Sec. 2. Natural Disaster Risk Reinsurance Program
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There is established in the Department of the Treasury the Natural Disaster Risk Reinsurance Program, which shall apply only to covered events occurring on or after January 1, 2024. The goal of the Program shall be to protect insurers from insolvency resulting from covered events of a significant magnitude in a manner that provides for affordability of coverage in the marketplace for losses from such covered events. Notwithstanding any other provision of State or Federal law, the Secretary shall administer the Program, in consultation with the Director of the Federal Insurance Office, and shall make payments to States in accordance with subsection
(b)to cover insured losses. Participation in the Program shall be voluntary on the part of a State, subject to the requirements under paragraph (4). The Secretary shall provide a procedure by which States may elect to participate in the Program. The Secretary shall provide a procedure by which States may elect to terminate participation in the Program, which shall require advance notice to the Secretary of not less than 180 days before such termination is effective. To be eligible to participate in the Program a State shall have in effect a plan, approved by the Secretary, that provides such assurances to the Secretary as the Secretary considers necessary— to ensure that insurers will cover claims for insured losses occurring in the State during the participation of the State in the Program not exceeding the trigger amount for the State under subsection (b)(2); to ensure that insurers submit to the State insurance regulator and the State insurance regulator submits to the Secretary, in accordance with such reasonable procedures as the Secretary may establish, information sufficient for administration of the Program, including information regarding claims for insured losses occurring in the State, insured losses incurred, and direct written premium for covered insurance in the State; to distribute Federal payments under the Program appropriately among insurers based on insured losses suffered by insurers and insurers’ market shares; to pledge the State’s full faith and credit toward full repayment to the Secretary, within 10 years of receipt, of any Federal payment amounts provided under subsection
(b)and to provide a regular payment schedule over such 10-year period; and to provide appropriate treatment under the program for any insurer that is a State residual market insurance entity. This Act may not be construed to affect any policy for covered insurance in force on the date of the commencement of participation in the Program by the State in which the dwelling covered by such insurance is located, but the Program shall apply to policies renewed after such date. Pursuant to the occurrence of a covered event, the Secretary shall pay to each participating State an amount equal to the amount by which the aggregate industry-wide insured losses within such participating State resulting from such covered event exceed the trigger amount in effect at such time under paragraph
(2)for such participating State for the type of covered event that occurred. The Secretary shall provide for payments under this subsection for a participating State for a covered event to be made in installments of approximately 25 percent of the estimated total amount to be provided for such State in connection with such disaster, as best determined by the Secretary after consideration of the information regarding insured losses provided to the Secretary pursuant to paragraph (2)(D). The Secretary shall enter into an agreement with the National Academy of Sciences (in this paragraph referred to as the Academy ) under which the Academy shall propose to the Secretary, for each participating State and for each different type of covered event, a trigger amount under this paragraph. A trigger amount proposed for a State shall be effective for purposes of the Program only upon review, adjustment if necessary, and approval by the Secretary. The trigger amount proposed by the Academy for a participating State for a type of covered event shall be the lesser of— the total direct written premiums for covered insurance in the participating State; and the amount, as determined by the Academy, that when applied under the Program, protects insurers from insolvency in the case of covered event of such type of a severity equal to or exceeding that of a covered event of such type having a two percent chance of occurring in any given year. The agreement pursuant to subparagraph
(A)shall provide for the Academy to review and revise the proposed trigger amounts for each participating State not less frequently than once every 24 months, and more frequently at the request of the Secretary. Any revised trigger amount may not take effect under the Program before the expiration of the 180-day period beginning upon the provision by the Secretary to such participating State of written notification of such revised trigger amount. The agreement pursuant to subparagraph
(A)shall provide that following the occurrence of a covered event, the Academy shall, for each participating State affected, make assessments of the insured losses for each such State and provide such information to the Secretary. Such assessments shall be made on an ongoing basis as necessary to make an accurate determination of such insured losses. The agreement pursuant to subparagraph
(A)shall provide that, in establishing proposed trigger amounts under this paragraph and assessing insured losses pursuant to subparagraph (D), the Academy may contract with such experts and consultants, including experts in disaster modeling, as it considers appropriate. There is authorized to be appropriated to the National Academy of Sciences such sums as may be necessary for costs of hiring experts and consultants pursuant to clause (i). In connection with a covered event for which the Secretary is required to make a payment under paragraph
(1)to a participating State, the Secretary shall issue bonds under this paragraph, the proceeds of which shall be used for making such payment. Bonds issued under this paragraph shall be in such form and denominations, and shall be subject to such terms and conditions of issue, conversion, redemption, maturation, and payment as the Secretary may prescribe and shall be fully and unconditionally guaranteed both as to interest and principal by the United States, and such guaranty shall be expressed on the face of each bond. Bonds issued under this paragraph shall bear interest at a rate not less than the current average yield on outstanding market obligations of the United States of comparable maturity during the month preceding the issuance of the obligation as determined by the Secretary. The aggregate amount of bonds issued under this paragraph in connection with a covered event shall be equal to the aggregate amount of payments made by the Secretary pursuant to paragraph
(1)in connection with such covered event and such additional amount as the Secretary considers appropriate to cover any administrative costs incurred by the State in connection with borrowing under this paragraph in connection with such covered event. All bonds issued under this paragraph, and the interest on or credits with respect to such obligations, shall not be subject to taxation by any State, county, municipality, or local taxing authority. Each participating State that receives a payment pursuant to paragraph
(1)shall repay the Secretary, pursuant to its pledge made in accordance with subsection (a)(4)(D) and within 10 years of such receipt, an amount equal to such payment, together with interest on such amount sufficient to cover the costs to the Secretary of borrowing such amounts pursuant to this paragraph. The Secretary shall cover any amounts repaid pursuant to this paragraph into the general fund of the Treasury.