE.—The term ‘‘affiliate’’ means, 16 with respect to a participating insurer, any entity 17 that controls, is controlled by, or is under common 18 [Text truncated for display. Full text available on Congress.gov.]