[Senate Hearing 113-216]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 113-216

 
     ROLE OF PRIVATE SECTOR IN PREPAREDNESS AND EMERGENCY RESPONSE

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

                                HEARING

                               before the

                       SUBCOMMITTEE ON EMERGENCY
 MANAGEMENT, INTERGOVERNMENTAL RELATIONS, AND THE DISTRICT OF COLUMBIA

                                 of the

                              COMMITTEE ON
                         HOMELAND SECURITY AND
                          GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE


                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                              MAY 8, 2013

                               __________

                   Available via http://www.fdsys.gov

       Printed for the use of the Committee on Homeland Security
                        and Governmental Affairs


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        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

                  THOMAS R. CARPER, Delaware Chairman
CARL LEVIN, Michigan                 TOM COBURN, Oklahoma
MARK L. PRYOR, Arkansas              JOHN McCAIN, Arizona
MARY L. LANDRIEU, Louisiana          RON JOHNSON, Wisconsin
CLAIRE McCASKILL, Missouri           ROB PORTMAN, Ohio
JON TESTER, Montana                  RAND PAUL, Kentucky
MARK BEGICH, Alaska                  MICHAEL B. ENZI, Wyoming
TAMMY BALDWIN, Wisconsin             KELLY AYOTTE, New Hampshire
HEIDI HEITKAMP, North Dakota

                   Richard J. Kessler, Staff Director
               Keith B. Ashdown, Minority Staff Director
                     Trina D. Shiffman, Chief Clerk
                    Laura W. Kilbride, Hearing Clerk


SUBCOMMITTEE ON EMERGENCY MANAGEMENT, INTERGOVERNMENTAL RELATIONS, AND 
                        THE DISTRICT OF COLUMBIA

                      MARK BEGICH, Alaska Chairman
CARL LEVIN, Michigan                 RAND PAUL, Kentucky
MARK L. PRYOR, Arkansas              JOHN MCCAIN, Arizona
MARY L. LANDRIEU, Louisiana          ROB PORTMAN, Ohio
JON TESTER, Montana                  MICHAEL B. ENZI, Wyoming
HEIDI HEITKAMP, North Dakota
                     Pat McQuillan, Staff Director
                Brandon Booker, Minority Staff Director
                       Kelsey Stroud, Chief Clerk


                            C O N T E N T S

                                 ------                                
Opening statement:
                                                                   Page
    Senator Begich...............................................     1
    Senator Paul.................................................     3

                               WITNESSES
                         Wednesday, May 8, 2013

Elizabeth Zimmerman, Deputy Associate Administrator, Office of 
  Response and Recovery, Federal Emergency Management Agency, 
  U.S. Department of Homeland Security...........................     4
Michael Chodos, Associate Administrator, Office of 
  Entrepreneurial Development, U.S. Small Business Administration     6
Christopher Terzich, Chair, Regional Consortium Coordinating 
  Council........................................................    17
Michael Merwarth, Senior Vice President, United Services 
  Automobile Association, on behalf of the BuildStrong Coalition.    19
Daniel L. Stoecker, Executive Director, National Volunteer 
  Organizations Active in Disaster...............................    21

                     Alphabetical List of Witnesses

Chodos, Michael:
    Testimony....................................................     6
    Prepared statement...........................................    37
Merwarth, Michael:
    Testimony....................................................    19
    Prepared statement...........................................    50
Stoecker, Daniel L.:
    Testimony....................................................    21
    Prepared statement...........................................    56
Terzich, Christopher:
    Testimony....................................................    17
    Prepared statement...........................................    42
Zimmerman, Elizabeth:
    Testimony....................................................     4
    Prepared statement...........................................    31

                                APPENDIX

John W. Madden, Director, Alaska Division of Homeland Security 
  and Emergency Management, prepared statement...................    66
Questions and responses for the Record from:
    Ms. Zimmerman................................................    70
    Mr. Chodos...................................................    75
    Mr. Terzich..................................................    77
    Mr. Stoecker.................................................    78


 THE ROLE OF THE PRIVATE SECTOR IN PREPAREDNESS AND EMERGENCY RESPONSE

                              ----------                              


                         WEDNESDAY, MAY 8, 2013

                               U.S. Senate,        
              Subcommittee on Emergency Management,        
                         Intergovernmental Relations,      
                          and the District of Columbia,    
                    of the Committee on Homeland Security  
                                  and Governmental Affairs,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 2:44 p.m., in 
room SD-342, Dirksen Senate Office Building, Hon. Mark Begich, 
Chairman of the Subcommittee, presiding.
    Present: Senators Begich and Paul.

              OPENING STATEMENT OF SENATOR BEGICH

    Senator Begich. Thank you very much. I appreciate you all 
being here. I was just saying to Senator Paul, and he indicated 
to me he has already had all the testimony, passed some 
legislation, and so we are all done for the day. We really 
appreciate you all being here. [Laughter.]
    Don't we wish this would run like that at times.
    Thank you all very much for being here. We will call the 
Subcommittee on Emergency Management, Intergovernmental 
Relations, and the District of Columbia (EMDC) of the U.S. 
Senate Committee on Homeland Security and Governmental Affairs 
to order. We appreciate the panels for being here, and we thank 
you very much for taking your time today.
    Good afternoon and welcome to the first hearing of the 
Subcommittee on Emergency Management, Intergovernmental 
Relations, and the District of Columbia. I want to begin by 
thanking all our witnesses here today for their willingness to 
participate as we examine the role of the private sector in 
disaster preparedness and response. I thank the witnesses for 
their patience due to the delayed start here, as we had 
important votes in front of us.
    In this time of declining budgets and limited Federal and 
State and local government resources, the involvement of the 
private sector in disaster assistance is critical. As we 
recently saw during the response of Hurricane Sandy, the whole-
of-community approach to disaster provides the best chance for 
success. By leveraging the skills and resources of retail, 
insurance, financial, transportation industries as well as 
nonprofit organizations, essential services can be provided in 
effective and efficient ways.
    This approach can save taxpayer dollars while promoting and 
supporting the businesses that play a vital role in the long-
term economic tax base of our States and territories.
    Restoring the economic vitality of an affected region has 
been a priority of the Federal Emergency Management Agency 
(FEMA) Administrator Fugate but is not simply a Federal 
responsibility. Our States and communities are best positioned 
to understand the opportunities for public-private 
partnerships.
    Perhaps nowhere is this more important for engaging the 
private sector than in my own State of Alaska. Given the 
separation between Alaska and the rest of the country, we must 
work with the private sector in the immediate aftermath of 
disasters. Even in Anchorage, if something happened to Alcan 
Highway or the port of Anchorage in a disaster, the State and 
local response teams would be hard pressed to get supplies to 
needed communities without the help of the private sector. We 
face natural and manmade threats every day, and response to a 
disaster will involve stakeholders from every sector across our 
State in order to address our unique challenges. The 
interdependencies that exist between our cities and villages 
make cooperation a critical component of our response.
    As many of you may know, prior to coming to the U.S. 
Senate, I was mayor of Alaska's largest city, Anchorage. During 
my time as mayor, our city was unfortunately confronted with 
some extreme weather events that caused damage to homes and 
businesses and required quick response from my office. I worked 
with the businesses across the municipality of Anchorage, 
including Home Depot, Sam's Club, and others, to establish an 
agreement that avoided price gouging on plywood and other 
supplies critical to the relief efforts. This public-private 
partnership was key to ensuring work crews were able to access 
the needs of the community before there could be a rush on the 
goods. This cost us nothing and was a great example of how 
storm preparedness, preparation, and response is greatly 
improved when we work together to ensure our communities emerge 
whole after storm events.
    As we all know, the primary responsibility of responders in 
disasters is to save lives. This is accomplished by 
coordinating all Federal, State, local, and private sector 
efforts to adequately support but not replace local operations. 
The private sector should not be an afterthought, but should be 
involved in the local planning, training, and exercising that 
leads up to a successful response mission.
    Innovation is integral to promoting emergency preparedness 
in response and concern with our private sector partners. Just 
as critical, however, is the work done before a disaster to 
reduce the social and economic impacts of these events. Loss 
avoidance and mitigation measures can deliver a positive return 
on investment and lessen future losses. The private sector 
routinely factors loss avoidance into their short-and long-term 
planning, and we look forward to understanding how these same 
strategies can be promoted at the State and local level to 
create sustained, resilient communities.
    I look forward to today's discussion, and before we start, 
I will turn to the Ranking Member, Senator Paul, if he has some 
comments he would like to make.

               OPENING STATEMENT OF SENATOR PAUL

    Senator Paul. I would like to thank Senator Begich for 
putting this hearing together and drawing attention to both 
what government does to help people and also particularly what 
private entities do to help people.
    When Hurricane Katrina happened, I think we gave billions 
of dollars privately. The government did a lot, too, but the 
private sector did quite a bit. In my community, the president 
of my Lions Club, Cardine Harrison, that year went down for 
several months with the Salvation Army. A friend of mine from 
medical school, George Ibrahim, housed a family I think for 
nearly a year from New Orleans in his house. They lived with 
him in his house. So Americans do extraordinary things through 
a voluntary basis and through donations, and I think it is just 
amazing.
    One point I would like to make and hopefully will address 
some is just that I think sometimes when we try to be 
everything to everyone, we do too much and we try to offer too 
much that we cannot help the people who truly need it. I think 
this happens in welfare and disability. I am forever saying in 
my speeches, if you look like me and you hop out of your truck, 
you should not be on disability.
    The same way with disaster loans. There are true disasters, 
and then there are disasters that still have two legs, two 
arms, and are not on dialysis and walking around and may not 
need government's help.
    Four decades ago, we had 435 per decade disaster relief, 
then 351 the next decade, then 929 two decades ago. Now we are 
up to 1,395 disasters. So I think we have expanded the 
definition probably of disasters. FEMA does not have enough 
money, and we are forever looking for more money.
    Hurricane Sandy was a disaster. Hurricane Katrina was a 
disaster. I think there are some things there is no question. 
But if we expand the definition just like if we expand the 
definition of disability and we are trying to help people who 
are not truly disabled, it is less money for the truly 
disabled. The same thing goes for storms. If we expand the 
definition of storms and we try to help too many people, there 
is not enough money. We are borrowing from foreign countries to 
pay for it, and then when we truly have a disaster, the people 
who need it do not have enough money because we have spent it 
on, I think, things that may not have been or should not have 
been defined as a disaster at the time.
    But I welcome the conversation and am glad to be part of 
it. Thank you.
    Senator Begich. Thank you very much.
    Let us get to our first panel. Again, we want to thank you 
for participating today.
    We have Elizabeth Zimmerman, Deputy Associate 
Administrator, Office of Response and Recovery, Federal 
Emergency Management Agency, U.S. Department of Homeland 
Security (DHS).
    Also, Michael Chodos, Associate Administrator, Office of 
Entrepreneurial Development (OED), U.S. Small Business 
Administration (SBA).
    Again, we want to thank you both for being here. I will 
turn to Elizabeth Zimmerman first, and then we will go to you, 
Michael, if that is OK.

     TESTIMONY OF ELIZABETH ZIMMERMAN,\1\ DEPUTY ASSOCIATE 
    ADMINISTRATOR, OFFICE OF RESPONSE AND RECOVERY, FEDERAL 
   EMERGENCY MANAGEMENT AGENCY, U.S. DEPARTMENT OF HOMELAND 
                            SECURITY

    Ms. Zimmerman. Well, good afternoon, and thank you, 
Chairman Begich and Ranking Member Paul. I am very happy to be 
here to be able to have this discussion and talk about the 
private sector because it is very important to us. As you 
mentioned, I am the Deputy Associate Administrator for Response 
and Recovery at FEMA, so that is everything that you do see 
going out in the news and all that.
---------------------------------------------------------------------------
    \1\ The prepared statement of Ms. Zimmerman appears in the Appendix 
on page 31.
---------------------------------------------------------------------------
    I look forward to really sharing and highlighting some of 
the collaborative endeavors that we have done with the private 
sector. Thank you, Chairman Begich, for mentioning the whole 
community because that is key. That is what FEMA--as we have 
talked about FEMA is not the team. FEMA is only part of the 
team, and only one piece of that, as well as the government 
itself. There are so many more aspects to it, and we have 
really been engaged in the last 4 years with our traditional 
emergency management partners as well as the non-traditional 
ones to really build what we call the whole community. The 
private sector is a significant member of that team also.
    We have been able to see the Nation's vast network of 
business, industry, academia, trade associations, and other 
nongovernmental organizations really as equal partners to us in 
the phase of disaster cycles. So from the preparedness that we 
do now, response during the disaster, recovering after, and 
then those efforts of mitigation that are threaded through the 
whole process of emergency management are very key that we are 
all participating in that.
    We are better able to provide assistance now to disaster 
survivors and the impacted communities when the public sector 
as well as the private sector are very active members and 
working together for that community to recover.
    FEMA really places a premium on our relationship that we do 
have with the public and private partnerships as well as the 
tools that we have been able to develop and to share and the 
resources to build to enhance those relationships that we have.
    The private sector outreach and steady State that we do 
have, we engage a variety of segments of the private sector 
through our various activities. There's the seasonal public 
affairs campaigns that we do, Preparedness Month in September, 
as well as things all throughout the year, providing feedback, 
and then also asking our business partners to provide feedback 
on the national policies and participating in joint exercises, 
everything that we do, keeping them hand in hand with us.
    FEMA did create a QuakeSmart program to help those local 
businesses mitigate earthquake damage losses and to get back up 
and running, to run them through scenarios. We have set up six 
different exercises that businesses can go online, pull off, 
see the injects, and run through an exercise, whether it is a 
cyber-type event or a flood, so that is something that has been 
very valuable.
    Also, this July, we are going to host the third annual 
public-private partnership conference, and it is based on 
resilience, is the theme of that conference.
    FEMA also has established private sector representatives 
within FEMA. We did this back in October 2010, put it out there 
for business and industry to have folks select an individual 
that would actually come to FEMA and work for 90 days in our 
offices working side by side with us, so not just through the--
so they were stationed there. So far we have had eight 
companies commit the resources, because it is an expense to the 
businesses. It started at Target, as I said, back in October 
2010. Big Lots sent a representative; Brookfield Properties; 
Verizon; Systems Planning Corporation, which is a small 
business, there are only a few people in the business; Walmart; 
and most recently, Dominion Power. When Hurricane Sandy hit, 
Dominion Power had a representative working right there in 
FEMA's office. And we are continuing that program so that we 
can be truly integrated and collaborative when we are working.
    So these continue to work at the national level, and I am 
proud to say that we are expanding that. FEMA has the 10 
regional offices, and our Region 5 in Chicago will be getting a 
partner from--Walgreens will be coming in there to be able to 
work and to be more collaborative at the regional level and 
working with the States and bringing their folks together. So 
we are very excited for that.
    Also, FEMA is working to bring representatives from the 
academic community in to support us.
    One of the things that we established back in July 2012 was 
the National Business Emergency Operations Center (NBEOC), and 
that is a virtual center where we are able to communicate 
during times of disaster--well, pre-hand we are coordinating, 
but then during disaster we are able to reach out to the 
businesses that have participated in that, and we have hundreds 
of businesses that are participating and able to get 
information out and to get information in, because we have to 
be able to share both ways. So it has been very productive 
during disasters, as I said, to be able to know what businesses 
are open, what businesses are closed. So these are things that 
we have been able to do through our processes and working with 
the private sector.
    There are many other things that we have been able to do in 
working--I want to say that businesses are not our only 
nongovernmental entities. Also, the faith-based organizations, 
the voluntary agencies, some of the other representatives that 
are on the next panel. So it is very key for us. We have signed 
a number of agreements with these agencies, the National VOAD, 
the Red Cross. We are signing up with the Young Men's Christian 
Association (YMCA), the American Association of Retired Persons 
(AARP), the National Association for the Advancement of Colored 
People (NAACP), as well as many faith-based organizations as we 
are working together.
    So, in closing, I would just like to thank you for allowing 
us to be here today. I appreciate this invitation. There is a 
lot of great work that has been going on with our partners, and 
we are happy to be here.
    Senator Begich. Thank you very much.
    And let me now turn to Michael Chodos. Michael.

TESTIMONY OF MICHAEL CHODOS,\1\ ASSOCIATE ADMINISTRATOR, OFFICE 
      OF ENTREPRENEURIAL DEVELOPMENT, U.S. SMALL BUSINESS 
                         ADMINISTRATION

    Mr. Chodos. Thank you, Chairman Begich and Ranking Member 
Paul, for the opportunity to testify today regarding the Small 
Business Administration's role in helping communities recover 
and rebuild after major disasters, as well as the importance of 
collaboration between the public and private sectors in 
disaster response and long-term recovery.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Chodos appears in the Appendix on 
page 37.
---------------------------------------------------------------------------
    As you know, SBA is responsible for providing affordable, 
timely, and accessible financial assistance in the form of low-
interest loans to businesses of all sizes, homeowners, renters, 
and nonprofit organizations in the aftermath of a disaster.
    When a major disaster strikes, SBA is on the ground across 
the affected region, providing individuals and businesses with 
information, support, and access to disaster recovery loans. 
After a major disaster, it is well known that we provide 
disaster recovery loans; however, those loans are only one 
small part of the agency-wide approach that we offer to 
affected communities. For example, because of the series of 
major disasters we have seen in recent years and the 
expectation of future extreme weather and other impacts of 
climate change, SBA has put a strong emphasis on preparedness 
through online training, district office outreach, and national 
webinars, including especially through public-private 
partnerships.
    Also, our Office of Entrepreneurial Development, of which I 
am in charge, and our vast network of business counselors and 
economic development partners also play an essential role on 
the ground in preparedness for small businesses, training 
thousands of businesses each year in the essentials of disaster 
planning. In addition, when a disaster strikes, our partner 
network is there on the ground to help the region's small 
businesses restart, rebuild, and thrive again.
    Our entrepreneurial development programs and partners are 
deeply embedded in the local and regional economic development 
ecosystems in communities across the country. We support over 1 
million clients annually and have more than 14,000 business 
counselors, mentors, and trainers available through our Small 
Business Development Centers (SBDCs), Women's Business Centers 
(WBCs), and SCORE chapters.
    In addition to their Federal funding, our partners receive 
funding from State and local governments, educational 
institutions, charitable foundations, and corporate and other 
private sector partners. Our vast partner network, in addition 
to our 68 district offices, is what makes us uniquely situated 
to aid survivors in the aftermath of a disaster and to act as 
the glue which connects the different parts of the community 
and provides the information necessary for our small businesses 
to connect with the other partners that they need in order to 
be able to recover.
    So immediately after a disaster occurs, our resource 
partners help staff Disaster Recovery Centers (DRCs). They 
provide intake space for Business Recovery Centers in their own 
service center locations, and they set up informational events 
in communities across the area.
    In this early period after a disaster, our partners help 
business owners map out the recovery process, collect 
information, and apply for disaster loans. They connect 
business owners with other State, local, and Federal resources, 
ranging from help accessing governmental and utility programs 
to connections with the Internal Revenue Service (IRS) to 
obtain copies of critical tax documents. Our partners also help 
businesses take the first concrete steps to obtain the capital, 
resources, and mentoring that they need to get back up and 
running. In addition, they help small businesses to connect 
with each other, with lost suppliers and with new customer 
networks.
    Over the long term, our resource partners help existing 
businesses review and reshape their business plans, vendor and 
customer relationships, marketing and customer acquisition 
plans, and financing arrangements. We know that some small 
businesses hardest hit by a disaster will unfortunately never 
return and reopen; therefore, our partners also help new 
businesses get access to the tools they need to plan for 
successful growth and to make their communities vibrant again.
    With regard to our response to Hurricane Sandy, the 
Hurricane Sandy supplemental enacted by Congress provided $20 
million for small business technical assistance for the areas 
impacted. SBA is using a two-phase approach to jump-start the 
recovery process and invest in rebuilding.
    In the first phase, which we have already deployed, $5.8 
million approximately was focused on immediate and intensive 
business counseling and training to support recovery as 
businesses are getting back up to speed.
    In phase 2 of our Hurricane Sandy response, we are using 
the remaining funds to build long-term, community-based, 
collaborative business recovery and resiliency in the affected 
counties. In this phase, our partners are collaborating with 
each other, with the private sector, and with State and local 
mayors' offices, Governors' offices, and community economic 
development corporations to have a single, non-duplicative, and 
coordinated effort to get businesses back up and running.
    With that, I thank you for the opportunity to testify, and 
I look forward to your questions.
    Senator Begich. Thank you very much.
    We will probably each have a 5-minute round, but we may 
double up because we have a little time if there are additional 
questions, so we might go back and forth. I just have a couple 
to start off with, but, again, thank you both for being here.
    Ms. Zimmerman, I have been, you may have read, a little bit 
of a critic at times on the private sector office within FEMA, 
so I want you to kind of explain a little bit more how we are 
engaged with stakeholders, from a function standpoint, what 
does it do and how does it work from how you see it. I have 
mentioned this more than once about what does this office do, 
how does it work, and I will be honest with you. When I go out 
to the business community throughout Alaska and in here, when I 
have seen more around the country when I am traveling, I have 
only found one business, large business, that has at least 
connected with this office, I should say. So help me understand 
this, and tell me about its role and functions.
    I do not mean to put you on the spot there, but it is one 
of those questions that--I know in the back of their minds over 
there at FEMA they are saying, ``That Begich keeps talking 
about this. We want to tell him.'' So this is your opportunity.
    Ms. Zimmerman. Thank you very much, Chairman. Yes, this 
office is within External Affairs for FEMA, right under the 
Administrator, and it is there to collaborate and to reach out. 
They do a lot of outreach to the businesses, small and large, 
to bring them in and to be able to share the emergency 
management. So they have provided what we----
    Senator Begich. Can I interrupt for a second? Before and 
after and during?
    Ms. Zimmerman. Yes, before, after, and during. Yes.
    Senator Begich. OK.
    Ms. Zimmerman. So through the whole phase of disasters, and 
whether it is preparedness, talking preparedness things, or 
mitigation, what can they do to help them to withstand damages 
from the disaster. So that office is doing a lot of outreach to 
all types of businesses, and it is not just businesses, but it 
is the faith-based community and it is everybody. So working 
within our program areas we have public assistance, which is 
the rebuilding of infrastructure, as well as individual 
assistance programs that we have for the individuals that are 
impacted by disasters. So this office reaches out to 
everything, as I said, within Response and Recovery that we do 
to help share and to bring those resources in to find out what 
those needs are going to be. And working with them--we just 
hosted a meeting, and I believe there were about 30 different 
companies that came into FEMA's office for a meeting to see how 
we were doing, to talk about things, what resources we could be 
providing to them, much like we do to States and local 
communities for providing exercise support, like I had 
mentioned with giving them here's the injects, you sit down and 
have this tabletop discussion: What are you going to do if an 
earthquake happens here? What are you going to do if a flood 
happens? And how you work through that.
    So this office is our point to reach out to that. They work 
very closely with the Department of Homeland Security's private 
sector office as well as the other components within DHS, as 
well as those within the White House and other offices to bring 
the business partners. Obviously, we work very closely with 
SBA, Economic Development, and all of those people to help to 
coordinate that. So that is what this office does.
    There is a private sector lead--or we have our lead, and 
then right underneath that is the private sector representative 
that we have come in, like I said. They are in there for 90 
days. The company commits to----
    Senator Begich. You have a loan executive or something like 
that?
    Ms. Zimmerman. So yes, I mean, it is staff members, people 
that have worked in maybe emergency management for that 
corporation. As I said, Target was the first representative. So 
that person sat in our Emergency Operations Center (EOC), and 
the National Response and Coordination Center (NRCC) during 
disasters, way back during Lee and, everything that we have 
been through. So they are sitting, and they are coordinating 
with the private sector. So it has been great. We have been 
able to--during Hurricane Isaac, we were able to reach out, 
find out where the stores were opened, find out what is open, 
because the one thing FEMA does not want to do is set up a 
point of distribution with the State and this local community 
and then find out that store is open. So being able to 
coordinate and say, OK, this part of town is good, so that, 
people are able to go in and shop. We want to get people doing 
that. So looking at where is the hardest hit. So we work with 
the businesses to say, OK, we need to go over here because this 
store is not going to open immediately, we need to make sure 
folks have the resources that they need.
    So really coordinating that way as well as during Hurricane 
Sandy we found businesses saying, our employees have been 
impacted by the disaster, so actually being able to coordinate 
that and to bring our representatives in the field to take 
applications. They are trying to keep the business open and 
running, and at the same time, they want to be able to apply 
for the services. And so, bringing us to them instead of them 
having to come to some facility that we set up.
    So we have been able to do a lot of coordination that way.
    Senator Begich. Very good. My time has expired on the first 
5 minutes, but I want to turn to Senator Paul. I do have some 
additional questions for both of you, but I will turn to 
Senator Paul next.
    Senator Paul. Well, thank you to the panel for attending 
and coming and giving us your presentations today.
    When you build a house, you get an estimate, you work with 
the builder. You talk about--you have to give them choices: Do 
you want wood or carpet, Formica or granite, linoleum, tile? 
You go through all these choices, and they give you their best-
faith estimate. But they still do not ask for all the money up 
front. If you are going to build a $200,000 house, you give 
them a downpayment on it. And then as you build it, you watch. 
The builder tells you if you are going over or under and gives 
you another estimate as you go along. And sometimes you end up 
paying more. In my house, we did pay a little more because 
things were not estimated. Maybe we wanted something that we 
did not tell them specifically enough.
    But the industry of building houses and the industry of the 
way the marketplace works is they are not so trusting as to 
give all the money up front. They want to know beforehand and 
they want to know specifics, and the people who are paying are 
hesitant to pay too much.
    So when we come to Hurricane Sandy, we have something where 
politicians on both sides, they insist, they demand, they put 
their arms up in the air and said, ``Give me my money. Give it 
all, $60 billion.'' I frankly find it inconceivable that you 
could really calculate where you are going to spend $60 
billion. I think nobody has any idea. And if I ask you the 
specific receipt, are you paying for wood or tile or linoleum 
or tile, nobody has any idea. That is just too big a number.
    I mean, private corporations cannot figure that out. Nobody 
can. And that is why I ask, give it a little bit at a time, 
like building a house. Give $9 billion for 1 year, see how they 
are doing with the money, investigate the $9 billion, make sure 
it is being spent appropriately.
    There have been accusations that money in the past did not 
always go to the right thing, that people came in with 
television sets and said, ``My TV was broken in 1997 after a 
big storm,'' and they got a new TV. I mean, this happened--
there are a lot of accusations of this. There were prisoners in 
Baton Rouge who got, displacement money while they were in jail 
for Hurricane Katrina. And it is not because I think you are 
bad people at FEMA, and I do not, but I think you cannot manage 
$60 billion. You cannot find who the bad people are. You cannot 
find who the fraud is, and you cannot spend the money wisely.
    So my question is: Do you think it is a good idea--this is 
to Ms. Zimmerman. I know you are going to love this question. 
Do you think it is a good idea to have so much money all up 
front, or do you think it would have been better to stagger the 
money and then see if it is being wisely spent and monitored a 
little bit at a time? The other reasoning being we do not have 
any money. We are a trillion dollars short up here. FEMA does 
not pay for itself. We do not allocate money for FEMA. We go 
from one disaster to another.
    Do you think it is best to get all the money up front, or 
would it better to dole it out a little bit at a time?
    Ms. Zimmerman. Thank you, Senator. Yes, so of the $60 
billion, as you know, $11 billion came to FEMA for the Disaster 
Relief Fund (DRF), for our programs, for public assistance and 
individual assistance. So our program for public assistance and 
for the rebuilding that we are covering is a reimbursement. So 
they go out and they do estimates, much like what you were 
saying, and then they start building. And then as they--because 
some of these projects are very expensive, and it is going to 
take time. So as they incur costs, then we can reimburse them. 
So it is not all up front at this point for FEMA's program.
    Senator Paul. Your money was given up front. You got it 
all, right?
    Ms. Zimmerman. So we got $11 billion of the $60 billion 
that was given. So, yes, so we got our money. So it sits in the 
Disaster Relief Fund until we need to draw it down and to be 
able to use that. So that is reimbursement.
    The money that goes to the individuals, on the other hand, 
is a grant, and that is----
    Senator Paul. Do the individuals have to prove that they do 
not have insurance to get money?
    Ms. Zimmerman. Yes. So we have to go through, and as you 
talked about Hurricane Katrina, and the things that happened 
there, and we have done a lot--put a lot of things in place 
since then to be able to do better with the identity 
verification process, so being able to scan in, to punch in 
when somebody calls in to our call center or goes online and we 
can--we have different ways of verifying that address. We have 
also found a number of ways to take some of the biggest hits. 
People will use some of the check-cashing or, 7-Elevens or 
something as their address, and it is not really their address.
    So we have put things in place to be able to do more 
identity verification, as well as people running Social 
Security numbers and all of that since Hurricane Katrina. We 
have taken our improper payment rate down from over 14 percent 
to less than 0.3.
    Senator Paul. I guess my problem is it is a huge guess. How 
do you know you are going to spend $11 billion? You have no 
idea. I mean, it is just a huge guess. Nobody can guess that 
specifically. And my tendency is to believe the government is 
not--you are not going to be sending us any of it back. I have 
yet to see a government entity send a couple billion back and 
say, ``Oh, we very wisely underspent here, and we checked 
everybody so well, we had money left over.'' That is why I 
would have only given you $2 billion or $3 billion. I would 
have said, ``Prove to me that you can do a good job,'' and then 
I would have monitored you. That would be my oversight. That is 
what--I am supposed to represent and defend the Treasury. I 
should be doing that. But I do not think we did that. I think--
and I trust you are a good person. You will try to do a good 
job. But the history of government is that people do not treat 
it like their money. It is somebody else's money. It is money 
that none of us could ever have. We do not know what $11 
billion is like to earn it. So we just do not treat it as 
wisely as we would treat our own.
    And it is not an allegation to you. It is just it is what 
it is. I do not think we husband our resources.
    I am out of time. I am sorry.
    Senator Begich. Let me, if I can, do a quick followup on 
that and then a couple other quick questions, then go right 
back to Senator Paul.
    Let me ask you, you mentioned--and I just caught the 
percentage. I want to make sure I heard that right. Your 
internal reimbursements, I should say, went from 14 percent 
improper payments, meaning they were not verified and other 
issues, down to 0.03 percent. Can you give me dollar figures 
related to that? And if you cannot do it now, maybe at a later 
time, would that be possible?
    Ms. Zimmerman. We will have to get back to you on that one.
    Senator Begich. I would like that for the record.
    Then I would like to also know what were the mechanisms, 
because I think we would have lots of agencies who would like 
to take this technique, whatever it was, to use. But can you 
maybe outline to the Committee here what are the steps you 
took, or whoever took, to really clamp down on that? We can 
point to Medicare that has $65 billion in overpayments or 
improper payments, dependent on how you categorize them, and 
other agencies have similar issues. So I would be interested if 
this is a practice that we could deal with or at least 
replicate.
    The other question I would like to ask is on the issue of 
how you go about the reimbursements process. For example, if I 
am a small business person--and this is going to actually go to 
both of you, if I can, because I have seen this before. So let 
us say it is an area that has had multiple disasters over the 
years, and I am the small business person. You keep coming 
back, which is fine. The damage keep coming. You keep writing 
me checks to fix the disaster that has occurred 2 years ago, 
and then 2 years before that. And what I would rather do is 
work with FEMA an SBA and say, ``I would like to move my 
business because it seems logical. Why would you keep writing 
me checks?'' How do each of your agencies approach that 
situation? Or can you under your jurisdiction or your 
authorization within the law? That should be the first thing. 
If you know an area that continually gets hit with disaster, it 
seems logical to start saying, ``You know what? You should 
move.'' I know in Alaska, we have communities literally falling 
into the ocean. Now, we have a choice. We can wait, because 
FEMA will be in, or we could figure out how to move them so we 
do not have to call FEMA. But on the SBA end, you also have a 
role because people come and they get the low-cost loans--
disaster loans, I guess I should say. So how do you approach 
that? Let me start with Ms. Zimmerman, and then I will go over 
to Mr. Chodos, if that is OK, because we both have kind of a 
role in this, and I guess the first question is: Do you have 
legal authority to even consider that? And, two, if you do, do 
you have funding? And, three, if so, how do you go about it?
    Ms. Zimmerman. Well, for any businesses, FEMA does not 
provide any assistance to businesses, so it all goes over to 
SBA.
    Senator Begich. OK. So we will hold that for the 
businesses. But on residential, same question.
    Ms. Zimmerman. Residential----
    Senator Begich. Can you relocate them?
    Ms. Zimmerman. Yes. And, in fact, New York is working 
through that right now, New Jersey. When there is a disaster 
that has happened, and so people--like I say, people from us do 
not get whole, but that is something communities take a look 
at, and they can use other funding.
    Senator Begich. The Community Development Block Grant 
(CDBG) and other things, correct.
    Ms. Zimmerman. CDBG money. We do have mitigation money. We 
do buyouts. So if you look actually up in Grand Forks, North 
Dakota, after the floods in 1997, we bought out the 
communities.
    Senator Begich. I have seen it.
    Ms. Zimmerman. And that is something the community has to 
decide. We do not direct that.
    Senator Begich. OK.
    Ms. Zimmerman. But it is an option that they can take their 
hazard mitigation grant money and buy out properties.
    Senator Begich. But residential only.
    Ms. Zimmerman. Residential only, no businesses.
    Senator Begich. OK. Let me flip it over--and I guess that 
is because that is statutorily limited, right?
    Ms. Zimmerman. Correct.
    Senator Begich. OK.
    Mr. Chodos. Yes, Chairman, thank you for the question. Let 
me say that my area of expertise and oversight at the agency is 
Office of Entrepreneurial Development. James Rivera is in 
charge of our Office of Disaster Assistance, so I would be 
happy to defer to him in questions for the record afterwards 
about the specifics.
    Senator Begich. OK.
    Mr. Chodos. But it is fundamentally not within the agency's 
purview, statutory purview, to make decisions about business 
relocation or community relocation. The agency in its disaster 
lending program is primarily engaged in remediating uninsured 
loss for property damage, both for individual and businesses, 
and economic injury essentially in the form of revenue loss as 
a result of a disaster.
    But I must say that the issue of relocation, restarting, 
and rebuilding is a constant issue after a disaster.
    Senator Begich. Right.
    Mr. Chodos. Especially like Hurricane Sandy----
    Senator Begich. Especially frequent disasters, too.
    Mr. Chodos. Yes. And in Hurricane Sandy, we have over 
600,000 businesses that are affected. Some significant 
percentage of those is going to either relocate or not come 
back, and somebody else will come and restart, and they have to 
decide where. Our partner network, our SBDCs, our WBCs, and our 
SCORE volunteers deal regularly with businesses on individual 
choice about relocation, restarting, where they are going to 
startup again, or where they are going to move, if appropriate.
    Senator Begich. If I am a business and I want to relocate, 
and let us say FEMA and other agencies recognize this area due 
to climate change and other issues, disasters will continue to 
kind of hit this area. Let us say a disaster occurred and I am 
affected, and I realize based on the data maybe this is not 
such a good place after maybe two or three disasters, and I 
might want to move, I am in my third disaster, if I came in and 
said, ``I want to borrow disaster aid money or disaster relief 
money to relocate my business out of this potential 
situation,'' is that available?
    Mr. Chodos. I will have to get back to you on that 
question.
    Senator Begich. OK.
    Mr. Chodos. I simply know this: You did differentiate in 
your question between climate change-related relocations, which 
are non-emergent----
    Senator Begich. Right.
    Mr. Chodos [continuing]. And actual disasters that occur, 
weather events or whatever, for which there is an opportunity 
for disaster relief. The agency's authority is for the emergent 
relief.
    Senator Begich. Got you. Do either one of you have climate 
change issues within your category of mitigation?
    Ms. Zimmerman. That is definitely something we are looking 
at, yes.
    Senator Begich. OK. So you are analyzing----
    Ms. Zimmerman. We are addressing that and looking at the 
longer range as we are----
    Senator Begich. What may be the future.
    Ms. Zimmerman. What may be the future, yes.
    Senator Begich. OK.
    Mr. Chodos. So I will say climate change I believe is not 
part of the disaster response statutory framework at SBA, but 
it is most certainly part of the preparedness training and the 
ongoing business planning process that we engage in with all of 
our counseling and training clients.
    Senator Begich. Very good.
    Mr. Chodos. So business--and disaster preparedness is a key 
part of the business planning process for every business in 
America, and if they are not doing it, they should be doing it.
    Senator Begich. We know insurance companies are doing it.
    Mr. Chodos. Yes, and our partners are working with 
insurance companies, with small business groups all across the 
country, and with their local communities to make sure it is 
part of the plan.
    Senator Begich. Let me ask you--and Senator Paul indicated 
he will be back, so I may ask a couple more and then go to the 
next panel. But let me ask, if I can, you mentioned--and I know 
it is the creation of the National Business Emergency Operation 
Centers, and I know you have had some after-action reviews by 
FEMA since Hurricane Sandy. Can you tell me a couple things 
that came out of those. If not now, for the record, here are 
some things we could do better or here are some things we did 
very well and we should now expand those. Also, our best 
practice and/or, I hate to say it, a worst practice? Can you 
give me a little sense on that?
    Ms. Zimmerman. Sure. I think the best practice is the fact 
that we are talking about before the disaster hits to 
collaborate. And then after Hurricane Sandy, we did, we pulled 
in folks, and we actually convened a call, and there were over 
100 representatives on that. And, what is it we could do better 
next time? And, it came down to how we can share data with this 
technology age and to be able to, like I said, find out what is 
open, what is closed from them, as well as what we are bringing 
in so that we are coordinating and collaborating for that 
community so they are able to feed data into us, and we are 
able to put that out so that everybody can see, so if they want 
to know what areas have been impacted by the disaster, and to 
be able to see where they have employees. So where are the 
places that they might need to bring in resources? Because a 
lot of businesses, even if there is not a business there, if it 
is one of the big box stores or something and they want to 
donate, they want to provide assistance, to be able to help 
them coordinate that.
    So what we learned was we still have a ways to go to be 
able to make sure that we are sharing the data, forward, both 
ways, both directions, so that they can both be better 
coordinated. So that was one of the things that I know came out 
of that.
    Senator Begich. Thank you very much.
    Let me, if I can, Michael, just one last question. I have 
some others I may submit for the record, but I do not want to 
keep you all at the table. I know most people who come and 
testify in a Committee are anxious to get off the table, so I 
hear you, I understand.
    Tell me the work you are doing, is there a difference 
between how you work with urban areas, more concentrated 
populations, and more rural areas? And I think of Alaska. I 
mean, I was just in Bethel, Alaska, and Anchorage, and there is 
a big difference between the two communities and how they 
respond or what they can do and how SBA participates. Actually, 
we had someone from SBA participating with us on the veterans 
side of the equation, veterans job creation.
    Mr. Chodos. I understand you had a very productive trip 
over the 2 days.
    Senator Begich. It was. He did a great job, and he got the 
experience of flying in Alaska, which he will remember. But is 
there a difference in how you respond or work with rural areas 
that is unique in itself? But maybe you could----
    Mr. Chodos. Absolutely there is, and what it basically 
boils down to is not a top-down decision about how we are going 
to respond differently in urban areas than we do in rural 
areas. It is our partners, as I mentioned in my testimony, are 
deeply embedded in their local communities. They live there, 
they work there----
    Senator Begich. If I can interrupt, like in Alaska, some of 
our communities might be the villages, the tribes.
    Mr. Chodos. Yes.
    Senator Begich. The local communities, state.
    Mr. Chodos. So we have five brick-and-mortar locations. It 
is actually either five or six brick-and-mortar locations for 
our Small Business Development Centers in Alaska, but there are 
communities spread all across Alaska which cannot come into 
those communities for counseling or training or for disaster 
response. So we offer online, webinar, and other outward-facing 
ways to connect to folks outside in the community, and because 
there are places in Alaska where it is not easy even to get 
full Internet access----
    Senator Begich. That is true.
    Mr. Chodos [continuing]. We partner with the PBC 
broadcasting station to get some of our word out in the form of 
courses and other things that are delivered across the 
television broadcast network, which just about everybody has 
access to. So this is really--we are the most entrepreneurial 
of agencies; when it comes to getting out and connecting with 
small business, we do what needs to be done to get out and to 
connect. And that is what that begin to look like.
    Senator Begich. Very good. Thank you both. I will say one 
thing. One, I appreciate you all here. We will have more 
questions I will submit for the record. I find it interesting--
I am glad you are reaching out to the business community. I 
will tell you, to expand a little bit more on when I was mayor, 
what we did was, I think, very unique in the country. It was 
right after Hurricane Katrina, and we came up with an idea. We 
actually embed into our operations, our operations center, the 
private sector folks. They are not extra. They are right there. 
And we embedded in the center folks that have logistic needs--
or products that we need, and we have an agreement with these 
stores with no cost, no retainer, none of that, it is a 72-hour 
closeout on the Stock Keeping Units (SKUs), meaning codes on 
product that we do not want purchased until we give an OK, 
because in a disaster, what can happen is people go start 
hoarding things, maybe water, lumber, equipment. So we actually 
have a list and a price document so it is not a gouging in the 
future, just here it is and they lock them out on the SKUs so 
people cannot come to Home Depot, load up seven pick-up loads 
of lumber. It is an interesting model because we pay no 
retainer, there is no government dollars. It is a private 
sector partnership, and they do it because they are good 
corporate citizens. And, I think, again, that can only be born 
in a lot of ways from a national--or from a local end, but 
nationally, I think there are some huge opportunities here, 
because on the flip side, our school district got a FEMA grant, 
and they went and started putting in storage facilities to put 
food and stuff. And I am like, do not do that. These stores 
have better logistics and turnover rates than we will ever 
have. And the net result is you can get to a Safeway or in our 
State, a Safeway Carrs, Fred Meyer, and have food product 
available. Water is usually the big draw. They know where it is 
every minute of the day, and they have disaster centers all 
around the globe.
    So I am glad you are reaching out. I think it is simpler 
than I think people think it is. Our agreements are very 
successful, and the corporations really appreciate it because 
obviously they get a lot of score from it publicly. But also 
they know when an emergency disaster occurs, they will be 
partners, not trying to figure out who they need to figure out 
to work with. And our view is you can work with any customer 
you want, but these products need to be with us first. And then 
we release them, and then they can go do whatever they want 
after that point. And usually the first 72 hours, you got a 
good sense of what you need or do not need.
    So I really appreciate your stepping out on that, and 
anything, we can do to add to that, we would be happy to.
    Senator Paul, I was about to dismiss them, but if you have 
some additional----
    Senator Paul. I am OK.
    Senator Begich. OK. Let me say thank you again very much. 
We will ask our second panel to come up, and I will have some 
questions I will submit for the record.
    Our next panel is joining us. I will let them get situated.
    And, Chris, is it ``Terzich''?
    Mr. Terzich. Senator Begich, apparently----
    Senator Begich. We are Croatian, so he must be.
    Mr. Terzich. And I learned a few years ago that my family 
mispronounces it, but I will stick with ``Terzich.''
    Senator Begich. Because they added the ``H'' like we did, 
and it is--Terzich. Chris, thank you very much for being here, 
Chair of the Regional Consortium Coordinating Council (RCCC).
    Michael Merwarth.
    Mr. Merwarth. Merwarth, yes, sir.
    Senator Begich. It is a long day. Thank you very much. 
Senior vice president and chief underwriter, United Services 
Automobile Association (USAA).
    And then Daniel--``Stocker'' or ``Stoker''?
    Mr. Stoecker. ``Stoker,'' sir.
    Senator Begich. Executive Director, National Volunteer 
Organizations Active in Disasters (NVOAD).
    We really appreciate your being here. Thank you very much. 
Again, you will see the same format. We might go back and forth 
a little bit here.
    So, Chris, we will start with you, and then we will just 
kind of go down the table, if that is OK. And, Chris, are you 
Croatian? I am just----
    Mr. Terzich. Yes, as a matter of fact, I am Croatian, and 
``Terzich'' I learned is a common Croatian name, but my family 
says ``Terzick,'' and I now go by either.
    Senator Begich. OK. Very good.

TESTIMONY OF CHRISTOPHER TERZICH,\1\ CHAIR, REGIONAL CONSORTIUM 
                      COORDINATING COUNCIL

    Mr. Terzich. Good afternoon, Chairman Begich, Ranking 
Member Paul. My name is Chris Terzich, and I am the Chair of 
the Regional Consortium Coordinating Council. This is a group 
of partnerships from across the country working on critical 
infrastructure and homeland security.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Terzich appears in the Appendix 
on page 42.
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    As you have heard already, Americans help Americans in 
need, whether it is through social media, whether it is 
traveling to disaster-stricken areas, or, as we just saw in 
April, whether it is running from a marathon to the hospital to 
give blood. Americans help Americans.
    And so as we look to be successful in our resilience in 
critical infrastructure protection, we need to understand that 
we need to focus on efforts that enable Americans in their own 
communities. We need to understand there are different dynamics 
in different communities. And we need to focus on their 
expertise, their strengths, their skills.
    There are two areas we can do this pretty easily right now 
following the Community Emergency Response Team (CERT) model, 
which has been very successful, and those areas are in social 
media, who are less engaged than the CERT team, or on the 
higher end with trained skilled response teams.
    America is changing. It is not a surprise to us, but there 
are a couple of numbers that I will share with you that I found 
startling. Today we are 82 percent urban, and that is compared 
to 30 percent in 1930. In 2030, we are expected to be 87 
percent urban. And in California, our most urban State, they 
are 95 percent urban. And Los Angeles is the most densely 
populated urban area in the country.
    We are also moving to the coasts in increasing numbers, 
over the last several years increasing our population there by 
150 percent. Both concentration in cities and concentration 
along coastal areas brings us into more interdependent 
situations and also, coincidentally, into more exposure to 
disasters. In 2011 and 2012, we had a record $25 billion or 
more disasters.
    So we are also very connected. We are all familiar with the 
Six Degrees of Separation, and as we were talking before the 
meeting, the Six Degrees of Kevin Bacon perhaps may be more 
known. But what is lesser known is something called the Three 
Degrees of Influence, and this is simply your friends' friends 
influence you. This has been studied in smoking, and it holds 
true in most areas.
    And, Chairman Begich, as you have already said, we are both 
of Croatian descent, but if Wikipedia is correct, your father 
and my mother also grew up in the same small town in Minnesota, 
Eveleth, and our fathers both went to the University of 
Minnesota, and we had not met before today. And so it is a 
small world.
    But this world is moving at light speed. Facebook, for 
instance, in a single day has 618 billion unique visitors. Just 
this morning I had a video conversation on my portable device 
with my daughter who is a thousands miles away. So when we have 
communities and we are connected like this, regional 
partnerships give us a sense of identity. And in my experience, 
some of the most successful partnerships start out with, as you 
have said, a simple organization, clear goals, and small 
committed core.
    In Alaska, where one emergency manager told me an 
earthquake of 9.0 at 40 below is his worst-case scenario. The 
Alaska Partnership for Infrastructure Protection did, as you 
mentioned, Chairman, establish that Emergency Operations Center 
and the Rapid Alert System.
    In New York and New Jersey, they put together maps of open 
and closed areas after Hurricane Sandy.
    In Illinois, Chicago FIRST brought financial institutions 
together and partnered with the Emergency Operations Center. 
The same thing in Iowa and in Minnesota and the Pacific 
Northwest where there are five provinces and five States 
together on infrastructure resilience. And these are just a few 
examples.
    My experience with the government side has been positive as 
well. The Office of Infrastructure Protection under Assistant 
Secretary Durkovich has been very open and collaborative, also 
holding briefings during Hurricane Sandy and the Boston 
Marathon bombing. And at FEMA, they have been perhaps the most 
embracing of the sense of community with active social media in 
the Private Sector Office.
    FEMA also has the CERT model which we can use going 
forward, and I will just sum up with where we can do a couple 
of things here because there is a lot of work to do.
    As we move forward, we can use the CERT model to provide 
the structure, the community in a kit, if you will, for social 
media, where they are already doing it with every disaster. 
Google Maps is providing us updated information, and also 
specifically with teams like Team Rubicon, which brings 
veterans who are struggling to get back into the community a 
sense of purpose at the same time helping those in disaster.
    And so these two are very easy to do. They can be modeled 
on CERT. But together we need to focus on the community, and 
the resilience will come with it.
    I thank you for your time today.
    Senator Begich. Thank you very much.
    Let me go to Michael.

TESTIMONY OF MICHAEL MERWARTH,\1\ SENIOR VICE PRESIDENT, UNITED 
 SERVICES AUTOMOBILE ASSOCIATION, ON BEHALF OF THE BUILDSTRONG 
                           COALITION

    Mr. Merwarth. Chairman Begich, Ranking Member Paul, thank 
you for holding this important hearing to examine the private 
sector's role in disaster relief and mitigation. And thank you 
for the opportunity to appear before you on behalf of USAA and 
the BuildStrong Coalition.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Merwarth appears in the Appendix 
on page 50.
---------------------------------------------------------------------------
    My name is Michael Merwarth, and I am the Senior Vice 
President and Chief Underwriter of USAA's Property and Casualty 
Insurance Company headquartered in San Antonio, Texas. USAA is 
a membership-based association, open to all who have honorably 
served in the U.S. military and their family members. We were 
founded in 1922 by a group of Army officers who decided to band 
together and insure one another after they were considered too 
risky by other insurance companies. And now, 90 years later, 
our mission has been and continues to be to facilitate the 
financial security of those members through a full range of 
financial products and services. Military service members and 
their families face unique challenges associated with their 
service to their country, and USAA recognizes these challenges, 
and we have tailored our products and services to meet those 
unique needs.
    USAA is also proud to be a founding member of the 
BuildStrong Coalition, which is a group of national business 
and consumer organizations, insurance companies, firefighters, 
emergency managers, and building professionals dedicated to 
helping families, communities, and businesses mitigate and 
recover from the devastating effects of natural disasters.
    At USAA, we are focused on living our commitment to serve 
our military membership by providing useful tools and advice to 
help our members protect their lives, their loved ones, and 
their property, both before and after disaster strikes. For 
example, we have developed an online tool that enables our 
members to research a specific property address and understand 
that address' exposure to various natural disasters. We provide 
our members with practical guidance on how to prevent or reduce 
the likelihood of loss at that specific location. So an active-
duty soldier getting ready to change duty stations would be 
able to use this tool during the process of deciding where to 
live and where to relocate his or her family. This tool can 
help them make better decisions by providing information about 
the exposure that those properties may be faced with concerning 
wild fire and flooding, for example, and then tips that they 
could take advantage of, practical advice to actually mitigate 
against those risks.
    USAA obviously is also there for our members after disaster 
strikes. This is when they need us most. Whenever possible, we 
stage our claims experts in nearby areas when a catastrophe 
event is imminent. Our state-of-the-art catastrophe response 
vehicles, which include satellite, Internet, mobile, and Wi-fi 
capabilities, enter impacted areas as soon as possible.
    To communicate with members before and after events, we 
utilize both traditional and social media tools, including 
Facebook, Twitter, text messages, and e-mails. We centralize 
all the information in a comprehensive Disaster & Recovery 
Center, available online and through our USAA Mobile App. 
Members can also use this mobile app to connect with the 
American Red Cross, FEMA, or to find one of our onsite claims 
locations.
    We recognize that our disaster mitigation and recovery 
efforts, and those of our BuildStrong partners, are more 
important now than ever. The insurance and emergency management 
community concluded long ago that strong building codes are the 
best first line of defense against natural disasters.
    The National Institute of Building Sciences has found that 
for every $1 spent to make buildings stronger, the American 
taxpayer saves $4 in Federal disaster assistance.
    The Louisiana State University Hurricane Center estimated 
that stronger building codes would have reduced wind damage 
from Hurricane Katrina by 80 percent. That is nearly $8 
billion. And Louisiana has since adopted model building codes.
    Most recently, FEMA assessed the damage from the 2011 
spring tornadoes in the Southeast and Midwest, and they 
identified model building codes as the top recommendation to 
improve public safety.
    So with this in mind, the BuildStrong Coalition has 
identified the Safe Building Code Incentive as our legislative 
priority and strongly endorses the bill as a forward-thinking 
investment in a stronger and safer America.
    Under the proposed law, States that adopt and enforce 
nationally recognized model building codes for residential and 
commercial structures would qualify for an additional 4 percent 
of funding available for post-disaster grants. This legislation 
will not require any additional appropriation to FEMA since it 
draws funds from the existing Disaster Relief Fund. 
Furthermore, the nature of the incentive does not mandate the 
adoption of statewide building codes on any States that wish to 
maintain their current system.
    A 2012 Milliman study found that the Safe Building Code 
Incentive Act would have saved U.S. taxpayers $11 billion in 
hurricane relief payments alone from 1988 to the present had it 
been in place during that time period. This Subcommittee can 
ignite this debate by moving forward with consideration of the 
Safe Building Code Incentive Act.
    In closing, I want to thank the Subcommittee again for 
holding this important hearing. USAA and the BuildStrong 
Coalition are dedicated to improving the resiliency of American 
communities and helping businesses and families mitigate and 
recover from the devastating effects of natural disasters.
    I look forward to your questions.
    Senator Begich. Thank you very much. Daniel.

 TESTIMONY OF DANIEL STOECKER,\1\ EXECUTIVE DIRECTOR, NATIONAL 
           VOLUNTEER ORGANIZATIONS ACTIVE IN DISASTER

    Mr. Stoecker. Thank you, Chairman Begich and Ranking Member 
Paul. My name is Dan Stoecker. I am the Executive Director of 
the National Voluntary Organizations Active in Disaster, also 
known as National VOAD, and in government-speak NVOAD. Thank 
you for this opportunity to appear before you.
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    \1\ The prepared statement of Mr. Stoecker appears in the Appendix 
on page 56.
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    In my written testimony, I have outlined a number of 
recommendations for legislative or administrative fixes that 
could serve to better facilitate private-public resource 
coordination to foster more resilient communities nationwide. I 
will use my oral comments here to briefly highlight a few 
innovative initiatives that demonstrate how the private sector, 
FEMA, and other Federal Government agencies can find more ways 
to work together.
    For 43 years, the National VOAD coalition has served as a 
forum where Non-governmental organizations (NGO's) share 
knowledge and resources to help communities prepare, respond, 
and recover from disasters. Today National VOAD is a coalition 
of 109 organizations--54 of the country's most reputable 
national faith-based and community-based organizations, and 55 
State and territory VOAD coalitions that represent many local 
VOADs and hundreds of additional local organizations throughout 
the country.
    National VOAD and FEMA established a formal partnership in 
2010 to work together throughout the disaster cycle to enhance 
cooperation, communication, coordination, and collaboration--
what we call the ``four C's''--between government and the 
private sector. We have just established a similar relationship 
with the U.S. Army Corps of Engineers (USACE) around the 
specific subject of mass care, which I will reference in a 
moment. And over the past year, National VOAD has also begun 
working with other Federal agencies to identify and implement 
public-private cooperative opportunities, including with Health 
and Human Services (HHS)' the Office of the Assistant Secretary 
for Preparedness and Response (ASPR), the Centers for Disease 
Control (CDC), Medical Reserve Corps (MRC), Substance Abuse and 
Mental Health Services Administration (SAMHSA), at the 
Department of Housing and Urban Development (HUD), with the 
Department of Agriculture (USDA), and also as Homeland Security 
U.S. Immigration and Customs Enforcement (USICE), and at the 
Department of Defense (DOD), the National Guard Bureau, and 
U.S. Northern Command.
    I would like to mention that each of the distinguished 
members of this Committee should also be very proud of the VOAD 
organizations in your home States and the constituents that do 
wonderful volunteer work, both at home and on behalf of the 
whole country.
    I will quickly share a few examples here of public-private 
partnerships that demonstrate promising opportunities going 
forward.
    Chairman Begich, in the summer of 2009, several National 
VOAD member organizations were engaged in an expedited home 
rebuilding effort to assist residents recovering from a 
flooding and ice jam disaster along the Yukon and Kuskokwim 
Rivers. Did I say that right?
    Senator Begich. Kuskokwim.
    Mr. Stoecker. Kuskokwim.
    Senator Begich. Yes. I have seen those projects. They are 
fantastic.
    Mr. Stoecker. Well, this disaster-affected area was remote, 
presented challenges to getting rebuilding materials and labor 
in the areas, and also there was the concern about the timing. 
There was only a 3-month window before the winter hit, and 
there was a concern about long-term displacement of residents. 
Alaska Emergency Management and FEMA partnered with VOAD 
organizations to perform repair and rebuilding services, a 
departure from the more typical practices of identifying 
contractors, going through a contractor process with for-profit 
companies, and getting building firms in. The collaboration 
saved State and Federal resources and helped families recover 
more quickly.
    And, Ranking Member Paul, the VOAD agencies leapt into 
action in response to the tornadoes that swept the Commonwealth 
of Kentucky this past year. VOAD organizations' volunteers came 
from everywhere to remove debris, repair and rebuild homes, and 
even worked to retrofit a warehouse so that the elementary 
school in West Liberty could reopen earlier. That work was 
performed in coordination with local government authorities, 
and it has yet to demonstrate how nonprofit organizations can 
be used to identify and help meet the local needs of 
communities that are disasters in their region. Yes, sir?
    Senator Paul. If I can interrupt you for a second, I went 
to that elementary school. I think they did it in 4 days. They 
changed a warehouse into a school in 4 days, and just 
volunteers and probably some government, but just amazing 
turnaround by the local community with help.
    Mr. Stoecker. Yes, sir.
    There are just two other quick examples I would like to 
offer. The Army Corps of Engineers partnership began at the 
FEMA National Response Coordination Center, which is like the 
EOC for Federal EOC, where all the interagency coordination is 
executed, but FEMA also has invited National VOAD and other 
private sector partners to have representation there. As a 
result of coordinated problem-solving opportunities that 
emerged at that center, we were able to develop a temporary 
roofing mission pilot program with FEMA, the Corps of 
Engineers, and some of our National VOAD members, including 
Southern Baptist Disaster Relief and Louisiana VOAD, to deploy 
a special Blue Roof Program that allowed us to do things at 
much less expense because FEMA did not have to use contractors. 
Volunteer labor was used to deploy the projects and to do the 
work, and labor time was used to offset the cost share that 
States have to have. So there were zero costs for Louisiana. We 
are looking at finding more innovative ways to work with FEMA 
and other agencies to do similar projects.
    And, finally, if I may be allowed to just quickly mention 
that there is a National Mass Care Strategy also that has been 
implemented. A National Mass Care Council was established by an 
agreement between FEMA and Red Cross, and that led to a council 
that was set up that--from a whole community council that 
created this strategy. A number of goals have been identified 
for where that could be going to be implemented. We are working 
with the National Emergency Managers Association (NEMA) now, 
and, Senator Begich, your Director of homeland security is now 
the President of NEMA, and we are working closely with him to 
help with strategies for implementation of the Mass Care 
Program with local communities.
    So, going forward, we would like to be expanding that sort 
of work, looking for opportunities throughout the government so 
that they will be--we are encouraged anytime anybody wants to 
speak with us about doing something more innovatively and 
creatively. We appreciate that.
    Thank you for your time here.
    Senator Begich. Thank you very much, and I appreciate the 
panel and your commentary.
    I do have a first question, if I can, Michael, from USAA. I 
have been to your corporate headquarters and talked to many of 
your folks, and it is impressive. Also, we carry your 
insurance. We are----
    Mr. Merwarth. Thank you for your membership, sir.
    Senator Begich. We are happy to.
    You heard the last panel a little bit, and one of the 
questions that came up was--I mentioned it, but now I want to 
take it to the next step, and that is, on insurance companies 
and the work you do to try to figure out--you mentioned one 
example of trying to help people understand if you are going to 
move somewhere here are some of the things you need to be aware 
of.
    Do you have within the insurance industry broader or your 
company specifically, do you have incentives or some sort of 
way to say, if you are in this zone, here is what it costs; if 
you are in this zone you get--I do not want to say ``a break,'' 
but you get a different rate structure? Or if you are in this 
zone that has maybe high winds or flood potential or whatever 
these other things are, if you do these five things, this will 
make an impact to your insurance rate? Is that a standard? It 
depends how you answer this. If so, then I would like you to 
expand on the broader industry.
    Mr. Merwarth. That is a great question, Mr. Chairman. I 
would be happy to elaborate.
    Senator Begich. OK.
    Mr. Merwarth. I can tell you firsthand at USAA that we are 
nothing but excited when we see our members deciding that they 
want to move into more resilient and stronger homes, because--
--
    Senator Begich. Excited meaning it is better rates?
    Mr. Merwarth [continuing]. Exactly we can offer more 
affordable rates for all of our members.
    Senator Begich. Good. That is exciting from an insurance 
company.
    Mr. Merwarth. We get excited. Exactly. That is our mission, 
to be able to provide those products at affordable price levels 
for our members. And so to the extent that our rating can match 
up to the resiliency of the home, that is a good thing, and we 
are constantly looking for ways to offer discounts, either for 
more resilient roofs, for anything that happens in the 
structure. We go State by State and figure out what makes sense 
over time on really a never-ending journey, I would 
characterize it, to really refine that pricing so that our 
rates reflect that better risk that those members are 
benefiting from when they make those kinds of decisions about 
their homes.
    Senator Begich. Very good. The reason I ask, I know when I 
was mayor, we did a lot of work with the fire-rating agency.
    Mr. Merwarth. Sure.
    Senator Begich. And the goal was locations of our----
    Mr. Merwarth. Right.
    Senator Begich [continuing]. Stations and response time, 
and we increased that dramatically, and the net result was----
    Mr. Merwarth. That is a great example. That passes right 
back to the consumer----
    Senator Begich. Right across, so it is the same kind of 
theory that you have----
    Mr. Merwarth. Yes, sir.
    Senator Begich [continuing]. In what you do.
    Mr. Merwarth. Yes, sir.
    Senator Begich. Let me ask, if I can, to Daniel, you have a 
list, and I appreciate it, of recommendations. And, Michael, I 
want to keep one thought in mind to start thinking about a 
little bit here, and that is on the piece of legislation. I am 
going to ask you a couple questions on that.
    But, Daniel, you have a list of recommendations in your 
written testimony, which I appreciate, things that could be 
addressed legislatively and/or regulatory. If you could pick 
one or two of those that you could say, if we could just have 
this done, it would make your work easier. I mean, an example 
in Fort Yukon, and up the Yukon River and up the Kuskokwim, I 
will tell you, the facilities we saw, were built fast in 
conditions that could dramatically change. In other words, 
people living in the winter, where you cannot fly in a portable 
home. You have to deal with what you got there. And actually 
they use some products from within the region, too, which is 
very interesting in itself.
    But are there things that we could do on that list that you 
would say here are the one or two, just if we could do that, it 
would really help get your organization working more smoothly 
with FEMA and other Federal agencies?
    Mr. Stoecker. Yes, sir. I think some things might relate to 
the Stafford Act, too.
    Senator Begich. OK.
    Mr. Stoecker. But I think to give FEMA and other agencies a 
little bit more flexibility in working with the private sector, 
there are some particular examples there that allow for that 
sector to be able to be directly engaged by FEMA. There could 
be opportunities for--you have volunteer resources, but they 
have to be deployed. So even if FEMA was allowed to bring--use 
invitational travel to get a lot of these people up there and 
be able to engage them or provide volunteer housing as well, 
the costs are far, far less.
    Senator Begich. So if I want to offer housing right now for 
the volunteers that are coming up, FEMA does not have a 
mechanism to pay for it, let alone accept it. They could have 
some nonprofit do it all and kind of do it off the books but 
not really in a process of creating an engagement on volunteer 
housing. Is that right?
    Mr. Stoecker. Yes, sir.
    Senator Begich. And if that happened, you need a room. If I 
know volunteers, it is like boarding houses in a lot of ways. A 
lot into a room. But right now FEMA does not have that 
authority to pay for part of that housing.
    Mr. Stoecker. That is correct. They do not have that 
authority, and that is not only in response. There is also--of 
course, people forget there is recovery.
    Senator Begich. Right.
    Mr. Stoecker. And there is a lot of work that goes on after 
the immediate response needs are met, and that is where there 
is often the need to people for them to recover to get back in 
their homes if their homes were damaged. That is involving 
rebuilding, and that is people that need to be brought up to do 
that.
    Senator Begich. Have you ever done a cost analysis of if 
this type of housing--if FEMA could pay for some of that 
housing, here is how many volunteer hours and value that could 
produce? Is there such an ability to prepare something like 
that? I mean, pick any disaster you dealt with recently. Is 
there such a thing?
    Mr. Stoecker. That is interesting you say that. That does 
not exist today, and that is something that the collaborative 
is looking at with private sector partners and doing that.
    Senator Begich. OK.
    Mr. Stoecker. In many ways the collaborative just came 
together in the last few years to be coordinating in this way 
and to be engaging government. That is why many partnerships 
did not even evolve until the last few years. And so the idea 
of how to assess that, how to identify costs in different 
areas, you all might be able to help with that, too.
    Senator Begich. I was going to say, you are sitting next to 
people that all they do is----
    Mr. Stoecker. That is right.
    Senator Begich [continuing]. Numbers every day, because I 
think that helps the argument of if we want to modify--the 
logic of it is--I mean, the way you described it. I have seen 
it. And as you heard, Senator Paul has seen it, clearly, how 
volunteers can make a difference. When you can convert a 
warehouse into a school in 4 days, there is no question you 
have saved some money. I do not care what anyone says. Now, it 
may not be the greatest educational setting, but at the same 
time now your schools are operating, kids are getting educated.
    So I would love it, as you progress on that, if you do, if 
you could keep this Committee informed if there is that data 
that we could utilize in making arguments of why we could focus 
on this kind of change.
    Mr. Stoecker. Yes, sir. We will make it a priority of 
putting that together now.
    Senator Begich. That would be great.
    Chris, let me ask you--you heard me ask the questions of 
FEMA on the Private Sector Office, so I am anxious to kind of 
hear how you work, or do not, with the Private Sector Division 
within the Department of Health and Human Services and within 
FEMA. Can you help me understand that a little bit, if you have 
that kind of relationship, or how you use it?
    Mr. Terzich. Certainly, Chairman Begich. So FEMA's Private 
Sector Office has traditionally worked with a lot of the folks 
who end up doing the response supply, so that is where they 
have the good relationship with Target, Walmart, Home Depot, 
and folks like that.
    With the Office of Infrastructure Protection (IP), we tend 
to work in the sector model, but I have to tell you, over the 
last couple of years, so there are a lot of different players, 
but over the last couple of years, the engagement has been 
there, the openness has been there. We are well on our way to 
kind of connecting the dots. We are not there yet. We still 
need to do more in that area. But I think that each--the 
Private Sector Office in FEMA serves a different purpose from 
the Private Sector Office within infrastructure protection 
issues.
    Senator Begich. I'll ask you the same kind of question I 
just asked Daniel. Are there things we could be doing, to help 
regulatory or legislatively--because I am a believer. I saw it 
when I was mayor, that the private sector is willing to 
participate. They just need to know the avenue. And they do not 
want to have a lot of avenues. They just want to know what the 
avenue is. And they will come to the table if given the task 
and chore, especially in a disaster. Do you think there are 
some things we could be doing better in encouragement and/or 
legislatively or regulatory with the Federal Government to make 
sure that continued private sector engagement occurs at a much 
higher level?
    Mr. Terzich. Certainly. From the standpoint of regional 
partnerships, I think--and this is why I raised the issue of 
CERT. I think what the Federal Government can do, where we have 
trouble in our partnerships, is to give us a structure and a 
formality so that if any community wants to build a CERT team, 
they do it. Mayor Bloomberg, said to the CERT members after 
Hurricane Sandy that they were the most direct connection to 
the people in the community. But that structure of CERT comes 
from--created by FEMA, and I think it is housed in the Citizen 
Corps. But it was provided by the government.
    So this kind of--there are very few things where the 
government can provide a great model and then let us build----
    Senator Begich. So build the structure to get some frame 
around it.
    Mr. Terzich. Absolutely.
    Senator Begich. Then give some guidance to the local 
communities.
    Mr. Terzich. Yes, sir. In the areas--social media is where 
I see this most significantly. The response is incredible, and 
I think most of us go to social media before any formal 
channels to understand what is going on in the early days of a 
disaster. And Google Maps showed the open and closed gas 
stations.
    Senator Begich. Do you think FEMA utilizes social media at 
a level that is--and I am saying this carefully--accessible to 
the general public? And the reason I say that is, again, as a 
former mayor, I know sometimes we like to create things that 
are much more complicated than they need to be. And so what 
happens is the poor person that is trying to weave their way--I 
call it the three clicks to the end product. It takes that at 
zero, and it takes you 20 or 30 clicks and you are now done. Do 
you think we are doing enough there? And do you think FEMA is 
engaged in enough of the private sector to make sure we are 
doing the right kind of social media connections in a disaster?
    Mr. Terzich. I would have to say that I think FEMA is 
probably doing better than a lot of the partnerships or 
businesses in this area. But that is to say, they are the 
fastest of the slow group, right?
    Senator Begich. Right.
    Mr. Terzich. Because social media is so much faster.
    Senator Begich. It is faster than anybody.
    Mr. Terzich. My 13-year-old daughter is faster than most 
businesses.
    Senator Begich. No question about it.
    Mr. Terzich. So I think they are doing a great job. I 
think, the YouTube videos--Administrator Fugate has a straight 
approach. He puts information out there in the midst of a 
disaster. They hold calls. IdeaScale that they use to collect 
information. I think they are doing well. We all need to do 
better.
    Senator Begich. Let me do one more for you. Then I want to 
go to the piece of legislation you mentioned, Michael. But, 
first, how does the Regional Consortium Coordinating Council, 
how do you think their membership represents a pretty diverse 
group of protection stakeholders, in other words, people who 
understand this issue? Or do you see any gaps that need to be 
filled?
    Mr. Terzich. The answer to both questions, Chairman Begich, 
is both--is yes. The groups are diverse. They are not organized 
for the same purpose. They are not organized in the same way. 
They do not have the same stakeholders other than regional 
resilience. But there are so many more efforts out there. As I 
am listening to all the volunteer groups, some of them would 
fit in what we would call critical infrastructure protection.
    So I think we are just starting this effort, but our 
approach is to first not duplicate something somebody else is 
doing.
    Senator Begich. Good.
    Mr. Terzich. And to connect the different modes, if you 
will, of all these regional groups.
    Senator Begich. Thank you. I said that was the last 
question for you, but I have one more. Are you hearing any 
resistance from any of the Federal, State, or local folks, even 
the private sector, in regards because of the financial 
conditions? And I say mostly the government--and we have seen a 
lot of reductions in local government. Obviously the Federal 
Government has its own issues, and some States have some 
issues. Are there people saying I want to participate but 
cannot?
    Mr. Terzich. I do not think resources are the problem. I 
think, like you experienced in the role as mayor, I think many 
governments are doing that, State, local, municipal, bringing 
the private sector in. Early on it was tough. We would have--
both sides would say, yes, we want to do this, but we did not 
know how.
    I think we could still do some more, put some more 
structure on it to make it easier. The National Incident 
Management System does account for the private sector, so that 
is a start. But it does not look the same. So I think that 
everybody is willing. I do not think anybody is resisting.
    Senator Begich. Very good.
    Michael, you mentioned the Safe Building Code Incentive 
Act.
    Mr. Merwarth. Yes.
    Senator Begich. Did I get that right?
    Mr. Merwarth. Correct.
    Senator Begich. Again, as a former mayor, I had to deal 
with building code revisions more than I probably wanted to, 
because they usually come about this thick, and you spend a lot 
of months with people. Can you tell me on the legislation how 
groups like Building Owners and Managers Association (BOMA), or 
home builders or how these folks respond to it? I know 
generally they do not like anything new, regulation, but do you 
have a sense on how they are responding or engaging with this 
idea?
    Mr. Merwarth. That is a good question, and we acknowledge 
that there are a lot of new requirements that are being put 
upon builders and people in the building community.
    Senator Begich. Right.
    Mr. Merwarth. One of the things we like to talk about when 
that issue comes up, though, is the relative affordability of 
what we are talking about here. The cost to the individual 
consumer is somewhere in the neighborhood of about $1,500 to 
$2,000 on average to do relatively----
    Senator Begich. On a new home?
    Mr. Merwarth. On a new home, yes.
    Senator Begich. Very good.
    Mr. Merwarth. Construction on a new home, which is really 
what the act is focused on going forward, building codes for 
new construction. Simple things like using ring-shanked nails 
or sealing the roof decking. Low cost changes that have a major 
impact in terms of resiliency going forward. So trying to stay 
focused on that short-term investment up front that reaps 
significant dividends over the long run.
    Senator Begich. At this point, just tell me--do you know 
where that legislation is right now?
    Mr. Merwarth. No, sir.
    Senator Begich. OK. That is fine. We will do some followup.
    Mr. Merwarth. OK.
    Senator Begich. This is one area I am very familiar with. I 
have been in real estate, I have been a mayor. I have had to 
deal with kind of both ends of the equation.
    Mr. Merwarth. Sure.
    Senator Begich. But I know we did some improvements, 
especially around earthquake preparedness.
    Mr. Merwarth. Right.
    Senator Begich. And, some would disagree with some of the 
codes we had to do. We had to do some things regarding wind 
conditions, because when we get 100-mile-an-hour winds--which 
is not uncommon in some of our areas----
    Mr. Merwarth. Right.
    Senator Begich [continuing]. Making sure that roof does not 
go flying off would make a big difference.
    Mr. Merwarth. Absolutely.
    Senator Begich. Even though you look at it, there is a lot 
of metal, somebody added it inside on a wood construction 
facility, I used to hear from builders that, they seemed to be 
building more with metal than wood, and I would say, ``Well, 
you got to keep that roof on, and that is how it works.'' 
Because I remember the days when I did have a roof go flying 
off on one of my commercial buildings, it peeled back, the 
insurance company paid a lot of money. And there were better 
things in the design that could have been done.
    Mr. Merwarth. Absolutely.
    Senator Begich. And now we are doing it. So that is kind of 
the stuff you are talking about.
    Mr. Merwarth. Yes, sir.
    Senator Begich. That is kind of the long-term value that 
may not be seen right away, but one disaster--or in the case of 
high winds, that is not necessarily a disaster. It is just a 
prolonged situation, which, for your own home, could be a 
single disaster, but not a community disaster.
    Mr. Merwarth. That is correct, sir. From the insurance 
perspective, we are really focused one member at a time at 
USAA.
    Senator Begich. Right.
    Mr. Merwarth. And so if your roof blows off, that is a big 
deal. So anything that we can do to advocate for stronger 
roofs, stronger building codes, those are good things for our 
members as well.
    Senator Begich. Very good.
    Let me end there, and I first want to say--and I will 
probably submit a few additional questions, but I first want to 
say thank you all very much. It is interesting to hear some of 
the discussions, especially about the volunteer capacity. I am 
just always amazed when called upon what can happen and how the 
private sector involves, and then again from the insurance 
company viewpoint of mitigation. You do not want to be there on 
the back end because that means usually life, property, and who 
knows what else. And if you can prevent that, that is a good 
thing from the community perspective, but also from a company 
perspective.
    Mr. Merwarth. That is right.
    Senator Begich. And that is a good deal all around.
    Mr. Merwarth. Yes, sir.
    Senator Begich. I guess I want to ask one more question 
before I close. Do you folks within your analysis and risk 
analysis, are you now doing anything from an insurance-wide 
perspective? I do not want to get you into the debate of 
climate change, but that is a reality that there is something 
happening. We can argue the science, but I do not want to argue 
that. I want to say, do you from an insurance perspective see 
an increase or have you seen an increase in real, not kind of 
made-up claims but, I mean, real stuff that is weather-related 
that is changing?
    Mr. Merwarth. That is a great question, Mr. Chairman. And, 
absolutely, there is no question, the frequency and the 
severity of these catastrophic-level events has really been on 
the rise over the past decade. We are not getting too hung up 
on why is it happening so much as----
    Senator Begich. Right, but you are seeing----
    Mr. Merwarth [continuing]. Acknowledging that it is 
happening and making sure that we are positioned well as an 
insurance company to be able to take care of our members in 
that changing environment.
    Senator Begich. Is it fair to say--and I do not want to put 
words in your mouth, but what your risk analysis have done of 
what you do today versus, say, 15 years ago around this issue 
of how there is something happening with regards to weather 
patterns and so forth, is that a piece of the equation more so 
than it was 10 or 15 years ago? Does that question make sense? 
In other words, in your risk analysis of future claims and what 
you have to put in reserve and all the things that you have to 
do to prepare, this ever-changing weather patterns, is that now 
becoming a more apparent piece within the risk analysis----
    Mr. Merwarth. I understand your question, Mr. Chairman, and 
I cannot speak for the entire industry.
    Senator Begich. Sure.
    Mr. Merwarth. Every company is going to think about this a 
little bit differently. But at USAA, being a financially strong 
company, it has always been top of mind that we are ensuring 
that we are holding enough capital for pretty severe weather 
events. That has been in our calculus for some time. What we 
are seeing, though, is that those events are becoming more and 
more common, which makes the imperative to focus on what we can 
do to actually shore up and protect our members as these things 
start to make landfall, something that is so important for us 
and for the BuildStrong Coalition as well.
    Senator Begich. Very good. And as a member, I mean, the 
goal is, when those rates go up, the members--we are the ones 
insuring.
    Mr. Merwarth. Right. That is right.
    Senator Begich. It is a mutual relationship in a lot of 
ways.
    Mr. Merwarth. Yes, sir.
    Senator Begich. Well, I appreciate again this very good 
information, very good discussion, and I thank you for being 
part of this hearing today, and I appreciate your willingness 
to step forward. And, again, we will have some additional 
questions. We will probably keep the record open for 15 days, 
and so if other Members who are not here today submit, be 
prepared there might be some additional questions.
    At this time we will adjourn the meeting, and thank you all 
for being here.
    [Whereupon, at 4:07 p.m., the Subcommittee was adjourned.]


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