(a)
Contracts— The Secretary may enter into a contract with a qualified reinsurance program to carry out this title, as the Secretary may deem appropriate. The contract shall include, at a minimum, the conditions for loan eligibility set forth in this section.
(b)
Conditions for loan eligibility— A loan under this section may be made only to a qualified reinsurance program and only if—
(1)
before the loan is made—
(A)
the State or regional reinsurance program submits to the Secretary a report setting forth, in such form and including such information as the Secretary shall require, how the program plans to repay the loan; and
(B)
based upon the report of the program, the Secretary determines that the program can meet its repayment obligation under the loan and certifies that the program can meet such obligation;
(2)
the program cannot access capital in the private market, including through catastrophe bonds and other securities sold through the facility created in title I of this Act, as determined by the Secretary, and a loan may be made to such a qualified reinsurance program only to the extent that such program cannot access capital in the private market;
(3)
the Secretary determines that an event has resulted in insured losses in a State with a qualified reinsurance program;
(4)
the loan complies with the requirements under subsection (d) and or (e), as applicable; and
(5)
the loan is afforded the full faith and credit of the State and the State demonstrates to the Secretary that it has the ability to repay the loans.
(c)
Mandatory assistance for qualified reinsurance programs— The Secretary shall, upon the request of a qualified reinsurance program and subject to subsection (b), make a loan under subsection (d) or (e) for such program in the amount requested by such program (subject to the limitations under subsections (d)(2) and (e)(2), respectively).
(d)
Liquidity loans— A loan under this subsection for a qualified reinsurance program shall be subject to the following requirements:
(1)
Preconditions— The Secretary shall have determined that the qualified reinsurance program—
(A)
has a capital liquidity shortage, in accordance with regulations that the Secretary shall establish; and
(B)
cannot access capital markets at effective rates of interest lower than those provided in paragraph (3).
(2)
Amount— The principal amount of the loan may not exceed the ceiling coverage level for the qualified reinsurance program.
(3)
Rate of interest— The loan shall bear interest at an annual rate 3 percentage points higher than marketable obligations of the Treasury having the same term to maturity as the loan and issued during the most recently completed month, as determined by the Secretary, or such higher rate as may be necessary to ensure that the amounts of interest paid under such loans exceed the sum of the costs (as such term is defined in section 502 of the Federal Credit Reform Act of 1990 (
2 U.S.C. 661a)) of such loans, the administrative costs involved in carrying out a program under this title for such loans, and any incidental effects on governmental receipts and outlays.
(4)
Term— The loan shall have a term to maturity of not less than 5 years and not more than 10 years.
(e)
Catastrophic loans— A loan under this subsection for a qualified reinsurance program shall be subject to the following requirements:
(1)
Preconditions— The Secretary shall have determined that an event has resulted in insured losses in a State with a qualified reinsurance program and that such insured losses in such State are in excess of 150 percent of the aggregate amount of direct written premium for privately issued property and casualty insurance, for risks located in that State, over the calendar year preceding such event, in accordance with regulations that the Secretary shall establish.
(2)
Amount— The principal amount of the loan made pursuant to an event referred to in paragraph (1) may not exceed the amount by which the insured losses sustained as a result of such event exceed the ceiling coverage level for the qualified reinsurance program.
(3)
Rate of interest— The loan shall bear interest at an annual rate 0.20 percentage points higher than marketable obligations of the United States Treasury having a term to maturity of not less than 10 years and issued during the most recently completed month, as determined by the Secretary, or such higher rate as may be necessary to ensure that the amounts of interest paid under such loans exceed the sum of the costs (as such term is defined in section 502 of the Federal Credit Reform Act of 1990 (
2 U.S.C. 661a)) of such loans, the administrative costs involved in carrying out a program under this title for such loans, and any incidental effects on governmental receipts and outlays.
(4)
Term— The loan shall have a term to maturity of not less than 10 years.
(f)
Use of funds— Amounts from a loan under this section shall only be used to provide reinsurance or retrocessional coverage to underlying primary insurers or reinsurers for losses arising from all personal real property or homeowners’ lines of insurance, as defined in the Uniform Property & Casualty Product Coding Matrix published and maintained by the National Association of Insurance Commissioners. Such amounts shall not be used for any other purpose.