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Title IV — Providing private market access, accountability, and competition

S. 1313 · 115th Congress · Jun 7, 2017 · Lineage

IV Providing private market access, accountability, and competition

Sec. 401 Use of private flood insurance to satisfy mandatory purchase requirement

(a)
In general—
(1)
Mandatory purchase requirement—
(A)
Amount and term of coverage— Section 102 of the Flood Disaster Protection Act of 1973 (42 U.S.C. 4012a) is amended by striking “Sec. 102. (a)” and all that follows through the end of subsection (a) and inserting the following:

“102.

“(a) Amount and term of coverage

“(1) In general—Subject to paragraph (2), on and after the date that is 60 days after the date of enactment of this Act, no Federal officer or agency may approve any financial assistance for acquisition or construction purposes for use in any area that has been identified by the Administrator as an area having special flood hazards and in which the sale of flood insurance has been made available under the National Flood Insurance Act of 1968 (42 U.S.C. 4001 et seq.), unless the building or mobile home and any personal property to which the financial assistance relates is covered by flood insurance.

“(2) Amount and term

“(A) Amount generally—The amount of flood insurance required under paragraph (1)—

“(i) in the case of Federal flood insurance, shall be not less than the lesser of—

“(I) 80 percent of the purchase price of the property;

“(II) the development or project cost of the building, mobile home, or personal property (less estimated land cost);

“(III) the maximum limit of Federal flood insurance coverage made available with respect to the particular type of property; or

“(IV) for multi-unit structures only, the outstanding principal balance of the loan; or

“(ii) in the case of private flood insurance, shall be not less than the lesser of—

“(I) 80 percent of the purchase price of the property;

“(II) the development or project cost of the building, mobile home, or personal property (less estimated land cost);

“(III) the maximum limit of Federal flood insurance coverage made available with respect to the particular type of property; or

“(IV) for multi-unit structures only, the outstanding principal balance of the loan.

“(B) Loans and insured and guaranteed loans—If the financial assistance described in paragraph (1) is in the form of a loan or an insurance or guaranty of a loan, flood insurance need not be required beyond the term of the loan.

“(C) Term generally—The requirement of maintaining flood insurance under paragraph (1) shall apply during the life of the property, regardless of transfer of ownership of the property.”

(B)
Mortgage loans— Section 102(b) of the Flood Disaster Protection Act of 1973 (42 U.S.C. 4012a(b)) is amended—
(i)
by striking paragraphs (1) through (5) and inserting the following:

“(1) Regulated lending institutions

“(A) In general—Each Federal entity for lending regulation (after consultation and coordination with the Financial Institutions Examination Council established under section 1004 of the Federal Financial Institutions Examination Council Act of 1974 (12 U.S.C. 3303)) shall by regulation direct regulated lending institutions not to make, increase, extend, or renew any loan secured by improved real estate or a mobile home located or to be located in an area that has been identified by the Administrator as an area having special flood hazards and in which flood insurance has been made available under the National Flood Insurance Act of 1968 (42 U.S.C. 4001 et seq.), unless the building or mobile home and any personal property securing the loan is covered for the term of the loan by flood insurance in an amount described in subparagraph (B).

“(B) Amount—The amount of flood insurance required under subparagraph (A)—

“(i) in the case of Federal flood insurance, shall be not less than the lesser of—

“(I) 80 percent of the purchase price of the property;

“(II) the maximum limit of Federal flood insurance coverage made available with respect to the particular type of property; or

“(III) for multi-unit structures only, the outstanding principal balance of the loan; or

“(ii) in the case of private flood insurance, shall be not less than the lesser of—

“(I) 80 percent of the purchase price of the property;

“(II) the maximum limit of Federal flood insurance coverage made available with respect to the particular type of property; or

“(III) for multi-unit structures only, the outstanding principal balance of the loan.

“(2) Federal agency lenders

“(A) In general

“(i) Insurance required—A Federal agency lender may not make, increase, extend, or renew any loan secured by improved real estate or a mobile home located or to be located in an area that has been identified by the Administrator as an area having special flood hazards and in which flood insurance has been made available under the National Flood Insurance Act of 1968 (42 U.S.C. 4001 et seq.), unless the building or mobile home and any personal property securing the loan is covered for the term of the loan by flood insurance in accordance with paragraph (1).

“(ii) Regulations

“(I) In general—Each Federal agency lender may issue any regulations necessary to carry out this paragraph.

“(II) Consistency—Any regulations issued under subclause (I) shall be consistent with and substantially identical to any regulations issued under paragraph (1).

“(B) Requirement to accept flood insurance—Each Federal agency lender shall accept flood insurance as satisfaction of the flood insurance coverage requirement under subparagraph (A)(i) if the flood insurance coverage meets the requirements for coverage under that subparagraph.

“(3) Government-sponsored enterprises for housing

“(A) Implementation of procedures

“(i) Requirement—The Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation shall implement procedures reasonably designed to ensure that, for any loan described in clause (ii) that is purchased or guaranteed by such entity, the building or mobile home and any personal property securing the loan is covered for the term of the loan by flood insurance in the amount provided in paragraph (1)(B).

“(ii) Secured loan—A loan described in this clause is a loan secured by improved real estate or a mobile home located in an area—

“(I) that has been identified, at the time of the origination of the loan or at any time during the term of the loan, by the Administrator as an area having special flood hazards; and

“(II) in which flood insurance is made available under the National Flood Insurance Act of 1968 (42 U.S.C. 4001 et seq.).

“(B) Acceptable insurance—Subject to subparagraph (C), the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation shall accept flood insurance as satisfaction of the flood insurance coverage requirement under paragraph (1) if the flood insurance coverage provided meets the requirements for coverage under that paragraph and any requirements established by the Federal National Mortgage Association or the Federal Home Loan Corporation, respectively, relating to the financial strength of private insurance companies from which the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation will accept private flood insurance.

“(C) Relation to State law—A requirement described in subparagraph (B) may not affect or conflict with any State law, regulation, or procedure concerning the regulation of the business of insurance.

“(4) Applicability

“(A) Existing coverage—Except as provided in subparagraph (B), paragraph (1) shall apply on the date of enactment of the Riegle Community Development and Regulatory Improvement Act of 1994 (12 U.S.C. 4701 et seq.).

“(B) New coverage—Paragraphs (2) and (3) shall apply only with respect to any loan made, increased, extended, or renewed after the expiration of the 1-year period beginning on the date of enactment of the Riegle Community Development and Regulatory Improvement Act of 1994 (12 U.S.C. 4701 et seq.). Paragraph (1) shall apply with respect to any loan made, increased, extended, or renewed by any lender supervised by the Farm Credit Administration only after the expiration of the period under this subparagraph.

“(C) Continued effect of regulations—Notwithstanding any other provision of this subsection, the regulations to carry out paragraph (1), as in effect immediately before the date of enactment of the Riegle Community Development and Regulatory Improvement Act of 1994 (12 U.S.C. 4701 et seq.), shall continue to apply until the regulations issued to carry out paragraph (1), as amended by section 522(a) of such Act, take effect.

“(5) Rule of construction

“(A) In general—Subject to subparagraph (B), nothing in this subsection shall be construed to supersede or limit the authority of a Federal entity for lending regulation, the Federal Housing Finance Agency, a Federal agency lender, the Federal National Mortgage Association, or the Federal Home Loan Mortgage Corporation to establish requirements relating to the financial strength of private insurance companies from which the entity or agency will accept private flood insurance.

“(B) Relation to State law—A requirement described in subparagraph (A) may not affect or conflict with any State law, regulation, or procedure concerning the regulation of the business of insurance.”

(ii)
by striking paragraph (7) and inserting the following:

“(7) Definitions—In this section:

“(A) Federal flood insurance—The term Federal flood insurance means an insurance policy made available under the National Flood Insurance Act of 1968 (42 U.S.C. 4001 et seq.).

“(B) Flood insurance—The term flood insurance means—

“(i) Federal flood insurance; and

“(ii) private flood insurance.

“(C) Private flood insurance—The term private flood insurance means an insurance policy that—

“(i) is issued by an insurance company that is—

“(I) licensed, admitted, or otherwise approved to engage in the business of insurance in the State in which the insured building is located, by the insurance regulator of that State; or

“(II) eligible as a nonadmitted insurer to provide insurance in the home State of the insured, in accordance with sections 521 through 527 of the Nonadmitted and Reinsurance Reform Act of 2010 (15 U.S.C. 8201 through 8206);

“(ii) is issued by an insurance company that is not otherwise disapproved as a surplus lines insurer by the insurance regulator of the State in which the property to be insured is located; and

“(iii) provides flood insurance coverage that complies with the laws and regulations of that State.

“(D) State—The term State means any State of the United States, the District of Columbia, the Commonwealth of Puerto Rico, Guam, the Northern Mariana Islands, the Virgin Islands, and American Samoa.”

(2)
Effect of private flood insurance coverage on continuous coverage requirements— Section 1308 of the National Flood Insurance Act of 1968 (42 U.S.C. 4015) is amended by adding at the end the following:

“(n) Effect of private flood insurance coverage on continuous coverage requirements—For purposes of applying any statutory, regulatory, or administrative continuous coverage requirement, including under section 1307(g)(1), the Administrator shall consider any period during which a property was continuously covered by private flood insurance to be a period of continuous coverage.”

(b)
Report on level of perceived adverse selection— Not later than 2 years after the date of enactment of this Act, the Administrator shall submit to Congress a report on the extent to which, of the properties that are required to satisfy the mandatory purchase requirement, the properties for which private flood insurance is purchased tend to be at a lower risk of flooding than the properties for which Federal flood insurance is purchased (commonly referred to as “adverse selection”), by detailing risk classifications of private flood insurance policies.

Sec. 402 Provision of private flood insurance by write your own companies

(a)
Temporary authority for provision of private flood insurance by Write Your Own companies for certain properties— During the first 2 years beginning after the date of enactment of this Act, the Administrator may not prohibit a Write Your Own company from offering or selling private flood insurance outside of the Write Your Own Program for properties that are described in subparagraphs (A) through (D) of section 1307(a)(2) of the National Flood Insurance Act of 1968 (42 U.S.C. 4014(a)(2)).
(b)
Authority for expanded provision of private flood insurance by Write Your Own companies— On and after January 1 of the third year beginning after the date of enactment of this Act, if the Administrator determines, based on the report required under subsection (d)(1) and any other independent data available, that the provision of private flood insurance by a Write Your Own company—
(1)
to properties in addition to the properties described in subsection (a) will not adversely impact the ability of the National Flood Insurance Program to maintain a diverse risk pool, the Administrator may waive any remaining restriction, under a Federal statute or regulation, on the ability of a Write Your Own company to offer or sell private flood insurance outside the Write Your Own Program, if the Administrator promulgates regulations to ensure a diverse risk pool for Write Your Own companies that are competing with the National Flood Insurance Program; or
(2)
is a deterrent to the National Flood Insurance Program maintaining a diverse risk pool of policies, the Administrator may place further restrictions on the ability of a Write Your Own company to offer or sell private flood insurance.
(c)
WYO Arrangement— The Administrator shall amend article XIII of the WYO Company Financial Assistance/Subsidy Arrangement as necessary to implement subsections (a) and (b).
(d)
Reports—
(1)
Initial report— Not later than the last day of the 2-year period described in subsection (a), the Administrator shall submit to Congress a report detailing the risk classifications of properties for which private flood insurance was sold and underwritten by Write Your Own companies during that 2-year period.
(2)
Additional report— Not later than 5 years after the date on which the report is required to be submitted under paragraph (1), the Administrator shall submit to Congress a report detailing the risk classifications of properties for which private flood insurance was sold and underwritten by Write Your Own companies during that 5-year period.

Sec. 403 Availability of NFIP claims data

(a)
Study required—
(1)
In general— The Administrator shall study the feasibility of selling or licensing the use of historical structure-specific National Flood Insurance Program claims data (referred to in this section as covered claims data) to nongovernmental entities.
(2)
Contents— In conducting the study required under paragraph (1), the Administrator shall, at a minimum—
(A)
investigate one or more methods of providing the most specific covered claims data possible while reasonably protecting policyholder privacy;
(B)
review existing means, as of the date of enactment of this Act, by which the Federal Government provides leases or licenses to private persons, and the various regulations, terms, conditions, and guidance employed;
(C)
identify potential uses for covered claims data, any known risks concerning those uses, and ways to mitigate or eliminate the risks;
(D)
identify mechanisms for determining the likely market value for access to covered claims data; and
(E)
recommend actions the Administrator could take, if any, to prevent unintended consequences associated with the sale or licensing for private insurance purposes covered claims data.
(b)
Report by Administrator—
(1)
Report required— Not later than 1 year after the date of enactment of this Act, the Administrator shall submit to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives a report that contains the results and conclusions of the study conducted under subsection (a) (referred to in this subsection as the study).
(2)
Contents— The report submitted under paragraph (1) shall include—
(A)
an analysis of—
(i)
the recommendations of the study; and
(ii)
the potential for covered claims data to increase the number of individuals insured against the peril of flood, to reduce the amount of debt the National Flood Insurance Program is required to service, or both;
(B)
a description of actions taken by the Administrator to implement any of the recommendations of the study; and
(C)
any recommendations of the study that, as of the date on which the report is submitted, have been deferred or not acted upon, together with an explanatory statement.
(c)
Authorization To sell or license claims data—
(1)
Amendments—
(A)
In general— Section 1313 of the National Flood Insurance Act of 1968 (42 U.S.C. 4020) is amended—
(i)
by striking “The Administrator” and inserting the following:

“(a) In general—The Administrator”

(ii)
by adding at the following:

“(b) Selling or licensing of claims data

“(1) In general—The Administrator may sell or license the use of historical structure-specific claims data obtained and maintained by the National Flood Insurance Program (referred to in this subsection as covered claims data) to nongovernmental entities as the Administrator determines is appropriate and in the public interest.

“(2) Rules, procedures—The Administrator may adopt rules, terms, conditions, policies, and procedures concerning—

“(A) the selling or licensing of covered claims data; and

“(B) the use, protection, and maintenance of covered claims data by nongovernmental entities.

“(3) Proceeds—The Administrator shall deposit the proceeds from selling or licensing covered claims data under this subsection in the National Flood Insurance Fund.”

(B)
Funding— Section 1310 of the National Flood Insurance Act of 1968 (42 U.S.C. 4017) is amended—
(i)
in subsection (a)—
(I)
in paragraph (7), by striking “and” at the end;
(II)
in paragraph (8), by striking the period at the end and inserting “; and”; and
(III)
by adding at the end the following:

“(9) for carrying out section 1313.”

(ii)
in subsection (b)—
(I)
in paragraph (5), by striking “and” at the end;
(II)
by redesignating paragraph (6) as paragraph (7); and
(III)
by inserting after paragraph (5) the following:

“(6) proceeds from the sale or licensing of historical structure-specific claims data, as authorized under section 1313(b); and”

(2)
Effective date—
(A)
In general— Except as provided in subparagraph (B), the amendments made by paragraph (1) shall take effect on the date on which the Administrator publishes in the Federal Register a certification that the Administrator has—
(i)
submitted the report required under subsection (b);
(ii)
determined that it is legally and practically feasible to implement a program to sell or license the use of covered claims data to nongovernmental entities; and
(iii)
determined that a program described in subparagraph (B) would be in the public interest.
(B)
Credits to Fund— The amendment made by clause (ii) of paragraph (1)(B) shall take effect on the date of enactment of this Act.

Sec. 404 Fees and surcharges for private flood insurance policies

(a)
Surcharges— Section 1308A(a) of the National Flood Insurance Act of 1968 (42 U.S.C. 4015a(a)) is amended—
(1)
by striking “The Administrator” and inserting the following:

“(1) Collection on nfip policies—The Administrator”

(2)
by adding at the end the following:

“(2) Collection on private policies

“(A) In general—An insurance company that issues a policy for private flood insurance shall impose and collect an annual surcharge, in the amount provided in subsection (b), on a private flood insurance policy.

“(B) In addition to increased cost of compliance surcharge—The surcharge imposed under subparagraph (A) shall be in addition to the surcharge imposed under section 1304(c) and any other assessments and surcharges applied to such coverage.

“(C) Federal equivalency fee payable to administrator—Not later than 180 days after the date on which an insurance company collects a surcharge under subparagraph (A), the insurance company shall transfer the amount of the surcharge to the Administrator, who shall deposit the amount in the National Flood Insurance Fund established under section 1310.

“(D) Information—The Administrator may require the provision of such information as the Administrator decides is necessary to verify that a surcharge imposed and collected under subparagraph (A) has been imposed and collected at the proper time and in the proper amount.

“(E) Cost of collecting surcharge—No portion of the surcharge collected under subparagraph (A) may be retained by the insurance company for the costs of collecting, handling, or remitting the surcharge except for interest accruing to the company after collection and before remittance.”

(b)
Federal policy fee— Section 1307(a) of the National Flood Insurance Act of 1968 (42 U.S.C. 4014(a)) is amended—
(1)
in paragraph (1)(B)(iii), by striking “shall be recovered by” and all that follows and inserting “shall be recovered—

“(I) in the case of a policy under the national flood insurance program, by a fee that—

“(aa) shall be charged to policyholders; and

“(bb) shall not be subject to any agents’ commissions, company expense allowances, or State or local premium taxes; and

“(II) in the case of a private flood insurance policy, by a fee—

“(aa) that shall be—

“(AA) charged to policyholders;

“(BB) collected by the insurance company that issued the policy; and

“(CC) transferred, not later than 180 days after the date on which the fee is collected, to the Administrator, who shall deposit the amount of the fee in the National Flood Insurance Fund established under section 1310;

“(bb) that shall not be subject to any agents’ commissions, company expense allowances, or State or local premium taxes; and

“(cc) with respect to which—

“(AA) the Administrator may require the provision of such information as the Administrator decides is necessary to verify that the fee has been imposed and collected at the proper time and in the proper amount; and

“(BB) no portion may be retained by the insurance company that collected the fee for the costs of collecting, handling, or remitting the fee except for interest accruing to the company after collection and before remittance; and”

(2)
in paragraph (2), in the matter preceding subparagraph (A), by inserting “, including a fee charged to policyholders of private flood insurance in a manner that is consistent with paragraph (1)(B)(iii)(II),” after “policyholders”.
(c)
Increased cost of compliance coverage under private policies— Section 102(b)(7)(C) of the Flood Disaster Protection Act of 1973 (42 U.S.C. 4012a(b)(7)(C)), as amended by section 401 of this Act, is amended—
(1)
in clause (ii), by striking “and” at the end;
(2)
in clause (iii), by striking the period at the end and inserting “; and”; and
(3)
by adding at the end the following:

“(iv) provides ordinance and law coverage that meets or exceeds increased cost of compliance coverage provided under a standard flood insurance policy under the national flood insurance program”

(d)
Applicability— The amendments made by subsections (a), (b), and (c) shall apply with respect to a private flood insurance policy that is newly issued or renewed after the date of enactment of this Act.
(e)
Technical and conforming amendments—
(1)
Premium surcharge— Section 1308A(a)(1) of the National Flood Insurance Act of 1968 (42 U.S.C. 4015a(a)(1)), as so designated by subsection (a)(1) of this section, is amended, in the second sentence, by striking “section 1304(b)” and inserting “section 1304(c)”.
(2)
National Flood Insurance Fund— Section 1310(b) of the National Flood Insurance Act of 1968 (42 U.S.C. 4017(b)), as amended by section 403(c)(1)(B)(ii) of this Act, is amended—
(A)
in paragraph (6), as so designated, by striking “and” at the end;
(B)
by redesignating paragraph (7) as paragraph (9); and
(C)
by inserting after paragraph (6) the following:

“(7) surcharges collected under section 1308A(a)(2);

“(8) fees collected under section 1307(a)(1)(B)(iii); and”

Sec. 405 Write Your Own Risk Sharing Pilot Program

(a)
Definition— In this section—
(1)
the term excess flood insurance policy means a flood insurance policy sold under the Pilot Program; and
(2)
the term Pilot Program means the Write Your Own Risk Sharing Pilot Program established under subsection (b).
(b)
Establishment— The Administrator shall establish and conduct a pilot program under the National Flood Insurance Program, to be known as the Write Your Own Risk Sharing Pilot Program, to make available a flood insurance policy applying only to loss or damage in excess of not less than $50,000 for sale by Write Your Own companies that agree to participate in the Pilot Program.
(c)
Eligibility To participate in Pilot Program— The Administrator may establish terms, conditions, and eligibility criteria for Write Your Own companies participating in the Pilot Program.
(d)
Terms and conditions of excess flood policy—
(1)
Chargeable rates— The chargeable rate for an excess flood insurance policy sold in an area (or subdivision thereof) shall be not less than the applicable estimated risk premium rate for the area (or subdivision thereof) under section 1307(a)(1) of the National Flood Insurance Act of 1968 (42 U.S.C. 4014(a)(1)).
(2)
Application of surcharges and fees— Any surcharge or fee, with respect to an excess flood insurance policy, charged to a policyholder participating in the Pilot Program for a period shall be reduced by the amount of any surcharge for a private flood insurance policy under section 1308A(a)(2) of the National Flood Insurance Act of 1968 (42 U.S.C. 4015a(a)(2)) (as added by section 404) or fee for a private flood insurance policy under section 1307(a)(1)(B)(iii) of that Act (42 U.S.C. 4014(a)(1)(B)(iii)) (as amended by section 404), respectively, paid by the policyholder for coverage during the same period.
(3)
Terms and conditions of insurance—
(A)
In general— An excess flood insurance policy shall have the same coverages, exclusions, and limitations as the Standard Flood Insurance Policy insofar as the Policy relates to the requirements of this section.
(B)
Coverage amounts— Coverage amounts for an excess flood insurance policy shall not exceed the coverage amounts established under section 1306(b) of the National Flood Insurance Act of 1968 (42 U.S.C. 4013(b)).
(4)
Underlying policy requirement— An excess flood insurance policy sold under the Pilot Program shall require the insured to carry primary flood insurance that—
(A)
provides a maximum coverage limit of not less than $50,000;
(B)
is issued by a Write Your Own company; and
(C)
complies with any other conditions adopted by the Administrator.
(e)
Authority— The Administrator shall carry out the Pilot Program as authorized by and in accordance with the National Flood Insurance Act of 1968 (42 U.S.C. 4001 et seq.) insofar as that Act relates to this section, subject to the modifications made by this section.
(f)
Implementation— The Administrator shall make policies available for sale to the public under the Pilot Program not later than 18 months after the date of enactment of this Act.
(g)
Sunset— The Administrator may not issue or renew contracts for flood insurance under the Pilot Program—
(1)
on and after the date is 5 years after the date contracts for flood insurance under this section are made available for purchase; and
(2)
at any time after the expiration of the National Flood Insurance Program under section 1319 of the National Flood Insurance Act of 1968 (42 U.S.C. 4026).
(h)
Report— Not later than 180 days after the date on which the authority for the Pilot Program terminates under subsection (g), the Administrator shall submit to Congress a report on—
(1)
the aggregate amount of premiums, surcharges, and fees charged under the Pilot Program; and
(2)
claims loss data experienced by the Write Your Own companies participating in the Pilot Program and the National Flood Insurance Program on policies sold under the Pilot Program.