[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]


                        FLOOD INSURANCE REFORM:
                           FEMA'S PERSPECTIVE

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

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                         HOUSING AND INSURANCE

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                     ONE HUNDRED FIFTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 9, 2017

                               __________

       Printed for the use of the Committee on Financial Services
       
      
                            Serial No. 115-3
                            
                            
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                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                    JEB HENSARLING, Texas, Chairman

PATRICK T. McHENRY, North Carolina,  MAXINE WATERS, California, Ranking 
    Vice Chairman                        Member
PETER T. KING, New York              CAROLYN B. MALONEY, New York
EDWARD R. ROYCE, California          NYDIA M. VELAZQUEZ, New York
FRANK D. LUCAS, Oklahoma             BRAD SHERMAN, California
STEVAN PEARCE, New Mexico            GREGORY W. MEEKS, New York
BILL POSEY, Florida                  MICHAEL E. CAPUANO, Massachusetts
BLAINE LUETKEMEYER, Missouri         WM. LACY CLAY, Missouri
BILL HUIZENGA, Michigan              STEPHEN F. LYNCH, Massachusetts
SEAN P. DUFFY, Wisconsin             DAVID SCOTT, Georgia
STEVE STIVERS, Ohio                  AL GREEN, Texas
RANDY HULTGREN, Illinois             EMANUEL CLEAVER, Missouri
DENNIS A. ROSS, Florida              GWEN MOORE, Wisconsin
ROBERT PITTENGER, North Carolina     KEITH ELLISON, Minnesota
ANN WAGNER, Missouri                 ED PERLMUTTER, Colorado
ANDY BARR, Kentucky                  JAMES A. HIMES, Connecticut
KEITH J. ROTHFUS, Pennsylvania       BILL FOSTER, Illinois
LUKE MESSER, Indiana                 DANIEL T. KILDEE, Michigan
SCOTT TIPTON, Colorado               JOHN K. DELANEY, Maryland
ROGER WILLIAMS, Texas                KYRSTEN SINEMA, Arizona
BRUCE POLIQUIN, Maine                JOYCE BEATTY, Ohio
MIA LOVE, Utah                       DENNY HECK, Washington
FRENCH HILL, Arkansas                JUAN VARGAS, California
TOM EMMER, Minnesota                 JOSH GOTTHEIMER, New Jersey
LEE M. ZELDIN, New York              VICENTE GONZALEZ, Texas
DAVID A. TROTT, Michigan             CHARLIE CRIST, Florida
BARRY LOUDERMILK, Georgia            RUBEN KIHUEN, Nevada
ALEXANDER X. MOONEY, West Virginia
THOMAS MacARTHUR, New Jersey
WARREN DAVIDSON, Ohio
TED BUDD, North Carolina
DAVID KUSTOFF, Tennessee
CLAUDIA TENNEY, New York
TREY HOLLINGSWORTH, Indiana

                  Kirsten Sutton Mork, Staff Director
                 Subcommittee on Housing and Insurance

                   SEAN P. DUFFY, Wisconsin, Chairman

DENNIS A. ROSS, Florida, Vice        EMANUEL CLEAVER, Missouri, Ranking 
    Chairman                             Member
EDWARD R. ROYCE, California          NYDIA M. VELAZQUEZ, New York
STEVAN PEARCE, New Mexico            MICHAEL E. CAPUANO, Massachusetts
BILL POSEY, Florida                  WM. LACY CLAY, Missouri
BLAINE LUETKEMEYER, Missouri         BRAD SHERMAN, California
STEVE STIVERS, Ohio                  STEPHEN F. LYNCH, Massachusetts
RANDY HULTGREN, Illinois             JOYCE BEATTY, Ohio
KEITH J. ROTHFUS, Pennsylvania       DANIEL T. KILDEE, Michigan
LEE M. ZELDIN, New York              JOHN K. DELANEY, Maryland
DAVID A. TROTT, Michigan             RUBEN KIHUEN, Nevada
THOMAS MacARTHUR, New Jersey
TED BUDD, North Carolina
                            
                            
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    March 9, 2017................................................     1
Appendix:
    March 9, 2017................................................    51

                               WITNESSES
                        Thursday, March 9, 2017

Wright, Roy E., Deputy Associate Administrator, Federal Insurance 
  and Mitigation Administration, Federal Emergency Management 
  Agency (FEMA), U.S. Department of Homeland Security............     5

                                APPENDIX

Prepared statements:
    Wright, Roy E................................................    52

              Additional Material Submitted for the Record

Duffy, Hon. Sean:
    Letter from the American Insurance Association...............    61
    Written statement of the Consumer Mortgage Coalition.........    64
    Letter from the National Multifamily Housing Council and the 
      National Apartment Association.............................   103
    Written statement of the Property Casualty Insurers 
      Association of America.....................................   107
Green, Hon. Al:
    Harris County, Texas, Resolution.............................   115
Wright, Roy E.:
    Written responses to questions for the record submitted by 
      Representatives Hultgren, Ross, Beatty, and Loudermilk.....   116

 
                        FLOOD INSURANCE REFORM:
                           FEMA'S PERSPECTIVE

                              ----------                              


                        Thursday, March 9, 2017

             U.S. House of Representatives,
                            Subcommittee on Housing
                                     and Insurance,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 10:05 a.m., in 
room 2128, Rayburn House Office Building, Hon. Sean P. Duffy 
[chairman of the subcommittee] presiding.
    Members present: Representatives Duffy, Ross, Royce, 
Pearce, Posey, Luetkemeyer, Stivers, Hultgren, Rothfus, Zeldin, 
Trott, MacArthur, Budd; Cleaver, Velazquez, Capuano, Sherman, 
Beatty, Kildee, and Kihuen.
    Ex officio present: Representatives Hensarling and Waters.
    Also present: Representatives Kustoff and Green.
    Chairman Duffy. The Subcommittee on Housing and Insurance 
will come to order. Without objection, the Chair is authorized 
to declare a recess of the subcommittee at any time.
    Also, without objection, members of the full Financial 
Services Committee who are not members of this subcommittee may 
participate in today's hearing for the purposes of making an 
opening statement and questioning our witness.
    Today's hearing is entitled, ``Flood Insurance Reform: 
FEMA's Perspective.''
    The Chair now recognizes himself for 3 minutes for an 
opening statement. As I said at our first hearing last month, 
this subcommittee has a full agenda this year. Our top priority 
is a timely reauthorization of the National Flood Insurance 
Program (NFIP) and its key authorities, which are set to expire 
on September 30th.
    Over the past few weeks, my staff and I have taken over 50 
meetings with stakeholders on top of the multiple meetings that 
were taken by Chairman Luetkemeyer in the last Congress.
    On Monday, I had the opportunity to visit Louisiana with 
Majority Whip Steve Scalise, where I visited local parish 
leaders, levee district representatives, bankers, retailers, 
homebuilders, and many others. I also toured the southern part 
of the State which was devastated, as we know, by Hurricane 
Katrina, in which 1,800 people lost their lives.
    The NFIP is critical to many Americans. Over and over 
again, some of the same things continue to emerge in the 
meetings that I hold.
    First, a lapse in the program would be irresponsible and 
would be damaging to communities.
    Second, policies must be accessible and affordable for 
those who are in need.
    Third, there is a strong interest in the growth of a robust 
private market that can offer consumers a choice in flood 
insurance.
    Fourth, communities are frustrated by the accuracy of 
FEMA's flood maps and the amount of time it takes for maps to 
be approved.
    Fifth, we should explore new options for mitigation and 
community resiliency.
    Sixth, the financial integrity of the program is weak. 
Today, the NFIP is more than $24.6 billion in debt and runs an 
annual deficit of $1.5 billion. This is absolutely 
unsustainable.
    And finally, we must address some of the egregious claims 
processing problems that the northeast in particular 
experienced during Superstorm Sandy.
    I am grateful to Mr. MacArthur, Mr. King, Mr. Zeldin, and 
Ms. Velazquez for the input they have given us as we have gone 
through this process, input on behalf of their constituents.
    So I look forward to a robust discussion with Mr. Wright 
this morning about FEMA's perspective on these issues and 
others as we ready legislation for reauthorization of this 
program, which is so important to millions of Americans.
    I now recognize the ranking member of the subcommittee, the 
gentleman from Missouri, Mr. Cleaver, for 5 minutes.
    Mr. Cleaver. Thank you, Mr. Chairman.
    And thank you, Mr. Wright, for being here today. Over the 
past few years, this subcommittee has held a number of hearings 
to assess the National Flood Insurance Program (NFIP) and to 
discuss the program's reauthorization. And as we all know, 
authorization for the program will expire on September 30, 
2017.
    Should the program expire without reauthorization, no new 
flood insurance contracts will be able to be extended, which 
means that homebuyers will not be able to obtain mortgages and 
close on their homes in flood hazard areas.
    Additionally, the NFIP's ability to borrow from the 
Treasury will be drastically reduced. Given the importance of 
the NFIP to our constituents, it is absolutely critical that 
this committee work together to reauthorize the program before 
the September deadline.
    The NFIP was created in 1968 to provide flood coverage to 
consumers who were unable to obtain coverage from the limited 
private market. The NFIP is funded primarily through premiums 
and fees from policyholders, and a portion of the premiums is 
used to fund mapping and mitigation activities.
    Currently, the program covers about 5 million homes 
nationwide for a total of $1 trillion in flood insurance 
coverage. It is important to reiterate that the threat of 
flooding impacts all of our communities, from coastal regions 
in Florida to parts of Texas and New York, and even to my own 
State of Missouri. There are over 200,000 Missourians who live 
in areas where flooding is a risk.
    As options for reauthorization are discussed, we need to 
work to ensure that flood insurance remains affordable to our 
constituents. And to this end, it is essential that FEMA 
completes the affordable framework that was mandated by the 
Homeowner Flood Insurance Affordability Act.
    Additionally, it is important for us to continue exploring 
the best methods for keeping our flood maps updated and to 
provide sufficient funding for the process. Mitigation is key 
to preventing flood damage, and I am eager to further assess 
how best to improve those efforts.
    Lastly, as we move forward in this legislative process we 
need to assess the current role of the private market and the 
role that it plays in our future.
    Mr. Chairman, with that, I yield to the ranking member of 
the full Financial Services Committee, Ms. Waters.
    Ms. Waters. Thank you, Mr. Chairman. Reauthorization of the 
National Flood Insurance Program is critical. Our housing 
market has struggled in the past as Congress continued to 
extend the NFIP for months at a time.
    These short-term extensions sometimes led to lapses in the 
program's authorization, which caused instability, wreaked 
havoc on our housing market, and placed communities at risk.
    That is why I worked with Mrs. Biggert on what ultimately 
became the Biggert-Waters Act, to put forth a bipartisan, long-
term reauthorization. We accomplished a lot of good things in 
the Biggert-Waters Act, but what I will never forget are the 
unintended consequences of the rate increases that caused great 
concern for homeowners, businesses, and renters across the 
country.
    In response, I worked tirelessly with my colleagues across 
the aisle to enact much-needed rate relief for thousands of 
homeowners and put FEMA back on the path to addressing 
affordability issues. Let's continue in that bipartisan spirit 
to ensure that the NFIP remains able to provide affordable 
flood insurance.
    The affordability challenges are great, but the risk of 
failing to protect homes and businesses in the face of 
catastrophe is greater. Congress must address the $24.6 billion 
debt the program has accumulated responding to catastrophic 
storms like Hurricane Katrina and Superstorm Sandy.
    I will continue to call for the cancellation of this 
enormous burden that has already cost the NFIP nearly $4 
billion in interest alone.
    Mr. Chairman, as we move forward, we should remember that 
in the past 5 years, Congress has made sweeping reforms to 
nearly every aspect of the flood insurance process. In our 
efforts to quickly move a reauthorization, let us not repeat 
the mistakes of the past, when we may have acted with good 
intentions, but due to unintended consequences ended up with 
bad outcomes for families and businesses.
    I yield back the balance of my time.
    Chairman Duffy. The gentlelady yields back.
    The Chair now recognizes the vice chairman of the 
subcommittee, the gentleman from Florida, Mr. Ross, who has 
done a lot of work on flood insurance both on this committee, 
and in his prior life in the legislature in Florida. The 
gentleman is recognized for 2 minutes.
    Mr. Ross. Thank you, Mr. Chairman. I want to thank our 
distinguished guest, Mr. Roy Wright, for being here to discuss 
FEMA's perspective on flood insurance reform. The NFIP is 
something that we have a responsibility to reauthorize in a 
very brief period of time, as was pointed out by my colleagues.
    The fact is the NFIP is in need of significant reforms. 
Floods are a costly and deadly peril, and as has been pointed 
out, the NFIP has an outstanding debt of $24.6 billion. We must 
thoroughly consider reforms to protect taxpayers and improve 
the program now and for the future.
    Ultimately, when I consider reforms to the NFIP, I do so 
with my Florida homeowners in mind. I am committed to ensuring 
that Florida homeowners have uninterrupted access to affordable 
and comprehensive flood insurance policies. As such, my 
priorities for reauthorizing the NFIP are as follows.
    First, Floridians and all Americans across the country 
would greatly benefit from more choices when it comes to flood 
insurance policies, and private competition in this market will 
lead to greater innovation and more affordable and 
comprehensive policies for consumers. We must enact reforms 
that remove regulatory barriers and allow for the development 
of a private flood insurance market.
    Yesterday, I reintroduced my bipartisan legislation that 
passed the House last session by a vote of 419-0. This bill 
will do just that with regard to competition and consumer 
choice.
    Second, we must place the NFIP on sound fiscal footing and 
ensure that there is no lapse in authorization of the program 
that would create an interruption to the real estate markets.
    Third, we must recognize the importance of mitigation and 
reducing the risk exposures for floods and other disasters. Our 
witness today has testified that for every $1 investment in 
mitigation, communities see a savings of $4 in disaster relief. 
The importance of mitigation cannot be understated or 
overlooked.
    I look forward to working with my colleagues to address 
these and other important issues related to the reauthorization 
and reform of the NFIP.
    I thank the chairman again for calling this hearing, and I 
yield back the balance of my time.
    Chairman Duffy. The gentleman yields back the balance of 
his time.
    We now welcome our witness, Mr. Roy Wright, who serves as 
FEMA's Deputy Associate Administrator for the Federal Insurance 
and Mitigation Administration. In that capacity, Mr. Wright 
directs the National Flood Insurance Program, the Mitigation 
and Resiliency programs under FEMA's Stafford Act authorities, 
the National Earthquake Hazard Reduction Program, and the 
National Dam Safety Program.
    Mr. Wright will now be recognized for 5 minutes to give an 
oral presentation of his testimony. And without objection, his 
written statement will be made a part of the record.
    Once the witness has finished presenting his testimony, 
each member of the subcommittee will be given 5 minutes within 
which to ask questions.
    On your table, as you know, Mr. Wright, you have three 
lights: green means go; yellow means you have a minute left; 
and red means your time is up.
    With that, Mr. Wright, you are now recognized for 5 
minutes.

  STATEMENT OF ROY E. WRIGHT, DEPUTY ASSOCIATE ADMINISTRATOR, 
   FEDERAL INSURANCE AND MITIGATION ADMINISTRATION, FEDERAL 
EMERGENCY MANAGEMENT AGENCY (FEMA), U.S. DEPARTMENT OF HOMELAND 
                            SECURITY

    Mr. Wright. Good morning, Chairman Duffy, Chairman 
Hensarling, Ranking Member Cleaver, Ranking Member Waters, and 
other members of the subcommittee. Thank you for the 
opportunity to testify today.
    I want to discuss four core principles for reauthorization 
with you this morning.
    First, we need an on-time multiyear reauthorization.
    Second, we need to increase flood insurance coverage across 
the Nation through both the expansion of private flood 
insurance markets as well as the National Flood Insurance 
Program.
    Third, we need to address barriers to meeting the needs and 
demands of our customers.
    And fourth, we need to bring transparency to the financial 
framework of the National Flood Insurance Program.
    Flooding is the most frequent and expensive disaster in the 
United States: 90 percent of natural disasters in the United 
States involve a flood, and 22,235 communities across the 
Nation rely on the National Flood Insurance Program. That 
represents 98 percent of the Nation's population.
    We work with 73 private insurance companies who participate 
with FEMA in delivering these policies to our 5.1 million 
policyholders.
    So let's look with some perspective over the last couple of 
decades. Due to the nature of flooding, impacts can vary 
significantly each year.
    After 15 years of lower-than-expected damages, Hurricanes 
Katrina, Rita, and Wilma all hit the Nation in 2005. These 3 
catastrophic events resulted in NFIP claims that totaled 8 
times the size of any prior year in the program's history.
    Rather than directly providing the funds to meet these 
requirements, Congress directed the NFIP to pay for 
catastrophic losses through funds borrowed from the Treasury. 
Paying the insured losses in 2005 required the NFIP to borrow 
$17.5 billion.
    In 2012, Hurricane Sandy hit the East Coast and resulted in 
more than 144,000 NFIP claims. The program paid out an initial 
$8.4 billion to policyholders. With the corrective actions that 
FEMA has taken, the NFIP has since paid out an additional $350 
million.
    Since Hurricane Sandy, FEMA has been transforming the NFIP 
customer experience and has been improving our oversight and 
engagement with the Write Your Own (WYO) companies. Using our 
own authorities, we have implemented a new appeals process. We 
have improved the oversight of the Write Your Own companies, 
with special attention to litigation.
    FEMA has streamlined the process for making regular changes 
to the relationships with the private sector partners. And we 
have begun to modernize the product to better provide the 
coverages that policyholders want and expect.
    The NFIP is also going to change as being more proactive in 
disaster readiness and response. I think 2016 is a case in 
point. We began issuing advanced payments to policyholders, up 
to $10,000, while their full claim was processed.
    We increased coordination with State insurance 
commissioners. We deployed our insurance staff directly 
downrange in the field. And we have far more proactive 
communication with policyholders and the companies. I would 
assert that FEMA's performance in 2016 demonstrates the 
proactive progress we have made.
    While there was no single catastrophic disaster in 2016, 
multiple events in Louisiana, Texas, and several other States 
involved in Hurricane Matthew all resulted in the third largest 
claims payout in NFIP history, with incurred losses of more 
than $4 billion.
    So to the reauthorization, the core principles, first, it 
has been said by numerous people today, and I would wholly 
agree, that the NFIP needs an on-time, multiyear 
reauthorization. The stability of the real estate and mortgage 
markets depend on this.
    Second, the reauthorization should recognize the need to 
increase flood insurance coverage across the Nation in both 
high- and moderate-risk areas.
    FEMA recognizes that there is a growing interest by private 
insurers to offer flood insurance protection. FEMA supports 
this because an insured survivor, whether they get their 
coverages on the private market or through the NFIP, will 
recover more quickly and more fully.
    To these ends, we must realize that it will take time for 
the private market to adapt to the market currently served by a 
public program.
    And if the private market were to glean only the lower-risk 
policies, the NFIP would be left with all of the high-risk 
policies. This could lower NFIP premium revenue while 
increasing potential claims payout. Such action would leave the 
program with even more financial risk, with greater reliance on 
taxpayers and the Treasury each and every year.
    As we look forward, a number of opportunities should be 
explored. Congress could identify a future point in time by 
which flood policies for all new construction would be provided 
solely by the private market. When coupled with ongoing 
floodplain management and building code enforcement, these new 
residential structures would be built to insurable levels for 
risk to the private market.
    Third, we need to remove barriers to providing 
policyholders the coverages they want and need.
    And finally, we will all be better off in the future 
discussions relating to the National Flood Insurance Program 
when the program has a sound financial framework.
    We need to price the risk and make it plain. Whether this 
is done by increasing premiums, reducing risk through 
mitigation grants, or by discounts directed by Congress, the 
fiscal solvency of the program depends on it.
    I appreciate the time to be with you this morning, and I 
look forward to the conversation, Mr. Chairman.
    [The prepared statement of Mr. Wright can be found on page 
52 of the appendix.]
    Chairman Duffy. Thank you, Mr. Wright.
    The Chair now recognizes himself for 5 minutes to ask 
questions. Mr. Wright, my staff reached out to yours in regard 
to data on compliance rates for mandatory purchase properties. 
We have heard a lot of conversation, as I have talked to a lot 
of stakeholders, that there is a low take-up rate.
    You have indicated to me that you don't have data on that 
front. We have actually reached out to the OCC, who also said 
that they don't have data on that front.
    However, earlier this week our staff was provided a copy of 
the following slide--if we could put the slide up--from a FEMA-
developed presentation entitled, ``State of the NFIP,'' which 
says there is a significant amount of noncompliance--53 percent 
of policies.
    I would just note, being a guy from Wisconsin, we are one 
of the best of the worst States on that front. Duly noted. Do 
you stand by this data?
    Mr. Wright. So--
    Chairman Duffy. My question is, I keep hearing this, and I 
am wondering where this data is coming from? That is a real 
issue in regard to the program.
    Mr. Wright. There is a set of studies that have been out 
there. We have cited them. As you look nationally, I have heard 
a third. We can look at the half in terms of these concentrated 
States.
    Under the National Flood Insurance Act, mandatory purchase 
is not a responsibility of the National Flood Insurance Program 
at FEMA. I can use the data that is there. What I will tell you 
is it is very difficult to fully understand a couple of pieces 
of the market.
    I was shown some data 2 weeks ago that 39 percent of real 
estate transactions in 2016 were cash transactions. And so when 
we started looking at the way that would play, those folks 
would not be having a federally-backed mortgage.
    That said, more people clearly need to be covered. There 
are structures at risk that do not have the insurance they 
need. And collectively, whether that is through us or through 
the lending regulators, we need to redouble our efforts to see 
that improve.
    Chairman Duffy. Just to be clear, this is a FEMA document, 
correct?
    Mr. Wright. Yes, sir.
    Chairman Duffy. FEMA in the bottom left corner. Do you 
stand by these numbers?
    Mr. Wright. They are the best--
    Chairman Duffy. Is it a surprise that this is a problem?
    Mr. Wright. I acknowledge it as a problem and it is the 
best numbers that I have available to me today, yes.
    Chairman Duffy. Okay. Let's move on to the NFIP debt and 
future costs. Under Grimm-Waters and Biggert-Waters, there is a 
requirement that FEMA put a plan together to pay back the 
billions of dollars the NFIP owes the American taxpayer. You 
are tasked in putting together a plan. Have you put together a 
plan to pay back the American taxpayer?
    Mr. Wright. We have developed the required plans related to 
when we borrow. To be very plain, given the discounts, later 
the subsidies and grandfathering that are in place today, there 
is not a practical way for us to repay this debt.
    Chairman Duffy. So we don't have a plan to pay it back?
    Mr. Wright. Based on the discounts and subsidies that I 
have been directed under the National Flood Insurance Act to 
implement, which are the constraints--I have to follow the 
laws--I don't have an ability to do so.
    Chairman Duffy. Is it possible for you to put together a 
plan that says okay, I am going to make a recommendation to 
Congress which states that if you want to pay this back, this 
is what you have to do on a policy front to actually allow me 
to be in a situation where this debt can be paid down or 
brought to zero?
    Mr. Wright. It would require an exponential move in the 
policy premiums or reserve allocations in order for us to be 
able to pay the normal year claims, deal with the mid and 
larger events that are prospectively coming, and deal with the 
$24.6 billion. The $24.5 billion that is there I can attribute 
to the grandfathering and discounts that we have been directed 
to implement.
    Chairman Duffy. Quickly, I want to move to reinsurance. 
Obviously, we now have purchased reinsurance through the NFIP.
    Mr. Wright. Yes.
    Chairman Duffy. Are there any plans to have further 
purchases of reinsurance to offload some of our risk?
    Mr. Wright. Absolutely, and I have collaborated with a 
number of people on the committee on this front. I think, 
rightfully, this committee pushed the program to begin to find 
other ways to transfer the debt. We did a pilot last fall and 
then did this first placement.
    I view it as a cornerstone placement that we will building 
upon going forward. Reinsurance is an important tool, but I do 
not believe that reinsurance can wholly solve for the unmanaged 
liabilities that are in front of us.
    Chairman Duffy. I only have 15 seconds left, but I want to 
go back to the slide that I presented to you. You said that you 
stand by these numbers.
    Do you have any recommendations on what you should be 
doing, or regulators of banks should be doing, or what Congress 
should be doing to make sure? If you stand by these numbers, 
the take-up rate isn't as low as it actually is. It is at 50 
percent.
    Mr. Wright. We need to collectively be working with the 
insurance agents that are across the country who are the 
frontline salesforce that is there. We need to be working with 
the banking regulators, the lenders, OCC and others, who have 
those authorities in place. And collectively, we have to push 
farther down the road.
    There were some increases in penalties that were put into 
the last bill that became law. Obviously, that has not forced 
us to see a bigger uptake.
    Where I see the uptake happen is when people in the 
aftermath of events, when they have seen their neighbors and 
others across their State experience flooding, that is the 
point by which I usually begin to see an increase in policies.
    Chairman Duffy. Thank you.
    The Chair now recognizes the ranking member of the 
subcommittee, the gentleman from Missouri, Mr. Cleaver, for 5 
minutes.
    Mr. Cleaver. Thank you, Mr. Chairman.
    Mr. Wright, I want to go back to where the chairman was on 
the debt, the $23 billion and coverage is about $1 trillion, a 
trillion dollars? If we wanted to realistically try to 
eliminate the debt, what percentage of an increase do you think 
would be required on the policy premiums?
    Mr. Wright. Without fully being able to model out the exact 
expected--
    Mr. Cleaver. No, I understand. I am just--
    Mr. Wright. --losses that are there, but I finished 2016 
having used up all of the reserve fund, which thankfully had 
been created. And we used up $1.5 billion out of the reserve 
fund. I drained all the premiums that were there and still 
needed another $1.6 billion.
    That kind of event or year the models tell me I would 
expect in any 10-year period it would be reasonable to expect 
that. To pay off the debt seems impractical to me in that that 
debt is associated with discounts and subsidies that Congress 
asked me and my predecessors to implement, which we did.
    The idea that we would then go to future policyholders and 
say they have to pay for that debt, I think becomes a difficult 
mountain to climb.
    Mr. Cleaver. Right. So we all acknowledge, I think, that we 
have a significant debt. And what would be at risk if we just 
forgave the debt, just write it off and with this new bill 
coming out, hopefully before September 30th, we can begin a 
process of preventing another rise of $23 billion?
    Mr. Wright. I think things like reinsurance help us build a 
credibility so that we are less likely to experience those kind 
of losses going forward. Ultimately, only Congress can deal 
with that. It was under Congress' direction that we went and 
borrowed those dollars.
    From a year-to-year perspective the piece that has the most 
direct impact on us is the servicing of that debt. And while 
today we have an advantageous rate with the Treasury, it is 
nearly $400 million a year that we are paying to service that 
debt.
    In this instance, the interest payments that I owe, just 
under $200 million this month, we will be paying based off of 
money that we borrowed from the Treasury.
    Mr. Cleaver. But if we had WYOs, if more than--how many? We 
have 70-something?
    Mr. Wright. We have 73 Write Your Owns today.
    Mr. Cleaver. Okay. If that wasn't the program, that means 
that the insurance companies would service the debt, would 
service the policies?
    Mr. Wright. So if this was written entirely in the private 
market they would have to charge rates and submit to insurance 
regulators in their State. They would have to charge rates 
commensurate with that risk. And those rates in many instances 
would be substantially higher than we charge today.
    Mr. Cleaver. Okay. Now, does it make sense to have a bill 
that we make--I realize we are legislative and you are not, but 
privately, I am asking for advice.
    Mr. Wright. Yes.
    Mr. Cleaver. Would it not be helpful if we had a 10- or 12-
year bill so that we could actually experiment with the WYO 
program, giving interested companies an opportunity to examine 
and look at this program perhaps better than they ever had or 
that we have had?
    And that as the years move by we then reduce the Government 
participation until it reaches a level that won't bankrupt the 
Government?
    Mr. Wright. Right. Two points on that, Mr. Cleaver. I think 
in terms of the length of a reauthorization, I would leave that 
up to the committee. I think we need a multiyear and there are 
a lot of different ways to get there.
    I do think that in terms of what does it mean over this 
next decade to see the private market grow, I am a strong 
proponent of seeing the private market grow. As I said in my 
testimony, I can imagine beginning to set aside portions, 
particularly new construction at a date on forward by which 
when we look at that it says that will solely be purchased on 
the private market.
    I think it give us an opportunity to create dedicated 
space, let those markets take hold, take root, and flourish. 
Because at the end of the day, from a public policy 
perspective, yes, I direct the National Flood Insurance 
Program, and I am an advocate for the National Flood Insurance 
Program, but more important is to ensure that people are 
covered for these risks. Because I know after an event, when I 
am on the ground, those who are insured recover more quickly 
and more fully.
    Mr. Cleaver. Thank you.
    Chairman Duffy. The gentleman yields back.
    The Chair now recognizes the vice chairman of the 
subcommittee, the gentleman from Florida, Mr. Ross, for 5 
minutes.
    Mr. Ross. Thank you, Mr. Chairman.
    And if I might go back to the slide that was up with the 
questioning by the Chair? Quickly, Mr. Wright, this is taken 
from a policy and mandatory purchase requirement penetration 
report ending in July 2014. Is there a more recent report, and 
if so can you provide the committee with that report?
    Mr. Wright. FEMA does not have a report it has generated. 
There are a number of statements and reports that are out and 
we would be happy to--
    Mr. Ross. The most recent would be whatever resources that 
are out there that would reflect similar data.
    Mr. Wright. I would be happy to do so.
    Mr. Ross. Great. Quickly, in regard to reinsurance, how 
much reinsurance would you say you purchased on behalf of NFIP 
in percent of your liability, your exposure--5 percent?
    Mr. Wright. It depends on what the probable maximum loss is 
in those kind of pieces and you would never insure all the way 
to that full probable maximum loss. But a 1 percent annual 
chance event across the entire program has been modeled at 
about $26 billion. We often view that as a probable maximum 
loss.
    So I would look at the revenues in any given year, retained 
premiums and the like. The 1 percent that we bought, the $1 
billion, excuse me, that we bought--
    Mr. Ross. So it is not a function of capacity in the 
market, is it?
    Mr. Wright. At some point, this does turn into a capacity 
question.
    Mr. Ross. But there is significantly more capacity than 1 
percent, I would assume?
    Mr. Wright. There is more capacity than we have used.
    Mr. Ross. Good. And I apologize because I am going to kind 
of go fast here in 5 minutes. Let's talk about risk assessment 
because I think that is what we really get at when we are 
talking about insurance, not relief but insurance where we have 
prefunding of risk and we manage that risk.
    There is a 2014 NFIP report report on the feasibility of 
releasing property specific policy and claims data which states 
that, ``Full risk premiums--these are flood premiums--are not 
based on loss experience due to the large variability of flood 
losses.
    ``Rather, NFIP rate setting is based on several components 
that vary from property to property and involves complex 
calculations of expected frequency and severity of flood 
losses.''
    So you would agree with that, I assume? And I guess my 
question is, you don't use loss claims data to assess risk, is 
that correct?
    Mr. Wright. I think--
    Mr. Ross. But anybody else out there who is managing risk 
uses loss claims data.
    Mr. Wright. We do use loss claims data.
    Mr. Ross. To what extent?
    Mr. Wright. We use that along with other data. And so--
    Mr. Ross. And about that data, do you consider the data and 
the calculations that the NFIP uses to assess their risk to be 
proprietary?
    Mr. Wright. I do not.
    Mr. Ross. So it could be shared?
    Mr. Wright. So--
    Mr. Ross. You are the only game in town essentially?
    Mr. Wright. What I have done is, as part of reinsurance, we 
did a lot of modeling in order to get pricing from the 
reinsurers.
    Mr. Ross. Right. But--
    Mr. Wright. the result of that additional--
    Mr. Ross. --for pricing to the consumer.
    Mr. Wright. Correct. So to that point, I have recently 
released most of the data that I provided to the reinsurers. It 
is the fullest expression of loss that we have ever published.
    Mr. Ross. Okay. So you use some loss claim data for that, 
but looking ahead, you also really just rely on mapping and 
elevations?
    Mr. Wright. No, I use loss claim data as well as future 
expected losses.
    Mr. Ross. Okay.
    Mr. Wright. There are other elements, but if I look at my 
rate calculations, both of those elements come into that 
calculation.
    Mr. Ross. How granular do you get? Do you ever go to see if 
this--do you concern yourselves with whether the structure you 
are considering insuring, which we will have to insure, is 
concrete block, wood, or whatever?
    Mr. Wright. We do look at type of construction. We also 
look at elevation of that structure and the expected--
    Mr. Ross. Yes.
    Mr. Wright. In a coastal area, we look at velocity 
elements, whether there has been ponding. We do look at those 
elements as well.
    Mr. Ross. So when we talk about mitigation, what incentives 
are out there for an existing homeowner to mitigate under the 
NFIP?
    Mr. Wright. The first incentive is that by mitigating, they 
are going to be able to withstand that flooding event. Beyond 
that, I have used some ways to discount the flood insurance 
pricing if their community participates in the community rating 
system.
    Mr. Ross. Okay.
    Mr. Wright. And in some instances, we make grants available 
to do that elevation or acquire that property.
    Mr. Ross. And if I am a homeowner who believes they have 
mitigated their home to withstand, and I have science and 
engineering to support that, how do I go about convincing you 
that I am entitled to a discount or otherwise am not the risk 
that you have assessed me at?
    Mr. Wright. Chief among them is going to be the elevation 
of that, and we have ways for you to submit those data to us, 
and we will look at that specific property.
    Mr. Ross. And if I am successful, having spent thousands of 
dollars for my engineerings, I bear the cost of that, don't I? 
There is no recovery of costs for being able to be successful 
against the NFIP to have a reduction in premium?
    Mr. Wright. Correct.
    Mr. Ross. Is that correct? Okay.
    I yield back.
    Chairman Duffy. The gentleman yields back.
    The Chair now recognizes the gentlelady from New York for 5 
minutes.
    Ms. Velazquez. Thank you, Mr. Chairman.
    Mr. Wright, President Trump has stated multiple times that 
Mexico will pay for his proposed border wall. But now, 
according to media reports released on March 7th by the 
Washington Post and this morning by another outlet, it is 
looking like the White House is considering a surcharge on NFIP 
policyholders to pay for the President's border wall.
    So Mr. Wright, what do you have to say to homeowners who 
are trying to purchase insurance through NFIP and find it more 
expensive because of this new surcharge? And what do you say to 
taxpayers in this country, because throughout the campaign 
trail Mr. Trump said that Mexico will pay for that wall?
    Mr. Wright. I am familiar with the report that you are 
referencing. To the best of my knowledge, final decisions 
related to the budget being developed by the White House have 
not been made, so I need to refer you to the Office of 
Management and Budget related to those pre-decisional elements 
related to it.
    The assurance that I can give you, Congresswoman, is that 
when we do have a budget proposal in hand, I would be happy to 
sit down and discuss that with you.
    Ms. Velazquez. Well, I can tell you this. Policyholders in 
my district in Red Hook, in lower Manhattan, who were 
devastated by Sandy, they truly, truly believe that this is an 
outrageous idea. And I hope that you can take that to the 
President.
    Mr. Wright, in response to the systemic problems in the WYO 
program that surfaced after Sandy, I have introduced H.R. 1423, 
the National Flood Insurance Program Reauthorization and 
Improvement Act of 2017, to improve the efficiency and 
transparency of the processing of claims and to provide better 
oversight and management of FEMA and the Write Your Owns.
    What lessons has FEMA learned in the aftermath of Sandy? 
And how have you incorporated those lessons into your claim 
practices?
    Mr. Wright. I appreciate the question. As we look at it, 
clearly Sandy was a pivot point. The program had lost the focus 
on the policyholder and on the customer that needed to be 
there.
    There are many things that we have learned, some of which 
change how we sell policies going forward. Let me take 
particularly the element related to claims and oversight 
because I think that is where you are headed with this.
    Ms. Velazquez. Yes.
    Mr. Wright. We have now issued instructions which ensure 
that after an event, we go down and provide additional training 
to adjusters before they go out. We have increased the amount 
of quality control of those adjusters.
    To the point of engineering reports, I have issued 
instructions, so there is policy out to all of the Write Your 
Owns--whatever engineering report is the basis of the claim 
decision must be provided to the policyholder. They have a 
right to see what those elements are.
    Ms. Velazquez. Okay. Thank you. A number of the Sandy claim 
disputes revolve around whether the flood caused the damage or 
the property had a pre-existing condition. Could you tell me 
what fraction of the properties in the NFIP currently have such 
a pre-existing condition that might lead to denial or reduction 
in a claim payment? And if not, what will FEMA need in order to 
estimate that figure?
    Mr. Wright. I think that the nature of structures, 
particularly residential structures, continues to evolve over 
time. And so I don't know if you can ever have a perfect 
insight into it. As we look at these elements, what I have 
tried to do is make plain--one of the things that we have given 
advice on to policyholders, and actually it is true for all 
kinds of insurance, is that you should be taking pictures and a 
video of your home every single year all the way around and 
walking all the way through. You will have physical 
documentation of what pre-existing looked like in these 
instances.
    But we have to look at this. I sometimes use a car example 
related to insurance.
    Ms. Velazquez. You are not of the opinion that you need to 
go and inspect a property before buying a flood insurance 
policy?
    Mr. Wright. Today, an agent works with them. There are data 
that are collected. I don't know about the feasibility of 
visiting all 5.1 million policyholders.
    Ms. Velazquez. Okay.
    Thank you, Mr. Chairman.
    Chairman Duffy. The gentlelady yields back.
    The Chair now recognizes the gentleman from New Mexico for 
5 minutes.
    Mr. Pearce. Thank you, Mr. Chairman.
    Mr. Wright, continuing the discussion that Mr. Ross had 
about the release of your data, are you allowed by law to 
release that data?
    Mr. Wright. The legal constraint that I have says that I 
need to continue to comply with the Privacy Act when I do so. 
And I know that folks have wanted to--
    Mr. Pearce. I just need to get to an answer. We have a lot 
of questions here. You can do it or you can't do it without 
conditions? I know you may have conditions, but you can do it?
    Mr. Wright. I can release data presuming--
    Mr. Pearce. And so you said you only recently--
    Mr. Wright. --that I do not violate the Privacy Act.
    Mr. Pearce. --released data. Why did it take this long to 
release the data and what is it going to take to release the 
rest of the data? If you are going to get private lines into 
the market, they need something to work with. So why did it 
take this long?
    Mr. Wright. Sir, it is something that we have worked on for 
a number of years. It hasn't moved fast enough. Part of what I 
did is I had to package up and do modeling related to 
reinsurance last year and I have now released those data.
    Mr. Pearce. Why didn't it move faster? What were the hold-
ups internally?
    Mr. Wright. There are some realities related to some 
systems that are in place and then how would we package up 
those data to make them available without violating the Privacy 
Act.
    Mr. Pearce. But when I translate that to West Texan, which 
we speak out in New Mexico, it sounds like ``stall.'' I don't 
know. Maybe it is; maybe it is not.
    And the problem is that you keep saying that we need to get 
the private sector involved. But when you don't facilitate that 
with the data, and I think Mr. Ross made it very clear that 
that is the basis, then it is just words, that we are going to 
get the private market involved.
    It is what your testimony says, but we don't actually ever 
make it possible. We don't ever make the information available. 
So we go year after year after year without that.
    And it gets very frustrating because now the taxpayer is on 
the hook for stuff that you said previously in answer to 
questions that we are not ever going to pay off. You don't see 
a way to pay that off. That is very frustrating for us from 
this side.
    So when a community is--changing the focus--going to join 
in and participate with FEMA, is there a process you all have 
to get an agreement back and forth?
    Mr. Wright. Yes, sir.
    Mr. Pearce. Recently, one of the tribes in my district got 
FEMA maps published, and that was during the last year. They 
had never entered into an agreement with FEMA, so how did it 
occur that one of the tribes didn't have an agreement, FEMA 
admits it doesn't have a signed agreement, and you go in and 
map? How did that occur?
    Mr. Wright. We have direction and authorities to do mapping 
across the country. I would need to go back, sir, and look at 
the specifics in this instance. And in many contexts we are 
doing water--
    Mr. Pearce. But you don't need signatures from Indian 
tribes?
    Mr. Wright. We do watershed-based analysis.
    Mr. Pearce. I see. You don't get signatures from Native 
American tribes to get into the FEMA system so that the maps 
are drawn. Yes or no?
    Mr. Wright. I require them to give me a signature if they 
want to join the program when they are--
    Mr. Pearce. Okay. So they didn't sign, they didn't indicate 
that desire, you all admit that you didn't get the signature, 
but you went ahead and mapped anyway.
    I have constituents of mine asking how a Government agency 
proceeded like that without their approval? And I am trying to 
get an answer from you in this hearing today. How did that 
happen?
    Mr. Wright. I can go back and get the specifics on this map 
and the information related to the tribe. Ultimately, it is the 
tribe's choice about whether or not to join the national--
    Mr. Pearce. Yes, but they made the choice not to join. I am 
telling you that they made the choice. You did it anyway, and I 
am asking how that moved forward? You said that you require so 
surely the agency had some ability. They have admitted they 
didn't have a signature.
    Surely they have the ability, whomever went out and mapped 
it has some requirement or checklist, yes or no, agreement, I 
don't have it, so I probably shouldn't go out there and map 
that and they did.
    And I am just saying that you need to get me an answer 
because I am being asked to give an answer. And that process 
needs to move rather quickly instead of rather slowly, like the 
whole release of data. I don't want it to take that long, if 
that makes some sense?
    Mr. Wright. We will get you an answer, sir.
    Mr. Pearce. Now, when I look at the $4 billion, 83,000 
participants that you paid out, that is $48,000 per person. 
Roughly in my last 28 seconds, how is that money distributed or 
how is that money used? What was it distributed for?
    Mr. Wright. When we distribute money post-claim, it is to 
pay for the damages to that facility. So we will send out an 
adjuster. We will look at the damages. Once those are 
documented we will pay for the eligible damages up to the 
maximum value of the policy.
    Mr. Pearce. And the $10,000 advance payment, what is that 
for?
    Mr. Wright. That $10,000 is part of their claim payment. It 
is the first piece of that, ensuring that policyholders who 
were insured have money in their hand immediately following the 
event.
    Mr. Pearce. Okay. I will look forward to hearing from you 
on the Isleta tribe in my district. Thanks.
    Mr. Wright. We will get you that.
    Mr. Pearce. I yield back my time.
    Chairman Duffy. The gentleman's time has expired.
    The Chair now recognizes the gentleman from Massachusetts, 
for 5 minutes.
    Mr. Capuano. Thank you, Mr. Chairman.
    And thank you, Mr. Wright. Mr. Wright, you realize we are 
here again doing flood insurance because some people in this 
committee have a blind philosophical commitment to total 
privatization of the flood insurance market. I am just curious. 
Do you think we could privatize it tomorrow?
    Mr. Wright. I think that there is a portion of the risk 
that--
    Mr. Capuano. Do you think we can privatize the whole of it? 
Right now. We have always had some private entities in the 
market. Nobody, I think, objects to that. Do you think that we 
could privatize the entire flood insurance market now?
    Mr. Wright. There is a portion of the risk that I believe 
will likely always be with the National Flood Insurance 
Program.
    Mr. Capuano. It is a very simple question. Can we do the 
whole market or can we not? Yes or no, very simple?
    Mr. Wright. I don't believe we could do that today.
    Mr. Capuano. I thought that was what you would say. I just 
wanted you to say it instead of me. Let me ask you a question. 
When you work for FEMA, you don't just work for flood. You also 
work for any other emergencies that happen or any other 
catastrophic--
    Mr. Wright. I have responsibilities across--
    Mr. Capuano. That is right.
    Mr. Wright. --a full range of natural hazards.
    Mr. Capuano. Can you tell me if there is a difference if I 
lost my home to a flood or a tornado? Do I care about that as 
an individual? Have you ever met an individual who cares how 
they lost their home?
    Mr. Wright. At that point, they are focused on the fact 
that they lost their home.
    Mr. Capuano. That is what I thought. Yes, we treat them 
differently because we don't have a tornado insurance trust 
fund. Is that correct? Did I miss something?
    Mr. Wright. Tornado is covered under the standard 
homeowners' policy loss--
    Mr. Capuano. Right. Standard homeowner policy and/or FEMA, 
but if there is a massive tornado that comes in and rips up 
thousands of homes, we don't have a typical thing like flood 
insurance?
    Mr. Wright. Most of those residences would be covered in 
their homeowners'. FEMA's role oftentimes from a financial 
perspective deals with the community and their infrastructure 
post-disaster.
    Mr. Capuano. So we come back in, and we still pay them lots 
of money. See, I personally think we should have a natural 
disaster insurance fund as opposed to simply flood insurance, 
because I don't think people care.
    It also avoids the argument after the Sandy's and the 
Katrina's of, did your house go away by flood or did your house 
go away by wind? Who cares? Nobody cares except the insurers 
who don't want to pay, which I understand, but nonetheless, I 
would argue that is something we should be looking at.
    I guess, as I was reading your testimony, you did talk 
about privatization for new construction. What do you think it 
would cost if it was just new construction?
    If I had a home here and I built the--and it was flood 
insurance and typical, and I built a home right next door. It 
was brand new construction, but the exact same home as was next 
door, what do you think the cost differential would be? About?
    Mr. Wright. At that point, the private market actually 
priced their risk. What I would tell you is this: Given the 
maps that are in place, the building codes that are in place, 
new construction would be built higher and stronger. It is an 
insurable risk. At that point it is--
    Mr. Capuano. What do you think it would cost? About the 
same?
    Mr. Wright. It would likely be commensurate to what we 
charge.
    Mr. Capuano. Commensurate to what we charge now?
    Mr. Wright. Minus the surcharges and other assessments that 
we are required to put on.
    Mr. Capuano. So it would cost more?
    Mr. Wright. It would likely cost more.
    Mr. Capuano. Right. And what do you think that would do to 
small communities or small businesses that want to expand, 
because new construction is also expansion? Who want to expand 
or want to build a new restaurant or a new little grocery store 
to service people?
    Mr. Wright. Congressman, I think this is why we need to lay 
this out and give ourselves a few, 3 years or whatever the 
right number is so that these markets can build out. We will be 
better served--
    Mr. Capuano. Can we do that if we simply kick this can down 
the road again like we did? If we just kick this can down the 
road another year or so because we won't be able to come up 
with an answer, do you think that will happen?
    Mr. Wright. It would require a more comprehensive action by 
this body for us to make this.
    Mr. Capuano. So you think we need to do something that 
takes, what, 3 years minimum, 5 years minimum?
    Mr. Wright. I would assert to you that we should work with 
the markets. I would say something like 3 years or so, so that 
we can see it build out would be an appropriate piece. At that 
point, the private markets will be there and they should be 
able to respond to those elements.
    Mr. Capuano. You think if we simply do what we have done 
already which is to say let's delay it a year, let's just keep 
what we have, because we can't come up with a conclusion, do 
you think that would be a missed opportunity?
    Mr. Wright. I will tell you that my first priority is to 
get a multiyear reauthorization done. And that can be done in a 
one-page bill or that can be done in a 300-page bill. The first 
priority is to make sure we don't have the disruption.
    Mr. Capuano. I would agree with that wholeheartedly. By the 
way, just out of curiosity, do you realize how many second 
homes there are in, oh, I don't know, let's say Florida?
    Mr. Wright. I don't have that number, sir.
    Mr. Capuano. I think the answer is a lot.
    [laughter]
    And how many of them are Mar-a-Lagos versus maybe a small 
condo a few hundred feet from the beach, or maybe even a 
trailer park? Do you have any idea--like a double-wide?
    Mr. Wright. Sir, I don't have a second home, and I don't 
have an answer on that.
    Mr. Capuano. I can only tell you my in-laws had a double-
wide, and it wasn't a multimillion dollar home, and it was in 
Florida and they were in a floodplain. And if it went totally 
private they would have had to sell their double-wide, gone 
away, and that town would have lost thousands of residents 
because of it. Thank you, Mr. Wright.
    Chairman Duffy. The gentleman yields back.
    The Chair now recognizes the gentleman from Florida for 5 
minutes.
    Mr. Posey. Thank you very much, Mr. Chairman.
    Mr. Wright, flood insurance policyholders pay for increased 
cost of compliance, ICCs, as part of the standard policy that 
offers $30,000 to cover the cost of certain mitigation 
measures. So that is up to $30,000 for a policyholder to 
elevate, flood-proof, relocate, et cetera, to come into 
compliance.
    However, they can only access the money after their home 
floods, a claim is filed, and the community makes a 
determination of substantial damage. Usually when I hear the 
word ``mitigation,'' I kind of visualize the word 
``prevention.''
    And I don't think it is really mitigation if we are only 
allowing the policyholder to take these measures after the 
fact, after the damage has already been done.
    So the statute does authorize ICC for homeowners who 
receive an offer of pre-flood mitigation, and I'm just 
wondering if you have implemented any part of that statute?
    Mr. Wright. Given the breadth of my responsibilities, I 
will tell you, there is no bigger proponent of building higher 
and stronger from a mitigation perspective than myself. As I 
look at ICC, this increased cost of compliance sits inside an 
insurance program, but it really is a mini-grant.
    And so we are told by Congress to set a price. There is a 
cap that is put on that price so that we can collect revenue 
for it. A decision to expand ICC to a higher number or to allow 
it to be applied in more instances would require us to collect 
more revenue related to that increased cost of compliance.
    Mr. Posey. Okay. So that is why it has not been 
implemented. You don't have the revenue.
    Mr. Wright. Yes, sir.
    Mr. Posey. Okay. Now, is it true that a few years ago FEMA 
considered providing ICC grants before a property floods, when 
it is more cost-effective?
    Mr. Wright. We have considered the pieces in the past. Up 
to this point we have implemented the pieces that are 
consistent with the revenue that we bring in.
    Mr. Posey. Okay. So what happened to the rulemaking when 
they were going to do the pre-catastrophe?
    Mr. Wright. Today, and we can go back to the specifics, I 
have a tolerance thing in the statute up to $75 that I can 
collect in premiums towards that increased cost of compliance. 
Those dollars are already being occupied based on those who are 
in the post-event environment.
    And so we have looked at this. Given your interest, sir, we 
will look into it more.
    Mr. Posey. Thank you. On another note, I want to ask about 
the flood insurance advocate office. The Homeowner Flood 
Insurance Availability Act created an Office of Consumer Flood 
Insurance Advocate to help homeowners navigate the flood 
insurance questions. Can you give us an update on how this 
office has been able to help consumers since 2014?
    Mr. Wright. Yes. I think it is one of the things as I look 
at HFIAA, as well as Biggert-Waters, that I can say truly has 
produced value and benefit for us.
    This group has really a sort of independence allowed to 
them. They get the frustrated and confused policyholders. It is 
the last kind of relief valve that is available to them.
    Their caseload has continued to rise as people become more 
aware of it. They work a specific case, but just as important 
to me is the fact that as they look at their caseload, they are 
making recommendations, back to myself and the FEMA 
administrator, about ways that we can improve the program and 
intervene in ways so that we can really be a learning 
organization so that--
    Mr. Posey. Okay.
    Mr. Wright. --we don't repeat those problems.
    Mr. Posey. All right. Now, what is the biggest complaint 
you hear from consumers and how can we help address those in a 
reauthorization?
    Mr. Wright. First, we get some concerns about the rates 
that they have to pay and they want to make sure that those 
have been looked at and any way to reduce their rate that they 
can have.
    The second piece that they look at is on their 
understanding of the coverages that they have. In the most 
recent report from the advocate that was given to me and has 
been released publicly, he has also highlighted the concerns 
about processing of the ICC, the increased cost of compliance.
    And then I have a whole smattering of things. Sometimes it 
is on a mapping issue. Sometimes it is on an underwriting issue 
on a--I get a report from him every 60 days looking at kind of 
the throughput of what they are hitting. He can make 
recommendations anytime during the year, and then once a year 
he releases a public report.
    Mr. Posey. Thank you for your frank answers.
    I yield back, Mr. Chairman.
    Chairman Duffy. The gentleman yields back.
    The Chair now recognizes the gentleman from Michigan for 5 
minutes.
    Mr. Kildee. Thank you, Mr. Chairman.
    And thank you, Mr. Wright, for being here, and like my 
colleagues, I am quite concerned that we reauthorize this 
program in a timely fashion. And I think many of us on the 
committee and in this room know what happens when there is 
uncertainty in these markets.
    It was not that long ago that we saw TRIA go through a 
similar situation where uncertainty and the uncertainty that 
this Congress would reauthorize that program led to a real 
impact in the marketplace.
    And we would certainly hate to see the entire housing 
market impacted by our inability to move and agree with you to 
get a longer-term reauthorization. That is really not the 
direction I would like to take.
    I would like to follow up a little bit on the last set of 
questions. In your answer on consumer concerns, you mentioned a 
few areas. And you indicated one of those areas where I think 
your term was, ``smattering of complaints or concerns'' that 
had to do with mapping.
    I wonder if you first might comment on what your level of 
confidence is or what your assessment is of the accuracy of the 
maps as they currently exist?
    I know it is a dynamic process, but in general how would 
you characterize the accuracy of maps that are determining 
which properties fall into the category requiring insurance?
    Mr. Wright. I would characterize the maps today as 
credible. And the nature of the science continues to evolve. 
The nature of the built environment continues to evolve.
    By statue, the mapping process is done in collaboration 
with the communities. And you can always buy more data. You can 
always buy more precision.
    I have to work with the resources that I have, and that is 
why from a credibility perspective, when the maps are 
developed, they are then sent to the community for review and 
comment, ultimately going through a formal due process and 
appeal period for 90 days.
    Mr. Kildee. It would seem to me though, having worked in 
local government for a very long time and seeing just 
incredible changes in the ability of a community to deal with 
say, planning and zoning or other land use issues through the 
development of new technology with GIS and all the other tools 
that are available, that we ought to be able to be much more 
efficient in terms of updating maps.
    And I raise that because at least in the area that I 
represent, and I am from Michigan, we run into significant 
problems with accuracy and also significant delays with the 
time-consuming nature of the appeal process for individual 
properties.
    What can you say about what is lacking, if anything, in the 
availability of technology or new applications that might make 
more efficient the updating of these maps?
    Mr. Wright. The single thing that would push us in a 
leapfrog forward would be to have an elevation layer, ground 
elevation layer map across the Nation.
    Today, when we go to build a map, we have to know where the 
ground is. We have to know how much water and we have to know 
how deep it is going to be and then how it is going to interact 
with the built environment in terms of the structures.
    Today, we partner with other Federal agencies and State 
agencies to acquire usually LIDARs, the technology that is 
referenced, that light detection radar that is used, but we 
don't have enough of it today. And so there is a significant 
investment that needs to be made in that national elevation 
data layer.
    Today, I buy it piecemeal. I buy it one watershed at a 
time, one piece. But what I do know, and we are running a 
couple of pilot projects with States, Minnesota is one of them, 
next-door to you, where they have a State-wide elevation, 
digital elevation data.
    And we are using some of the innovations in technology that 
are speeding things up tremendously because the automation 
works very well when you have highly accurate ground 
elevations.
    Mr. Kildee. I would certainly encourage that and suggest 
that you include in any of your recommendations that the 
accuracy issue is really an important one. It affects 
individual customers but it also affects the entire program. 
And I would be really anxious to see some movement in that 
direction.
    And also, if you could just briefly comment in the few 
remaining seconds, on anything that is being done to streamline 
the process for individuals to challenge maps? That can be very 
time-consuming and often becomes irrelevant because of the time 
involved.
    Mr. Wright. If you want to look at a map amendment on a 
single structure basis, when those data are submitted, on 
average, it is a 7-day turnaround time. Some of it can be done 
online within 24 hours. So if you are doing single structure 
data to submit to us, I think it goes pretty quickly.
    If you are trying to do something that is more of a 
neighborhood scale--
    Mr. Kildee. Right.
    Mr. Wright. --that map revision process is longer. It 
requires us to verify data in a much greater level of 
precision. And we are required under the statute to go through 
due process. And so a draft has to be presented to the 
community. Ultimately, we have to go through the Federal 
Register for a 90-day appeal period.
    I do think that this element is one that we could explore 
through reauthorization. In this particular element of it, and 
I know that other Members have asked me about this in the past, 
if there is no objection to the map and the data that was 
generated by the community, well, I don't think we can bypass 
the due process because there may be a homeowner who believes 
that they have an equity in this.
    I do think we should be looking at ways to leapfrog 
elements and push faster.
    Mr. Kildee. I thank you. And I know my time is over.
    I thank the chairman for his indulgence. Thank you very 
much.
    Chairman Duffy. The gentleman's time has expired.
    The Chair now recognizes the gentleman from Pennsylvania 
for 5 minutes.
    Mr. Rothfus. Thank you, Mr. Chairman.
    Good morning, Mr. Wright.
    Mr. Wright. Good morning.
    Mr. Rothfus. You mentioned in your testimony that at a 
national scale, estimates lead FEMA to believe as little as 
one-third of residential properties in the special flood hazard 
area have NFIP policies. What, if anything, does FEMA do to 
coordinate with banking regulators to determine whether 
homeowners with federally-linked mortgages are actually current 
NFIP policyholders?
    Mr. Wright. We cooperate with the regulators, as I 
understand it, and I am not a banking regulation expert. When 
they come in, they do a small sample of the book that may or 
may not even be in the special flood hazard area. If it is, 
they would check to make sure that the right kind of insurances 
are in place.
    That cooperation, though, is simply how we deal with the 
enforcement. Where we have focused is, what does it mean to do 
the outreach at the point of a new map and working with the 
agents, as well as the State commissioners, to advocate that 
people do those purchases?
    Mr. Rothfus. Is this a reactive or a proactive approach? If 
you say that you are cooperating with the banking regulators 
and they are coming in to take a look, that is a little 
different from you proactively going out and assessing.
    Mr. Wright. Right. To my understanding, I don't have the 
authority to go in and ask to see a bank's book of business and 
do that audit. The banking regulators have that authority. So I 
defer to the Office of the Comptroller of the Currency and the 
other regulators.
    Mr. Rothfus. Yes, and the regulators--the OCC, the Fed, the 
FDIC, and the Farm Credit Administration, as well as the NCUA--
issued a joint notice of proposed rulemaking last fall in 
November concerning the implementation of the private flood 
insurance provisions of Biggert-Waters.
    In this release the regulators proposed a provision that 
would allow regulated lending institutions to accept at their 
discretion certain flood insurance policies issued by mutual 
aid societies, which are common in the Amish and Mennonite 
communities in Pennsylvania.
    As you may be aware, due to their religious beliefs, 
members of these committees do not purchase traditional 
insurance products, and they have established a long tradition 
of insuring their own communities. How does FEMA view this 
proposal?
    Mr. Wright. FEMA has not taken a formal view on that 
rulemaking. That said, I believe that what is proposed 
personally is right-headed, and the kind of provision that you 
are highlighting I think is an important one.
    Mr. Rothfus. I have heard concerns about homeowners 
receiving widely divergent flood insurance quotes from 
different insurance agents. Much of this is likely due to the 
challenges associated with navigating the NFIP. How can we make 
it easier for insurance agents to provide consumers with 
consistent and accurate information?
    Mr. Wright. Congressman, I think you really have hit the 
heart of some of the transformation we are trying to do in the 
program today. It is too complex. And while I don't find it 
acceptable that they are getting different answers, I can 
understand how that can happen.
    So I think we actually need to get to a point by which, 
given our understanding of the underwriting actuarial 
provisions of the program, we can get to the base information.
    Today, the application and the questions we ask are far too 
many and there is far too much room for misunderstanding that 
can move one direction or another.
    Mr. Rothfus. So what are you doing in that space right now? 
Do you have a plan?
    Mr. Wright. We sure do. First--
    Mr. Rothfus. When can we expect to see something?
    Mr. Wright. Later this spring. For the last 8 months we 
have been working to rewrite the underwriting manual, which is 
where all of those instructions are at. Frankly, it was not in 
plain language.
    Sometime in April, we will be releasing that in beta and 
testing it with the agents on the ground. It will go into full 
effect this summer. We are doing a similar kind of thing on the 
claim side.
    Ultimately, we have to look at the coverages because this 
kind of push-pull that happens often gets, well, there are too 
many options that bring too many complexities. And usually they 
don't fully understand that until the day they file a claim. I 
have to bring that forward.
    Ultimately, with this underwriting approach I would like to 
get us to a point by which we are using online and technology-
based ways by which the same answer is being produced every 
single time.
    Mr. Rothfus. Any idea what that would require or what it 
would take to make that happen?
    Mr. Wright. The first thing is we are going through a 
modernization of our IT efforts. We actually have gone through 
all the reviews with the Department of Homeland Security and we 
are beginning agile development this spring on elements of it.
    Over the next 2 years, more of those pieces will be in 
place. We are also partnering with the Write Your Own companies 
who can implement these technologies themselves to make sure 
that there are data standards in place to better enable us to 
use technology.
    Mr. Rothfus. I had to step out and take care of something 
outside, so you might have been asked this question already, 
but I just wanted to see what the answer is.
    As I have studied the NFIP, I have noticed how difficult it 
is to get complete and usable data, I can only imagine how 
difficult it would be for firms in the private sector that want 
to get into the flood insurance business to get a better 
understanding of the NFIP's historical data. Is there a 
provision in the law or some other reason that FEMA cannot 
share this information with insurers?
    Mr. Wright. The chief concern is one related to the Privacy 
Act. What I have done, and again, I have been pushed rightfully 
on this because we did not make enough progress on it, we were 
able to do some new modeling last year related to reinsurance.
    It was sufficient for the reinsurers to price the products 
for me. And I have recently released most of the data that we 
worked on with those reinsurers and they are now available to 
be downloaded from FEMA.gov.
    Chairman Duffy. The gentleman's time has expired.
    The Chair now recognizes the ranking member of the full 
Financial Services Committee, the gentlelady from California, 
Ms. Waters, for 5 minutes.
    Ms. Waters. Thank you very much, Mr. Duffy.
    Let me just say to Mr. Wright, I appreciate you being here 
and sharing with us how FEMA works. You are in an untenable 
position. You were asked by Mr. Duffy, what is your plan for 
reduction of the debt?
    I wish you could have told him there is no such thing as a 
plan for the reduction of the debt. We are paying $4 billion a 
year on this debt. The Congress of the United States of America 
will have to make a decision about this.
    And I don't know what my colleagues are thinking, but I use 
the word ``forgiveness.'' I really do believe that we need to 
forgive this debt.
    This agency needs a revolution, and it starts with 
forgiving the debt. There is no way that you could plan to 
forgive this debt by raising the premiums or doing some of the 
other things that you say that you do in order to come up with 
premium costs.
    You talk about loss claims data, future expected losses. 
You can redo that a thousand times, but it is not going to 
reduce this debt. And so I am going to be working very hard to 
try and convince my colleagues that we need to really, really 
step up to the plate and deal with this issue and this issue of 
debt.
    Having said that, when I talk about a revolution, in 
addition to forgiving the debt I think the Members of Congress 
really do need to understand all of the calculations that go 
into determining premiums.
    You talk about loss claims data and there seems to be some 
misunderstanding about whether or not you are actually using 
this. I heard the questioning on this issue and it sounded as 
if you said that is part of it.
    We don't know how much of that is taken into consideration. 
I heard you talk about future expected losses. How much of 
that? How is that calculated? Is this truly scientific, on and 
on and on?
    I would like to say to the chairman of this committee, who 
is sitting here, that we need to have a special task force on 
flood insurance alone so that you would be able to take the 
agency apart, working with the members of the special task 
force to understand how you come up with your calculations. And 
I think that if we started out anew with these premium 
policies, we could correct a lot of things.
    There have been problems with mapping historically. And my 
staff just brought me a copy of a press release that we did 
about a mapping area in Los Angeles that I got involved in, in 
2010, where we worked with FEMA.
    And FEMA changed because when they took a look at what the 
citizens were complaining about and the whole area, and the 
fact that it had never had a flood, on and on and on. When they 
gave consideration to all of these things, they changed their 
mind about the way that mapping had taken place.
    The other thing that I discovered in working on this issue 
was I know that you send the notices or information to the 
cities. And the cities have an opportunity to raise questions, 
to talk with the community, but oftentimes they don't do 
anything.
    You send that information to the cities and it just goes 
into a file somewhere and the citizens don't get an opportunity 
to really have the cities working with them to bring their 
concerns to you.
    And so for all of these reasons, I think that we really do 
need to have this change, this big change, this revolution.
    Now, on top of all of my concerns and even what we did, 
after we changed our minds about Biggert-Waters and we came up 
with the repeal, we didn't treat those small businesses right.
    And everybody on this committee claims to be concerned 
about our small businesses, but yet when we take a look back at 
what we did and what their responsibility is in terms of 
premium cost, it really must be corrected.
    Now on top of that--you had nothing to do with this--to 
fund the border wall, the Trump Administration weighs cuts to 
Coast Guard, airport security.
    Your name is not in the headlines but the proposal drawn by 
the Office of Management and Budget would also slash the budget 
of the Federal Emergency Management Agency, which provides 
disaster relief after hurricanes, tornadoes, and other natural 
disasters.
    The Coast Guard, $9.1 billion in 2017 would be cut, 14 
percent to about $7.8 billion. The TSA and FEMA budgets would 
be reduced about 11 percent each to $4.5 billion and $3.6 
billion. This is outrageous and unconscionable.
    And so Mr. Chairman, I hope that you are listening and you 
are going to take this into consideration. You can pound all 
you want. Be--
    [laughter]
    Chairman Duffy. You are over your time, Ranking Member 
Waters.
    Ms. Waters. The ranking member would respectfully request 
unanimous consent for 30 more seconds?
    Chairman Duffy. Without objection--
    Ms. Waters. Thank you so very much.
    Chairman Duffy. --because you are so compelling.
    Ms. Waters. I just wanted the 30 seconds to say that you 
now have a big responsibility, and you asked the question of 
Mr. Wright when he came in about what he was going to do to 
reduce the debt.
    I hope that you have paid attention so that you know that 
all he can do is continue to pay that $4.0 billion every year 
on this outrageous debt. And I hope that you are hearing some 
of us when we ask you to take consideration for eliminating 
this debt.
    This is natural disasters and our taxpayers deserve better. 
And I don't intend to sit here and work on any increased 
premiums. Thank you so much, Mr. Chairman.
    Chairman Duffy. To the ranking member, thank you. It was 
only a minute and 38 seconds over your time.
    Ms. Waters. Thank you for that.
    Chairman Duffy. I have been trying to be generous to let 
Mr. Wright finish his questions if he is over, but to you the 
exception goes, Ranking Member Waters. With that, your time has 
definitely expired.
    The Chair now recognizes the gentleman from Michigan for 5 
minutes.
    Mr. Trott. Thank you, Mr. Chairman.
    Just a point of clarification, Mr. Wright, and thank you 
for being here. The ranking member has mentioned a couple of 
times in her questioning and in the opening statement how 
unfair, and I believe she means $400 million in interest a 
year, not $4 billion, but how unfair it is that we are 
collecting this interest and it is how it is costing the 
program and that is the reason for the inability to repay the 
$24 billion, and it should be forgiven.
    Just a point of clarification. It is really not costing the 
program $400 million a year. It is costing the taxpayers $25 
billion at the moment. Isn't that a correction that needs to be 
made? It is the taxpayers, right? That is what I am talking 
about.
    Mr. Wright. The taxpayers have loaned us $24.5 billion.
    Mr. Trott. Okay.
    Mr. Wright. The policyholders are paying $400 million of 
their premium toward servicing that debt.
    Mr. Trott. So let's talk about your solution. In your 
opening statement you talked about the need to have the private 
sector play a greater role. And so I assume that you believe 
that the private sector would step in to fill this need if we 
remove some of the barriers and maybe figure out a way to 
better share the data. Is that a fair assumption?
    Mr. Wright. I think that is an element of it. I think time 
would have to show what the private sector would do. Over the 
last 49 years, the National Flood Insurance Program has been, I 
don't know that those markets have flourished.
    I would note that there already are private markets selling 
the excess coverage, as well as in some States there are flood 
riders that are particularly used for areas outside the high-
risk area.
    Mr. Trott. Right. And so I am concerned about as we move 
towards a long-term solution as part of any reauthorization, 
kind of the sticker shock issue. Allegedly, one of the 
unintended consequences of Biggert-Waters was the sticker shock 
that some of the homeowners experienced.
    So do you believe there is a way, over a period of years, 
to implement a solution that greater involves the private 
sector that would allow for actuarial sound premiums to be put 
in place where homeowners wouldn't lose their homes?
    Mr. Wright. Congressman, Congress is going to need to make 
some choices for me about that, and I can implement them. In 
this instance, what I will tell you is there is no more 
effective risk communication tool than a pricing signal.
    And I was in communities, actually sat next to Members 
doing town hall meetings in the intervening time between 
Biggert-Waters and the Homeowners Flood Insurance Affordability 
Act, where I heard the outcry in terms of the impact from an 
affordability.
    So there is a push-pull--
    Mr. Trott. And could that been avoided? Is that something 
we could have avoided, in hindsight? If there is part of any 
solution we don't want to have that happen again, right?
    Mr. Wright. I would assert that all of us would be better 
off if we didn't have that happen again.
    Mr. Trott. None of us wants that. So is there a solution 
that you can envision? Is it possible to avoid that scenario?
    Mr. Wright. The first step that we are already taking under 
Section 28 of the Homeowners Affordability Act is to clearly 
communicate risk. And so this is the first year that we are 
pushing out a notification that says, here is your premium but 
this is what the full risk rate would be, or at least the range 
of what your full risk rate would be.
    We still are implementing escalations in the policies that 
move us there. I think the 2014 Act put a much longer time 
horizon on it whereas the 2012 bill did it quite quickly.
    Mr. Trott. Okay. So part of the problem, as I understand 
it, is approximately 1.6 percent of the 5.1 million 
policyholders account for 24 percent of the claims. At least 
that is the statistic that was shared with me yesterday.
    So how does the solution in your mind address that problem? 
Because that seems to be the crux of the issue is we have 
85,000 policyholders who are accounting for the vast--an 
inordinate number of claims.
    Mr. Wright. I think when you look at the insurance realm, 
it is not unusual to have a small segment that is occupying a 
good bit of the claims payments.
    For me what is highlighted, and this is not always popular, 
but I think we have to look at those repetitive loss properties 
because under the statute today, I am required to continue to 
offer them coverage.
    And there may be a point that we should draw that says if 
your total payouts of claims exceeds 200 percent of your policy 
limits, or some other number, I offer that hypothetically to 
you--
    Mr. Trott. Right.
    Mr. Wright. --we are in a position by which you need to get 
your insurance through another means. You need to have lost the 
ability to have those cheaper rates.
    I think we have to look at that. I would point us back to 
some things learned from 2004's reauthorization, where there 
was an attempt at a ``three strikes and you are out.'' I don't 
think that worked as effectively, but we could find a way to 
draw that line.
    Mr. Trott. Thank you. I agree with your comments, and while 
my time is running out, I come from Michigan, the Great Lakes 
State.
    What is the status on sharing the data that is being 
collected by Sea Storm in terms of the flooding patterns for 
the lakes, because they are much different, obviously, than the 
coastal areas? And when can that be available to my 
constituents? And does the same privacy concern hold you up 
from doing that?
    Mr. Wright. The privacy concern only deals with address-
specific claims data. The work that we are doing on the Great 
Lakes today is ongoing. We will work with your office to make 
sure that is made available to them.
    We are partnering with the State of Michigan and the 
communities to share that data. As you know, the lakes have 
been on a downward trajectory, and I think you will see that 
reflected in the update of the maps.
    Mr. Trott. Thank you for your time.
    Chairman Duffy. The gentleman's time has expired.
    The Chair now recognizes the gentleman from Nevada for 5 
minutes.
    Mr. Kihuen. Thank you, Mr. Chairman.
    And thank you, Mr. Wright, for your presentation and for 
being here this morning. I have a couple of questions relating 
to climate change. Climate change is a real threat. And I think 
we are going to start seeing folks get washed out more and more 
often.
    I believe we will see more Superstorm Sandy's, which will 
cost the program billions and billions of dollars. Are you 
taking climate change into account while you are doing your 
mapping?
    And secondly, if we see an acceleration in extreme weather 
events, wouldn't this add further debt to the NFIP? And is this 
something we should be concerned about as we work towards 
reauthorization?
    Mr. Wright. There are a number of future risks that we have 
to consider in the National Flood Insurance Program. Climate 
variability, climate change is one of those.
    In 2012, Congress directed us to use our Technical Mapping 
Advisory Committee--it has been a very beneficial group for 
us--to specifically look at this. They have delivered a report 
to us related to future risk and future conditions and how we 
would map that.
    I do think that we could benefit from showing that risk to 
communities in a more forward way, but let me draw two 
important distinctions. When we are charging insurance 
premiums, we should do it based on today's risk.
    I should inform the built environment based on our 
understanding of the future, but I shouldn't be charging a 
premium based on a risk that has not yet arrived.
    The second piece that I would highlight is, and we released 
a report in 2013 to this end, as you look at the changes that 
we anticipate between now and 2100, there are changes in 
climate. But a third of that change in risk is wholly 
attributable to changes in the built environment.
    Essentially, where do the next 50 million people live? 
Where do we build their homes and their condos and their 
apartments? Where do those pieces sit, and how is that sited? 
Because frankly, every time we keep building, if we don't do it 
intelligibly on the way in, we exacerbate those flood risks.
    Mr. Kihuen. Thank you, Mr. Wright. My other question has to 
do with rural America, and my district is for the most part 
very rural. On the one hand, we saw in the aftermath of 
Hurricane Sandy that there were serious concerns about 
engineers not having the proper expertise to be handling flood 
claims.
    But on the other hand, it can be difficult to find a 
sufficient number of qualified professionals in the area in the 
aftermath of a storm this size. That was in New York and New 
Jersey.
    My district includes Las Vegas, but it also goes all the 
way up, almost to Reno. For my East Coast colleagues, that is 
the same distance between Washington, D.C., and Boston or 
Atlanta. I have a number of constituents who reside in rural 
counties.
    And though we definitely don't have the flood issues some 
of my colleagues do, these counties do have thousands of NFIP 
policies that have paid out hundreds of thousands of dollars in 
claims.
    What is FEMA doing to ensure that we have a sufficient 
number of qualified professionals handling claims in the 
aftermath of a storm, especially in rural counties?
    Mr. Wright. Let me take the rural county piece first, and 
then I will broaden out to the broader piece. As we look at 
rural counties, we see flooding go on most weeks of the year in 
some rural county across America.
    The number of claims we would see in those instances are 
low enough by which I can get enough adjusters and the like on 
the ground pretty readily, which allows us to close out those 
claims and get them paid in a very timely way.
    It is usually in an urban context, think more of your Las 
Vegas context, by which I start seeing tens and hundreds of 
thousands of claims. And that is the point that stresses the 
system.
    So what have we been doing to address the stresses on the 
system? We have been working with the companies to ensure that 
we are building out more capacity for adjusters.
    We are also looking at technology. Technology first of all 
to do the quality control to ensure that there is not 
sloppiness, there aren't inadvertent errors being made.
    But also ways that I can imagine in the years to come for 
claims being able to be adjusted by people taking pictures on 
their smartphone. And when this is a smaller scale, this is a 
$10,000 or $20,000 claim, I can imagine them taking pictures, 
uploading those to us, and us adjusting this remotely, which 
saves a tremendous amount of time and we would be able to get 
those dollars paid far quicker.
    Mr. Kihuen. Thank you, Mr. Wright.
    I yield back the remainder of my time, Mr. Chairman.
    Chairman Duffy. The gentleman yields back.
    The Chair now recognizes the chairman of the full Financial 
Services Committee, the gentleman from Texas, Mr. Hensarling, 
for 5 minutes.
    Chairman Hensarling. Thank you, Mr. Chairman, and thank you 
on behalf of the full committee for holding this hearing.
    Mr. Wright, I just want to follow up on a couple of items 
that you have already testified on, and particularly I want to 
follow up first on the question from the gentleman from 
Michigan, Mr. Trott, which has to do with the repetitive loss 
properties.
    I don't quite recall the term of art, whether it was 
``severe repetitive loss'' or simply ``repetitive loss,'' but 
approximately 2 percent of the properties are accounting for 
roughly 24 percent of the losses historically.
    You mentioned the 2004 effort, kind of a ``three strikes 
and you are out.'' So could you give us a few other thoughts 
and approaches on how FEMA is thinking about these repetitive 
loss properties, and any different approaches you would bring 
to the committee's attention?
    Mr. Wright. Right. There are some nuances to the 2004 
piece, but overplayed 3 claims of $1,000 apiece would strike 
you out, and I don't think that was ever quite the intent we 
are looking at.
    And so the first thing I think we need to do is actually 
move the threshold of what we consider the repetitive loss. 
Where is the big money going as opposed to some things that may 
just be some nuances that were applied?
    As I have thought about it, and we have begun going through 
the data, and my team hasn't finished on this point yet, there 
is a point by which we have to draw a line that says if you 
exceed--is it 150 percent or 200 percent of your policy 
limits--at least we need to take the subsidies and 
grandfathering away from you and you need to be paying at its 
face value, actuarial premium. Or we should tell you to get 
that on the private market.
    There is the other side of that coin by which some of these 
are in places where the homeowners are of less means and 
wouldn't be able to actually take that on. And so I think we 
have to look at that dimension of it.
    But the face of it is in any other kind of insurance piece 
that third, that fourth time to the well, we change the rules 
somehow. And I think it would be wise for us to do so.
    Chairman Hensarling. Mr. Wright, if I could suggest that 
your staff prioritize analyzing--
    Mr. Wright. We will do so.
    Chairman Hensarling. --this particular data? I share your 
goal of having a long-term reauthorization--
    Mr. Wright. Right.
    Chairman Hensarling. --and maybe September 30th is looming 
large, but this is an important part.
    You also, I guess fairly early on in your testimony, spoke 
of mitigation, and one or two other Members also spoke of it. 
So I think the grant program is a relatively small portion--
    Mr. Wright. Yes.
    Chairman Hensarling. --of the FEMA budget today. But could 
you expound upon your thoughts, and again, other matters you 
would bring to the committee's attention in the mitigation 
space?
    Mr. Wright. The mitigation investments pay off over and 
over again. I have three different grant programs that I am 
accountable for. One of them is funded by the Stafford Act 
after events. That is where there is anywhere between $700 
million and $1 billion a year spent in that space.
    Congress then also created a Pre-Disaster Mitigation Fund, 
which averages about $100 million a year. And then inside the 
National Flood Insurance Program, we have a Flood Mitigation 
Assistance Program. That is paid for by the premiums of 
policyholders. So $175 million, which is not enough to actually 
mitigate risk.
    And I kind of look at these upper limits of $26 billion or 
$45 billion worth of risk that I could assume in any given year 
and what do those pieces look like?
    The limited pot I have today I prioritize on repetitive 
loss, severe repetitive loss properties all moved to the top 
because that benefits the fund.
    I think we would do more to help communities if we started 
taking on projects that were a bit larger at a community scale. 
So rather than do three houses on that block, what does it mean 
to actually take that entire block out of harm's way?
    The question is where do the resources come from? Where do 
the resources come from to pay those bills? I don't know how 
much more policyholders can bear, and I don't know what the 
appetite is for that to come out of general authorization.
    Chairman Hensarling. In the seconds I have remaining here, 
you have indicated a desire to open up greater space to the 
private market. The committee shares that particular goal. I 
know we have had a fulsome dialogue between your office and 
this committee. But is there any barrier to entry, as you 
understand it, that has not been brought to our attention?
    Mr. Wright. I think there is a reality that when these 
markets stand up, they are going to be subject to State 
regulation, appropriately so, McCarran-Ferguson gives that 
responsibility there. And they need to be able to price a 
product.
    But I think what is keeping us from actually seeing it 
broaden up is what does it mean to actually establish, they 
will guard against concentrations, which I don't today. They 
will have to make sure that their rates are affordable and that 
they don't push and pull out.
    But I really see that we need to move to an appetite, 
because one of the things I have pushed the private markets on 
is today I am responsible for assessing a surcharge of $250 on 
any second home. I look at properties outside the mandatory 
purchase, the preferred risk, and I am putting a $250 tax on 
top of a $350 premium.
    And I have told the private markets that this is a perfect 
place where I have a competitive disadvantage. You should be 
coming in and filling this space. This is cheap, insurable 
risk.
    Yet, I am not seeing that expansion happen yet. And so 
there needs to be some motivation that will keep pushing them 
down that road. And I think that will be as a step-wise process 
for us.
    Chairman Hensarling. Thank you.
    Chairman Duffy. The chairman's time has expired.
    The Chair now recognizes the gentleman from Texas, Mr. 
Green, for 5 minutes.
    Mr. Green. Thank you very much, Mr. Chairman. And if my 
friend, the Chair of the full committee, needs additional time 
I will be honored to yield to him, without any questions I 
might add.
    Mr. Chairman, and Mr. Ranking Member, I thank you for this 
hearing. And Mr. Chairman, if I may say so, I want to 
congratulate you on being promoted to this subcommittee, but I 
will tell you that I enjoyed serving with you on O&I. We didn't 
always agree, but I always enjoyed the opportunity to serve 
with you.
    Chairman Duffy. You were always agreeable.
    Mr. Green. Thank you so much.
    Mr. Wright, thank you for your appearance today. There are 
some aspects of your job that are complicated by virtue of 
things that we can do here in Congress and that we haven't 
done. An example would be in Houston, Texas, wherein we have 
floods that total $100 million and it is not unusual.
    We had the Memorial Day flood in 2015 which was about $100 
million, and we had the tax day flood in 2016 which was about 
$1.9 billion by some estimates. It depends on who is counting 
and how you count.
    People have lost their lives: in 2015, 8 people; in 2016, 9 
people. FEMA paid out $57 million with reference to the 
Memorial Day flood in 2015.
    Now, I mention these circumstances because there are 
projects that are on the docket of the Army Corps of Engineers 
that if completed would eliminate some of the flooding and 
mitigate a good deal of the flooding as well. These projects 
total about $311 million. We are spending a lot of money after 
the fact.
    We spend millions after the flooding, after the damage, but 
we could spend millions also before and mitigate and eliminate. 
Would you care to comment on what I have just said, sir?
    Mr. Wright. I think this investment before the disaster is 
imperative. And while I cannot speak to the specifics of the 
Corps' investments and budget, I can and I would highlight for 
you a report and some findings by the Government Accountability 
Office last year where they directed an interagency group that 
I chair to develop a national mitigation investment strategy so 
that we harmonize Federal investments, and we find ways to 
incentivize more private investments in this space.
    I would assert there are not enough Federal dollars to 
eliminate all the risk across all the communities in this 
country. We have to find ways to engage the private sector in 
that, and I do think that we collectively could find a better 
way to harmonize those programs. I expect some work later this 
summer to be done to demonstrate the progress there.
    Mr. Green. Thank you. With reference to our sharing risk, 
you are well aware that at one time the insurance companies had 
the entire market.
    Mr. Wright. Yes.
    Mr. Green. And we are in the market now because it became 
too much for them to bear. Would you kindly explain to us the 
consequences of the Federal Government moving to becoming the 
insurer of last resort only and allowing the market to manage 
the other aspects of these disasters?
    Mr. Wright. Yes. In many ways, I would say we are the 
residual market today because there is a limited amount that is 
done through private flood.
    And 49 years ago, there was a limited market, and where it 
was, the prices were quite exorbitant. I think as we look at 
these dimensions, we have to find the right balance.
    Florida Citizens is often held up as an example for me to 
look at and they still retain a half million policies through 
their citizens program that the private market did not take up.
    And so those policies would be there and so what would that 
equivalent be inside the National Flood Insurance Program? It 
is impossible to know precisely, but there could be 3 million 
or more policies that we are left with.
    Yet, those are the ones that would be at greatest risk with 
greatest kind of concentrations of that risk, and where we 
would pay those bills becomes difficult.
    In the Florida example, they have a whole series of ways by 
which all the taxpayers of Florida and all the rate payers in 
Florida would contribute to pay those bills. We don't have 
those mechanisms in the National Flood Insurance Program.
    Mr. Green. Mr. Chairman, I know my time is up. May I 
introduce some things into the record, please?
    I have a resolution from the Commissioner's Court in Harris 
County supporting our reauthorization. I would also like to 
introduce H.R. 121, which is the bill that would allow us to 
fund those projects that have been authorized by this Congress 
that would help us mitigate in Harris County. I ask unanimous 
consent to enter these documents into the record.
    Chairman Duffy. Without objection, the documents will be 
made a part of the record.
    Mr. Green. Thank you, Mr. Chairman.
    Chairman Duffy. With that, the gentleman's time has 
expired.
    The Chair now recognizes the gentleman from New Jersey, Mr. 
MacArthur, for 5 minutes.
    Mr. MacArthur. Thank you, Mr. Chairman.
    We have talked about what I think should be our priorities 
in this reauthorization--affordability, certainly mitigation is 
critical. I want to focus for a few moments on accountability, 
which I think needs to be a priority as well. And all of my 
questions and comments come out of whom I represent.
    I represent southern New Jersey, the epicenter of 
Superstorm Sandy. On October 29, 2012, my district was 
devastated: lives, homes, businesses, neighborhoods, and 
communities. And we have all probably seen photos of the iconic 
Jet Star rollercoaster sitting in the ocean. That is my 
district.
    Mr. Wright. Right.
    Mr. MacArthur. We have seen photos of the house sitting on 
a little island in the middle of a newly created inlet that 
went right through an island. That is my district. Those are 
the people I represent.
    And you mentioned earlier, Mr. Wright, 144,000 flood claims 
came out of that event. And of those 73,000, about half, were 
in the State of New Jersey, and of those, 36,000 were in my 
home county--50 percent of the claims in New Jersey were in my 
home county.
    Do you know how many people--I don't expect you probably 
do--who are still out of their homes now, nearly 5 years later?
    Mr. Wright. I don't, sir.
    Mr. MacArthur. Thousands. Thousands of them. And might you 
guess the leading cause for people to still be out of their 
homes 5 years later?
    Mr. Wright. No.
    Mr. MacArthur. It is a gap. And it works like this. There 
are resources from a flood policy, maybe resources from a FEMA 
grant like a REM grant to lift a home. There are resources from 
an SBA loan. There are private savings that people have put 
away for retirement.
    And they keep inching towards completion and they run out 
of money, 95 percent there but they can't get a certificate of 
occupancy.
    Mr. Wright. Right.
    Mr. MacArthur. So getting paid fairly at every step of that 
chain is absolutely essential for my constituents. And that is 
where I want to focus for a few moments. What percentage of the 
underwriting risk does a Write Your Own carrier take?
    Mr. Wright. Zero.
    Mr. MacArthur. Zero. Would an engineer or an adjuster have 
any financial incentive for depressing the amount of a claims 
payment?
    Mr. Wright. They should not.
    Mr. MacArthur. They should not. I want to read to you 
testimony, not testimony, but commentary from your predecessor 
I believe, Brad Kieserman, who in February of 2015 said this on 
60 Minutes, that he ``had seen evidence of fraud in reports 
used to deny them, the policyholders, full insurance payouts.''
    Again I am quoting: ``I am not going to sit here and 
conceal the fact that it happened because in the last 3 weeks, 
I have seen evidence of it,'' said Kieserman. He went on to say 
that they had seen evidence in late 2013, a year after the 
storm, but nothing had happened.
    I am going to ask you, Mr. Wright, to look at the two 
photos that are up on the wall. Do they look like the same 
photograph to you, left and right? I assure you they are and 
they came out of your files.
    Mr. Wright. Okay.
    Mr. MacArthur. I would ask you to read what is circled on 
the photo on the left.
    Mr. Wright. ``Floodwaters damage heater and boiler.''
    Mr. MacArthur. Okay. And that was dated November 12th. Then 
on the right side is the photograph that was sent to the 
insured on 11/26 when their claim was denied. Can I ask you to 
read what is in the circled box on the insured's photograph?
    Mr. Wright. ``Floodwaters do not damage water heater and 
boiler.''
    Mr. MacArthur. I don't have time, unfortunately, to put up 
a series of these very similar photographs, but I assure you 
and I trust that you will accept that it is accurate, that they 
all do the same thing.
    You reopened thousands of claims under some pressure by me 
and others. Can I ask how much you have paid from all of those 
reopened and litigated claims in the latter part of the 
process?
    Mr. Wright. We have paid out an additional $350 million so 
far.
    Mr. MacArthur. I am going to stop you there because I have 
only 30 seconds left, and I have to end with commentary.
    Chairman Duffy. I would ask for unanimous consent to give 
the gentleman 1 more minute of time.
    Mr. MacArthur. I'm very grateful for that.
    Chairman Duffy. Without objection, it is so ordered.
    Mr. MacArthur. You were under pressure in FEMA, and I 
recognize you weren't in the role then, but FEMA under pressure 
allowed my constituents to reopen claims--50 percent of the 
claims in my State, 25 percent of the claims in this entire 
episode, you reopened them and you paid out $300 million you 
just testified--$300 million that would not have come to my 
State had you not been under pressure to reopen these claims.
    Sir, I beg you, and I am telling you that when we 
reauthorize, we will be watching to make sure that there is 
accountability in the process. The McKinsey study that was 
implemented by your company suggested that your adjusters ought 
to pay within ranges. Is that correct?
    Mr. Wright. So--
    Mr. MacArthur. I don't have time to actually let you 
answer. I know that is what it did because we have had plenty 
of testimony that it did. We had five whistleblowers that I 
have statements from, affidavits from. I will read you the 
quote from two of them.
    ``We received instructions not to conduct a comprehensive 
evaluation of claims. We were directed to tailor evaluations to 
fall within a range even if we identified additional covered 
damage.'' That was one of your employees who was a 
whistleblower.
    Another said, ``There was an elaborate process designed to 
justify minimum payments to policyholders irrespective of the 
actual merits of the claim.'' Mr. Wright, this is completely 
unacceptable--$300 million of additional funds paid that would 
have been denied but for the pressure that was on your agency.
    You are charged with helping the very people who have 
suffered the most, and my constituents got cheated. And so did 
others across New Jersey and across New York, and you have to 
fix that.
    You have to fix that process so that people at least are 
getting paid what they are owed and it doesn't create a gap 
that keeps them out of their home for years after these events.
    I yield back. Thank you.
    Chairman Duffy. The gentleman's time has expired.
    The Chair now recognizes the former Chair of this 
subcommittee, who is now the current Chair of the Financial 
Institutions Subcommittee, the gentleman from Missouri, Mr. 
Luetkemeyer, for 5 minutes.
    Mr. Luetkemeyer. Thank you, Mr. Chairman.
    And Mr. Wright, it's good to see you again.
    Mr. Wright. Yes, sir. Likewise.
    Mr. Luetkemeyer. I know that a number of the things that 
were discussed today were happening and were consequential 
prior to your taking over. I know that in working with you over 
the last couple of years here you have done a pretty good job 
under your leadership of improving the claims process.
    As my colleague next to me here has pointed out, there were 
a lot of mistakes made.
    Mr. Wright. We are--
    Mr. Luetkemeyer. And I know that the last two storms we had 
this last summer, this past year, there were not that many 
mistakes made--as many mistakes. Put it that way. I know that 
as chairman, we wound up with a lot fewer complaints, and so I 
congratulate you on improving your process. There's always room 
for improvement, of course, but--
    Mr. Wright. Agreed.
    Mr. Luetkemeyer. --I think that you have also, improving 
the process, going to advance payments has been a big help. And 
so I think one of the things we have and one of the things that 
is in our bill, in fact, is taking some of those improvements 
and trying to put them into the statute. So we thank you for 
that.
    And obviously, one of the things that is a big concern to 
my colleagues and myself is the reinsurance, trying to find a 
way to take the taxpayers off the hook. Can you tell me what 
the size of the two losses were last year? What was the size of 
the two events?
    Mr. Wright. The total loss last year was about $4.2 
billion.
    Mr. Luetkemeyer. Right.
    Mr. Wright. And the largest was that Louisiana one alone 
was $2.4 billion.
    Mr. Luetkemeyer. $2.4 billion and $1.6 billion.
    Mr. Wright. Yes.
    Mr. Luetkemeyer. Okay. So if we would have had reinsurance 
and would have kicked in at the billion dollar level, we would 
have had $2 billion worth of reinsurance and you wouldn't have 
had to increase the debt from $23 billion to $24.6 billion, 
right?
    Mr. Wright. So--
    Mr. Luetkemeyer. Yes. I can do the math, Mr. Wright.
    Mr. Wright. You can. So I learned quite a bit when I went 
to the markets at the end of last year on the price points. And 
the attachment that we bought at $4 billion was the place where 
the optimization of the pricing began to kick in.
    Pricing below--
    Mr. Luetkemeyer. Well--
    Mr. Wright. --at $4 billion--
    Mr. Luetkemeyer. With all due respect, Mr. Wright, the 
pricing of this is obviously important. But at the end of the 
day, what you are talking about is the flood insurance program 
and having the taxpayers be the backstop. Right now, the 
taxpayers are the reinsurers of the NFIP program.
    And the program is not structurally sound. It is not 
actuarially sound, because obviously we have a loss of $24.6 
billion sitting there.
    And if we would have had reinsurance in place that would 
have kicked in at the billion dollar level this past year, we 
wouldn't have added another $1.6 billion to our debt.
    Mr. Wright. That is true.
    Mr. Luetkemeyer. And so I think the reinsurance, to me, is 
the most important thing we can do because it takes the 
taxpayers off the hook and we can finally begin to go down the 
road of getting this program under control. And from there, we 
can start working on getting the actuarial rates more sound and 
work on things like that.
    With regards to the data, I want to go quickly to that. I 
know that there were a couple of questions with regards to the 
data collection. What kind of information when you have a 
policy, what information, personal data, is collected on a 
policyholder when you do your application--name, address, 
birthdate, Social Security number?
    Mr. Wright. We do not take Social Security numbers any 
longer, but--
    Mr. Luetkemeyer. I see.
    Mr. Wright. --name, address, birthdate, value of 
structures, and ultimately we end up with loss history attached 
to that.
    Mr. Luetkemeyer. Okay. So when you gave the loss history to 
the reinsurance folks, all of this data--the name, address, 
personal data--was given over to them or not?
    Mr. Wright. I created a derivative product based on zip 
code that was sufficient for them to provide me pricing.
    Mr. Luetkemeyer. Okay. So you didn't give individual--
    Mr. Wright. They knew exactly how many--
    Mr. Luetkemeyer. --addresses?
    Mr. Wright. They knew exactly how many claims, the value of 
each of those claims, but they were generalized at the zip code 
level. They didn't get the street address. And that was--
    Mr. Luetkemeyer. They didn't get the street address, didn't 
get names--
    Mr. Wright. Correct.
    Mr. Luetkemeyer. --so the data of those people was 
protected?
    Mr. Wright. Correct.
    Mr. Luetkemeyer. Okay. With regards to--
    Mr. Wright. And those are the data, sir, that I have 
recently released on FEMA's website that are now downloadable.
    Mr. Luetkemeyer. Right. To me, the mapping is another very 
important part of this. My information shows that last year you 
had 25,000 letters of map amendment called LOMA letters at a 
cost of $13 million. Is that accurate, or close to it?
    Mr. Wright. Those numbers seem correct to me.
    Mr. Luetkemeyer. Okay. So we have the maps that are off, 
25,000 people around this country had to spend anywhere from 
$300 to $500 and $700 to get themselves out of the program and 
show that they didn't need to have that coverage. And one of 
the things that I think is important is, can you get the maps 
corrected every year?
    Mr. Wright. I am constrained by the number of resources 
that I have to spend on those maps.
    Mr. Luetkemeyer. And the reason I ask the question is, how 
often do you get to being able to remap?
    Mr. Wright. I am required by statute to evaluate them at 
least every 5 years and then resource-dependent drives the 
amount of investment that I make.
    Mr. Luetkemeyer. Are we lucky to do it every 10 years?
    Mr. Wright. In most areas--
    Mr. Luetkemeyer. I see you are smiling, so I am not too far 
off.
    Mr. Wright. No, no. In the risky areas--
    Mr. Luetkemeyer. Okay. All right.
    Mr. Wright. --and I have to be careful given the rural 
nature of some parts of the country. The riskier the area, the 
more policies I have there. I am basically on a 5- to 6-year 
cycle. In other cases, it may be closer to 10 years before they 
have an update.
    Mr. Luetkemeyer. So my comment would be that one of the 
things we are looking at trying to do is go to at least every 3 
years.
    If you are not able to go back and redo this, allow the 
local folks, if they adhere to certain criteria, to be able to 
do their own maps and then have them approved. Is that 
acceptable to you?
    Mr. Wright. And it is acceptable under today's authorities 
as they exist today. I will take data from a community--
    Mr. Luetkemeyer. Great.
    Mr. Wright. --at any time from that provision.
    Mr. Luetkemeyer. I am being timed out. I appreciate the 
indulgence by the chairman.
    Thank you very much, Mr. Wright.
    Chairman Duffy. The gentleman's time has expired.
    The Chair now recognizes the gentleman from Illinois, Mr. 
Hultgren, for 5 minutes.
    Mr. Hultgren. Thank you, Mr. Chairman.
    And thanks for being here, Mr. Wright. My district is the 
suburbs of Chicago, and the Fox River cuts directly through the 
center of my district. It is bordered by towns and cities like 
Fox Lake, Crystal Lake, Elgin, St. Charles, Oswego, Yorkville, 
and Plano, not to mention the lakes in the northern part of my 
district.
    I believe we should maintain affordable access to flood 
insurance, but we also must be fiscally responsible. I think 
that has been a common theme today. First question, is it true 
that FEMA is no longer able to even make interest payments on 
its debt? Yes or no?
    Mr. Wright. In January, I borrowed the resources necessary 
to make the interest payment for March.
    Mr. Hultgren. When will FEMA technically default on its 
obligation or have they done so already?
    Mr. Wright. I would not use that word in relationship to 
this program. There are people who have purchased those 
Treasury bills and they have the full faith and credit of the 
United States behind them.
    Mr. Hultgren. I am still very concerned with the delays of 
payment and failure, well, we will see question marks on how 
that will continue to be paid.
    Certainly, I think all of us are concerned with the amount 
of debt NFIP has accumulated. I can certainly understand some 
risk in providing insurance, but there is also an expectation 
that it should be properly managed, whether it is provided by 
the public sector or the private sector.
    However, in the case of the public sector, as we say, 
taxpayers are left holding the bag. Your testimony states that 
a quick succession in severe storms is the primary cause for 
the NFIP being about $25 billion in debt.
    Your testimony also states that conservatively, Hurricane 
Katrina has a 2 percent chance of occurring in a given year; 
Hurricane Sandy has a 5 percent chance; and the August 2016 
storm in Louisiana has a 4 percent chance. Combined, the chance 
of all three happening is extremely low, less than one-tenth of 
1 percent.
    Do you believe FEMA was doing a poor job of accounting for 
the risk? Or do you believe they were collecting insufficient 
premiums to account for this risk?
    Mr. Wright. We were collecting the premiums generally 
allowable under the statute. So nearly 80 percent of my book is 
actuarially sound. The other 20 percent of it has statutorily 
directed discounts and subsidies that I live within.
    Mr. Hultgren. What changes should FEMA make to avoid ever 
accruing this much debt again? Do any of these policies require 
action by Congress to make sure the debt never gets this big 
again?
    Mr. Wright. Absolutely, sir. When I talk about a sound 
financial framework and bringing transparency, we need Congress 
on that front. We can look at the amount of premium and may 
make adjustments in that.
    We can look at kind of what is repayable debt, simple 
liquidity that I might need in any given year, the use of 
reinsurance, which we have a cornerstone and we will continue 
to build. But there are tipping points based on events by which 
only Congress will be able to help me solve those.
    Mr. Hultgren. Let me get into a specific circumstance in my 
district. I mentioned St. Charles. This is a city in my 
district that had a significant amount of trouble working with 
your agency last year to update the flood maps along the 7th 
Avenue Creek.
    There has been significant flooding here in recent years so 
the City of St. Charles would like to undertake development 
projects to manage the flood risk in this area, which has a 
number of businesses and homes.
    The problem is FEMA took an agonizingly long time to update 
the maps, which caused significant uncertainty for the 
community. It has now been resolved, finally, but I want to 
know what steps FEMA plans to take to prevent this from 
happening to other communities in Illinois and around the 
country, this unacceptable delay?
    Mr. Wright. First of all, I apologize for the delay. We 
need to be efficient--we take in the data that communities give 
us and process it to make sure it meets the standards. I think 
as we look at the breadth of the mapping programs, one of the 
improvements we are doing on the technical side is bringing far 
more visibility.
    There are nearly 1,400 projects going on across the 
country. And ways by which we can see things that are falling 
behind. I want to particularly find ways to understand where is 
there an expectation from the community, particularly, which is 
I believe the instance you are highlighting, the community made 
the investment in the mapping update. Those need to go to the 
front of the line and get processed.
    Mr. Hultgren. Yes. That is what is so frustrating, that 
they feel like they have done everything they are supposed to 
do and their hands are tied waiting on bureaucracy.
    Mr. Wright. Right.
    Mr. Hultgren. Which is just unacceptable. But just wrapping 
up, I have less than a minute, as you noted in your testimony, 
FEMA removed the NFIP's financial assistance subsidy 
arrangement with the Write Your Own companies from regulation.
    You might remember that Chairman Luetkemeyer, Ranking 
Member Cleaver, and I wrote you a letter last year expressing 
some concerns about this decreasing accountability to the 
public.
    Your testimony also states, ``This process was time-
consuming and created a delay to make any administrative 
updates or changes in regulation. Now, the process is 
streamlined to improve the ability for FEMA and its industry 
partners to negotiate operational adjustments and corrections 
more quickly and efficiently.''
    I agree it is important that we remove red tape and provide 
some flexibility, but operationally, won't Write Your Own 
partners be subject to program changes with potentially little 
or no notice? And how do you plan to transparently communicate 
such changes to these companies that, again, are just trying to 
abide by the rules of the program?
    Mr. Wright. I do think that removing the red tape was 
essential. The contract with the companies had been codified 
into regulation and hadn't been changed in 17 years. The 
commitment we made going into this process is that any changes 
will be publicized at least 6 months in advance.
    I anticipate later this month publishing the arrangement 
that will be in effect October 1st, so more than 6 months' 
notice if a company wanted to make a different business 
decision related to those pieces. And we are consulting.
    And so we put out a series of principles. I have tried to 
be transparent with the public as well as the companies about 
where we are going while eliminating the red tape. But there is 
a firm commitment, and frankly, a standard in the regulation 
now. I cannot simply make the decision by fiat on my own.
    Mr. Hultgren. My time has expired. I yield back. Thank you, 
Mr. Chairman.
    Chairman Duffy. The gentleman's time has expired.
    The Chair now recognizes the Chair of the House Foreign 
Affairs Committee, and a long-term member of this committee, 
the gentleman from California, Mr. Royce, for 5 minutes.
    Mr. Royce. Thank you very much, Mr. Chairman.
    I wanted to ask Mr. Wright a question, sort of a follow-up 
on the chairman's question concerning repetitive loss 
properties.
    Mr. Wright. Right.
    Mr. Royce. I actually have bipartisan legislation with Mr. 
Blumenauer from Oregon on this, and one of the things we seek 
to do here is empower communities to tackle this problem. We 
would like to work with you on that legislation.
    But the precise numbers change from time to time. The 
bottom line seems to be that a small fraction of policies, and 
let's say it is roughly 1 percent of policies, seem to account 
for 20 to 30 percent of the claims and losses.
    In 2009, the Department of Homeland Security's Inspector 
General said that an increase in new repetitive loss properties 
was outpacing what we were attempting to do in terms of 
mitigation by a factor of 10 to 1.
    Now, that is a troubling number. Have our mitigation 
programs begin to catch up? Have the numbers turned lately or 
does it look like we are still growing the number of repeat 
loss properties arithmetically here? And can you provide the 
committee with the most up-to-date data on that?
    Mr. Wright. I can get back to the committee on the 
specifics on the data, and I look forward to the opportunity to 
collaborate with you all as you look at potential legislation. 
The number continues to rise.
    Mr. Royce. Okay. And then the other point I would make is 
just taking FEMA's current guidance document on the community 
rating system as it relates to potential homeowners, and I 
think it is pretty cogent here, most prospective buyers do not 
take the time nor do they know how to investigate whether a 
property is subject to a hazard.
    In many cases, a property may not be near a shoreline or a 
stream. Past flooding may have been minor or there may be no 
history of flooding since the area was developed. As a result, 
many people are caught by surprise when the properties are 
flooded.
    One of the best times to advise someone of a flood hazard 
is when he or she is considering the purchase of that property.
    Mr. Wright. Agreed.
    Mr. Royce. So as I understand it, FEMA gives credit to 
communities that are able to work with local REALTORS and the 
community to push this sort of pre-closing flood disclosure.
    Mr. Wright. We do. And we would offer discounts on the 
premiums as a result of those activities.
    Mr. Royce. And I think that is helpful, but my question is 
what more could FEMA do or what more could Congress do to 
ensure that the American people aren't in the dark when it 
comes to flood history?
    And won't we improve take-up rates for flood insurance and 
strengthen individual and community mitigation if you better 
inform communities and people about flood risks when they are 
looking at potential properties or developing potential 
properties?
    Mr. Wright. This is a conversation that I have a couple of 
times a year with the REALTORS who obviously have become that 
first, that forward-leaning part of this conversation. And we 
have had conversations with some of the private sector app 
developers that we all know well, that provide data on the 
values of homes and what is for sale.
    I think greater disclosure about the risks on the front 
side are very helpful. Some States require this. Most States do 
not.
    Mr. Royce. So there are steps that we could take that 
uniformly would assure that there was more knowledge?
    Mr. Wright. I think we would have to look at the 
implementation--
    Mr. Royce. For more mitigation presumably?
    Mr. Wright. Yes. I would want them available. I think when 
we push that out, we have to look at the implementation side of 
that.
    Mr. Royce. Right.
    Mr. Wright. I don't have a relationship with every REALTOR 
in the United States, and so I couldn't be the enforcement 
mechanism for that.
    Mr. Royce. No, no, I understand that. But as we look at 
what different States are doing--
    Mr. Wright. Agreed.
    Mr. Royce. --we can get a feedback in terms of what seems 
efficient, what seems easy and what is effective in getting to 
this--
    Mr. Wright. And I think there are some things to be 
learned--
    Mr. Royce. --solution?
    Mr. Wright. --from your State of California that does have 
some responsive requirements related to earthquake risk, 
related to dam safety risk and the like. There are things that 
we learn from there.
    Mr. Royce. Yes. Well, thank you, and again, Mr. Wright, I 
look forward to working with you on the Earl Blumenauer-Ed 
Royce bill--
    Mr. Wright. Yes.
    Mr. Royce. --that we are moving forward on.
    Mr. Wright. I look forward to collaborating with you.
    Mr. Royce. I appreciate it.
    Chairman Duffy. The gentleman yields back.
    The Chair would now ask for unanimous consent to allow the 
Chair and the ranking member to each ask one more round of 
questions for 5 minutes each? Without objection? And I would 
guess we may not take that full 5 minutes.
    So with that, Mr. Wright, I have to get clarification from 
you because in regard to the mandatory purchase properties and 
the take-up rate, okay, we asked you this very question and 
your liaison responded to Congress and told us that you have no 
knowledge or data on this issue.
    We asked the OCC and they said they don't have any data on 
this issue. Okay? So you clearly have said I can't advise you, 
Congress, we have no information. To which, the slide that I 
have now put up a second time.
    The picture that comes at the top of this slide, and it is 
a very nice picture of you. Okay? Right there, great picture.
    [laughter]
    And here you are giving us different information. So I have 
a slide from FEMA, and I have letters from the NFIP and FEMA 
and they are conflicting. Can you clarify that for me? Do we 
have data on the take-up rate on mandatory purchase properties 
or do we not have data on it?
    Mr. Wright. First of all, to the degree that my staff or I 
have not given you the clearest information, you have my 
apologies. And what I can assert is I am going to get you the 
best data and information that I have.
    I think that sometimes we get caught up on, is it data that 
FEMA collected or did FEMA access it? Frankly, that sets aside. 
You are after an outcome I would imagine, Mr. Chairman, and you 
want to understand why we are not seeing a higher degree of 
take-up.
    I can collaborate with you on that. I know that the rates 
are different across the country.
    Chairman Duffy. Yes.
    Mr. Wright. And--
    Chairman Duffy. That is my concern. And I want to make sure 
we are very clear because in the response from your liaisons, 
January 30, 2017, to this very question, the response was, 
``FEMA does not have knowledge on the compliance rate for 
mandatory purchase properties as the managed purchase 
provisions of the law are not under FEMA's purview.'' Okay?
    That was the response, and so I then asked the OCC and they 
gave me the same answer. But again, that was the email 
response, but again, the data that was provided in a FEMA 
document says you do have this information and the take-up rate 
is about 50 percent. And if you don't know the answer today, I 
understand that, but we need an answer.
    Do you know or do you not know? You have to clarify that 
for us. And for everybody else who says we have a take-up rate 
of 50 percent? And we have a $24 billion debt or we are $1.5 
billion short a year? Go for the people who are required to 
purchase that aren't.
    Mr. Wright. You are referencing the 2014 report--
    Chairman Duffy. I am.
    Mr. Wright. --that we did commission--
    Chairman Duffy. Right.
    Mr. Wright. --and asked for it to be collected. It is not 
data that we keep up-to-date. We don't have a tracking element 
for it. I will make sure you have the best information that I 
have, Mr. Chairman, and I, like you, am committed to ensure 
that we have everyone participating who needs to.
    Chairman Duffy. I would just argue that if you don't have 
up-to-date data, in your email response to me, you would say I 
do have 2014 data that I can give you, but it is not current.
    Mr. Wright. Sir, to the degree--
    Chairman Duffy. You say I don't collect that data, that is 
different than putting a--then we find this slide deck that 
actually shows that this is what you are putting out there. 
That is my rub on how you handled this.
    Mr. Wright. Sir, to the degree that we were not clear in 
our transmission of this and the provision of it I apologize, 
and we will make right by it.
    Chairman Duffy. All right. I would argue that you are not 
clear when you have a slide deck giving one data from 2014 and 
then an email that says we don't collect data. So I am pretty 
clear on what you told me, and I think we have to work through 
how we get on the same page.
    I want to switch quickly again--$24.6 billion in debt. On 
average we would say we bring in $3.5 billion in revenue, but 
the cost of the program on average is $5 billion, and we run a 
$1.5 billion deficit a year in the NFIP.
    And we are paying 31 percent in compensation for the Write 
Your Owns. Now, I am not passing judgment on that, but is it 
fair to say that is almost $1 billion in compensation for the 
Write Your Owns?
    Mr. Wright. You are right on the amount of compensation. 
The Write Your Owns retain a portion of that. And so first of 
all I would tell you I want the price operating this program to 
go down. I want it to go down across-the-board, whether that is 
on my side of the books or what the companies are ultimately 
doing.
    When you look inside that, half of that compensation goes 
to insurance agents, the independent agents who are small 
business owners across the country. And we can begin to walk 
through those elements.
    Ultimately, we need to--
    Chairman Duffy. But it--
    Mr. Wright. --pay the actual expenses, put the right 
incentives in place, and we need to drive down the costs.
    Chairman Duffy. So just to be clear, this is roughly close 
to $1 billion in compensation?
    Mr. Wright. Yes, sir.
    Chairman Duffy. And we roughly run a $1.5 billion deficit a 
year. You would agree with that number, too, correct?
    Mr. Wright. I would describe the deficit numbers 
differently, but I appreciate how you came to those numbers.
    Chairman Duffy. And again, there is no risk taken on by the 
Write Your Owns?
    Mr. Wright. There is none.
    Chairman Duffy. And did you see any disparity in, because 
we have had this conversation and those who are involved in the 
program make the argument that it takes a lot of work to 
educate homebuyers on what the program is and work it up--I get 
that.
    But oftentimes, you just have renewals year-over-year and 
there is really no work in that, is there? It's pretty simple 
stuff. And we don't have any distinction between the first year 
the policy is written where there might be a little extra work, 
but also the renewals that take place year-over-year-over-year 
and there is virtually no work.
    Mr. Wright. There are standards of practice in the 
insurance industry in terms of how the compensation works. That 
said, we need to drive down the cost. It is we are working--
    Chairman Duffy. That does not--
    Mr. Wright. Is it--
    Chairman Duffy. --answer my question. A renewal is pretty 
darn easy, right?
    Mr. Wright. A renewal is usually easier than writing a new 
policy. That is correct.
    Chairman Duffy. There are circumstances where it is not? 
Well, yes, they would give you one if the maps change and--
    Mr. Wright. Exactly.
    Chairman Duffy. Or--
    Mr. Wright. So when maps change or there has been a change 
in rates or surcharges, there can be conversations by which it 
would be more work.
    Chairman Duffy. And I know it is hard to compare apples-to-
apples in this, but outside of the NFIP, when we look at 
commissions or compensation, I don't know that you are going to 
find the industry paying 30, 31 percent.
    Mr. Wright. I can speak to that. I think that today, and we 
have been directed and we are working on the study to move away 
from this, but today we would use the average of five lines, 
including fire, homeowners, allied, and that average comes 
together.
    And then today we pay an additional one basis point because 
of the complexity of the Flood Insurance Program. So, 
homeowners sits at 27 percent, and fire sits at 28 percent, 
which shows me there is an opportunity to bring those prices 
down.
    Chairman Duffy. And I would just add, this is an important 
conversation we should have. It might be fair or it might be 
unfair, but this is a big part of the cost of the program.
    And I think it is important that we engage in the 
conversation, and your 31 percent may be right. And it may be a 
little too high.
    Mr. Wright. So I think--
    Chairman Duffy. That is a--
    Mr. Wright. --my position is clear. I do think we can bring 
those costs down. We need to look at them in terms of the Write 
Your Owns. We need to look at it also in terms of the agents 
and also the fact that at least 2.4 percent basis points of 
that go to State taxes that just flow back through to the 
States.
    Chairman Duffy. Absolutely. And we know the agents do great 
work in our communities, making sure these programs and these 
policies get out.
    With that, my time is well over, and I now recognize the 
ranking member of the subcommittee, Mr. Cleaver, for 5 minutes.
    Mr. Cleaver. Thank you, Mr. Chairman.
    Mr. Wright, I just returned. I missed votes all week. I 
have been in my district because we were hit by tornadoes--
    Mr. Wright. Right.
    Mr. Cleaver. --in small towns you have never heard of, Oak 
Grove, Richmond. We had a tornado hit Orrick, a great vacation 
spot if you are looking for a place to visit this summer. But 
the problem is that we have this threshold that you have to 
reach of $8 million in damage in order to get help.
    So we are, unintentionally but for sure, hurting small 
communities because Orrick has 800 homes in the whole town. And 
so if all of them had been destroyed, we still wouldn't have 
reached that threshold.
    The same thing happened in Richmond, population 5,000, and 
Oak Grove, population 7,700. Do you think that is something 
that needs to be changed?
    Mr. Wright. Mr. Cleaver, those standards are set in terms 
of how FEMA implements the Stafford Act and there are per 
capita standards that are in place. I am not an expert on those 
various thresholds, but I would be happy to get the right folks 
talking with you about them.
    Mr. Cleaver. Okay. Because the people there think, we live 
in a small town. No matter what happens to us, we don't get 
help. But I would be happy to get that information because I am 
going back up there Sunday and many people are just interested 
in well, why is it that we can't get help?
    I live in a small town, so, a small town never gets kicked. 
And you have to live in the urban area before you get help from 
your own government. So I would be very, very interested in 
information.
    The other thing that I am a little concerned about, and it 
is tornado season so I hope there are no more tornadoes in the 
country. That is a hope, but I don't think I am going to be 
able to stop that with the hope.
    And so we are going to end up before spring is over having 
some more tornadoes. Hopefully, they won't be devastating to 
the point where lives are lost, but they are going to happen.
    With that in mind, and with the OMB slashing or proposing 
to slash the FEMA budget by 11 percent, if that should happen, 
does that mean that my people in my small towns have less of a 
chance to get help?
    Mr. Wright. Sir, I can't speak to the specifics of the 
budget that is still under formulation. What I will tell you is 
the disaster relief fund is where we pay these expenses to 
communities, and we can walk you through more of those details 
when we show you the elements related to the standards for 
review on declarations.
    Mr. Cleaver. Okay. All right. Thank you, Mr. Chairman.
    Chairman Duffy. The Chair recognizes that the gentleman 
from California has now arrived, and recognizes him for 5 
minutes.
    Mr. Sherman. Thank you. Yesterday, it was reported in the 
Washington Post that the Trump Administration may slash FEMA's 
budget in part to help find funds for other priorities. It was 
reported that homeowners may face a surcharge on their flood 
insurance policies, and I guess that would be to make up for 
the lost revenue.
    What impact would these cuts have on your ability to 
properly administer the flood insurance program? Can you 
elaborate on the flood fee, and what kind of surcharge we are 
talking about?
    Mr. Wright. Sir, I am aware of the reporting that you are 
referencing. What I can tell you is that to the best of my 
knowledge, the final decisions related to the President's 
budget haven't been made. So it would be premature for me to 
speak about specifics. I would refer you to the Office of 
Management and Budget.
    Once that proposal is available, I would be happy to 
discuss how it would be implemented in our programs with you.
    Mr. Sherman. But obviously if the budget is cut, homeowners 
will be paying more, correct?
    Mr. Wright. The related elements that are here deal with 
when are there fees that are in place and surcharges and who 
bears the costs of those elements? Again, I don't know that I 
can speak to the specifics of that until I know what the 
proposal says.
    Mr. Sherman. Last Congress, the House passed the Flood 
Insurance Market Parity and Modernization Act (FIMPMA) 
unanimously. Although it did not receive a vote in the Senate, 
the bill had bipartisan support.
    As you will recall, the bill clarified the provision in the 
Biggert-Waters 2012 Act allowing for private flood policies to 
meet mandatory purchase requrements of the flood insurance 
program.
    Because there is some confusion that remains for insurers 
and lenders causing the market to be slow in responding, the 
FIMPMA would clarify this provision. In addition to some 
suggestions for growing private insurance options, including 
the removal of the non-compete clause from the WYO arrangement 
and granting access to the NFIP's claim to loss data.
    What is your opinion of this proposal? Do you agree with 
the 419 Members of the House who voted for it?
    Mr. Wright. I believe that the bill has important elements 
in it, particularly as we bring clarity onto what satisfies 
comparable coverage. And I think that we look forward to 
working with the committee and its members on what that 
provision would look like in this new Congress.
    Mr. Sherman. What would the future of the NFIP look like if 
perhaps as many as 80 percent of the current policyholders, 
those with moderate or low risk, are recruited away by the 
private flood carriers? What effect would that have?
    Mr. Wright. Far less than 80 percent of our book of 
business is low or moderate. I do believe to the degree the 
private market comes in, that would be an obvious place for 
them to start.
    So today of my 5.1 million policies, 1.6 million of those 
are preferred risk policies. Given the assertion you have made, 
that might be a place where they would begin.
    I am convinced, and this goes to the chairman's earlier 
point about there are far more structures that need to be 
insured. And so I am convinced a mutual gain approach is the 
right way on here. And I think making space and encouraging the 
private markets is a helpful way to ensure that more people are 
covered for flood in this country.
    Mr. Sherman. You noted that FEMA wants to see flood 
insurance private or public increasing as we move forward. 
Could you explain some more on what steps Congress can take so 
more people are insured?
    Mr. Wright. I think there are particularly some 
programmatic and technical issues that are barriers for us to 
giving folks the product that they want or need. It requires us 
to look at the coverage limits. It also requires us to look at 
things like basements and the like.
    Today, the statute mandates that I put the terms and 
conditions of the policy into the Code of Federal Regulations, 
which is a very cumbersome process. My agency is very slow to 
do rulemaking, and so in making these changes, I think one of 
the elements I would assert to you is that it still should go 
through notice and comment.
    I should still be very transparent about it, but the idea 
that I go through a full regulatory rulemaking to add a 
coverage for someone that they are willing to pay for at an 
actuarial rate, those are the kind of barriers that Congress 
could help us remove.
    Mr. Sherman. I am hoping you will propose statutory 
language so that we understand what we can do to be helpful and 
are very specific about that.
    I yield back.
    Mr. Wright. I would be happy to work with you on that.
    Chairman Duffy. The gentlemen yields back.
    The Chair has spoken with the ranking member and asks 
unanimous consent to allow the gentleman from New Jersey 5 
additional minutes.
    Mr. Cleaver. No objection.
    Chairman Duffy. Without objection, it is so ordered. The 
gentleman is recognized for 5 minutes.
    Mr. MacArthur. Thank you, Mr. Chairman, and Mr. Ranking 
Member.
    I want to just follow up a little bit on what we talked 
about before. Mr. Wright, you and I have some things in common. 
I think you know that I spent my business career in insurance, 
a business I love very much, which I think can do an awful lot 
of good for people.
    I noticed in my business life that as things got bigger, 
you have to manage them differently. And so when I had a small 
company, it was one thing. When I had thousands of people, it 
was very different.
    And often when you are trying to understand how things are 
going wrong, you only see the ripples at the top where the 
causation is really beneath the water line. And it is not easy 
to get to the bottom of things sometimes.
    I am trying to understand something you talked about a bit 
earlier. The Write Your Owns had zero incentive to underpay 
claims. In fact, you might argue they had an incentive to pay 
them quickly because they don't make more money by creating a 
tortuous process. And yet, claims got delayed and there were 
some pretty egregious errors made, some of them apparently 
intentionally.
    You testified that the engineers and the adjusters would 
have no financial incentive to change a report to say something 
was covered by flood and then a few weeks later send it to the 
insured with a denial and say it wasn't covered.
    Are you aware of any action within either the NFIP or FEMA 
more broadly, any action either explicit or implicit, implied--
are you aware of anything that came out of NFIP or FEMA, either 
verbally or in writing that would have suggested to various 
Write Your Own companies, various engineers and adjusters, that 
you wanted them to reduce claim payments?
    Mr. Wright. Sir, as you well know and we have discussed, it 
precedes me, but I have gone back and I have had the team 
looking at this question. And I have seen no evidence of that 
instruction being provided.
    Mr. MacArthur. Does it strike you as just incongruous that 
this could have happened this way without somebody directing 
it?
    Mr. Wright. The best I have been able to understand, is we 
have looked through this: 19,000 of these claims came back for 
reconsideration as we have moved through, and as you addressed. 
I was brought in to finish fixing this given the problems that 
were in place.
    A few things have been made clear to me, and I have spent a 
lot of time with some of the files myself looking at them, 
including some of the ones with errors in them.
    What I saw was a system that was overwhelmed without the 
right controls in place. I saw a lot of sloppiness. That is 
inexcusable, and we have to have the controls in place to be 
able to see that and correct it.
    When you have a size event as large as this one, you are 
not going to play perfect ball. But we have to make sure that 
we do that and so some of the changes I made, we changed the 
appeals process because when people didn't think they got a 
fair shake on it, they couldn't win through that appeals 
process. That is changed.
    The litigation oversight, the companies were fighting the 
wrong battles on this. But more fundamentally I have to get to 
the point by which we are not seeing changes made that are 
except to improve the quality of the reports.
    Mr. MacArthur. That is what I will be looking for. And I 
don't doubt your motives and your good intentions about fixing 
it, but we have to see something different in the actual 
structure of NFIP the next time.
    Actually, I only have a minute left, and I want to change 
gears--
    Mr. Wright. Okay.
    Mr. MacArthur. --for a moment. ICC coverage, we have talked 
about a little bit today. And I just want to ask you, assuming 
actuarial adequacy, do you believe that increasing ICC limits 
and increasing the actual payment of ICC funds would result in 
avoidance of future losses?
    Mr. Wright. It would help mitigate future losses. For me, 
the key is finding out how to do it where--today it is $30,000. 
Structures in your district largely are well in excess of a 
half million. I know it is a diverse place, but there are high 
property values. There are other parts of the country where the 
property values are only $100,000.
    We have to find the right way to tie that coverage or mini-
grant program to the structure in a way that understands it, 
and then come to an understanding today we run a mini-grant 
program that has helped to defray the cost of that increased 
cost of compliance.
    Are we trying to actually stand up something that provides 
you full coverage, at which point we should price it and we 
should mirror some things that go in other peril lines?
    That is what I have been grappling with. It is not simple 
and we have to do something that works in various geographic 
contexts.
    Mr. MacArthur. I appreciate it. My time has expired.
    And I thank the chairman for his indulgence today.
    Chairman Duffy. The gentleman yields back.
    Mr. Wright, I want to thank you again for your testimony 
today. We appreciate it. It is a way to inform our Members 
about the way you are thinking about these issues.
    Just as a notice to members of the subcommittee, we can 
expect another NFIP hearing next week to get the community 
perspective on this program. Both sides of the aisle have been 
working together on that.
    The Chair notes that some Members may have additional 
questions for this witness, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 5 legislative days for Members to submit written questions 
to this witness and to place his responses in the record. Also, 
without objection, Members will have 5 legislative days to 
submit extraneous materials to the Chair for inclusion in the 
record.
    This hearing is now adjourned.
    [Whereupon, at 12:28 p.m., the hearing was adjourned.]

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