< Back to H.R. 4115 (104th Congress, 1995–1996)

Text of the Residential Windstorm Insurance Plan Act of 1996

This bill was introduced on September 19, 1996, in a previous session of Congress, but was not enacted. The text of the bill below is as of Sep 19, 1996 (Introduced).

Source: GPO

HR 4115 IH

104th CONGRESS

2d Session

H. R. 4115

To require the Director of the Federal Emergency Management Agency to study the feasibility of a Residential Windstorm Insurance Program designed to provide windstorm insurance to residential property owners unable to obtain coverage in the private market and to require a study by the Comptroller General of the United States, the Secretary of the Treasury, and the Secretary of Commerce to evaluate the public policy issues associated with conferring favorable Federal tax treatment to insurance reserves set aside by private insurers for future catastrophic natural disasters.

IN THE HOUSE OF REPRESENTATIVES

September 19, 1996

Mr. FRAZER (for himself, Ms. MCKINNEY, Mr. OWENS, Mr. LEWIS of Georgia, Ms. WATERS, Mr. MORAN, Mr. RUSH, Mr. LAFALCE, Mrs. CLAYTON, Mr. FALEOMAVAEGA, Ms. BROWN of Florida, Mr. GENE GREEN of Texas, Mr. HINCHEY, Mr. BROWN of Ohio, Mr. HASTINGS of Florida, Mr. WATT of North Carolina, Mr. SERRANO, Mr. RANGEL, Ms. KAPTUR, Mr. WARD, Mr. MARKEY, Mr. STUPAK, Mr. WYNN, Mr. CUMMINGS, Mrs. MEEK of Florida, Ms. JACKSON-LEE of Texas, and Mr. JEFFERSON) introduced the following bill; which was referred to the Committee on Transportation and Infrastructure, and in addition to the Committee on Banking and Financial Services, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned


A BILL

To require the Director of the Federal Emergency Management Agency to study the feasibility of a Residential Windstorm Insurance Program designed to provide windstorm insurance to residential property owners unable to obtain coverage in the private market and to require a study by the Comptroller General of the United States, the Secretary of the Treasury, and the Secretary of Commerce to evaluate the public policy issues associated with conferring favorable Federal tax treatment to insurance reserves set aside by private insurers for future catastrophic natural disasters.

    Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ‘Residential Windstorm Insurance Plan Act of 1996’.

SEC. 2. CONGRESSIONAL FINDINGS.

    Congress finds that--

      (1) since the devastation of Hurricane Hugo on September 17, 1989, insurance against windstorm damage has been difficult to obtain at reasonable premium rates for many residents of the United States;

      (2) an unusual number of other catastrophic events, such as Hurricane Andrew in Florida, Hurricane Iniki in Hawaii, the Northridge earthquake, and more recently, Hurricanes Bertha and Fran in Gulf and Atlantic Coast States, Puerto Rico, and the Virgin Islands, have nearly collapsed the worldwide reinsurance market, seriously limiting the ability of local insurance companies to meet existing demands for continued coverage, much less expand their capacity for additional coverage;

      (3) major hurricanes and earthquakes pose substantial long-term consequences for the country;

      (4) the National Hurricane Center reports that 60 percent of the United States population live in coastal States or regions subject to natural disasters, such as hurricanes and earthquakes;

      (5) private sector insurance protection against property damages caused by the peril of wind is generally excluded under standard homeowners insurance policies sold in 7 States along the Gulf and Atlantic Coast States, the Virgin Islands, and Puerto Rico, and property and casualty insurers are withdrawing underwriting capacity from the market by refusing to issue new policies or renew existing policies, or by increasing premiums to unaffordable levels; and

      (6) new and innovative programs are required to provide a limited program of property insurance protection from windstorm.

SEC. 3. RESIDENTIAL WINDSTORM INSURANCE PROGRAM.

    (a) IN GENERAL- The Director of the Federal Emergency Management Agency (hereinafter in this Act referred to as the ‘Director’) shall study the advisability and feasibility of establishing a Residential Windstorm Insurance Program designed to provide windstorm insurance to residential property owners unable to obtain coverage in the private market.

    (b) PURPOSE OF PROGRAM- The Residential Windstorm Insurance Program shall--

      (1) amend the ‘Write Your Own’ Program under the National Flood Insurance Program to explicitly provide insurance protection against the windstorm peril;

      (2) allow residents in wind-exposed localities across America and United States territories to purchase federally subsidized insurance to supplement standard homeowners insurance policies sold by private insurers;

      (3) provide windstorm insurance protection only to residents in communities that have adopted and enforced the land use and flood plain management provisions of the National Flood Insurance Program;

      (4) encourage the private insurance industry to sell, service, and adjust Federal windstorm insurance claims under their own corporate name under a nonrisk bearing arrangement with the Federal Insurance Administration; and

      (5) outline requirements under which the private sector, including insurance companies, banks, and other financial sector firms, could become involved in the Residential Windstorm Insurance Program.

    (c) CONTENTS- The Residential Windstorm Insurance Program required under subsection (a) shall be designed--

      (1) to supplement Federal disaster relief and emergency assistance provided pursuant to the Robert T. Stafford Disaster Relief and Emergency Assistance Act and other laws for damage and loss caused by hurricanes;

      (2) to make affordable insurance coverage available to protect against losses resulting from physical damage to, or loss of, residential structures arising from the wind peril;

      (3) to provide such insurance coverage for residential structures through a program that provides--

        (A) insurance coverage for wind damage caused by hurricanes, but not for water damage arising from any such wind peril;

        (B) insurance coverage at premium rates affordable to homeowners in areas at risk for such wind damage;

        (C) appropriate building and structural requirements and other wind damage mitigation measures; and

        (D) schedules of the amount of coverage available for various residential structures;

      (4) to provide incentives for private property and casualty insurers to reenter markets from which they have previously withdrawn; and

      (5) to provide incentives for other private financial sector companies to enter the market for hazard insurance.

    (d) CONSIDERATIONS- The Residential Windstorm Insurance Program required under subsection (a) shall--

      (1) provide for participation of the private insurance industry in carrying out the program;

      (2) define--

        (A) the areas in which such coverage is made available by establishing requirements for the eligibility or participation of communities; and

        (B) the types of residential properties for which such coverage is made available;

      (3) establish premium rates for coverage that are actuarially based on the risk of wind-caused damage or subsidized premium rates that are less than such actuarially based rates; and

      (4) provide community-based mitigation and other initiatives for participation in the Program.

    (e) CONSULTATION- In developing the program required under subsection (a), the Director shall consult with--

      (1) the heads of any Federal agencies authorized to provide disaster relief;

      (2) the chief executive officers of the States and territories of the United States, that suffered significant losses caused by windstorms occurring after the beginning of 1989; and

      (3) insurance and reinsurance companies, insurance trade associations, consumer advocacy groups, and taxpayer groups in developing actuarial rates and underwriting guidelines used to cover damages to property caused by the hurricane peril.

    (f) COMPLETION OF STUDY- Not later than the last day of the 180-day period beginning on the date of the enactment of this Act, the Director shall submit to the Committee on Transportation and Infrastructure and the Committee on Banking and Financial Services of the House of Representatives and to the Committee on Environment and Public Works and the Committee on Banking, Housing, and Urban Affairs of the Senate a study containing--

      (1) the written plan required under subsection (a);

      (2) a statement of the amount of disaster assistance provided pursuant to the Robert T. Stafford Disaster Relief and Emergency Assistance Act and other Acts during each of fiscal years 1989 through 1996 for property damage caused by winds from hurricanes, tornadoes, and other windstorms to residential properties, business properties, agricultural properties, properties owned by private nonprofit organizations, and public infrastructure facilities and properties owned by State and local governments;

      (3) an estimate of the cost to the Federal Government of carrying out the Residential Windstorm Insurance Program under the plan, by making coverage available only for residential structures;

      (4) an estimate of the cost to the Federal Government of carrying out the Residential Windstorm Insurance Program under the plan, by making coverage available for residential structures and for public infrastructure and properties owned by State and local governments, other residential properties, business properties, agricultural properties, and properties owned by private nonprofit organizations;

      (5) an estimate of the effects that implementing the national windstorm insurance program would have on the amount of disaster assistance provided by the Federal Government;

      (6) an estimate of the effects that implementing the national windstorm insurance program would have on the private insurance industry and the availability of residential and other property insurance and insurance against windstorm damage;

      (7) a description of any amendments to the Robert T. Stafford Disaster Relief and Emergency Assistance Act and other laws relating to disaster assistance that would be necessary or appropriate in the event of the implementation of the Residential Windstorm Insurance Program; and

      (8) any other information that the Director considers appropriate.

SEC. 4. EARTHQUAKE INSURANCE STUDY.

    (a) IN GENERAL- The Director shall enter into an arrangement with the National Academy of Sciences to conduct a study on the advisability and feasibility of establishing a Federal earthquake insurance program modeled after the ‘Write Your Own’ Program under the National Flood Insurance Program.

    (b) NATIONAL ACADEMY OF SCIENCES- The study described in subsection (c) shall be performed by a panel of recognized experts appointed by the National Academy of Sciences. The experts shall include representatives of building contractors, real estate interests, consumer advocacy groups, taxpayer groups, lending institutions, private insurers and reinsurers, the model building code organizations, local government zoning and land use planning bodies, and other experts deemed relevant by the National Academy of Sciences.

    (c) COMPLETION OF STUDY- The results of the study described in subsection (c), with any recommendations, shall be transmitted by the National Academy of Sciences to the Director and Congress not later than 18 months after the date of the enactment of this Act.

SEC. 5. STUDY ON TAX TREATMENT OF CATASTROPHIC RESERVES.

    (a) JOINT STUDY- The Comptroller General of the United States, the Secretary of the Treasury, and the Secretary of Commerce shall conduct a joint study to evaluate the public policy issues associated with conferring favorable Federal tax treatment to multiyear insurance reserves set aside by private insurers for future catastrophic natural disasters.

    (b) FACTORS TO BE STUDIED- The study described in subsection (a) shall evaluate the likelihood and magnitude of the following public policy objectives:

      (1) The increased financial capacity of private insurers to respond to future natural disasters.

      (2) The enhanced financial ability of private insurers to continue providing property coverages following catastrophic natural disasters.

      (3) The overall benefit to the competitiveness of United States business and private insurers in the worldwide economy.

      (4) The short- and long-term revenue impact on the United States Treasury.

    (c) LIMITATIONS- The study of the favorable tax treatment of catastrophic reserves shall be limited as follows:

      (1) The study will not be limited to private insurer reserve funds but will also assess the ability of the Federal and State governments to build such reserves.

      (2) Any tax exemption given to catastrophic reserves will be done in a very limited and restricted manner in order to protect reserves against being used for other than catastrophe costs.

      (3) A portion of the buildup from the tax-exempt reserves will be used to fund statewide mitigation efforts.

    (d) CONSULTATION- The Comptroller General, the Secretary of the Treasury, and the Secretary of Commerce shall consult with recognized experts in preparing the study described in subsection (a). The experts shall include representatives from State insurance departments, private insurers, insurance agents, economists, natural disaster risk modeling experts, insurance consumer advocacy groups, and other experts deemed relevant.

    (e) REPORT TO CONGRESS- The results of the study described in subsection (a), including any recommendations, shall be transmitted to Congress not later than 180 days after the date of enactment of this Act.