42 U.S.C. § 4017a: Reserve Fund

Summary

The Administrator must create a National Flood Insurance Reserve Fund in the U.S. Treasury as a separate account. The fund is for future flood insurance costs like paying claims, claim-adjusting costs, and repaying any debt taken under section 4016(a). Any surcharges collected under section 4015a must go into the fund. The fund should hold an amount equal to 1% of the total potential loss exposure of all flood policies from the prior fiscal year, or a higher share if the Administrator finds greater risk. To reach and keep that target, the Administrator can change annual insurance premiums, while following other rate rules. When deciding on premiums, the Administrator must consider operating costs, expected losses, investment income, and other relevant factors. Starting in fiscal year 2013 and until the target is reached, the Administrator must add at least 7.5% of the required reserve each year. If the target is met, no more set‑asides are required unless the fund falls below the target later; then the 7.5% rule applies again. If the Administrator decides the target cannot be met in a year, they must report to Congress every calendar quarter explaining the problems, the harm to the program, and the highest achievable ratio. The Treasury Secretary may invest the fund in U.S. government securities.

Title 42, §4017a

The Public Health and Welfare, Source: USLM XML via OLRC

(a)Establishment of Reserve Fund

In carrying out the flood insurance program authorized by this subchapter, the Administrator shall establish in the Treasury of the United States a National Flood Insurance Reserve Fund (in this section referred to as the “Reserve Fund”) which shall—

(1)be an account separate from any other accounts or funds available to the Administrator; and

(2)be available for meeting the expected future obligations of the flood insurance program, including—

(A)the payment of claims;

(B)claims adjustment expenses; and

(C)the repayment of amounts outstanding under any note or other obligation issued by the Administrator under section 4016(a) of this title.

(b)Reserve ratio

Subject to the phase-in requirements under subsection (d), the Reserve Fund shall maintain a balance equal to—

(1)1 percent of the sum of the total potential loss exposure of all outstanding flood insurance policies in force in the prior fiscal year; or

(2)such higher percentage as the Administrator determines to be appropriate, taking into consideration any circumstance that may raise a significant risk of substantial future losses to the Reserve Fund.

(c)Maintenance of reserve ratio

(1)In general

The Administrator shall have the authority to establish, increase, or decrease the amount of aggregate annual insurance premiums to be collected for any fiscal year necessary—

(A)to maintain the reserve ratio required under subsection (b); and

(B)to achieve such reserve ratio, if the actual balance of such reserve is below the amount required under subsection (b).

(2)Considerations

In exercising the authority granted under paragraph (1), the Administrator shall consider—

(A)the expected operating expenses of the Reserve Fund;

(B)the insurance loss expenditures under the flood insurance program;

(C)any investment income generated under the flood insurance program; and

(D)any other factor that the Administrator determines appropriate.

(3)Limitations

(A)Rates

In exercising the authority granted under paragraph (1), the Administrator shall be subject to all other provisions of this chapter, including any provisions relating to chargeable premium rates or annual increases of such rates.

(B)Use of additional annual insurance premiums

Notwithstanding any other provision of law or any agreement entered into by the Administrator, the Administrator shall ensure that all amounts attributable to the establishment or increase of annual insurance premiums under paragraph (1) are transferred to the Administrator for deposit into the Reserve Fund, to be available for meeting the expected future obligations of the flood insurance program as described in subsection (a)(2).

(4)Deposit of premium surcharges

The Administrator shall deposit in the Reserve Fund any surcharges collected pursuant to section 4015a of this title.

(d)Phase-in requirements

The phase-in requirements under this subsection are as follows:

(1)In general

Beginning in fiscal year 2013 and not ending until the fiscal year in which the ratio required under subsection (b) is achieved, in each such fiscal year the Administrator shall place in the Reserve Fund an amount equal to not less than 7.5 percent of the reserve ratio required under subsection (b).

(2)Amount satisfied

As soon as the ratio required under subsection (b) is achieved, and except as provided in paragraph (3), the Administrator shall not be required to set aside any amounts for the Reserve Fund.

(3)Exception

If at any time after the ratio required under subsection (b) is achieved, the Reserve Fund falls below the required ratio under subsection (b), the Administrator shall place in the Reserve Fund for that fiscal year an amount equal to not less than 7.5 percent of the reserve ratio required under subsection (b).

(e)Limitation on reserve ratio

In any given fiscal year, if the Administrator determines that the reserve ratio required under subsection (b) cannot be achieved, the Administrator shall submit, on a calendar quarterly basis, a report to Congress that—

(1)describes and details the specific concerns of the Administrator regarding the consequences of the reserve ratio not being achieved;

(2)demonstrates how such consequences would harm the long-term financial soundness of the flood insurance program; and

(3)indicates the maximum attainable reserve ratio for that particular fiscal year.

(f)Investment

The Secretary of the Treasury shall invest such amounts of the Reserve Fund as the Secretary determines advisable in obligations issued or guaranteed by the United States.

Notes & Related Subsidiaries

Editorial Notes

References in Text

This chapter, referred to in subsec. (c)(3)(A), was in the original “this Act”, and was translated as reading “this title”, meaning title XIII of Pub. L. 90–448, Aug. 1, 1968, 82 Stat. 572, known as the National Flood Insurance Act of 1968, which is classified principally to this chapter, to reflect the probable intent of Congress. For complete classification of this Act to the Code, see

Short Title

note set out under section 4001 of this title and Tables.

Amendments

2014—Subsec. (c)(4). Pub. L. 113–89, § 8(b), added par. (4). Subsec. (e). Pub. L. 113–89, § 20, inserted “, on a calendar quarterly basis,” after “submit” in introductory provisions.

§4017a Reserve Fund