“To require the Secretary of the Treasury to establish a catastrophic property loss reinsurance program, and for other purposes.”
No CRS summary available for this bill.
This section defines terms used in the Act, including "all-perils property insurance policy" (i.e., a state-approved property insurance policy covering catastrophe perils added to the Program); "catastrophe peril" (i.e., damage from wind, hurricane, wildfire, severe convective storm, flood as added under section 3(d); earthquake conditioned on a section 5(2) report; or other perils as determined by the Secretary); "insurer" (i.e., a state-licensed admitted or non-admitted company selling primary property insurance, excluding reinsurance or captive insurers); "Program" (i.e., the catastrophic property loss reinsurance program established under section 3(a)); and "Fund" (i.e., the Federal Catastrophe Reinsurance Fund established under section 3(i)).
This section establishes a catastrophic property loss reinsurance program, to be administered by the Secretary not later than 4 years after enactment, to provide reinsurance to qualifying primary insurers offering all-perils property insurance policies for residential or commercial properties along with loss prevention partnerships that encourage policyholder investments to reduce catastrophe losses. The program phases in coverage as follows: (1) wind and hurricane not later than January 1 of the year beginning 4 years after enactment; (2) severe convective storm and wildfire not later than January 1 of the year beginning 5 years after enactment; (3) flood not later than January 1 of the year beginning 6 years after enactment; and (4) earthquake not later than the earlier of January 1 of the year beginning 8 years after enactment or submission of a specified feasibility report. Participating insurers must pay quarterly premiums reflecting expected average annual losses (based on exposure), administrative costs, and a trend factor, with a minimum premium of at least 50% of expected losses plus administrative costs; premiums may be adjusted quarterly for exposure changes and increased annually by no more than 7% excluding adjustments. The Secretary must establish a reinsurance payment threshold of no greater than 40% of a participating insurer's probable maximum loss per peril (after consulting an advisory committee), considering factors such as reinsurance needs to reduce coverage costs, market stability, private reinsurance capacity, catastrophe bonds, and loss-reduction investments. The Secretary must also develop (with an advisory committee, state insurance agencies, and emergency management agencies) a list of qualifying loss prevention partnership activities, excluding premium discounts without insurer investment or general information provision, and may contract with reinsurance brokers and consultants for program design and management.
This section directs the Secretary to submit two reports to Congress: (1) not later than two years after enactment, on the feasibility of establishing a fund to relocate homes and businesses that have become uninsurable due to catastrophe perils; and (2) not later than three years after enactment, on the feasibility of including earthquakes as a peril covered under the all-perils property insurance policy.
This section directs the Secretary, in consultation with states and the National Association of Insurance Commissioners, to establish a pilot program for all-perils property insurance policies with a term of at least five years (multi-year policies), as perils are phased in under section 3(d). Participating insurers may (1) increase premiums based on construction cost price indexes, changes in home value, or optional coverages selected by the policyholder; (2) not increase premiums based on changes in the insurer's assessment of catastrophe peril risks for the insured property; (3) require property maintenance consistent with the property's condition at initial policy issuance; and (4) require loss mitigation investment partnerships as a condition of the policy. Policyholders may, with insurer agreement, continue a multi-year policy upon property purchase; if switching insurers, the new insurer may consider prior loss mitigation investments in rate setting; and if canceling early after receiving funds for loss prevention property improvements from any source, the policyholder must return a pro-rata share of those funds to the source.