[Senate Hearing 112-698]
[From the U.S. Government Publishing Office]





                                                        S. Hrg. 112-698


     THE NATIONAL FLOOD INSURANCE PROGRAM: THE NEED FOR LONG-TERM 
                       REAUTHORIZATION AND REFORM

=======================================================================

                                HEARING

                               before the

                            SUBCOMMITTEE ON
                            ECONOMIC POLICY

                                 of the

                              COMMITTEE ON
                   BANKING,HOUSING,AND URBAN AFFAIRS
                          UNITED STATES SENATE

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                                   ON

  EXAMINING THE NEED FOR LONG-TERM REAUTHORIZATION AND REFORM OF THE 
                    NATIONAL FLOOD INSURANCE PROGRAM

                               __________

                              MAY 9, 2012

                               __________

  Printed for the use of the Committee on Banking, Housing, and Urban 
                                Affairs





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            COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

                  TIM JOHNSON, South Dakota, Chairman

JACK REED, Rhode Island              RICHARD C. SHELBY, Alabama
CHARLES E. SCHUMER, New York         MIKE CRAPO, Idaho
ROBERT MENENDEZ, New Jersey          BOB CORKER, Tennessee
DANIEL K. AKAKA, Hawaii              JIM DeMINT, South Carolina
SHERROD BROWN, Ohio                  DAVID VITTER, Louisiana
JON TESTER, Montana                  MIKE JOHANNS, Nebraska
HERB KOHL, Wisconsin                 PATRICK J. TOOMEY, Pennsylvania
MARK R. WARNER, Virginia             MARK KIRK, Illinois
JEFF MERKLEY, Oregon                 JERRY MORAN, Kansas
MICHAEL F. BENNET, Colorado          ROGER F. WICKER, Mississippi
KAY HAGAN, North Carolina

                     Dwight Fettig, Staff Director

              William D. Duhnke, Republican Staff Director

                       Dawn Ratliff, Chief Clerk

                      Riker Vermilye, Hearing Clek

                      Shelvin Simmons, IT Director

                          Jim Crowell, Editor

                                 ______

                    Subcommittee on Economic Policy

                     JON TESTER, Montana, Chairman

           DAVID VITTER, Louisiana, Ranking Republican Member

MARK R. WARNER, Virginia             ROGER F. WICKER, Mississippi
KAY HAGAN, North Carolina            MIKE JOHANNS, Nebraska
TIM JOHNSON, South Dakota

             Alison O'Donnell, Subcommittee Staff Director

                 Beth Cooper, Professional Staff Member

         Travis Johnson, Republican Subcommittee Staff Director

                                  (ii)











                            C O N T E N T S

                              ----------                              

                         WEDNESDAY, MAY 9, 2012

                                                                   Page

Opening statement of Chairman Tester.............................     1

Opening statements, comments, or prepared statements of:
    Senator Vitter...............................................    11

                               WITNESSES

Todd Klietz, Missoula County Floodplain Administrator, Missoula, 
  Montana........................................................     3
    Prepared statement...........................................    25
Dwayne Bourgeois, Executive Director, North Lafourche 
  Conservation, Levee, and Drainage District, Raceland, Louisiana     5
    Prepared statement...........................................    26
David A. Sampson, President and Chief Executive Officer, Property 
  and Casualty Insurers Association of America...................    12
    Prepared statement...........................................    63
Jon Jensen, Government Affairs Committee Chairman, Independent 
  Insurance Agents and Brokers of America, and President, Correll 
  Insurance Group................................................    13
    Prepared statement...........................................    65
Moe Veissi, 2012 President, National Association of Realtors.....    15
    Prepared statement...........................................    68
Sarah Murdock, Senior Policy Advisor, The Nature Conservancy.....    17
    Prepared statement...........................................    75

              Additional Material Supplied for the Record

Prepared statement of the American Insurance Association.........    80
Prepared statement of the Mortgage Bankers Association...........    83
Prepared statement of the National Association of Mutual 
  Insurance Companies............................................    87
Prepared statement of the American Bankers Association and the 
  American Bankers Insurance Association.........................    91
Prepared statement of the Council of Insurance Agents and Brokers    95
Prepared statement of R.J. Lehmann, Deputy Director, Center on 
  Finance, Insurance, and Real Estate, The Heartland Institute...    97
Letter submitted by Bill Cheney, President and Chief Executive 
  Officer, Credit Union National Association.....................   104
Letter submitted by James W. Tobin III, Senior Vice President and 
  Chief Lobbyist, National Association of Home Builders..........   106
Letter submitted by Franklin W. Nutter, President, Reinsurance 
  Association of America.........................................   107
Letter submitted by SmarterSafer.................................   109
Letter submitted by James Bradley, Senior Director of Government 
  Relations, American Rivers.....................................   111
FIRM map and notice submitted for the record.....................   113

                                 (iii)

 
     THE NATIONAL FLOOD INSURANCE PROGRAM: THE NEED FOR LONG-TERM 
                       REAUTHORIZATION AND REFORM

                              ----------                              


                         WEDNESDAY, MAY 9, 2012

                                       U.S. Senate,
                           Subcommittee on Economic Policy,
          Committee on Banking, Housing, and Urban Affairs,
                                                    Washington, DC.
    The Subcommittee met at 10:04 a.m., in room SD-538, Dirksen 
Senate Office Building, Hon. Jon Tester, Chairman of the 
Subcommittee, presiding.

            OPENING STATEMENT OF CHAIRMAN JON TESTER

    Chairman Tester. I want to welcome everyone, and I call to 
order this hearing of the Economic Policy Subcommittee titled 
``The National Flood Insurance Program: The Need for Long-Term 
Reauthorization and Reform.'' Oh, how we long for the day.
    I look forward to hearing from our witnesses this morning 
about the importance of long-term reauthorization and reform of 
the National Flood Insurance Program, which is vitally 
important to Montana homeowners and communities. Given the 
fast-approaching May 31st expiration of the Flood Insurance 
Program, the need to reauthorize and reform this program is 
imperative. Without an extension, in a matter of weeks 
policyholders and insurers will be in limbo; realtors and 
homeowners will be forced to put closings on hold contingent on 
reauthorization of this program.
    We have been down this road before and have seen how 
unproductive and destructive lapses of this program can be. The 
unprecedented flooding in the Mississippi River basin last year 
further drove home the necessity of passing a long-term 
reauthorization that offers Americans and Montanans certainty 
in the face of risk.
    Senator Vitter and I have been working together on this 
issue for quite some time now. He has been a great partner and 
dogged in his efforts to ensure that the NFIP program does not 
continue to suffer from the same lapses that we saw in 2010. I 
appreciate his sponsorship of S. 2344, a short-term extension 
of the program through the end of this year, which I joined as 
a cosponsor to ensure that we do not fall into a lapse on June 
1 and that we can continue our work on a long-term 
reauthorization bill.
    Teaming up on recommendations to improve the Senate Banking 
Committee draft, Senator Vitter and I worked with the Committee 
to incorporate critical provisions in the final bill. These 
provisions include a requirement that the Army Corps and FEMA 
work together to develop common standards that would allow 
existing Corps certification activities to meet FEMA levee 
certification criteria and a lengthening of the phase-in period 
for homeowners who must purchase flood insurance as a result of 
being mapped into a floodplain.
    Unfortunately, too many Montana communities have 
experienced what happens when FEMA and the Army Corps do not 
work together. I am especially pleased to hear from Todd Klietz 
this morning, who will discuss his experience in Missoula with 
levee certification. In addition to these important provisions, 
the flood insurance bill also makes a number of important 
reforms to put the program on a more sound financial footing to 
protect taxpayers and to ensure long-term solvency of the 
program.
    The bottom line is that we need a long-term reauthorization 
and reform bill and we need it now. The House and the Senate 
have never produced long-term reauthorization bills as closely 
aligned as the two that we have before us today. I am also not 
sure whether we have had the same strong, broad, industry-wide 
support that we have now, evidenced by our witnesses here 
today, and the efforts of the Flood the Hill Coalition, and I 
want to thank everybody who has been a part of that and will be 
a part of that.
    And while we cannot take our focus away from passing a 
long-term reauthorization and reform bill, it is also clear 
that we will need a short-term extension in order to continue 
our work in getting the long-term reauthorization reform bill 
across the finish line.
    I look forward to hearing from all of our witnesses about 
the importance of this program and protecting communities from 
national disasters and protecting taxpayers.
    Senator Vitter is not here yet, so I think we will go right 
straight to the panel. When he shows up, we will get his 
testimony when appropriate.
    So I would like to welcome our witnesses, two folks who 
have spent quite a bit of time in the field, and I want to 
thank them for their willingness to testify this morning. We 
will start with Mr. Klietz, a Montana floodplain administrator 
for the city of Missoula and Missoula County, a role that he 
has served in since 2003. He is also a past chairman of the 
Association of Montana Floodplain Managers. He is a certified 
floodplain manager and also previously served as a floodplain 
administrator for Ravalli County, a bit south of Missoula. I 
want to welcome you, Mr. Klietz.
    We also have with us--and my French is not exceptionally 
good today, but I will do my best--Mr. Dwayne Bourgeois, 
executive director of the North Lafourche Conservation, Levee, 
and Drainage District, a role that he has served in since 2010. 
Mr. Bourgeois has significant experience in the area of 
emergency preparedness, developing new ways for employers and 
employees to communicate in the event of an emergency 
evacuation through his work developing Rally Point. Welcome, 
Mr. Bourgeois.
    Each of our witnesses will have 5 minutes for oral 
statements, and your entire written testimony will be a part of 
the record. Mr. Klietz, I would like you to start.

     STATEMENT OF TODD KLIETZ, MISSOULA COUNTY FLOODPLAIN 
                ADMINISTRATOR, MISSOULA, MONTANA

    Mr. Klietz. Thank you, Senator. On behalf of Missoula 
County, Montana, and the Association of Montana Floodplain 
Managers, I am honored to appear before you today to provide 
comment on the reauthorization of the National Flood Insurance 
Program. I respectfully urge this Committee to ensure that 
long-term reauthorization of the NFIP is enacted prior to May 
31st.
    Over the past several years, I have witnessed the results 
that delayed and uncertain congressional action on 
reauthorization has caused within my community and my State. 
Property values, already having fallen due to the economy, fall 
further in the floodplain due to buyers' uncertainty that 
Congress will provide homeowners with long-term flood insurance 
coverage. Real estate transactions have been delayed, and some 
have completely fallen through.
    Homeowners, many of whom already must sell their property 
at a loss, are forced to reduce their sales prices further. The 
small pool of local insurers that are willing to process flood 
insurance policies dwindles further as they become increasingly 
frustrated with the ever changing uncertainty the last several 
years of delayed short-term reauthorizations have caused. 
Floodplain citizens need to know that you have their back by 
reauthorizing the National Flood Insurance Program for the long 
term.
    This is not to say that we support reauthorization of the 
exact same Flood Insurance Program that has contributed 
significantly to our national debt. From my perspective, reform 
is correctly focused on the insurance side as the requirements 
for floodplain development within NFIP communities do work. 
Simply tour a participating community post-flood to see those 
results. My own community just experienced a 10-year flood last 
spring. Older homes built before FEMA mapping were destroyed 
while the newer homes right next door suffered virtually no 
damages.
    The commonsense reforms, including those that the Montana 
delegation and this Committee have put forward, must be 
included in the long-term reauthorization. The American 
taxpayer is increasingly unwilling to provide financial support 
for those who have time and time again received handouts post-
flood who then do absolutely nothing to prevent future damages 
as they know Uncle Sam will be there check in hand to quite 
literally bail them out again. Many repetitive loss property 
owners within my community received FEMA checks last year. None 
have voluntarily chosen to mitigate their homes.
    Gone, too, are the days that the taxpayer will support 
those who knowingly choose to live in areas and in homes with 
severe flood risk. So we thank you for moving the NFIP away 
from overwhelmingly tax-subsidized premiums toward actuarially 
rated policies. I also want to thank you for your commitment to 
fund ongoing mapping so that communities in rural States like 
Montana will eventually be provided with detailed floodplain 
maps allowing our citizens to build homes constructed through 
means that minimize flood loss.
    I further appreciate the efforts that are being made 
regarding levees. Although the issuance of new FEMA floodplain 
maps for my community has been on hold for several years due to 
inconsistencies with how FEMA is mapping properties behind them 
and behind levee-like structures such as railroad beds, roads, 
and even interstate highways, my community was fortunate that 
the Army Corps of Engineers certified their levees. This makes 
sense as the Corps designed, built, and inspects them on a 
regular basis. My community's experience with the Seattle 
District of the Army Corps of Engineers was exactly the way it 
should be. We asked, they came, and while we had some 
unexpected work that needed to be done, we did our job in 
maintaining those levees, and the Corps did their job in 
certifying them. Unfortunately, other Montana communities have 
been required to spend hundreds of thousands of dollars to 
certify the levees that the Corps designed, built, and already 
inspects. An unjustifiable burden on those communities and 
their residents, we are glad to see the Senate taking a 
proactive position to put the Federal responsibility for 
certifying Federal levees back where it belongs.
    The positive reforms that have been put forward are long 
overdue, and I applaud your efforts to make them happen. 
However, there remains one very important issue: 500-year 
floodplains. You have heard testimony regarding the losses that 
the NFIP incurs--the taxpayer incurs--when homes within 500-
year floodplains are damaged. The Senate bill will ensure 
property owners will now be notified of the risk of living in a 
500-year floodplain. The problem is that FEMA does not map 500-
year floodplains. These areas are identified as ``Shaded-X'' on 
the floodplain maps, and in small print, the corresponding 
legend states that these actually are ``areas of 100-year 
flood'' or ``areas protected by levees from the 100-year 
flood'' or ``areas of 500-year flood.'' Until FEMA is actually 
required to map these Shaded-X areas based on actual 
topography, the maps simply cannot be relied on to determine if 
a building proposed in these locations is actually within the 
500-year floodplain or will be inundated during lesser flood 
events. Last spring, I was in a Shaded-X 500-year home with a 
full walkout basement that was inundated during our 10-year 
flood. There are no Federal requirements for how that home 
should have been built, nor how that home should be mitigated 
to prevent future losses. There are no requirements that the 
property owner obtain flood insurance to ease the burden on the 
taxpayer. The property owners had received multiple checks 
prior to last year's 10-year flood event, and they did so again 
last spring.
    I was in another flooded home. This one was built in the 
100-year floodplain--with a basement. It should have never 
happened--and it did not happen on my watch--but it did. 
Although that home was not constructed in compliance with FEMA 
requirements, those property owners also received a check from 
FEMA.
    I sincerely appreciate the opportunity to appear before you 
today and would like to leave you with my own top three 
requests:
    Stop issuing subsidized flood insurance policies for new 
structures built after FEMA's floodplain designation. 
Fortunately, as addressed in the Senate bill, the taxpayer will 
no longer be forced to subsidize insurance for those that 
choose to build in designated floodplains.
    Stop rewarding those who bring fill into the floodplain to 
protect their development at the expense of pushing those flood 
waters onto their neighbors. FEMA encourages this practice by 
issuing Letters of Map Revision Based on Fill which completely 
removes the owner's obligation to obtain flood insurance 
coverage and contribute to the National Flood Insurance 
Program.
    Finally, stop issuing FEMA floodplain maps without 
providing written notice to affected property owners. FEMA has 
the audacity--and the budget--to send notices to widows on 
fixed incomes in Bozeman and Missoula and across the Nation 
whose homes are nowhere near the floodplain which scares them 
into buying flood insurance. At the same time, FEMA does not 
have the budget or desire to send such notices to people that 
are actually in the floodplain. Thankfully, notification is now 
addressed in the Senate bill. These scare tactics are not. Even 
Missoula City Hall, located nearly a half-mile from the 100-
year floodplain, received such a letter from FEMA. Targeting 
extremely low-risk properties may be good for the bottom line 
but is not what citizens expect from their Government.
    In closing, I sincerely thank this Committee and both 
Houses for pursuing significant reform and providing our 
citizens with long-term, confidence-restoring reauthorization.
    Thank you.
    Chairman Tester. Thank you, Mr. Klietz, and I appreciate 
your testimony. We will get to some questions for both of you, 
but we will go to Mr. Bourgeois now for his testimony. Mr. 
Bourgeois?

   STATEMENT OF DWAYNE BOURGEOIS, EXECUTIVE DIRECTOR, NORTH 
LAFOURCHE CONSERVATION, LEVEE, AND DRAINAGE DISTRICT, RACELAND, 
                           LOUISIANA

    Mr. Bourgeois. Thank you, Senator Tester and Members of the 
entire Committee, for this opportunity to testify today. I am, 
as you mentioned, the executive director of the North Lafourche 
Levee District, a political subdivision of the State of 
Louisiana. However, I am here today representing a broader 
coalition of Government agencies, citizens, and businesses in 
the State of Louisiana who rely heavily on the National Flood 
Insurance Program.
    We commend the Committee for addressing the long-term 
reauthorization and reform of the National Flood Insurance 
Program. Further, we appreciate the opportunity to provide to 
you details of our current circumstance. Though particulars may 
vary, the situation we face today is typical for many areas in 
South Louisiana and across our Nation.
    Currently, we are working with FEMA--and I will add that 
the U.S. Senate and the House of Representatives have been 
actively working along with us--to reform a FEMA policy 
regarding the impact of nonaccredited levees during the Flood 
Insurance Study. We believe that you will agree that our issue 
clearly demonstrates the need for reform for the National Flood 
Insurance Program. However, we further believe that such reform 
is currently being complicated and made more difficult by the 
lack of a long-term reauthorization of the National Flood 
Insurance Program itself. Even the seemingly obvious need for 
reforms takes much effort and time in a program such as this. 
It is hard for everyone involved to work diligently through 
such a complicated issue with a looming expiration date set for 
the fate of the entire program.
    Our issues began in mid-2009 when we received new flood 
maps in our area. It was immediately obvious to us that the 
maps could not possibly represent the true risk of flooding in 
our area because the flood zones shown in the maps had no 
correlation to any real world features. We began working 
through the appeals process with FEMA and were able to quickly 
identify the elements of the Flood Insurance Study that were 
causing the erroneous mapping as well as limitations of the 
process itself that would not allow the maps to more accurately 
reflect the threat of flooding in our area.
    Realizing that complete resolution of our issues would have 
to come from a change in FEMA's policy and that this change 
would have to come from Washington headquarters of FEMA, we 
began to inform and work with our legislative delegation. In 
early February 2011, 27 Senators signed a letter to FEMA 
Administrator Fugate asking FEMA to discontinue the ``Without 
Levees'' policy. In March of 2011, Administrator Fugate 
announced that FEMA would begin developing a series of targeted 
modeling approaches to replace the ``without levees'' approach 
to identifying the risk of flooding behind uncertified levees.
    In December 2011, FEMA released for public comment a draft 
of their proposed revised approach. About this same time, FEMA 
did reveal to us that they were still working on details on how 
to address coastal levee analysis. They realized that some of 
the riverine methods developed would not be appropriate for 
coastal levees. Most importantly, in a collaborative reform 
process, they also agreed to meet with us on these specific 
issues. A small group from our local coalition met with FEMA's 
technical staff in February of this year. When it came to 
producing more accurate flood maps, we were told by FEMA 
nothing was off the table. This was a very productive meeting, 
but we have a long way to go. As of today, FEMA has not 
released the results of their analysis of all the public 
comments they received. This is still very much a reform in 
process.
    So today we find ourselves working hand in hand with FEMA 
on meaningful reforms to their policy only to be met by another 
pending expiration of a short-term extension of the National 
Flood Insurance Program. Yet, the details I have provided today 
are a tremendous effort to resolve but a single issue within 
the National Flood Insurance Program. There are many more 
issues that can be corrected through cooperative reform and a 
long-term reauthorization of this vital program.
    The framework for some of the other required reform is 
already in the language of the bill. An example is the creation 
of a task force that will help local levee owners work more 
efficiently with the U.S. Army Corps of Engineers when trying 
to have their levees accredited for consideration in the 
National Flood Insurance Program.
    In conclusion, I would like to point out that ours is a 
working delta, the fruits of which are enjoyed by and enrich 
our entire Nation. From our freight transportation on the 
Mississippi River to our oil and gas and petrochemical industry 
to our abundant fisheries, not to mention tourism, jazz, and 
Mardi Gras, we simply must work and live within this delta. As 
such, the availability of federally backed, affordable, and 
financially stable flood insurance is of vital importance to 
our region and the entire Nation. All of this can be provided 
with the long-term reauthorization and reforms being proposed.
    We thank you for this opportunity to share both our 
situation and our views on this important issue. We look 
forward to working with all of you to continue making these 
changes to the National Flood Insurance Program.
    Chairman Tester. Well, I want to thank you for your 
testimony also, Mr. Bourgeois.
    I think what we will do is we just go right into the 
questions, if I might. I am going to start with you, Mr. 
Bourgeois. One of the last statements you made was you have a 
working delta and how critically important it was to have a 
financially stable Flood Insurance Program. I do not know if 
you have had a chance to look at the bill in depth, but does it 
meet that criteria?
    Mr. Bourgeois. I have not read it completely in total 
depth, but I am familiar with it and familiar with the fact 
that we have gone through a series of short-term 
reauthorizations and how difficult that was to us.
    I will put this to you simply. Yesterday I had a revelation 
eating lunch at a deli, and I had a bag of chips that had the 
same expiration date as the National Flood Insurance Program. A 
program as important as this should not have the same 
expiration date as a bag of chips.
    [Laughter.]
    Mr. Bourgeois. It just floored me, and I wanted to bring it 
in because I did not think anybody would believe me. But those 
are the problems we are having. I mean, how can anyone make 
meaningful reforms, how can you plan long term, when we are 
faced with these constant short-term things? We need a solid 
commitment to the program so that everybody can move on and do 
what they need to do.
    Chairman Tester. And predictability comes with that long-
term commitment.
    Mr. Bourgeois. Absolutely.
    Chairman Tester. Yes, thank you.
    Mr. Klietz, I want to thank you for being here this 
morning. We both know how long a trip it is from Montana to 
Washington, DC, so I appreciate your willingness to be here and 
to share your expertise on the program of flood insurance.
    You mentioned in your testimony that flood maps are in the 
process of being remapped and that levees were certified by the 
Army Corps in your town. Could you describe the process of how 
that certification was handled and the division of cost and 
labor between the local levee sponsors, FEMA, and the Army 
Corps?
    Mr. Klietz. Certainly. Missoula and Missoula County have 
three levees that were built by the Corps--one in 1949 and two 
more in the 1960s within the city of Missoula. When we first 
heard that the NFIP was going to be updating FEMA's floodplain 
maps for Missoula and Missoula County, I contacted the Army 
Corps of Engineers in Seattle, the Seattle District, who built 
our levees, and they readily agreed to come out and assist us 
with that process. It was their dime. They came out, and as 
they normally inspect our levees anyway, they were willing to 
certify that. They came out, saw the condition of our levees, 
saw that we had been maintaining them, but also saw some issues 
that had concerned them, mainly had to do with overgrowth of 
vegetation. So both the city and the county then had to spend 
several thousands dollars to bring those levees into compliance 
with the requirements for certification.
    That certification, again, was primarily--the cost of doing 
the certification was done by the Army Corps of Engineers out 
of Seattle. FEMA's response basically was to review the 
certification papers that the Corps provided and to ensure that 
we had an ongoing maintenance and operation for those 
particular levees. So there was not a whole lot that FEMA had 
to do other than review the paperwork. And, again, the Corps 
did most of that work themselves.
    Chairman Tester. Bottom line, the local levee folks had the 
financial capacity to handle the cost?
    Mr. Klietz. The cost and the obligation of maintaining the 
levees, not the financial resources if we would have been 
forced to certify those ourselves like some other Montana 
communities have.
    Chairman Tester. OK. As you know--and I was going to ask 
Mr. Bourgeois--coastal levees, does the Corps certify those?
    Mr. Bourgeois. Yes, sir. They certify any levees that meet 
65.10, so they will certify any levees that will have that 
requirement. Some of them are coastal and some of them are 
riverine in our area.
    Chairman Tester. OK. So in Louisiana, because I am not 
familiar with it, so this is an education point, what percent 
does the Army Corps certify now? I mean, they used to certify 
them all in Montana. They do not do any of them now.
    Mr. Klietz. It is a relatively short number of levee 
systems. The mileage may be up there because they certify the 
main line Mississippi River levees, but a lot of the additional 
and ancillary levee systems are no longer certified by the 
Corps, and a lot of the levees that we have in our district--
for example, we have no federally authorized levees, no Federal 
levees whatsoever. So none of our levees are actually certified 
currently.
    Chairman Tester. OK. So this is a question for both of you. 
Since the Army Corps has ceased providing levee certification 
services for flood mapping, my question is: Without the Corps 
performing the certifications, how is the process working in 
your respective States?
    Mr. Klietz. Senator, in Montana it is not working at all. 
The town of Miles City has levees. They have not been able to 
certify those levees. The Corps has not certified those levees. 
The properties behind those levees are being mapped as being 
within the floodplain as if the levee does not exist.
    The city of Livingston did, on their own dime, spend almost 
$300,000 to certify those levees that were built by the Corps. 
The Corps levees in Great Falls, Cascade County, Montana, were 
able to eventually get a 2-year provisional accreditation from 
FEMA, but that is just a 2-year stop gap, and when that 2-year 
period expires, the levee accreditation will expire. And 
without the Corps' ability to certify those levees, all those 
properties will go into the floodplain and require those 
individual property owners to now carry flood insurance.
    Chairman Tester. Could you give me a Louisiana perspective, 
if different?
    Mr. Bourgeois. Well, it is somewhat similar. The actual 
process of certifying something is--certifying the levees is 
very difficult for an individual engineering firm to take on 
the responsibility. So it sort of all turns to the Corps, and I 
think in some cases the Corps would be willing, but they have 
their limitations on what they can do, and the funding and 
everything else also. So it does put everyone in a quandary.
    Chairman Tester. Well, it is interesting because Montana is 
a headwater State; you guys are where it goes into the ocean; 
and the challenges we have with levee certification obviously 
are concerning the whole river system.
    Do the local levee sponsors--and this can be a pretty short 
answer because I think I know what it is. Do the local levee 
sponsors have the ability to certify those levees, even if they 
could get an engineering firm to do it?
    Mr. Bourgeois. It would be very difficult and very costly.
    Chairman Tester. OK.
    Mr. Klietz. The same in Missoula.
    Chairman Tester. All right. I want to talk a little bit 
about the 500-year floodplain. Mr. Klietz, you mentioned in 
your testimony the mapping of the 500-year floodplain and a 
move toward actuarial premiums. I want to flesh this out a 
little bit. Could you tell us a little bit about how these 
issues affect somebody in your position's ability to manage the 
floodplain and ensure the right kind of development is 
happening in the right place?
    Mr. Klietz. In regards to the 500-year floodplains, the 
Montana Legislature actually back in the early 1970s went above 
and beyond the requirements of the FEMA mandates, and they do 
give local communities in Montana the ability to look at 500-
year floodplains for development purposes. That is quite 
different than what happens at the national level, but we do 
have that specific legislative authority from the State of 
Montana.
    For instance, in my community, when there is a proposed 
subdivision within a 500-year floodplain or when there is a 
proposed septic system that needs to be installed for a new 
home, we ensure that those properties are above the 100-year 
flood elevation and that they are constructed so that their 
lowest floors are 2 feet above the 100-year flood elevation, 
which is the standard for freeboard in the State of Montana.
    Chairman Tester. The last one, and then I will kick it over 
to my Ranking Member. And I may ask this question of the second 
panel, too. You guys touched on a little bit in your testimony 
about the consequences of the continual short-term extension 
versus a flood insurance program that is long term. Could you 
give me some real-life examples in your communities of what you 
have seen over the last few years, the impacts of those short-
term extensions, problems that have arisen that would not 
necessarily have to arise if we could get a long-term extension 
passed? Mr. Bourgeois, go ahead.
    Mr. Bourgeois. Well, as mentioned in my testimony, the 
whole process of reforms that we are working on to give credit 
or some consideration to nonaccredited levees in a Flood 
Insurance Study puts everything in flux. And I would think that 
even as complicated as the issue is, we could have gotten 
through this a lot quicker, but, you know, with a constant 
expiration date hanging over the whole thing, it is very 
difficult for everyone to work diligently toward solving such a 
complicated issue, thinking the whole thing could be ending 
fairly soon. And I know that that has had impacts on our 
development and impacts on--we still have flood maps that are 
in flux. Again, since 2009 and still working on this today, we 
do not have solid maps and things in place that we need for 
floodplain management.
    Chairman Tester. OK. Mr. Klietz, would you like to respond?
    Mr. Klietz. The reduction of property values for property 
owners in the floodplain, their inability to sell their homes 
when flood insurance has lapsed, and the inability for buyers 
to want to buy a home in the floodplain when they do not know 
what is going to happen, if they are going to be able to pay 
for their mortgage on top of flood insurance and whether flood 
insurance is going to be provided. It has affected property 
values, and it has affected the sales of homes within my 
community.
    Chairman Tester. Well, thank you both. I appreciate your 
testimony, and I appreciate your frank answering of the 
questions.
    Senator Vitter is here, and I will just turn it over to you 
because I am done with the first panel, David.
    Senator Vitter. Thank you, Mr. Chairman, and thanks to both 
of you for being here, and a special welcome to Dwayne 
Bourgeois of the North Lafourche Conservation, Levee, and 
Drainage District. Thank you for your service and for being 
here.
    I apologize for being late, but it was only because I was 
on the floor talking about the absolute need to pass a long-
term reauthorization now before May 31st, so talking about the 
same thing. But thank for being here.
    Mr. Bourgeois, I just wanted to underscore what I 
understand to be one of your significant points, which is that 
a lot of important improvements and reforms can be done 
administratively, but all of these very short-term extensions 
really get in the way of that, and a long-term full 
reauthorization would allow that to happen in a much more 
effective way. Is that fair to say?
    Mr. Bourgeois. Yes, sir, absolutely. That is the best way 
to put it. And we know it is happening to us here. We are 
working with you guys. FEMA is trying to work with us, I feel, 
working through these issues. The legislators in the House and 
the Senate put pressure on FEMA to do so. They have agreed. We 
are all in step. But we keep hitting the deadline.
    Senator Vitter. Right. And, again, perhaps the best example 
from our Louisiana experience is this so-called without-levee 
issue, and we want to work through that.
    Mr. Bourgeois. Absolutely, and I think we are making 
headway, but we need to be able to do this before June 1st.
    Senator Vitter. Right. Well, of course, the Chairman and I 
completely agree, and that is why we are pushing hard for that 
long-term reauthorization. Of course, we do not want to let the 
program expire, but we need to get beyond this Band-aid 
approach, too. We need a real long-term reauthorization for all 
the reasons you have both talked about, so thank you.
    Mr. Klietz. Thank you.
    Mr. Bourgeois. Thank you.
    Senator Vitter. Thank you, Mr. Chairman.
    Chairman Tester. Thank you, Senator Vitter. I appreciate 
your support on this issue. You are right. We are trying to get 
this thing done, and I want to thank the panel for their 
testimony because I think it helps contribute to the fact that 
there are issues out there we need to deal with, and continuing 
to deal with them on a short-term basis is not really getting 
the job done. So I want to thank you, and we will bring up the 
next panel.
    The next panel consists of Dr. David A. Sampson, Mr. Jon A. 
Jensen, Maurice ``Moe'' Veissi, and Sarah Murdock. You guys can 
all come up, and we will get the proper name tags.
    What we will do, before we start on this panel, is I would 
like to give Ranking Member Vitter the opportunity to say a few 
words.

               STATEMENT OF SENATOR DAVID VITTER

    Senator Vitter. Thank you again, Mr. Chairman, and I will 
be very brief. I just wanted to underscore really my last 
point. Today is May 9th. The entire program expires after May 
31st, 22 days, slightly over 3 weeks, and we really, really 
need to act for the good of the country and the economy. And we 
need to act in a longer-term way, not just another Band-aid, 
another short-term extension which creates and continues an 
unhealthy level of uncertainty. And I appreciate the Chairman 
feeling the same way and working very closely with me and 
others in this regard.
    I am going to be doing two things this week that I hope get 
widespread support. I will be passing around a new letter 
addressed to Senators Reid and McConnell urging this to be put 
on the floor absolutely as soon as possible. Senator Tester and 
I had that same sort of plea in a letter dated February 14th. 
That was 3 months ago. So it is even more urgent now.
    Second, I am going to be proposing as a floor amendment to 
the next bill on the floor after the present one, whatever that 
is, the Senate reauthorization bill with some noncontroversial 
perfecting amendments that have been worked out since 
Committee. So it looks like that next bill on the floor will 
either be an FDA user fee reauthorization or a small business 
tax bill. Neither of those is highly partisan or highly 
controversial. So whichever of those comes up, I will be 
proposing as a floor amendment the Senate bill with the 
perfecting amendments incorporated into it, and I hope we can 
get bipartisan cooperation and effort to get that attached to 
that bill as a means of pushing this forward.
    Thank you, Mr. Chair, for the couple of minutes, and I look 
forward to our second panel.
    Chairman Tester. Absolutely, and I do not think flood 
insurance should be controversial or partisan either. It 
impacts everybody.
    I want to get started with our next panel, representing 
broad, cross-industry support for reauthorization and reform of 
NFIP. I want to thank you all for being here ahead of time.
    Dr. David A. Sampson is the president and CEO of the 
Property and Casualty Insurers Association of America, 
otherwise known as PCI, which represents more than a thousand 
homeowners, autos, and business insurance companies that write 
over 30 percent of this Nation's property and casualty 
insurance. Dr. Sampson also served in the George W. Bush 
administration as Deputy Secretary of the U.S. Department of 
Commerce and Assistant Secretary of Commerce for Economic 
Development. Welcome, Dr. Sampson.

 STATEMENT OF DAVID A. SAMPSON, PRESIDENT AND CHIEF EXECUTIVE 
 OFFICER, PROPERTY AND CASUALTY INSURERS ASSOCIATION OF AMERICA

    Mr. Sampson. Thank you, Mr. Chairman and Ranking Member 
Vitter. It is a pleasure to be with you today. I appreciate 
your leadership on this issue and the invitation to be here. 
PCI and its members, who write about 52 percent of all the 
flood insurance as partners with the NFIP through the Write-
Your-Own Coalition Program, believe that the NFIP is vitally 
important to our Nation and the economy. It does not just 
affect one part of the Nation. Flooding occurs all across the 
country. And we fully support your efforts to pass bipartisan 
legislation that includes a long-term reauthorization and 
meaningful reforms.
    I would like to just briefly emphasize three key points in 
my testimony today.
    First, it is vitally important to avoid another lapse in 
the NFIP as lapses have real-world negative consequences for 
consumers and the economy.
    Second, as confirmed by the Government Accountability 
Office, the program needs meaningful structural reforms.
    And, third privatization of the Flood Program is not 
feasible under current conditions.
    Let me just expand on those a little bit.
    The first priority, of course, is to avoid a lapse in 
coverage. You have already documented your concern about that. 
More than 5.6 million American homeowners, renters, and 
businesses are NFIP policyholders and rely on this program to 
protect their property. You have already discussed the 12 
short-term extensions of the program since September of 2008 
leading to lapses in coverage when Congress has failed to act. 
In 2010 alone, the NFIP lapses for a total of 53 days, and 
during these lapses flood insurance policies could not be 
issued or renewed. And each time the program lapses, a 
cumbersome and expensive series of special bridging 
transactions is required from insurers and consumers and the 
NFIP to set aside policy purchases, collect funds, and advance 
claim payments. And all of this creates significant friction 
costs for the marketplace and certainly for Americans who rely 
on this important protection.
    Second, while it is critical for Congress to reauthorize 
the NFIP before May 31st, the program as it stands now needs 
essential structural reforms which are addresses in the Senate 
Banking Committee bill. The NFIP is deeply in debt and must 
transition to a more sustainable path. I would point out that 
if a private insurance company held no surplus and carried $18 
billion in debt on a $4 billion annual revenue stream for 6 
years running, regulators would immediately shut it down and 
the CEO would be fired, and yet that is the situation that we 
face with the NFIP program.
    Two PCI studies on flood risk pricing revealed that the 
NFIP is providing Government-subsidized flood policies at 
roughly one-third of what the full load risk costs would be in 
the private sector.
    The subsidies for repetitive loss and high-risk policies 
are even greater. One percent of the properties insured by the 
NFIP have accounted for over a third of the claims on an 
ongoing basis, and the previous panel spoke of that so 
eloquently.
    The third point I wanted to make is that while the program 
needs to be reauthorized and must be reformed, it is important 
to note that discussions on privatizing the program are 
unfeasible under the current conditions. The current NFIP rates 
would need to be closer to true market rates before any 
meaningful discussion related to the private industry taking on 
flood risk can take place.
    A 2011 PCI study estimated that if the private market were 
to underwrite the flood peril, policyholders in floodplains 
could see rate increases of up to 200 to 300 to 400 percent. 
Proposals to end the NFIP are unrealistic given the current 
steep subsidies and the unwillingness of many homeowners to 
purchase coverage in high-risk areas even when mandated at 
these subsidized risks.
    So we applaud your efforts, and PCI certainly stands 
willing to work with this Committee to do anything we can to 
help this overwhelmingly bipartisan piece of legislation make 
it through the Senate in time to avoid the lapse and to pursue 
the structural reforms that you have proposed.
    Thank you, Mr. Chairman.
    Chairman Tester. Well, thank you, Dr. Sampson. We 
appreciate your testimony, and we will have questions after we 
get done with the testimony of the other panelists. But thank 
you for your perspective and for your testimony.
    Next we have Mr. Jon A. Jensen, who serves as Government 
Affairs Committee chairman of the Independent Insurance Agents 
and Brokers of America and as president of Correll Insurance 
Group. He is currently the South Carolina national director for 
Independent Insurance Agents and Brokers of America. He is a 
past chairman of the Independent Insurance Agents and Brokers 
of America's InsurPac Board of Trustees. I want to welcome you 
today, Mr. Jensen. You may proceed with your testimony.

STATEMENT OF JON JENSEN, GOVERNMENT AFFAIRS COMMITTEE CHAIRMAN, 
   INDEPENDENT INSURANCE AGENTS AND BROKERS OF AMERICA, AND 
               PRESIDENT, CORRELL INSURANCE GROUP

    Mr. Jensen. Thank you very much. Good morning, Chairman 
Tester and Ranking Member Vitter. I am pleased to be here today 
on behalf of the Independent Insurance Agents and Brokers of 
America--or the Big ``I''--to present our association's 
perspective on extension and reform of the NFIP. We commend the 
Subcommittee for looking at this very important issue. I am 
president of Correll Insurance Group, which is an agency with 
132 associates in 12 locations, including offices in both 
Myrtle Beach and Hilton Head Island. We also write nearly 3,000 
NFIP policies. Since 2011 I have served as chairman of the 
Government Affairs Committee for the Big ``I.''
    The Big ``I'' is the Nation's oldest and largest trade 
association of independent insurance agents and brokers, and we 
represent a nationwide network of more than a quarter of a 
million agents, brokers, and employees. Many of these agents 
serve as the sales force of the NFIP, working with Write-Your-
Own companies. It is from this vantage point that we understand 
the capabilities and the challenges of the insurance market 
when it comes to insuring against flood risks.
    The private insurance industry has been and continues to be 
largely unable to underwrite flood insurance because of the 
catastrophic nature of these losses. Therefore, the NFIP is 
virtually the only way for people to protect against the loss 
of their home or business due to flood damage. Prior to the 
introduction of the program in 1968, virtually the only 
financial remedy available to consumers after floods was 
Federal disaster assistance. Since then, the NFIP has filled 
the private market void and created a reliable safety net for 
people whose properties have suffered damage.
    With this said, we do recognize that the program is far 
from perfect, which was made all the more clear by the 
devastating 2005 hurricane season. The current $17.2 billion 
dollar debt reveals some of the deficiencies of the program, 
and it is clear that Congress should shore up the NFIP's 
financial situation.
    For this reason, the Big ``I'' is very encouraged by 
Chairman Johnson's legislation, the Flood Insurance Reform and 
Modernization Act of 2011. I want to be very clear: The Big 
``I'' strongly supports a long-term extension and reform 
legislation. There are important reforms that must happen to 
the program in order for it to be put on stable footing.
    In particular, the Big ``I'' for many years has asked 
Congress to begin phasing out subsidies found in the program. 
We are pleased that Chairman Johnson's legislation contains 
proposals to do just that for many properties.
    Additionally, the Big ``I'' welcomes the legislation's 
proposal to increase the amount FEMA can raise premiums in any 
given year. Currently, FEMA can only raise premiums by 10 
percent on any property. The legislation would propose to 
increase this to 15 percent, which would allow the program to 
become more financially sound.
    I would also like to comment on some recent discussions 
aimed at finding ways to privatize the program. The Big ``I'' 
would always prefer to utilize the private market. However, we 
have yet to see evidence that the private marketplace is any 
more prepared or capable of underwriting flood risk today than 
they were in 1968. That said, we welcome the study on 
privatization options found in the legislation, and we would be 
happy to discuss any ideas for increasing the private market's 
role going forward.
    Finally, I would like to touch on one of the most important 
things found in the reform legislation, and that is the long-
term extension. As you know, for the past 6 years, Congress has 
not passed a long-term extension of the program and instead has 
opted to pass numerous short-term extensions. This has been 
done mainly so that Congress could continue efforts at reform 
legislation. While the Big ``I'' fully appreciates the passage 
of each of these short-term extensions, it should be noted that 
there is increasing frustration both in the marketplace and 
among our consumers with the program and its complete lack of 
stability.
    A 5-year extension of the NFIP, as found in S. 1940, is of 
more importance than I can stress. We strongly urge the Senate 
leadership to secure floor time for a full debate of S. 1940. 
In fact, as you know, this week a number of organizations from 
various industries are taking part in a Flood the Hill Week to 
urge the Senate to finally pass S. 1940. I am happy that three 
panelists here today--the realtors, PCI, and Nature 
Conservancy--are part of that effort. Hopefully we can make 
some progress this week.
    I thank the Committee for giving me the opportunity to 
express the views of the Big ``I'' on this important issue, and 
I look forward to any questions you may have. And on a separate 
note, I would like to thank you, Mr. Chairman, on behalf of our 
entire membership for introducing NARAB II. We look forward to 
working with you on this commonsense agent licensing reform 
legislation.
    Chairman Tester. Well, thank you, Jon. I appreciate the 
kudos, and it is good to see a guy who spells ``Jon'' right. So 
thank you.
    [Laughter.]
    Chairman Tester. I appreciate your testimony.
    Mr. Maurice ``Moe'' Veissi is president of the National 
Association of Realtors representing 1.1 million members 
involved in all aspects of residential and commercial real 
estate industries. He was elected president of the Florida 
Association of Realtors in 2001 and was named Realtor of the 
Year in 2003.
    I want to welcome you here today, Mr. Veissi, and proceed 
with your testimony, please.

 STATEMENT OF MOE VEISSI, 2012 PRESIDENT, NATIONAL ASSOCIATION 
                          OF REALTORS

    Mr. Veissi. Thank you, Chairman Tester, Senator Vitter, and 
Members of the Subcommittee. Thank you for the opportunity to 
testify on this urgent need for a 5-year reauthorization of the 
National Flood Insurance Program. And I would be remiss if I 
did not bring you these salutations from Marbury Little, past 
president of the Louisiana Association of Realtors, and all the 
5,000-plus Realtors in Louisiana who appreciate, Senator 
Vitter, your involvement and commitment to this issue; and from 
Betty Kissock and Ronda Tompers, who said specifically, 
Chairman, to tell you that they are very much pleased and very 
much committed to what you are trying to accomplish here on the 
Hill.
    Chairman Tester. Thank you.
    Mr. Veissi. My name is Moe Veissi. I am the 2012 President 
for the National Association of Realtors and the broker-owner 
of Veissi & Associates in Miami, Florida, a Realtor firm that 
has been in existence for over 42 years.
    The National Association of Realtors represents more than a 
million members, as you have mentioned, involved in all aspects 
of the real estate industry. Long-term reauthorization and 
reform of the National Flood Insurance Program is a key 
priority to our members. As a matter of fact, on May 17th, here 
in Washington, DC, we will have over 15,000 Realtors at the 
Washington Monument, and one of the five key issues that we 
will be speaking to the folks on the Hill about is just this 
issue.
    Ensuring access to affordable flood insurance is critical. 
It creates certainty in the real estate market, and certainty 
is required for this real estate market to recover. Home prices 
are still enormously fragile across the United States, and more 
than a quarter of a million of existing home sales are 
distressed properties. Tight lending standards remain a 
problem, and we do not want to give a lender another excuse not 
to approve a loan.
    Stopgaps or shutdowns exacerbate this market uncertainty. 
There have been 17 stopgaps since 2008. Twice, failure to act 
led to program shutdowns, and the latest is set to expire, of 
course, as you know, on May 31st of this year.
    The National Flood Insurance Program stopgaps and shutdowns 
have broader implications for the U.S. economy. NFIP is 
essential to 500,000 home sales annually; 1,300 sales 
nationally can be delayed per day if we do not have this 
program--intact. More than 47,000 real estate transactions were 
stalled in June 2010 for the 33 days that this act was not in 
service.
    Over 16,000 homes are in the floodplains in Montana. Over 
660,000 homes are in the floodplains in Louisiana. But more 
than the homes are impacted by this. The commercial, 
multifamily, and refinancing of properties all are impacted by 
the uncertainty in the National Flood Insurance Program.
    The 5-year National Flood Insurance reauthorization offers 
broad advantages, and the first one is the important bipartisan 
win for Congress, which in my humble estimation is so much 
needed right now.
    Two, this has passed unanimously out of Committee, and the 
House has passed this bill by over 400 votes. Crucial reforms 
are lost if the 5-year bill is not adopted: enhancing FEMA 
communications with communities, greater notification of 
floodplain mapping, reimbursement of flood map and appeal 
expenses for NFIP errors, streamlining of the mapping appeals 
process, additional time for the resolution of appeals, and 
review of flood mapping standards and procedures. The number of 
States that are affected are enormous. This is no longer a 
coastal issue. Places like West Virginia, Tennessee, Kentucky, 
Alabama, New Mexico, Vermont, Kansas, Iowa, Nebraska, Missouri, 
Utah, Minnesota, Wyoming, North and South Dakota all have 
related Presidential disaster declarations, and there is more. 
Every time we slow this down, every time we create an 
uncertainty in this program, we slow down the process of a 
healthy real estate recovery in this country.
    If there is one thing that is enormously important to this 
country's economic and social and cultural background, it is 
the resurgence of a strong and healthy housing market and 
peripheral industry.
    So I would encourage you to continue to do the good work. 
You have the National Association of Realtors who believes and 
understands your commitment. Thank you very much.
    Chairman Tester. Moe, thank you for your testimony, and I 
could not agree more. The real estate recovery is critically 
important to get our entire economy back on track. Thank you 
for your testimony.
    Next we have Sarah Murdock, senior policy advisor for 
climate change policy with The Nature Conservancy, a leading 
conservation organization working to protect ecologically 
important lands and waters. Ms. Murdock handles climate change 
adaptation strategies and Federal hazard risk reduction policy 
for The Nature Conservancy. She has also worked here in the 
Senate, working for Senator John Kerry.
    Welcome, Ms. Murdock, and you may proceed with your 
testimony.

 STATEMENT OF SARAH MURDOCK, SENIOR POLICY ADVISOR, THE NATURE 
                          CONSERVANCY

    Ms. Murdock. Thank you, Mr. Chairman and Members of the 
Subcommittee. Thank you for the opportunity to present The 
Nature Conservancy's views on the timing and nature of reforms 
to the National Flood Insurance Program. My name is Sarah 
Murdock, and I am a senior policy advisor for the Conservancy. 
The Nature Conservancy is an international, nonprofit 
conservation organization working around the world to protect 
ecologically important lands and waters for nature and people.
    The Nature Conservancy continues to support a 5-year 
reauthorization of the National Flood Insurance Program through 
the passage of the Senate Banking Committee's flood insurance 
reform legislation. We ask that this legislation be brought 
before the full Senate for debate and consideration at the 
earliest opportunity.
    The Nature Conservancy is also a member of the Smarter 
Safer Coalition, a diverse coalition of environmental 
organizations, taxpayer advocates, insurance industry 
representatives, and housing groups. Smarter Safer also 
strongly supports the Senate Banking Committee's flood 
insurance reform, and this week we are participating in this 
week's Flood the Hill activities. With this much diverse 
political support, it seems like passage of flood reform 
represents a win for all.
    Contrary to congressional intent, the program as it 
currently functions is increasing risk from storms and flooded 
to people, property, and ecosystems, and the important services 
that those ecosystems provide to people. Enactment of the flood 
insurance reform legislation will phaseout subsidies that have 
undermined the financial stability of the program, will require 
FEMA to ensure that maps are updated and accurate so that 
people can understand and better prepare for their risks, and 
will streamline and strengthen the mitigation programs to help 
decrease flood risks and better protect flood-exposed 
communities, homes, and businesses.
    I would like to focus the remainder of my testimony on our 
interest in this final provision--our support for strengthening 
the mitigation programs.
    In 2011 alone, there were 58 Federal flood disaster 
declarations covering 33 different States and costing $8 
billion and causing 113 deaths. Both the costs and the number 
of deaths exceeded the 30-year averages, and results from 
scientific studies indicate that changing climate has 
exacerbated and will continue to intensify extreme weather 
events, including flooding and coastal storms.
    The proposed reform legislation is the most important 
single step we can take toward mitigating these risks. 
Currently, under the Flood Insurance Program, a dangerous 
feedback loop is in play. Subsidized insurance rates facilitate 
development in coastal zones and freshwater floodplains, which 
not only puts people and property at risk, it simultaneously 
facilitates the destruction and degradation of the ecosystems 
that provide a natural defense to people and properties.
    The traditional approach to flood protection and river 
floodplain systems has been to rely on dams and levees to 
contain flood waters and in coastal areas has been to build sea 
walls, bulkheads, and other ``grey'' infrastructure. While 
built infrastructure plays an important role in helping secure 
our communities, it requires substantial investments for both 
initial construction and ongoing maintenance.
    Instead of relying solely on grey infrastructure, an 
alternative approach involves integrating the use of natural 
infrastructure--or so-called ``green'' infrastructure--with 
built infrastructure. This specifically involves maintaining 
and restoring the connectivity of rivers along with sufficient 
area of floodplain and conserving and restoring coastal natural 
infrastructure such as wetlands, reefs, dunes, barrier beaches, 
and islands.
    In addition to flood control benefits provided, these 
ecosystems provide many services that support and protect 
humans and nature, such as filtering pollutants, erosion 
protection, production of fish and shellfish, and continued 
agriculture production.
    The Nature Conservancy is working with diverse partners 
across the country to implement floodplain restoration projects 
and along the east and Gulf coasts, in Louisiana and Alabama in 
particular, we are restoring and building oyster reefs as a way 
of protecting against floods.
    Due to our understanding of the benefits of investments in 
mitigating efforts, we stand ready to work with FEMA and 
Members of Congress to strengthen this aspect of the Flood 
Insurance Program.
    Thank you for the opportunity to present The Nature 
Conservancy's recommendations on the need to pass the Senate's 
5-year reauthorization of the Flood Insurance Program.
    Chairman Tester. Well, thank you, Ms. Murdock. I appreciate 
your testimony, as I do with the whole panel. We will start 
with questions now. I want to, before I start, though, thank 
each one of you for your commitment to a long-term 
reauthorization. I very much appreciate it.
    I think the clerk can put on 7 minutes. We will probably 
have more than one round, would be my guess.
    I am going to start with the most pressing issue that is 
facing us right now, and that is the danger of a lapse in the 
program. I understand--and this may be different today. I do 
not know, Senator Vitter, but the short-term extension has 
cleared my side of the aisle. I do not know if it has cleared 
yours yet or not. But we are working together to try to get 
this done. In some cases, I would rather just see us get this 
thing done rather than deal with the extension. I think that is 
what Senator Vitter talked about in his remarks.
    I want to drill down on the point of the lapse because the 
clock is ticking. In your testimony, you all spoke of 
consequences which can be pretty severe if this program does 
lapse again. So what I would like is from each one of your 
different perspectives, describe the most damaging consequences 
of failing to extend this program. And at what point prior to 
the expiration do carriers and agents and realtors and 
homeowners need to start preparing for a potential lapse? Go 
ahead, Dr. Sampson.
    Mr. Sampson. Well, while the costs of the lapse are hard to 
quantify, they are very real. And in answer to your question, 
Mr. Chairman, insurers are already in the process, now that we 
are this close to the expiration, of beginning to mail out 
those notices of the imminent lapse of the program. Now, the 
only one who wins by that may be the U.S. Postal Service 
because they get revenue, and I know you have been dealing with 
that recently, but those are embedded friction costs to 
insurers. And I think it is these repetitive lapses in the 
program that have caused a number of major participants in the 
Write-Your-Own Program to leave in recent years. We are down to 
85 active participants in the program from 150 just a few years 
ago.
    So that is giving you the indication that the frustration 
and the friction costs of these very complicated bridging 
transactions are making it not worth the participation from the 
insurers' perspective.
    Chairman Tester. OK. Jon, would you like to respond to 
that?
    Mr. Jensen. Yes, sir. As Dr. Sampson mentioned, the 
carriers are forced to start sending out these notices. The 
perspective from an agency, as I mentioned in my testimony, we 
have 3,000 flood insurance policies. That means we will get 
6,000 calls from folks that say, you know, ``What is happening? 
What is going on?''
    I would also emphasize that it is truly important to the 
consumers. As a matter of fact, this morning on a cab ride over 
I was forced to share a cab with five other people due to some 
transportation issues, but one of the ladies had a home in 
Charleston, Structural, and asked me what I was doing here. And 
I explained to her, and she said, ``My God, don't they 
understand that hurricane season is June 1st?'' And this lapses 
May 31st. She said, ``We get these notices all the time.'' And 
as we were leaving the cab, she said, ``Would you do me a 
favor?'' She said, ``My name is Angie Davis. Would you please 
tell the Senate to do good work here. We need flood insurance. 
We cannot be without it.''
    Chairman Tester. That is good. Thanks, Jon.
    Maurice? Moe?
    Mr. Veissi. You know, six of the last eight recessions have 
come out because of a healthy housing and construction market. 
We know that every two houses sold generate one job, so even in 
the worst of times, we are generating about 2-plus million jobs 
a year when a housing market is on track. Without national 
flood insurance, we affect so many homes--not just coastal 
States but interior States today. And even those that have 
existing homes--not potential homeowners, not folks that are 
looking to either go out and sell their home or buy a new one, 
but those that exist--have clauses in their existing mortgage 
that simply say if there is a failure to renew flood insurance, 
the mortgage could be in technical default. So even those folks 
do not know how at risk they might be.
    This is a fledgling, recovering real estate market. As 
important to this market as any other aspect, as important to 
the recessionary period that we have had is a healthy real 
estate market both from the economic standpoint for America and 
from the social and cultural standpoint. And when you do 
anything--anything--to affect that fledgling real estate 
recovery, you are literally affecting the economic recovery and 
the social and cultural aspects of America. I cannot tell you 
how important this piece of legislation is and, Senator Vitter 
and Senator Tester, how important your efforts are to get it 
extended for the 5 years. That is enormously important not just 
to Realtors but to American homeowners.
    Chairman Tester. Just a real quick follow-up, Moe. You may 
not know this on a national basis, but you may know it on a 
southern Florida basis. If this thing were to expire, what kind 
of impact as far as percentage of homes would it have, say, in 
southern Florida?
    Mr. Veissi. Well, I cannot be specific about that, although 
I will get you those----
    Chairman Tester. Is it a big number? I just want to get an 
idea.
    Mr. Veissi. As I quoted to you, nationally the lapse 
stalled about 1,300 a day, or 47,000 during June 2010. But in 
Florida, where we would be specifically impacted because the 
entire State, for all intents and purposes, is a floodplain, it 
would impact every one of those sales and even the existing 
mortgages. Percentage-wise, I am going to guess at least one 
out of every two.
    Chairman Tester. Thank you very much.
    Ms. Murdock, from your perspective, from The Nature 
Conservancy's perspective, if we just keep doing extensions or 
if it is to expire, how does that impact the mitigation 
efforts?
    Ms. Murdock. Clearly, we are seeing more frequent and more 
intense storms, which is causing more and more damage. And the 
mitigation efforts are long-term efforts. They are not 
something that can happen overnight. So you need that long-term 
certainty of the program, the backing of the program and the 
grants that they provide in order to really plan for an 
implement some of these mitigation efforts.
    Chairman Tester. Thank you.
    Senator Vitter.
    Senator Vitter. Thank you, Mr. Chairman. And I certainly 
strongly support a short-term extension if we need it, if we 
cannot do anything else before May 31st. In fact, I think 
technically it is my bill, so I will certainly be trying to 
clear that if it is necessary.
    I am just concerned about two things. Number one, patience 
is running really thin among some members about doing all these 
short-term extensions, so we may not be able to clear it. 
``Clear it'' means get unanimous consent, every Senator on our 
side has to agree. And, you know, the more these Band-aid 
extensions we do, the less patience members have because they 
want reform, which is needed.
    Second, a short-term extension avoids a lot of negatives, 
but it does not accomplish the positives that the full 
reauthorization does, and I think that was one of Moe's points. 
So I am for it if we can only do that between now and May 31st, 
but I am also trying, as Jon and others are, for the full 
reauthorization.
    May 31st is 3 weeks and a day away. When do concrete 
negative actions, notices, letters, other things, start going 
out compared to that date? Is it now, Dr. Sampson?
    Mr. Sampson. They have already started.
    Senator Vitter. Why don't you describe some of that and 
when that starts?
    Mr. Sampson. Sixty days out from the expiration of the 
program, insurers are required to notify holders of policies 
that the coverage is going to be ending. And then as I say, it 
has a cascading--during the lapse, there is this whole 
cascading series of very complicated bridging transactions that 
add no value to the process but only cost to the carriers and 
uncertainty to the policyholders.
    You know, we are in a bizarre situation where you have the 
National Flood Insurance Program actively advertising the NFIP 
on television to try to increase the take-up rate, which is the 
socially responsible thing to do. And yet everyone who has a 
policy knows the number of disruptions that we have experienced 
over the last several years. And so, you know, we are really 
sending cross signals here, and these lapses are causing 
companies to exit the program, and I am convinced that these 
continual lapses create such uncertainty in the policyholder 
that it reduces and suppresses the take-up rate and the renewal 
rate.
    Senator Vitter. And I assume part of what you are saying is 
a near lapse, a near miss, is also negative. I mean, if you act 
the day before or 3 days before, that is also not a great 
situation.
    Mr. Sampson. Well, we are within the period where negative 
activities are already occurring from the companies' 
perspective.
    Senator Vitter. Right.
    Mr. Sampson. But I would say, if you can get the short-term 
extension without letting it lapse, we are talking about here 
the least of the bad alternative. So certainly we are in the 
cone of negative activity, but it is not as negative as it will 
be if we get to May 31st and the program lapses for the 13th 
time.
    Senator Vitter. Right, right. OK.
    That is all I have. Thank you, Mr. Chairman.
    Chairman Tester. Senator Moran.
    Senator Moran. Mr. Chairman, thank you. I am not a Member 
of this Subcommittee, although I am a Member of the full 
Committee, and I appreciate you allowing me the opportunity to 
join you today, really only for the purpose to lend my support 
to the efforts of the two of you to see that we get this 
accomplished and to hear from the witnesses today so that I can 
have my arguments reinforced.
    I still remain baffled by--at least I am unaware of a 
response to the letter that the two of you led to our leaders 
asking that the 5-year reauthorization be considered by the 
Senate. I just do not understand why this is something that 
cannot be accomplished based upon the nature of this 
legislation, its importance, its value to the country, and its 
bipartisan support. And so every once in a while, when we have 
to admit how dysfunctional this place is, this just seems to me 
to be the perfect example of dysfunction. And if there is 
something I can do, Senator Vitter, Senator Tester, to assist 
in your efforts to get the 5-year reauthorization bill to the 
Senate floor, I am your ally. And I appreciate the testimony 
that I read and heard expressing the value and importance of 
accomplishing that.
    What Mr. Sampson just said I had not thought about, but it 
does make sense to me that the ability to continue to write 
these policies in this uncertain environment diminishes as 
Congress fails to act on so many occasions.
    I appreciate you having this hearing to highlight the 
importance of this legislation, and I am pleased that you would 
allow me to join you for this brief period of time.
    Chairman Tester. I have got another question here. There 
are some that have suggested that a 2-year straight extension 
would be better than the reform of the existing insurance 
program. I think both Senator Vitter and Senator Moran alluded 
to it. I think we have an opportunity here to reform this 
program and put it on more firm ground with a long-term 
extension.
    I would just like--and this is basically to Dr. Sampson or 
Mr. Jensen or Moe, either one of the three or two of the three 
or all of you can talk to this. But beyond improving the 
solvency of the program, could you discuss some areas where 
reform on this bill is important to the constituencies that you 
represent? What else does it provide?
    Mr. Jensen. Thank you, Senator. In addition to the reform, 
as you mentioned, there are some issues with increasing maximum 
coverage limits. Currently, the coverage limit on a home for 
flood loss is $250,000 as the maximum indemnity limit. That is 
increasingly becoming a problem and an issue as we see higher 
values in homes again.
    As well, we are looking at business interruption. It is 
important to note that there is a study called for in the bill 
that talks about business interruption coverage within the 
commercial sector. We think that is very valuable as well.
    Mr. Veissi. In addition, you heard testimony on the 
previous panel of folks that were placed in areas that, in 
fact, were not in a floodplain. One of the bill's reforms would 
be to enable folks who were not in floodplain areas but were 
charged for flood insurance to come back and get reimbursed for 
their floodplain appeal expenses. So that would help us for the 
folks that have been incorrectly mapped into the floodplain.
    Chairman Tester. Thank you.
    Mr. Sampson. Mr. Chairman, I would say that from the 
company perspective, the number one concern is the fiscal 
reforms, and I would not underestimate that at all. I think the 
bill also, though, does address the repetitive loss properties. 
I think it is absolutely essential, as the previous panelists 
talked about, that repetitive loss properties where you have 1 
percent of the properties that account for 30 percent of all of 
the claims in the NFIP, the reform bill does address that. And 
I would say that that is a critical component.
    The increase in the amount that FEMA can increase premiums 
to incrementally move toward an actuarially sound rate, while 
important, I would say what is even more important than that, 
though, is that FEMA has been unwilling to raise the premium 
prices even by the amount that they are currently authorized in 
legislation, which is 10 percent a year. And so even more 
important than raising the cap in legislation of what they 
could raise prices I think is a signal to the marketplace that 
they will actually do that in incremental steps. The longer you 
artificially suppress these rates, the greater the impact is 
going to be on the consumer down the road.
    So in addition to what is in the legislation, this 
Committee and other committees of jurisdiction, encouragement 
of FEMA to use the authority that they currently have I think 
is critically important.
    Chairman Tester. Well, thank you.
    Ms. Murdock, in your testimony you cite an interesting 
statistic that for every dollar spent on flood mitigation, $5 
are saved. In your testimony you make the distinction between 
grey and green flood-related infrastructure investments. Could 
you just elaborate on the distinction between grey and green 
infrastructure investment and the relative costs of both?
    Ms. Murdock. Yes. When we are talking about grey, we are 
talking about hard infrastructure like levees and dams, 
bulkheads, sea walls. An increased focus is now being placed on 
implementing projects where we allow natural systems--
floodplains, wetlands, coastal wetlands, barrier beaches, 
oyster reefs--to also perform flood mitigation services. So we 
are doing a lot of projects like that both in floodplain 
systems focused on restoring floodplains. Some of that involves 
just setting back levees far enough from the river to allow 
floodplains to perform their natural function. And then along 
the Gulf coast, for example, where we have a goal of building 
100 miles of oyster reefs along the Alabama coast.
    The cost comparison compared to grey infrastructure is very 
new, and we are actually starting to work in partnership with 
some insurance companies to accurately compare the cost of grey 
versus green infrastructure. We have some preliminary figures 
on the oyster reefs, but it is very new, and I do not think it 
accurately yet reflects what the true cost/benefit of the green 
versus grey would be.
    Chairman Tester. Thank you very much.
    Senator Wicker is coming here in just a second, and I want 
to make sure to get his perspective for his questions. In lieu 
of that, I just want to say this, first of all--and he will be 
here momentarily. I would just like to say thank you for your 
testimony--we are waiting for you, Roger. You are good to go. 
Go ahead and get organized while I talk for a second.
    I want to thank you for your testimony. I can tell you that 
Senator Vitter and myself and Senator Moran and others want to 
make sure we get this thing considered and moved forward. I 
think, as you do, Moe, that this is a critically important 
piece of our economic recovery, and I think the longer we put 
this off, I think it is just a missed opportunity. So the 
coalition that has formed here and the work that you are doing 
on the Hill, do not underestimate it. It is critically 
important to put pressure on everybody that serves in the 
Senate to allow us to put pressure on leadership to take this 
bill up sooner rather than later.
    And with that, Senator Wicker, you have comments, 
questions. Have at it.
    Senator Wicker. Right, and thank you, Mr. Chairman. I have 
been back in my office watching the hearing while trying to get 
my desk cleared. I would not be surprised if some other Members 
of the Committee also were availing themselves of this 
opportunity. But I just had to rush down and add my support for 
what you are trying to do, Mr. Chairman, and to thank all of 
these Members of the panel for their excellent remarks.
    I guess it was the representative from the realtors--I am 
not sure, but someone made a very cogent point. You know, Mr. 
Chairman, we need a bipartisan accomplishment in this Senate. 
And we have it in our grasp to do this on a very important 
issue. The American people are looking at us, they are looking 
to us. They expect us to come to Washington and actually engage 
in accomplishments, and this is an opportunity for us to do 
that. A good vote in the House, strong support in this 
Committee, and the opportunity is right there.
    So for those Members of the leadership within the sound of 
our voices, I just had to rush down before we gavel to a close 
and say that I absolutely hope we can do this.
    I would mention that the Committee leadership has been very 
generous in working with me and others on the so-called Coastal 
Act, which is a small step toward using science that is already 
out there to get us toward a resolution on this wind and water 
issue that is often a problem when a hurricane comes along. But 
you have made great points. This is not just a bill for people 
along the oceans and the gulf. This is a bill for the entire 
United States of America. It is a bill for the taxpayers, for 
heaven's sake. And so, Senator Tester, thank you for your 
leadership and that of Senator Vitter, and I appreciate Senator 
Moran coming, too.
    I do not have questions because the questions I would have 
asked had been asked while I was listening. But thank you very 
much, and let us keep this up and let us redouble our resolve 
to actually get an accomplishment for the taxpayers and for the 
American public.
    Chairman Tester. Well, thank you, Senator Wicker. We 
certainly appreciate your long support and working on this bill 
has been critically important, and I think you are right--Moe 
brought it up--it is a good bipartisan win. It is something 
that we need to do that will help do a lot of good things for a 
lot of folks out there, and plus fix some fiscal problems that 
this program has.
    So I just want to thank this panel, and I want to thank the 
previous panel for their testimony. The hearing record will 
remain open for 7 days for any additional comments that anybody 
might want to add for that, or any questions that folks want to 
submit for the record.
    With that, thank you all very much, and this hearing is 
adjourned.
    [Whereupon, at 11:21 a.m., the hearing was adjourned.]
    [Prepared statements and additional material supplied for 
the record follow:]
                   PREPARED STATEMENT OF TODD KLIETZ
      Missoula County Floodplain Administrator, Missoula, Montana
                              May 9, 2012
    On behalf of Missoula County, Montana, and the Association of 
Montana Floodplain Managers, I am honored to appear before you today to 
provide comment on the reauthorization of the National Flood Insurance 
Program.
    I respectfully urge this Committee to ensure that long-term 
reauthorization of the National Flood Insurance Program (NFIP) is 
enacted prior to May 31st. Over the past several years, I have 
witnessed the results that delayed and uncertain congressional action 
on reauthorization has caused within my community and my State. 
Property values, already having fallen due to the economy, fall further 
in the floodplain due to buyer's uncertainty that Congress will provide 
homeowners with long-term flood insurance coverage. Real estate 
transactions have been delayed--and some have completely fallen 
through. Homeowners--many of whom already must sell their property at a 
loss--are forced to reduce their sales prices further. The small pool 
of local insurers that are willing to process flood insurance policies 
dwindles further as they become increasingly frustrated with the ever-
changing uncertainty the last several years of delayed short-term 
reauthorizations has caused. Floodplain citizens need to know that you 
have their back by reauthorizing the National Flood Insurance Program 
for the long term.
    This is not to say that we support reauthorization of the exact 
same flood insurance program that has contributed significantly to our 
national debt. From my perspective, reform is correctly focused on the 
insurance side as the requirements for floodplain development within 
NFIP communities do work--simply tour a participating community post-
flood to see those results. My own community just experienced a 10-year 
flood last Spring. Older homes built before FEMA mapping were destroyed 
while the newer homes right next door suffered virtually no damages.
    The commonsense reforms including those that the Montana delegation 
and this Committee have put forward must be included in long term 
reauthorization. The American taxpayer is increasingly unwilling to 
provide financial support for those who have time and time again 
received handouts post-flood who then do absolutely nothing to prevent 
future damages as they know Uncle Sam will be there check in hand to 
quite literally bail them out again. Many repetitive loss property 
owners within my community received FEMA checks last year. None have 
voluntarily chosen to mitigate their homes.
    Gone too are the days that the taxpayer will support those who 
knowingly choose to live in areas and in homes with severe flood risk--
so we thank you for moving the National Flood Insurance Program away 
from overwhelmingly tax-subsidized premiums towards actuarially rated 
policies. I also want to thank you for your commitment to fund ongoing 
mapping so that communities in rural States like Montana will 
eventually be provided with detailed floodplain maps allowing our 
citizens to build homes constructed through means that minimize flood 
loss.
    I further appreciate the efforts that are being made regarding 
levees. Although the issuance of new FEMA floodplain maps for my 
community has been on hold for several years due to inconsistencies 
with how FEMA is mapping properties behind levee-like structures such 
as railroad beds, roads and even interstate highways, my community was 
fortunate that the Army Corps of Engineers certified their levees. This 
makes sense as the Corps designed, built and inspects them on a regular 
basis. My community's experience with the Seattle District of the Army 
Corps of Engineers was exactly the way it should be. We asked, they 
came and while we had some unexpected work that needed to be done, we 
did our job in maintaining them--and the Corps did their job in 
certifying them. Unfortunately, other Montana communities have been 
required to spend hundreds of thousands of dollars to certify levees 
that the Corps designed, built, and already inspects. An unjustifiable 
burden on those communities and their residents, we are glad to see the 
Senate taking a proactive position to put the Federal responsibility 
for certifying Federal levees back where it belongs.
    The positive reforms that have been put forward are long overdue 
and I applaud your efforts to make them happen. However, there remains 
one very important issue: 500-year floodplains. You've heard testimony 
regarding the losses that the National Flood Insurance Program incurs--
i.e., the taxpayers incur--when homes within ``500-year floodplains'' 
are damaged. The Senate Bill will ensure property owners will now be 
notified of the risk of living in a 500-year floodplain. The problem is 
that FEMA does not map 500-year floodplains. These areas are identified 
as ``Shaded-X'' on the floodplain maps and in small print, the 
corresponding legend states these are actually ``areas of 100-year 
flood'' OR ``areas protected by levees from 100-year flood'' OR ``areas 
of 500-year flood.'' Until FEMA is actually required by Congress to map 
these Shaded-X areas based on actual topography, the maps simply cannot 
be relied on to determine if a building proposed in these locations is 
actually within the 500-year floodplain or will be inundated during 
lesser flood events. Last Spring, I was in a Shaded-X ``500-year'' home 
with a full walkout basement that was inundated during our 10-year 
flood. There are no Federal requirements for how that home should have 
been built--nor how that home should be mitigated to prevent future 
losses. There are no requirements that the property owner obtain flood 
insurance to ease the burden on the taxpayer. The property owners had 
received FEMA checks multiple times prior to last year's 10-year flood 
event--and they did so again last Spring.
    I was in another flooded home that was built in the 100-year 
floodplain--with a basement. It should have never happened but it did. 
Although that home was not constructed in compliance with FEMA 
requirements, those property owners also received a check from FEMA.
    I sincerely appreciate the opportunity to appear before you today 
and would like to leave you with my own Top Three reform requests:

    Stop issuing subsidized flood insurance policies for new 
        structures built after FEMA's floodplain designation. As 
        addressed in the Senate Bill, the taxpayer will no longer be 
        forced to subsidize insurance for those that choose to build in 
        designated floodplains.

    Stop rewarding those who bring fill into the floodplain to 
        protect their development at the expense of pushing those 
        floodwaters onto their neighbors. FEMA encourages this practice 
        by issuing Letters of Map Revision Based on Fill (LOMR-F) which 
        completely removes the owner's obligation to obtain mandatory 
        flood insurance coverage and contribute to the National Flood 
        Insurance Program.

    Stop issuing FEMA floodplain maps without providing written 
        notice to affected property owners. FEMA has the audacity--and 
        the budget--to send notices to widows on fixed incomes in 
        Bozeman and Missoula whose homes are nowhere near the 
        floodplain which scares them into buying flood insurance--but 
        FEMA does not have the budget or desire to send such notices to 
        people that are actually in the floodplain?! Thankfully, 
        notification is now addressed in the Senate Bill--scare tactics 
        are not. Even Missoula City Hall located nearly a half mile 
        from the floodplain received such a letter from FEMA. Targeting 
        extremely low risk properties may be good for the bottom line 
        but is not what citizens expect from their Government.

    In closing, I sincerely thank this Committee and both Houses for 
pursuing significant reform--and providing our citizens with long-term, 
confidence restoring, reauthorization.
                                 ______
                                 
                 PREPARED STATEMENT OF DWAYNE BOURGEOIS
 Executive Director, North Lafourche Conservation, Levee, and Drainage 
                     District, Raceland, Louisiana
                              May 9, 2012
    I would like to thank you Mr. Chairman and Members of the 
Committee, for this opportunity to testify today. I am the Executive 
Director of the North Lafourche Levee District, a political subdivision 
of the State of Louisiana. However, I am here today representing a 
broader coalition of agencies, citizens, and businesses in the State of 
Louisiana who rely heavily on the National Flood Insurance Program.
    We commend the Committee for addressing long-term reauthorization 
and reform of the National Flood Insurance Program. Further, we 
appreciate the opportunity to provide to you today details of our 
current circumstances which are typical for many areas in South 
Louisiana and across our Nation. We firmly believe that our issues are 
being complicated and made worse by the lack of a long-term 
reauthorization of the National Flood Insurance Program. We also 
believe that our issues clearly demonstrate a need for reform, a reform 
that we are right in the middle of at this time.
    Our issues began in mid-2009 with FEMA's issuance of Preliminary 
Digital Flood Insurance Rate Maps (DFIRMS) for our area. It was 
immediately obvious to us that the maps could not possibly represent 
the true risk of flooding in our area because the maps had no 
correlation to any real world features. The North Lafourche Levee 
District, along with the South Lafourche Levee District and the 
Lafourche Parish Government immediately began to prepare our appeals to 
FEMA. (A full copy of the Appeal launched by the North and South 
Lafourche Levee Districts is included as Attachment A.)
    The conclusion in our appeal was that FEMA's policy of removing 
noncertified levees before running the wave analysis part of their 
Flood Insurance Study was a scientifically unsound policy. This 
approach to mapping produces DFIRMS that indicate base flood elevation 
zones with boundaries that have no correlation to real world features. 
Such maps are not understood or acceptable to local residents and 
businesses. Further, and most importantly, we noted that intentionally 
ignoring the impact of noncertified levees on the propagation of 
floodwater necessarily yields results that overstate the risk of 
flooding in some areas and understates the risk of flooding in other 
area. We also noted that FEMA's Mapping Partners had insufficient 
information, familiarity and experience to realize the results of their 
mapping efforts were not a reasonable result of their study. Finally, 
we pointed out that the modeling and mapping results were not in even 
basic agreement with past flooding patterns and historical data.
    Particularly in our appeal, we questioned how the preliminary 
DFIRMs could indicate that a small polder, with a ring levee system of 
only 8.2 miles in circumference, would possibly have a requirement for 
7 different base flood elevations. (VE8, AE7, AE6, AE5, AE4, AE3, and 
X) This entire polder is surrounded by a single levee of the same 
elevation and the ground elevations inside this sub-drainage district 
were virtually at the same elevation throughout. The results were 
nonsensical. In the South Lafourche Levee System, the Preliminary 
DFIRMS had similar unbelievable results. In some areas these maps 
indicated there were 5 different base flood elevation requirements 
within 800 feet all over perfectly flat ground. Literally, if the 
DFIRMS were to be believed in expressing the risk of flooding, two 
people standing on level ground, a mere 800 feet apart could be in two 
different flood zones and there would be three additional base flood 
elevations between them. This simply could not be.
    We began working through the appeals process with FEMA and were 
able to quickly identify the elements of the Flood Insurance Study that 
were causing the erroneous mapping as well as the limitation of the 
process that would allow the maps to more accurately reflect the threat 
of flooding in our area. In short, two items primarily caused the 
mapping problems. First, was the FEMA policy to NOT consider the 
impacts of nonaccredited levee in their Flood Insurance Study. This 
would become known as the ``without levees'' policy. The second problem 
was in the application of the wave model FEMA was using as part of the 
Flood Insurance Study for coastal levees. This model, known as the Wave 
Height Analysis for Flood Insurance Studies (or WHAFIS) had serious 
limitations when applied to long transects such as would be required in 
south Louisiana.
    We found that the appeals process was also limited in its ability 
to produce accurate DFIRMS. We learned these limitations as we took our 
appeals on these issues to FEMA including FEMA's Region 6 office in 
Denton, TX. All along this process, we encountered cooperative and 
sympathetic FEMA employees who were powerless to make any changes that 
were not part of the official FEMA policy. Realizing that complete 
resolution of these issues would have to come from a change in FEMA's 
policy, and that this change would have to come from Washington, we 
began to inform our Legislative Delegation of our quandary. In early 
February of 2011, twenty-seven (27) U.S. Senators signed a letter to 
FEMA Administrator Fugate asking FEMA to discontinue the ``Without 
Levees'' policy.
    In March of 2011, Administrator Fugate announced that FEMA would 
begin developing a series of targeted modeling approaches to replace 
the ``without levees'' approach to identifying the risk of flooding 
behind uncertified levees. In one of the first publications that FEMA 
released to answer questions as to how they were going to go about 
making and implementing such a change, FEMA stated that it was 
``engaged in a systematic effort to reform the national Flood Insurance 
Program (NFIP), and we view a change in the manner in which we map 
levees that do not meet the criteria for accreditation as a step toward 
a long-term solution.'' (See Attachment B for a full copy of that 
document.)
    FEMA began working on the change to their policy. By the end of 
July 2011, FEMA had put together enough of their revised policy to host 
a Community Roundtable Forum here in Washington. Approximately 20 
people from various stakeholder agencies across the country were 
invited to participate in this forum. This was a very welcomed step and 
I can truly say that FEMA was working earnestly on the issues at hand. 
The main points that I was able to take away from attending the Forum 
was first and foremost, the ``without levees'' approach was history. 
Next, FEMA made it clear that the substitute process was going to be 
collaborative with the local stakeholders, flexible yet technically 
sound, and feasible in that the approach must be cost effective and not 
overly burdensome on a community. (A full copy of our press release 
after this event is included as Attachment C.) But, the forum focused 
most of its efforts on the process and the basic revisions to the 
policy. We started to see that FEMA was still working on the technical 
side of the approach and we remained concerned for FEMA's ability to 
develop a suitable approach for both Riverine and Coastal flood 
protection levees.
    We continued to follow-up with our friends at FEMA who were working 
on the technical side of the policy changes. (Please see Attachment D.) 
We were hoping to get a better understanding on how FEMA was going to 
handle the differences in coastal versus riverine flooding; but, we 
were hampered by FEMA's desire to release the Proposed Approach for 
Public Review, which eventually came in December of 2012. After the 
proposed policy change was opened for a 45 day public comment period, 
FEMA did reveal that they were still working on how to address coastal 
levee analysis. Further, they realized that some of the riverine 
methods developed would not be appropriate for coastal levees. Finally, 
they also acknowledged the limitations of their use of the one 
dimensional WHAFIS model used for V zone determination was not 
appropriate in parts of coastal Louisiana. However, they stated that 
making changes to the use of WHAFIS was beyond their current study (the 
revised approach) and they were looking for ways to improve coastal 
analysis. They also agree to meet with us on these specific issues.
    In order to answer the call for public comment on the revised 
approach, we broadened our coalition to include questions and comments 
agreed upon by the State's Coastal Protection and Restoration 
Authority, the Association of Levee Boards of Louisiana, the North 
Lafourche Levee District, the South Lafourche Levee District, the 
Lafourche Parish Government, the Terrebonne Parish Government, the St. 
Mary Parish Government and Coastal Oceanographer Dr. Joseph Suhayda. 
(Please see Attachment E.) Again, most of these comments centered on 
the difference between coastal levees and riverine levees. The draft, 
revised policy included pages of technical details on how riverine-
based flood protection systems would be analyzed; but, it certainly 
lacked detail in how reasonable maps would be developed for coastal 
levees. As you can imagine, the flood source for coastal levees, 
typically a short duration tropical event, is broadly different than 
the flood source for riverine levees which is primarily driven by the 
timing of rainfall and snowmelt. Further, the arrangement of riverine 
levees, basically along the river, is different than coastal levees 
which intend to provide protection from backwater flooding. The two 
types of systems are so different that there is little opportunity to 
create one methodology that can be used for both.
    Following up on FEMA's offer to meet with us further on coastal 
levee issues, FEMA helped facilitate a meeting with a small group from 
our local coalition in February of this year, the topic of which was 
centered on coastal levee issues. I must state that each time we have 
met with FEMA we have encountered a group of individuals that were 
cooperative in trying to produce the best product that they could, 
given the confines of their operational policies. I could sense that 
the recent proposed changes were giving them a better opportunity to 
produce a better product and they were enthusiastic about the new 
possibilities to produce a more accurate DFIRM. The most import points 
that our group took away from the meeting are as follows.

  1.  When it comes to producing more accurate DFIRMS, no methods of 
        analysis are ``off the table'' as far as FEMA is concerned.

  2.  The process is not going to be black or white any longer. The 
        process is now ``intentionally gray'' in order to allow the 
        utmost flexibility in producing accurate results.

  3.  Where in the past, when trying to work with FEMA, we encountered 
        a series of well intending people whose hands were ``tied'' by 
        existing regulations; we will now be able to meet with FEMA 
        personnel who are no longer encumbered.

  4.  We can hope to see released coastal levee guidance independent of 
        riverine guidance to draw a clean distinction in the 
        differences to better assist FEMA mapping partners in handling 
        Coastal Levees.

    (A full copy of the press release for this meeting is included as 
        Attachment F)

    Overall, it was believed by all to be a very productive meeting. 
Yet we have a long way to go and as of yet, FEMA has not released the 
results of the analysis of all the Public Comments received.
    So, today, we find ourselves working hand in hand with FEMA on 
meaningful reforms to their policy only to be met by another looming 
expiration of a short-term extension of the National Flood Insurance 
Program. These are reforms that from our point of view began in mid-
2009, were enhanced by Legislative intervention and a commitment by 
FEMA to improve the process in 2011 and are still being worked on 
today. Obviously, changes to a process such at this takes time. And 
yet, the details I have provided today are the efforts to resolve but a 
single issue within the National Flood Insurance Program. There are so 
many more issues that can be corrected trough cooperative reform and a 
long-term reauthorization of this vital program.
    In conclusion, I would like to point out that ours is a working 
delta, the fruits of which are enjoyed by and enrich our entire Nation. 
From freight transportation on the Mississippi River to our oil and gas 
and petrochemical industry to our abundant fisheries, not to mention 
tourism, jazz and Mardi Gras, we simply must work and live within this 
delta. As such, the availability of federally backed, affordable and 
financially stable flood insurance is of vital importance to our region 
and the entire Nation.
    We thank you for this opportunity to share both our situation and 
our views on this important issue. We look forward to working with all 
of you to continue to make these changes to the National Flood 
Insurance Program.


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



                 PREPARED STATEMENT OF DAVID A. SAMPSON
 President and Chief Executive Officer, Property and Casualty Insurers 
                         Association of America
                              May 9, 2012
Executive Summary
    Good morning Mr. Chairman, Members of the Subcommittee. My name is 
David Sampson and I am President and Chief Executive Officer of the 
Property Casualty Insurers Association of America (PCI).
    PCI and our members believe that the National Flood Insurance 
Program (NFIP) is vitally important to our Nation and the economy, and 
we are here today to support your efforts to pass bipartisan 
legislation in the Senate that includes a long-term reauthorization and 
meaningful reforms.
    PCI represents the broadest cross-section of insurers of any 
national trade association. Our more than 1,000 member companies write 
approximately 38 percent of all home, auto, and business insurance in 
the country. PCI members write about 52 percent of all the flood 
insurance as partners with the NFIP through the Write-Your-Own (WYO) 
program. PCI also chairs the WYO Flood Insurance Coalition, a group 
that includes the more than 85 private insurers that actively 
participate in the WYO Program as well as all the other national 
property casualty trade associations. Thank you for the opportunity to 
appear before you today on behalf of PCI and its members.
    PCI commends you for holding this important hearing. The NFIP is 
set to expire on May 31--the day before the official start to the 
Atlantic hurricane season--if Congress does not act. More than 5.6 
million American homeowners, renters, and businesses are NFIP 
policyholders and rely on this program to protect their homes and their 
financial security. They are depending on you to act quickly to avoid 
another lapse in flood insurance coverage. In addition, the millions of 
Americans who intend to purchase or refinance homes with financing from 
federally regulated lenders will not be able to do so if they live in a 
flood plain and Congress fails to extend the NFIP. Finally, the U.S. 
Government, and ultimately taxpayers, will be forced to pay the tab for 
the next flood if consumers are unable to purchase insurance due to an 
expired NFIP.
    The NFIP is also deeply in debt and needs long-term structural 
fiscal reform. If a private insurance company held no surplus and 
carried $17.75 billion in debt (on $4 billion in revenue) for 6 years, 
State regulators would immediately shut it down and the CEO would be 
fired. And yet the NFIP is both statutorily unable to charge adequate 
rates and often unwilling to raise prices by even the amount they are 
allowed, despite their massive accumulated debt.
    Two PCI studies on flood risk pricing revealed that the NFIP is 
providing Government subsidized flood policies at roughly one-third the 
private sector comparable premium. A RAND study estimated that FEMA is 
underpricing policies by 20 to 50 percent, and even the Congressional 
Budget Office estimates that the NFIP's built-in deficit is at least 
$1.3 billion annually, with the Government Accountability Office (GAO) 
suggesting the true program subsidy is far higher. The subsidies for 
repetitive loss and high flood-risk properties are even greater, 
estimated by GAO at 40 to 45 percent of Government risk costs, with 
such explicitly subsidized policies actually growing in number and now 
representing over 22 percent of all Federal flood policies. The NFIP is 
fiscally unsustainable in its current path and must be reformed.
NFIP Reauthorization
The NFIP Should Be Reauthorized on a Long-Term Basis (e.g., 5 Years)
    Congressional authorization for the NFIP program has been extended 
on a short-term basis 12 times since September 30, 2008, with the flood 
program scheduled to expire again on May 31, 2012. A long-term 
reauthorization will ensure that there will be no gaps in coverage, 
which occurred four times in 2010 alone, each lapse longer than the 
previous with increasing uncertainty and frustration among consumers 
and providers.
    Gaps in flood insurance coverage cause significant disruption in 
the housing markets. Homebuyers in flood zones with a federally backed 
mortgage are required to purchase flood coverage before the property 
can be closed on. According to the National Association of REALTORS, in 
2010, more than 40,000 real estate transactions were delayed because of 
lapses in the NFIP's authorization.
    Gaps also cause policyholders and insurers to doubt the continued 
availability of the product. Each time the program lapses, or is 
extended for a short term, a cumbersome and expensive series of special 
bridging transactions is required. Insurers, consumers, and the NFIP 
must set aside policy purchases, collect funds and advance claims 
payments. This creates significant costs and bureaucracy for the 
marketplace and uncertainty for Americans who rely on this important 
protection. This uncertainty has been one of the reasons that several 
Write-Your-Own carriers have exited the program.
    With the next NFIP expiration deadline scheduled for the day before 
the upcoming hurricane season, Congress and consumers face a potential 
economic nightmare in both public and private markets if a major storm 
occurs during a lapse--something that is so easily preventable.
    First and foremost to protect Americans and our economy, a long-
term reauthorization of the national flood program is needed.
Reforms
Fixing the Rate Structure
    The NFIP heavily subsidizes consumer rates across the board, unlike 
rates charged in the private sector. High flood-risk properties are 
particularly and explicitly subsidized, as part of a grandfather clause 
established at the NFIP's inception in 1968 that was expected to shrink 
over time but has instead morphed into an ever-growing subsidy. Even 
while carrying tens of billions of dollars in ongoing debt, the NFIP 
has allowed these subsidies to grow in recent years as it has struggled 
to impose updated flood maps. Rate increases during that time have been 
minimal despite increasing predictions of storm loss by catastrophe 
modelers. While Write-Your-Own carriers have little direct interest in 
the NFIP's rates, as taxpayers who help facilitate the program, we 
encourage Congress to consider phasing out NFIP subsidies over time. 
Government insurance subsidies can create a moral hazard by encouraging 
overbuilding and discouraging consumer risk mitigation. This results in 
greater ultimate costs to taxpayers.
    The long-term NFIP reauthorization bill passed by the Senate 
Banking Committee last year includes reforms raising from 10 to 15 
percent the ceiling for annual rate increases that the NFIP can 
establish. Insurers believe that insurance premiums should reflect the 
risk of loss, and we support this initial improvement. The bill also 
increases the minimum deductibles for flood losses to reduce program 
costs and more appropriately reflect prevailing practices in the 
private insurance market. Increasing the loss deductible should also 
improve the NFIP's solvency and allow more resources to be reallocated 
towards loss mitigation and protecting consumers from financial ruin. 
PCI also supports congressional proposals to establish an NFIP reserve 
fund, setting aside a percentage of the potential loss exposure. This 
would better protect consumers and taxpayers, though it would still be 
a fraction of the surplus that would be required for private insurers.
    Increasing the rates is the first step, but the program must also 
begin to further offset the significant Government subsidy (which FEMA 
states is 40-45 percent for pre-FIRM properties). The rates need to be 
closer to true market rates before any meaningful discussion related to 
the private industry taking on flood risk can take place. PCI estimates 
that flood insurance premiums would need to double, and in some cases 
triple, if the private insurance market were to write this business on 
a primary basis. Proposals to end the NFIP's primary flood underwriting 
are unrealistic given the current steep subsidies and the recognized 
unwillingness of many homeowners to purchase coverage in high risk 
areas and at highly subsidized rates, even when mandated.
Address Mapping Issues
    The certification of levees and ongoing flood map modernization has 
continued to be controversial, particularly for consumers who are now 
required to purchase flood insurance, often at higher-than-average 
Federal rates, as a result of map revisions. While PCI believes that 
insurance rates should always appropriately reflect the cost of risk, a 
phase-in for these purchasers as well as the reestablishment of the 
Technical Mapping Advisory Council are important measures to ameliorate 
the impact of these changes for consumers, communities, the States and 
policyholders. PCI and members of the Write-Your-Own coalition would 
ask that our industry be represented on that Council by a 
representative of a flood insurance servicing carrier (a ``Write-Your-
Own'' company).
    PCI encourages the extension of the Flood Insurance Reform Act of 
2004 program for Severe Repetitive Loss Properties. These properties 
account for just 1 percent of NFIP's insured properties but are 
responsible for 25 to 30 percent of claims. It is time to buy-out, or 
otherwise charge the appropriate premium for these properties that 
continually flood and are rebuilt time after time.
    PCI also supports the inclusion of nationally recognized building 
codes in the floodplain management criteria. This would require FEMA/
NFIP to work with the building code councils to include this 
information. It would provide for better construction of properties and 
help minimize damage from a variety of perils, including flood, as well 
as reduce the number of repetitive loss properties over time.
Address Servicing Issues
    The ``Write-Your-Own'' (WYO) program, established in 1984, has been 
very successful in increasing consumer participation in the NFIP, but 
it has also been the subject of legislative discussion over the past 
few years. There have been issues related to loss settlement, expense 
reimbursement, and participation in the NFIP by WYO insurers.
    Following Hurricane Katrina, there were significant issues related 
to the settlement of wind and water losses. Most of these issues would 
have been addressed by the application of the NFIP appeals process that 
was included in the Flood Insurance Reform Act of 2004. Unfortunately, 
that process was not implemented when Katrina hit, but it is in place 
now. Thus, the rare occurrences of wind-water disputes are already 
effectively dealt with by existing reforms and no new reporting 
requirements (such as providing the NFIP with wind claims information) 
or other legislation is needed to address these issues.
    Questions sometimes also arise about the WYO claims expense 
reimbursement for insurers. Following Katrina, the NFIP worked with the 
WYO participating insurers to revise the claims expense reimbursement 
when significant catastrophes occur. Indeed, the NFIP reduced the 
amount of the claims expense reimbursement where the number of losses 
are significant and insurers and the NFIP can benefit from some 
economies of scale. However, the marketplace has now proven that 
existing claims reimbursement payments are not overly generous. If they 
were, the number of insurers willing to participate in the WYO program 
would not have continued to decline. Thus, to the extent any further 
changes are proposed, we urge careful consideration of the potential 
effect on WYO participation.
Eliminate Outdated Commissions
    Past Senate bills have included provisions establishing a natural 
catastrophe commission to examine insurance market conditions following 
the 2005 hurricanes. PCI suggests that the marketplace, its regulation, 
and the sophistication of catastrophe modeling have advanced 
significantly over the past 7 years, eliminating the need for such a 
commission.
Conclusion
    A long-term extension of the flood program with fiscal rate reforms 
is supported by consumers, insurers, environmental groups, taxpayer 
groups, the real estate industry, and the overwhelming majority of both 
parties in Congress. At a time when the American economy is struggling 
to move forward, housing values are still mired in recession, and 
hurricane season is rapidly approaching, a fiscally sound long-term 
reauthorization of the NFIP is absolutely critical before another lapse 
occurs.
    PCI applauds your efforts to encourage the Senate to take up this 
issue and to pass a long-term reauthorization and reform bill before 
May 31. PCI stands ready to be of any assistance in this effort.
    Thank you.
                                 ______
                                 
                    PREPARED STATEMENT OF JON JENSEN
Government Affairs Committee Chairman, Independent Insurance Agents and 
       Brokers of America, and President, Correll Insurance Group
                              May 9, 2012
    Good afternoon Chairman Tester, Ranking Member Vitter, and Members 
of the Subcommittee. My name is Jon Jensen, and I am pleased to be here 
today on behalf of the Independent Insurance Agents and Brokers of 
America (IIABA or Big ``I'') to present our association's perspective 
on efforts to reform the National Flood Insurance Program (NFIP). I am 
president of Correll Insurance Group, an insurance agency based in 
South Carolina with 12 offices and 132 associates. Since 2011 I have 
served as Chairman of the Government Affairs Committee for the Big 
``I''.
    The Big ``I'' is the Nation's oldest and largest trade association 
of independent insurance agents and brokers, and we represent a 
nationwide network of more than a quarter-of-a-million agents, brokers, 
and employees. IIABA represents independent insurance agents and 
brokers who present consumers with a choice of policy options from a 
variety of different insurance companies. These small, medium, and 
large businesses offer all lines of insurance--property/casualty, life, 
health, employee benefit plans, and retirement products. In fact, our 
members sell 80 percent of the commercial property/casualty market. It 
is from this vantage point that we understand the capabilities and 
challenges of the insurance market when it comes to insuring against 
flood risks.
Background
    The Big ``I'' believes that the NFIP provides a vital service to 
people and places that have been hit by a natural disaster. The private 
insurance industry has been, and continues to be, largely unable to 
underwrite flood insurance because of the catastrophic nature of these 
losses. Therefore, the NFIP is virtually the only way for people to 
protect against the loss of their home or business due to flood damage. 
Prior to the introduction of the program in 1968, the Federal 
Government spent increasing sums of money on disaster assistance to 
flood victims. Since then, the NFIP has saved disaster assistance money 
and provided a more reliable system of payments for people whose 
properties have suffered flood damage. It is also important to note 
that for almost two decades, up until the 2005 hurricane season, no 
taxpayer money had been used to support the NFIP; rather, the NFIP was 
able to support itself using the funds from the premiums it collected 
every year.
    Under the NFIP, independent agents play a vital role in the 
delivery of the product through the Write Your Own (WYO) system. 
Independent agents serve as the sales force of the NFIP and the 
conduits between the NFIP, the WYO companies, and consumers. This 
relationship provides independent agents with a unique perspective on 
the issues surrounding flood insurance, yet also makes the role of the 
insurance agent in the delivery process of flood insurance considerably 
more complex than that of many traditional property/casualty lines. 
Agents must possess a higher degree of training and expertise than 
their non-NFIP participating counterparts, which requires updating 
their continuing education credits through flood conferences and 
seminars. This is done regularly and involves traveling to different 
regions of the country, costing personal time and money. Every agent 
assumes these responsibilities voluntarily and does so as part of being 
a professional representative of the NFIP.
    Despite our strong support of the NFIP, we also recognize that the 
program is far from perfect, which was made all the more clear by the 
devastating 2005 hurricane season. The current $17.2 billion dollar 
debt, incurred in 2005, reveals some of the deficiencies of the program 
and has strained Government resources. While IIABA is confident that 
the NFIP will recover, it is important that Congress shore up the 
NFIP's financial foundation and use this opportunity to enact needed 
reforms to ensure the long-term sustainability of the program.
    For this reason, the Big ``I'' strongly supports S. 1940, the 
``Flood Insurance Reform and Modernization Act of 2011,'' by Chairman 
Tim Johnson, which the Senate Banking Committee reported out 
unanimously last year. The Big ``I'' thanks the Committee for its 
action on this legislation and urges the full Senate to consider the 
legislation on the floor at the earliest opportunity.
    The Big ``I'' also supports H.R. 1309, the ``Flood Insurance Reform 
Act of 2011,'' similar legislation which passed the House of 
Representatives with over 400 votes last year. We believe that while 
there are some differences between the Senate and House bills, these 
minor differences could be overcome by policy makers with a modest 
amount of effort.
Long-Term Extension
    As you know, the NFIP is a Congressionally authorized program that 
requires periodic extensions. Traditionally these extensions have been 
for multiple years (often for 5-year periods) but in recent years 
Congress has not passed a long-term extension of the program and 
instead has opted to pass numerous short-term extensions. In 2010 alone 
the NFIP expired three separate occasions only to be retroactively 
extended by Congress each time. Each expiration of the program led to 
concrete damage to the real estate market and the country's economy. 
During one month-long expiration in June 2010, for example, the 
National Association of Realtors estimated that as many as 50,000 new 
home loans were either significantly delayed or canceled. While the 
IIABA appreciates each of the retroactive extensions, we strongly 
believe that in order to provide certainty to the marketplace as well 
as avoid damage to our fragile economy, Congress should pass a long-
term extension.
    Even the short-term extensions passed over the last several years, 
while thankfully staving off expiration of the program, caused their 
own economic damages. Every time the program is set to expire, WYO 
companies send notices to their consumers about the pending expiration, 
agents must then communicate to their clients about what the 
ramifications of an expiration would be (as well as oftentimes 
providing real time legislative updates on extension legislation), 
banks must prepare for how and if to enforce the mandatory purchase 
requirement of an expired program, and realtors and mortgage bankers 
must discuss with their customers how and if to proceed with home loan 
closings. While not nearly as damaging as an actual expiration, the 
uncertainty and the increased work-load caused by short-term extensions 
justifies a long-term extension of this critical program.
    It is for these reasons that IIABA strongly supports the 5-year 
extension found in the Senate reform bill.
Moving Towards More Actuarial Prices
    The Big ``I'' has for many years asked Congress to explore phasing 
out subsidies in the NFIP altogether. We are pleased that the Senate 
legislation contains proposals to phase out subsidies for many 
properties. Almost 25 percent of property owners participating in the 
NFIP pay subsidized premium rates. These subsidies allow policyholders 
with structures that were built before floodplain management 
regulations were established in their communities to pay premiums that 
represent about 35 to 40 percent of the actual risk premium. The 
subsidized rates were deliberately created by Congress in 1968 in order 
to help property owners during the transition to full-risk rates. 
However, after 43 years the Big ``I'' believes it is time to start 
phasing out this significant subsidization.
    In addition to the fact that subsidized rates torpedo any hope that 
the NFIP could ever be actuarially sound, FEMA estimates that 
subsidized properties experience as much as five times more flood 
damage than structures that are charged full-risk rates. Customers that 
are paying a full actuarial rate have a vested interest to take 
measures to reduce the economic damages associated with floods. In 
contrast, those with subsidized rates have less incentive to mitigate. 
The Big ``I'' welcomes and supports the Senate legislation's phasing 
out of subsidies for commercial buildings, second and vacation homes, 
homes experiencing significant damage or improvements, and repetitive 
loss properties.
    Finally, the Big ``I'' welcomes S. 1940's proposal to increase the 
``elasticity band'' with which FEMA can increase premiums in any given 
year. Currently the annual elasticity band for premium increases is a 
maximum of 10 percent on any property. S. 1940 would propose to 
increase this band to 15 percent which would allow the program to move 
even more properties towards actuarially priced rates.
Privatization of the NFIP
    Some observers have argued that the program should be eliminated or 
completely privatized. These arguments center on the assumption that 
the private market could step in and offer flood insurance coverage. 
However, the IIABA has met with many insurance carriers who 
categorically state that the private market is simply unable to 
underwrite this inherently difficult catastrophic risk, especially in 
the most high risk zones where it is needed. IIABA would always prefer 
to utilize the private market, and our members would almost certainly 
prefer to work directly with private insurance carriers rather than a 
Government agency. However, where there is a failure in the 
marketplace, as there is in the case of flood insurance, we believe it 
is imperative that the Government step in to ensure that consumers have 
the protection they need. This was the reason the NFIP was first 
created in 1968, because the private market could not offer flood 
insurance and a series of high profile floods had consumers turning to 
direct Federal disaster assistance as their only recourse. We see no 
evidence that the private marketplace is any more prepared or capable 
of underwriting flood risk in 2011 than they were in 1968.
    We do not, however, oppose the study on private market capacity as 
called for in the Senate bill. We believe that this study will likely 
show that the private market cannot properly underwrite flood risks, 
but if it can be demonstrated that a private market could emerge in 
some way, we would welcome that discussion.
Repetitive Loss Properties
    Repetitive loss properties--currently defined as those that have 
had two or more flood insurance claims payments of $1,000 or more over 
10 years--continue to put a significant drain on NFIP resources. These 
properties account for about 1 percent of all policies but are 
estimated to account for up to 30 percent of all NFIP losses. The Big 
``I'' is encouraged that the Senate legislation would phase out 
subsidized rates for these repetitive loss properties, and in the 
future would urge the Committee to consider taking further measures to 
combat this difficult issue. For example, if a repetitive loss property 
continues to experience a certain number of losses within a specific 
timeframe, Congress could require that property to either take 
stringent mitigation measures or to be disqualified from participating 
in the NFIP altogether.
    While Congress has previously made efforts to tackle the repetitive 
loss issue, according to GAO the number of repetitive loss properties 
has actually grown over the last decade. Dealing with repetitive loss 
properties is of the utmost importance not only because of the 
financial strain that they place on the program, but also because of 
the obvious lack of fairness that these properties highlight to other 
program participants and the general public.
May 31st Expiration
    As you know, the NFIP is set to once again expire on May 31, 2012, 
barring Congressional action. While some stakeholders believe that 
short-term extensions are helping to add a sense of urgency for the 
passage of the long-term reform and extension bills, the Big ``I'' is 
very concerned about the messages that these continual short-term 
extensions are sending to NFIP consumers, the WYO companies, and the 
agents that drive consumers to the program.
    While the most important message the Big ``I'' would like to share 
with this Subcommittee is to urge you to not allow the NFIP to expire, 
it is also important to reiterate the increasing frustration felt in 
the marketplace concerning the continual short-term extensions. The 
NFIP protects 5.6 million consumers across the country, and after 6 
years of short-term extensions it deserves some long-term certainty.
Conclusion
    The IIABA is very pleased that the Subcommittee is conducting 
today's hearing on comprehensive flood insurance reform and we strongly 
urge the Senate to quickly consider the Flood Insurance Reform and 
Modernization Act so that work can start immediately on resolving 
differences between S. 1940 and H.R. 1309. Reforming and extending the 
NFIP is essential to ensure the long-term stability of the NFIP. It is 
our sincere hope that agreement can be reached soon on the reform and 
long-term extension legislation, but we also feel that the time is 
approaching to consider abandoning the chaotic practice of short-term 
extensions and to finally provide some stability for the program and 
the marketplace--regardless of the status of the reform bills.
    I thank the Committee for giving me the opportunity to express the 
views of the IIABA on this important program. I hope very much that 
this hearing will contribute to additional action taken by Congress to 
pass long-term flood insurance reforms and to ensure the stability of 
the NFIP.
                                 ______
                                 
                    PREPARED STATEMENT OF MOE VEISSI
            2012 President, National Association of Realtors
                              May 9, 2012
Introduction
    Chairman Tester, Senator Vitter, and Members of the Economic Policy 
Subcommittee, the 1 million members of the National Association of 
REALTORS' (NAR) thank you for this opportunity to testify on 
the urgent need for long-term reauthorization and reform of the 
National Flood Insurance Program (NFIP).
    My name is Moe Veissi, and I am NAR's 2012 President. I have been a 
REALTOR' for over 40 years, and am the broker-owner of 
Veissi & Associates, Inc., in Miami, FL. Since 1981, I have served the 
REALTOR' community in many capacities, from local 
association president, to State association president, to Regional 
Vice-President, and now on the national stage as NAR President. Based 
on numerous first-hand accounts over the years, as well as my direct 
personal experience as a practitioner in the field, I can assure you 
that there are few issues of greater importance to real estate markets 
than ensuring access to affordable flood insurance.
    Thanks to your continued leadership, the Senate Banking, Housing, 
and Urban Affairs Committee has already taken a critical step toward 
providing that certainty, by unanimously approving the Flood Insurance 
Reform Act (S. 1940) last year. One of the most important next steps 
the Senate could take right now is to pass this bill and keep the 
legislative process moving forward. The House has already passed 
similar legislation (H.R. 1309) by an overwhelming margin (406-22). 
This is a level of bipartisan support few bills have received in any 
Congress, and it is testament to the careful and painstaking work by 
you and many other members over multiple sessions. The bill would not 
only reauthorized but reform and strengthen NFIP long-term, and we are 
confident that any remaining issues can be resolved through the 
amendment process on the floor. This bill is ready for Senate 
consideration. It is a bipartisan opportunity. It deserves a vote.
    As the Committee is well aware, for some time now, the NFIP has 
been operating under stopgap extensions of authority to issue flood 
insurance. The latest one is set to expire on May 31, 2012. There now 
have been a total of 17 extensions since 2008 (appended); twice, 
failure to act on an extension resulted in a multiweek lapse of NFIP 
authority. According to NAR research, this stalled more than 1,300 home 
sales per day during the 53-day lapse in 2010. Each sale meant jobs and 
growth to the U.S. economy. There were unquantified losses to property 
owners and taxpayers beyond homes sales--not to mention 17 missed 
opportunities for reforms which would help pay down the outstanding 
loan for Hurricane Katrina. A stopgap approach to NFIP reauthorization 
is not a responsible way to run a Federal program--let alone one upon 
which 5.6 million taxpayers in 21,000 communities depend. We urge the 
Senate to bring up and pass the Flood Insurance Reform Act, 
immediately.
Background
    Floods are a national problem requiring a Federal solution. As 
detailed in our prior testimony before this Committee, there is not a 
single State in the Union that has escaped a presidential flood 
disaster declaration in the past two decades. \1\ Since May 1, 2011, 
disasters have been declared in more than half the States, including 
Wyoming, New Mexico, Oklahoma, Utah, Nebraska, North and South Dakota, 
Iowa, Kansas, Ohio, and Missouri. Tomorrow, it could be Michigan or New 
York. Floods are inherently unpredictable. They can occur anywhere--
along rivers, wherever snow melts or rain falls. We simply do not know 
when or where they will strike next.
---------------------------------------------------------------------------
     \1\ NAR Statement to the U.S. Senate Committee on Banking, 
Housing, and Urban Affairs, regarding the hearing ``Reauthorization of 
the National Flood Insurance Program,'' June 9, 2011, pp. 9 and 20.
---------------------------------------------------------------------------
    Because of their unpredictable nature and high cost, there has 
never been an adequate private market for flood insurance. The lack of 
predictability would force insurers to charge unaffordable rates that 
few States would be willing to approve. \2\ Already, few property 
owners will buy flood insurance at the more affordable NFIP rates; 
short of imminent threat, most question the need. However, allowing the 
rate to rise to reflect this ``adverse selection'' (i.e., those most 
likely to buy are also most likely to flood) would guarantee that few 
could afford flood insurance in a purely private market.
---------------------------------------------------------------------------
     \2\ Id, pp. 4-5.
---------------------------------------------------------------------------
    Given this, and the widespread devastation floods cause, the 
Federal Government will step in, one way or another. In the past, the 
Federal response took entirely the form of appropriated disaster relief 
where taxpayers were 100 percent ``on the hook'' for rebuilding flooded 
communities and properties. Then Hurricane Betsy struck in 1965, and 
the Federal Government could no longer afford to ignore the cost to the 
Federal Government and taxpayers. A HUD commission, authorized by 
Congress and convened by President Johnson, had demonstrated how 
creation of a Federal insurance alternative could reduce the cost. 
Rather than relying on Government assistance after the fact, those at 
risk of flooding could assume a measure of responsibility and control 
upfront by purchasing federally backed insurance and essentially 
prepaying to cover future flood damage. Every insured property would 
mean one fewer to be rebuilt with taxpayer dollars. Insurance would pay 
for the damage, so taxpayers would not. The NFIP was the result in 
1968.
    Since then, the NFIP has been reauthorized multiple times, but the 
Bunning-Bereuter-Blumenauer Flood Insurance Reform Act of 2004 (P.L. 
108-264) was the last reauthorization bill to become law. Congress 
returned to the subject last session, but the 110th Congress came 
closer to a subsequent reauthorization, when both houses passed similar 
versions of the Flood Insurance Reform Act, the predecessor to this 
Committee's S. 1940. That bill passed the Senate by 92 votes and was 
headed to a conference with the House when attention turned to the U.S. 
financial crisis. S. 1940 is virtually unchanged from what passed the 
Senate in 2008. And while there were not many bill differences to begin 
with, the House has since adopted many of the Senate provisions. Now 17 
stopgaps and two shutdowns later, NFIP authority is again set to expire 
on May 31st of this year.
Real Estate Markets Have NOT Rebounded
    The housing market continues to recover from one of the longest 
economic downturns since World War II. While fewer property owners are 
reporting as many major problems as they have in the past and some 
markets are even starting to trend upward, surveys show real estate 
prices remain weak as the distressed properties still make up a 
significant portion of home sales. Many home buyers, who bought during 
the peak of the market and saw their homes values drop precipitously, 
continue to be underwater and many of those face foreclosure. Below is 
NAR's chart of existing home sales.


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    Data show a concomitant drop in sales around the time of the last 
multiweek lapse. As the chart illustrates, sales were dropping before 
and during June 2010 but rebounding afterward. The lapse was not the 
only or even the driving factor for this, but as this suggests, it 
contributed. By Federal law, buyers and property owners may not obtain 
a federally related mortgage loan without flood insurance in 21,000 
communities, where there is a 100-year floodplain. These days, the bulk 
of financing is federally related, and private insurance is not an 
option, except for the highest value property owners. \3\
---------------------------------------------------------------------------
     \3\ Id, p.4.
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    Commercial real estate markets are similarly struggling. Property 
values have plummeted across the board since 2007. Small business 
owners--the engine of job creation and innovation and backbone of the 
local community--have suffered the most. Compounded with $2 trillion in 
commercial real estate loans coming due over the next decade and a 
limited capacity to refinance, sales and leasing of commercial 
properties have been dismal. The failure to reauthorize the NFIP has 
only exacerbated the situation for commercial property owners, who are 
already struggling to stay afloat amid the liquidity crisis, high 
vacancy rates, and lower net operating incomes. In many cases, this 
held up commercial sales, contributing to the economic instabilities.
NFIP Stopgaps Exacerbate Market Uncertainty
    For some time now, the NFIP has operated under stopgap extensions 
of authority to issue flood insurance. Since 2008, there have been a 
total of 17 extensions, with the latest one set to expire on May 31, 
2012. Twice in 2010, failure to act on an extension turned into a 
multiweek shutdown, resulting in the delay or cancellation of any 
property sale to be financed with a federally related mortgage in the 
100-year floodplain.
    NAR surveyed its membership to assess the impact of the shutdown 
and found that the NFIP is essential for successfully completing half a 
million home sales annually. Further analysis confirmed that each day 
of a lapse stalls more than 40,000 sales per month or 1,300 daily. 
Nationwide, about 8 percent, or 10 million homes, are located in the 
100-year floodplain or Special Flood Hazard Areas (SFHAs). Table 1 
presents the daily impact in SFHAs by census region.
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     \4\ NAR estimated annual existing home sales by taking the 2008-
2010 average. Using an average ensures that any year-to-year 
variability (such as the first-time home buyer credit) is smoothed out 
and avoids the elevated activity of the circa-2002 housing boom. The 
2008-2010 market activity has been generally consistent with the 
activity prior to the year 2000. Adding 2011 data would not 
significantly change the results.
     \5\ NAR estimated the percentage of the existing sales in SFHAs by 
using GIS software to overlay spatial layers of block-level data from 
the latest American Housing Survey (ACS 2005-2009) with the map of 
SFHAs from FEMA.
     \6\ New residential sales data is available by region only. 
Assuming the new homes are similarly located in the SFHAs as the 
existing homes are, the share of homes located in the flood zone is 
multiplied by the total number of new sales by region.


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Economic Impact of Home Sales
    A stopgap approach to NFIP reauthorization not only affects home 
sales but also has a ripple effect throughout the economy. Each sale 
provides jobs and income to real estate agents, construction workers, 
building contractors, mortgage service providers, home inspectors, home 
appraisers, and many others. There is an annual impact to the community 
as there is less income to spend on goods and services.
    NAR estimated the contribution of each home sale to Gross Domestic 
Product (GDP). In 2010, real estate and related industries added 
$58,000 in income per sale, accounting for the multiplier effect. Using 
a conservative earnings assumption, this translates into two jobs 
generated for each sale.


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Additional Economic Impacts
    Each NFIP lapse affects +1,300 home sales daily, each of which has 
the potential to generate jobs and contribute to the annual growth of 
the economy. But this home sales impact is not the full impact of a 
lapse. While NAR has quantified the loss of those sales with a 
federally related mortgage in the 100-year floodplain, as well as the 
multiplier effect, this does not account for:

    Property Sales Other Than Single Family Homes and Rentals. 
        The mandate to purchase flood insurance applies to multifamily 
        and nonresidential properties, too.

    Refinancing. During the lapse, Write Your Own companies 
        (which partner with NFIP to process insurance policies) are 
        unable to renew or modify a policy, either. Existing property 
        owners could be in technical default of a mortgage for failure 
        to renew flood insurance after the 30-day grace period.

    Financing BEFORE Lapses. Some banks, when faced with the 
        prospect, often weeks in advance, preemptively suspended 
        lending in the floodplain. Federal regulators attempted to 
        address this through guidance that loans could still be made 
        where buyers took steps, though due to the lapse, were unable 
        to obtain flood insurance; nevertheless, anecdotal reports were 
        that most of these lenders did not find the guidance persuasive 
        and instead, erred on the side of protecting their interest in 
        the property, by choosing not to lend.

    Insurance Outside of Federally Designated Floodplains. 
        According to NFIP, 25 percent of flood claims come from 
        properties located outside of areas where flood insurance is 
        required but where the owner chooses to purchase coverage.

    Finally, there is also the consequence to taxpayers. Again, a 
property without flood insurance is a property one flood away from 
Federal disaster relief--at taxpayer expense. Owners of a property 
facing a 1-percent chance of flooding in a given year (or a 26-percent 
chance over the life of a 30-year mortgage) would most likely turn to 
the Federal Government after flooding. Compared to the number of NFIP 
policies, the following table bounds the impact of uninsured 
residential structures for the United States.


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Bipartisan Opportunity for NFIP Reform
    We appreciate NFIP's many program innovations over the years, 
including employing advanced flood mapping technologies (e.g., 
satellite imaging and LIDAR), working to replace its ``without levee'' 
policy with a more precise approach, and instituting independent review 
of map appeals. While there have been many great strides, 
REALTORS' have helped identify a number of areas for further 
improvement, including:
---------------------------------------------------------------------------
     \7\ NAR estimated the percentage of these in SFHAs by using GIS 
software to overlay spatial layers of block-level data from the latest 
American Housing Survey (ACS 2005-2009) with the map of SFHAs from 
FEMA.
     \8\ The 5-year ACS offers a rolling average of housing units at 
the lowest geographic level available. NAR calculated the comparable 5-
year average of NFIP policies, based on data provided by FEMA.

    Enhancing FEMA notifications and communications with 
---------------------------------------------------------------------------
        communities.

    Providing reimbursement of flood-map appeal expenses where 
        NFIP erred.

    Providing additional time for communities and homeowners to 
        work through appeals.

    Reviewing mapping standards and procedures, and 
        streamlining the process.

    Undertaking more accurate insurance pricing, particularly 
        behind dams and levees to account for the protection provided 
        by flood control structures.

    Indexing and expanding coverage to include business 
        interruption and living expenses.

    We applaud the Committee for addressing virtually every one of 
these recommendations in S. 1940. These reforms will greatly improve 
the accuracy of floodplain mapping and increase participation. They 
will help property owners better understand the flood risk and make 
more informed decisions that protect their homes and businesses as well 
as taxpayers. But unless the Senate takes up this bill and soon, the 
many years of hard work and collaboration on these reforms will be 
lost, and we will have to start again. We will not only have lost these 
important reforms but also missed yet another opportunity to fiscally 
strengthen the program for the long run.
Conclusion
    Thank you again for the opportunity to share the 
REALTOR' community's views on the NFIP and the urgent need 
for long-term reauthorization and reform. All stopgap extensions do is 
maintain an uncertain status quo while shut downs risk homes, 
businesses, communities, and the U.S. economy. NAR urges the Senate 
take up and pass the Flood Insurance Reform Act, immediately, and keep 
the legislative process moving forward. NAR stands ready to work with 
you and the Senate to pass meaningful reforms to the NFIP that help 
protect property owners and renters and help them prepare for and 
recover from future losses resulting from floods.


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                  PREPARED STATEMENT OF SARAH MURDOCK
             Senior Policy Advisor, The Nature Conservancy
                              May 9, 2012
    Mr. Chairman and Members of the Subcommittee, thank you for the 
opportunity to present The Nature Conservancy's views on the timing of 
and nature of reforms to the National Flood Insurance Program. My name 
is Sarah Murdock and I am a Senior Policy Advisor for The Nature 
Conservancy. The Nature Conservancy is an international, nonprofit 
conservation organization working around the world to protect 
ecologically important lands and waters for nature and people. Our 
mission is to conserve the lands and waters upon which all life 
depends.
    The Nature Conservancy continues to support a 5-year 
reauthorization of the National Flood Insurance Program through passage 
of The Flood Insurance Reform and Modernization Act of 2011 currently 
being considered by the United States Senate. We believe this 
legislation brings significant reforms which we consider critical to 
begin to address areas of the Program that are currently broken. 
Contrary to Congressional intent, the Program as it currently functions 
is increasing risk from storms and floods to people, property and 
ecosystems, and to the important services that those ecosystems provide 
to people.
    Enactment of The Flood Insurance Reform and Modernization Act of 
2011 will phase out subsidies that have undermined the financial 
stability of the program; will require the Federal Emergency Management 
Agency (FEMA) to ensure maps are updated and accurate so that people 
understand and can better prepare for their risks; and will streamline 
and strengthen mitigation programs to help decrease flood risks and 
better protect flood-exposed communities and homes and businesses. We 
ask that this legislation be brought before the full Senate for debate 
and consideration at the earliest opportunity.
    The Nature Conservancy is also a member of the Smarter Safer 
coalition, a diverse coalition of environmental organizations, taxpayer 
advocates, insurance industry representatives and housing groups. 
Though the groups span the political spectrum, the coalition works 
together on insurance, natural disasters and mitigation. Smarter Safer 
also strongly supports the Senate Banking Committee flood insurance 
reform bill which will help ensure that the flood program can continue 
to provide needed insurance to Americans in harm's way while making 
commonsense reforms.
Why Reform Is Needed Now
    Waiting to implement reforms will continue a policy that results in 
increased risk, destruction of homes and infrastructure, and cost to 
people, property and the natural resources upon which we depend. The 
National Flood Insurance Program (NFIP) is currently over $18 billion 
in debt.
    Without significant reform, the NFIP will not be economically 
sustainable and American taxpayers will continue to be asked to bail 
out the program and subsidize public and private development in flood 
risk areas.
Extreme Weather Events Predicted To Increase
    Results from scientific studies indicate that a changing climate 
has exacerbated and will continue to intensify extreme weather events 
including flooding and coastal storms. Over the last 50 years, 
Americans have seen a 20 percent increase in the heaviest downpours. In 
addition, newly published research demonstrates that proportion of 
category 4-5 hurricanes has doubled from 20 percent to 40 percent in 
only 35 years. \1\ Coastal storm surge and storm impacts will only 
intensify as sea levels continue to rise the predicted 0.6 and 2 feet 
globally in the next century. \2\
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     \1\ Holland and Bruyere (2012).
     \2\ International Panel on Climate Change (2007).
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    A published study conducted by Nature Conservancy scientists and 
others examines the impacts of storm surge to people and property on 
Long Island, NY and in particular examines the likely added effect of 
sea level rise to these impacts. Just a little bit of sea level rise 
(just 1.6 feet) increases predicted impacts of storms to people and 
property by nearly 50 percent and 75 percent respectively. \3\
---------------------------------------------------------------------------
     \3\ Shepard, C., V.N. Agostini, B. Gilmer, T. Allen, J. Stone, W. 
Brooks, M W. Beck. 2011. ``Assessing Future Risk: Quantifying the 
Effects of Sea Level Rise on Storm Surge Risk for the Southern Shores 
of Long Island, New York''. Natural Hazards. DOI: 10.1007/s11069-011-
0046-8.
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Associated Costs Are Increasing
    In the first decade of the new millennium, floods and flood damage 
associated with extreme rainfall events have increased, with damages 
rising from $6 billion to $10 billion over this time period, despite 
the billions of dollars invested in flood control. In 2011 alone, there 
were 58 Federal flood disaster declarations, covering 33 different 
States. The 2011 flooding damages cost over $8 billion and caused 113 
deaths; both the costs and the number of deaths exceeded the 30-year 
averages. Clearly, these trends all speak to the immediate need to 
decrease risk and allow implementation of mitigation measures that 
decrease risks. The proposed reform legislation is the most important 
single step we can take toward decreasing flood risks.
Maximizing Our Return on Investment by Integrating Built and Natural 
        Infrastructure
    Under the current National Flood Insurance Program (NFIP), a 
dangerous feedback loop is in play. Subsidized insurance rates 
facilitates development in coastal zones and in freshwater floodplains 
which not only puts people and property at risk, it simultaneously 
facilitates the destruction and degradation of ecosystems that provide 
a natural defense to people and properties. Left in place, coastal 
marshes and sand dunes and inland wetlands and floodplains serve 
important flood- and storm-control purposes.
    The overall benefits of flood mitigation efforts implemented has 
been studied and found that for every dollar spent on flood mitigation 
5 dollars are saved. \4\ Other recent studies \5\ show that one of the 
most cost-effective solutions to protect people from the impacts of 
increased extreme precipitation and coastal storm intensity will be to 
preserve, enhance and restore the natural systems that already deliver 
critical protection from sea level rise, storm surge and coastal and 
inland flooding. Scientists from the Nature Conservancy recently 
published a review of all papers that measured the role of salt marshes 
in protecting coastlines from waves and erosion. They found that salt 
marshes have a strong and significant role in the United States and 
globally in providing coastal defense and shoreline stabilization. \6\
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     \4\ Multihazard Mitigation Council, ``Natural Hazard Mitigation 
Saves: An Independent Study To Assess the Future Savings From 
Mitigation Activities'', Multihazard Mitigation Council, http://
www.floods.org/PDF/MMC_Volume1_FindingsConclusionsRecommendations.pdf, 
and Rose, A., et al. 2007. ``Benefit-Cost Analysis of FEMA Hazard 
Mitigation Grants''. Natural Hazards Review 8, 97.
     \5\ Examples include a report on the effect climate change will 
have on Caribbean economies, by the Caribbean Catastrophe Risk 
Insurance Facility; and a study by Entergy Corporation and Swiss Re on 
disaster risk along the Gulf Coast.
     \6\ Shepard, C., Crain, C., Beck, M.W. 2011. ``The Protective Role 
of Coastal Marshes: A Systematic Review and Meta-Analysis''. PLoS ONE 
6(11): e27374. http://bit.ly/vfAHvT
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    In addition to flood control benefits provided by protection and 
restoration of floodplains and coastal wetlands, these ecosystems 
provide many services that support and protect humans and nature such 
as filtering pollutants, erosion protection, habitat that supports fish 
and shellfish populations. These services provide real economic 
benefits that can be measured through reduced cost of water quality 
protection, increased revenue from fishing and increased value to 
personal property.
    The traditional approach to flood protection in river-floodplain 
systems has been to rely on dams and levees to contain flood waters and 
in coastal areas has been to build sea walls, bulkheads and other 
``grey'' infrastructure and to ``nourish'' beaches with additional sand 
to slow erosion and diminish the impact of storms. While built 
infrastructure plays an important role in helping to secure our 
communities, it requires substantial investments for both initial 
construction and ongoing maintenance. Moreover, an over-reliance on 
built infrastructure in the United States during the 20th and early 
21st centuries has encouraged extensive land development in areas 
particularly susceptible to flooding and storm damage, and catastrophic 
flooding when infrastructure fails. And fail it has. Despite many 
billions of dollars in taxpayer investment in flood protection, flood 
damages continue to increase and now average more than $6 billion 
annually. \7\ If left unaddressed, as the Nation's water and coastal 
protection infrastructure continues to age we should be expecting that 
these economic losses will continue to increase--including the 
taxpayer's obligation under the National Flood Insurance Program--along 
with the risk faced by tens of millions of Americans who live and work 
behind levees \8\ and tens of millions more living along the coast.
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     \7\ U.S. Army Corps of Engineers (USACE). (2009). ``Flood Risk 
Management: Value to the Nation''. (http://www.corpsresults.us/docs/
VTNFloodRiskMgmtBro_loresprd.pdf).
     \8\ Freitag, B. S., Bolton, F. Westerlund, and Clark, J.L.S. 
(2009). ``Floodplain Management: A New Approach for a New Era'', Island 
Press, Washington, DC, USA.
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    Simply investing to renew the Nation's over-reliance on built flood 
control infrastructure poses a daunting challenge. There are more than 
more than 110,000 miles of levees across the country, \9\ the average 
of which is well over a half century and which the American Society of 
Civil Engineers estimates would require $100 billion to repair and 
rehabilitate. \10\ The challenge also exists for coastal 
infrastructure. In Massachusetts alone, there are about 140 miles of 
publicly owned sea walls or other structures along the coast designed 
to protect billions of dollars of property. Most were designed to last 
a half century but are older than that now. The estimated price tag to 
repair and fortify all of them against rising seas is more than a 
billion dollars. I happen to live in the coastal town of Scituate, 
Massachusetts, where the sea walls are crumbling and in disrepair. 
During a nor'easter on Dec. 27th, 2010, a break in the sea wall 
occurred, flooding dozens of homes. Two homes caught fire and burnt to 
ground as firefighters could not access them through the five feet deep 
freezing water. All of the residents living in those homes were 
displaced for many months and some were forced to permanently relocate. 
Yet the town does not have the financial resources necessary to 
adequately repair the town's sea walls. The town is seeking State and 
Federal resources to maintain the sea walls, yet those funds are 
becoming scarcer and more difficult to secure. Unless significant 
repairs are made, residents living behind these sea walls continue to 
be at significant risk. This is but one example of similar incidents 
occurring throughout our Nation.
---------------------------------------------------------------------------
     \9\ National Committee on Levee Safety. (2009). ``Draft 
Recommendations for a National Levee Safety Program: A Rep. to Congress 
From the National Committee on Levee Safety''.  (Jan. 15, 2009).
     \10\ ASCE. (2009). ``Facts About Water and Environment, Levees'', 
2009 Infrastructure Fact Sheet, (http://
www.infrastructurereportcard.org/sites/default/files/RC2009_levees.pdf) 
(Mar. 25, 2009).
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    Instead of relying solely on grey infrastructure, an alternative 
approach involves integrating the use of natural infrastructure (or so-
called ``green infrastructure'') with built infrastructure. This 
specifically involves maintaining and restoring the connectivity of 
rivers along with sufficient area of floodplain and conserving and 
restoring coastal natural infrastructure such as wetlands, reefs, 
dunes, and barrier beaches and islands.
    An example of this approach is the Yolo Bypass in California's 
Central Valley. It is a 60,000-acre engineered area of the Sacramento 
River floodplain that was reconnected to the river in the 1930s. The 
system is designed such that when the Sacramento River rises during 
major floods and exceeds the elevation of weirs built within the levee, 
additional floodwater flows over the weirs into the Yolo Bypass and 
away from the City of Sacramento and its suburbs. Since its 
construction, Yolo has been an integral part of the valley's flood 
management system, conveying as much as 80 percent of large floods. The 
Yolo Bypass not only protects Sacramento and the surrounding area, it 
does so at a small fraction of the cost of would have been necessary to 
construct and maintain traditional built infrastructure for a similar 
level of protection. Moreover, because of the episodic and seasonal 
nature of floods, Yolo has continued to act as economically valuable 
and productive farmland while providing additional benefits such as 
critical habitat for fish and water fowl. \11\
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     \11\ Sommer T., Harrell B., Nobriga M., et al. (2001). 
``California's Yolo Bypass: Evidence That Flood Control Can Be 
Compatible With Fisheries, Wetlands, Wildlife, and Agriculture''. 
Fisheries 26: 6-16.
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    On the Gulf Coast, The Nature Conservancy is focusing efforts on 
restoration of sea grass and oyster reef habitat both of which serve to 
greatly diminish coastal erosion and mitigate impacts from storms and 
flooding. Over the past 100 years, the oyster reef habitat has severely 
diminished and this has contributed to increased coastal erosion and 
vulnerability to storm impacts. In Alabama and Louisiana, The Nature 
Conservancy has created 5 miles of shoreline--protecting oyster reefs 
and directly supported 227 jobs through the work to create these reefs. 
Working with partners, our goal is to develop 100 miles of oyster reef 
breakwaters/living shorelines in Alabama that will in turn promote the 
growth of more than 1,000 acres of coastal marsh and sea grass.
    The Nature Conservancy and dozens of diverse partners across the 
country recognize the long-term effectiveness and cost-efficiency of 
connected river-floodplains and in conserving and restoring coastal 
wetlands and reef habitats in helping to reduce flood risk, while 
providing other economically important benefits such as continued 
agricultural production, enhanced water quality, and improved fish and 
wildlife habitat and associated recreation. Floodplain restoration 
projects such as Mollicy Farms in Louisiana, Emiquon and Spunky Bottoms 
in Illinois, and Hamilton City in California are further demonstrating 
the many values of this approach and underscore the commitment of the 
Conservancy and its partners to implement these projects and realize 
the associated high returns on investment.
Nature Conservancy Supports Legislative and Administrative Reforms
    Enactment of The Flood Insurance Reform and Modernization Act of 
2011 will accomplish several policy objectives. It will put the program 
on a path of financial sustainability, will improve communication of 
risk through more accurate, higher quality maps, and finally will 
streamline and strengthen mitigation programs to help decrease flood 
risks and better protect flood-exposed communities and homes and 
businesses. In addition to passage of the legislation, there are 
additional policy changes that support the legislative goals that are 
needed and could be achieved administratively that would support, 
amplify and run parallel to the legislative reform efforts.
    The Nature Conservancy supports the following three key provisions 
of the Senate Flood Insurance Reform and Modernization Act of 2011 and 
corresponding administrative reforms:
Scientifically Accurate Mapping of Current and Future Risk
    Providing scientifically sound data and information related to 
flood risk, land use, and natural resources is essential to 
communicating the actual flood risk to people and properties. 
Information on future changing climate conditions must also be 
incorporated to enable individuals, communities, and regional and State 
Government entities to sufficiently plan to mitigate their flood risks. 
The Senate NFIP bill accomplishes this by requiring the incorporation 
of the most accurate science on current conditions and future 
conditions by assessing the best available climate science related to 
flood risks including the impact of sea level rise and other future 
conditions. The bill also requires outreach and education to property 
owners to ensure sharing of this new risk based information.
Charging Rates That Accurately Reflect Flood Risk
    Only if rates reflect the true risk to people and property will 
people understand the true risk of living in or developing certain 
areas and act to discourage development in the most risky areas. 
Additionally, the current Program allows and subsidizes redevelopment 
in flood risk zones, not properly incentivizing retreat of structures 
and restoration of the important natural systems. It is the American 
people who are currently supporting the subsidization of this Program 
through our tax dollars, and this subsidization occurs regardless of 
the economic status of those benefiting from it. The National Flood 
Insurance Program will never be financially sound until actuarial sound 
rates are charged. Currently there are 1.2 million NFIP properties (20 
percent) that are charged premiums well below the actuarial value of 
the insured liability. On average (including subsidized and 
unsubsidized policies) NFIP premium collections cover approximately 70 
percent of the actuarial value of the insured liability. The Senate 
bill makes a number of needed reforms to put the flood insurance 
program on sound financial footing by eliminating subsidized rates and 
allowing for rates to be adjusted reflecting true risk, taking into 
consideration future conditions. Charging actuarial sound rates for 
properties in flood hazard areas will greatly improve the public's 
understanding of the true risk of living in such areas. Such 
understanding should drive better decisions related to development and 
implementation of mitigation measures.
    We recognize that increase rates for flood insurance will place an 
economic burden on people of lower economic means living in flood prone 
areas. The Senate bill does not and should consider the affordability 
of increased flood insurance through implementation of a voucher system 
or some similar means tested assistance. At a minimum a thorough study 
of the issue of affordability of flood insurance needs to be conducted 
to determine the extent to which this is an issue.
Ensuring Nature-Based Solutions Are Properly Incentivized and Funded in 
        All FEMA Programs
    The Senate bill will accomplish improvements related to the use of 
hazard mitigation grant funds and the ability to use grant funds to 
accomplish conservation and restoration of freshwater and coastal 
ecosystems by consolidating, streamlining and making more efficient the 
existing programs and clarifying that voluntary buy out of properties 
are an allowable use of these funds.
    As discussed above, preserving and restoring natural ecosystems 
like floodplains and coastal wetlands can provide cost-effective 
protection against some of the threats that result from current natural 
disasters which will be exacerbated by climate change. For example, 
coastal ecosystems like wetlands, mangroves, coral reefs, oyster reefs, 
and barrier beaches and intact freshwater floodplains all provide 
natural protection from storms and flooding in addition to their many 
other benefits such as habitat for fish populations, water quality 
improvement, economic development from recreation and tourism. 
Incentives to protect and restore floodplains in the Mississippi River 
valley could substantially contribute to reducing the dead zone in the 
Gulf of Mexico. The Conservancy supports greater emphasis placed on use 
of hazard mitigation funds for the purpose of conservation and 
restoration of natural systems like floodplains and natural coastal 
ecosystems.
    While the legislation begins to make more efficient the mitigation 
programs of the NFIP, more changes need to occur to enable, facilitate, 
and encourage floodplain and coastal protection and restoration. Doing 
so will play a significant role in returning the National Flood 
Insurance Program to solvency, thereby making a relatively modest--yet 
important--contribution to Federal debt reduction. Overall greater 
emphasis should be made to improve these programs which as cited 
before, return $5 in reduced cost for every $1 invested. Improvements 
should include overall increased funding for the mitigation programs 
and increased effort to link the FEMA mitigation programs to programs 
with similar goals of other Federal agencies, including FEMA's other 
mitigation programs that fall under the Stafford Act. Several important 
administrative changes should also be considered that will additionally 
facilitate use of the mitigation funds for floodplain and coastal 
restoration. Such changes involve changes to how FEMA calculates the 
cost and benefit of mitigation activities. Currently, clear economic 
benefits such as water quality improvements, flood reduction benefits, 
and fisheries revenue enhancement are currently valued or considered.
    These policy changes will better protect American communities from 
the threat to life and livelihood of future flooding, improve the 
quality of our drinking water, and help restore the health and 
productivity of the Nation's rivers and estuaries.
Summary
    Thank you for the opportunity to present The Nature Conservancy's 
recommendations on the need to pass the Senate's 5-year reauthorization 
of the National Flood Insurance Program and why we implore immediate 
reform to begin to fix aspects of the Program that are currently 
financially and environmentally unsustainable.
              Additional Material Supplied for the Record
        PREPARED STATEMENT OF THE AMERICAN INSURANCE ASSOCIATION


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         PREPARED STATEMENT OF THE MORTGAGE BANKERS ASSOCIATION



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  PREPARED STATEMENT OF THE NATIONAL ASSOCIATION OF MUTUAL INSURANCE 
                               COMPANIES


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PREPARED STATEMENT OF THE AMERICAN BANKERS ASSOCIATION AND THE AMERICAN 
                     BANKERS INSURANCE ASSOCIATION


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   PREPARED STATEMENT OF THE COUNCIL OF INSURANCE AGENTS AND BROKERS


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PREPARED STATEMENT OF R.J. LEHMANN, DEPUTY DIRECTOR, CENTER ON FINANCE, 
          INSURANCE, AND REAL ESTATE, THE HEARTLAND INSTITUTE


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LETTER SUBMITTED BY BILL CHENEY, PRESIDENT AND CHIEF EXECUTIVE OFFICER, 
                   CREDIT UNION NATIONAL ASSOCIATION


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LETTER SUBMITTED BY JAMES W. TOBIN III, SENIOR VICE PRESIDENT AND CHIEF 
            LOBBYIST, NATIONAL ASSOCIATION OF HOME BUILDERS


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    LETTER SUBMITTED BY FRANKLIN W. NUTTER, PRESIDENT, REINSURANCE 
                         ASSOCIATION OF AMERICA


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                    LETTER SUBMITTED BY SMARTERSAFER


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   LETTER SUBMITTED BY JAMES BRADLEY, SENIOR DIRECTOR OF GOVERNMENT 
                       RELATIONS, AMERICAN RIVERS


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              FIRM MAP AND NOTICE SUBMITTED FOR THE RECORD


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