Summary: H.R.21 — 106th Congress (1999-2000)All Information (Except Text)

Bill summaries are authored by CRS.

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Reported to House with amendment(s) (03/15/2000)

Homeowners' Insurance Availability Act of 2000- Directs the Secretary of the Treasury to make reinsurance coverage available for purchase by: (1) eligible State programs; and (2) private insurers and reinsurers, State insurance and reinsurance programs, and other interested entities through auctions. Requires that such program be designed to improve the availability of homeowners' insurance for the purpose of facilitating the pooling, and spreading the risk, of catastrophic financial losses from natural disasters and to improve the solvency of homeowners' insurance markets.

(Sec. 3) Directs the Secretary to offer reinsurance coverage through contracts with covered purchasers which: (1) do not displace or compete with the private insurance, reinsurance, or capital markets; (2) minimize the administrative costs of the Federal Government; and (3) provide coverage based solely on insured losses within the State of the eligible State program purchasing the contract or within the region for which the auction for contract purchase is held.

(Sec. 4) Requires each contract for reinsurance coverage made available under this Act to provide insurance coverage against residential property losses to homes (including dwellings owned under condominium and cooperative ownership arrangements) and the contents of apartment buildings (qualified lines of coverage).

(Sec. 5) Identifies covered perils (including earthquakes, tropical cyclones, volcanic eruptions, and tornadoes).

(Sec. 6) Sets reinsurance prerequisites for eligible State programs, including: (1) State-operated insurance programs that offer coverage for homes and apartment contents based on a finding that such programs are necessary to provide continued availability of coverage for all residents; (2) incorporation of public officials as majority members of the governing body; (3) establishment of a State financial interest that is separate from a State program requiring insurers to pool resources to provide property insurance coverage for covered perils; (4) an exemption from Federal taxation; (5) single peril coverage; (6) a minimum ten percent net investment income requirement for disaster loss mitigation; (7) implementation and enforcement of building safety codes that offer disaster resistance substantially equivalent to or greater than Federal Emergency Management Agency (FEMA) strictures; and (8) laws or regulations in effect prohibiting price gouging.

Establishes one-year contract terms (or such other terms as the Secretary may determine). Sets forth considerations to be made by the Secretary in determining the cost of reinsurance coverage and requires the cost to consist of a risk-based price, risk load, and administrative costs.

Mandates contract provisions granting the purchaser the option of purchasing additional contracts during the original contract term from among those offered at the beginning of the term, at prorated prices.

Instructs the Secretary to establish a competitive procedure for qualified private sector entities to offer reinsurance coverage that is substantially similar to that provided under this Act. Sets forth competitive procedure guidelines.

(Sec. 7) Sets forth: (1) requirements for regional auctions to purchase reinsurance contracts; (2) contract terms and conditions (including maximum one-year terms); (3) prohibitions on price gouging; and (4) mitigation requirements.

Mandates fiscal year audits of contract prices conducted by the Comptroller General.

(Sec. 8) Conditions reinsurance coverage availability upon certified compliance by participating insurers with Fair Housing Act prescriptions governing activities involved in making insurance coverage available.

(Sec. 9) Requires eligible State programs to sustain an amount of retained losses from a single event of a covered peril of at least the greater of: (1) between $2 billion and $5 billion, as determined by the Secretary in accordance with this Act; (2) the program's claims-paying capacity; and (3) an amount determined by the Secretary sufficient to cover eligible loss projections in the State in the range between once every 100 years from a single event in the region and once every 250 years from such an event. Applies the requirements of (1) and (3) above to auctioned contracts as well.

Establishes transitional requirements for the minimum level of retained losses applicable to certain existing and new State programs.

Authorizes the Secretary to raise the minimum level of retained losses prior to making reinsurance coverage contracts in order to ensure that such contracts comply with the principle of neither displacing nor competing with private insurance or reinsurance markets or capital markets.

Authorizes the Secretary to raise the minimum level of retained losses annually.

Sets forth maximum Federal liability guidelines which address: (1) aggregate liability estimates; (2) eligible loss coverage sold; (3) annual adjustments; and (4) a limitation on percentage of risk in excess of retained losses.

Limits reinsurance contracts to 50 percent of the risk of eligible losses in excess of retained losses for States or regional auctions.

(Sec. 10) Establishes the Disaster Reinsurance Fund within the Treasury. Specifies: (1) the amounts with which the Fund shall be credited; and (2) the uses of Fund assets.

(Sec. 11) Directs the Secretary to establish the National Commission on Catastrophe Risks and Insurance Loss Costs. Requires the Commission to meet for the sole purpose of advising the Secretary regarding the estimated loss costs associated with the reinsurance contracts and implementing this Act. Authorizes appropriations. Provides for an offset amount to be obtained from purchasers of reinsurance coverage and deposited in the Fund.

(Sec. 14) Terminates reinsurance coverage ten years after this Act's enactment. Provides a five-year extension of such deadline if the Secretary determines such coverage necessary because of insufficient growth of capacity in the private homeowners' insurance market.

(Sec. 15) Requires the Secretary to report annually to Congress on the cost and availability of homeowners' insurance for losses resulting from catastrophic natural disasters covered by the reinsurance program under this Act.

(Sec. 16) Instructs the Comptroller General, in consultation with the Director of FEMA , to study and report to Congress on the availability and adequacy of flood insurance coverage for hurricane-related flooding.