42 U.S.C. § 4017a — Reserve Fund

(a) Establishment of Reserve Fund. To carry out the flood insurance program authorized by this subchapter, the Administrator must establish in the United States Treasury a National Flood Insurance Reserve Fund, called the “Reserve Fund” in this section. The Reserve Fund must: (1) be separate from every other account or fund available to the Administrator; and (2) be available to meet the flood insurance program’s expected future obligations, including: (A) paying claims; (B) paying claims-adjustment expenses; and (C) repaying 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 in subsection (d), the Reserve Fund must maintain a balance equal to: (1) 1 percent of the total potential loss exposure of all outstanding flood insurance policies in force during the prior fiscal year; or (2) a higher percentage that the Administrator determines is appropriate after considering any circumstance that could create a significant risk of substantial future losses to the Reserve Fund. (c) Maintenance of reserve ratio. (1) In general. The Administrator may establish, increase, or decrease the total annual insurance premiums collected for a fiscal year when necessary: (A) to maintain the reserve ratio required by subsection (b); and (B) to reach that reserve ratio if the Reserve Fund’s actual balance is below the amount required by subsection (b). (2) Considerations. When using this authority, the Administrator must consider: (A) the Reserve Fund’s expected operating expenses; (B) insurance-loss expenditures under the flood insurance program; (C) investment income generated under the flood insurance program; and (D) any other factor the Administrator considers appropriate. (3) Limitations. (A) Rates. When using this authority, the Administrator remains subject to all other provisions of this chapter, including provisions about chargeable premium rates or annual increases in those rates. (B) Use of additional annual insurance premiums. Regardless of any other law or agreement entered into by the Administrator, the Administrator must ensure that all amounts resulting from establishing or increasing annual insurance premiums under paragraph (1) are transferred to the Administrator for deposit into the Reserve Fund. Those amounts must be available to meet the flood insurance program’s expected future obligations described in subsection (a)(2). (4) Deposit of premium surcharges. The Administrator must deposit in the Reserve Fund any surcharges collected under section 4015a of this title. (d) Phase-in requirements. The phase-in requirements are: (1) In general. Beginning in fiscal year 2013 and continuing through the fiscal year in which the ratio required by subsection (b) is reached, the Administrator must place in the Reserve Fund, in each such fiscal year, an amount equal to at least 7.5 percent of the reserve ratio required by subsection (b). (2) Amount satisfied. Once the ratio required by subsection (b) is reached, and except as paragraph (3) provides, the Administrator is not required to set aside amounts for the Reserve Fund. (3) Exception. If, after the ratio required by subsection (b) is reached, the Reserve Fund ever falls below that required ratio, the Administrator must place in the Reserve Fund for that fiscal year an amount equal to at least 7.5 percent of the reserve ratio required by subsection (b). (e) Limitation on reserve ratio. If, in a fiscal year, the Administrator determines that the reserve ratio required by subsection (b) cannot be reached, the Administrator must submit a report to Congress every calendar quarter. The report must: (1) describe and give details about the Administrator’s specific concerns about the consequences of not reaching the reserve ratio; (2) show how those consequences would harm the flood insurance program’s long-term financial soundness; and (3) state the maximum reserve ratio attainable for that fiscal year. (f) Investment. The Secretary of the Treasury must invest amounts in the Reserve Fund that the Secretary determines it is advisable to invest in obligations issued or guaranteed by the United States.