[Senate Hearing 117-349]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 117-349

                REAUTHORIZATION OF THE NATIONAL FLOOD 
                    INSURANCE PROGRAM PARTS I AND II

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

                                HEARING

                               BEFORE THE

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

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             FIRST SESSION

                                   ON

          EXAMINING THE REAUTHORIZATION OF THE NATIONAL FLOOD INSURANCE 
                                  PROGRAM

                               __________

                        MAY 18 AND JUNE 17, 2021

                               __________

  Printed for the use of the Committee on Banking, Housing, and Urban 
                                Affairs
                                
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]                                


                Available at: https: //www.govinfo.gov /

                              __________

                    U.S. GOVERNMENT PUBLISHING OFFICE                    
48-383 PDF                 WASHINGTON : 2022                     
          
-----------------------------------------------------------------------------------   

            COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

                     SHERROD BROWN, Ohio, Chairman

JACK REED, Rhode Island              PATRICK J. TOOMEY, Pennsylvania
ROBERT MENENDEZ, New Jersey          RICHARD C. SHELBY, Alabama
JON TESTER, Montana                  MIKE CRAPO, Idaho
MARK R. WARNER, Virginia             TIM SCOTT, South Carolina
ELIZABETH WARREN, Massachusetts      MIKE ROUNDS, South Dakota
CHRIS VAN HOLLEN, Maryland           THOM TILLIS, North Carolina
CATHERINE CORTEZ MASTO, Nevada       JOHN KENNEDY, Louisiana
TINA SMITH, Minnesota                BILL HAGERTY, Tennessee
KYRSTEN SINEMA, Arizona              CYNTHIA LUMMIS, Wyoming
JON OSSOFF, Georgia                  JERRY MORAN, Kansas
RAPHAEL WARNOCK, Georgia             KEVIN CRAMER, North Dakota
                                     STEVE DAINES, Montana

                     Laura Swanson, Staff Director

                 Brad Grantz, Republican Staff Director

                       Elisha Tuku, Chief Counsel

                 Beth Cooper, Professional Staff Member

                Megan Cheney, Professional Staff Member

                 Dan Sullivan, Republican Chief Counsel

                 John Crews, Republican Policy Director

                      Cameron Ricker, Chief Clerk

                      Shelvin Simmons, IT Director

                    Charles J. Moffat, Hearing Clerk

                                  (ii)


                            C O N T E N T S

                              ----------                              

                         TUESDAY, MAY 18, 2021

                                                                   Page

Opening statement of Chairman Brown..............................     1
        Prepared statement.......................................    35

Opening statements, comments, or prepared statements of:
    Senator Toomey...............................................     2
        Prepared statement.......................................    36
    Senator Scott................................................
        Prepared statement.......................................    36

                               WITNESSES

Chad Berginnis, Executive Director, Association of State 
  Floodplain
  Managers.......................................................     5
    Prepared statement...........................................    37
    Responses to written questions of:
        Senator Sinema...........................................    72
Velma M. Smith, Senior Officer, Government Relations, The Pew 
  Charitable Trusts..............................................     6
    Prepared statement...........................................    50
    Responses to written questions of:
        Senator Sinema...........................................    72
        Senator Scott............................................    74
Rebecca Kagan Sternhell, Director, New York City Office of 
  Federal Affairs................................................     8
    Prepared statement...........................................    58
    Responses to written questions of:
        Senator Sinema...........................................    76
Stephen Ellis, President, Taxpayers for Common Sense.............    10
    Prepared statement...........................................    63
    Responses to written questions of:
        Senator Sinema...........................................    77
        Senator Scott............................................    79
R.J. Lehmann, Senior Fellow and Editor-in-Chief, International 
  Center for Law & Economics.....................................    11
    Prepared statement...........................................    66
    Responses to written questions of:
        Senator Sinema...........................................    80

              Additional Material Supplied for the Record

Statement submitted by RAA.......................................    81

                                 (iii)
                                 
                        THURSDAY, JUNE 17, 2021

                                                                   Page

Opening statement of Chairman Brown..............................   103
        Prepared statement.......................................   132

Opening statements, comments, or prepared statements of:
    Senator Toomey...............................................   104
        Prepared statement.......................................   132

                                WITNESS

David I. Maurstad, Deputy Associate Administrator, Federal 
  Insurance and Mitigation Administration, Federal Emergency 
  Management Agency..............................................   106
    Prepared statement...........................................   134
    Responses to written questions of:
        Senator Menendez.........................................   140
        Senator Warnock..........................................   148
        Senator Kennedy..........................................   149

              Additional Material Supplied for the Record

Statement submitted by Jeffrey C. Wiley, President and CEO, Fort 
  Bend Economic Development Council, Sugar Land, Texas...........   159

 
    REAUTHORIZATION OF THE NATIONAL FLOOD INSURANCE PROGRAM--PART I

                              ----------                              


                         TUESDAY, MAY 18, 2021

                                       U.S. Senate,
          Committee on Banking, Housing, and Urban Affairs,
                                                    Washington, DC.
    The Committee met at 2:30 p.m., remotely, via Webex, Hon. 
Sherrod Brown, Chairman of the Committee, presiding.

          OPENING STATEMENT OF CHAIRMAN SHERROD BROWN

    Chairman Brown. Good morning. The Senate Banking, Housing, 
and Urban Affairs Committee will come to order. This hearing is 
in the virtual format. A few reminders as we begin. Once you 
start speaking there will be a slight delay before you are 
displayed on the screen. To minimize background noise, please 
click the Mute button until is your turn to speak or ask 
questions.
    There is a box on your screen labeled ``Clock.'' For 
witnesses, you will have 5 minutes for your opening statements. 
For all Senators, the 5-minute clock still applies for 
questions. With 30 seconds remaining for your statements and 
questions you will hear a bell ring to remind you your time is 
almost expired. It rings again 30 seconds later. If there is a 
tech issue we will move to the next witness or Senator until it 
is resolved.
    To simplify the speaking process, Senator Toomey and I have 
agreed to go by seniority for this hearing.
    This hearing is the beginning of our efforts, bipartisan 
efforts, to enact a long-term reauthorization of the National 
Flood Insurance Program. At a later hearing, we will invite the 
Federal Emergency Management Agency to discuss the status of 
reauthorization of the program.
    Flooding is the most common, most costly natural disaster 
facing families, businesses, and communities across our 
country. It can take families' homes and memories, wreck their 
finances, shutter a small business, destroy infrastructure, 
even entire communities. Disasters often fall hardest on low-
income families in communities who have fewer resources to 
prepare for and respond to them.
    We can only expect flooding to get worse and become even 
more common as the climate continues to change. People in Ohio 
and in North Dakota, Maryland, Louisiana, all over the country, 
are already seeing more flooding. They are feeling the 
consequences, whether from spring snow melt or increasingly 
powerful storms or sunny-day flooding in coastal communities, 
or extreme rainfall that overwhelms aging infrastructure and 
the land's capacity to absorb water. Just today we are seeing 
flash flooding in Louisiana and Texas.
    No matter where you live, everyone pays for the natural 
fallout as the country spends tax dollars to help families and 
communities recover. We know we must take action to protect 
communities from climate change and seize the opportunities 
that come with that effort. That is going to be a long-term 
effort. While we seek to halt the trajectory of our changing 
climate, we also need to help families and communities become 
more resilient to the flooding we face now in the coming 
decades, and, whenever possible, avoid it altogether.
    The NFIP is critical to that effort. The program, as we 
know, provides $1.3 trillion in coverage to more than 5 million 
homes and businesses, and some 22,000 communities. It is not 
just an insurance program. It is not just to help with 
recovery, but to prevent and minimize the damage in the first 
place.
    The NFIP combats the overall threat of flooding through 
four interrelated components: flood insurance, to help property 
owners and renters recover quickly after a flood and reduce the 
need for Federal emergency spending; floodplain management, to 
minimize damage to people and property, make our communities 
more resilient through the adoption of local ordinances and 
building codes; floodplain mapping, to identify and communicate 
that risk to first responders, homeowners, and communities so 
they can mitigate or avoid hazards altogether; and mitigation, 
to help remove property from harm's way through property-level 
and community investments that reduce our overall level of 
flood risk and will save money.
    Through NFIP reauthorization, we have an opportunity to 
make our families and businesses and communities safer and more 
resilient. Today our witnesses will provide their perspectives 
on what this Committee should consider as we work on that 
effort. I am interested, from all you as witnesses, in your 
recommendations for ways we can strengthen the NFIP so it can 
provide reliable access to insurance for property owners and 
renters, so we can address affordability concerns, so we can 
ensure that more people are aware of their flood risks and 
ensure against losses. We help the Nation predict and reduce 
our overall level of flood risk through investments and 
improvements in mapping, management, floodplain management and 
mitigation.
    In 2017, then-Chairman Crapo and I began working with 
Members of this Committee on a long-term reauthorization. This 
Congress I look forward to continuing this work with Ranking 
Member Toomey and the Members of the Committee to strengthen 
NFIP and the country's comprehensive approach to mitigation 
flood risk through a long-term reauthorization bill. That is 
our goal, and I am hopeful we can do it.
    Ranking Member Toomey.

         OPENING STATEMENT OF SENATOR PATRICK J. TOOMEY

    Senator Toomey. Thank you, Mr. Chairman, and greetings to 
all of our witnesses today. As we know, the last long-term 
reauthorization of the National Flood Insurance Program 
occurred in 2012. That 5-year authorization expired, of course, 
in 2017, and since then we have had 16 short-term NFIP 
reauthorizations. I am hoping that we can find the common 
ground necessary to avoid a 17th short-term reauthorization.
    However, I would remind my colleagues our deadline of 
September 30th is closer than it may seem. I am ready to work 
quickly and cooperatively to find a path forward. But before we 
discuss what ought to be in the NFIP reauthorization, I do want 
to remind everyone of the scope of NFIP's challenges. Put 
simply, NFIP is broken. Since 2005, when Hurricane Katrina 
devastated the Gulf Coast, NFIP has had to borrow nearly $40 
billion from the Treasury in order to pay claims, and that was 
not just Hurricane Katrina.
    In other words, NFIP has lost about $2.25 billion per year, 
on average, over the last 16 years. Now consider that $2.25 
billion per year loss, considered in the context of NFIP's 
total annual revenue last year of about $4.6 billion. For the 
last decade-and-a-half, NFIP has averaged an annual loss 
representing about half its total annual revenue.
    Now in the real world, a private insurer that had this 
magnitude of losses year after year would certainly cease to 
exist. And that brings me to an important point. The NFIP 
really should not be considered an insurance program at all. In 
many ways, it is really a subsidization program. Specifically, 
NFIP subsidizes the cost of living and building in flood-prone 
areas. Usually we subsidize activities because we want to 
encourage them. Reversely, in the case of NFIP, subsidies lead 
to more building and rebuilding in areas at extreme risk of 
flooding. Exacerbating the problem, development itself within 
these flood-prone areas tends to further increase flood risk 
and flood damage, because it covers the absorbent green space 
with impermeable surfaces.
    And to whom do these subsidies mostly accrue? Wealthy 
people. Properties with subsidized NFIP premiums are 
overwhelmingly located in our wealthiest communities. Likewise, 
subsidized NFIP premiums are rare in our lower-income 
communities.
    Lately, this Committee has spent a great deal of time 
discussing climate risk and equity. I cannot think of a better 
opportunity to demonstrate a commitment to addressing both than 
through a proper reauthorization of the NFIP.
    Now part of the good news is that the NFIP is on a slow but 
positive path toward actuarially more sound premiums, and that 
brings me to the key principle of reauthorization, which is 
let's do no harm. Reauthorization must not interrupt this 
important positive progress. Next we should continue to explore 
opportunities to bring more private capital into the flood 
insurance business. NFIP should continue to pursue 
opportunities to lay off risk to the private sector through 
reinsurance and other creative capital market structure.
    In the event that NFIP needs additional authority to do so, 
we should provide that authority. Additionally, we should 
discharge private flood insurance as an alternative to NFIP. 
Increasing the availability of private flood insurance is a 
great way to get more homeowners insured against flood damage. 
That is a worthwhile goal that is good for the homeowner and 
the taxpayer.
    Further, if the private sector can offer better coverage, 
better service, and do it at a better price, why would we want 
to stand in the way of that service for our constituents? 
Additionally, to the extent that subsidies continue to exist 
within NFIP, we should at least explore opportunities to target 
those more to the people who need them the most. But I would 
remind my colleagues that the incentives, the perverse 
incentives involved in flood insurance subsidies, and urge 
great caution.
    Finally, I hope we take this opportunity to find a better 
way to explain flood risk to policyholders, and perhaps more 
importantly, future home buyers. Those who choose to live in 
flood-prone areas should do so with eyes wide open. Flood 
insurance is important, and it provides considerable financial 
security, but flood insurance is not the National Guard or the 
Coast Guard. It cannot rescue people stranded by rising 
floodwaters. And flood insurance is not a time machine. It 
cannot give back the days, weeks, months, and in some cases 
years it takes to rebuild and recover from a major flood.
    So, Mr. Chairman, in conclusion, I think a long-term 
reauthorization must continue to move NFIP in a positive 
direction, and I stand ready to work with you and my other 
colleagues to achieve that goal. Thank you.
    Chairman Brown. Thank you, Senator Toomey.
    I will introduce today's witnesses. Mr. Chad Berginnis is 
the Executive Director of the Association of State Floodplain 
Managers. He previously served in several planning and 
community support roles in my State, including serving as Ohio 
State Hazard and Mitigation Officer. He has previously 
testified before this Committee on the topic of NFIP. He lugs 
around Ohio State while inexplicably having moved to Wisconsin.
    Ms. Velma Smith is the Senior Government Relations Officer 
at Pew Charitable Trusts, where she has worked in reforming 
flood insurance and promoting flood-resilient and 
environmentally sound coastal policy. She previous served as a 
senior advisor with the National Environmental Trust and 
Executive Director of Friends of the Earth.
    Rebecca Kagan Sternhell is Director of the New York City 
Office of Federal Affairs, where she has worked on flood 
insurance issues for almost a decade. She previously served as 
Deputy Assistant Administrator at the U.S. Small Business 
Administration, and as Assistant Corporate Counsel in the 
Division of Legal Counsel in the Mayor's Office of Federal 
Affairs for New York City's Law Department in Washington.
    Mr. Stephen Ellis is the President of Taxpayers for Common 
Sense. He joined Taxpayers for Common Sense in 1999, where his 
roles have included serving as media and legislative 
spokesperson. Mr. Ellis has also previously testified before 
this Committee on flood insurance.
    Mr. R.J. Lehmann is Senior Fellow and Editor-in-Chief at 
the International Center for Law & Economics. He founded the R 
Street Institute where he served as Director of Finance, 
Insurance, and Trade Policy. He also served as Deputy Director 
of the Heartland Institute's Center on Finance, Insurance, and 
Real Estate.
    Mr. Berginnis, if you would begin.

STATEMENT OF CHAD BERGINNIS, EXECUTIVE DIRECTOR, ASSOCIATION OF 
                   STATE FLOODPLAIN MANAGERS

    Mr. Berginnis. Thank you. Good morning Chairman Brown, 
Ranking Member Toomey, and Members of the Committee. I am Chad 
Berginnis, Executive Director of the Association of State 
Floodplain Managers and am honored to be testifying on a 
program that our organization and members consider essential to 
the Nation's flood loss reduction efforts, the National Flood 
Insurance Program.
    Our members are involved in implementing most elements of 
the NFIP, and ASFPM has provided input on every NFIP reform 
effort since the 1980s. Our written statement identifies over 
20 reform ideas for your consideration.
    Today the NFIP is on the cusp of a significant 
transformation. The premise is simple: use an accurate, risk-
based rate to communicate to homeowners, business owners, and 
renters their true flood risk. That is what Risk Rating 2.0 
does. Despite having some implementation questions and 
concerns, especially regarding how the new system will tie into 
floodplain management and mitigation elements of the NFIP, we 
are nonetheless supportive of Risk Rating 2.0.
    If we were to identify one of the most significant 
financial risks to the NFIP, though, we must examine how debt 
is dealt with. We have seen you give FEMA authority to use 
private sector financial risk management tools, such as 
reinsurance and catastrophe bonds. You have put policies on the 
path to full risk rates, and with Risk Rating 2.0, FEMA will be 
using current insurance rating approaches.
    Yet the NFIP's debt seems to be treated by Congress 
differently than programs like crop insurance, where the annual 
taxpayer cost is near $10 billion. It is time to recognize the 
progress that FEMA has made with managing the financial risk of 
the program, recognizing that the NFIP was never designed to 
handle today's catastrophic flood events and recognize the 
broader societal benefits of the NFIP by forgiving the debt and 
establishing a threshold like a sufficiency standard, above 
which debt is treated, like disaster assistance and 
appropriated through disaster supplementals.
    The foundation on which the entire program is built is 
comprehensive and complete flood mapping. Arguably, the most 
significant reform in 2012 was the establishment of the 
National Flood Mapping Program. It mandated an ambitious 
national flood mapping effort that comprehensively identified 
the types of different flood risks facing our citizens.
    Sadly, we have to report that since that time, beyond 
ensuring that the maps were largely updated, we barely made 
progress on expanding the mapping to ensure we have identified 
flood hazard areas before development, not afterwards.
    In candidly refreshing testimony in early 2020 before the 
House Science Committee, FEMA not only recognized this 
shortfall but also indicated that appropriations are not nearly 
where they need to be. ASFPM is calling for an increased 
authorization for flood mapping and also asking you to consider 
a $7.5 billion flood mapping surge as part of any 
infrastructure bill that the Senate might consider.
    Floodplain management's role in the NFIP is only successful 
if we enable communities and States to have the capacity to do 
it. It focuses on adopting and enforcing codes and standards 
that govern land use and construction in flood hazard areas. 
Because State and local capability is key to effective 
floodplain management, ASFPM is calling for the authorization 
of the Community Assistance Program, doubling its budget from 
$10 million to $20 million annually.
    The flood mitigation element of the NFIP is realized 
primarily through increased cost of compliance coverage as part 
of every NFIP policy, and the Flood Mitigation Assistance 
Program, which focuses on mitigating existing at-risk 
buildings. ASFPM is calling for a much stronger investment, 
both ICC and FMA, including tripling the amount of ICC funds 
available through a flood insurance policy. ASFPM also 
recognizes and supports adding new mitigation tools to the 
toolbox, including loan programs and more focused flood 
mitigation planning.
    Finally, we have already commented on Risk Rating 2.0, and 
we also note that the flood insurance element of maintaining 
availability of NFIP policies is critical, even with the 
growing private sector market, as private policies will 
inevitably be dropped after claims in an area due to geographic 
concentration of risk. ASFPM continues to believe that there 
are some reforms necessary to ensure that the NFIP is on a fair 
playing field with private flood before mechanisms like 
continuous coverage are considered.
    In closing, we would also like to comment on how the NFIP 
can address equity and social justice. One of the strong 
arguments for Risk Rating 2.0 is that preliminary data from 
FEMA suggested it will make rates more equitable and just. We 
also recognize that the NFIP will need a targeted, means-tested 
affordability program. Mitigation efforts through FMA could be 
made more just by evaluating how other policies like relocation 
assistance and benefit-cost analysis can be changed to 
recognize equity and social dimensions of flooding.
    By building the NFIP of tomorrow, we should ensure that all 
of our communities and property owners have the opportunity to 
make the families, their homes, and businesses more resilient 
to the Nation's most significant natural hazard, flooding. 
Thank you.
    Chairman Brown. Thank you, Mr. Berginnis. Ms. Smith is 
recognized.

    STATEMENT OF VELMA M. SMITH, SENIOR OFFICER, GOVERNMENT 
              RELATIONS, THE PEW CHARITABLE TRUSTS

    Ms. Smith. Thank you. Good morning, Chairman Brown, Ranking 
Member Toomey, Members of the Committee. On behalf of the Pew 
Charitable Trusts I thank you for the opportunity to testify.
    Let me start with this. The NFIP is essential to the 
Nation's management of flood risk. While the program needs to 
be adjusted and reformed, we know that you must carefully 
consider the impacts of any changes to a program that serves so 
many flood-weary communities.
    In our written testimony we cover a range of topics, from 
the pressing need for more mapping, particularly in rural 
areas, to the shortfalls in mitigation. Let me run through a 
few of the suggestions.
    We urge you craft a requirement for flood disclosure, and 
we are grateful to Committee Members who have endorsed such 
proposals. Up-front disclosures about flood risk, made before 
financial commitments and mortgages or leases, can help 
consumers make flood-smart decisions.
    We wholeheartedly endorse the proposal by Senators Reed, 
Kennedy, and Menendez to establish a flood-specific revolving 
loan fund. Floods rank, as you have noted, as the most 
frequently and costly natural disaster, so we believe it makes 
good sense to create and generously seed a program to help 
States, territories, and tribes with flood mitigation. A 
revolving loan fund would address the feast-and-famine problem 
that can attach to grant awards and allow States to buildup 
their own staffing and preparedness capability.
    We also thank Senator Scott and Schatz for focusing on the 
longstanding but still growing problem of repetitive loss 
properties. These are the properties that in some years account 
for as little as 1 percent of policies but tap the fund for as 
much 30 percent of claims. Pew believes we must make the 
neighborhoods that contain these properties top priorities for 
mitigation.
    And, of course, we know you must look at rates and 
affordability. We support efforts to make premiums more 
affordable for those least able to maintain coverage. We 
believe you must do so with a carefully targeted program, one 
that is truly equitable and will not threaten the program's 
ability to pay claims. We caution against across-the-board-rate 
cuts, which will only perpetuate some of the program's current 
inequities.
    We understand the apprehension around Risk Rating 2.0, but 
urge you not to stand in the way of this important and 
carefully considered update. We also believe that rate 
assistance must be accompanied by mitigation assistance. For 
those who live in high-risk areas, particularly areas where 
high risk overlaps with high social vulnerability, a simple 
rate subsidy does not solve the real problem. As storms grow 
fiercer and rainfall increases, threats to life and property 
will grow despite the lower cost of insurance. The Nation's 
resilience gap must be met with substantial new mitigation 
investment and safer building practices.
    Finally, we ask you to examine how the NFIP might be 
changed to foster better, more informed decisions about future 
flood risk, perhaps prompting changes to the program's 
floodplain management regulations and mapping efforts. For 50 
years, this program has been based on the notion that flooding 
can be managed by looking backwards and on the assumption that 
tomorrow's flood will mirror those of the past. Surely the last 
decade, or even the last half decade has shown us that that is 
wrong.
    In closing, let me say that Pew looks forward to working 
with the Committee to support an NFIP that will keep flood 
insurance available to those who need it, without asking 
taxpayers to subsidize risky development, that will foster 
fixes or buyouts of problem properties, and provide assistance 
to vulnerable communities, that will promote careful 
consideration of future risk and conservation of the natural 
resources that can help in flood management, and ultimately 
make the Nation better prepared for tomorrow's severe storms.
    I look forward to working with the Committee and I look 
forward to your questions. Thank you.
    Chairman Brown. Thank you. Ms. Kagan Sternhell is 
recognized for 5 minutes.

 STATEMENT OF REBECCA KAGAN STERNHELL, DIRECTOR, NEW YORK CITY 
                   OFFICE OF FEDERAL AFFAIRS

    Ms. Sternhell. Good morning, Senator Brown, Ranking Member 
Toomey, and other Members of the Committee. On behalf of the 
mayor and the 8.6 million New York City residents, I thank you 
for having me here today to discuss the National Flood 
Insurance Program and its role in our communities.
    The advent of sea level rise and rapid climate change is 
forcing us to reckon with our relationship to the water and the 
cities and communities we have developed next to it. Like so 
many other States and communities throughout this country, New 
York City's riverbanks and coasts hold a dangerous beauty we 
must begin to grapple with. Hurricane Sandy laid this fact bare 
in New York City and communities up and down the Eastern 
Seaboard, as did Hurricane Irma along the Gulf Coast, and the 
2019 Missouri River floods in the Dakotas, Missouri, Iowa, 
Illinois, Nebraska, and many more. The NFIP is a lifeline for 
property owners after a flooding event that can mean the 
difference between recovery and the loss of a critical core 
asset.
    In my written statement I cover a range of reauthorization 
issues and concerns from the perspective of local governments. 
Today I want to focus on how we can solve two critical 
questions. First, how do we make sure flood insurance is 
affordable to all Americans who need it, and second, what steps 
should take to mitigate against catastrophic harm stemming from 
floods?
    Flood insurance affordability is already a problem for 
households across the country, as premiums continue to increase 
year over year. The challenge of affordability will only 
continue to grow as climate change increases the intensity and 
frequency of flooding.
    The COVID-19 pandemic has added an additional layer of 
complexity to the affordability issue, as millions of Americans 
have lost jobs, saw their incomes reduced, and struggled to pay 
mortgages and rents. Though we are at the long-awaited moment 
of this pandemic seemingly coming under control and the country 
opening back up, millions of Americans will now face staggering 
rent and mortgage arrears on top of existing mandatory expenses 
like insurance.
    Further complicating matters is the policy FEMA has 
recently undertaken to reform how rates are calculated, 
ostensibly to better reflect risk based on a series of public 
and proprietary tools. Risk Rating 2.0, as it is designed, is 
expected to cause flood insurance costs to increase in many 
areas of the country, including New York City's coastal 
neighborhoods. Many of these neighborhoods are among our last 
bastions of affordable home ownerships, especially for 
communities that continue to experience the damaging legacies 
of racist redlining policies.
    Rapidly rising premiums will force thousands to make the 
impossible choice between abandoning insurance policies or 
cutting back on household expenses and necessities like food, 
utility payments, and school supplies, or even abandoning their 
homes altogether. This could lead to and trigger a Government-
made foreclosure crisis in communities that are already 
struggling to make ends meet, especially after the COVID-19 
pandemic.
    Because of all this, the city urges Congress to carefully 
consider what the future rate structure for the NFIP should be 
upon reauthorization and what it means for affordability going 
forward. Congress needs to ensure flood insurance remains 
affordable for the most vulnerable by establishing a means-
tested financial assistance for households that need it most.
    Congress can look at metrics, like the RAND-developed PITI 
ratio, that looks at the cost of owning a home relative to 
income to help model the program. Rather than blunter metrics 
like AMI or home value alone, the city believes this type of 
metric offers an opportunity to set national policy that is 
sufficiently sensitive to local and individualized conditions, 
much in the way Risk Rating 2.0 is attempting to be more 
individualized.
    Of course, we cannot solve the affordability problem 
without also addressing mitigation measures, which serve to buy 
down risk for the property owner and the program. Currently, 
the NFIP provides few incentives for property owners to protect 
their buildings from flood damage and reduce their premiums 
other than by elevating their buildings. Past efforts at 
pushing FEMA to identify mitigation alternatives to elevation 
have yielded limited results.
    The city believes more needs to be done and supports 
provisions on alternative mitigation strategies, especially for 
dense urban areas, and community-level mitigation is also a 
critical part of lowering program costs and achieving greater 
affordability at scale. Federal mitigation programs like BRIC 
should be maximally funded, whether through a large 
infrastructure plan or simply through annual appropriations, to 
increase the resiliency of American communities against the 
impacts of climate change.
    Funding should be allocated for coastal and riverine 
flooding prevention infrastructure and for interior drainage 
system upgrades. And Federal support of resilient design must 
go hand-in-hand with these investments. Federal-local policies 
that anticipate future risks in new construction and 
infrastructure should become the national norm. For example, in 
New York City, we have climate resiliency design guidelines 
that provide an even higher standard of flood protection for 
city capital projects. We use sea level rise predictions and 
maps of future flood risks to calculate building-specific 
resilient design criteria, in addition to abiding by building 
codes.
    The city urges you to act decisively to safeguard our 
economy and our communities by ensuring that Americans can 
affordably protect their homes and businesses from the risks of 
disastrous floods, now and in the future.
    I thank you again for having me here today, and I look 
forward to your questions.
    Chairman Brown. Thank you. Mr. Ellis, you are recognized 
for 5 minutes.

  STATEMENT OF STEPHEN ELLIS, PRESIDENT, TAXPAYERS FOR COMMON 
                             SENSE

    Mr. Ellis. Thank you. Good morning, Chairman Brown, Ranking 
Member Toomey, Members of the Banking Committee. I am Steve 
Ellis, President of Taxpayers for Common Sense, a national, 
nonpartisan budget watchdog. Thank you for inviting me to 
testify at this hearing on reauthorizing the National Flood 
Insurance Program. TCS has worked on flood- and disaster-
related issues on behalf of taxpayers for our entire 26 years 
of existence, and I have been involved in flood issues dating 
back to my days as a young Coast Guard officer dealing with the 
aftermath of the Great Midwest Flood of 1993. These are 
critical issues for taxpayers, and the country needs smart 
public policy that protects people and property.
    It is worth noting that the first named storm of the 2020 
Atlantic hurricane season appeared on May 16th and continued 
with 30 named storms, a record. This was on the heels of 
increasing billion-dollar disasters annually. The Congressional 
Budget Office estimates that hurricane winds and storm-related 
damages cost the U.S. economy $54 billion annual, including $34 
billion in annual economic losses to the residential sector. 
The expected annual cost to taxpayers is estimated to be $17 
billion.
    For 50 years, the Flood Insurance Program has helped fuel a 
development boom in medium- and high-risk areas simply by 
making it more affordable to take on flood risk. And housing 
does not occur in a vacuum. As areas develop, infrastructure 
follows, with roads, bridges, water, electric, and sewer. These 
all intensify along with residential development. The NFIP has 
exacerbated exposure to climate change. At the same time, it is 
negatively impacted by it. As storms increase in frequency, as 
sea levels rise, this increases the costs to the program. It 
also increases the demand for disaster spending.
    Before Hurricane Katrina in 2005, the Federal Flood 
Insurance Program never borrowed more than $1.5 billion from 
the U.S. Treasury. Since the 2005 storms, the program has 
borrowed nearly $40 billion.
    NFIP has subsidized rates in the program virtually since 
its inception, regardless of need. FEMA estimates that more 
than 25 percent of the properties in the program pay subsidized 
or grandfathered rates, where the flood zone designation has 
changed. Even with the properties that are paying supposedly 
risk-based premiums, the fact that the program can borrow from 
the Treasury is a built-in subsidy.
    The Government Accountability Office has documented large 
cross-subsidies, many of which benefit high-income homeowners. 
They found that over 78 percent of subsidized properties in the 
NFIP are located in counties with the highest home values, 
while only 5 percent of subsidized properties are in the 
counties with the lowest home values. This represents a real 
challenge to the program's sustainability. To help address 
this, grandfathering should not be allowed for any new 
construction in the floodplain.
    The best way to reduce the rate, for property owners and 
taxpayers, is to reduce the risk, not with artificial rate caps 
that hide the real risk to people but about finding ways to 
fund mitigation, either at the property or community level. 
While it varies by situation and peril, we know that every 
dollar spent on mitigation can save as much as six dollars or 
more in post-disaster response.
    Disasters also have a disproportionate impact on poor and 
minority populations. In many cases, these individuals do not 
have the savings to rely on while they rebuild, they may have 
lost their transportation to work, and their place of business 
may be destroyed as well. Because of historically 
discriminatory policies or a need for lower housing costs, 
these individuals are often situated in less desire, more 
vulnerable, higher-risk areas. They may not be able to repay 
loans made available after disasters or provide sufficient 
funds of their own to tap Federal programs.
    We have long called for means-tested premium assistance to 
help more homeowners obtain flood insurance while shifting the 
program away from property-based subsidies. There are a little 
more than 5 million NFIP policies, but there are well over 100 
million housing units in this country. To put the need for 
flood insurance in perspective, according to FEMA, after 2016's 
extraordinary heavy rainfall event in Baton Rouge, Louisiana, 
the average homeowner with flood insurance got $86,500 to 
rebuild their home. The average person without flood insurance 
got only $9,100 in individual disaster assistance. This sadly 
demonstrates that many people who are not required to buy flood 
insurance should. And even with protection from levees, 
floodwalls, or dams, there is a residual risk of flooding.
    FEMA has launched Risk Rating 2.0 to better price actual 
risk for properties. It is supposed to start with new 
properties and policies in October and existing policies next 
year. FEMA worked with a variety of organizations to 
incorporate more data and flood variables to determine actual 
risk to properties, and it will be updated annually. In theory, 
this will reduce some of the cross-subsidies that have plagued 
the program.
    This move to Risk Rating 2.0 coincides with long overdue 
mapping efforts. It goes without saying there have been 
enormous technological advancements in mapping and modeling 
since the program's inception 50 years ago. More advanced 
technologies such as LiDAR, 3D mapping, and computing power 
enable much more accurate and predictive maps than we have seen 
today.
    In conclusion, I want to thank you for inviting me to 
testify today. NFIP and related disasters are critical issues, 
not just for their budget and taxpayer impacts but for society 
as a whole. The goal must be to develop risk management and 
mitigation strategies that enable communities, infrastructure, 
and industries to become more resilient, face less risk, and 
can better adapt and mitigate future costs and damages of 
climate change.
    Thank you very much.
    Chairman Brown. Thank you. Mr. Lehmann is recognized for 5 
minutes.

 STATEMENT OF R.J. LEHMANN, SENIOR FELLOW AND EDITOR-IN-CHIEF, 
            INTERNATIONAL CENTER FOR LAW & ECONOMICS

    Mr. Lehmann. Thank you, Chairman Brown, Ranking Member 
Toomey, and Members of the Committee. I am R.J. Lehmann, and I 
am a Senior Fellow and Editor-in-Chief of the International 
Center for Law & Economics.
    I am speaking to you from St. Petersburg, Florida, and 
Florida is a strong case study in how the NFIP has transformed 
America. At the beginning of World War II, Florida was the 
least-populated State in the South. It is now the third most 
populated State in the Nation. That is not solely because of 
the NFIP--air conditioning also played a part--but the NFIP has 
been the catalyst in the mass movement of population. It has 
allowed us to convert wetlands and barrier islands, the natural 
defenses against things like tropical storms and flooding, into 
millions of acres of flood-prone housing. In the 40 years after 
the NFIP was created there was a 45 percent increase in the 
number of Americans living in coastal counties.
    The problem, of course, is that thanks to climate change we 
are projected to see three to six feet of sea level rise by the 
end of this century. Given current population trends, a sea 
level rise of three to six feet means that between 4 and 13 
million properties will be inundated, not just periodic 
flooding or chronic flooding, permanently underwater. That is 
on top of the other flood-related impacts of climate change, 
like more frequent and more severe tropical storms, more 
frequent and more severe precipitation events, and it is on top 
of what human development itself contributes to the problem. 
When you pave over permeable land, it cannot drain. The more 
properties that are hooked up to antiquated sewage and drainage 
systems, the greater the odds of catastrophic failure.
    Models show that what are now considered 100-year storms in 
the Southeast and the Gulf Coast will, by the end of this 
century, occur ever 1 to 30 years. What are considered 100-year 
storms in the Northeast and Mid-Atlantic will be expected every 
year. So when we talk about the NFIP and its debt and the 
problems with its structure, we need to keep in mind this 
context that all of this is going to get so much worse.
    Yet we are not treating it like a crisis. We continue to 
build more in flood-prone areas than outside of them. According 
to FEMA and census data from 2000 to 2016, the population of 
the 100-year floodplain grew by 14 percent, faster than the 
rest of the country combined. A 2019 report looked at 
construction since 2010 in areas that, by the end of the 
century, will be 10-year floodplains. That is an order of 
magnitude greater than the 100-year floodplain. In eight 
coastal States there was more development in that 10-year 
floodplain than outside of it, and in four of them it is twice 
as fast. In Connecticut, it was three times as fast.
    So how do we address this? Obviously, the NFIP is only part 
of the problem and can only be part of the solution. I think it 
is inevitable, in at least some locations, that we would to 
consider pulling back from the coast and moving Americans to 
higher ground. FEMA's buyout program, some of them within the 
scope of the NFIP, are one tool to accomplish that, but it will 
be very difficult for them to match the scale of the problem.
    I propose two policies, a carrot and a stick that I think 
could help nudge us in the right direction. The first is to 
stop making the problem worse. New construction in 100-year 
floodplains should not be eligible for NFIP coverage. The 
guaranteed issue of new policies is where the program most 
clearly incentivizes building where it is risky. So that is the 
stick. We have precedent for this sort of approach with the 
Coastal Barrier Resources System, USDA's sodsaver and 
swampbuster programs, and in my State of Florida, the State-run 
Citizens Insurance no longer insures new construction on the 
coast.
    But importantly, making this shift does not affect existing 
NFIP policyholders, which I think is a big plus. But it is not 
enough just to tell people where they cannot build. You also 
have to provide somewhere where they can. People need to live 
somewhere. If we are going to see 13 million flood refugees by 
the end of this century, then we have to make sure that build 
environment is able to absorb them. We struggle today, in large 
part because of stringent land use policies, even to keep up 
with the current housing demand. So this can't wait.
    So my second proposal, the carrot, is provide incentives 
for States to make it easier to build in areas of low risk. 
What I have in mind is a version of what is called the 
``disaster deductible'' under the Stafford Act. After a 
disaster, the Federal Government picks up 75 percent of the 
cost of recovery, States pick up the other 25 percent. I 
propose a sliding scale so that if a State decides that 
property owners in less risky areas can build accessory 
dwelling units, and if they abolish single-family zoning in the 
500-year floodplain, the least risky, then instead of having 
the State pick up a 25 percent Stafford Act cost-share, maybe 
they have a 20 percent cost-share or a 15 percent cost-share.
    What I am proposing, obviously, does not solve climate 
change, and I know it is partly outside this Committee's 
jurisdiction, but I think the two policies pair well together. 
For half a century, the Flood Insurance Program has helped to 
draw people to risky areas. This would be a nudge to begin to 
reverse that process, to remove the incentives to build where 
it is risky and provide incentives to build where it is safe.
    With that I am available for your questions.
    Chairman Brown. Thank you, and all five of you, thanks for 
your thoughtful approach you all have laid out from different 
perspectives, with the problem, I think, in a really acute way 
that Senator Toomey and I know we have work to do to figure out 
how we can move forward on this.
    Ms. Smith, let me start with you. Too often after disasters 
we hear news stories of families saying they did not know their 
homes had been flooded before they bought them or signed a 
lease. You have called for flood risk disclosure to prospective 
homeowners or renters, similar to the lead paint disclosures 
that took a while, that finally Government has done in most 
places.
    So talk to me about what are the consequences if we do not 
do that? What will this information, what kind of impact will 
it have on families and on properties?
    Ms. Smith. Mr. Chairman, I lost audio for a minute. I 
presume you are asking me that question?
    Chairman Brown. Yeah. What happens with this information? 
You have called for this information. What impact it would 
have?
    Ms. Smith. Yes. I think there are so many instances that we 
have heard story after story of folks who moved into a place 
and really had no notion that they were buying into an area 
that had previously flooded. The neighbors in that community 
often knew, but those people did not realize what was 
happening. And they turn around and find out that their 
finances are strained, they cannot recover. It is renters. 
There are many instances of apartment buildings where people 
rent an apartment and then have to be rescued and lose all 
their belongings.
    So we think that if we can add more information, people can 
make smarter decisions. It is not just about whether they are 
in a flood zone but whether the building they are going into 
has ever flooded before.
    Chairman Brown. And a follow-up question to you and Mr. 
Berginnis about mapping and risk identification. Knowing where 
it might flood is key to being able to mitigate these risks or 
avoid them altogether. What are your recommendations for 
improving FEMA's mapping efforts? Every time we do another 
reauthorization, as Senator Toomey talked about, we talk about 
mapping, how important mapping is. We never fund. We authorize 
it and we never fund mapping as well as we should.
    How important is it that FEMA provide projections of future 
flood conditions? Mr. Berginnis, you go first and then Ms. 
Smith, if you would.
    Mr. Berginnis. Well, I suppose on a positive note, you 
know, back when we were testifying in 2004, we were talking 
about the quality of existing maps, and one of the things that 
FEMA has done quite successfully is improve the quality of the 
existing inventory.
    But here is the reality. We have 3.5 million miles of 
streams, rivers, and coastlines in the country. We have mapped 
about 1.2 million miles of those. The new development that a 
lot of the panels talked about typically occurs in an area that 
does not have existing development, and the problem is if we 
are developing along these creeks and rivers and areas that we 
do not know the flood risk, we are already behind. And then the 
map gets put on and people get all mad because FEMA has put the 
floodplain on them, and we are doing this backwards.
    The most impactful thing is to get the job done mapping the 
Nation, and also include what future flood risk is going to be, 
because then local codes and standards can be adopted to make 
sure that that house is resilient to flooding 100 years down 
the road, based on its useful life, as opposed to building to 
today's flood risk standard.
    Ms. Smith. I absolutely agree with Mr. Berginnis that we 
have to finish the job in the communities that do not have 
flood maps or have very old flood maps. Those people have to be 
given a better idea of what their risk really looks like and 
where it is headed. If they understand existing flood risk, 
understand what is driving the risk in their area, whether it 
is development, whether it is sea level rise, whether it is 
filling of wetlands, then they can work to manage that risk. 
But if they do not have a notion, then they will just be coming 
back for disaster assistance and insurance subsidies in the 
future.
    Chairman Brown. ----floodplains are wealthy people, which 
is true, but it is also a place where--I mean, I remember 
growing up, the places that were flooded in Mansfield, Ohio, 
were mostly African American, mostly poor people in the White 
Appalachian section of town too.
    So what do we do to make sure under-resourced--and Kagan 
Sternhell, you can weigh in on this too--tell me, what do we do 
to make sure under-resourced communities and communities of 
color can access grants that will keep their communities safe?
    Mr. Berginnis, be brief if you would, and then Ms. Kagan 
Sternhell.
    Mr. Berginnis. I think two characteristics we know in 
communities that are problematic with grants. One is to find 
cost-share, and the second is just have the technical expertise 
to actually prepare the grants.
    So two things that I think need to be changed is working 
with the cost-share formula to recognize, I believe, kind of 
equity and even environmental justice kind of factors. And 
then, second, we have got to provide better capacity, either 
building it with the community or providing assistance to 
actually get grant applications built.
    Chairman Brown. Thank you. Ms. Kagan Sternhell, please.
    Ms. Sternhell. So, briefly, I wholeheartedly agree. 
Especially one of the things we also need to look at is the 
cost-benefit issue, because often we have low-income 
neighborhoods, property values are low. Sometimes projects do 
not cost out, and therefore they are not eligible for a FEMA 
program like BRIC. So including those social factors are very, 
very important.
    I would say also working to make sure, beyond just getting 
applications or technical expertise, working at the individual 
homeowner level, and as I testified to a bit earlier, 
alternative mitigation measures, because sometimes what works 
like going up does not really work in a lot of neighborhoods, 
certainly where it is densely packed, older cities, maybe 
construction was not as strong as it was previously, you need 
something other than lifting a home.
    Chairman Brown. Thank you. Senator Toomey is recognized for 
5 minutes.
    Senator Toomey. Thank you, Mr. Chairman. My first question 
is about moral hazard. You know, this is an intrinsic problem 
with many kinds of insurance products, and flood insurance is 
no exception. When homeowners and communities are protected 
from the financial loss of flooding, all else being equal they 
have less of an incentive to manage and mitigate that risk. 
Consider repetitive loss and severe repetitive loss properties, 
which are properties which have repeatedly flooded and 
repeatedly been rebuilt by NFIP money over the years. These 
properties have had approximately $17 billion in NFIP claims 
over the years. So when I look at these numbers I worry that 
NFIP, in its current form, is not appropriately managing moral 
hazard.
    So Mr. Ellis and Mr. Lehmann, would you just briefly 
address, do you think that historically the NFIP has the right 
incentive structure to manage moral hazard, or should we do 
something differently?
    Mr. Ellis. Thank you, Senator Toomey. Certainly I think it 
is pretty clear that it has not had the right incentive 
structure to deal with moral hazard. In my testimony I 
documented how the subsidies disproportionately go to more 
wealthy communities and do not go to less-wealthy counties. 
When you look at the numbers, when I talked about that only 5 
percent of the subsidies go to the lower-wealthy counties, it 
was the bottom 5 deciles. So it was not just like the bottom 
decile. It was actually really disproportionately balanced 
toward that side.
    So we have disincentivized homeowners from mitigating the 
risks, and many times hidden their risk from them because they 
do not actually know what their rate would be, absent the 
subsidies. And so we are actually hiding the ball.
    And I certainly support what Velma was talking about, what 
Ms. Smith was talking about, in that making sure people know 
their risk in these areas, and I think that is important risk 
communication. But certainly the rate structure as well has 
done a disservice to homeowners and it has done a disservice to 
taxpayers.
    Mr. Lehmann. Yeah, and I would add not only do the 
subsidies flow from lower- to higher-risk policyholders, but 
they flow from inland to the coast. So riverine flooding is a 
serious problem in many communities, but if you eliminated the 
coastal counties, the NFIP would actually be profitable. CBO 
has shown that. So that is specifically how it breaks down. 
Lower-risk policyholders, many of them pay some flood risk 
because of riverine flooding, are subsidizing coastal 
policyholders, and that is a big part of why it the income 
works the way it does. And I say this as someone who lives in a 
coastal county. But it is something that is relevant.
    Senator Toomey. So just to follow up on that, so are you 
saying that across the Nation, as a whole, on average, the 
inland plans actually are actuarially sound?
    Mr. Lehmann. More than actuarially sound. They are being 
overcharged, because they need to subsidize the far below risk 
cost personal properties, which, you know, if we, as a country, 
want to make the decision that we want to help people who live 
in coastal communities, that is a perfectly find decision for 
Congress to make. But I would think the taxpayers are the 
people who should support that and not lower-risk policyholders 
within the NFIP. That only discourages them from buying the 
protection that they need [inaudible] charge.
    Senator Toomey. And maybe it should be an explicit 
understanding or arrangement rather than implicit and kind of 
hidden in the premium structure.
    Let me ask a little bit about Risk Rating 2.0. So FEMA has 
been working to update its flood risk rating system. That is 
what Risk Rating 2.0 is meant to do, as I understand it. And it 
is going to rely on more granular data, setting flood insurance 
premiums presumably more accurately, using geography and 
flooding frequency and flooding types and building 
characteristics, and other sources of information that 
presumably get us a more accurate risk rating.
    So, again, for Mr. Ellis and Mr. Lehmann, is it your view 
that Risk Rating 2.0 is a positive, constructive development 
for NFIP and its stakeholders?
    Mr. Ellis. Absolutely, Senator Toomey. I think that it is 
more information, it is more data. It is taking away a mapping 
system--well, not taking away a mapping system but updating a 
mapping system that is 50 years old, that is essentially going 
to target it at a property level rather than a broad swath of a 
neighborhood or a zone.
    Mr. Lehmann. And it helps move the discussion to data and 
science and away from what are local politics, in many cases. 
It is contentious to adopt community flood maps--I am sure Mr. 
Berginnis can speak to that--where everyone does not want to be 
put in the mandatory purchase zone, which is unfortunate 
because we should want everyone to have flood insurance. If you 
are low risk you get charged less, but everyone should have 
this protection.
    Senator Toomey. Great. Thank you. Thank you, Mr. Chairman.
    Chairman Brown. Thank you, Senator Toomey. Senator Reed 
from Rhode Island is recognized for 5 minutes.
    Senator Reed. Mr. Chairman? Mr. Chairman?
    Chairman Brown. We can see you and hear you, Jack.
    Senator Reed. OK. Then let me begin my questioning. There 
is a little bit of disruption through the technology.
    First, Ms. Smith, thank you very much for your testimony, 
and with respect to the State Flood Mitigation Revolving Loan 
Fund Act, which I have been pursuing for several years. I think 
providing low- and moderate-income individuals with funds to 
mitigate flood risk would be a positive.
    Could you just elaborate on the benefits of [inaudible]?
    Mr. Chairman, I am sorry. I cannot hear anything. 
Technology just----
    Ms. Smith. Senator Reed----
    Chairman Brown. If Ms. Smith knows the question she can do 
the answer. She seems a bit eager here. So why don't you go 
ahead, Ms. Smith, and then Jack, you can go back then.
    Ms. Smith. Senator Reed, I apologize. My audio was going in 
and out. But we are very supportive of the notion of setting up 
a revolving loan fund to bring some stability to the funding 
levels. We have heard over and over again from communities that 
they cannot sustain keeping mitigation experts on staff and 
planning ahead for the mitigation projects that they need, 
because the funding goes up and down. It is feast and famine.
    So your proposal would stabilize funding, would allow 
States to put money on the table and help leverage this, and 
would really be transformational, I think, in terms of 
promoting new mitigation projects.
    Senator Reed. Thank you very much. I have another question, 
Mr. Chairman, although my machine is not cooperating. But Mr. 
Berginnis, can you comment on FEMA's efforts doing flood 
mapping across the country, and also, should these map products 
[inaudible]?
    Mr. Berginnis. OK. I caught the----
    Chairman Brown. Mr. Berginnis, did you get enough of that 
question?
    Mr. Berginnis. Well, the detail I did not get.
    Senator Reed. Mr. Chairman, I think the order of the 
community, I should get off and let other people who have 
better connections ask questions. I am not usually this 
inarticulate.
    Chairman Brown. Well, now you are fine. Go ahead and ask 
the question for Mr. Berginnis.
    Senator Reed. Chaos. It is chaos. But I will defer to my 
colleagues, and excuse me for the technical difficulties.
    Chairman Brown. OK.
    Senator Reed. I will defer.
    Chairman Brown. All right that is fine. Thank you, Senator 
Reed. Senator Rounds from South Dakota is recognized.
    Senator Rounds. Thank you, Mr. Chairman. Even though I am 
in Washington, DC, right now, I think our bandwidth in South 
Dakota is better than what Senator Reed had here in DC for the 
last few minutes.
    Let me just begin by saying that I really do believe that 
we have to have a good, solid National Flood Insurance Program 
in place, and I believe that because the real estate market is 
critical. Long-term, if we want stability in that market there 
has to be an alternative. And just as I see private insurance 
being available, and I think that is going to be a real 
challenge to get, I think that we do have to have a strong NFIP 
program. But I like the idea of the write-your-own product.
    And I would like to begin by talking a little bit about 
what happened with regard to Hurricane Sandy and what that has 
done in terms of driving the discussion today. And I would like 
to ask Rebecca, just in terms of what happened that caused the 
problems on Sandy, with regard to the consumers that were 
there, the folks that had purchased policies and so forth. What 
were the challenges on Sandy that really drives a lot of the 
agitation, the irritation, and the disappointment with the NFIP 
product that was available at that time?
    Ms. Sternhell. Well, I think, first and foremost, the city 
had not new, and still does not have new final firm flood 
insurance rate maps since 1983. So when we finally get our 
final maps, coming in 2024, anticipated from FEMA, it will be 
41 years. So, you know, floodwater does not abide by what the 
flood map says to begin with, but then during Sandy there was 
far greater inland flooding than had been anticipated, and 
anyone was aware of.
    So there were many people who should have had coverage that 
did not. There were many people who did have coverage and then 
were died claims, based on statements that it was earth 
movement or what have you. But within the write-your-own 
program, specifically, there were a number of instances where 
adjusters came out, filed reports. Those reports were 
subsequently doctored before they were submitted to FEMA, or 
adjuster reports were submitted without ever a site visit to 
the property.
    So there was a good amount of fraud and a good amount of 
homeowners being unaware of what was being claimed on their 
behalf, or even getting an accurate reporting of the damage 
that was sustained, in addition to claims also being denied.
    So that was sort of the genesis behind the reform push 
certainly in the claims sector, and then with the write-your-
owns as well, trying to ensure that there is a higher standard 
and a higher level of responsibility in the claims process, 
especially when someone is so vulnerable after sustaining a 
loss.
    Senator Rounds. And I appreciate that, because I think this 
goes to the heart of some of the challenges we have here, and 
yet I do not understand why this would occur, because as I 
understand it, the write-your-owns do not handle the 
underwriting losses themselves. That goes directly back into 
the programs.
    So why would someone try to manipulate or to change a 
claim, or as you have indicated, doctor a report? What was the 
basis for that happening?
    Ms. Sternhell. I think we have seen, starting with Katrina 
and then with Sandy as sort of the next big hurricane claims, 
just with national attention, is sort of a swing one direction, 
where the claims during Katrina, people were paid out large 
claims, large sums of money. And upon review, and after, in 
fact, reconciling all that, it turns out people should not have 
been maybe reimbursed quite so much. And then the insurers and 
others were required to recoup those overpayments.
    And so with Sandy you saw this pendulum swing the other 
way, where they were trying to avoid having to deal with that 
recoupment issue. And so it is now a question about how we can 
better calibrate to get to a point where people are not being 
overpaid or overcompensated for their losses, but being 
compensated appropriately, and at the same time not being 
shortchanged what they are due under the various Federal 
programs and policies available to them.
    Senator Rounds. You know, in my prior life I sold 
insurance, and one of the challenges--smoke losses is one 
thing, water losses is another thing that is really difficult 
and challenging to appropriately handle or to do the adjustment 
on. And I think that any time you bring the third parties in to 
actually write their policies, put their company's name on 
them, they really want to do it correctly. And I think it is an 
excellent program in terms of keeping it simple and easy to do, 
and to bring more people into the process.
    But I would like to ask Mr. Ellis, Mr. Ellis, do you see 
the write-your-own as a feasible long-term alternative, or at 
least a part of the National Flood Program in the future?
    Mr. Ellis. Certainly, Senator Rounds. Thank you for the 
question. I do see that it will be a part of it. It is an 
element to expand it. But I also think the alternative of 
private insurance is something that should be promoted and 
developed, and certainly because one of the issues that you 
bring up is that if you have a problem with a write-your-own 
coverage you have got to go to FEMA to argue about this. If you 
have a private insurer, you go to your State insurance 
commissioner, which is a lot closer to the consumer and has a 
lot more skin in the game as far as regulating that exact 
insurer, and that insurer wants to behave for this insurance 
commissioner.
    Senator Rounds. Thank you. And, Mr. Chairman, thank you for 
the time. I know I am over a little bit. I would just make the 
comment, I think part of the long-term plan on this should be 
to allow that State insurance commissioner--because I agree 
totally with Mr. Ellis. I think that State insurance 
commissioners, if they had some oversight over the National 
Flood Insurance plan, I think we might find a lot of these 
problems being handled.
    But thank you, Mr. Chairman. I am over my time.
    Chairman Brown. Thank you, Senator Rounds. Senator Menendez 
from New Jersey is recognized for 5 minutes.
    Senator Menendez. Well, thank you, Mr. Chairman. I think 
everyone on the Committee can agree that we need to put an end 
to the short-term reauthorization extensions, I should say, of 
the NFIP, and finally pass a long-term reauthorization of the 
program. In my mind, any NFIP authorization bill needs to keep 
premiums affordable and invest in robust mitigation and fix the 
claims process that left so many New Jerseyians, for example, 
out of their homes for years after Hurricane Sandy.
    And I also think we need to deal with the NFIP debt so that 
we can put the program on sound financial footing and reinvest 
those savings into building resiliently so that communities are 
prepared for their climate challenges of the 21st century.
    Last Congress I introduced a bipartisan NFIP re-auth that 
answers these challenges. I certainly appreciate Senators 
Cassidy, Schumer, Kennedy, and other cosponsors on the 
Committee who came together to advance bold and necessary 
reforms, and I am hopeful that we can come together. I know 
Senator Rounds has expressed interest on working on this. I 
look forward to working with him and others to get a long-term 
reauthorization done.
    But unfortunately, what I have heard from some of the 
witnesses today concerns me and runs counterintuitive to the 
whole purpose of the NFIP. The great solution, as some say, to 
the problems is to raise premiums. Now that makes the most 
vulnerable to flooding pay extremely high premiums for their 
coverage. The reality is, the more you put onto the back of the 
policyholder, the most people leave the program altogether. 
Ultimately, this idea is worse off for taxpayers, forcing 
Congress to spend more on expensive disaster relief that goes 
to unprotected homes.
    So I think we know that there are two sides to a budget. 
You either increase revenues or you cut costs. So why would we 
penalize policyholders when there are runaway expenses of the 
NFIP? I mean, 30 cents every premium dollar written goes 
straight to the pockets of insurance companies. The Federal 
Government pays itself $400 million every year in interest 
payments. FEMA even covers insurance companies' high-priced 
lawyers that rack up endless legal bills to challenge, I think 
very often from my experience in Sandy, unfairly, 
policyholders.
    So, Ms. Sternhell, wouldn't you agree that we should get 
the costs of the program under control, like cutting WYO 
compensation instead of jacking up premiums that push people 
out?
    Ms. Sternhell. That is a good question, Senator, and as I 
laid out in some of my testimony, yes. Write-your-own 
compensation is something we are concerned about, given the 
financial situation of the NFIP. Obviously, we want people to 
be paid fairly for work done, and so one of the things that we 
have put forward, as perhaps the year one that you issue a 
policy, a WYO can receive 30 percent of the premium cost.
    But when you are basically forwarding a Docusign for a 
renewal, that is not the same degree of work. At that point 
there is an opportunity for the NFIP to recoup more of that 
premium back to them.
    Senator Menendez. Well, I think one of the long-term 
reauthorization goals has to be keeping premiums affordable.
    Now FEMA has been working for the last few years on a new 
ratings system called Risk Rating 2.0. However, to date there 
is still very little known about the new rating system, how 
much premiums will increase, where the impacts will be 
concentrated, how they went about their rating. And it is not 
just a New Jersey problem. This rating system will impacted 
colleagues in the Gulf Coast and southeastern coastal States, 
among others.
    Under the existing rate cap, homeowners can see their 
premiums double in just 4 short years. This is why I have 
called for a 9 percent rate cap to protect policyholders from a 
sudden increase.
    Let me ask you again, Ms. Sternhell. Can you talk about why 
it is important for flood insurance premiums to remain 
affordable?
    Ms. Sternhell. At the end of the day we want people to be 
covered, and we want them to be able to rebound after an event. 
And so ensuring affordability means people will take up 
coverage. It means that homeowners who maybe are not required 
to have that insurance coverage will adopt policies, will 
subscribe. It broadens the pool of risk. It lowers rates for 
everyone. It lowers the risks to the program overall.
    That is some of our concern about Risk Rating 2.0, that it 
has been done a bit in a black box, and we do not know what the 
impacts will be, whether they are localized, whether they are 
widespread in specific communities. And so ensuring 
affordability I think is the number one challenge facing you 
all right now as you reauthorize this program.
    Senator Menendez. OK. And finally for every dollar spent on 
mitigation, the Federal Government saves $6 on the back end. 
Mr. Berginnis, can you talk about why mitigation is a critical 
part to reforming NFIP?
    Mr. Berginnis. Absolutely. Usually the buildings that are 
being mitigated tend to be our older buildings. They tend to 
also be lower-cost buildings, and housing folks that are of 
more modest means, and those that are most vulnerable. So 
mitigation becomes very important because then whether you 
elevate, whether you relocate, whether you buy out, and do 
those kinds of things, you truly can make those families and 
those businesses much more resilient to flooding in the future, 
and have the benefit of a lower flood insurance rate.
    Senator Menendez. As well as stopping the likelihood of 
repetitive loss.
    Mr. Berginnis. Exactly.
    Senator Menendez. Thank you, Mr. Chairman. I appreciate 
your hearing on this.
    Chairman Brown. Thank you. Senator Tillis from North 
Carolina is recognized for 5 minutes.
    Senator Tillis. Thank you, Mr. Chairman. Just following up 
on Senator Menendez's comment. I think that we have seen far 
too many instances down in North Carolina when a homeowner is 
willing to accept a buyout having no choice but to rebuild, 
only to be in the same position a year or two down the road. So 
I think quick resolution is something that we should focus on.
    Mr. Ellis and Mr. Lehmann, if you look at a map of the East 
Coast of the United States you know that North Carolina juts 
out there and is prone to hurricanes that can hit the Outer 
Banks or go down south to Emerald Isle. And we know too many 
hurricanes, even in my tenure as Senator.
    The one question that I have, and I want to get to Risk 
Rating 2.0, and maybe you can just answer it, do you think the 
Risk Rating 2.0, that they are comprehensive in nature? One of 
the things I am particularly concerned with, in North Carolina 
we all see the storm surge, and a lot of people may think it is 
over. But anybody that lives in North Carolina knows that about 
two or 3 days later that is when we are going to get some of 
the worst flooding as the river basins drain out to the coast.
    So is the Risk Rating 2.0 considerations comprehensive? Do 
they take that into account, or do we need to do more on that, 
moving forward? That is for Mr. Ellis and Mr. Lehmann.
    Mr. Ellis. Thank you, Senator Tillis. And also in North 
Carolina a lot of the concentration is looking at the coast, 
but you have huge instances of riverine flooding and where 
storms have just parked themselves over there and repetitive 
losses in places like Lumberton or Princeville. So this is 
certainly a big issue.
    And yes, I do believe that Risk Rating 2.0, and it is 
something that is iterative and we are learning more about it. 
I will point out that FEMA points out that almost 25 percent of 
the properties are going to see less premium under Risk Rating 
2.0. But it is intended to be more forward looking, to be more 
extensive than what we currently have.
    And certainly your State, the State of North Carolina, has 
been a leader in mapping and putting this information about 
there, and making it publicly available for either 
futurecasting or even looking at real-time with storms. And so 
I really salute the State of North Carolina in their efforts.
    Mr. Lehmann. And I agree. North Carolina was an innovator 
in using LiDAR, which provides accurate three-dimensional 
picture of waterflow drainage, et cetera. That is the direction 
that Risk Rating 2.0 takes. Risk is much more granular than the 
old-school paper maps ever showed, and moving in a direction 
that looks at property level risk, which also if you take into 
account mitigation at the property level is really important.
    Senator Tillis. Yeah, I am glad to hear you say that. I was 
going to brag on North Carolina, but it was something that I 
worked on as Speaker of the House to make sure that we could 
see that the lack of information was causing what I thought 
were unreasonable outcomes and risk assessments, so I am glad 
that you all recognize that that investment that we made has 
paid off.
    Can you go back and briefly--I think it is very important, 
because I think a lot of people think that this is an across-
the-board increase in flood insurance. Could either one or both 
of you maybe add to what the other one says? Mr. Lehmann, we 
will go with you first. Can you briefly summarize how these 
rates are going to be spread out across the insurer base? It is 
my understanding that about 4 or 5 percent may experience a 
significant increase. Some will have a decrease and some in the 
middle will have a moderate increase. Can you give me a little 
bit more flesh on the bones?
    Mr. Lehmann. Sure, and I believe that Steve has those 
specific figures in his testimony so I might defer to him.
    Senator Tillis. OK. Mr. Ellis.
    Mr. Ellis. Yes. Thank you, Senator Tillis. So yes, you are 
absolutely right. According to FEMA, that 4 percent will see an 
increase of more than 20 percent a month, but those are for 
high-value homes in high-risk areas. But 23 percent will see an 
average decrease of $86 a month, and 66 percent will see an 
increase of less than $10 a month, and another 7 percent an 
increase of less than $20 a month.
    And I would also add that we are still talking about 
affordability issues as well. So it is not just, you know, we 
still should have means-tested assistance outside the rate 
structure. If people cannot afford those premiums, it changes. 
Well, then we should certainly do it. Even if their premiums 
decrease they may not be able to afford their premiums and we 
should have means-tested assistance in the appropriate areas.
    Mr. Lehmann. Absolutely.
    Senator Tillis. Thank you all very much. Thank you, Mr. 
Chair.
    Chairman Brown. Thank you, Senator Tillis. The next two 
Senators--and I may have to step out to do Finance Committee 
real quickly--is Senator Warren and then, I believe, Senator 
Kennedy. And perhaps after the two of them is Senator Van 
Hollen, but I do not know for sure. But Senator Warren, you are 
recognized for 5 minutes, from Massachusetts.
    Senator Warren. OK. Thank you, Mr. Chairman. So floods are 
our country's most costly natural disasters. Climate change is 
worsening this crisis, sea levels are rising, severe storms are 
becoming more frequent, and as a result our floodplains are 
spreading and putting more people at risk every year.
    By 2050, 1 in every 10 properties in Massachusetts is 
projected to face a substantial risk of flooding. In Boston, it 
is even higher, at 30 percent, and in communities like Hull, 
Massachusetts, more than two-thirds of properties will be at 
risk.
    Now the National Flood Insurance Program, NFIP, is designed 
to help homeowners in at-risk areas rebuild after a flood, but 
that is really only part of the picture. It is also a tool to 
prevent and mitigate the damage to our communities before the 
flood hits, including making sure that we have the right 
infrastructure to protect property from rising water levels.
    Ms. Smith, study after study tell us that it pays to 
prepare. For every dollar the Government invests in disaster 
mitigation, we get about $6 in return on that investment. So 
let me just ask you, are we spending enough on efforts to lower 
the long-term risk of loss from floods?
    Ms. Smith. Senator, thank you for that important question, 
and the answer is no, not by a long shot. We have been stingy 
in predisaster planning and investment, and that ends up 
costing us in damages, not just to property but lives and 
livelihoods. And NIBS, the folks who give you the 6-to-1 
number, they have recently said that our Nation's disaster 
investment gap now exceeds $520 billion.
    Senator Warren. Wow.
    Ms. Smith. Now that is all disasters, but flood is a big 
chunk of that.
    So we need better building and we need more investment. You 
know, communities in your State are trying to help people 
elevate. We need projects like, for example, the Charles River 
project that the Army Corps did years and years ago. Preserving 
thousands of acres of wetlands has paid benefits in reduced 
damages.
    Senator Warren. That is very helpful. Thank you.
    You know, a recent study found that only about 1 percent of 
properties insured by the NFIP suffered repeated losses, and 
yet these properties account for more than 30 percent of claim 
payments. So we have to find ways to make these properties and 
the floodplains and coastlines where these homes are located 
more resilient, or the NFIP will never be sustainable.
    So beyond restoring and protecting our natural 
infrastructure, we can also protect against flood losses by 
investing in our physical infrastructure, like strengthening 
building codes, elevating buildings, as you mentioned, moving 
costly HVAC units to higher floors.
    Mr. Berginnis, do you agree that if the NFIP is ever going 
to be self-sustaining, the Federal Government is going to have 
to dramatically increase funding for physical infrastructure, 
such as water resource projects and robust funding of the Army 
Corps of Engineers, that helps build this infrastructure?
    Mr. Berginnis. Yes, Senator Warren, absolutely. And when 
you look at our national flood mitigation approach and the 
investments in infrastructure, I think multiple agencies have 
pieces of this, right. The Corps of Engineers tends to do the 
larger flood control projects, and they definitely have a role. 
As the panel, as many folks have said, the situation, 
especially on the coast, is only going to get worse.
    But then FEMA has a role too, in terms of investing, in 
particular more building-by-building and smaller mitigation 
projects. And even agencies like the Department of Agriculture, 
through conservation programs and things, they have a role too.
    So I think when we do all of those together, we need to 
triple down on our investment, in terms of infrastructure and 
resiliency.
    Senator Warren. That is very helpful. Thank you.
    Climate change is the biggest threat to NFIP programs and 
to the families that rely on this program to insure their 
homes. So we have to remember that NFIP is just one of the 
tools the Government has to protect communities from the 
immediate and catastrophic impact of climate change.
    A big piece of this is addressing climate change head-on, 
and that means ending our dependency on fossil fuels and 
investing in renewable energy and coastal restoration in 
natural resiliency. And until we get serious about canceling 
climate, that tackling climate change, we are going to be 
treating NFIP as a bottomless bucket that we can never refill 
fast enough. Now is the time to act.
    So thank you all very much for being here. Thank you, Mr. 
Chairman.
    In the absence of the Chairman, I think Senator Kennedy is 
up next.
    Senator Kennedy. Thank you, Senator. Can you hear me OK? 
Can you hear me OK?
    Senator Warren. Yes.
    Senator Kennedy. I want to thank the Chairman and the 
Ranking Member for calling this hearing. I am curious why FEMA 
is not here, particularly Mr. Maurstad, who is in charge of 
Risk Rating 2.0. But I am sure my friends at FEMA are 
listening, so let me direct this next comment to them.
    Have you lost your frigging minds? This is the most--
``this'' meaning Risk Rating 2.0--is the most massive change to 
the NFIP since we created it in 1968. Why are you trying to ram 
it down everyone's throat, including, but not limited to, the 
people who are going to be affected by this change? We have 
five million policyholders, and 3.8 million are going to see 
their rates go up, at least. They have no idea why.
    Now I get that there is a spreadsheet, an arithmetic side 
to this problem, but there is also a human side. A lot of the 
people, most of the people that your Risk Rating 2.0 is going 
to impact are not wealthy homeowners with a second or third 
home on the beach. That is certainly not the case in Louisiana. 
Most of the people, FEMA, that you are going to impact get up 
every day, go to work, obey the law, pay their taxes, try to do 
the right thing by their kids, and try to save for retirement. 
And their biggest financial asset is their home. And in 5 
months' time, without even a public notice and comment 
opportunity, you are going to ram through changes that 
potentially could make their home unaffordable, and affect its 
value and make it impossible to sell.
    Have you lost your frigging minds?
    I am very disappointed with the way this whole process has 
been handled. People do not understand Risk Rating 2.0, and 
FEMA has done virtually nothing to help them understand.
    Ms. Sternhell, what has been your experience? Do you 
understand Risk Rating 2.0?
    Ms. Sternhell. Senator, you put it immaculately. I could 
not agree more. The city is greatly concerned because we have 
no idea where this is going to land, what communities it is 
going to target. They have not made public the algorithm by 
which they are going to calculate many of these rates. Appendix 
E is not available online yet, according to their report. They 
have put out that it is only monthly increases of $10 or $20. 
Well, you know, most people pay at once, and if most people 
cannot afford a $400 emergency, how are they going to afford 
another, you know, $250 in insurance premiums a year?
    We do not know where this is going to land. There has been 
no consultation with local government. There has been no 
consultation with us, who are dealing directly with 
constituents, and yes, we are very, very concerned.
    Senator Kennedy. Well, I am too, Ms. Sternhell. I am very 
concerned. And given the lack of transparency, which is 
breathtaking, and the speed with which the new FEMA is trying 
to move this, and ram it down everybody's throats, you can 
pretty this up all you want to, but it just looks to me like a 
massive rating increase that they do not want to explain to the 
policyholders.
    I mean, what is the point of the flood insurance program? 
The whole point is to strike a balance between solvency and 
affordability. But what good is it to have a program if nobody 
can afford it, for God's sakes? In your opinion, Ms. Sternhell, 
you may not know the answer to this, but we have got 2,000 
levees in my State, many of which have been paid for not by the 
Federal Government but by Louisianians through their taxes. 
Have the folks at FEMA taken into consideration the levees?
    Ms. Sternhell. I think that is a factor, though again, we 
have not seen it explained in plain English. We have not been 
consulted. We have not had it walked through. You know, I got 
the very helpful infographic on the New York State Profile that 
said 93 percent of rate-payers or subscribers in New York will 
see their rates either go up or down.
    Senator Kennedy. I am out of time, but to my friends at 
FEMA, hello. Hello. I realize that today we cannot find you 
with Google, but you need to come before the U.S. Congress and 
express what you are doing here, and you need to come before 
the policyholders and explain what you are doing here. And you 
need to come before all of us and explain that you actually 
understand what you are doing here, because I do not think you 
do.
    Thank you, whoever is chairing this thing.
    [Pause.]
    Senator Van Hollen. Well, Senator Kennedy, this is Chris 
Van Hollen. I think I am going to ask my questions now. I do 
not know who I am supposed to hand it over to, but let me thank 
all of our witnesses for being here today. Thank you for your 
testimony. I think we are seeing, in this debate, the increased 
costs that families are experiencing every day, from climate 
change, from rising sea levels, from other impacts of climate 
change, and we have got to have a strategy as a country.
    That strategy has to include two parts. One part is 
addressing climate change head-on, and President Biden has put 
forward a plan as part of the American Jobs Plan to address 
those issues, to dramatically reduce our reliance on fossil 
fuels and move toward a clean energy future. And if we do not 
do that, the costs will go up and up, to taxpayers, to rate-
payers, and to everybody else. The other thing is to work 
through adaptation and mitigation, and obviously the flood 
insurance programs is part of trying to support families, in 
homes that are particularly hard hit during these times.
    I would like to just step back, broaden the lens a little 
bit, and talk about Federal Government investments, whether 
they are in roads, bridges, transit, buildings, shipyards, 
other sort of things, and recognize that in order to save 
taxpayers money in the future, we have to build now and going 
forward in a way that incorporates resilience. Otherwise, we 
are going to invest money in, you know, say a highway in a 
floodplain right now, and if it is not built in way that can 
withstand the impact of climate change, it is going to be a 
real loss to taxpayers. And so better investment up front in 
hardening these things, rather than paying more in the end.
    Obviously, with Colonial Pipeline, we are already seeing 
the negative impacts of not hardening our cyber infrastructure 
against attacks. We need to be doing the same thing with our 
other physical infrastructure in the area of transportation and 
other things.
    And so in that regard, the Obama administration put forward 
a Federal Flood Risk Management Standard. The GAO, an 
independent entity, looked at it and concluded that that 
standard could help with mitigating the harmful impacts on 
future Federal infrastructure investments. Unfortunately, the 
last Administration, the Trump administration, eliminated that 
standard. So Senator Brian Schatz and Senator Booker and I are 
reintroducing our legislation to establish in law what that 
Biden-era standard did through regulation. I have also 
questioned the Biden administration about it, and I hope that 
they will move forward in reinstating that important standard 
to adapt and to save taxpayer money dollars.
    I do want to ask Ms. Smith just to comment on this. 
Shouldn't we, as a Government, be making investments with 
taxpayer dollars in a way that foresees these risks and costs 
if we do not build in a resilient manner?
    Ms. Smith. Yes. Thank you for the question, Senator, and 
thank you for being an advocate on this important issue. It is 
just common sense. You know, anyone who is building, making a 
big investment, needs to look at how long that is going to last 
and how long you want it to last, the design life. If you look 
only at the flood map that tells you what the flood was 
yesterday, and try to build to protect against yesterday's 
flood, over and over again, you potentially can be hit by 
damage and disaster. We waste Federal tax money. As someone 
else pointed out on the panel, you put infrastructure in risky 
areas, houses follow.
    So we definitely need that Federal risk standard back in 
place.
    Senator Van Hollen. Well, I appreciate that. I mean, I 
realize the previous Administration was essentially climate 
change deniers, including the President of the United States, 
but all of us have an interest in protecting American taxpayer 
investments. And for the life of me I am not sure why they 
eliminated a provision which GAO has indicated would help 
prepare and would save taxpayer dollars.
    So we need to press forward with this. Thank you for your 
input on this. And now I am going to be turning this over to 
Senator Cramer, for questions.
    Senator Cramer. Thanks a lot, and thanks to all of the 
witnesses. You know, I just really have one questions, and I do 
not care what order we go in. Maybe start with Ms. Kagan. But 
one of the most common concerns that I hear from homeowners and 
other stakeholders on this issue of NFIP reauthorization is 
really the need to ensure that there is not a penalty for 
homeowner transferring between the Government programs, NFIP 
programs, and private flood insurance. And I am just wondering 
if you could, first of all, just give a basic opinion, but a 
rationale for that.
    Ms. Sternhell. The city's view is that everybody should 
have coverage, whether it is coming from NFIP or the private 
sector. So we would certainly encourage everyone to maintain 
coverage, whether you are switching to the public program or 
you are going to private insurance, because at the end of the 
day we want people protected.
    Senator Cramer. Sure. And go ahead. I am sorry. Go ahead.
    Mr. Lehmann. Senator, so a lot of the implementation of 
bigger waters, allowing private flood to satisfy the mandatory 
purchase requirement has been accomplished in the last few 
years by lending regulators, but this is one area that Congress 
could still provide clarity, that if you leave the NFIP, go to 
a private insurer, and then want to return to the NFIP later--
maybe the private insurer you went to leaves the market, maybe 
they raise rates significantly--that you could still get the 
rate you would have gotten as if you had not left in the first 
place. And I think that is a valuable thing that Congress could 
provide is clarity.
    I also would help the private market. It would help both 
the private market and the NFIP, because the private market 
needs to attract people, and that is a concern people would 
have about buying private flood is, is it a one-way street and 
I can't go back?
    Senator Cramer. Mm-hmm. Sure. Mr. Ellis.
    Mr. Ellis. Yes. Thank you very much, Senator Cramer. I 
absolutely, not surprisingly, agree with Mr. Lehmann, but that, 
yes, you want to have that portability. I mean, the only reason 
why somebody would leave the NFIP is if they have a better 
product or a better price, or both. But you want to make sure 
that then there is confidence that, OK, I am sticking my toe 
into the water. I want to make sure that if I do want to go 
back to the NFIP it is available. And so I think that will 
actually foster more people getting coverage, which is really 
what the whole goal should be, is that more Americans get flood 
insurance coverage.
    As I pointed out in my testimony, only 5 million policies--
we have well over 100 million housing units. We have heard 
repeatedly about flooding that occurs outside of the mandatory 
purchase areas, and so this is an area where we want to see 
more people getting coverage, and the way you are going to do 
that is if people are starting to buy their insurance from 
gecko at GEICO, or they are buying from Mayhem, and/or they are 
buying it from Flo.
    Senator Cramer. Sure.
    Mr. Berginnis. Yes. Senator, if I could add to that.
    Senator Cramer. Please.
    Mr. Berginnis. The continuous coverage provision is one we 
know that there is a desire to do. But one of the things, I 
think, that we elaborate on in our testimony is based on the 
principle of fairness between the NFIP and private insurers. In 
the changes in 2012 and 2014, there are a couple of additional 
changes that are needed to make sure the NFIP is actually on a 
level playing field with private. For example, we have long 
proposed this concept of an equivalency fee that is equal to 
national policy fee to help pay for floodplain management and 
mapping. The mapping, even for private policies, delineates 
where you have to buy flood insurance. It inherently is helpful 
to private industry.
    Also, we need to make sure that communities are not 
dropping out of the program because they know private flood is 
available. And then finally, we need to address the 
discretionary acceptance loophole, I guess is what I will call 
it, a rule that the regulators passed in 2019, that, quite 
honestly, runs totally contradictory to what Congress directed 
in terms of private policies. Thank you.
    Senator Cramer. Yep. Well said. Thank you. That is good 
with me, Mr. Chairman.
    Chairman Brown. Thank you, Senator Cramer. I believe 
Senator Smith is asking a question of the Committee right now, 
so we will go to Senator Warnock for 5 minutes, the Senator 
from Georgia.
    Senator Warnock. Thank you so very much, Mr. Chairman. As a 
native of Savannah, Georgia, the city by the sea, this issue of 
flooding is deeply personal for me and for folks I know, 
including, you know, my own family, my own hometown. An 
analysis from the Union of Concerned Scientists noted that the 
Savannah area experiences some level of flood approximately ten 
times a year. Just 40 years ago, that was five times a year. By 
2030, they are predicting 30 coastal flooding events per year 
and 100 flooding events by 2045.
    I am extremely concerned about the impact of these flooding 
events, particularly on low-income communities and their 
vulnerability to climate change. This issue is particularly 
timely for Georgia's coastal communities. We all kind of shake 
in our boots this time of year, the closer we get to the 
hurricane season.
    Mr. Berginnis, how will increased flooding events driven by 
climate change affect coastal communities like Savannah? 
Particularly, how will a greater frequency of these events 
affect low-income communities near the coast?
    Mr. Berginnis. Well, Senator, thank you for the question, 
and of course, when we think of low-income communities we 
immediately understand that that is the segment of the 
population that is the least resilient to flooding.
    And so, you know, where we may have had a big flood that 
would affect folks occasionally, by having more repetitive 
flooding, for folks of low income, it will significantly 
degrade, I think, their quality of life, especially if we do 
not help support, through mitigation and also through things 
like affordability programs for flood insurance, mean-tested 
affordability.
    So we need to bring to bear all the resources--the 
mitigation resources, affordability assistance--and also build 
capacity so that they can mitigate and enjoy the same benefits 
of the NFIP that others do.
    Senator Warnock. Right. So around this issue of both 
vulnerability and affordability, as you know, a 2018 FEMA 
report found that the majority of homeowners who live in high-
risk flood zones without flood insurance not surprisingly were 
low income and may be deterred from buying coverage due to 
expensive flood insurance prices. I understand the many 
considerations that led to FEMA's decision to enact a new 
pricing risk model for flood insurance, but I am concerned that 
this new pricing model will affect low-income communities in 
flood zones, those that have the least amount of resources.
    Ms. Sternhell and Ms. Smith, Congress has been grappling 
with flood insurance affordability for many years, and this new 
pricing structure is intended to contain the Federal costs of 
flood insurance. But do we risk unintentionally exacerbating 
the racial and socioeconomic disparities that already exist?
    Ms. Sternhell. Yes, Senator, I think we do. And part of the 
difficult with this, as you heard from Senator Kennedy 
previously, is we do not know exactly where this new risk 
rating program will land and whether it will be concentrated 
predominantly in communities that are low income or majority 
minority or those that have been most disadvantaged. And that 
is one of the things that is most concerning.
    Even part from this revised rate structure, the 
affordability challenge would be the same. The rates are going 
to continue to go up, but for the statutory limits on annual 
rate increases, people would see their rates going up even 
further. And we know with climate change and with new maps 
coming in, that affordability issue is going to be exacerbated.
    And so we need to find a good model that looks at how we 
can do affordability directly for that homeowner, and at the 
same time bring to bear the resources of the Federal Government 
and local government to mitigate more broadly, because we 
cannot just do it home by home. We need to do it at the 
community level, and we need to pull together as a Nation and 
communities to actually ensure that we can protect these 
residents, keep them in their home, and/or get them somewhere 
safer and ensure they maintain their assets.
    Senator Warnock. Yes, Ms. Sternhell.
    Ms. Smith. Yes, Senator, this is Ms. Smith, and I would say 
that we can do both of these things, and that actually, Risk 
Rating 2.0 in some respects helps those people who are least 
able, who have policies now, and have been paying too much in 
order to cross-subsidize the higher priced homes.
    But I think we can then do an affordability program on top 
of that that addresses both rate and assistance for mitigation, 
and I think if we allow FEMA to look at social vulnerability as 
one of the factors in giving grants, this will help solve the 
problem.
    Senator Warnock. So, you know, inasmuch as most folks have 
a majority of their wealth in their home, this obviously has 
implications for the racial wealth gap and underscores the need 
for public policy that ensure that everybody who needs or wants 
flood insurance can get it. And it seems to me that we have an 
obligation in Congress to make sure that is the case.
    Thank you so much.
    Chairman Brown. Thank you, Senator Warnock. Senator Daines 
from Montana is recognized for 5 minutes, then Senator Smith.
    Senator Daines. Thank you, Chairman Brown, and thanks to 
our witnesses for being here today.
    When we talk about floods, a fact of life in Montana, it is 
what makes flood insurance a big deal in our State. We have 
leading companies that provide hundreds of jobs and thousands 
of national flood insurance programs, policy folders. That is 
the reason I am encouraged by the upcoming rollout of FEMA's 
Risk Rating 2.0 pricing methodology.
    As I chat with Montanans who work in and around flood 
insurance industry, and to those who hold policies, it seems 
like the Risk Rating 2.0 enjoys broad support and will increase 
fairness in the NFIP.
    However, I have heard from some of the companies back in 
Montana they want to make sure they have enough time in between 
the finalization of Risk Rating 2.0 to understand how it works 
and the impacts before it actually goes live.
    Mr. Ellis, do you think FEMA should consider allowing a bit 
of time for private industry to understand the impacts of Risk 
Rating 2.0 before it is ruled out? To be clear, I would like to 
see this implemented swiftly, but the Government unfortunately 
does not have the best record when it comes to the rollout of 
new programs. Mr. Ellis, your thoughts.
    Mr. Ellis. Well, Senator Daines, that might be an 
understatement about FEMA not doing very well with the rollout 
of programs. Certainly we have seen that time and again. I can 
understand some of Senator Kennedy's frustration that he 
brought up earlier about not knowing all the details. I do know 
that FEMA is going to be coming and presenting before Congress.
    But I definitely think that, yes, there needs to be a pause 
to make sure that there is greater comfort, and I think it 
makes sense. The reality, though, I will say, is somebody will 
have an axe to grind. I mean, we know that. Ms. Sternhell 
talked about the delay in maps and stuff like that. Some of 
that is because communities have--I cannot speak directly for 
New York City, but some of those communities have opposed the 
maps and stalled them for decades, and so that is part of the 
reason. I can certainly see that happening with Risk Rating 
2.0, and so it is just going to be a balancing act. But 
certainly there needs to be less of a black box and more 
confidence in what the information is, Senator Daines.
    Senator Daines. Mr. Lehmann, do you have anything to add to 
that?
    Mr. Lehmann. Yeah. You are not doing anyone a favor by 
hiding from them what their real risk is. I support Ms. Smith's 
proposal for a flood history in every real estate transaction, 
but you should also have, on your policy, whether you are a 
grandfathered policy or a subsidized policy or if you create a 
new affordability metric, you should know what the full risk 
base cost of your insurance is. If you are getting a discount, 
you should know how much that discount is.
    This is not just about saving money for the Government. We 
want people to understand their flood risk so that we have 
fewer helicopter pulling people off of roofs.
    Senator Daines. Thank you. According to FEMA's analysis, 
about 37 percent of policyholders will immediately see their 
premiums decrease under Risk Rating 2.0. About 58 percent of 
Montana policyholders will see an increase of somewhere between 
0 to $10. However, even that second group of policyholders is 
likely to be better off than they are now, as the current 
structure of the NFIP raises the premiums every year of all 
policyholders.
    Mr. Ellis, do you think the current structure of the NFIP 
is fair, and beyond Risk Rating 2.0, what can we do to help 
improve the NFIP?
    Mr. Ellis. Sure, Senator Daines. So right now, as 
documented in this hearing, there are enormous cross-subsidies, 
particularly from rural counties to coastal counties, and from 
less affluent to more affluent, and certainly the more affluent 
get the bulk of the subsidies. And so certainly there are 
issues there.
    Also, the way the rate structure is, it is supposed to try 
to pay for itself every year, and so it counts in catastrophic 
loss years and it counts in every historical loss year to try 
to calculate these premiums. And so it does end up penalizing 
some groups. And also it does the insurance in broad swaths, in 
zones, when, in reality, a homeowner may have a different risk 
profile than their neighbor, and certainly than the next 
subdivision, yet they are all kind of washed together in these 
very broad categories that do not target the rates.
    Senator Daines. Thank you, Mr. Ellis. Mr. Lehmann, do you 
believe the NFIP could help protect taxpayers through using 
additional reinsurance to help transfer more risk to the 
private sector?
    Mr. Lehmann. To date, the reinsurance program that the NFIP 
has enacted has worked out pretty well. In 2017, in particular, 
they recovered in full.
    Like anything else, the NFIP should approach reinsurance as 
a consumer. There will be changing in pricing in reinsurance. 
Sometimes it will be more affordable and a better bet for you, 
and sometimes less. But that, as a risk management tool, is a 
great thing to have in the quiver, going forward.
    Senator Daines. Thanks, Mr. Lehmann. Chairman Brown, thank 
you.
    Chairman Brown. Thank you, Senator Daines. Senator Smith of 
Minnesota is recognized for 5 minutes.
    Senator Smith. Thank you, Chair Brown and Ranking Member 
Toomey, and thanks to all of our panelists. I have a question, 
and I will ask for your forbearance because I have been in 
between committee hearings today, if I ask you to answer it 
again, but it is really important in Minnesota. This is a 
question about how we can encourage more communities to sign up 
for NFIP, and it is really important in Minnesota because, as 
it turns out, Minnesota has one of the lowest participation 
rates in flood insurance. Only about 0.4 percent of eligible 
properties receive coverage under NFIP, and only 7.6 percent of 
Minnesota structures in high-risk floodplains carry flood 
insurance. And this is occurring even though Minnesota is a 
relatively high flood risk State, and, of course, due to 
climate change and more extreme weather events, that number is 
only getting worse, not better.
    So my question is this. As we face these big challenges 
with large rain events, these sort of so-called pluvial 
flooding that is going to be included, as I understand it, in 
the new Risk Rating 2.0 system, how do we balance this out? We 
need to dramatically expand the number of households covered by 
NFIP. We also need to make sure--we know the premiums are not 
sufficient to cover the increasing cost of coverage, and we 
have got this rising debt challenge.
    So my question to all the panelists, and maybe I will start 
with Ms. Smith and Mr. Berginnis, how do we balance out these 
values, encourage participation, and also address this 
affordability challenge?
    Ms. Smith. Senator, it is an important question. I mean, it 
is the fundamental question before the Committee. It is how do 
you weave all of these pieces together. So I think we have to 
really up the game on mitigation assistance. I think the other 
thing to do is, as Mr. Berginnis mentioned, help communities 
that are under-resourced. In my own State of Virginia, there 
are many, many communities that do not have certified 
floodplain managers.
    So if we can help those small, under-resourced communities 
find technical assistance from FEMA, work as partners with 
FEMA, get funding from FEMA, and allow them to work with 
neighboring communities, with the Silver Jackets Army Corps 
program and other programs, to help them buildup their capacity 
in this area, then we can have more participation in the NFIP.
    Senator Smith. Thank you. Mr. Berginnis, would you like to 
respond too? Anybody else?
    Mr. Berginnis. Sure. You know, one of the issues in 
Minnesota, having known for most of my career the State 
floodplain manager there, is in a way you are a victim of your 
own success. Minnesota has been effectively managing flood risk 
for decades, and I almost think that from the standpoint of 
when it floods and not a lot of people are affected that has 
psychological impact of saying, well, geez, we don't have do 
something about it.
    Nonetheless, as Ms. Smith said, this is an age-old problem 
of the NFIP, penetration rate. How do we increase that? FEMA 
has a role to play in that, but honestly, so do States and 
communities. And so I like Ms. Smith's idea of building State 
and local capacity to help communicate the risk and help 
encourage folks. And again, one of the ideas we have is 
significantly expanding the Community Assistance Program.
    Senator Smith. Thank you. Would anybody else like to 
respond?
    Ms. Sternhell. If I may. I mean, one of the things we 
confront within New York City is that there are a number of 
properties outside the Special Flood Hazard Area, or Zone X, 
where you can get a preferred risk policy. Now what happens 
with this with regard to Risk Rating 2.0, setting that aside 
for the moment? If people are buying those policies, we want 
them to, right, because they are lower flood risk and they get 
a preferred rate. But there are still no mitigation options 
available to them to lower that rate further.
    And so encouraging that mitigation and pushing FEMA to find 
alternatives so we can say, hey, here is a really low-cost 
policy. You can do this mitigation and it will go down even 
more. We can bring more people into the program so that they 
are covered in the outside event there is a flooding event for 
them.
    Senator Smith. Thank you.
    Mr. Ellis. Senator Smith, if I may, just really briefly--I 
know you do not have much time--but there is sort of the 
tyranny of the 100-year floodplain, and that is people think 
they are either in the floodplain or they are out of the 
floodplain, when, in reality, we are all in some sort of 
floodplain. And so there is the issue of where people think if 
they do not have to buy it then they do not buy it.
    And so some of it is risk communication that we talked 
about. Some of it is getting the private sector involved. More 
people selling flood insurance, more familiar people selling 
flood insurance, so that people can bundle their policies with 
their and their homeowner insurance. There is a whole variety 
of tools and tactics that I think can be done in that way.
    And the other thing is, and this was brought up when I 
testified in House Financial Services, we need to have like a 
crosscut of the Federal budget of all the disaster spending and 
mitigation programs so we can really better target that, and 
then it also will hopefully promote better flood resilience but 
also better take-up of the flood insurance program.
    Senator Smith. Thank you very much. I think my time is up. 
Thank you, Mr. Chair.
    Chairman Brown. Thank you, Senator Smith. Thank you all. I 
just thought the idea of sweeping across this panel where no 
real partisanship, not even much ideology, just how are we 
going to solve this. So I just thought all five of you were 
really, really helpful. It has demonstrated the importance and 
the complexity of NFIP, its interrelated activities of ensuring 
and preventing flood damage as these various questions affect 
the things people care about most--their homes, their 
businesses, their communities, their future.
    Congress has struggled, as Senator Toomey said, to settle 
these complex questions through reauthorization. I am 
encouraged we have heard a lot of agreement across the panel, 
particularly around the areas of investments in mapping and 
mitigation--we need to get serious about that--and concern for 
people who struggle to afford the protection they need.
    So I will continue working with Senator Toomey and others 
on this Committee. The questions from Committee Members I felt 
were really good too and provided a lot of insight. So thanks 
to the witnesses.
    For Senators who wish to submit questions for the record, 
these questions are due 1 week from today, on Tuesday, May 25. 
To the witnesses, you have 45 days, if you would, to respond to 
any of those questions.
    So thank you again. With that the hearing is adjourned. 
Thank you so much.
    [Whereupon, at 11:49 a.m., the hearing was adjourned.]
    [Prepared statements, responses to written questions, and 
additional material supplied for the record follow:]
              PREPARED STATEMENT OF CHAIRMAN SHERROD BROWN
    This hearing is the beginning of our effort to enact a long-term 
reauthorization of the National Flood Insurance Program this Congress. 
At a later hearing, we will invite the Federal Emergency Management 
Agency to discuss the status and reauthorization of the program.
    Flooding is the most common and most costly natural disaster facing 
families, businesses, and communities across the country. It can take 
families' homes and memories, wreck their finances, shutter a small 
business, and destroy infrastructure and entire communities. And 
disasters often fall hardest on low-income families and communities who 
have fewer resources to prepare for and respond to them.
    We can only expect flooding to get worse, and become even more 
common, as the climate continues to change.
    People in Ohio and those in North Dakota, Maryland, Louisiana, and 
all over the country are already see more flooding, and they're feeling 
the consequences--whether from spring snowmelt, increasingly powerful 
storms, ``sunny day'' flooding in coastal communities, or extreme 
rainfall that overwhelms aging infrastructure and the land's capacity 
to absorb water. Just today, we are seeing flash flooding in Louisiana 
and Texas.
    And no matter where you live, everyone pays for the financial 
fallout from floods, as the country spends tax dollars to help families 
and communities recover.
    We know we must take action to protect communities from climate 
change, and seize all of the opportunities that come with that effort.
    That's going to be a long-term effort. While we seek to halt the 
trajectory of our changing climate, we also need to help our families 
and communities become more resilient to the flooding we face now and 
in the coming decades, and whenever possible, avoid it altogether.
    The NFIP is critical to that effort. The program provides over $1.3 
trillion in coverage to more than 5 million homes and businesses in 
over 22,000 communities.
    The NFIP is not just an insurance program--its job isn't just to 
help with recovery, but to prevent and minimize the damage in the first 
place.
    The NFIP combats the overall threat of flooding through four 
interrelated components:

    Flood insurance--to help property owners and renters 
        recover quickly after a flood and reduce the need for Federal 
        emergency spending;

    Floodplain management--to minimize damage to people and 
        property, and make our communities more resilient through the 
        adoption of local ordinances and building codes;

    Floodplain mapping--to identify and communicate that risk 
        to first responders, homeowners, and communities so they can 
        mitigate or avoid hazards all together; and

    Mitigation--to help remove property from harm's way through 
        property-level and community investments that reduce our 
        overall level of flood risk and save money.

    Through NFIP reauthorization, we have an opportunity to make our 
families, businesses, and communities safer and more resilient.
    Today, our witnesses will provide their perspectives on what this 
Committee should consider as we work on that effort. I am interested in 
their recommendations for ways we can help strengthen the NFIP so that 
it can:

    Provide reliable access to insurance for property owners 
        and renters,

    Address affordability concerns,

    Ensure that more people are aware of their flood risk and 
        insured against losses, and

    Help the Nation predict and reduce our overall level of 
        flood risk through investments and improvements in mapping, 
        floodplain management, and mitigation.

    In 2017, then-Chairman Crapo and I began working with Members of 
this Committee on a long-term reauthorization.
    This Congress, I look forward to continuing this work with Ranking 
Member Toomey and the Members of the Committee to strengthen the NFIP 
and the country's comprehensive approach to mitigating flood risk 
through a long-term reauthorization bill.
                                 ______
                                 
            PREPARED STATEMENT OF SENATOR PATRICK J. TOOMEY
    Thank you, Mr. Chairman. The last long-term reauthorization of the 
National Flood Insurance Program (NFIP) occurred in 2012. That 5 year 
reauthorization expired in 2017. Since then, we have had 16 short-term 
NFIP reauthorizations.
    I am hopeful we can find the common ground necessary to avoid a 
17th short-term reauthorization. However, our deadline, September 30, 
is closer than it may seem. I am ready to work quickly and 
cooperatively to find a path forward.
    Before discussing what ought to be in an NFIP reauthorization, I 
would like to remind everyone of the scope of NFIP's challenges. Put 
simply, NFIP is broken.
    Since 2005, the year Hurricane Katrina devastated the Gulf Coast, 
NFIP has had to borrow nearly $40 billion from the Treasury in order to 
pay claims. In other words, NFIP has lost about $2.25 billion per year 
over the last 16 years. Consider that $2.25 billion per year loss in 
the context of NFIP's total annual revenue last year of approximately 
$4.6 billion.
    For the last decade-and-a-half, NFIP has averaged an annual loss 
representing about half its total annual revenue. In the real world, a 
private insurer that had this magnitude of losses year after year would 
cease to exist.
    This brings me to an important point: the NFIP really should not be 
considered an insurance program at all. Rather, it is a subsidization 
program. Specifically, NFIP subsidizes the cost of living and building 
in flood prone areas. Usually, we subsidize activities because we want 
to encourage them. Perversely, in the case of NFIP, subsidies lead to 
more building and rebuilding in areas at extreme risk of flooding.
    Exacerbating the problem, development itself within these flood-
prone areas further increases flood risk and flood damage by covering 
absorbent green space with impermeable surfaces. And to whom do these 
subsides accrue? The rich of course.
    Properties with subsidized NFIP premiums are overwhelmingly located 
in our wealthiest communities. Likewise, subsidized NFIP premiums are 
rare in our lower-income communities.
    Lately, this Committee has spent a great deal of time discussing 
climate risk and equity. I cannot think of a better opportunity to 
demonstrate a commitment to addressing both than in the reauthorization 
of NFIP.
    The good news, if there is any, is that NFIP is on a slow but 
positive path towards actuarially sound premiums. This brings me to the 
key principle of reauthorization: do no harm. Reauthorization must not 
interrupt this important positive progress.
    Next, we should continue to explore opportunities to bring more 
private capital into the flood insurance business. NFIP should continue 
to pursue opportunities to layoff risk to the private sector through 
reinsurance and other creative capital market structures. To the extent 
NFIP needs additional authority to do so, we should give it to them.
    Additionally, we should continue to encourage private flood 
insurance as an alternative to NFIP. Increasing the availability of 
private flood insurance is a great way to get more homeowners insured 
against flood damage--a worthwhile goal that is good for the homeowner 
and the taxpayer. Further, if the private sector can offer better 
coverage, better service, and a better price, who are we to stand in 
the way of that for our constituents?
    Additionally, to the extent subsidies continue to exist within 
NFIP, we should explore opportunities to target them towards those most 
in need. However, I would remind my colleagues of the perverse 
incentives involved in flood insurance subsidies and urge great 
caution.
    Finally, I hope we take this opportunity to find a way to better 
explain flood risk to policyholders and, perhaps more importantly, 
future homebuyers. Those who choose to live in flood prone areas should 
do so with eyes wide open.
    Flood insurance provides some financial security, but flood 
insurance is not the National Guard or Coast Guard. It cannot rescue 
those stranded by rising floodwaters.
    Flood insurance is not a time machine. It cannot give back the 
days, weeks, months, and--in some cases--years it takes to rebuild and 
recover from a major flood.
    In conclusion, a long-term reauthorization must continue to move 
NFIP in a positive direction. I stand ready to work with my colleagues 
to achieve that goal.
                                 ______
                                 
                PREPARED STATEMENT OF SENATOR TIM SCOTT
    In reaction to this hearing's discussion around the compensation 
level for Write Your Own (WYO) carriers participating in the National 
Flood Insurance Program (NFIP), I will take a facts-based approach 
based on elementary economic principles I learned as a small 
businessman and insurance agency owner myself.
    The story of the WYO carrier participation rate tells us everything 
we need to know. In 2004, there were 107 companies participating in the 
WYO program. By 2016, that number had fallen to 75. Today, that number 
is at 56 companies.
    If claims of sky-high compensation rates for insurers getting fat 
off taxpayers were true, why has the number of participating WYO 
carriers dropped so dramatically? We would expect to see the exact 
opposite, if such claims were true.
    I have heard directly from one large participating WYO carrier that 
writes policies in South Carolina that it will undoubtedly leave the 
program if compensation levels are cut. Smaller carriers will be forced 
to do the same.
    WYOs currently write 87 percent of all NFIP policies. They are a 
critical distribution mechanism for a product that allows millions of 
our fellow citizens to protect themselves from the risk of flooding. I 
agree that Congress desperately needs to make reforms to the NFIP that 
will ensure it is around for future generations and save taxpayers 
billions of dollars on an annual basis. That said, cutting WYO 
compensation would be a terrible mistake and one that would quash the 
moderate amount of private sector participation we have in the NFIP.
    The Senate Banking Committee and this Congress should do everything 
in its power to encourage WYO participation in the NFIP, not hamper it.
                                 ______
                                 
                  PREPARED STATEMENT OF CHAD BERGINNIS
      Executive Director, Association of State Floodplain Managers
                              May 18, 2021
    The Association of State Floodplain Managers is pleased to 
participate in this hearing about the National Flood Insurance Program. 
We appreciate the opportunity to discuss our views and recommendations 
for the future of the program. We thank you, Chairman Brown, Ranking 
Member Toomey, and Members of the Committee for your interest in this 
important subject.
    The ASFPM and its 38 chapters represent more than 20,000 local and 
State officials as well as private sector and other professionals 
engaged in all aspects of floodplain management and flood hazard 
mitigation, including management of local floodplain ordinances, flood 
risk mapping, engineering, planning, community development, hydrology, 
forecasting, emergency response, water resources development, and flood 
insurance. All ASFPM members are concerned with reducing our Nation's 
flood-related losses. For more information on the association, our 
website is: www.floods.org.
    Floods are this Nation's most frequent and costly natural disasters 
and the trends are worsening. The National Flood Insurance Program or 
NFIP is the Nation's most widely used tool to reduce flood risk through 
an innovative and unique mix of incentives, requirements, codes, hazard 
mitigation, mapping, and insurance. It is a partnership between 
communities, States, and the Federal Government. The NFIP is the one 
tool in the toolbox that serves policyholders, taxpayers, and the 
public well. Our testimony is intended to provide a better description 
of these interdependencies as well as 20 recommendations for Congress 
to consider to reform the NFIP.
The NFIP Is a National Comprehensive Flood Risk Reduction Program
    The NFIP was created by statute in 1968 to accomplish several 
objectives. Among other things, the NFIP was created to:

    Provide for the expeditious identification of and 
        dissemination of information concerning flood-prone areas 
        through flood mapping,

    Provide communities the opportunity to voluntarily 
        participate in the National Flood Insurance Program in order 
        for their citizens to buy flood insurance and, as a condition 
        of future Federal financial assistance, to adopt adequate 
        floodplain ordinances consistent with Federal flood loss 
        reduction standards,

    Require the purchase of flood insurance in special flood 
        hazard areas by property owners who are being assisted by 
        Federal programs or by federally supervised, regulated, or 
        insured lenders or agencies,

    Encourage State and local governments to make appropriate 
        land use adjustments to constrict the development of land 
        exposed to flood damage so homes and businesses are safer and 
        to minimize damage caused by flood losses,

    Guide the development of proposed future construction, 
        where practicable, away from locations threatened by flood 
        hazards

    Authorize a nationwide flood insurance program through the 
        cooperative efforts of the Federal Government and private 
        insurance industry,

    Provide flexibility in the program so flood insurance may 
        be based on workable methods of distributing burdens equitably 
        among those protected by flood insurance and the general public 
        who benefit from lower disaster costs.

    Beyond merely providing flood insurance, the NFIP is unique as it 
integrates multiple approaches for identification of flood risk, 
communication of risk, and techniques to reduce flood losses. It is a 
unique collaborative partnership enlisting participation at the State 
and local level. It is a multifaceted, multiple objective program--a 
four-legged stool as it is often called. The four legs of the stool are 
(1) floodplain mapping, (2) flood standards, (3) flood hazard 
mitigation and (4) flood insurance. Altering one leg without careful 
consideration of impacts on the other three legs can have serious 
repercussions on reducing flood losses. The NFIP on the whole provides 
substantial public benefits as our testimony will further detail.
    We must remember that 90 percent of natural disasters in the United 
States involved flooding, and all 50 States and 98 percent of counties 
have the potential to be impacted by a flood event. The NFIP, which is 
now over 50 years old, had paid over $69 billion in claims (and half of 
that has come in the past 15 years). But beyond paying insurance 
claims, the NFIP has also mapped 1.2 million miles of streams, rivers, 
and coastlines--flood hazard data that is freely and widely available. 
It has invested more than $1.3 billion in flood hazard mitigation for 
older, at-risk structures and into local flood mitigation planning. 
Because of the program, over 22,000 communities have adopted local 
flood risk reduction standards--far more communities than have building 
or zoning codes, which have resulted in $2.45 billion of flood losses 
avoided every single year. The NFIP has provided innumerable public 
benefits, direct monetary benefits to taxpayers, and significant 
benefits to policy holders.
A Pivotal Time for the NFIP--and a Window of Opportunity
    Today, the NFIP is preparing to embark on one of its most 
transformational actions in the past several decades--the 
implementation of Risk Rating 2.0. At its core, Risk Rating 2.0 is 
consistent with a reform that ASFPM and many other organizations have 
been calling for which is to ensure that through accurate insurance 
rating we can communicate the relative level of flood risk to property 
owners and renters. Of course this is a simplified view and 
implementing transformation like Risk Rating 2.0 is much more 
complicated, but we should keep the fundamental reason we are doing 
this in mind as additional reforms are considered. The timing of both 
Risk Rating 2.0 and your consideration of NFIP reform and 
reauthorization can be very complimentary. For example, a seemingly 
widely supported reform from the last Congress was the need for a 
targeted, means-tested way to assist lower income property owners with 
NFIP premiums. Now, Congressional reform ideas can be tested against 
the NFIP's more accurate rating approach in Risk Rating 2.0 to fine 
tune the approach. Over the past few months, ASFPM has been pleasantly 
surprised to learn that Risk Rating 2.0 will have the effect of 
generally reducing flood insurance premiums for those lower-cost, more 
modest homes than the rating approach in place now, resulting in more a 
more equitable program overall.
    Today's NFIP must ensure that the Nation is ready to address 
tomorrow's flood risk. Floodplain managers know development often 
results in increased flood heights, and we observe changing weather 
patterns that result in shifting snowmelt/rainfall in the West, and 
nationally, more intense short duration storms are causing more flash 
floods. Additionally, unrelenting sea level rise (SLR) is beginning to 
affect communities from Florida and the Gulf of Mexico to Virginia and 
the Mid-Atlantic, and to Alaska. A 2017 NOAA report added a new upper 
boundary for SLR this century up to 2.5m (8 feet) by 2100 due to new 
data on the melting of the Greenland and Antarctic ice sheets. 
According to a 2018 report by the Union of Concern Scientists, 
accelerating sea level rise in the lower 48 States, primarily driven by 
climate change, is projected to worsen tidal flooding putting as many 
as 311,000 coastal homes with a collective market value of about $117.5 
billion today at risk of chronic flooding within the next 30 years--the 
lifespan of a typical mortgage. America's trillion-dollar coastal 
property market and public infrastructure are threatened by the ongoing 
increase in the frequency, depth, and extent of tidal flooding due to 
SLR, with cascading impacts to the larger economy. Higher storm surges 
due to SLR and the increased probability of heavy precipitation events 
exacerbate this risk. Inland, the situation is only slightly better, 
but is still problematic. A 2014 Climate Change Vulnerability Analysis 
by the Milwaukee Metropolitan Sewerage District shows that in the 
future to expect a pattern of increasing precipitation intensity in a 
few larger events but a decrease in the size and frequency of many 
smaller events, which is also consistent with the National Climate 
Assessment. The mapping, mitigation, and floodplain management elements 
of the NFIP all have a role to play in addressing future flood risk.
    More recently, issues of equity and social vulnerability have been 
recognized as needing to be addressed. FEMA's National Advisory 
Council's (NAC) 2020 report made the focus on equity a centerpiece of 
the vision of the future of emergency management. It noted that ``For 
disaster preparedness, mitigation, response, and recovery to 
drastically improve in 2045, emergency management must understand 
equity and become equitable in every approach and in all outcomes. The 
exacerbated impacts of disasters on underserved and historically 
marginalized communities across the United States showcases existing 
inequity.'' We must examine the NFIP and proposed reforms through the 
lens of equity and social vulnerability to ensure that policies do not 
intentionally or unintentionally make these inequities worse and seek 
opportunities to reduce them. ASFPM is pleased to learn that Risk 
Rating 2.0 will lead to a more equitable program recognizing that lower 
value homes that have traditionally paid more for flood insurance will 
pay less (as compared to higher value homes). NFIP reauthorization and 
reform and modernizing our Nation's infrastructure should support 
States and localities' ability to reduce flood risk by increasing 
resilience, particularly for vulnerable communities. Legislation could 
facilitate identification of these communities through a data-driven 
approach and direct public and private sector resources, including 
grants, bonds, and tax incentives, to improve the resilience of these 
communities that, otherwise, could not make these investments on their 
own.
    So what will the NFIP of tomorrow look like? ASFPM believes the 
Nation will continue to need a robust, fiscally strong NFIP to 
comprehensively reduce today's and tomorrow's flood risk. The program 
should strive to enhance equity and reduce social vulnerability. ASFPM 
is always vigilant that when it comes to NFIP reforms. We have seen far 
too many ideas over the past several years, that would change one 
element without consideration of how that change would impact the other 
elements of the NFIP (for example, changes in insurance shouldn't 
weaken the role of either mitigation or floodplain management. We must 
ensure that reforms carefully contemplate the potential impacts to the 
overall comprehensive approach to flood risk management that the NFIP 
provides so that we strengthen the Nation's overall resilience to 
flooding.
A Long-Term Sustainable Financial Framework Is Needed; Debt Is an Issue
    The NFIP had generally been self-supporting until 2005. In the 
1980s the program went into debt a few times and ultimately Congress 
forgave approximately $2 billion. But from the mid-1980s to 2005, the 
NFIP was entirely self-sustaining and, when borrowing from the U.S. 
Treasury, the debt was repaid with interest. However, due to 
catastrophic floods in 2004, 2005, and 2012, 2016-2019 the program 
currently owes $20.5 billion to the U.S. Treasury and since Hurricane 
Katrina, has paid $5.06 billion in interest to the Treasury.
    The NFIP was never designed to pay for catastrophic events. In 
fact, from 1968 to 1978 the concept was one of risk sharing with the 
private sector, with the program actually paying a subsidy to private 
insurers for pre-FIRM structures (structures built prior to 
availability of flood insurance rate maps). As recently as the late 
1980s, internal communications show that the Administration reaffirmed 
the Federal treasury was essentially the reinsurer of last resort.
    Congress and FEMA have made some progress toward putting the 
program on a sound financial footing as part of the past two NFIP 
reforms in 2012 and 2014, which ASFPM supported. Under BW-12, reforms 
(later modified by HFIAA-14) included changes that led to moving 
subsidized policies toward actuarial premium rates, allowing the NFIP 
to purchase reinsurance, and to establish a reserve fund. These changes 
help reduce the financial risk to the program (and ultimately to the 
American taxpayer) and better prepare for the ever increasing number of 
catastrophic flood events. However, those reforms did have a 
consequence of exacerbating the issue of flood insurance affordability. 
We also note Congress' very significant action to forgive $16 billion 
of the NFIP's debt in 2017, and point out that the aforementioned 
reforms put in place in 2012 and 2014 to put the program in a better 
fiscal position continue today.
    So what is next? ASFPM believes that Congress should consider 
reforms that don't endlessly put the NFIP at financial risk and at the 
same time, will also assure that the program remains consistent with a 
primary reason for having a Federal flood insurance program in the 
first place--to reduce the need for disaster declarations and 
subsequent emergency spending bills. As a point of comparison, the 
Federal crop insurance program now costs taxpayers approximately $9 
billion annually. Yet the program is not required to pay that debt 
back--with interest--while filling almost exactly the same public 
policy goal; to reduce much larger costs to the taxpayers for 
agriculture disasters. Even those wishing to reform the crop insurance 
program aren't advocating to eliminate all subsidies nor considering 
the program a failure because the program results in taxpayer debt 
every single year; rather, reforms are targeted to certain subsidies, 
subsidy caps, and income limits.

    ASFPM recommends forgiving the remainder of the current 
        debt and adopting some form of a ``sufficiency standard'' as an 
        automatic, long-term mechanism within the NFIP that ensures, 
        after a certain threshold of flooding, the debt will be paid by 
        the U.S. Treasury, much like other disaster assistance. \1\ 
        Among other things, the sufficiency standard would consider the 
        reserve fund balance, utilization of reinsurance, and ability 
        of the policy base at that time to repay.
---------------------------------------------------------------------------
     \1\ Most insurance systems have some trigger for socializing risk 
of extreme events, such as a sufficiency standard based on a pre-
identified event (i.e., a 1-in-25-year or 1-in-100-year event) beyond 
which mechanisms like guaranty funds pay losses. Adopting an explicit 
standard of this type for the NFIP would provide clarity as to what its 
funding sources should be and give Congress and taxpayers an 
understanding of when NFIP debt should be forgiven. Such an approach 
has been suggested by the American Academy of Actuaries for Congress to 
consider as part of a broader set of NFIP reform considerations their 
updated 2019 report The National Flood Insurance Program: Challenges 
and Solutions.

    At a minimum, the requirement for the NFIP to pay interest 
        on the debt should be discontinued, or the interest and debt 
        payments should be directed as reinvestments back into the 
        program for needs such as flood mapping or mitigating flood-
---------------------------------------------------------------------------
        prone buildings, especially repeatedly flooded buildings.

    ASFPM is worried that as we head into a likely more inflationary 
environment over the long term which could have the effect of 
increasing interest rates, servicing the debt will quickly become the 
largest financial risk to the NFIP. The fact is, today's NFIP has taken 
advantage of the numerous tools Congress has provided to make it more 
fiscally sound and is more of a public-private partnership than ever 
before, leveraging private sector financial risk management tools like 
reinsurance and catastrophe bonds, as well as enabling the market for 
private flood insurance. Much progress has been made over the past 8 
years and Congress should take the final steps by recognizing these 
steps and permanently put the program on a sound financial footing by 
addressing today's and tomorrow's debt.
Floodplain Mapping
    Floodplain mapping is the foundation of all flood risk reduction 
efforts, including design and location of transportation and other 
infrastructure essential to support businesses and the Nation's 
economy. The flood maps are also used for emergency warning and 
evacuation, community planning, and locating critical facilities like 
hospitals and emergency shelters. Today FEMA has in place the right 
policies and procedures (i.e., requiring high-resolution topography 
(LiDAR) for all flood map updates), and is using the best available 
technology to produce very good flood studies. For example, FEMA is 
doing some pilot studies in Minnesota and South Dakota using very 
precise topographic mapping and automated flood study methods to 
develop base level engineering that can be used as an input into future 
flood studies. This gives communities access to data immediately to use 
for planning and development rather than waiting years for the data. In 
coastal studies, FEMA now uses the state-of-the-art ADvanced 
CIRCulation (ADCIRC) model for storm surge analysis.
    Today, flood risk maps only exist for about \1/3\ of the Nation--
only 1.2 million of 3.5 million miles of streams, rivers, and 
coastlines have been mapped. Also, even some of today's maps are many 
decades old, or were updated before the current standards to redraw 
boundaries based on more accurate study data and topography. ASFPM has 
repeatedly expressed concern that there is still a large inventory of 
pure ``paper'' maps that have never been digitized and modernized with 
newer flood study procedures. Many other areas have never been mapped, 
so there is no identification of areas at risk and communities have no 
maps or data to guide development to be safe from flooding. This is a 
significant problem and the example below illustrates why.
    Cameron Chase is an 87-acre residential subdivision developed in 
the early 2000s in Licking County, Ohio. As a crow flies, it is 17 
miles from downtown Columbus, Ohio (metro area population 2+ million). 
An unnamed stream flows through the subdivision:


    On the FEMA maps that were effective at the time and even on 
today's maps, the unnamed stream is not mapped. Why? The old guideline 
for mapping these small streams was that you needed about 10 square 
miles of land draining into the stream for it to reach a threshold for 
FEMA mapping in rural areas. In the case of this tributary, it only had 
about 760 acres or just over one square mile of drainage. Also, the 
land previously had been a cornfield, and as a result never had enough 
property at risk for FEMA to map prior to development:


    Luckily, Licking County has strong local floodplain management 
regulations that exceed Federal minimum standards and the regulations 
required the developer to map the floodplain on any stream where one 
wasn't identified. Prior to development a flood study (similar to one 
that FEMA would prepare) was completed and the result? A 1 percent 
chance floodplain identified that ranged from 150 feet wide to 300 feet 
wide and more importantly a map to guide the proposed development. But 
most communities do not have such standards and what happens then? The 
development occurs with no flood standards. Well, this is what is 
happening in thousands of subdivisions across the country: areas that 
used to be cornfields and cow pastures are developing into subdivisions 
with tens of thousands of housing units. Later, after there is 
significant development already built at risk and often after a flood 
or two, FEMA comes in and maps it. Then the dynamic changes and 
everything becomes adversarial. People think FEMA put a floodplain on 
them, when it was there all along. The property owner is mad because 
they have to buy flood insurance at high premiums because flood 
elevations were unknown. Realtors are upset because it is a surprise 
and may have an impact on the future salability of homes. And local 
elected officials fight to minimize the size of the mapped floodplain, 
spending thousands of dollars on competing flood studies. The entire 
dynamic can change if maps showing risk are available before 
development starts. You can see from the FEMA flood map above that 
there are many existing farm fields that will be developed in the next 
few decades (and there are small streams running through them too). We 
must map today's corn fields and cow pastures to assure that quality 
flood mapping precedes development.
    For most of the history of the NFIP, flood mapping was done to 
primarily support two functions of the NFIP: flood insurance rating and 
floodplain management standards. As a result, two pieces of data were 
typically produced: the 100-year and the 500-year flood. However, as 
the NFIP grew and as flood risk management became more important, the 
Nation's citizens looked to the FEMA flood maps as the primary source 
of any kind of flood risk information for a given area. In 2012, 
Congress, for the first time, authorized a National Flood Mapping 
Program (NFMP) as part of the NFIP reform legislation which took this 
more expansive view of flood mapping. It required, among other things, 
several new, mandatory types of flood risks to be shown on the Nation's 
Flood Insurance Rate Maps (FIRMs) beyond the 100-year and 500-year 
flood including:

  1.  All populated areas and areas of possible population growth 
        located within the 100-year and 500-year floodplains;

  2.  Areas of residual risk, including areas that are protected by 
        levees, dams, and other flood control structures and the level 
        of protection provided by those structures;

  3.  Ensuring that current, accurate ground elevation data is used;

  4.  Inclusion of future conditions risk assessment and modeling 
        incorporating the best available climate science; and

  5.  Including any other relevant data from NOAA, USACE, USGS, and 
        other agencies on coastal inundation, storm surge, land 
        subsidence, coastal erosion hazards, changing lake levels, and 
        other related flood hazards.

    Unfortunately, ASFPM is not aware of any single flood map in the 
entire country that exists today where all of these data sets exist on 
either a FIRM panel or in the accompanying data FEMA provides. Therein 
lies the problem. We have had a National Flood Mapping Program 
authorized since 2012, but many key elements have not been implemented. 
In fairness to FEMA since 2012, progress has been made on improving the 
quality of the existing flood maps, in use of high resolution 
topography, and in the area of communicating information to communities 
and the public (either through the mapping process itself or through 
technologies and tools). Nevertheless, we believe these additional 
elements Congress required are essential for an effective national 
flood mapping program.
    What is the gap then? ASFPM believes that the gap lies in getting 
the job of initially mapping the Nation done.
    Consider:

    Based on the National Hydrography Dataset (NHD) and NOAA 
        shoreline data, there are approximately 3.5 million miles of 
        streams and rivers, and 95,471 miles of coastlines in the 
        Nation. Currently, only 1.14 million stream miles and 45,128 
        shoreline miles have flood maps. By this metric, only about \1/
        3\ of the Nation has been mapped.

    Over 3,300, or roughly 15 percent, of NFIP communities have 
        maps over 15 years old, with many of these over 30 years old 
        and still having ``un-modernized'' paper maps.

    Many of the added mapping requirements from 2012 haven't 
        even been started beyond preliminary studies and research. This 
        includes residual risk mapping around flood control structures 
        and future conditions mapping. A 2016 TMAC report reviewing the 
        National Flood Mapping Program stated: ``To create technically 
        credible flood hazard data, FEMA needs to address residual risk 
        areas in the near term. Residual risk areas associated with 
        levees and dams are of great concern.''

    In 2020, in a House Science Committee hearing examining 
        FEMA's flood mapping program, FEMA recognized these mapping 
        needs and testified that appropriations simply have not been 
        enough to make meaningful progress on the additional mapping 
        responsibilities identified under the National Flood Mapping 
        Program.

    ASFPM believes this gap in data is contributing significantly to 
the increasing flood losses in the Nation. A 2018 study shows that the 
total U.S. population exposed to serious flooding is 2.6-3.1 times 
higher than previous estimates, and that nearly 41 million Americans 
live within the 100-year floodplain (compared to only 13 million when 
calculated using FEMA flood maps). This translates into 15.4 million 
housing units. The same study indicates that over 60 million people 
live in the 500-year floodplain.
    In 2020, ASFPM completed the update to its 2013 report Flood 
Mapping for the Nation, which modeled the costs to fully implement the 
National Flood Mapping Program under the 2012 Biggert-Waters Reform Act 
and complete the initial flood mapping of the Nation. We conclude that 
it will cost between $3.2 and $11.8 billion to complete the mapping in 
the Nation and then cost between $107 and $480 million to maintain 
these maps as accurate and up-to-date.
    To improve flood mapping in the Nation:

    ASFPM recommends the reauthorization, funding, and 
        enhancement of the National Flood Mapping Program (NFMP).

    ASPFM supports an increased authorization for the National 
        Flood Mapping Program to between $600 million to $1.8 billion 
        annually in order to accelerate the completion of the job of 
        initially mapping the Nation in 5 years and getting to a 
        steady-state maintenance phase.

    FEMA must complete the initial flood mapping of the entire 
        Nation to get ahead of development and must prioritize the 
        elimination of the un-modernized paper map inventory in the 
        Nation.

    ASFPM urges consideration of a one-time flood map funding 
        investment of $7.5 billion as part of any emerging 
        infrastructure bill to finish the initial job of completing 
        flood mapping for the Nation.

    ASFPM notes that in 2016, a letter initiated by then Chairwoman 
Ranking Member Maxine Waters and signed by 43 House members, not only 
recognized the benefits of flood mapping, but urged Congress to get the 
job done by funding FEMA's mapping program at a level of $1.5 billion/
year for 5 years. A stepped up commitment to mapping flood risk is 
should really go hand-in-hand with any major infrastructure investment; 
otherwise, we risk making costly and important infrastructure 
vulnerable to both today's and tomorrow's flood risk.
Floodplain Management (Floodplain Regulations, Training, Public 
        Education)
    To participate in the NFIP, States and communities must abide by 
minimum development standards and designate a NFIP coordinator. At the 
State level, this means that there is a NFIP coordination office that 
provides technical assistance and training to communities and the 
public, serves as a repository for the State's flood maps, ensures the 
State has sufficient enabling authority for communities to participate 
in the NFIP and is the lead agency to ensure that State development is 
consistent with NFIP minimum standards. At the local level this means 
that more than 22,500 communities participate in the NFIP and have 
adopted minimum development and construction standards to reduce flood 
losses. As floodplain areas are identified and mapped throughout the 
Nation, NFIP participating communities must adopt and enforce local 
floodplain management standards that apply to all development in such 
areas.
    NFIP standards are the most widely adopted development/construction 
standards in the Nation as compared to building codes, subdivision 
standards, or zoning. FEMA has estimated that for approximately 6,000 
of the NFIP participating communities, the only local codes they have 
adopted are their floodplain management standards. Today it is 
estimated $2.4 billion of flood losses are avoided annually because of 
the adoption and implementation of minimum floodplain management 
standards. Often communities decide to adopt standards that exceed the 
Federal minimums. For example, over 60 percent of the population in the 
United States lives in a community that has adopted an elevation 
freeboard--which requires the first floor of the building be at an 
elevation that is at least a foot higher than the base flood (or 100-
year flood). A freeboard not only has the benefit of making the 
construction safer, but it can have a tremendous impact on lowering 
flood insurance rates. A freeboard of 3 feet can reduce premiums by 
more than 70 percent.
    Why do communities participate in the NFIP and adopt local 
standards? State floodplain managers around the Nation who have 
enrolled nearly all of the communities in the past 40 years know a 
major reason is to make flood insurance available to their citizens. If 
a community hasn't joined (there are still about 2,000 communities not 
in the NFIP), it is usually compelled to do so when a resident gets a 
federally backed mortgage and needs to have flood insurance. While 
there are some nonparticipation disincentives in terms of restrictions 
on some forms of disaster assistance, such disincentives are weak and 
very limited. For most communities, they are not much of a disincentive 
at all, but getting flood insurance is a strong incentive. We must 
ensure changes to the insurance element of the NFIP do not undermine 
this incentive.
    To enable the NFIP to provide better technical assistance to over 
22,000 communities in the NFIP, the Community Assistance Program (CAP-
SSSE) was developed in the 1980s. This program invests in building 
capability to do floodplain management at the State level in order to 
assist the communities in the State with their NFIP participation 
responsibilities because it would be impossible for FEMA to either 
directly assist that many communities or for the program to provide 
funding assistance to all communities in the program. It is important 
to recognize communities must meet the NFIP standards, they do so 
within the laws and framework that differs in each State, making it 
important States provide that assistance. For a modest investment of 
around $10 million annually, CAP-SSSE leverages State investment to 
create and maintain the capability to do effective floodplain 
management at the State and local level. The entire floodplain 
management budget (100 percent), which includes staffing, community and 
State technical assistance, and the Community Assistance Program (CAP-
SSSE), is funded out of the Federal Policy Fee. However, the CAP-SSSE 
program is not explicitly authorized.

    ASFPM recommends that a community assistance program which 
        would provide resources to States be explicitly authorized and 
        its funding doubled to maintain and expand community technical 
        assistance through effective State floodplain management 
        programs.

    Although millions of American's homes are at risk of flooding, 21 
States have no real estate disclosure laws. This makes it difficult for 
a home buyer to learn of a property's flood history. These States do 
not require sellers to tell prospective home buyers or renters whether 
a property has been damaged by a flood and limiting access to such 
information prevents people from making smart decisions about where to 
live. Unfortunately, many homeowners learn of their propensity to flood 
only after suffering through multiple disasters. The other 29 States 
have varying degrees of disclosure requirements. This hodgepodge of 
State and local policies hinders buyers from making fully informed 
decisions.

    ASFPM supports a national real estate disclosure 
        requirement for a property's flood history. Such a requirement 
        could be tied to a State's participation in the NFIP.

    In 2018, the Natural Resources Defense Council researched this 
topic extensively and developed an interactive website where each 
State's flood disclosure law can be reviewed.
Flood Hazard Mitigation
    NFIP has two built-in flood mitigation programs: Increased Cost of 
Compliance (ICC) and Flood Mitigation Assistance (FMA). These NFIP 
funded mitigation programs have resulted in more than $1.3 billion in 
funds to reduce risk to thousands of at-risk, existing structures. The 
National Institute of Building Science's Multi-Hazard Mitigation 
Council, in its research of FEMA flood hazard mitigation projects, 
determined that such projects resulted in $5 in benefits for each $1 
spent. ICC and FMA have mitigated, on average, 1,850 buildings annually 
between 2010 and 2014. ASFPM strongly supports both programs.
    ICC is the fastest way to get flood mitigation done and is paid for 
100 percent through a separate policy surcharge. Since it is simply 
part of the flood policy it isn't run like a typical grant, funds are 
available to the owner much quicker. It is a transaction between the 
insured and insurance company. Sixty percent of ICC claims are used to 
elevate a building and 31 percent of the time ICC is used to demolish a 
building. Other techniques used are floodproofing or relocation of the 
building out of the floodplain altogether. From 1997 to 2014, ICC has 
been used to mitigate over 30,000 properties.
    ASFPM has been frustrated for several years over the pace of FEMA's 
implementation of its own authority to make ICC much more useful. In 
2004 ASPFM worked with Congress to add triggers to ICC, so now there 
are four of them in the law:

    A building being substantial damaged,

    A building classified as a repetitive loss,

    A building where another offer of mitigation is being made,

    And the administrator's discretion to offer ICC when it is 
        in the best interest of the flood insurance fund.

    Of these four, only one trigger is being utilized--when a structure 
has been determined to be substantially damaged. While FEMA will claim 
it also applies ICC to repetitive loss properties, it is only if that 
subset of repetitive loss properties that have also been substantially 
damaged. The point is that there are three triggers--in existing law--
that could be used in a predisaster sense. We are pleased to note that 
there is increasing Congressional recognition of the value of 
investment in predisaster mitigation.
    Another frustration with how ICC is currently being implemented is 
the determination of how the ICC premium surcharge is set by FEMA's 
actuaries. Currently funding for ICC is through a congressionally 
mandated surcharge capped at $75 per policy. The latest data ASFPM has 
is for calendar year 2014 where ICC brought in approximately $74 
million for mitigation. On average the ICC surcharge was about $15 per 
NFIP policy--which is far below the statutory cap. However, as ASFPM 
has been discussing changes to ICC, including increasing the ICC claim 
limit beyond $30,000, a response we often get is that FEMA would have a 
tough time making the changes because it is collecting as much as it 
can under the existing cap and that the surcharge rate is set using 
actuarial principles.
    In its 2010 rate review, however, FEMA discussed how it was 
collecting more in ICC than it was spending and therefore adjusted 
downward the amount it would collect per policy in 2011. The result? In 
2010 the surcharge collected $84.5 million and in 2011 the surcharge 
collected $78.2 million. The point of this is that the rate setting 
becomes a self-fulfilling prophesy--FEMA's decision to not implement 
ICC's other triggers result in the program not being fully used. And 
its low utilization in turn led to FEMA determining that the rates 
should be lowered. So it gives the appearance there is room under the 
existing cap. ASFPM believes there is room under the existing cap. We 
suggest that Congress look at setting a tiered amount that would be 
consistent with the existing cap limit and reflective of risk. ASFPM 
calculates that under such an approach an ICC surcharge set at $25 for 
BCX-Zone properties, $50 for actuarially rated A- and V-Zone properties 
and $75 for subsidized A- and V-Zone properties, would generate 
approximately $227 million in revenue that could be used by 
policyholders to mitigate their flood risk.
    ASFPM believes ICC needs two other adjustments by Congress to be 
more effective. First, while ICC is collected on every policy, FEMA 
believes the statute requires the ICC claim be counted toward the total 
claim limit. This means a home that gets a $250,000 damage claim, the 
amount available for ICC is $0. Second, the ICC claim limit is too low. 
Estimates to elevate a home range from $30,000 to $150,000 with an 
average closer to $60,000. While $30,000 is very helpful, it often does 
not come close enough to cover enough of the mitigation cost, to be 
practical or feasible, especially for lower income homeowners.

    ASFPM recommends the ICC claim limit be in addition to the 
        maximum claim limit under a standard flood insurance policy.

    ASFPM recommends the ``base'' ICC claim limit be raised to 
        at least $60,000 to $90,000 with the ability to purchase an 
        optional additional amount of at least $30,000 in ICC coverage.

    ASFPM recommends Congress specifically allow FEMA to 
        utilize the available ICC amount for both demolition and 
        acquisition costs as a means of compliance, when the claim is 
        assigned to the community and deed restricted as open space.

    ASFPM recommends Congress waive any rulemaking requirements 
        that may be an impediment to quickly implementing the 
        predisaster triggers for ICC and allowing demolition and 
        acquisition costs.

    FMA operates like a typical grant program where a community applies 
through the State through a grant application. Further, FMA also funds 
other types of mitigation that can address issues on the neighborhood- 
or community-scale such as stormwater management systems to reduce 
flood risk and flood mitigation plans. In recent years, the priority 
for the FMA program has been repetitive loss and severe repetitive loss 
properties. While this is an important objective, ASFPM worries that an 
exclusive focus on such projects is increasingly resulting in a gap 
where no assistance is available for properties that desperately need 
assistance, such as older pre-FIRM, nonrepetitive loss structures for 
which insurance rates may be increasing significantly. ASFPM recommends 
that accommodations be made for these types of properties as well, when 
FEMA formulates its new policy guidance.
    Repetitive loss claims unnecessarily drain the National Flood 
Insurance Fund, and today, there are at least 160,000 repetitive loss 
properties. Because increased flooding keeps adding more repetitive 
loss buildings, hazard mitigation efforts have been insufficient to 
reduce flood damage to older structures and ultimately reduce the 
overall number repetitive loss properties. Current mitigation programs 
within the NFIP are underfunded and not reducing the overall number of 
repetitive losses in the country. One idea for Congress to consider is 
a mitigation surge where Congress would supplement FMA funds with a 
large one-time or multiyear appropriation to either address the growing 
number of repetitive loss properties, or specifically address pre-FIRM 
properties where affordability of flood insurance has become untenable.

    ASFPM urges consideration of a one-time mitigation funding 
        investment of $5 billion as part of any emerging infrastructure 
        bill to reduce the amount of repetitive loss properties and 
        improve the financial stability of the NFIP.

    Another idea for expanding mitigation that has merit is flood 
mitigation loan programs. After Superstorm Sandy, ASFPM worked with HUD 
to clarify that their Federal Housing Administration 203K loan program 
was available for flood mitigation purposes. Certainly loans have their 
place as a flood mitigation approach. ASFPM supports the State Flood 
Mitigation Revolving Loan Fund Act as a way to expand mitigation 
investment and its approach to emphasize flood preparedness as well as 
allowing States to develop their capacity in mitigation. We also 
support the ability of the program to offer grants instead of loans, 
especially in States where less funding might be available, and where 
State capacity and/or interest to administer such a revolving loan 
program may be lower.
    ASFPM supports improvements to FEMA mitigation grant programs, like 
FMA to better address equity and social vulnerability. Increasingly, it 
is recognized that traditional benefit-cost analysis (BCA) which 
focuses primarily on damages and losses avoided favor high value homes 
and communities: it does little to recognize issues of social 
vulnerability. Further, FEMA's longstanding, restrictive interpretation 
and treatment of Uniform? Relocation Act assistance can result in 
inequities for those vulnerable especially who ultimately cannot 
participate in a mitigation project due to the inability to secure 
comparable safe, sanitary, and affordable housing. We've offered ideas 
in the past such as excluding costs of complying with other Federal 
laws like URA and environmental compliance laws from BCA calculations 
which would result in mitigation grants being more equitable as well as 
making progress on environmental justice issues.

    ASFPM supports Recommendation 2020-01 and 2020-22 of the 
        NAC report which recommends the FEMA Administrator create an 
        Equity Standard and that would encourage FEMA to assess the 
        current process of distributing mitigation funds to determine 
        which policies, regulations and legislation need to be revised 
        so the outcomes are more equitable.
Flood Insurance
    Flood insurance is the easiest way for a property owner to manage 
their flood risk. It was also viewed by the original authors of the 
program as a way to more equitably share risks and costs of development 
decisions. Yet too few property owners and renters carry flood 
insurance. Today it is estimated 10 percent of the population lives in 
an identified floodplain and that number is projected to grow to 15 
percent by the year 2100 based on natural population growth and future 
conditions (land use, development, and climate change). While the NFIP 
provides some standards to reduce flood losses to new development, it 
has not helped communities avoid development in high flood risk areas. 
It is also estimated the number of policies increasing by 100 percent 
and the average loss per policy increasing by 90 percent in 2100. \2\ 
The point is that these trends show growth in the human occupation of 
flood hazard areas and the potential damage that may result. As we have 
pointed out earlier, there are many more miles of rivers, streams and 
coastlines that aren't even yet mapped (which is why it is unsurprising 
that 25 percent of NFIP claims and \1/3\ of Federal disaster assistance 
come from outside of mapped floodplains). \3\
---------------------------------------------------------------------------
     \2\ ``The Impact of Climate Change and Population Growth on the 
National Flood Insurance Program through 2100''. 2013.
     \3\ ``FloodSmart Flood Facts''. Webpage accessed 3/14/17.
---------------------------------------------------------------------------
Flood Insurance Affordability
    The aforementioned 2020 NAC report describes how the NFIP 
``inadvertently assists the wealthier segment of the population by 
serving only those who can afford flood insurance.'' Although reforms 
in 2012 and 2014 did put all properties on the path to full risk 
rating, it also affected flood insurance affordability. Unfortunately, 
a long-term solution to affordability was not included in either BW-12 
or HFIAA. However, through Risk Rating 2.0, we argue that in addition 
to making the program more equitable, it also will result in making 
flood insurance more affordable to those who are likely most sensitive 
to higher flood insurance rates, fixing the legacy rating approach 
which resulted in low-value homes paying too much and high-value homes 
paying too little. Additionally, ASFPM has identified three reforms 
that may have an impact on flood insurance affordability.
    Over the past several years, another idea gaining traction is a 
program providing means-based premium subsidies to address flood 
insurance affordability. ASFPM is supportive of the concept based as 
long as it includes two provisions--that the subsidy is shown separate 
from the premium so that the policyholder better understands the 
underlying flood risk, and that the subsidy is paid for outside of the 
NFIP and therefore by taxpayers versus NFIP policy holders as the 
benefits accrue to society at large versus other NFIP policy holders. 
It seems appropriate that such a program would be inclusive of an 
equity standard that has been proposed by FEMA's National Advisory 
Council.

    ASFPM supports a needs based, equitable flood insurance 
        premium assistance program. However, the subsidy should remain 
        separate from the premium in order to properly communicate 
        flood risk and it should be paid for outside of the NFIP as the 
        benefits of the program are to society at large.

    In 2014, to meet House PAYGO rules, there was a large surcharge 
imposed on nonprimary residences, small businesses and other 
nonresidential structures. The surcharge is neither risk-based nor 
need-based. Premium increases and surcharges have led to a notable 
reduction in policies in force, declining from a high of 5.5 million to 
about 5.1 million today.

    ASFPM recommends the elimination of the PAYGO surcharge 
        established in 2014 to improve flood insurance affordability 
        and equity with private flood policies. This will take an 
        additional cost burden off of small businesses.

    A third reform that is presently being debated is the cap on flood 
insurance premium increases. ASFPM does not have a specific 
recommendation on a suggested rate cap; rather, we would remind the 
Committee that generally rate caps that are too aggressive (too high) 
reduce the glide path to actuarial risk rating and therefore could 
exacerbate the problem of flood insurance affordability, while rate 
caps that are lower could help with flood insurance affordability and 
give owners time to consider and implement rate reducing flood 
mitigation options.
The Private Flood Insurance Market
    Since 2012, previous NFIP reforms have led to a robust private 
market for flood insurance. Reforms to stimulate more private market 
participation have worked as intended. ASFPM very much believes a 
strong NFIP can coexist with the private market offering flood 
insurance as long as both are on equal playing fields. In other words, 
neither the NFIP nor the private market should be at a competitive 
disadvantage. The result can be coverages that complement each other. 
For example, private insurers depend on NFIP maps and agree local 
floodplain regulations help all insurance by reducing risk, yet private 
policies do not have to include the Federal Policy Fee to help pay a 
share of the flood mapping and floodplain management costs. The wholly 
unfair PAYGO surcharge has allowed private policies to be written using 
FEMA rate tables and the private sector is profiting on the difference 
between the loaded NFIP policy (with surcharges and fees) and private 
sector policy that does not have to charge such fees. ASFPM further 
believes that with the increase in the number of private flood 
insurance policies, it is even more important that the NFIP continue to 
be widely available when the private sector no longer writes policies 
in an area due to the concentration of risk or claims.
    In 2019, the mortgage regulators issued a final rule which directly 
conflicts with statute when it comes to what type of flood insurance 
policy qualifies to meet the mandatory purchase requirement. While 
rulemaking had gone on for some years, the ``discretionary acceptance'' 
approach appeared in the latest, final version with no opportunity to 
comment. The primary issue is that Congress mandated that private flood 
insurance policies that were sold to for properties to meet the 
mandatory purchase requirement had to have coverages and deductibles 
``at least as broad as'' a NFIP policy. This means that such private 
sector policies must have a coverage similar to ICC, to provide 
resources to come into compliance with flood codes and have deductibles 
that aren't too excessive--a cheap flood insurance policy does a 
property owner no good if the deductible exceeds their ability to pay. 
Yet the ``discretionary acceptance'' alternative would allow policies 
without these provisions. Such a loophole hurts property owners and 
will lead to greater dependence on Federal disaster assistance--
contrary to the foundational goals of the NFIP. Additionally, the 
private flood insurance market that has grown rapidly the past 7 years 
has done so without the loophole being in effect.

    ASFPM recommends Congress eliminate the Lender regulators 
        2019 ``discretionary acceptance'' rule that allows lenders to 
        decide whether to accept private policies not meeting the 
        specific requirements set by Congress for private flood 
        policies.

    The private insurance industry uses FEMA flood maps in various 
ways: sometimes to calibrate their risk assessment models, and 
sometimes to determine basic eligibility of their private flood 
insurance product. Certainly the most impactful part of flood mapping 
for private industry is the identification of where the mandatory 
purchase requirement is in effect. Industry officials that ASFPM talks 
with all support the floodplain management efforts in a community that 
provides a meaningful program of risk reduction. Given that 100 percent 
of the Federal Policy Fee goes to mapping and floodplain management, it 
is only equitable that private policies help pay for these functions 
and that they are not just borne by NFIP policyholders.

    ASFPM recommends an equivalency fee, equal to the Federal 
        Policy Fee, be assessed on all private flood insurance policies 
        sold to meet the mandatory purchase requirement.

    As private flood insurance becomes more widely and easily 
available, provisions must be made to ensure such policies can only be 
made available to meet the mandatory purchase requirement if the 
community participates in the NFIP. Why? For thousands of communities 
in the NFIP, the primary reason for joining the program is the 
availability of flood insurance to meet the mandatory purchase 
requirement. As a requirement of joining, communities agree to adopt 
and enforce local floodplain management standards. As a result, 
floodplain management standards are the most widely adopted in the 
United States--exceeding the coverage of building codes, subdivision 
regulations and zoning. The adoption and enforcement of these codes, in 
turn, reduces future flood risk to the individual, businesses, 
communities, and taxpayers. ASFPM members understand that once you 
remove the incentive for joining (flood insurance availability) 
thousands of communities may rescind their codes, drop out of the NFIP, 
and rely on the private policies to meet needs of property owners 
without the administrative burden of adopting and enforcing local codes 
and the likely future result of more development in flood risk areas. 
Particularly susceptible to this are small communities with low policy 
counts and where more development will occur. As stated earlier in this 
testimony, most communities in the Nation already participate in the 
NFIP. And while the private industry is still emerging, let's be 
partners in persuading communities to comprehensively reduce flood 
losses. Finally, this fee has no cost to the private insurance 
industry.

    ASFPM recommends that when private flood insurance policies 
        are sold to meet the mandatory purchase requirement, they can 
        only be sold for that purpose within NFIP participating 
        communities.

    Finally, ASFPM is concerned about the availability of private 
claims and policy data for the purposes of floodplain management and 
flood mitigation planning and programs. For decades FEMA has provided 
these data to local and State officials to assist with substantial 
damage determinations, flood recover, flood mitigation grants, 
Community Rating System participation, and flood mitigation planning. 
There should be a requirement that private flood insurance providers 
share comparable policy data to State and local floodplain managers.
Other Flood Insurance Issues
    Community floodplain managers often hear complaints about the NFIP 
centered around what is covered and what is not; and the inability to 
get additional coverages like living expenses as part of a NFIP policy. 
ASFPM has been impressed with FEMA's customer experience initiative 
after Superstorm Sandy with FEMA committing to improving the insurance 
product it sells. Yet FEMA is constrained by a cumbersome rulemaking 
process that can take years to complete.

    ASFPM recommends Congress give FEMA the flexibility to 
        offer additional flood insurance policy options and make 
        changes to existing options without the need for extensive 
        rulemaking.

    Consistent with ASFPM's overall philosophy laid out in this 
testimony, the roll-out of Risk Rating 2.0 should strive to do no harm 
to the floodplain management and flood mitigation elements of the NFIP. 
As the initial roll-out of the program has begun, and while recognizing 
the many benefits of Risk Rating 2.0, many of our members have 
expressed concerns about how this will impact floodplain management and 
flood mitigation. ASFPM has been engaging with FEMA to answer questions 
on how these changes will affect how floodplain managers assist 
property owners, how it will impact mitigation grant programs, and to 
ensure that tools and information is developed to address these issues. 
We urge the Committee's continued oversight to ensure that the roll-out 
of Risk Rating 2.0 recognizes and addresses the needs of all of the 
NFIP's partners and stakeholders.
    Finally, for nearly 2 years, ASFPM has been engaging FEMA to 
address access to certain policy and other data that might be 
classified as personally identifiable information (PII). Previously, 
State and local floodplain and mitigation managers had had access to 
information such as claims data provided it was used for official 
purposes such as implementing local floodplain management codes or for 
mitigation planning. However, two events conflated to inordinately 
restrict these data--Inspector's General reports where some 
inappropriate uses of data were discovered (and uses that ASFPM would 
never support), and the implementation of FEMA's new PIVOT system and 
accompanying reporting tool which did not contemplate needing to 
provide these data to those involved in flood mitigation or floodplain 
management. Today, FEMA has implemented a cumbersome system where some 
States and communities cannot even agree to FEMA's legal agreement 
under which some of these data are provided. Further, it is the DHS 
Privacy Office--that has dictated this burdensome overall approach. 
Unfortunately, we are not optimistic that FEMA can solve this 
administratively on its own.
In Conclusion
    Floods are this Nation's most frequent and costly natural disasters 
and the trends are worsening. The NFIP is the Nation's most widely used 
tool to reduce flood risk through an innovative and unique mix of 
incentives, requirements, codes, hazard mitigation, mapping, and 
insurance. At the same time, we understand the four main pillars of the 
NFIP are interconnected; and making significant changes to one pillar 
without thoughtful consideration of the impact on the other three can 
erode the program overall. The NFIP is a key tool in the toolbox that 
serves policyholders, taxpayers, and the public well.
                                 ______
                                 
                  PREPARED STATEMENT OF VELMA M. SMITH
    Senior Officer, Government Relations, The Pew Charitable Trusts
                              May 18, 2021
    Chairman Brown, Ranking Member Toomey, and Members of the 
Committee, thank you for your invitation to share The Pew Charitable 
Trusts' (Pew) perspective on the reauthorization of the National Flood 
Insurance Program (NFIP). My name is Velma Smith. I have a Masters in 
Urban and Regional Planning, and I am a senior officer in Government 
relations with Pew's flood-prepared communities initiative.
    Pew's flood-prepared communities initiative--like this Committee--
has taken on one of these complex and truly difficult problems: the 
costly and common problem of floods and flooding damage. Our aim is to 
reduce the impact of flood-related disasters on the U.S. economy, 
communities, and environment. Pew applies a rigorous, analytical 
approach to improving public policy that prioritizes investments in 
flood-ready infrastructure, mitigates the impact of disasters, 
modernizes flood insurance, and promotes nature-based solutions to 
flooding.
    The NFIP, now 50 years of age, has long been an essential component 
of our Nation's management of flood risk. While the program must be 
adjusted and reformed, we understand that Congress must consider fully 
the consequences of changes to a program that serves so many flood-
weary communities across the country. That is why Pew thanks the 
Committee for starting this important discussion now in anticipation of 
a timely reauthorization prior to the program's expiration on September 
30th.
    Pew supports changes to the NFIP that will:

    keep flood insurance available to those who need it without 
        asking taxpayers to subsidize risky development;

    help drive new development away from flood-prone areas, 
        including areas that will be at high risk for flooding or even 
        permanent inundation in the future;

    foster fixes or buyouts of problem properties, make 
        significant new investments in mitigation action, and provide 
        additional assistance to the most vulnerable communities;

    promote the conservation and restoration of natural 
        resources that can help in flood management;

    accelerate the collection, dissemination, and use of 
        information on flood risk; and

    ultimately, make the Nation better prepared for tomorrow's 
        severe storms.

    As the Committee considers changes to the NFIP, we believe it is 
critical to balance the multiple aspects of the program and remain 
focused on the fact that the program is much more than a vehicle to 
sell insurance. The NFIP was established, not just to provide insurance 
and to lower Federal disaster relief expenses, but also to communicate 
risk, improve disaster response, and enable local governments to make 
sound decisions about land use and development. The fixes the Committee 
considers, therefore, should recognize and address these multiple 
goals.
Flood Maps
    First, let me touch briefly on a central component of the flood 
program: Flood Insurance Rate Maps (FIRMs) that determine who is 
covered by the program's mandatory purchase requirements and provide 
critical information for local communities, mitigation planners, and 
emergency responders. \1\ Though the slow pace of map production and 
the information--or misinformation--conveyed through the mapping 
program may appear far less pressing than issues of rates and 
affordability, we would urge the Committee to consider how to support 
and improve this foundational aspect of the NFIP.
---------------------------------------------------------------------------
     \1\ Association of State Floodplain Managers, ``Flood Mapping for 
the Nation: A Cost Analysis for Completing and Maintaining the Nation's 
Flood Map Inventory'', January 2020, https://
www.floodsciencecenter.org/products/flood-mapping-for-the-nation/.
---------------------------------------------------------------------------
    Flood maps and the studies that underlie the maps can help State 
and local decision makers steer public investment into areas least 
likely to flood during the lifetime of newly constructed 
infrastructure. Informed by maps, communities can construct critical 
facilities, such as hospitals, utilities, and emergency shelters 
outside of the most hazardous zones, thereby lowering future response 
and recovery costs. Maps can show areas of ``residual risk'' behind 
levees or dams that could be affected by overtopping or structural 
failure, identify areas that might be preserved as parks and natural 
areas to absorb floodwaters, help coastal communities plan sensibly for 
sea level rise, and pinpoint priorities for storm drainage 
improvements. But none of this is possible for communities that still 
lack updated maps or, even more commonly, rely on maps that give no 
clues to what the future of flood risk may be.
    Flood map production is, in part, a matter of money, and Pew has 
for many years advocated for significant increases in the level of 
general appropriations for flood mapping. But map production can also 
be affected by process, including multiple levels of appeals and delays 
in map adoption and by the chosen metrics of success. \2\ Right now, 
FEMA measures success in the program largely by the percentage of the 
Nation's population living in areas with completed maps. Those numbers 
are indeed impressive, but it is also true that many of the more rural 
areas lack even the most basic information about risks. This data gap 
can mean that as those locales begin to experience development 
pressures, builders and investors will not be guided by risk 
information. The result, in too many instances, will be new 
construction of homes and businesses that become tomorrow's NFIP 
problems.
---------------------------------------------------------------------------
     \2\ Federal Emergency Management Agency, ``Adoption of Flood 
Insurance Rate Maps by Participating Communities'', January 2019, 
https://www.fema.gov/sites/default/files/2020-07/fema-adoption-flood-
insurance-rate-maps-participating-communities-bulletin.pdf.
---------------------------------------------------------------------------
    Pew, therefore, urges the Committee to consider options for 
accelerating map production in underserved areas and to resist any 
changes that would add time and complexity to what is already a very 
lengthy map review and appeals process. We also support direction to 
the Agency to include additional data on future risks in new maps 
products as quickly as possible. This future risk information will be 
helpful not only to local developers and homebuilders but also to 
decision makers targeting new monies for infrastructure investments and 
upgrades.
Rates and Affordability
    As Members on this Committee know, flood insurance rates have 
proven to be a key sticking point. There are those who see rates as too 
low, enticing people to build or live in risky areas. Others believe 
the opposite or expect to recoup every dollar spent on insurance in 
eventual claims payments. Given the chasm between these points of view, 
it may be useful to consider a bit of history and to proceed with 
caution on any initiatives to further lower rates across the board.
    When the NFIP was started, its proponents were wary of flood 
insurance providing an indirect subsidy for development in risky areas. 
\3\ Nonetheless, they were driven by what, at the time, seemed like 
large Federal disaster expenditures, and they were compelled to find a 
way to assure that those already living in flood-prone areas could make 
some sort of down payment on future Federal assistance. The program's 
drafters were cognizant of the fact that land use decisions and 
building practices affect flood risk and that those decisions are made, 
not at the Federal level, but by individual communities. They saw 
Federal flood insurance as a means of leveraging improved floodplain 
management by local governments to reduce overall risk. \4\
---------------------------------------------------------------------------
     \3\ See, for example, U.S. Task Force on Federal Flood Control 
Policy, ``A Unified National Program for Managing Flood Losses'', House 
Document No. 465, 89th Congress, second session, August 10, 1966, 
https://www.loc.gov/law/find/hearings/floods/floods89-465.pdf.
     \4\ See, for example, Federal Emergency Management Agency, ``A 
Chronology of Major Events Affecting the National Flood Insurance 
Program'', October 2002, prepared by The American Institutes for 
Research, The Pacific Institute for Research and Evaluation, and 
Deloitte & Touche LLP, https://www.dhs.gov/xlibrary/assets/privacy-pia-
mip-apnd-h.pdf; and Michel-Kerjan, Erwann O., 2010, ``Catastrophe 
Economics: The National Flood Insurance Program'', Journal of Economic 
Perspectives, 2010, 24(4): 165-86, https://www.aeaweb.org/articles/pdf/
doi/10.1257/jep.24.4.165.
---------------------------------------------------------------------------
    They assumed that a very limited number of communities would be at 
risk for flooding and that flood maps could be produced rather quickly 
and prove useful for long periods of time. They aimed for covering 
risks for the average ``normal'' year and allowed for borrowing from 
the Treasury for ``extreme'' events. At the same time, they seemed 
certain that there would be enough years with few storms to allow quick 
repayment of borrowed funds.
    When Congress pressed ahead with rate reductions to attract more 
policyholders, it also assumed that the need for subsidies would 
diminish over time as local floodplain management improved and as older 
structures were leveled by storms or rebuilt entirely.
    Some of these assumptions were on point. Others, with the benefit 
of hindsight, appear naive.
    Today, we are beginning to understand that where it rains, it can 
flood and that even in communities that sit above a river or far from 
the coast, heavy rainstorms can overcome storm drainage infrastructure. 
We are also beginning to understand that flood risk is dynamic and that 
assessing risk must be an ongoing process. Now we see, all too clearly, 
that large events can follow on the heels of other large events, 
diminishing opportunities for building up financial reserves. We can 
also see that many at-risk homes and businesses have remained at risk 
for multiple decades, and that discounted rates that were once seen as 
temporary have endured.
    Now, it seems, the space between the rock and the hard place that 
the program occupies has become tighter. Although $16 billion of 
program debt to the Treasury was forgiven in recent years, experts see 
no realistic chance that the program will be able to repay, with 
interest, the currently owed $20 billion plus. \5\
---------------------------------------------------------------------------
     \5\ U.S. Government Accountability Office, ``High Risk List: 
National Flood Insurance Program'', 2019, https://www.gao.gov/highrisk/
national-flood-insurance/why-did-study#t=0; FEMA, Federal Insurance and 
Mitigation Administration, ``Watermark, Fiscal Year 2021'', First 
Quarter Volume 13, https://www.fema.gov/sites/default/files/documents/
fema-watermark-report-12-2020.pdf.
---------------------------------------------------------------------------
    Therefore, to the extent that Congress makes no changes to the 
structure of the program but offers new risk rate relief to 
policyholders, you may run the risk of increasing the NFIP program's 
current financial shortfall and threaten its ability to pay claims. On 
the other hand, to the extent to which rates are perceived as too high, 
lower-risk policyholders may drop coverage, thereby increasing the 
pressure to raise rates on the remaining properties. In addition, as 
some policyholders pay off loans and, thereby, fall out of the group 
that is required to carry flood insurance, they may drop coverage as 
well. If those individuals suffer uninsured losses in the future, 
Congress will be pressed to offer other types of disaster relief.
    Clearly, this is a tough problem to solve, and we recognize that 
adjusting the NFIP's rate structure is a delicate business, because of 
the way it impacts people's ability to live and work in places they 
love. As the Committee approaches this difficult issue, Pew offers the 
following considerations:
    First, we suggest to the Committee that FEMA has taken step one on 
affordability--in the form of the recently announced Risk Rating 2.0 
pricing methodology. We understand that there is considerable 
apprehension about the impact of these changes, but we see these 
updates as ones that remedy a basic unfairness built into the program. 
As Carolyn Kousky of the University of Pennsylvania's Wharton Risk 
Management and Decision Process Center states: ``Right now, low-valued 
homes pay too much for flood insurance and high-value homes too 
little.'' \6\ With adjustments to the program's previous differential 
between base rates and additional coverage rates and a modernized 
approach to considering costs of repairs, Risk Rating 2.0 would address 
this unfairness. From FEMA's preliminary nationwide data, we estimate 
that Risk Rating 2.0 would actually lower insurance rates for more than 
1.1 million policyholders nationwide. We urge the Committee to let this 
important initiative proceed.
---------------------------------------------------------------------------
     \6\ Kousky, Carolyn, ``Stopping Price Reform Won't Eliminate Flood 
Risk'', The Hill, April 2, 2021, https://thehill.com/changing-america/
opinion/546158-stopping-price-reform-wont-eliminate-flood-risk.
---------------------------------------------------------------------------
    Second, we know there is a desire to go beyond Risk Rating 2.0's 
changes to address affordability. On that point, we recommend that the 
Committee use the information provided in FEMA's affordability 
framework study to craft an affordability program that is carefully 
targeted to those policyholders that need it most.
    Again, we caution that an overly generous program--especially one 
that is not tied to other program reforms--will continue to undermine 
the program's claims-paying abilities and simply hasten the date by 
which Congress will again be debating loan forgiveness or changes to 
the borrowing cap.
    Pew believes the Committee should work to avoid an affordability 
approach that is administratively complex and costly. While we 
understand the desire to help those who are severely housing burdened, 
we would remind the Committee that the task of determining each 
policyholder's current income and assets as well as outlays for 
mortgage and other insurance payments would require extensive and 
potentially costly data collection. In addition, an affordability 
program focused solely on mortgage-holders may also overlook the needs 
of many low-income homeowners who do not currently carry mortgages.
    To ensure that artificially low insurance rates do not encourage 
more risky development in flood-prone areas, Pew also recommends that 
the Committee consider clearly restricting any additional rate 
subsidies for new construction.
    Third, we urge the Committee to ensure that any new affordability 
program compensates clearly for the price signals that new discounts 
convey. Too many individuals assume that a low insurance rate equals 
low risk; many will see a lowering of rates as confirmation of minimal 
risk. Where this is not the case, people should be fully informed and 
educated about their true risks. An affordability program should not 
feed flood complacency.
    Finally, Pew recommends beginning a triage of the program's 
financial ailments by moving more vigorously to improve the floodplain 
management aspects of the program, including by accounting for future 
risk with respect to land use regulations. The program should also 
address the costly repeat loss properties and, at the same time, 
provide more robust mitigation funding and resources in order to lower 
risk, not just premiums. Additionally, we believe that a reformed 
program must provide the public with information that can help families 
and individuals make sensible and affordable decisions about where to 
live.
Flood Risk Disclosure
    As many flood experts have noted, an understanding of flood risk is 
fundamental to preparedness and protection, but individuals frequently 
underestimate their own risk of flooding, the extent of the damage that 
flooding can cause, or both. Some may not realize that the standard 
homeowner's insurance policy does not cover flooding. Others assume 
that their chances of significant loss to a flood are remote or believe 
that Federal disaster assistance will allow for full recovery and 
restoration. Many do not realize that for those living in the 1-
percent-annual-chance or 100-year floodplain, the chances of a flood 
occurring during the lifetime of a 30-year mortgage are roughly one in 
four, far greater than the risk for fire. \7\ Others mistakenly believe 
that if they reside outside of a flood hazard area, their chances of 
experiencing a flood fall to zero.
---------------------------------------------------------------------------
     \7\ See, for example, National Association of Insurance 
Commissioners, ``Flood Insurance Basics'', undated, https://
www.naic.org/documents/cmte-c-trans-read-wg-related-flood-insurance-
basics-v4.pdf?modal; and U.S. Geological Survey, ``100-Year Flood--It's 
All About Chance'', April 2010, https://pubs.er.usgs.gov/publication/
gip106.
---------------------------------------------------------------------------
    This lack of awareness or understanding can have devastating 
consequences for families and their property. Flooding can wreak havoc 
on what may have seemed like a sensibly balanced family budget. Flood 
victims, who may have lost their belongings, means of livelihood, cars, 
pets, or even loved ones to floodwaters can become trapped financially, 
unable to sell or to break a lease; they may be making rent or mortgage 
payments while flood damages force them to live elsewhere. They may 
have foregone flood insurance, simply because they had no means of 
recognizing their own flood risk.
    Upfront disclosures about flood risk-available before financial 
commitments are made--could change those results. Informed about a 
structure's loss history, for example, homebuyers could consider 
alternative neighborhoods, purchase flood insurance, or investigate 
mitigation options, such as landscaping improvements, building 
elevation, or special placement of costly mechanical equipment. An 
informed buyer who has not yet finalized financing may be able to roll 
the costs of flood-resiliency improvements into a long-term loan that 
will protect the structure and lower insurance rates. For most, this 
would be much easier than facing a costly repair bill on top of a 
mortgage payment post-storm.
    For renters, flood knowledge can allow for the same sort of 
informed decision-making. The individual with mobility issues may 
choose a safer location, for example. A renter with expensive computer 
equipment might opt for the second floor rather than the basement 
apartment. And, again, more individuals may decide that an insurance 
policy to cover loss of their belongings is a sensible safeguard.
    Pew believes that buyers and renters need to have all the 
information necessary to make informed decisions on what is often their 
largest and most important purchase. Sellers and lessors should be 
compelled to share the information they know about past flood damages 
and claims, obligations to carry insurance based on previous access to 
Federal disaster assistance, and designation of a home as repetitive 
loss property, which can have serious implications for flood insurance 
rates. They should also be compelled to share the results of any 
elevation survey completed on the property. Such information can round 
out the broader picture of flood risk for a given property, giving 
consumers the equivalent of the repair and accident history that has 
become standard for automobiles.
    We were delighted to find broad agreement on this issue with groups 
such as the National Association of Realtors and the Natural Resources 
Defense Council. Further, such a proposal enjoys bipartisan support by 
the public. A Pew poll released in 2019 shows that three quarters of 
respondents support a single, national standard to ensure that 
potential homebuyers are aware if a property has flooded repeatedly and 
if that property is required to carry flood insurance.
    Pew urges the Committee to direct FEMA to move quickly to develop 
national standards for disclosure of past flood losses by sellers and 
lessors and to ensure that those standards become a basic part of the 
NFIP program. We also support directing FEMA to make flood claims data, 
aggregated at block or census level, readily available to the public on 
its website.
Repeatedly Flooded Properties
    Where should Congress begin the financial and mitigation triage? 
Pew believes that Congress must start with the long-standing but still 
growing problem of repetitive loss properties.
    This subset of insured properties that flood over and over again 
has strained the program's finances for decades. In some years, 
repetitive loss properties account for as little as 1 percent of the 
program's policyholders but cover 25 to 30 percent of its claims. \8\ 
Since the 1990s, Congress, FEMA, the Government Accountability Office 
(GAO), and others have probed this imbalance problem, documenting 
multiple cases of properties repaired and rebuilt numerous times at the 
NFIP's expense.
---------------------------------------------------------------------------
     \8\ Federal Emergency Management Agency, ``Severe Repetitive Loss 
Property Locations in FEMA Region IV and VI'', 2009, https://kymn.net/
wp-content/uploads/2018/08/FEMA.RepetitiveLoss.Southeast.pdf.
---------------------------------------------------------------------------
    In 2009, the Department of Homeland Security's Inspector General 
(IG) said that about one in ten repeatedly flooded homes had cumulative 
claims exceeding the value of the house. \9\ The IG also said the 
increase in new repeat loss properties was outpacing mitigation efforts 
by a factor of ten to one. At that time, the universe of these 
properties was estimated to be growing at roughly 5,000 per year. A 
2016 report by Resources for the Future and the Wharton Risk Center 
notes that claims filed by repetitive loss properties run 5 to 20 
percent higher than the average of claims overall. \10\ And as recently 
as 2020, the GAO again noted the growing number of nonmitigated 
repetitive loss properties--despite significant Federal expenditures on 
property acquisitions and other flood mitigation action. \11\
---------------------------------------------------------------------------
     \9\ Department of Homeland Security, Office of the Inspector 
General, ``FEMA's Implementation of the Flood Insurance Reform Act of 
2004'', March 2009, https://www.oig.dhs.gov/assets/Mgmt/OIG-09-45-
Mar09.pdf.
     \10\ Kousky, Carolyn, and Erwann Michel-Kerjan, ``A Look at 35 
Years of Flood Insurance Claims'', undated, https://www.rff.org/files/
document/file/RFF-Resources-191-FloodInsuranceClaims-0.pdf.
     \11\ Government Accountability Office, ``National Flood Insurance 
Program: Fiscal Exposure Persists Despite Property Acquisitions'', GAO-
20-508, June 25, 2020, https://www.gao.gov/products/gao-20-508.
---------------------------------------------------------------------------
    The NFIP program currently allows for a more rapid escalation of 
rates for repetitive loss and severe repetitive loss properties 
compared with other premium-discounted properties. It also directs FEMA 
to prioritize mitigation assistance to such properties through Flood 
Mitigation Assistance grants and requires even more rapid rate 
escalation if an offer of mitigation assistance is refused. However, 
these are simply starting points to reducing the growth of properties 
that flood over and over.
    In the 115th Congress, a House-passed bill included a mandatory 
deductible that would have required owners to shoulder more of the 
repair costs, and it also included a measure that Pew supports aimed at 
addressing the root causes of repeated flooding. The Senate version of 
this bill has been championed by Senator Tim Scott, working along with 
Senator Brian Schatz.
    Inspiration for what was called the Repeatedly Flooded Communities 
Preparation Act came from work already being done. A few jurisdictions 
participating in FEMA's Community Rating System (CRS) were already 
conducting what have been called repetitive loss area analyses, using 
FEMA data to map and evaluate concentrations of repeated claims. Some 
appeared to be having real success reducing the number of unmitigated 
repetitive loss properties.
    While such efforts could be sophisticated, they might also be as 
simple as using a paper map and a marker to look for patterns in the 
data, following up, as necessary, with field visits, and looking at 
options for identified flooding hotspots. The bill uses a specific 
number to identify the very small set of communities that would be 
required to participate, but it does not dictate specific outcomes. It 
directs FEMA to set up rules and calls on communities to make progress 
mitigating these hotspots. The legislation also reflects the fact that 
progress for one community might look very different from progress in 
another.
    Let me be frank. This modest proposal to press communities to deal 
with repeatedly flooded areas has drawn some criticism. On the one 
hand, some believe it too unambitious. A more straightforward approach 
would simply remove some of the worst properties from the NFIP 
program--perhaps after a certain threshold of claims has been paid. 
Others see it as too tough on localities. Local governments don't want 
to be singled out as a problem for the NFIP; they have other high 
priorities to consider.
    We believe that the legislation, however, is a true attempt to hit 
the sweet spot--a spot that tries to focus attention on a nagging and 
growing problem, a directive that acknowledges the difficulty of the 
problem and offers a good dose of flexibility for finding solutions 
even as it creates a new level of accountability.
    We know that among the repeatedly flooded properties, there are 
older homes built long ago on filled wetlands, on the edges of stream, 
or in a narrow valley below a rapidly growing area whose parking lots 
and new construction are sending water flowing downstream. Among these 
may be neighborhoods plagued by frequent low-level flooding tied to 
undersized drainage ditches cleaned out far too infrequently. The 
solutions to flooding, in some cases, may not be in the hands of the 
impacted homeowners. The bill would compel communities to get serious 
about addressing such problems.
    At the same time, the list of repeatedly flooded properties might 
also include apartment buildings, beach houses, or businesses where 
flood claim payments have never been and will likely never be directed 
into improvements to protect those structures from the next storm--even 
though such improvements might be possible.
    Pew supports The Repeatedly Flooded Communities Preparation Act, 
and we are hopeful that the Committee will include it in its 
reauthorization legislation. In our view, this proposal recognizes the 
size and seriousness of the repeat loss problem but also recognizes the 
need for locality-by-locality solutions. It does not penalize the 
homeowner, who may or may not have any means of controlling the flood 
threat. It allows for multiple solutions. Overall, such legislation 
would foster thoughtful floodplain management and careful priority-
setting by local governments--very much in keeping with the original 
intent of the NFIP program.
Investment in Mitigation
    Pre-flood preparation, mitigation, and adaptation: To date, these 
have been the missing pieces of the NFIP puzzle--despite the fact that 
multiple studies have shown that mitigation pays for itself in the 
long-term.
    The most widely quoted of these studies comes from the National 
Institute of Building Sciences (NIBS) Multi-Hazard Mitigation Council, 
a panel of experts in fields related to the building sciences. This 
group has completed numerous reviews of mitigation projects of various 
types, concluding over and over that investments in mitigation save 
money and in some cases lives. \12\ These studies also show that the 
sooner mitigation actions are taken, the more the associated benefits 
will multiply. The amount of savings varies by type and by project, but 
overall, the numbers run in ranges from $2 in savings per mitigation 
dollar invested to as high as $11 saved per dollar invested.
---------------------------------------------------------------------------
     \12\ National Institute of Building Sciences Multihazard 
Mitigation Council, ``Natural Hazard Mitigation Saves: 2019 Report'', 
December 2019, https://www.nibs.org/page/mitigationsaves; and National 
Institute of Building Sciences Multihazard Mitigation Council, 
``Natural Hazard Mitigation Saves: Utilities and Transportation 
Infrastructure'', October 2018, https://www.nibs.org/resource/resmgr/
docs/NHMS-UtilitiesFactSheet.pdf.
---------------------------------------------------------------------------
    As you know, there are existing mitigation programs attached to the 
NFIP. The Flood Mitigation Assistance (FMA) program and the Increased 
Cost of Compliance (ICC) insurance riders have been helpful, and my 
colleagues at the Association of State Floodplain Managers have 
proposed an important expansion of the ICC program. Even if the ICC 
program is altered to become more generous to policyholders and even if 
the amounts appropriated for the FMA program increase to meet the full 
demand for yearly project applications, the Nation's huge mitigation 
gap would remain, however.
    That is why Pew sees the State Flood Mitigation Revolving Fund Act, 
a proposal from Senators Reed, Kennedy, and Menendez as a solid 
approach for expanding flood mitigation investment. It is a concept 
that is supported by over 120 national and local organizations from 
Florida to Minnesota to Texas to California. \13\
---------------------------------------------------------------------------
     \13\ The Pew Charitable Trusts, ``Pew Joins Organizations in 
Supporting Bill To Boost Flood Preparedness'', October 18, 2018, 
https://www.pewtrusts.org/en/research-and-analysis/speeches-and-
testimony/2018/10/08/pew-joins-organizations-in-supporting-bill-to-
boost-flood-preparedness.
---------------------------------------------------------------------------
    Modeled on the success of similar programs for wastewater treatment 
and drinking water, this approach would put a real emphasis on flood 
preparedness, allow the States to develop their own in-house 
institutional capacity in the field of mitigation, and help break the 
flood-damage-and-repair cycle that cripples so many communities.
    Under the proposal, the States, which already have good experience 
in managing revolving loan funds, will be able to evaluate needs across 
communities and set priorities. Some communities would be given loans--
to be repaid over time--rather than being faced with enormous ``repair 
bills'' that come due all at once following a storm. Other communities 
might need more assistance. Where incomes and economic circumstances 
dictate, States could offer grants rather than loans, and, as loan 
payments return or ``revolve'' back to the fund, more communities will 
be helped over time.
    Overall, we see this proposal as one that will save lives, 
livelihoods, and money, and we hope it will become a central feature of 
the NFIP reauthorization this Committee moves forward.
Equity and Social Vulnerability
    Related to the issues of premium affordability, but in many 
respects larger than that is the issue of equity and social 
vulnerability.
    As FEMA's Federal Advisory Council reminds us in their 2020 report 
to the Agency: ``[D]isasters disproportionately affect those who are 
already socio-economically marginalized in a community, subjecting them 
to even greater depths of poverty.'' \14\ Numerous studies provide 
evidence that disasters take a heavy toll on the well-being of those 
who are economically or otherwise disadvantaged--among them the 
elderly, the disabled, and those struggling to support their families. 
Without ready access to temporary housing or savings to repair homes 
and cars, many of these individuals will struggle for many months or 
years to recover from floods. Some will be permanently impacted. Many 
of you don't need to read the studies, for you've met those 
constituents as they sheltered in temporary housing, waited desperate 
for word of modest disaster assistance, or returned to homes with mold-
covered wallboard.
---------------------------------------------------------------------------
     \14\ Federal Emergency Management Agency, ``National Advisory 
Council Report to the FEMA Administrator'', November 2019, https://
www.fema.gov/sites/default/files/documents/fema-nac-report-11-2020.pdf.
---------------------------------------------------------------------------
    We know these most vulnerable families may be on your mind as 
consider how to reform the NFIP, and we believe there are opportunities 
to better serve these individuals and families through the insurance 
program.
    First and foremost, we would remind the Committee that the current 
insurance law does not appear to directly authorize FEMA to consider 
poverty levels or other social vulnerabilities in the administration of 
its programs. Creating a program for rate affordability based on income 
would alter that, but there may be other actions that Congress should 
consider as well--policies that could draw on the data being made 
available through the Centers for Disease Control and Prevention's 
Social Vulnerability Index, \15\ FEMA's own National Risk Index, \16\ 
or the Environmental Protection Agency's Environmental Justice 
Screening and Mapping Tool. \17\ Congress might consider authorizing, 
either permanently or on a pilot project basis, the use of these 
vulnerability factors in scoring or awarding of grants and technical 
assistance. We understand that the Reinsurance Association of America 
has also begun looking at overlays of disaster risk data and social 
vulnerability and is formulating ideas for promoting private 
investments into those areas most in need. Their proposals go beyond 
the issue of flooding but may be of interest as well.
---------------------------------------------------------------------------
     \15\ Agency for Toxic Substances and Disease Registry, ``CDC/ATSDR 
Social Vulnerability Index'', https://www.atsdr.cdc.gov/placeandhealth/
svi/index.html.
     \16\ Federal Emergency Management Agency, ``National Risk Index 
for Natural Hazards (NRI)'', https://www.fema.gov/flood-maps/products-
tools/national-risk-index.
     \17\ Environmental Protection Agency, ``EJSCREEN: Environmental 
Justice Screening and Mapping Tool'', https://www.epa.gov/ejscreen.
---------------------------------------------------------------------------
    The Committee might also delve into the extent to which current 
approaches to benefit-cost-analysis (BCA) may bias mitigation 
investment decisions against neighborhoods or homes of lower values; a 
reform bill may be able to shift considerations from property value to 
people, including equity and social vulnerability factors, for such 
evaluations.
    On this point, we would note that when it comes to property 
buyouts, it may not be the FEMA cost analyses that create a barrier for 
low-income residents. FEMA adjusted its procedures several years ago to 
allow for BCA waivers for cases in which a property is within the 
designated flood hazard zone and the appraised value of the home is 
below a certain level. \18\ The waiver policy was based on an analysis 
of 11,000 structures acquired or elevated, which found that the average 
benefits for each project type are $276,000 and $175,000 respectively. 
This change makes it easier for projects seeking to buy lower-value 
homes to be deemed cost-effective.
---------------------------------------------------------------------------
     \18\ FEMA, ``Memorandum to Regional Mitigation Division Directors 
Hazard Mitigation Assistance Branch Chiefs from David L. Miller, 
Associate Administrator, Federal Insurance and Mitigation 
Directorate'', undated, https://www.fema.gov/sites/default/files/2020-
04/fema-bca-pre-calculated-special-flood-hazard-area.pdf.
---------------------------------------------------------------------------
    The larger problem, however, occurs when a family is unable to 
accept a buyout offer because the appraised value of their home is not 
enough to enable them to find alternative, safe housing. To address 
this barrier, Congress might look to the buyout program run by the City 
of Austin, Texas or the State program used in North Carolina. In the 
case of Austin, the city works to help the flood-trapped lower-income 
families with procedures based on the Uniform Relocation Assistance and 
Real Property Acquisition Act (URA). \19\ URA provides for payments 
beyond appraised value in cases of mandatory buyouts. North Carolina 
has done something similar by providing localities with financing to 
help add funds to standard buyout offers in certain cases. \20\
---------------------------------------------------------------------------
     \19\ City of Austin, Office of the City Auditor, ``Audit Report: 
Flood Buyout Program'', February 2017, http://www.austintexas.gov/
edims/document.cfm?id=271149.
     \20\ North Carolina Department of Public Safety, ``State Awards 
Supplements to Local Governments for Buyout of Properties Flooded by 
Hurricane Matthew'', October 15, 2019, https://www.ncdps.gov/news/
press-releases/2019/10/15/state-awards-supplements-local-governments-
buyout-properties%C2%A0flooded.
---------------------------------------------------------------------------
Looking Forward
    Touching again on issues of mapping, I will finish by asking you to 
look to the future, pressing the Agency to change the program not only 
to supplement our current depictions of flood risk but also to promote 
floodplain management solutions that will result in lasting protection.
    Though it can flood just about anywhere, the Federal Government 
long ago opted to use the line associated with a certain statistical 
construct of a flood--the imaginary 1-percent-annual-chance or 100-year 
flood--as the arbitrary marker of where flood insurance is required and 
where it is not.
    As a statistical calculation, this line is drawn from data observed 
in past events, so it has been criticized as unduly optimistic and 
worthless in the face of possible climate change impacts. Indeed, it 
has been widely misinterpreted as the indicator of safe and not safe, 
though it is not. But, if an arbitrary line is needed to look at a 
single year's flood insurance policies, this line can, perhaps, serve 
that purpose.
    The trouble we have been creating for ourselves, however, is that 
we use the very same line to make decisions with consequences that run 
much longer than a single year. The NFIP asks local communities to 
evaluate the potential flood impacts only for those activities that 
fall within that arbitrary 100-year line--a line that will undoubtedly 
move in the future. Though many structures will likely stand for 
decades if not centuries, we still make siting and building decisions 
based on this line that offers no real glimpse of the future.
    We would ask the Members of this Committee to examine how the NFIP 
program might be changed to make better, more forward-looking 
decisions, how FEMA can be directed to provide communities with data 
and tools that tell a more nuanced story of evolving flood risk, and of 
how the program's basic land use regulations might be changed to 
consider and account for future risks. On this point, we would note 
that the Association of State Floodplain Managers and the Natural 
Resources Defense Council have a petition before FEMA that argues for 
changes to the long-standing and grossly outdated NFIP regulations on 
floodplain management. We applaud our colleagues for pressing this 
point, and we are hopeful that the Agency will engage in a 
comprehensive review of possible improvements.
    In closing, I again thank the Committee for the opportunity to 
testify and for allowing The Pew Charitable Trusts to be a part of this 
important discussion. We look forward to working with all the Members 
of the Committee to improve and sustain the Nation Flood Insurance 
Program.
                                 ______
                                 
             PREPARED STATEMENT OF REBECCA KAGAN STERNHELL
           Director, New York City Office of Federal Affairs
                              May 18, 2021
    Chair Brown, Ranking Member Toomey, and other Members of the 
Committee, on behalf of the Mayor and the 8.6 million NYC residents, I 
thank you for having me here today to discuss the National Flood 
Insurance Program (NFIP) and its role in communities like New York City 
(NYC).
    My goal today is to present a community perspective, one based on 
experience as a local government official and direct feedback from 
constituents. NYC has more than 520 miles of coastlines and riverbanks. 
Like so many other States and communities throughout this country, our 
riverbanks and coasts hold a dangerous beauty we must grapple with. The 
advent of sea level rise and rapid climate change is forcing us to 
reckon with our relationship to the water and the cities and 
communities we have developed next to it.
    The Federal Government has a range of tools at its disposal to help 
manage flood, from macro solutions like large-scale resiliency projects 
to the more micro like the NFIP. The NFIP is a lifeline for property 
owners after a flooding event that can mean the difference between 
recovery and the loss of a critical asset.
    Given the stakes the program has for so many, I want to focus your 
attention on four key areas as the reauthorization of NFIP is 
contemplated: affordability, mitigation, mapping, and other program 
alternatives.
Affordability
    Flood Insurance affordability is already a large problem for 
households across the country as premiums continue to increase year 
over year. The challenge of affordability will only grow as climate 
change increases the intensity and frequency of flooding. For example, 
NYC's commissioned 2017 RAND \1\ Study on flood insurance affordability 
found that flood insurance is a financial burden for 25 percent of 
owner-occupied households in the City, and for nearly two-thirds of 
extremely low-income households.
---------------------------------------------------------------------------
     \1\ https://www.rand.org/pubs/research_reports/RR1776.html, p. 27
---------------------------------------------------------------------------
    The COVID-19 pandemic has added an additional layer of complexity 
to the issue as millions of Americans lost their jobs, saw incomes 
reduced, and struggled to pay mortgages and rents. Though we are at the 
long awaited moment of the pandemic seemingly coming under control and 
the country opening back up, millions of Americans will now face 
staggering rent and mortgage arrears on top of existing mandatory 
expenses like insurance.
    Further complicating matter is a program FEMA has recently 
undertaken to reform how rates are calculated ostensibly to better 
reflect risk based on a series of public and proprietary tools--``Risk 
Rating 2.0.'' This policy has recently been rebranded as ``Equity in 
Action'' but is anything but equitable. As it is currently designed, it 
will overhaul how premiums are calculated, causing flood insurance 
costs to skyrocket in many areas around the country, including in New 
York City's coastal neighborhoods. Many of these neighborhoods are 
among our last bastions of affordable home ownership, especially for 
communities that continue to experience the damaging legacies of racist 
redlining policies.
    These rapidly rising premiums will force thousands to make the 
impossible choice between abandoning their insurance policies or 
cutting back on household necessities like food, utility payments, and 
school supplies, or even abandoning their homes altogether. That could 
trigger a Government-made foreclosure crisis in communities where many 
are already struggling to make ends meet especially after the COVID-19 
pandemic.
    The City urges Congress to ensure flood insurance remains 
affordable for the most vulnerable, by establishing means-tested 
financial assistance for the households that need it most; and 
providing grants for low- and middle-income households to allow them to 
retrofit their homes to decrease their vulnerability to flood risk.
    The RAND report offers an instructive look at how an affordability 
program could be modeled. To start, RAND looked at what 
``affordability'' meant, noting that, ``[f]lood insurance adds to the 
cost of owning a home, and we frame the discussion of flood insurance 
affordability in terms of the ratio of home ownership costs to 
household income.'' \2\ From this, the report utilized a metric called 
a PITI ratio (a ratio of mortgage principal and interest, property 
taxes, and property insurance (PITI) payments to income), that looked 
at the cost of owning a given home, not merely property value or income 
alone. This tool enabled researchers to see what small changes could 
affect the ability of a person to stay in their home, whether it was a 
mandatory rate increase or even just additional fees.
---------------------------------------------------------------------------
     \2\ Ibid. at 23.
---------------------------------------------------------------------------
    The City believes this type of metric offers an opportunity to set 
national policy that is sufficiently sensitive to local and 
individualized conditions. Other options that utilize a percentage of 
AMI alone are too limiting. Though AMI is set to regional conditions, 
it is not honed enough; take for instance Manhattan and Brownsville in 
the same NYC AMI, or Center City and Fairhill in the same Philadelphia 
AMI. Moreover, using a metric of gross income ignores the reality of 
people's lives and unavoidable expenses like--taxes, mortgages, 
commuting expenses, homeowner's insurance, dependents and children--
children are expensive.
    The PITI ratio doesn't utilize all of these but it does provide a 
more nuanced look at ``ability to pay'' for the purposes of premium 
reduction affordability programs and grants for mitigation.
    The City strongly supports rate reductions and grants to help 
address affordability over loans. While loans are often discussed to 
help homeowners cover the cost of mitigation investments, they remain a 
relatively unviable option for low- to middle-income households. 
Setting aside the ability to qualify for a loan, many low- to middle-
income households will find even at 0 percent interest, loan repayments 
are out of reach and savings from mitigation activity will not be 
realized until after the loan is repaid.
    The chart below illustrates some of the challenges with loans using 
a high NFIP premium--$3,000, the national average for FY18--$900, and 
the average for New York State for FY18--$1,150. We assume a modest 
$20,000 10-year 0 percent interest loan \3\ for home elevation which 
would yield meaningful (50 percent+) NFIP premium savings. We also 
assume 8 percent annual NFIP premium increases. Even though there is no 
interest on the loan and the homeowner successfully lowered their flood 
insurance premium through the work, the homeowner is still responsible 
for paying back the same amount or more than what was already deemed to 
be unaffordable to them.
---------------------------------------------------------------------------
     \3\ According to various home improvement sites, the cost of 
elevating a home ranges from $20,000-$100,000.


Mitigation
    The availability of a range of mitigation options is key to 
affordability puzzle. It also, by definition, buys down risk for the 
property owner and to the NFIP.
    Currently, the NFIP provides few incentives for property owners to 
protect their buildings from flood damage and reduce their premiums, 
other than by elevating their buildings. While that option may be 
possible for some structures--it simply is not feasible in many areas 
of New York City and other dense urban environments. According to the 
RAND Study, 39 percent of buildings in the City's high-risk flood zones 
face impediments to elevation because they are on narrow lots or are 
attached buildings. Past efforts at pushing FEMA to identify mitigation 
alternatives to elevation have yielded limited results. The City 
believes that more needs to be done and supports provisions on urban 
mitigation alternatives in the current House reauthorization bill by 
Chair Waters.
    To best evaluate these alternatives, FEMA and the public need to 
see where the drivers of loss are. Congress should mandate that FEMA 
collect data on the extent to which major items (i.e., boilers, HVAC 
systems) are driving losses to better target mitigation approaches for 
property owners. The current small premium reduction for elevating 
mechanical items above the Base Flood Elevation may undervalue its 
mitigation effect. In addition, other factors such as the type of 
construction (e.g., brick compared to wood, attached compared to 
detached, etc.) can play a significant role in whether a structure will 
suffer catastrophic or lesser damage, but the extent to which these 
factors may influence premiums under the new rating system remain is 
unknown despite their importance.
    Furthermore, there are currently no options for homeowners with an 
X-zone policy who are ineligible for a Preferred Risk Policy (PRP) to 
reduce their premiums through mitigation. Since flood risk is growing 
in these areas due to climate change, FEMA should provide rating 
options for homeowners in these areas who invest in mitigation to help 
encourage expanded flood insurance uptake in the X-zone.
Community Level
    Community level mitigation is also a critical part of lowering 
program costs and achieving greater affordability at scale. Two core 
elements of this are funding for infrastructure measures and changes to 
floodplain management practices.
    NFIP and FEMA programs like BRIC, should fund projects that will 
increase the resiliency of American communities to the impacts of 
climate change. Funding should be allocated for coastal and riverine 
flood prevention infrastructure, and interior drainage system upgrades. 
In particular, investments in both large- and small-scale coastal 
protection projects (i.e., floodwalls, levees, gates, berms, road 
raisings, tide gates) and associated interior drainage system upgrades 
are needed. Additionally, coastal areas would benefit from resiliently 
reconstructed waterfront infrastructure such as bulkheads, esplanades 
and wharfs as well as new coastal resiliency projects that use nature-
based features, such as dunes, wetlands, and living breakwaters.
    Federal support of ``Resilient Design'' that anticipates future 
risks in new construction and substantial rehabilitations of buildings 
and infrastructure can go a long way in avoiding catastrophic loss. New 
York City is doing its part at the local level by reforming our zoning 
code to facilitate floodproof construction and by embedding a climate 
risk screen into all city capital projects with Climate Resiliency 
Design Guidelines.
    Since Hurricane Sandy in 2012, NYC has repeatedly increased 
required flood protection levels in Appendix G of the building code. 
These strategic changes help ensure that new buildings and major 
renovations are better prepared to withstand extreme flood events. 
Simultaneously, NYC has developed Climate Resiliency Design Guidelines 
which provide an even higher standard of flood protection for City 
capital projects. These Guidelines go beyond building codes by using 
sea level rise predictions, the useful life of the structure, and maps 
of future flood risk to calculate building-specific resilient design 
criteria. The Guidelines were recently made mandatory through local 
legislation for all public buildings and infrastructure, and this law 
will help ensure that NYC's investments in public services are designed 
to withstand flooding and sea level rise for decades to come.
    Just this past week the City passed new zoning rules tied to flood 
risk mitigation. The goal of the Zoning for Coastal Flood Resiliency 
(ZCFR) is to help buildings better withstand and recover from major 
disasters and sea level rise, which could lead to lower insurance 
costs.
    Briefly, the ZCFR updates, improves, and makes permanent the 
emergency rules established in the wake of Superstorm Sandy. New and 
substantially rehabbed buildings in areas of the City that, by 2050, 
are expected to have a 1 percent chance of a flood event in any given 
year, are now permitted to meet or exceed flood-resistant construction 
standards set by the FEMA or NYC's Building Code.
    ZCFR lets buildings elevate or relocate important mechanical, 
electrical and plumbing equipment, or backup systems like generators, 
above the expected height of floodwaters. This can be done either 
within the building, atop of the structure, or on a separate platform. 
For example, a NYCHA complex in Lower Manhattan can construct an 
elevated mechanical building in its yard to address the needs of the 
campus while keeping equipment out of the path of damaging floodwaters.
    In addition to ZCFR, the City has undertaken specific ``Resilient 
Neighborhood'' actions to further limit flood risk in three 
neighborhoods, including:

    In Gerritsen Beach, the establishment of a new Special 
        Coastal Risk District, limiting future density and capping 
        building heights at 25 feet above the potential height of 
        floodwaters to more closely match the area's built character.

    In Old Howard Beach, zoning changes limit the construction 
        of attached homes, which are harder to retrofit and elevate 
        than detached homes because of their shared walls.
Mapping
Rate Maps
    FEMA's flood maps are a snapshot in time. Development of the maps 
is currently a long process; and given the impacts of sea level from 
climate change, many maps are often outdated by the time they are 
finalized and adopted. Prior to the Preliminary FIRMs for NYC issued in 
December 2013, the City's flood maps had not been updated since they 
were first created in 1983. These outdated maps left many New Yorkers 
in the dark about their flood risk. At the time of Hurricane Sandy many 
NYC residents outside of the SFHA were unaware of the true flood risk 
to their property and therefore did not have an NFIP policy to help 
recover.
    NYC ultimately appealed and won an appeal to Preliminary flood maps 
that FEMA released after Sandy due to modeling errors. Technical and 
process improvements are required to better map and reflect flood risk, 
including more regular map updates; and the use of more sophisticated 
modeling that better represents and communicates flood risk. As a 
result of the appeal, FEMA is updating the maps with more precise data 
and information. New preliminary flood maps, however, are not 
anticipated to be completed until 2024--41 years after our first maps.
    As you think through the program going forward, we ask you to 
consider the role of maps and zones, especially if Risk Rating 2.0 is 
to become to be the metric by which rates are set.
    Up until now zones have been critical for setting rates--but Risk 
Rating 2.0 rates are NOT based on zones, although the NFIP purchase 
requirements ARE based on zones. In effect there is a general metric 
telling a property owner they must carry a policy, however the rate 
they pay on that policy is not tied to that metric. This approach risks 
causing considerable confusion for residents about what the flood risk 
to their home actually is. The role of zones in the NFIP must be 
carefully thought out to ensure clear communication and limit confusion 
about a home's flood risk.
Future Flood Risk maps
    Apart from the flood zone (potentially rate) maps, NYC, in 
partnership with FEMA, is soon to begin modeling future flood risk 
citywide for the 2050s, 2080s, and 2100. This effort will produce flood 
maps and the forward-looking time scales that planners and designers 
need, so that zoning and construction today are informed by our best 
understanding of future conditions that our built environment needs to 
be ready to withstand; this innovative project will not only provide 
New Yorkers with a new, necessary tool for resilient design, but will 
also provide a model that can be replicated elsewhere around the 
country.
Program Alternatives
    Disclosures Congress should develop policy that encourages States 
to develop clear and transparent disclosure requirements in real estate 
around flood risk. Currently many property owners lack meaningful 
information about their flood insurance requirements and flood risk. 
Households considering their next purchase or rental should be aware of 
risk and cost implications they may face from flooding before closing 
on a property. Status within the NFIP is tied to the property, not an 
owner. Thus, it is also important to know a property's claim history 
when purchasing a home regardless of its location in a SFHA or not. To 
better facilitate information flow, Congress should require the NFIP to 
share a property's ``file'' that includes coverage dates and claim 
dates and amounts, stripped of any PII, to purchasers with accepted 
bona fide offers to purchase a property. This will allow potential 
property owners to access full information about a property, including 
potential additional cost related to insurance or mitigation.
Increased Cost of Compliance
    Increased Cost of Compliance (ICC) coverage, currently included in 
standard NFIP policies, allows for up to $30,000 to bring a building 
into compliance with floodplain management codes. $30,000 is not enough 
in most cases to come fully up to code or to a more resilient standard 
than the minimum requirements. Though supply chains are expected to 
eventually normalize, the current hitches in supply chains for 
construction materials have driven up costs dramatically. We recommend 
incrementally increasing ICC from $30,000 to $100,000, with an option 
for the policy holder to purchase more coverage.
    In addition to increasing the amount of ICC, Congress should also 
expand eligibility for ICC or ensure FEMA uses extant authorities. 
Specifically, ICC is the only mitigation assistance available directly 
to homeowners, but it is only made available after a flood loss for 
substantially damaged or repetitive loss properties. The City proposes 
allowing ICC to `intervene' before the property is designated a 
repetitive/severe repetitive loss property. In doing the program 
transforms a liability into an asset, by converting the property to low 
risk immediately. Congress should expand mitigation approaches other 
than elevation and expand ICC eligibility into properties moving into 
Severe Repetitive Loss status (i.e., filing their 4th claim of 
>$5,000).
Definitions
    The designation of a property as Severe Repetitive Loss has 
significant implications for property owners and communities. The 
current definition of a severe repetitive loss property (SRP) is one 
based on the number (4+) and value ($5,000+) of claims for a property. 
The notable variable missing from this definition is time. There is no 
time horizon over which these 4 claims need to occur, meaning a 
property can be deemed high risk despite not actually costing the NFIP 
much in claims. It is not hard to conceive of a property that had 2 
modest $5,000 claims in the 1970s, one in the early 2000s, and another 
in 2021. Despite the fact that this property isn't perpetually 
flooding, NFIP characterizes this home as severe repetitive loss and 
imposes higher rates, which given the nature of these designations is 
handed down from property owner to property owner
    Time needs to be added to the SRP equation. The current SRP 
definition is too narrow and too easily triggered, especially with the 
limited options for all properties to reduce risk and premiums. The 
definition should be reserved for the most at risk properties that are 
truly experiencing repeated catastrophic loses.
FEMA Grant Funding
    Reforms are needed for FEMA's Hazard Mitigation Assistance (HMA) 
grant program so these grants have more flexible and predictable 
requirements and spending caps to allow local governments to work with 
property owners in identify flood mitigation strategies, such as 
buyouts that meet the needs of the owner and community.
    Spending caps for both elevation and acquisition are typically well 
below the cost it takes to elevate a home or purchase a property in 
NYC. Additionally, the grants do not currently allow for funding to 
spent on a household's relocation expenses. We recommend that the FMA 
grant for acquisition of a residential property for purposes of flood 
mitigation be expanded to support ``reasonable out-of-pocket expenses'' 
for household relocation and rehousing. Consistent with the Uniform 
Relocation Act (24 CFR 578.83), reasonable relocation costs include 
but are not limited to: moving cost expenses, temporary rental or home 
ownership assistance based on the market value of a ``comparable 
replacement dwelling,'' closing cost reimbursement and transfer taxes, 
and legal and housing counseling services necessary to support 
relocation, particularly for low- and moderate-income households.
    The grant process must also be made more flexible. Currently 
communities are required to submit a list of properties at the time of 
application. This requires each community to maintain a preexisting 
list of interested property owners, posing several challenges: (1) FEMA 
grant funding is not guaranteed so it could be years before the 
mitigation is funded and the ownership of the property may have 
changed; (2) difficult to garner property owner interest when it's 
unclear when there will be funding and what will be funded.
WYOs Claims and Compensation
    Recognizing FEMA has begun to address concerns about claim payments 
and claims reviews by adjusters with the NFIP Transformation Task 
Force, the City still sees room for a more consumer-oriented approach 
to claims review. Including restricting the use of outside technical 
reports by WYO companies in the claims process and ensuring that final 
reports are prepared in accordance with local, State, and Federal laws. 
The City supports Nydia Velazquez's (NY-7) reauthorization legislation 
that ensures there is a focus on the flood survivor, by requiring 
protections for policyholders, such as a clear appeal process with the 
requirement that FEMA provide appeal determination in writing to the 
policyholder and limit final claim determinations to a set timeframe.
    Relatedly, as the City is concerned about flood insurance 
affordability and the solvency of the NFIP, the City strongly urges 
FEMA to pursue the most accurate payment model for WYOs. WYO's are a 
key player in increasing NFIP coverage, but they also benefit from not 
underwriting any of the actual risk. Accordingly, the City feels the 
WYO compensation should be right-sized to actual expenses. Where it 
might be understandable for an agent to receive a 30 percent commission 
for the year they issue the policy, subsequent year renewals do not 
require the same customer acquisition costs or property evaluations. 
Because of the financial condition of the NFIP, we encourage Congress 
to look at the current compensation structure to ensure it aligns with 
actual work on policy issuance.
    Thank you again for having me here today and I look forward to 
answering your questions.
                                 ______
                                 
                  PREPARED STATEMENT OF STEPHEN ELLIS
                 President, Taxpayers for Common Sense
                              May 18, 2021
    Good morning, Chairman Brown, Ranking Member Toomey, Members of the 
Banking Committee. I am Steve Ellis, President of Taxpayers for Common 
Sense (TCS), a national nonpartisan budget watchdog. Thank you for 
inviting me to testify at this hearing on reauthorizing the National 
Flood Insurance Program (NFIP). TCS has worked on flood and disaster 
related issues on behalf of taxpayers for our entire 26 years of 
existence and I've been involved in flood issues dating back to my days 
as a young Coast Guard officer dealing with the aftermath of the Great 
Midwest Flood of 1993. These are critical issues for taxpayers and the 
country needs smart public policy that protects people and property.
    The timing of this hearing is notable considering the first named 
storm of the extremely active 2020 Atlantic hurricane season appeared 
on May 16th. The year included a total of 30 named storms, a record. 
This was on the heels of years of increasing billion-dollar disasters. 
The Congressional Budget Office estimates that hurricane winds and 
storm-related funding cost the U.S. economy $54 billion annually 
including $34 billion in expected annual economic losses to the 
residential sector. The expected annual cost to Federal taxpayers is 
estimated to be $17 billion. \1\
---------------------------------------------------------------------------
     \1\ Congressional Budget Office. ``Expected Costs of Damage From 
Hurricane Winds and Storm-Related Flooding'', April 2019. https://
www.cbo.gov/system/files/2019-04/55019-ExpectedCostsFromWindStorm.pdf
---------------------------------------------------------------------------
    Taxpayers for Common Sense is allied with SmarterSafer, a coalition 
in favor of promoting public safety through fiscally sound, 
environmentally responsible approaches to natural catastrophe policy. 
The groups involved represent a broad set of interests, from free 
market and taxpayer groups, to consumer and housing advocates, to 
environmental and insurance industry groups.
    For more than a decade the coalition has advocated reforms to 
Federal disaster policy and in the National Flood Insurance Program 
that ensure the program is smarter and safer for those in harm's way, 
the environment, and for Federal taxpayers.
    Federal floodplain policy and management has enabled unwise 
development that ironically contributes to catastrophic events. For 
instance, the flood insurance program subsidizes construction in risk- 
and disaster-prone areas, making it economically ``safe'' to build in 
medium- and high-risk areas by removing the costs of such decision-
making. Before Hurricane Katrina in 2005, the Federal flood insurance 
program never borrowed more than $1.5 billion from the U.S. Treasury 
and loans were repaid with interest. Since the 2005 storms, the program 
has borrowed more than $35 billion.
    One other truism of disasters is that they have a disproportionate 
impact on poor and minority populations. In many cases these 
individuals don't have savings to rely on while they rebuild, they may 
have lost their transportation to work, and their place of business may 
have been destroyed as well. Because of historically discriminatory 
policies or a need for lower housing costs, these individuals are often 
situated in less desirable, more vulnerable, higher risk areas. They 
may not be able to repay loans made available after disasters or 
provide sufficient funds of their own to tap Federal programs.
    On a cost-adjusted basis, billion-dollar disasters in the U.S. have 
increased from 2.9 per year at an average cost of $17.8 billion in the 
1980s to 16.2 disasters per year at an average annual cost of $121.4 
billion from 2016-2020. \2\ The Congressional Budget Office puts it 
rather succinctly, ``Climate change increases Federal budget 
deficits.'' And that, ``Investment by the Government or others in 
various types of mitigation or adaptation efforts could reduce the 
costs of climate change.'' \3\
---------------------------------------------------------------------------
     \2\ National Oceanic and Atmospheric Administration National 
Centers for Environmental Information. ``U.S. Billion-Dollar Weather 
and Climate Disasters (2021)'', https://www.ncdc.noaa.gov/billions/.
     \3\ Congressional Budget Office. ``Budgetary Effects of Climate 
Change and of Potential Legislative Responses to It'', April 27, 2021. 
https://www.cbo.gov/publication/57019.
---------------------------------------------------------------------------
    While it varies by situation and peril, we know that every dollar 
spent on mitigation can save as much as $6 or more in post-disaster 
response. \4\
---------------------------------------------------------------------------
     \4\ National Institute for Building Sciences. ``Mitigation Saves: 
Mitigation Saves Up to $13 for Every $1 Invested'', 2021. nibs.org/
files/pdfs/ms-v4-overview.pdf
---------------------------------------------------------------------------
NFIP
    It is important to understand the context of how the Nation got 
into the flood insurance business. After years of ad hoc disaster aid 
being meted out by Congress, the NFIP was established in 1968 to create 
``a reasonable method of sharing the risk of flood losses through a 
program of flood insurance which can complement and encourage 
preventative and protective measures.'' \5\ The program was to make up 
for a perceived lack of available flood insurance. But even at that 
time Congress was warned that it was playing with fire. The 
Presidential Task Force on Federal Flood Control Policy wrote in 1966:
---------------------------------------------------------------------------
     \5\ P.L. 90-448
---------------------------------------------------------------------------
    A flood insurance program is a tool that should be used expertly or 
not at all. Correctly applied it could promote wise use of flood 
plains. Incorrectly applied, it could exacerbate the whole problem of 
flood losses. For the Federal Government to subsidize low premium 
disaster insurance or provide insurance in which premiums are not 
proportionate to risk would be to invite economic waste of great 
magnitude. \6\
---------------------------------------------------------------------------
     \6\ U.S. Task Force on Federal Flood Control Policy. ``A Unified 
National Program for Managing Flood Losses'', August 1966. P 17. http:/
/www.loc.gov/law/find/hearings/floods/floods89-465.pdf
---------------------------------------------------------------------------
    For 50 years, the flood insurance program has helped fuel a 
development boom in high-risk areas simply by making it more affordable 
to take on flood risk. And housing doesn't occur in a vacuum. As areas 
develop infrastructure follows with roads, bridges, water, electric, 
and sewer; these all intensify along with residential development. The 
NFIP has exacerbated exposure to climate change. At the same time, it 
is negatively impacted by it. As storms increase in frequency, as sea 
levels rise, this increases the costs to the program. It also increases 
demand for disaster spending.
    In a little over 15 years, NFIP has been forced to borrow nearly 
$40 billion from taxpayers to pay off claims, so I think it's pretty 
clear that this ``tool'' was not used expertly and that the waste issue 
has come to fruition.
    NFIP has subsidized rates in the program virtually since its 
inception, regardless of need. FEMA estimates more than 25 percent of 
properties in the program pay subsidized or ``grandfathered'' rates, 
where the flood zone designation has changed. \7\ Even with the 
properties that are paying supposedly risk-based premiums, the fact 
that the program can borrow from the Treasury is a built-in subsidy. 
The Government Accountability Office (GAO) has documented large cross-
subsidies, many of which benefit high-income homeowners. \8\ They found 
that over 78 percent of subsidized properties in NFIP are located in 
counties with the highest home values (the top three deciles), while 
only 5 percent of subsidized properties are in counties with the lowest 
home values (the bottom five deciles). \9\ This represents a real 
challenge to the program's sustainability. To help address this, 
grandfathering should not be allowed for any new construction in the 
floodplain.
---------------------------------------------------------------------------
     \7\ Congressional Research Service. ``National Flood Insurance 
Program: The Current Rating Structure and Risk Rating 2.0'', January 
25, 2021. https://fas.org/sgp/crs/homesec/R45999.pdf
     \8\ Government Accountability Office. ``Flood Insurance: More 
Information Needed on Subsidized Policies'', July 2013.
     \9\ U.S. Government Accountability Office. July 2013. ``Flood 
Insurance: More Information Needed on Subsidized Properties''. 
(Publication No. GAO-13-607). Retrieved from: http://www.gao.gov/
assets/660/655734.pdf.
---------------------------------------------------------------------------
    The best way to reduce the rate--for property owners and 
taxpayers--is to reduce the risk. It's not about artificial rate caps 
that hide the real risk to people, but about finding ways to fund 
mitigation either at the property level or at the community level. If a 
property owner is unable to afford the premium, means-tested assistance 
outside the rate structure should be provided.
    We have long called for means-tested premium assistance to help 
more homeowners obtain flood insurance while shifting away from 
property-based subsidies. There are a little more than 5 million NFIP 
policies, but there are well over 100 million housing units. To put the 
need for flood insurance into perspective, according to FEMA, after 
2016's extraordinary heavy rainfall event in Baton Rouge, the average 
homeowner with flood insurance coverage got $86,500 to rebuild their 
home, the average person without flood insurance got only $9,100 in 
individual disaster assistance. \10\
---------------------------------------------------------------------------
     \10\ Taxpayers for Common Sense. ``Weekly Wastebasket: Another 
Hurricane Season Begins'', June 1, 2018. https://www.taxpayer.net/
infrastructure/another-hurricane-season-begins/
---------------------------------------------------------------------------
    This sadly demonstrates that many people who aren't required to buy 
flood insurance should. Even with protection from levees, floodwalls, 
or dams, there is a residual level of risk of flooding.
    We strongly urge the Banking Committee to enact a 5-year 
reauthorization of the NFIP in order to get past the annual or even 
monthly fights.
    However, there are several things not to do in reauthorization--
such as a number of provisions that have been contemplated in a 
partisan discussion draft in the other chamber. These include a 
proposed repeal of the surcharge imposed by Grimm-Waters--a surcharge 
that was implemented to pay for the repeal of elements of Biggert-
Waters. Without offsets for this repeal, more NFIP costs will be borne 
by taxpayers. This legislation also envisions halving of the cap on 
premium increases intended to bring some policyholders rates closer in 
line to their risk, which is also a step backward. It would go from 18 
percent to 9 percent. Further the legislation redefines average 
historical loss year to exclude catastrophic loss years and 
misrepresent the true costs of the program. The average historical loss 
year is used to set premiums in an effort to try to ensure they help 
offset costs to taxpayers. Excluding catastrophic loss years does not 
eliminate past floods or their costs on communities and taxpayers. The 
House draft also waves the magic debt-cancelation wand without even 
reducing the $30 billion borrowing limit--a ridiculously high amount.
    As the Committee knows, FEMA has launched a new effort to better 
price actual risk for properties. The new program, Risk Rating 2.0, is 
supposed to start for new properties and policies in October and for 
existing policyholders next year. According to FEMA, they worked with 
public, private, and nonprofit organizations to incorporate more data 
and flood variables to determine actual risk to properties, and it will 
be updated annually. In theory, this will reduce some of the cross-
subsidies that have plagued the program. In addition, FEMA predicts 
that 23 percent of policyholders will see an average decrease of $86 a 
month and 66 percent will see an increase of less than ten dollars and 
another 7 percent an increase of less than $20 per month. Four percent 
will see an increase of more than $20 per month, but those are for high 
value homes in high-risk areas. This adheres to the existing rate caps. 
\11\
---------------------------------------------------------------------------
     \11\ Federal Emergency Management Agency. ``Risk Rating 2.0 is 
Equity in Action'', https://www.fema.gov/sites/default/files/documents/
fema-rr-2.0-equity-action-0.pdf.
---------------------------------------------------------------------------
    This move to Risk Rating 2.0 coincides with long overdue updates to 
mapping efforts. It goes without saying that there have been enormous 
technological advancements in mapping and modeling since the program's 
inception 50 years ago. More advanced technology such LiDAR, 3D 
mapping, and computing power enable much more accurate and predictive 
maps than what have been in use to date.
    Speaking of additional data, FEMA's National Risk Index coupled 
with other data can be used to target mitigation funds to communities 
and property most at risk and most in need of assistance. By targeting 
this way, Federal funds and assistance from a range of agencies and 
programs can be used with an even greater return on investment and risk 
reduction than otherwise.
Conclusion
    I want to thank you for inviting me to testify today. NFIP and 
related disasters are critical issues not just for their budget and 
taxpayer impacts, but for society as a whole. Federal policies must 
better promote realistic and responsible solutions to climate change 
including targeted investments that lift innovative solutions and 
reflect the needs and experiences of low-income and minority 
communities. The goal must be to develop risk management and mitigation 
strategies that enable communities, infrastructure, and industries to 
become more resilient, face less risk, and can better adapt to and 
mitigate future costs and damages of climate change.
    To that end, I urge the Senate Banking Committee to pursue 
solutions to these issues in a bipartisan manner as has been done in 
the recent past. In countless areas across Government, this has proved 
to be the only method to achieve durable and lasting solutions to our 
challenges. Thank you again, and I'm happy to answer any questions you 
might have.
                                 ______
                                 
                   PREPARED STATEMENT OF R.J. LEHMANN
   Senior Fellow and Editor-in-Chief, International Center for Law & 
                               Economics
                              May 18, 2021
    Chairman Brown, Ranking Member Toomey, and Members of the 
Committee, my name is R.J. Lehmann, and I am a Senior Fellow with and 
Editor-in-Chief of the International Center for Law & Economics. ICLE 
is a nonprofit, nonpartisan research center that promotes the use of 
law and economics methodologies to inform public policy debates. 
Working with a roster of more than 50 academic affiliates and research 
centers from around the globe, we develop and disseminate academic 
output to build the intellectual foundation for rigorous, economically 
grounded policy.
    I have been an active observer of the challenges facing the 
National Flood Insurance Program (NFIP) for 18 years. In my former life 
as a business journalist, I was from 2003 to 2011 the Washington bureau 
chief of two major trade publications covering the business of 
insurance. That stint included covering the 2004 and 2008 NFIP 
reauthorization debates and, of course, the devastating impact of 
Hurricane Katrina in 2005. In 2012, I cofounded the R Street Institute, 
where I remained until joining ICLE 6 months ago. Among my duties at R 
Street was running the Institute's insurance policy research program, 
and I made NFIP reform a major part of my research focus.
    I thank the Committee for conducting this hearing, its first in 4 
years on the topic of NFIP reauthorization. It has been nearly a decade 
since Congress last approved a long-term reauthorization of the NFIP. 
The program remains in need of structural reform, and the series of 
short-term extensions on which it has relied for the past 4 years 
leaves many parties--homeowners, business owners, builders, lenders, 
realtors, insurers, and insurance agents--without the clarity they need 
to make forward-looking decisions. One hopes Congress will be able to 
reach agreement this session on legislation that provides that clarity, 
while also making the adjustments needed to address the long-term 
challenges this program faces.
    The past year has given us all an up-close view of how Americans 
respond when faced with the realization of remote and nominally 
``unforeseen'' catastrophic risks. But, of course, the COVID-19 
pandemic was not unforeseen at all. Public health officials and 
catastrophe modelers have long known that a viral contagion of this 
sort was not only possible, but inevitable. The 1918 influenza pandemic 
was within the lifetime of some Americans. Much more recently, another 
H1N1 influenza spread as a pandemic in 2009; we were merely fortunate 
that it did not prove to be terribly deadly. And we have in recent 
years seen other coronaviruses like SARS and MERS reach epidemic levels 
abroad.
    Similarly, there is nothing unforeseen about the challenges facing 
the National Flood Insurance Program. It was established more than 50 
years ago to provide coverage that private insurers would not; to 
reduce the Nation's reliance on post-hoc disaster assistance; to 
provide incentives for communities to invest in mitigation; and to be 
self-sustaining.
    What is now clear is that the NFIP has not been--and, as currently 
structured, cannot be self-sustaining. Since Hurricane Katrina, the 
program has been forced to borrow nearly $40 billion from the U.S. 
Treasury. Reforms passed as part of the Biggert-Waters Flood Insurance 
Reform Act of 2012 were intended to place the program on a path toward 
long-term fiscal sustainability by phasing out explicit premium 
subsidies and shifting more risk to the private insurance, reinsurance, 
and capital markets. But some of those reforms were scaled back or 
repealed almost immediately in the Grimm-Waters Act, passed in 2014. 
And even with $16 billion of the program's debt erased by Congress in 
2017, the NFIP remains $20.5 billion in debt to U.S. taxpayers as of 
the first quarter of Fiscal Year 2021, \1\ with no feasible plan ever 
to repay that debt in full.
---------------------------------------------------------------------------
     \1\ ''The Watermark Fiscal Year 2021, First Quarter, Volume 13'', 
Federal Emergency Management Agency, p. 2. https://www.fema.gov/sites/
default/files/documents/fema-watermark-report-12-2020.pdf.
---------------------------------------------------------------------------
    Post-hoc disaster spending also continues to grow, with more than 
90 percent of all federally declared disasters involving floods. And 
while the program has provided incentives for mitigation, by making 
cheap flood insurance available, it also has played a role encouraging 
development in flood-prone and environmentally sensitive regions. 
Moreover, due to the looming threat of climate change--which we know 
will drive both rising sea levels and more frequent and more severe 
precipitation events--it is more crucial than ever that Congress 
address the NFIP's structural issues and the ways to correct its 
perverse incentives for where and how Americans live.
Structural Problems of the NFIP
    At its inception in 1968, the NFIP was not designed as a risk-based 
program. Property owners in participating communities were charged flat 
rates, irrespective of the level of flood risk their properties faced. 
That design was intentional, as the overarching goal was to encourage 
take-up, particularly by residents of the riskiest communities.
    Shortly thereafter, in 1973, the program was redesigned to account 
for risk with the introduction of Flood Insurance Rate Maps (FIRM) that 
assign properties to various risk-rated zones and assess premium rates 
commensurate with the flood risk faced by that zone. Federally related 
mortgages on homes in high-risk zones that face a greater than 1 
percent annual chance of flooding--also known as Special Flood Hazard 
Areas or 100-year flood zones--are required to purchase flood 
insurance.
    But exceptions to risk-based ratings were built into the FIRM 
process from early on. Properties that joined the program prior to the 
introduction of rate maps could continue to pay non-risk-based rates 
through what are known as ``subsidized'' policies, which historically 
were assessed rates that were only 45 percent of their true actuarial 
liability. \2\
---------------------------------------------------------------------------
     \2\ Bill Jones, ``Biggert-Waters Flood Insurance Reform Act of 
2012 Summary'', Nebraska Dept. of Natural Resources, February 2013. 
https://agriculture.ks.gov/docs/default-source/dwr-floodplains/summary-
of-the-biggert-waters-act.pdf?sfvrsn=ce3ffec1-0.
---------------------------------------------------------------------------
    Moreover, while the Federal Emergency Management Agency (FEMA) is 
required by statute to revise and update all its maps at least once 
every 5 years, mapping changes do not force rate changes for existing 
structures. These are treated as ``grandfathered'' properties, which 
continue to pay the rates assigned when their community joined the 
program or when its prior rate designation was finalized.
    As a result, the NFIP has always taken in less in policyholder 
premiums than actuarial assessments would recommend. In the years just 
prior to Biggert-Waters, from 2002 to 2013, the Government 
Accountability Office (GAO) estimates the program collected $11 billion 
to $17 billion less in premiums than was actuarially prudent. \3\
---------------------------------------------------------------------------
     \3\ ''Forgone Premiums Cannot Be Measured and FEMA Should Validate 
and Monitor Data System Changes'', Government Accountability Office, 
GAO-15-111, Dec. 11, 2014. https://www.gao.gov/products/GAO-15-111.
---------------------------------------------------------------------------
    Biggert-Waters and the subsequent Homeowner and Flood Insurance 
Affordability Act of 2014 (HFIAA) placed business properties and second 
homes on a glidepath toward actuarial rates, with annual premium 
increases that are capped at 25 percent, while rate increases on 
subsidized primary homes are capped at 15 percent. Biggert-Waters would 
have placed grandfathered properties on a glidepath to actuarial 
soundness with a rate cap of 20 percent, but HFIAA amended that 
provision such that it only takes effect if a grandfathered property's 
map changes again in the future. If it does, the grandfathered property 
would see rate increases that likewise would be capped at 15 percent.
    Were the NFIP actuarially sound, it would have the resources to 
sustainably administer the program--including marketing and claims-
adjustment expenses--and pay all expected claims that fall within the 
ordinary distribution of potential outcomes. But the NFIP would still 
experience--and in recent years, has experienced--outsized claims 
events like Hurricane Katrina, Superstorm Sandy, and Hurricane Harvey 
that fall in the tail end of the probability distribution. Indeed, 
those three events alone account for the overwhelming majority of the 
$40 billion the program has had to borrow since 2005.
    Since Hurricane Katrina, the NFIP has made $5.06 billion in 
interest payments to service its debt to the Treasury but has managed 
to repay just $2.8 billion of principle. It is, by all accounts, 
completely infeasible that it will ever repay its debt in full. Indeed, 
in 2017, the Congressional Budget Office (CBO) estimated that, under 
its existing structure, the NFIP is expected to post an average annual 
loss of $1.4 billion. \4\
---------------------------------------------------------------------------
     \4\ ''The National Flood Insurance Program: Financial Soundness 
and Affordability'', Congressional Budget Office, Sept. 1, 2017, p. 1. 
https://www.cbo.gov/publication/53028.
---------------------------------------------------------------------------
    That the program has proven structurally unsustainable was foreseen 
by its creators. In 1966, Lyndon Johnson's Presidential Task Force on 
Federal Flood Control Policy warned Congress that creating a Federal 
flood insurance program ``in which premiums are not proportionate to 
risk would be to invite economic waste of great magnitude.'' \5\
---------------------------------------------------------------------------
     \5\ Gary William Boulware, ``Public Policy Evaluation of the 
National Flood Insurance Program (NFIP)'', doctoral dissertation, 
University of Florida, December 2009, p. 14. https://ufdc.ufl.edu/
UFE0041081/00001.
---------------------------------------------------------------------------
    Congress could assess that the benefits to homeowners and business 
owners in flood-prone regions merit the cost of subsidies. Even if that 
were the determination, however, the program's existing structure 
largely functions not through express taxpayer subsidies, but by 
enabling cross-subsidies from inland NFIP policyholders to those in 
coastal regions. The CBO has found that 85 percent of NFIP properties 
exposed to coastal storm surge (properties classified as ``Zone V'') 
pay below full risk-based rates. Altogether, 69 percent of Zone V 
properties are grandfathered, 29 percent are subsidized, and 13 percent 
are both grandfathered and subsidized. \6\
---------------------------------------------------------------------------
     \6\ ''The National Flood Insurance Program: Financial Soundness 
and Affordability'', Congressional Budget Office, Sept. 1, 2017, p. 1. 
https://www.cbo.gov/publication/53028.
---------------------------------------------------------------------------
    In addition to subsidies flowing from inland policyholders to 
coastal policyholders, NFIP subsidies broadly flow from higher-income 
areas to lower-income areas. In 2013, the GAO reported that 29 percent 
of subsidized policies were in counties in the top decile of median 
household income and 65 percent were in counties among the top three 
deciles, while just 4 percent were in the bottom decile and 10 percent 
in the bottom three deciles. \7\
---------------------------------------------------------------------------
     \7\ ''Flood Insurance: More Information Needed on Subsidized 
Policies'', Government Accountability Office, July 2013. https://
www.gao.gov/assets/gao-13-607.pdf.
---------------------------------------------------------------------------
    Should Congress determine that it does expressly want to subsidize 
property owners in flood-prone regions, those subsidies should properly 
flow directly from the taxpayers. Laying the burden on inland and 
lower-risk NFIP policyholders discourages take-up of flood insurance, 
at the margin, when the goal should be much broader take-up to close 
the protection gap. Moreover, to the extent that subsidies are 
necessary to protect at-risk populations from displacement, it would be 
proper to transition to an income-based voucher system, rather than the 
existing system of subsidies and grandfathering tied to when the 
property joined the NFIP.
Rising Waters, Rising Risks
    Over the past 50 years, the NFIP has helped to shape the landscape, 
with significant impact on the country's built environment. In the 
first four decades after its passage, from 1970 through 2010, the 
number of Americans living in coastal counties grew by 45 percent and 
now comprises more than half the U.S. population. \8\ Nowhere is this 
shift more apparent than in my State of Florida. At the beginning of 
World War II, Florida was the least-populated State in the Southeast. 
As the recent 2020 U.S. Census figures confirmed, it is now the third 
most populated State in the Nation. The NFIP was not the sole driver of 
that growth, of course. Air conditioning also played a part. But by 
providing guaranteed and affordable coverage for the most common 
catastrophe risk facing property owners in a place like Florida, the 
NFIP has been a key enabler of the mass conversion of wetlands and 
barrier islands--nature's built-in defenses against tropical storms and 
flooding--into acres and acres of manicured lawns and suburban tract 
housing.
---------------------------------------------------------------------------
     \8\ Ross Toro, ``Half of U.S. Population Lives in Coastal Areas 
(Infographic)'', LiveScience, March 12, 2012. https://
www.livescience.com/18997-population-coastal-areas-infographic.html.
---------------------------------------------------------------------------
    But even as Americans spent much of the past half-century moving to 
areas at greater risk of catastrophic flooding, we have begun to see 
how anthropogenic climate change will make that problem much worse. 
Global sea levels rose by 2.6 inches from 1993 through 2014 and are 
projected to continue to rise by an average of one-eighth of an inch 
per year for the foreseeable future. \9\ Projections for the 21st 
century anticipate sea level rise of between 20 inches, should we 
manage to make sharp and immediate cuts to global carbon emissions, 
\10\ and six-and-a-half feet, should the Antarctic ice sheet break up. 
\11\
---------------------------------------------------------------------------
     \9\ ''Is Sea Level Rising?'', U.S. National Oceanic and 
Atmospheric Administration, Feb. 26, 2021. https://
oceanservice.noaa.gov/facts/sealevel.html.
     \10\ Carling C. Hay, et al., ``Probabilistic Reanalysis of 
Twentieth-Century Sea-Level Rise'', Nature 517 (Jan. 14, 2015), pp. 
481-84. https://www.nature.com/articles/nature14093.
     \11\ Robert E. Kopp, et al., ``Evolving Understanding of Antarctic 
Ice-Sheet Physics and Ambiguity in Probabilistic Sea-Level 
Projections'', Earth's Future 5 (Dec. 13, 2017), pp. 1217-33. https://
agupubs.onlinelibrary.wiley.com/doi/full/10.1002/2017EF000663.
---------------------------------------------------------------------------
    And yet, even facing these challenges, there has been no slowdown 
in Americans preferring to build and live in flood-prone areas. A 2018 
analysis of FEMA records conducted by Governing magazine found that 15 
million Americans lived in 100-year floodplains, where current rules 
for federally related mortgages require the purchase of flood 
insurance. That was a 14 percent increase from the turn of the 21st 
century, compared with 13 percent population growth in all other zones. 
\12\ Even more strikingly, a 2019 report by ClimateCentral looked at 
areas projected to have a 10-percent risk of coastal flooding by 2050. 
They found that, in eight coastal States, there were more homes built 
within this project 10-year flood zone than in all other areas. \13\ 
Development was twice as fast in the 10-year flood zone than outside of 
it in Delaware, Mississippi, New Jersey, and Rhode Island, while in 
Connecticut, it was three times as fast.
---------------------------------------------------------------------------
     \12\ Mike Maciag, ``Analysis: Areas of the U.S. With Most 
Floodplain Population Growth'', Governing, August 2018. https://
www.governing.com/gov-data/census/flood-plains-zone-local-population-
growth-data.html.
     \13\ ''Ocean at the Door: New Homes and the Rising Sea'', 
ClimateCentral, July 31, 2019. https://ccentralassets.s3.amazonaws.com/
pdfs/2019Zillow-report.pdf.
---------------------------------------------------------------------------
    Losing land to the sea is not an entirely new phenomenon, of 
course. Sen. Kennedy's home State of Louisiana has lost more than 2,000 
square miles of land since the 1930s. But the scale of land loss we may 
now face, combined with the surge in development in flood-prone areas, 
is new. In 2016, a piece in the journal Nature Climate Change overlaid 
anticipated population growth with projected sea-level rise of roughly 
3 feet to 6 feet, finding that between 4.2 and 13.1 million Americans 
would be displaced by inundation.
    The changing nature of flood risk makes it even more crucial that 
FEMA, as the NFIP's administrator, regularly update its Flood Insurance 
Rate Maps to keep up with changes on the ground. The evidence, however, 
is that the agency is failing to do that. A 2017 Department of Homeland 
Security Inspector General's report found that FEMA was up to date on 
just 42 percent of the NFIP's flood hazard miles, far short of a goal 
of 80 percent set in 2009, and that the agency had not properly ensured 
that ``mapping partner quality reviews are completed in accordance with 
applicable guidance.'' \14\ In 2017, the CBO found that, of the 166 
counties that produce more than $2 million in average annual flood 
claims, half were using maps that were more than 5 years old. \15\
---------------------------------------------------------------------------
     \14\ ''FEMA Needs To Improve Management of Its Flood Mapping 
Programs'', U.S. Department of Homeland Security Office of the 
Inspector General, Sept. 27, 2017, p. 3. https://www.oig.dhs.gov/sites/
default/files/assets/2017/OIG-17-110-Sep17.pdf.
     \15\ ''Age of Flood Maps in Selected Counties That Account for 
Most of the Expected Claims in the National Flood Insurance Program: 
Supplemental Material for The National Flood Insurance Program: 
Financial Soundness and Affordability'', Congressional Budget Office, 
November 2017, p. 3. https://www.cbo.gov/system/files?file=115th-
congress-2017-2018/reports/53028-supplementalmaterial.pdf.
---------------------------------------------------------------------------
    Sea-level rise and other impacts from climate change threaten to 
radically transform how we must deal with the risk of flooding. A 2019 
study in Nature Communications had a grim projection about the 
frequency and severity of flooding and coastal storm surge: By the end 
of this century, today's 100-year flood events in the Southeast and 
Gulf Coast will be expected every 1 to 30 years. Today's 100-year 
events in New England and the mid-Atlantic can be expected every single 
year. \16\
---------------------------------------------------------------------------
     \16\ Reza Marsooli, et al., ``Climate Change Exacerbates Hurricane 
Flood Hazards Along U.S. Atlantic and Gulf Coasts in Spatially Varying 
Patterns.'', Nature Communications 10:3785 (Aug. 22, 2019). https://
www.nature.com/articles/s41467-019-11755-z.
---------------------------------------------------------------------------
    It is inevitable that, in at least some locations, we will have to 
consider pulling back from the coasts and moving Americans to higher 
ground. But an important first step is to stop making the problem 
worse.
Baby Steps Toward Managed Retreat
    ''Managed retreat'' is a controversial phrase, both because it 
connotes surrender in the battle against climate change and because it 
is taken to mean a radical realignment in the way we live. And yet, in 
some respects, managed retreat is longstanding policy. It is seen most 
clearly in FEMA's Hazard Mitigation Grant Program (HMGP), the Flood 
Mitigation Assistance (FMA) Grant Program, and Pre-Disaster Mitigation 
(PDM) Program, all of which execute buyouts of flood-prone properties, 
which are then demolished, and the vacated land dedicated in perpetuity 
to open space.
    While buyouts are likely to continue to be part of the solution to 
rising flood risk, there are serious questions about whether they could 
ever scale anywhere close to meet the scope of the problem. A 2019 
report from the Natural Resources Defense Council found that, at the 
pace FEMA executed buyouts in the 30 years between 1989 and 2019, it 
would only be able to buy out another 115,000 properties by the end of 
the 21st century. \17\ For comparison, current projections are that as 
many as 13 million properties will be completely inundated by the year 
2200.
---------------------------------------------------------------------------
     \17\ Anna Weber and Rob Moore, ``Going Under: Long Wait Times for 
Post-Flood Buyouts Leave Homeowners Underwater'', Natural Resources 
Defense Council, Sept. 12, 2019. https://www.nrdc.org/resources/going-
under-long-wait-times-post-floodbuyouts-leave-homeowners-underwater.
---------------------------------------------------------------------------
    Rather than tearing down the flood-prone properties that already 
exist, a more immediate approach would be to remove the incentives to 
build new ones. I authored a report last year that proposed doing so 
directly--by barring any new construction in 100-year floodplains from 
NFIP eligibility. Based on my review of NFIP claims data, had this 
policy been in place starting in 1980, the program's payouts between 
1990 and 2019 would have been roughly 13 percent smaller, representing 
$16.5 billion in savings. \18\
---------------------------------------------------------------------------
     \18\ R.J. Lehmann, ``Do No Harm: Managing Retreat By Ending New 
Subsidies'', R Street Institute, February 2020. https://
www.rstreet.org/wp-content/uploads/2020/02/195.pdf.
---------------------------------------------------------------------------
    What I could not quantify in my research, but which is likely even 
more crucial to the pressing challenge of climate adaptation, is how 
many of those severely flood-prone properties would not have been built 
in the first place, but for guaranteed NFIP coverage. In some cases, 
property owners in such areas might turn to the emerging private market 
for flood insurance, but they would be assessed risk-based premiums 
that, in many cases, likely would be prohibitive.
    Of course, an additional benefit of this approach is that, unlike 
phasing out subsidies, it does not lay any new burden on existing 
policyholders. Similar approaches can be found in the Coastal Barrier 
Resources System (CBRS), a 37-year-old program that bars Federal 
subsidies to development across a 3.5-million-acre zone of beaches, 
wetlands, barrier islands, and estuaries along the Atlantic Ocean, Gulf 
of Mexico, and the Great Lakes. Likewise, in Florida, the Legislature 
adopted a similar rule in 2015 that bars the State-sponsored Citizens 
Property Insurance Corp. from writing coverage for new construction 
located seaward of the State's Coastal Construction Control Line. \19\
---------------------------------------------------------------------------
     \19\ Jane Smith and Michelle Quigley, ``Along the Coast. A Line in 
the Sand'', The Coastal Star, Aug. 30, 2017. https://
thecoastalstar.com/profiles/blogs/along-the-coast-a-linein-the-sand.
---------------------------------------------------------------------------
    But it is not enough simply to tell people where they cannot build; 
we must also tell people where they can. Many areas remain gripped by a 
serious housing affordability crisis caused by stringent land-use 
controls that make it excessively difficult to build new housing in 
places where people wish to live.
    Therefore, in addition to the ``stick'' of removing the NFIP's 
incentives to build in flood-prone areas, I propose an additional 
``carrot'' of Federal incentives for States that liberalize their land-
use policies in areas of lowest flood risk.
    Specifically, the Stafford Act currently requires that, when the 
Federal Government provides post-disaster relief to repair, restore, or 
replace damaged facilities, State, and local governments are 
responsible to pick up 25 percent of the cost. I propose that providing 
for dense housing in the lowest-risk flood zones--those classified as 
1-in-500-year zones, or Zone X and Zone C in the current mapping 
system--would enable States to ``buy down'' the local cost share. For 
example, if a State were to abolish single-family zoning in the lowest-
risk flood zones--e.g., allowing construction of accessory dwelling 
units and up to four-family homes, by right--the Federal Government's 
cost-share for post-disaster recovery would rise to 80 percent or even 
85 percent. This would begin the process of ensuring that, as rising 
seas force more Americans to move to higher ground, there will be 
sufficient housing stock to absorb them.
Other Considerations
    I mentioned earlier that it would be proper to transition 
        the current subsidies to an income-based voucher system. An 
        important element of such a system is that policyholders should 
        be made aware of the full risk-based cost of flood insurance. 
        The same applies to current subsidized and grandfathered 
        policyholders. Any NFIP policy with rates that are less than 
        the full risk-based cost should disclose to policyholders what 
        that cost would be. Similarly, a complete flood history should 
        be made available to buyers as part of all real estate 
        closings.

    Many of the implementation questions that surrounded 
        Biggert-Waters' provisions permitting private flood insurance 
        to satisfy mandatory purchase requirements have, in recent 
        years, been resolved by State authorities and the Federal 
        lending regulators. One additional point of clarification this 
        Committee could provide is to determine whether consumers who 
        move from the NFIP to private flood insurance and then maintain 
        continuous coverage can later return to the NFIP at the same 
        rate as if they had remained with the program all along. This 
        would protect consumers if, for example, after switching to a 
        private policy, the private insurer raised rates or exited the 
        market.

    Some have proposed forgiving the NFIP's current $20.5 
        billion debt to the Treasury. Should Congress opt to do so, the 
        program's existing $30.425 billion borrowing authority would be 
        far too large to offer any meaningful check. Congress should 
        instead simply set the borrowing authority cap 1 percent of the 
        NFIP's total insurance in force. Based on its current total of 
        $1.3 trillion, this would mean the NFIP could borrow up to $13 
        billion without needing further authorization.

    With that, I would be glad to answer any of the Committee's 
questions.
        RESPONSES TO WRITTEN QUESTIONS OF SENATOR SINEMA
                      FROM CHAD BERGINNIS

Q.1. Last year, the University of Arizona led and published a 
study in the Journal of Environmental Economics and Management 
about the National Flood Insurance Program. The study found 
that Black and Hispanic homeowners are more likely to live in 
high-risk flood zones and could be disproportionately affected 
by reforms to the program. What do you make of this study, and 
how should it inform ongoing efforts to reform and improve 
NFIP?

A.1. Response not received in time for publication.

Q.2. Avoiding a lapse in the National Flood Insurance Program 
is an important policy goal, but we must strive for a long-term 
reauthorization of the program. What are the negative 
consequences for policyholders associated with short-term 
reauthorizations?

A.2. Response not received in time for publication.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR SINEMA
                      FROM VELMA M. SMITH

Q.1. Last year, the University of Arizona led and published a 
study in the Journal of Environmental Economics and Management 
about the National Flood Insurance Program. The study found 
that Black and Hispanic homeowners are more likely to live in 
high-risk flood zones and could be disproportionately affected 
by reforms to the program. What do you make of this study, and 
how should it inform ongoing efforts to reform and improve 
NFIP?

A.1. Academic research and other studies that help us better 
understand how demographics overlay with risk can make an 
important contribution to debates regarding policy changes to 
the National Flood Insurance Program. The University of Arizona 
study is an important addition to the literature on this topic.
    That study examined one region in south Florida and looked 
at home purchases dating over a 5-year period, examining a 
range of factors and concluding that ``low income and minority 
residents are more likely to move into high risk flood zones.'' 
The study also attempted to estimate the likely NFIP premium 
levels associated with different properties and project the 
price differences that would be experienced by homeowners under 
certain changed pricing scenarios, including loss of assumed 
pre-FIRM subsidies, loss of Community Rating System (CRS) 
discounts, and loss of assumed grandfathering subsidies.
    In thinking about the conclusions drawn in this report, it 
is important to recognize that the analysis was completed prior 
to announcements regarding Risk Rating 2.0 and that none of the 
reform scenarios studied are currently under consideration. To 
the contrary, the proposed Risk Rating 2.0 methods, in many 
instances, will lower rather than raise the rates now being 
paid by certain pre-FIRM property owners.
    Rather than focus solely on this one study, then, we would 
urge the Committee to consider the important issues of equity 
in flood protection by using information in FEMA's own 
Affordability Report. That report, prepared in collaboration 
with the Census Bureau and with direct access to NFIP pricing 
and policy take-up information, offers what may be the clearest 
picture to date of the demographics of NFIP policyholders.
    FEMA's analysis shows that, with some notable exceptions, 
residents of flood zones in most States tend to have incomes 
lower than those of residents who live outside of designated 
flood zones. The study also finds that within flood zones, a 
greater percentage of lower income households go without flood 
insurance, compared with higher income families. This finding 
may not be surprising given the overall statistics on flood 
insurance penetration rates and the fact that the law's 
mandatory purchase requirement drops off once a mortgage is 
paid down to $5,000. According to FEMA, it `` . . . suggests 
that policymakers should pay particular attention to the 
affordability of flood insurance for households that currently 
do not have flood insurance but face flood risk.''
    While the study itself does not offer a specific 
prescription for making flood insurance more affordable to 
lower-income families, it offers Congress a basis for comparing 
the advantages and disadvantages and the likely range of costs 
for various approaches, including approaches
    based on means-testing, percentage of insurance coverage, 
or measures of housing burden. This report, as well as the 2016 
Government Accountability Office report on the same topic, may 
be helpful to the Committee as it considers options for helping 
families without the financial means to insure and protect 
themselves.
    As I noted in our testimony, Pew is hopeful that Congress 
will choose an affordability approach that is carefully 
targeted to those most in need and structured to avoid costly 
and complicated data collection requirements. We also urge the 
Committee to assure that any discounted rates are accompanied 
by clear information about actual risks and that insurance 
assistance is complemented by mitigation assistance to allow 
property owners and communities to reduce their flood 
vulnerabilities.
    On this point, we applaud the recent announcement by FEMA 
that it will begin making Individual Assistance (IA) available 
to disaster victims for specific mitigation efforts, such as 
elevation of utilities. We were also pleased to see that the 
President's proposed budget includes possible new funding for 
an affordability program. A general appropriations approach to 
funding this program would eliminate the potential for new 
cross-subsidies within the program. We anxiously await the 
details of the Administration's announced legislative proposal 
on this issue, and we hope to engage with the Committee when 
the proposal is released.

Q.2. Avoiding a lapse in the National Flood Insurance Program 
is an important policy goal, but we must strive for a long-term 
reauthorization of the program. What are the negative 
consequences for policyholders associated with short-term 
reauthorizations?

A.2. An actual lapse in the authorities for the National Flood 
Insurance Program could directly affect real estate 
transactions and the payment of claims for existing NFIP 
policies. A useful discussion of the possible impacts is found 
in a Congressional Research Service report updated last 
October. ``What Happens If the National Flood Insurance Program 
(NFIP) Lapses?'' notes that flood insurance contracts entered 
into before the expiration date would remain in effect to the 
end of their terms, but no new flood insurance policies could 
be written. In turn, this could affect the functioning of real 
estate markets, because lenders would still be obligated to 
assure coverage on mortgages for homes located in a designated 
flood zone. In addition, because a lapse would also lower the 
program's borrowing authority, there could be a lapse or delay 
in claims payments if a major flood event occurred during a 
time when FEMA was not collecting additional premiums.
    For the most part, Congress has in the past avoided actual 
lapses in the program but frequently resorts to multiple short-
term program extensions, with many coming only a matter of days 
or hours before the program authorities would expire. Each of 
these potential lapse occasions can cause disruptions to the 
program, as lenders, real estate professionals, FEMA, and the 
Write-Your-Own insurance agents must evaluate and prepare for 
the implications of a lapse. Policyholders may not be directly 
aware of such situations but may experience some level of delay 
or confusion with insurance purchase or servicing or with real 
estate transactions and mortgage closings.
    Pew urges Congress to resist the temptation to continue a 
series of short-term extensions of NFIP.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR SCOTT
                      FROM VELMA M. SMITH

Q.1. This is a deeply important topic to my home State of South 
Carolina, where I spent over 15 years in the insurance business 
helping to write flood insurance policies, responding to flood 
insurance claims, going to homes that had been flooded and 
watching the families try to piece their lives back together.
    One issue that continues to frustrate me is that we have 
not yet--as a Committee or a country--come up with a way to 
address repeatedly flooded properties; homes and businesses 
that time and again see flood waters rise, putting people in 
harm's way.
    Within the NFIP these properties represent about 1 percent 
of the policies, yet make up approximately 30 percent of the 
claims.
    In the last two Congresses, I have authored a bipartisan 
proposal, the Repeatedly Flooded Communities Preparation Act, 
which would offer a community response to lowering flood risk 
in these problem areas.
    This is not a one-size-fits-all approach but a community by 
community approach. Some communities need voluntary buyouts, 
others need drainage improvements, while others may simply need 
to clean out storm drains regularly.
    Can you comment on the problem of repeat loss, the 
community approach to addressing it, and what policymakers can 
learn from work already being done around the country?

A.1. The repetitive loss issue has some very big numbers 
attached to it, numbers that have plagued the financial 
stability of the program for decades. The numbers, of course, 
change from year to year, but, as you note, in some years, 
estimates have shown as little as 1 percent of the properties 
insured accounting for as much as a third of claims. According 
to the Government Accountability Office, the NFIP has paid out 
more than $22 billion in cumulative claims for repeatedly 
flooded properties--more than the current debt of the program. 
The Agency itself has cited the repetitive loss problem as 
``the single most important factor that affects the stability 
of the National Flood Insurance Fund.''
    But the good news is that there are success stories--
stories in which communities have looked carefully at those 
neighborhoods hit hard by major disasters or vexed by chronic, 
recurrent flooding and worked to diagnose and solve those 
problems. In some communities, fixes have been put in place in 
relatively short order. More frequently, as in the Onion Creek 
area of Austin, Texas, mitigation has been a slow but steady 
journey.
    Sometimes, as the question indicates, buyouts are the 
answer, as in Austin; Augusta, Georgia; Nashville, Tennessee; 
Tulsa, Oklahoma; Sayreville, New Jersey; Charlotte-Mecklenburg, 
North Carolina; and a host of other towns and cities. In 
numerous instances, such buyouts not only eliminate the threat 
to life and property but also provide local open space 
amenities. In a small southeastern community in Minnesota, for 
example, where there had been more than 40 years of flooding 
with loss of life that community protected its citizens by 
buying out 14 homes and one business to create a local park.
    In some communities, solutions will be harder to find and 
implement than in others; decisions may be painful, and the 
costs for correcting mistakes of the past and confronting the 
challenges of climate change can be high. Many communities have 
addressed their problems with Federal dollars from programs 
ranging from FEMA's Hazard Mitigation Grant Program or Pre-
Disaster Mitigation funding to the Department of Agriculture's 
Natural Resources Conservation Service Emergency Watershed 
Protection--Floodplain Easement program or the Department of 
Housing and Urban Development's Community Development Block 
Grant program. A good number of States and communities also use 
their own financial resources to better protect those areas 
that are prone to repeat flooding.
    As you know from South Carolina's own experience, the 
answers are turning out to be all of the above: buyouts, storm 
drainage improvements, home elevations, living shorelines, 
improved land use regulations, and sea walls. That is why we 
think it is sensible that your legislation doesn't dictate 
answers. It requires action and effort. Paired with new funding 
through a revolving loan program as well as other grant 
resources, this initiative could begin to reverse the troubling 
trends on repeat loss.
    Pew strongly supports the legislation that you and Senator 
Brian Schatz, formerly a Member of this Committee, have 
championed. We believe it recognizes the seriousness and the 
complexity of the problem. It also builds on the experience and 
successes of communities that have begun to address what might 
be considered their flooding hotspots. By compelling more 
communities to focus attention and resources on the problem, 
your legislation will save taxpayer monies and help flood 
victims break free from troubling and dangerous cycles of flood 
loss.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR SINEMA
                  FROM REBECCA KAGAN STERNHELL

Q.1. Last year, the University of Arizona led and published a 
study in the Journal of Environmental Economics and Management 
about the National Flood Insurance Program. The study found 
that Black and Hispanic homeowners are more likely to live in 
high-risk flood zones and could be disproportionately affected 
by reforms to the program. What do you make of this study, and 
how should it inform ongoing efforts to reform and improve 
NFIP?

A.1. I am not familiar with this exact study, although your 
framing of it comports with what we see in neighborhoods in New 
York and many other places across the county. ``Where We Live 
NYC5'', New York City's fair housing plan, states ``Emerging 
research suggests that the proportion of Black and Hispanic 
homeowners within New York City's neighborhoods exposed to 
reoccurring flooding risks is increasing, suggesting that the 
impacts of flooding could be borne disproportionately by people 
of color in the future'' (p.136). Decades of racist redlining 
policies and exclusionary zoning have shifted minority and 
lower income families (often times one in the same) into less 
desirable areas, including those that are more vulnerable to 
flooding and with lower levels of infrastructure investment. 
\1\ As a result, these property owners face not only repeat 
flooding events but the resultant increased flood insurance 
rates as well.
---------------------------------------------------------------------------
     \1\ New York City's Floodplain by the Numbers indicates that more 
than half of the population living in NYC's floodplain identifies as 
Black, Hispanic, or Asian.
---------------------------------------------------------------------------
    Given this understanding, it is critical that the NFIP rate 
structure be affordable and sensitive to economic realities. 
Congress needs to enact affordability programs to ensure 
everyone can afford a policy, as well as mitigation grants to 
help households retrofit to protect the structures against 
flooding. As outlined in my written and oral testimony, the 
City believes an affordability program utilizing a metric like 
the PITI ratio offers an opportunity to set national policy 
that is sufficiently sensitive to local and individualized 
conditions. Other options that utilize a percentage of AMI 
alone are too limiting and loans quickly become unrealistic for 
the individuals they are intended to help.

Q.2. Avoiding a lapse in the National Flood Insurance Program 
is an important policy goal, but we must strive for a long-term 
reauthorization of the program. What are the negative 
consequences for policyholders associated with short-term 
reauthorizations?

A.2. There are consequences for both policyholders and for the 
NFIP itself. For the NFIP, the off-again/on-again nature of 
reauthorization means it is forever selling an unstable product 
to policyholders. One year a household might have flood, the 
next year they might have no coverage for a period of time as 
Congress lets it lapse while they work out reauthorization. Who 
would want to buy such a product when a more stable one is 
available in the private market? Congress does the NFIP no 
favors in issuing short-term reauthorizations. While the idea 
of regular reauthorizations certainly affords Congress a chance 
to look at and review the program, it has become essentially 
meaningless and toothless in terms of motivating Congress to 
act. The market failure that created the NFIP remains decades 
later, artificial reauthorization deadlines do not yield 
meaningful policy/programs reforms in the current political 
dynamic, and the instability creates needless chaos for the 
NFIP, its staff, and--most importantly--policyholders. Congress 
should make the program permanent or reauthorize for 10-20 
years, requiring that the program be revisited for reforms 
every 5 years.
    Specifically for policyholders, the churn of short-term 
reauthorizations create problems in implementing ideas like 
mitigation credits, loans, and affordability programs. As 
discussed in the previous question, the unavailability or over-
complexity of these can lead to NFIP being increasingly 
unaffordable especially for LMI households. In households with 
busy working parents, who has the time to sort through flood 
insurance turning on and off, affordability programs coming on 
and off, recertifying information, trying to seek advice only 
to find program staff aren't available? Stability in the 
program begets stability for policyholders. Pairing stability 
with affordability tools will help ensure policyholders remain 
in the program and NFIP is viewed as something worth 
purchasing. The longer the program goes without an 
affordability program, the greater the burden placed on 
policyholders as their rates rise, potentially resulting in 
NFIP policies that are too expensive for the policyholder. 
Without changes, these policyholders (especially those in areas 
without mandatory purchase requirements) may choose to drop 
their policies and go uncovered, which, as we know, is a 
substantial risk.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR SINEMA
                       FROM STEPHEN ELLIS

Q.1. Last year, the University of Arizona led and published a 
study in the Journal of Environmental Economics and Management 
about the National Flood Insurance Program. The study found 
that Black and Hispanic homeowners are more likely to live in 
high-risk flood zones and could be disproportionately affected 
by reforms to the program. What do you make of this study, and 
how should it inform ongoing efforts to reform and improve 
NFIP?

A.1. The study should absolutely be part of the data informing 
the Committee on reauthorization and reform of the NFIP. Along 
with studies from the GAO, the Wharton Risk Management and 
Decision Processes Center, First Street Foundation, and others. 
As I mentioned in my testimony the GAO has found that inherent 
subsidies in the NFIP (Pre-FIRM and grandfathering) 
predominantly benefit the well off at the expense of the less 
affluent. That is why one of the reforms that TCS advocates for 
is a shift from property-based subsidies to means-tested 
assistance. This shift would better target Federal assistance 
while getting more people insured because not enough Americans 
are insured.
    Turning specifically to this University of Arizona study, 
it is necessary that the debate around reauthorizing NFIP 
incorporates the connections between race, pricing, and the 
enrollment rate into the program. Decades of policies have set 
many Black, Hispanic, and other people of color back in terms 
of economic and social mobility. Today, policymakers need to 
take an active role in drafting policy that incorporates equity 
into the system. We are very fortunate to have the research 
that can identify potential complications in price reforms as 
well as provide policymakers with emperical data to guide them 
in the decision making process.
    There are many factors, such as affordability and proximity 
to employment, that influence where people choose to live. The 
authors illustrate how people are generally risk-adverse and 
want to avoid flood risk. It also discovers that that changes 
in premium pricing may be a costly solution to remove people 
out of high-risk flood areas because it would leave the most 
vulnerable Americans, those who cannot afford to leave their 
homes, in these at-risk communities paying a higher premium. 
This obstacle needs to be addressed. Flooding can eradicate a 
lifetime's worth of hard work and savings; people lose their 
homes, their jobs, and become displaced. This fact is more 
pronounced in low-income communities that lack savings and 
resources to recover from flooding. If the data points to Black 
and Hispanic homeowners being disproportionately affected by 
premiums priced on the actual risk of flooding, then programs 
should be put in place to ensure that they have the ability to 
move to lower risk areas and get the protection they need at a 
price they can afford. The authors point to the benefits and 
success of the NFIP grandfather clause and the series of other 
price discount programs, but these alone are not a solution. 
They do not remove the risk of flooding, they simply shift the 
financial cost. At the same time subsidized homeowners will 
continue to bear the risk of physical, emotional, and much of 
the financial trauma associated with flooding. The best way to 
reduce rates is to reduce risk, which is why TCS supports 
robust investments in mitigation for both communities and 
individual homeowners.
    Congress must decide what they want the mission of NFIP to 
be, and how they want to carry it out. NFIP is a dominant 
source of flood information for homebuyers. Yet, at the time 
the paper was written, 66 percent of flood maps had not been 
updated. Without consistent funding, all participants in the 
housing market are denied the tools they need to make informed 
decisions. A true multifaced approach for NFIP with premium 
prices that accurately reflect flood risk and influence people 
to move away from these high-risk areas, should also include 
channels to provide individuals with the means and resources to 
move. These could include more access to affordable housing in 
safe areas that will keep them connected to their current job, 
or training for jobs so they can continue to fit into the new 
economy.

Q.2. Avoiding a lapse in the National Flood Insurance Program 
is an important policy goal, but we must strive for a long-term 
reauthorization of the program. What are the negative 
consequences for policyholders associated with short-term 
reauthorizations?

A.2. Short-term reauthorization may seem like an easy fix to 
NFIP, but unfortunately, it has caused more harm than good and 
will cause all positive developments to unravel. Short-term 
reauthorizations are the antithesis to long-term planning, and 
as a result, long-term solutions. Exercises that merely kick 
the can down the road prevent communities from effectively 
creating and acting on emergency disaster budgets and prevent 
the program from addressing operational shortfalls. This lack 
of planning pushes the program into a debt cycle that 
disproportionately falls on the shoulders of taxpayers. As 
Congress analyzes long-term reauthorization, it must keep 
sustainability and longevity in mind. Floods are one of the 
most expensive natural disasters, and while FEMA has taken 
measures to provide more funding for these communities, 
Congress must take action to be facilitators, and not 
inhibitors, of FEMA's advancements.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR SCOTT
                       FROM STEPHEN ELLIS

Q.1. This is a deeply important topic to my home State of South 
Carolina, where I spent over 15 years in the insurance business 
helping to write flood insurance policies, responding to flood 
insurance claims, going to homes that had been flooded and 
watching the families try to piece their lives back together.
    One issue that continues to frustrate me is that we have 
not yet--as a Committee or a country--come up with a way to 
address repeatedly flooded properties; homes and businesses 
that time and again see flood waters rise, putting people in 
harm's way.
    Within the NFIP these properties represent about 1 percent 
of the policies, yet make up approximately 30 percent of the 
claims.
    In the last two Congresses, I have authored a bipartisan 
proposal, the Repeatedly Flooded Communities Preparation Act, 
which would offer a community response to lowering flood risk 
in these problem areas.
    This is not a one-size-fits-all approach but a community by 
community approach. Some communities need voluntary buyouts, 
others need drainage improvements, while others may simply need 
to clean out storm drains regularly.
    Can you comment on the problem of repeat loss, the 
community approach to addressing it, and what policymakers can 
learn from work already being done around the country?

A.1. FEMA has been somewhat proactive in addressing repetitive 
loss. The agency previously established the Severe Repetitive 
Loss (SRL) grant program to provide funding for high risk 
communities to access capital to implement mitigation 
strategies, as well as other similar programs such as the Post-
Disaster Hazard Mitigation Grant Program and the Flood 
Mitigation Assistance Program. Congress has also been vocal on 
this issue. The Repeatedly Flooded Communities Preparation Act 
was the needed legislative pressure to get FEMA and others to 
continue conversations on how to best turn ideas into action, 
and how to advance mitigation discussions into tangible 
solutions with results. The arrival of FEMA's Risk Rating 2.0 
will provide a more accurate and granular look at flood risk 
and enable adjusted pricing as a result. The more accurate 
pricing mechanism would mean that those living in areas at 
greater risk of flooding pay more while residents in 
communities with lower risk would pay less. At the same time, 
TCS believes the best way to protect homeowners and taxpayers 
is to reduce risk, which is why we support robust investments 
in mitigation for communities.
    The reality is that taxpayers cannot continue to shoulder 
the costs of and the NFIP cannot financially support repetitive 
loss properties. NFIP is the only Federal program that 
incentivizes people to put themselves in harm's way. 
Policymakers at all levels of Government must do more to 
discourage building and rebuilding in flood-prone areas and 
provide options, including but not limited to voluntary buyouts 
of property owners.
    Further, and as Congress continues to debate infrastructure 
funding, lawmakers should seriously consider imposing standards 
to ensure that investments made with Federal funds are able to 
withstand flooding and other natural disasters in an effort to 
better protect communities nationwide. TCS has no problem 
attaching strings to this Federal funding to protect taxpayers. 
If an individual or community refuses to take the necessary 
steps to protect the Federal taxpayer's investment, they don't 
have to take the cash.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR SINEMA
                       FROM R.J. LEHMANN

Q.1. Last year, the University of Arizona led and published a 
study in the Journal of Environmental Economics and Management 
about the National Flood Insurance Program. The study found 
that Black and Hispanic homeowners are more likely to live in 
high-risk flood zones and could be disproportionately affected 
by reforms to the program. What do you make of this study, and 
how should it inform ongoing efforts to reform and improve 
NFIP?

A.1. Response not received in time for publication.

Q.2. Avoiding a lapse in the National Flood Insurance Program 
is an important policy goal, but we must strive for a long-term 
reauthorization of the program. What are the negative 
consequences for policyholders associated with short-term 
reauthorizations?

A.2. Response not received in time for publication.
              Additional Material Supplied for the Record
                       STATEMENT SUBMITTED BY RAA
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

    REAUTHORIZATION OF THE NATIONAL FLOOD INSURANCE PROGRAM--PART II

                              ----------                              


                        THURSDAY, JUNE 17, 2021

                                       U.S. Senate,
          Committee on Banking, Housing, and Urban Affairs,
                                                    Washington, DC.
    The Committee met at 10 a.m., in room 538, Dirksen Senate 
Office Building, Hon. Sherrod Brown, Chairman of the Committee, 
presiding.

          OPENING STATEMENT OF CHAIRMAN SHERROD BROWN

    Chairman Brown. The Senate Banking, Housing, and Urban 
Affairs Committee will come to order. Today, as Ranking Member 
Toomey and I were talking, is our first hearing in person in 
months and months, and over a year. Welcome back to Room 538. 
It is exciting to see you here, Senators, staff people, and 
people at FEMA. Thank you for joining us.
    Now that we are in person, Members who are present before 
the gavel will be called on in order of seniority. Those after 
the gavel will be added to the queue in the order that you 
arrived.
    Today's hearing is the second in our effort to enact a 
long-term reauthorization of the National Flood Insurance 
Program this Congress. In May, we heard from a panel of experts 
who emphasized we needed to do more to improve flood mapping 
and mitigation in the face of climate change. Flooding is the 
most common and most costly natural disaster facing families, 
businesses, and communities across the country. We hear from 
constituents how it takes families' homes and memories, it 
wrecks their finances, it shutters small businesses, it 
destroys communities' infrastructure.
    Disasters often fall hardest on low-income and families of 
color in communities that have fewer resources to prepare for 
and respond to them. No matter where you live, everyone in our 
country pays for the financial fallout from floods, as we spend 
tax dollars to help families and communities recover.
    As the climate continues to change, we can only expect 
flooding to get worse and become even more common. Spring snow 
melts, increasingly powerful storms, sunny-day flooding in 
coastal communities, extreme rainfall could overwhelm our 
Nation's infrastructure and the land's capacity to absorb 
water.
    Reversing the trajectory of climate change is going to be a 
long-term effort. While we work on that, we need to help our 
families and communities become more resilient to the flooding 
we face now and in the coming decades, and, of course, whenever 
possible, we need to prevent that flooding altogether.
    NFIP is critical to that effort. The program provides $1.3 
trillion in coverage to more than 5 million homes and 
businesses, and some 22,000 communities. It is not just an 
insurance program. NFIP's job is not just to help communities 
after floods but to prevent and minimize the damage in the 
first place. Through NFIP reauthorization, we have an 
opportunity to improve NFIP to make our families, businesses, 
and communities safer and more resilient, and to meet the 
challenges posed by a changing climate.
    Today our witness, Mr. David Maurstad, the Deputy Associate 
Administrator of FEMA, will provide the agency's perspective on 
what this Committee should consider as we work on that effort. 
I am interested in the Administration's recommendation for ways 
we can strengthen NFIP so that it can provide reliable access 
to insurance for property owners and renters so that it can 
address affordability concerns and that it can ensure that more 
people are aware of flood risk and insured against losses, and 
so it can help the Nation predict and reduce our overall level 
of flood risk through investments and improvements in mapping, 
floodplain management, and mitigation.
    And last, I look forward to discussing NFIP's Risk Rating 
2.0 effort, which would change rate-setting in NFIP. We want to 
hear more about how FEMA communicates with stakeholders about 
these changes, better understand how these rates will affect 
low- and moderate-income communities, many of whom lack the 
resources to renovate or move out of harm's way.
    I look forward to continuing this work with Members of the 
Committee to strengthen NFIP and take a comprehensive approach 
to mitigating flood risk through a long-term reauthorization 
bill.
    Ranking Member Toomey.

         OPENING STATEMENT OF SENATOR PATRICK J. TOOMEY

    Senator Toomey. Thank you, Mr. Chairman, and thank you, 
Administrator Maurstad for joining us today for our second NFIP 
reauthorization hearing. As I mentioned at our last hearing, 
finding a consensus on reauthorization will be challenging, and 
time is tight, but it is important that we try to do this. I am 
ready to work, and I hope we can reach an agreement on the 
long-term reauthorization that improves the program.
    But first let me take a moment to remind everyone of the 
scope of the NFIP's challenges. In the last 16 years, the NFIP 
has had to borrow nearly $40 billion to pay claims. In other 
words, the NFIP has lost an average of about $2.25 billion per 
year over the last 16 years, and these are multiple different 
events, not just a single event. These loses are particularly 
shocking in the context of the NFIP's annual premiums 
collected, which is $4.6 billion.
    So clearly the NFIP systematically underprices flood 
insurance, and frustratingly, it is the policies of Congress 
that are the root cause of this, not FEMA.
    During our last hearing I discussed several of my 
priorities in reauthorization, and first I would say is let's 
do no harm. Right now, under existing law, NFIP is moving 
toward an actuarially sound premium program. We should not 
interrupt that progress. Second, we should encourage more 
private capital in the form of private policies and private 
reinsurance. Third, to the extent that subsidies persist, they 
really should be better targeted. And fourth, I think we should 
improve communication with homeowners and home buyers so that 
they understand fully the flood risk of properties that they 
own or are contemplating buying.
    Let me elaborate a little bit. First, on do no harm. As our 
understanding of flood risks change, we need to allow NFIP to 
keep up with those changes. For instance, I have long heard 
complaints about mapping, and I agree we need better flood 
maps, and I support taking steps to improve maps. But in some 
ways, better mapping is really a means to an end. It is not an 
end unto itself. Mapping, in fact, is the easy part, in a way. 
The hard part is using those improved maps to better plan 
development, mitigate risk, and price flood insurance premiums 
appropriately.
    Fortunately, FEMA is moving in the right direction with its 
development of Risk Rating 2.0. FEMA has worked for years to 
build a better risk rating model, and it incorporates far more 
granular data in setting premiums, including geography and 
flooding frequency and flood types, you know, river versus 
ocean, and building characteristics. And when Risk Rating 2.0 
is implemented, we will not only have a more fair NFIP, but 
also a more fiscally sound NFIP. So reauthorization really 
should not interrupt the implementation of Risk Rating 2.0.
    Of course, that implementation will be a challenge. After 
all, NFIP has been using more or less the same old system for 
the last half century. Administrator Maurstad, I urge you, 
encourage you to continue to work hand in glove with the Write-
Your-Own insurers who sell and service NFIP policies. I 
certainly hope that there will not be a turbulent rollout, 
because that could be used by some as an opportunity to kill 
some really important reforms and improvements in the program.
    And while successful implementation of Risk Rating 2.0 will 
make NFIP a better program, it will not be a perfect program, 
and that is one of the reasons why I think we should continue 
to facilitate expansion of the private flood insurance market. 
My home State of Pennsylvania has been a leader on this front. 
As of January of this year, there were nearly 13,000 private 
flood insurance policies in Pennsylvania. That is almost 20 
percent of all Pennsylvania flood insurance policies.
    And private uptake should come as no surprise. NFIP data on 
Risk Rating 2.0 implementation reveals that millions of 
American policyholders are currently overpaying for flood 
insurance. Over 200,000 NFIP policyholders are overpaying by at 
least $100 a month. That is $1,200 per year. And besides 
competing on price, private flood may bring better products, 
maybe all-peril coverage, which would mean no more debate about 
whether a claim results from water or wind damage.
    And further, private flood insurance brings more capacity 
to the market. That means more uptake, by more homeowners, 
which I think is a good thing. It also means more resources to 
process claims after a major flooding event like Superstorm 
Sandy, an event that, as my colleagues know all too well, 
overwhelmed FEMA.
    Finally, I just want to briefly touch on subsidies within 
NFIP. As a general principle, I do not think we should be 
encouraging people to live in flood-prone areas by providing 
flood insurance subsidies, but I acknowledge that over the past 
50 years, NFIP has acclimated homeowners to a world in which 
these subsidies do exist. And so it would be unfair to suddenly 
and completely remove them, but in the interest of fairness and 
program solvency, I think these property-based subsidies should 
be phased out over time.
    Today, properties with subsidized NFIP premiums are 
overwhelmingly located in our wealthiest communities, and 
subsidized NFIP premiums are rare in lower-income communities. 
How does that make sense? I am open to finding ways to help 
current, low-income owners afford flood insurance, but such 
help should not interrupt a long-term trend toward true, risk-
based NFIP premiums.
    In conclusion, Mr. Chairman, I think the current system of 
NFIP is not working properly, it is problematic for taxpayers 
who have to bail it out, year in and year out, it is bad for 
homeowners and future homeowners from whom NFIP obscures the 
true nature of the flood risk. I recognize we cannot fix it all 
overnight, but I think the 2.0 reforms are a step in the right 
direction, and we can use reauthorization as an opportunity to 
move further in a better direction. Thank you.
    Chairman Brown. Thank you, Senator Toomey. I will introduce 
today's witness. David Maurstad serves as Deputy Associate 
Administrator for Federal Insurance and Mitigation at FEMA. He 
was appointed to the position in 2018, after serving as 
Assistant Administrator since 2016. In this role, he serves as 
the senior executive of the NFIP. He is a former mayor, and he 
saw the Blue River flood, I think regularly or at least often, 
and he is a former lieutenant Governor of Nebraska also, and 
brings a wealth of private sector expertise to his job also.
    Mr. Maurstad, you are recognized for 5 minutes, or whatever 
you need. Thank you.

STATEMENT OF DAVID I. MAURSTAD, DEPUTY ASSOCIATE ADMINISTRATOR, 
   FEDERAL INSURANCE AND MITIGATION ADMINISTRATION, FEDERAL 
                  EMERGENCY MANAGEMENT AGENCY

    Mr. Maurstad. Thank you. Good morning, Chairman Brown, 
Ranking Member Toomey, and Members of the Committee. My name is 
David Maurstad and I am the Deputy Associate Administrator for 
Insurance and Mitigation, responsible for directing Federal 
Emergency Management Agency's risk management, mitigation, and 
insurance programs. Thank you for the opportunity to testify 
today about the National Flood Insurance Program.
    As mentioned, for over 50 years, the NFIP has provided more 
than 5 million policyholders with $1.3 trillion in flood 
insurance in more than 22,500 participating communities in all 
50 States, the District of Columbia, and 6 territories. The 
NFIP has grown to be the largest single-peril insurance 
operation in the world.
    Yet, in the advent of every hurricane or rainy season, I 
worry, knowing that despite all our best efforts we will most 
likely see more disaster suffering resulting from flooding, the 
number one natural disaster in the United States, because too 
many policyholders will not have the financial support that a 
flood insurance policy provides to begin their recovery 
journey.
    A look at the Nation's flood loss experience over the past 
17 years tells us that we can and must do better. It is 
imperative that we bolster investments in resilience, and break 
the cycle of life-altering disaster impacts on individuals and 
communities with limited capabilities to build back.
    Nature is not waiting for us to act. The frequency and 
intensity of storms is rising across the country. Flooding and 
coastal storms account for roughly 70 percent of all 
Presidential disaster declarations over the past decade. In 
2020, the Nation saw 47 major disaster declarations, involving 
every kind of natural hazard, and 22 events with losses that 
exceeded $1 billion each. For comparison, the previous high was 
16, in 2011 and 2017.
    Inaction will exacerbate risky development in floodplains--
low take-up of flood insurance coverage, mounting NFIP debt to 
the U.S. Treasury, and ballooning supplemental appropriations, 
and the cycle of needless disaster-related suffering will 
continue.
    Like many of you, I have walked through leveled 
neighborhoods after major disaster events. Each time I come 
away asking, how much more can we bear? Over the past few 
years, under our own authorities, FEMA has undertaken several 
internal operational improvements to transform the NFIP, to 
reduce complexity, and increase transparency and fairness.
    Most recently, on April 1, 2021, FEMA formally released 
Risk Rating 2.0, Equity in Action, a new pricing methodology 
with equitable pricing, and an individual's property's unique 
risk. The NFIP's rating methodology has not been updated in 
more than 40 years. Over the years, we have heard the calls for 
change from many corridors, to include key stakeholders, 
industry, Government partners, the media, and Members of 
Congress. While we understand the change is difficult, now is 
the time.
    The current system is severely flawed, if not broken. Rates 
are going up under the current pricing methodology for all 
policyholders, and will continue to do so year after year if no 
action is taken. Risk Rating 2.0 lets us evaluate risk for each 
individual property, and unlike the current system, rate 
increases stop once a property reaches its true risk rate. Risk 
Rating 2.0 fixes the inequity of policyholders with low-value 
homes, subsidizing policyholders with higher-value homes.
    Risk Rating 2.0 fixes inequities identified by GAO-12, 
which states that policyholders are not paying a premium 
reflective of their true risk. GAO analysis across the 
continental U.S. identified that the practice of aggregating 
risk across zones results in pricing that does not accurate 
reflect flood risk. And Risk Rating 2.0 lets us adapt and 
readjust rates based on a changing and unpredictable climate.
    Now this is just one solution to a multipronged approach to 
reforming the NFIP. There is more work to be done so that we 
have a sustainable program, built to withstand an unpredictable 
weather system, one which is easy to understand, accountable to 
taxpayers, and is accessible for everyone, especially with 
financial barriers to purchasing a policy.
    Right now we simply are not seeing the outcomes that we 
need, to close the insurance gap across the country, protect 
the natural and beneficial functions of the floodway, and 
promote judicious development, all to make our communities 
safer and more resilient. Our ability to exercise continuous 
improvement of the NFIP begins with the certainty associated 
with a multiyear reauthorization of the NFIP with meaningful 
reforms by September 30 of 2021.
    For your consideration, FEMA has developed four guiding 
principles that we believe will lead to meaningful 
transformation.
    First, increased flood insurance coverage by ensuring more 
Americans are covered, by establishing a means-tested 
assistance program for one- to four-family primary residences.
    Next, build climate resilience by transforming the 
communication of risk and providing tools to Americans to 
manage their flood risk.
    Third, reduce risk losses and disaster suffering by 
strengthening local floodplain management minimum standards and 
addressing extreme repetitive loss properties.
    And fourth, institute a sound and transparent financial 
framework that allows the NFIP to balance affordability and 
fiscal soundness.
    Chairman Brown, I respectfully ask that this Committee 
consider these principles in your ongoing reauthorization 
discussions on how best to reform the NFIP, to ensure its 
financial sustainability, and reduce disaster suffering, 
especially for vulnerable citizens and communities. FEMA stands 
ready to assist in any way that we can.
    In closing, FEMA is honored to be a part of finding the 
solution to combat insidious peril of flooding. It is more than 
just my job, sir. My passion and determination are vested in 
providing a safe future for every American, including my nine 
grandchildren. I look forward to answering your questions.
    Chairman Brown. Thank you, Mr. Maurstad, for your insight 
and for the four points I think are especially important. This 
is an issue, that you can see, sitting around this table and 
watching the history when you have been part of this for 
several years, this is an issue that is especially a partisan 
issue at all. It is regional, but it is much more than that 
too. Thank you for that.
    Since Katrina, the NFIP has paid the U.S. Treasury about 
$400 million per year in interest on NFIP's debt, over $5 
billion interest so far. Your predecessor, some three, 4 years 
ago, told this Committee that FEMA would have no practical way 
to repay that debt. In your opinion, what effect does this debt 
have on the program? What effect does FEMA paying interest on 
the debt have overall in this program?
    Mr. Maurstad. Well, quite frankly and candidly, the debt 
and the interest associated with it is an anchor around the 
neck of the NFIP. The over $5 billion in interest that the 
program has paid to the Treasury, over the last 15, 16 years, 
have had little benefit to the program and to policyholders. In 
fact, it seems to me to be morally suspect to be using premium 
dollars that are paid today, using a portion of those premium 
dollars, to pay for interest on a debt that was accumulated by 
paying valid claim payments to policyholders in past year.
    So the $450 million of interest that is paid every year can 
certainly be put to better use in the program, in other aspects 
of the program, whether that be flood mitigation, whether that 
be increasing commitment to reinsurance, or other aspects of 
the program, whether it be floodplain management or the risk 
identification and mapping part of the program.
    Chairman Brown. Thank you. It is critical that FEMA map the 
Nation and provide projections of future flood conditions, 
because when communities make decisions about where and how to 
build, they need these maps. I thought Senator Toomey's 
comments about mapping were particularly incisive, that it is 
essential but it is only a step. It is not the end reason we do 
it.
    At the current rate of funding, how long will it take FEMA 
to finish the job of mapping the country and give families and 
communities better understanding of their current and future 
risks? Would additional investments in mapping help you 
complete that job?
    Mr. Maurstad. Well currently we have about 81 percent of 
the Nation has new, validated engineering maps. By statute, we 
are required, every 5 years, to determine whether a community's 
map needs to be updated. Many maps do not need to be updated 
because the conditions in those communities have not changed. A 
lot of the area that is not mapped is in lower-populated, 
sparsely populated areas.
    And so certainly we are going to continue to look at 
getting to 100 percent, but we also want to look at what 
changes that we can make to better communicate flood risk. And 
so we have inaugurated a new initiative, the Future of Flood 
Risk Data, that will allow us to better depict the flood risk 
in the 22,500 communities, in a graduated fashion.
    Instead of fixating on the 1 percent annual chance flood, 
the line on the map that says, you know, if you are on this 
side of the line you are at a high risk to our minimum Federal 
standards, and if you are on the other side of the line you low 
to moderate risk. If you are on the high side, you are 
required, if you have a federally backed mortgage, mandated, to 
buy a flood insurance policy, so you need it. If you are on the 
other side and it is not required by the Federal Government, 
unfortunately many people do not believe they are at flood risk 
and they do not need it.
    And so we need to move away from that fixation of the line 
on the map, 1 percent annual chance, and give a broader 
depiction of flood risk in the communities, including looking 
at what future conditions need to be considered in a particular 
community, because of the change of climate.
    Chairman Brown. Thank you. My last question follows up on 
what you said for how important it is to better communicate 
flood risk. Talk briefly what we should do about that. Should 
Congress consider requiring flood risk disclosure to 
prospective home buyers or renters? Too often after disasters 
we hear news stories of families saying they had no idea they 
were building their home or buying a home in a floodplain, or 
starting their business there. What can we do to make that 
better, to communicate that risk?
    Mr. Maurstad. Yeah, well, you are absolutely correct. I 
mean, there are a couple of things you are always going to hear 
after a major flooding event. Number one is, ``I didn't realize 
I was at flood risk and I wish I would have had a flood 
insurance policy.'' I will go into a neighborhood and we maybe 
have three homes there with flood insurance coverage, and as I 
walk the rest of the neighborhood the other six or seven homes 
on that block do not have the coverage. And so closing that 
insurance gap is critical, and all the steps that we take need 
to be focused on what can we do to make sure we have more 
insured survivors after flood events.
    And then another consistent is what you have outlined, and 
that is, ``I didn't realize that my property had flooded before 
until it flooded this time, and I wish I would have known that 
at the time that I was considering buying this property.''
    And so I do believe that the Committee should consider 
disclosure of flood risk, and look for ways that it is 
appropriate for the Federal Government to look at making sure 
that home buyers, business owners/buyers, property buyers 
understand and know what the flood risk of that property is, 
including previous flood damage.
    Chairman Brown. Thank you, Mr. Maurstad. Senator Toomey.
    Senator Toomey. Thank you, Mr. Chairman. Mr. Maurstad, 
thanks again for joining us. As you know, moral hazard is an 
intrinsic problem with any insurance product, and flood 
insurance is no exception. When homeowners and communities are 
protected from the financial risk of an event they have less of 
an incentive to manage that risk. I am not saying it is true of 
all insurance, but it seems to me this phenomenon is 
significantly aggravated if the insurance is subsidized, as it 
is for NFIP.
    I think about the repetitive loss and severe repetitive 
loss properties in particular. These are properties that have 
repeatedly flooded over the years, and then repeatedly been 
rebuilt with taxpayer money. And these properties, I believe, 
have had about $17 billion in NFIP claims over the years. That 
is repetitive loss and severe repetitive loss properties.
    So when I look at these numbers I worry that the NFIP 
program, in its current form, does not really appropriately 
manage this moral hazard. And so my question for you is, do you 
agree with the idea that the NFIP's historically generous 
subsidies make it harder to manage what I am calling this moral 
hazard, and especially this tendency to build and rebuilt in 
flood-prone areas?
    Mr. Maurstad. So I think I would particularly like to 
address the issue associated with what excessive loss 
properties, repetitive loss properties, severe repetitive loss 
properties--quite frankly, we have too many definitions of the 
same issue, and it would be good if we could focus in on one 
definition. And certainly the excessive loss property situation 
and issue has been around for decades. Congress attempted to 
address this issue in the 2004 reauthorization of the program. 
Unfortunately, it came up with a manner in which to do it that 
was too complicated and cumbersome for communities to enact.
    So we do want to work with the Committee and look at ways 
that we can address the situation of properties. I think it is 
common sense that at some point in time if you have had a 
certain number of losses and you have taken no mitigation 
action to do it, that maybe the Federal insurance program 
should not be available for you.
    Senator Toomey. So just to be clear, I think you said this 
in your opening statement, but is it your view that 
implementing Risk Rating 2.0 is a step in the right direction, 
a step in improving the fairness and the effectiveness of the 
NFIP?
    Mr. Maurstad. I mean, there is no question. It is a 
transformational leap forward. Quite frankly, the way that we 
have been doing it, while it is built on actuarial principles, 
is actuarially sound, was developed on those principles that 
were back in the 1970s--you know, I have a friend that has got 
a 1978 Olds Cutlass that looks good, it sounds good, it runs 
well, but it is not a 2021 electric vehicle that can do things 
far better.
    Senator Toomey. And contrary to what some people may think, 
I just want to underscore this point. From what I have seen 
Risk Rating 2.0 is not a universal increase in premiums. It 
seems to me it is more like a universal increase in fairness. 
And I say that because FEMA estimates that nearly 400,000 
policyholders currently pay at least $500 a year too much for 
their NFIP flood insurance. In my home State of Pennsylvania, 
there are 4,689 policyholders who are paying at least $1,200 
per year too much for flood insurance. And my understanding is 
that Risk Rating 2.0 is likely to reduce premiums for people 
who are overpaying, and therefore, that is part of the step in 
the direction of greater fairness. Is that a fair 
characterization, in your mind?
    Mr. Maurstad. I mean, certainly when we first introduced 
Risk Rating 2.0 back in 2016, we indicated the reasons why we 
were doing that, and that is that some people were paying too 
much, some people were not paying enough, and some people were 
paying the right amount. And we needed to develop a system that 
would be able, on a risk basis--because your insurance should 
be correlated to what your risk is. And so that is what we set 
out to do, and I believe that is what we have accomplished, in 
making sure that a homeowner can know what they are paying is 
what they should be paying, based on the characteristics of 
their property and their risk, and that they are not paying--go 
ahead.
    Senator Toomey. Thank you. And my last point, Mr. Chairman, 
consistent with this idea, there is a way to have a sort of 
independent verification of whether or not the risk pricing is 
as fair as it can be at that point in time, and that is to see 
how it compares to the private market, which is not subsidized 
and which is offering these services.
    As I said, in Pennsylvania, 20 percent of flood insurance 
policies are private market. Are you supportive of a 
marketplace that includes competitive, private insurance?
    Mr. Maurstad. Yeah. We have said, for at least 4 years now, 
when we set a goal within FEMA to double the number of 
properties covered by flood insurance, that that was not just 
with the NFIP, that there should be, and we hope, a continuing 
increase in flood insurance coverage in the residential market, 
private market, to help close the insurance gap. And so clearly 
there is plenty of room for both. I mean, when you look at the 
high-risk area, and only two out of six properties in the high-
risk area are covered by either an NFIP or a private-sector 
policy, there is plenty of market out there for the private 
sector to play a larger role in covering the flood risk of 
America.
    Senator Toomey. Thank you very much. Thanks, Mr. Chairman.
    Chairman Brown. Thank you, Mr. Toomey. Senator Menendez of 
New Jersey.
    Senator Menendez. Thank you, Mr. Chairman. Look, FEMA's 
Risk Rating 2.0, the agency itself says that 80 percent of 
property owners nationwide will see rate increases, and some of 
those will be compounded annually over the course of several 
years. Now I hear a lot from FEMA, and special interest groups, 
that we should keep raising rates on policyholders, that 
premiums are too low, they need to go higher, but this 
completely ignores the cost side of the ledger and fails to 
look within the program for savings and efficiencies that 
benefit the policyholders.
    One of the biggest costs to the program is not paying out 
claims. The real drain on the program, in my view, comes from 
padding the pockets of insurance companies that bear none of 
the financial risk.
    So, Mr. Maurstad, for every dollar of a written premium, 
how much goes to private insurance companies?
    Mr. Maurstad. We have 65 of the leading property insurance 
companies that administer the program on behalf of the Federal 
Government, and currently 30 percent of the premium dollars are 
provided to them to administer the program.
    Senator Menendez. Thank you. Now let me ask you this. For 
FEMA to currently run that program in house, how much of the 
written premium does that cost?
    Mr. Maurstad. So the direct side, which writes about 15 
percent of the flood policies, compared to 85 percent of the 
policies that are written by the WYO--rough numbers, and we can 
get you the exact numbers--it is about $30 million.
    Senator Menendez. Well, looking at it, I saw, as you said, 
30 percent goes to the insurance company, 20 percent FEMA has 
to use to operate it, so that is 50 percent less than what the 
insurance companies receive. Why are we paying insurance 
companies 50 percent more than it would cost to do it in-house?
    Mr. Maurstad. Well, the reason why is because that is what 
the statute and our regulations allow for. And as you are well 
aware, the 2012 reauthorization indicated that the agency 
should look at, and study, and come up with what is the proper 
amount to pay the WYO companies, based on what they are actual 
expenses are. And while it is taking too long, we are 
continuing to work on that regulatory process, and we will 
eventually look at what the appropriate amount should be to pay 
the WYO companies.
    Senator Menendez. Mr. Chairman, this is an area that we 
need to look at, because if we are paying 50 percent more than 
it would cost to operate in-house, my bipartisan (NFIP-RE) Act 
takes the commonsense approach, and it would require FEMA to 
compensate the insurance companies the same amount it costs 
FEMA, to serve as the program itself. I think it is fair to 
compensate our hard-working agents at a minimum of 15 percent, 
but this 50 percent is a huge cost. We are talking about 
hundreds of millions of dollars.
    I am glad to hear the Chairman raise the question of NFIP 
debt and your response. Four hundred million dollars a year in 
interest--that is in interest--that is 10 percent of the 
written premiums the NFIP takes in. No program could be solvent 
with 10 percent debt service. And sour bill also tackles this 
issue by freezing interest payments and putting those savings 
into mitigation. And it is fair to say that mitigation has a 
multiple effect. For every dollar we spend on mitigation, there 
is how many dollars that we save?
    Mr. Maurstad. Six to one.
    Senator Menendez. Six to one. I like anything the Federal 
Government could do that six to one at the end of the day.
    Legal expenses. Policyholders' premiums are also footing 
the bill for the insurance industry's high-priced defense 
lawyers. Systemic abuses were uncovered after Superstorm Sandy, 
where the Nielsen firm capriciously ran up legal defense fees. 
This led to the NFIP to cover $60 million worth of fees, and 
could have reached $100 million if FEMA had not stepped in.
    One judge called Nielsen's actions ``reprehensible.'' Mr. 
Maurstad, why don't we have Government attorneys handle these 
cases, like they do in virtually every other Government 
program?
    Mr. Maurstad. Sure. So since Sandy was put in place we have 
done some things to improve the claim handling process. One was 
we set up an appeal branch that is separate from the claims 
branch, so that if a policyholder has issue with the way their 
claim was handled there is a firewall between the claims 
handling part, and they can make an appeal to the agency. We 
can go through that process.
    We have also put in place a new litigation program, where 
we oversee and manage the litigation of not only those that are 
written in the direct but with the WYO. And we can provide you 
with the specificity associated with the litigation reforms 
that we have put in place to address the issues that you have 
raised.
    Senator Menendez. Well, I think the Government should be 
doing this.
    Mr. Chairman, since this is such a critical issue to New 
Jersey, I think what I find even more frustrating is that we 
call Risk Rating 2.0 equity in action, when I think this new 
rating system is anything but equitable.
    Keansburg, New Jersey, home to just over 10,000 people, 
nearly 2,000 NFIP policyholders. It is town made of hard-
working families, blue collar, median household income of 
$52,000. This is a town that lost everything after Superstorm 
Sandy. Under Risk Rating 2.0, 90 percent of policyholders in 
Keansburg would be seeing premium increases in the first year, 
and the increases continue to compound in years to come.
    Now the one thing about insurance, as you know, Mr. 
Chairman, is that it is about spreading the risk over the 
widest pool. And more expensive this insurance becomes, the 
less the pool that will exist, and the premiums will continue 
to go up as there are less people in the pool, not to mention 
the ratable losses for communities across the Nation who, if 
you cannot sell the property at the end of the day because you 
cannot afford flood insurance, the dramatic effect on a ratable 
basis.
    So I appreciate the Chairman having this hearing, and we 
look forward to working with you to try to meet some of these 
challenges. Thank you.
    Chairman Brown. Thank you, Senator Menendez, for your 
thoughtfulness on this issue, for years. Senator Kennedy----
    Mr. Maurstad. Mr. Chairman----
    Chairman Brown. Yes, Mr. Maurstad.
    Mr. Maurstad. May I respond?
    Chairman Brown. Of course. I am sorry.
    Mr. Maurstad. So the Senator is right. Eighty percent of 
policyholders will see their premiums go up. Right now, if we 
did nothing, 100 percent of them would. There are 217,000 
policyholders in New Jersey that are going to see a decrease in 
their flood insurance rates, at an average of $85 a month, with 
Risk Rating 2.0. Then there are another 137, or 65 percent, 
that are going to see an increase on the same level of an 
increase that they would see if we did nothing.
    And so he is absolutely correct. We just are looking at the 
numbers slightly differently. And for that reason we believe, 
when it is based on risk and the individual property 
characteristics, that we do have a methodology that is more 
equitable and fair.
    Senator Toomey. I would be happy, at some time, Mr. 
Chairman, to go over the numbers. I will not delay my 
colleagues here today, but there is a real impact for a very 
large number of people, and it not only the impact, it is the 
size of the impact. Thank you.
    Chairman Brown. Thank you, Senator Toomey. Senator Kennedy 
from Louisiana is recognized for 5 minutes.
    Senator Kennedy. Thank you, Mr. Chairman. Thank you, Mr. 
Maurstad, for being here today.
    You are not clairvoyant, and I am certainly not 
clairvoyant, so I can just share with you what I have observed 
so far. I think with respect to Risk Rating 2.0, I think you 
are presiding over tire fire. I think the rollout of Risk 
Rating 2.0 looks like a ferret fire drill.
    I mean, here is what I hear FEMA saying. We created this 
program in 1968. FEMA has the authority to assign premiums. We, 
FEMA--I hear you saying--all these years have been doing it 
wrong. We have assessing risk wrong. And now we, FEMA, have had 
an epiphany, and we have figured out how to look at every 
individual property, out of all the properties in the United 
States of America, and assign the risk for that particular 
property. But we are not going to tell you how we are going to 
do it. In fact, we are going to require the insurance companies 
who are implementing Risk Rating 2.0 to sign a gag order. We 
are not going to promulgate a rule. We are not going to allow 
for public comment. We are just going to do it, because we are 
smarter than the people who pay the premiums, and we are 
smarter than the U.S. Congress.
    Now I need you to explain to the policyholders of American 
right now, not in gauzy platitudes--no disrespect, Mr. 
Administrator, but I feel strongly about this. Because you are 
not waiting. You are going to pull the trigger in August. I 
need you to explain to them this epiphany that FEMA has had, 
and how, if you look at a particular property, you are able now 
to assign, with specificity and accuracy, flood risk, when all 
these years you did it wrong. Tell me what you did wrong and 
tell me how why it is going to be accurate.
    Mr. Maurstad. So fundamentally the methodology is 
different. Previously, we looked at rating policies based on a 
zone----
    Senator Kennedy. I get that part. I am sorry to interrupt 
you but I only have 5 minutes. I get the part. You are saying I 
can look at Senator Brown's property, now that we have had this 
epiphany, and we have talked to consultants, and know 
specifically, on his property, what the risk is. How? What new 
factors are you considering? How are you going to do it?
    Mr. Maurstad. So we do not have much time, and I would just 
point you to the document that we put on the website, that, in 
essence, is the same as an insurance rate filing that a private 
insurance company would provide to a State insurance 
commissioner that would be able to validate the methodology 
associated with the rates that they were going to charge. So I 
would----
    Senator Kennedy. How are you going to do it?
    Mr. Maurstad. So that document shows how, and explains how 
we do it. We, in essence--the simplified form would be we are 
using three different commercially available cat models. We 
have developed two----
    Senator Kennedy. Who developed the models?
    Mr. Maurstad. One of them is AIR, one of them is CoreLogic, 
and the other is CATRisk. We combined that with two----
    Senator Kennedy. Has the public--I am sorry. Go ahead. 
Excuse me.
    Mr. Maurstad. We combined that with two Government-
developed, FEMA-developed cat models, and then we added 
replacement cost information, that we get from CoreLogic, that 
all the regular insurance companies use.
    Senator Kennedy. Let me stop you because I have got 30 
seconds, and I am sorry, Mr. Maurstad. I really apologize. I am 
going to ask the Chairman to hold another hearing on this.
    OK. You have got some consultants and they have developed 
models. I get that part. They have not been tested. You have 
done no rule. You have done no public comment. Nobody has been 
allowed to weigh in. Policyholders have no idea what you are 
talking about. You know what I have discovered about 
consultants from predicting the future? For every consultant 
there is an equal and opposite consultant, and oftentimes they 
are both wrong, and a lot of them, their accuracy is about as 
good as those late-night psychic hotlines on TV. And you have 
done this in secret, and it is not right.
    Mr. Maurstad. Well, sir----
    Senator Kennedy. And we do not know whether you have 
considered other alternatives, as Senator Menendez--I am almost 
done, Mr. Chairman--as Senator Menendez talked about. Are we 
paying the insurance companies too much? Is 30 percent off the 
top too much. Why aren't we doing a better job of requiring 
people who are supposed to have insurance to have the 
insurance? What about some of these consultants that I have 
talked to FEMA about, that you could persist in hiring? They 
are thieves?
    Mr. Maurstad. Yes, sir. So all----
    Senator Kennedy. None of this has been addressed.
    Mr. Maurstad. ----all good points. I look forward to having 
further discussion with you on all of it. I know how important 
the National Flood Insurance Program is to your State. Over the 
past 16 years there have been 260,000----
    Senator Kennedy. But I want you to understand, Mr. 
Maurstad, because I am going to get cutoff----
    Mr. Maurstad. ----policyholders----
    Senator Kennedy. In my State we are not talking a bunch of 
wealthy homeowners who have a second and third beach house. 
These are working people. They get up every day, they go to 
work, they obey the law, they try to do the right thing by 
their kids, they try to save a little money for retirement. 
Their biggest investment is in their home, and now you are 
doing this to them without explaining it to them?
    Mr. Maurstad. This will----
    Senator Kennedy. And we wonder why Congress and the Federal 
Government ranks in polls right up there with skimmed milk?
    Mr. Maurstad. Risk Rating 2.0 will assist exactly the 
people that you are talking about. Two-thirds of the homeowners 
that have subsidized homes are going to see a reduction in 
their premium. Currently, low-value homes----
    Senator Kennedy. Eighty percent of my people----
    Mr. Maurstad. Currently low-value homeowners are 
subsidizing high-value homes. This program addresses the 
concerns that you have----
    Senator Kennedy. But you have got to explain why, Mr. 
Maurstad.
    Mr. Maurstad. Back to the----
    Senator Kennedy. There is a lot of distrust of Washington. 
You have got to explain why. You cannot hide your consultants. 
In front of God and country and policyholders, you have got to 
say this is the methodology. Now let's test it through debate.
    Mr. Maurstad. So let's clear the consultant issue, first of 
all. FEMA has been working on this for 5 years, thousands of 
hours. It is probably not a well-known fact, but FEMA has some 
of the best flood, catastrophic actuaries in the country.
    Senator Kennedy. Then we ought to test them in public.
    Mr. Maurstad. They are top notch.
    Senator Kennedy. Then they ought to be tested in public.
    Mr. Maurstad. ----data----
    Senator Kennedy. They ought to be cross-examined.
    Mr. Maurstad. In addition to we did use three cat models, 
the same cat models the reinsurance industry uses, to price 
their product.
    Senator Kennedy. Then why is FEMA trying to hide----
    Chairman Brown. Please wrap up, Senator Kennedy.
    Mr. Maurstad. We are not hiding anything.
    Senator Kennedy. I told you he was going to cut me off. 
Then FEMA should not hide. They should not hide your work. Show 
your work.
    Mr. Maurstad. We post more information on the website than 
what has ever been posted before. I point you to our website--
--
    Senator Kennedy. Right.
    Mr. Maurstad. ----where State profiles----
    Senator Kennedy. That is the answer. That is the answer, a 
website.
    Mr. Maurstad. Well, sir, and we have done 450 stakeholder 
engagements since March 1.
    Senator Kennedy. Why did you make the----
    Chairman Brown. Senator Kennedy, your time has expired. You 
have gone over 8 minutes. Senator, we can do a second round if 
you want to stick around.
    Senator Kennedy. Thank you, Mr. Chairman.
    Chairman Brown. Senator Warren is recognized for 5 minutes, 
from Massachusetts.
    Senator Warren. So thank you, Mr. Chairman, and thank you 
for holding this hearing today.
    There is no dispute about the basic facts. Sea levels are 
rising and storms are becoming more intense and more frequent. 
In Massachusetts, we recently learned that Boston Harbor 
Islands are at risk of being lost to rising tides, and 1 day 
soon the same could be true of many of our coastal cities and 
towns.
    Our communities rely on FEMA's flood maps to help gauge the 
risk. It is easy for residents to presume that if they live 
outside the invisible line on the map that designates the flood 
zone then they do not have to worry. And if their home is 
inside that line then they are at higher risk.
    The problem is we are beginning to learn that is a very 
dangerous assumption. Some of these maps have not been updated 
in decades, but even for maps that are up-to-date, they may not 
be providing an accurate assessment of the risk.
    So here is what I want to ask about, Mr. Maurstad. We know 
that flood risk areas are rapidly expanding because of climate 
change, but FEMA's maps do not incorporate projections of 
future conditions, such as rapidly rising sea levels. So let me 
ask you what FEMA is doing to try to make sure that all 
communities have good information, not just about past risk but 
about future risk.
    Mr. Maurstad. Right. So you are absolutely correct in all 
of the statements that you made, and right now FEMA only has 
the statutory authority to map the 1 percent annual-chance 
event. It is a minimum Federal standard that was set back in 
1968, when the Flood Insurance Act was put in place, and at 
that time there were statements, and the intent was to evaluate 
that standard on a regular basis.
    We still have that minimum Federal standard. I believe that 
ought to be looked at. It also ought to be looked at as to 
whether or not FEMA should have additional authority to map 
future conditions as a result of the things that you are 
talking about. But in the meantime we have put in place a 
Future of Flood Risk Data, where we are working with the 
Technical Mapping Advisory Commission and using their 
recommendations on how we, within our current authorities, 
develop nonregulatory products that will help communities 
better understand their complete flood risk, and not just their 
flood risk from the 1 percent annual chance.
    Senator Warren. That is very helpful, and I appreciate it, 
and I appreciate your point that we need to make some changes 
around here in your authorizations.
    Our communities need maps that tell them more than just a 
story about the history of floods, and we need the NFIP to 
change the perception of flood risk as either you have risk or 
you do not have risk, and if you are outside the zone you don't 
need to worry about it.
    So I am very glad to see that you are moving toward a 
graduated assessment in terms of risk, instead of using a 
binary approach here. I think that is going to help families 
better understand the risks that they face. But we just need to 
make sure that we turn this plan into action and that families 
that live just outside flood zones actually are participating 
and understanding what is going on here.
    So let me ask you this part. Mr. Maurstad, do you believe 
that mortgage lenders should bear a greater responsibility for 
informing homeowners of their graduated flood risk, and if so, 
would you commit to working with lenders to make sure they are 
living up to this responsibility?
    Mr. Maurstad. So I absolutely commit to working with them. 
We already with them. They, of course, are responsible for 
enforcing the mandatory purchase requirements, and I appreciate 
your remarks because we have been trying for years now to get 
people to not be fixated on in or out, line on the map, 
required or not required, but to really look at their flood 
risk. Risk Rating 2.0 will actually help that, because it is 
going to give a better indication of what the risk is in a 
community, in a graduated basis. So price is one of the best 
signals for what your risk is. Risk Rating 2.0 will help in the 
situation that you are talking about.
    And so yes, if we can work with ways where the lending 
community can embrace the graduated risk, we will do everything 
we can to help.
    Senator Warren. And I take it from your answer you are 
saying yes that you think mortgage lenders should bear some 
responsibility in this?
    Mr. Maurstad. I think they do. Can they take more? Yes.
    Senator Warren. Good. That is what I wanted to hear. You 
know, climate change is making flood risk worse with each year, 
and our homeowners need NFIP coverage to protect their 
families. We just have a real responsibility to inform them 
accurately about what those risks are.
    We also have a duty to mitigate flood risks by tackling 
climate change head on. Today our coasts and islands are in 
grave danger, and tomorrow our cities and towns will be in 
grave danger. We need to act before then. Thank you.
    Mr. Maurstad. There is no question that flood risk in 
America is underappreciated, and we need to do a better job of 
making sure that we develop a culture of preparedness so that 
we can build resiliency with individuals and communities and 
reduce disaster suffering.
    Chairman Brown. Thank you, Senator Warren. Senator Rounds 
from South Dakota is recognized for 5 minutes.
    Senator Rounds. Thank you, Mr. Chairman. Well, flood occurs 
in South Dakota just like it does in other parts along the 
coast. It is a different kind. It is primarily because of, in 
some cases, the Missouri River, which has the mainstem dams of 
the Missouri--or the mainstem dams are there and yet while we 
do our best to provide for flood control, sometimes Mother 
Nature takes the upper hand. And so to us, in the central part 
of the country, it is important as well.
    I would like to ask you a question about coverage limits, 
to begin with, sir. In my prior life I was also a property and 
casualty agent, and our agency would market Write-Your-Own 
policies from different companies, who did a very good job for 
us. But there were many cases in which we looked at the way 
that flood insurance was written and marketed versus the way 
other traditional types of insurance were, and we do some 
things in the national flood program that no normal insurance 
company would ever do, such as limiting the total amount of 
coverage but not insuring to value, necessarily, or perhaps not 
looking at coinsurance clauses, and so forth, while, at the 
same time, not developing the premium necessary to actually 
cover the expenses involved.
    One of the areas that I was curious about exploring, with 
any new flood insurance product or renewal would be whether or 
not we could actually come out ahead in the game if we allowed 
for higher limits of insurance with appropriate additional 
purchases of premium, in the least dangerous flood-identifiable 
areas, so that we could actually increase the total premium 
dollars being brought in versus not significantly increasing 
the risks involved for the program.
    Would you comment on that for me please, sir?
    Mr. Maurstad. Sir, and thank you, Senator. It is good to 
see you again. Our paths first crossed when I was the Regional 
Administrator out in Region 8, and you were Governor. I am also 
a former agent, and so we share that in common. And certainly 
the issues that you raise are valid ones. We are working on 
those.
    You know, another little difference in NFIP policy and your 
private sector policy or your homeowner policy is you have to 
buy a flood policy on your dwelling and you have to buy a 
separate policy on your contents. We are working on developing 
new policy forms to combine those, make it more like the 
homeowner policy, easier for agents to sell, understand, be 
less complex, better understood by policyholders.
    And yes, the limits have not been changed since the early 
1990s, and so I believe that during the reauthorization process 
we should look at what is the appropriate limit for NFIP flood 
insurance in the next go-around. It certainly is one where we 
have seen the number of our policies that are at the max, 
$250,000 limit for a residence, has increased steadily, and I 
will get you the exact number but I think it is well over 50 
percent, or at the maximum limit, which indicates there is a 
need there.
    Senator Rounds. Well, just as an example, and the reason 
why I think some people say, well gee, all they are trying to 
do is increase the total amount of losses paid out, with the 
flood insurance you pay first dollar out. And so if your risk 
is based upon a valued property may very well be a half-a-
million dollars in value, if you are always going to take the 
first $250,000, no matter what happens--and most flood 
insurance losses are not total losses--you have first dollar 
exposure and yet your premium is developed only on a $250,000 
risk, where the risk really is significantly higher in terms of 
total value of the loss. And it simply is not something that 
any of the rest of the insurance industry has ever found a 
successful way of underwriting in the past.
    Mr. Maurstad. Yeah. Part of the change that we are making 
in Risk Rating 2.0 is using replacement cost as one of the 
measures of how you determine the premium. That is part of what 
balances out the inequity in low-value homes and high-value 
homes. And so you are correct, and I think we are on the right 
path to address some of your issues.
    Senator Rounds. Thank you, and I would note for the record 
that I actually have a flood insurance policy on my home, and 
it was amazing to me that the value on my home would be greater 
than the $250,000, my premium is based on a $250,000, but most 
certainly, in any other type of insurance product they would 
never allow me to have $250,000 in coverage on that home if I 
was not insuring it to value. And I think that is something 
that would increase my premiums, but it most certainly would be 
a lot more stable product within the market if we appropriately 
priced it.
    Mr. Maurstad. Yeah, correct.
    Senator Rounds. Thank you. My time has expired. Thank you, 
Mr. Chairman.
    Chairman Brown. Thank you, Senator Rounds. Senator Smith of 
Minnesota is recognized.
    Senator Smith. Thank you, Chair Brown, and thank you so 
much for this hearing today. I appreciate it. And thank you, 
Mr. Maurstad.
    So in Minnesota you do not need to convince folks about the 
reality of climate change. We see it in more and more extreme 
weather events and wildfires and in dramatically fluctuating 
water levels on our lakes. In fact, climate change impacts are 
more extreme in Minnesota than in a lot of other places.
    One of the things that we are seeing more and more of are 
pluvial flooding, which is what happens when you have a massive 
amount of water dumped from a big storm all at once, and there 
is just no place for that water to go. We are seeing an 
increase in this kind of flooding also in Minnesota, and bigger 
storms and more of them. So it is good to see that this kind of 
flooding would be included in the Risk Rating 2.0 strategy. 
This is going to make a lot more Minnesotans eligible for 
coverage, and it is also good to see that Risk Rating 2.0 will 
be tying premiums to that specific property's flood risk rather 
than just sort of assigning a broad zone.
    I also just want to say, you know, there is going to be an 
increased demand for better, stronger surface water management 
and mitigation strategies on top of everything else.
    But Mr. Maurstad, could you just talk a little bit more 
about how NFIP will be evaluating these future pluvial flood 
risks as these events become more and more frequent with 
climate change?
    Mr. Maurstad. Sure. I mean, how is Risk Rating 2.0 better? 
It is better because it incorporates new variables into 
calculating what the premium is. So instead of just the 1 
percent annual chance one event and your elevation and the type 
of structure, it is now flood frequency, multiple flood types, 
as you have mentioned, whether it be river overflow, storm 
surge, coastal erosion, heavy rainfall, which has not been a 
part of factor in the past, distance to a water source, of 
course elevation and cost to rebuild.
    So it far more encompasses the entire realm of flood risk, 
which is part of the reason why it is more equitable for the 
program.
    Senator Smith. Right. And you are trying to balance 
premiums that do a better job of covering the overall cost, and 
also trying to balance encouraging more people to participate, 
right?
    Mr. Maurstad. Yes. I believe that because of the new change 
in pricing methodology we will see more policyholders, because 
they will now better understand they are at risk, and in 
addition to that, I think that the method by which the agents 
are going to sell the policies is going to be easier and 
simpler. Instead of going to a manual as big as this deck and 
trying to pencil out what your premiums are going to be, we 
have developed a rating engine that everybody will be able to 
tap into, be able to tell you what your premium is. It will be 
uniform across the country, far easier for the agents. I think 
we will see more agents involved in the program because of its 
simplicity, and because of that we will see more homeowners, 
small business owners buy the necessary flood insurance they 
need, and will reduce disaster suffering.
    Senator Smith. And that expands the overall pool, which is 
a good thing.
    Mr. Maurstad. Correct.
    Senator Smith. So this is a big issue in Minnesota, where 
we pride ourselves at often being at the top of most metrics, 
but unfortunately we are not at the top when it comes to flood 
insurance participation. Only 0.4 percent of eligible 
properties in Minnesota receive coverage under the flood 
insurance program, and only 7.6 percent of Minnesota structures 
in high-risk floodplains are carrying flood insurance. So we 
want more of those folks to be participation.
    Now I think adding pluvial flood risk will help, but we 
need to do something dramatically different. And I think that 
the changes that we are going to be seeing in Risk Rating 2.0 
will be very helpful to Minnesotans. But could you talk a 
little bit about what education efforts you think that we need 
to ensure that homeowners, small businesses, homeowners 
especially living newly declared flood zones, are aware of the 
changes and now what is going on?
    Mr. Maurstad. Well, I mean, of course with 22,500 
communities we work with associations, the Association of State 
Floodplain Managers, for example, in making sure that 
floodplain managers understand. We are doing training for them. 
We are doing training for agents. We have already trained about 
2,400 agents. We are doing training every week from now through 
the summer, where more agents will be trained.
    We rely on realtors, lenders, but realtors have been very 
involved and are certainly supportive of the direction that we 
are moving. And so realtors help. It is a whole community 
approach on how we can do a better job of getting people to 
understand their flood risk so that after that flood event that 
is going to happen--98 percent of the counties in the U.S. have 
had a flood event--more people have the coverage they need to 
be on the road to recovery.
    Senator Smith. Thank you. Thank you so much, Mr. Chair. You 
know, I am encouraged that this Risk Rating 2.0 strategy I 
think is going to result in a more fair allocation of costs and 
a better correlation with risk, and that this is going to 
benefit Minnesota, even as the overall risks are spread out 
over a larger pool. So thank you very much.
    Chairman Brown. Thank you, Senator Smith. Senator Tillis of 
North Carolina is recognized for 5 minutes.
    Senator Tillis. Thank you, Mr. Chairman. Mr. Maurstad, 
thank you for being here. I think Risk Rating 2.0 is a great 
development. It is a shame that it is the first update since 
the Beatles were topping the charts, but at least it is here.
    You know, in North Carolina, when I was Speaker of the 
House, we invested in mapping so that we had the best available 
data. I think we rank up there as some that probably have the 
best situational awareness. The question I have on the Risk 
Rating 2.0 has to do with the flood events that we normally 
experience a couple of days after a storm or a major weather 
event, that is not on the coast. We get the brunt of the impact 
of a hurricane on the coast, and then we get the brunt of 
flooding to our river basins in the eastern part of the State.
    Do you think Risk Rating 2.0 is designed to leverage the 
best mapping information and to make available the program to 
the inland, at-risk areas?
    Mr. Maurstad. Yeah. I think that absolutely that is the 
case. As I mentioned the different types but also there are 
many ingredients that go into Risk Rating 2.0. It is not just 
one factor that dictates how a property is going to be rated. 
And so we incorporate, as I mentioned before, the cat models. 
We incorporated the FEMA NFIP flood mapping that is so 
important, and the flood loss history, and the replacement 
cost, and the elevation. So there is a lot that goes into this 
new program.
    As I indicated, it is all laid out in the over 200-page 
document that explains the methodology associated with Risk 
Rating 2.0. You have got to be an actuary or a Ph.D. to 
understand it, quite frankly, but it is there. And everyone is 
there to assess and evaluate it, which we hope people do. We 
did not do this in a vacuum. We utilized the private sector 
company that does this for major insurance companies across the 
country.
    So, you know, there is no question in my mind that it will 
address the issue that you raised, but it will provide a more 
comprehensive approach across all of our 22,500 communities.
    Senator Tillis. With respect to moving forward with the 
NFIP reauthorization, what other kind of things should we think 
about to maybe incent other States? Again, I believe that North 
Carolina has done a pretty good job through our own State 
resources, but what else should we consider to make sure that 
you have the best information available? That is one.
    And also, I am a part of a bipartisan workgroup that is 
focused on infrastructure, and one of the infrastructure 
components there is several billion dollars for resiliency. It 
would seem to me that with our better situational awareness 
over where the risks are that that should be a part of 
prioritizing the resources that we have, to make more resilient 
areas less likely, maybe even get them to a point to where they 
have a lower risk rating. So I think that is something to think 
about if we are successful with the infrastructure bill.
    But what more should we be thinking about as we move 
forward with the reauthorization of the program, tools, and 
priorities?
    Mr. Maurstad. Well, I mean, certainly the incentives 
associated with a community rating system, that provides 
discounts to those communities that adopt higher standards and 
do other endeavors that either provide better information or 
mitigation or reduce the risk within their community. So we are 
going to continue to evaluate the community rating system 
program, make sure it does what it should do.
    But we should also look at what are the other ways that 
communities can be incentivized to provide additional 
information when the mapping occurs, which we are, quite 
frankly, going to move away from as we look at how we generate 
flood risk data, and how we can have communities now, any 
information they bring we certain incorporate. But what can we 
do to incentivize them to provide more information, put more 
skin in the game, so to speak, to make their maps--because they 
are not our maps. They are the community maps. The communities 
adopt the maps--as relevant as possible.
    Senator Tillis. Thank you for that. Mr. Chairman, I think 
Senator Cortez Masto is wondering why I am sitting in her seat. 
I got confused too.
    Chairman Brown. Someone needs to inform Cortez Masto the 
Democrats are in the majority now. I think she knows that.
    [Laughter.]
    Chairman Brown. So we flipped sides. Sorry to walk in 
front.
    Thank you. Do you want to start a second round with Senator 
Kennedy, or are you ready, Senator Cortez Masto?
    Senator Cortez Masto. I am ready.
    Chairman Brown. OK. Then Senator Cortez Masto is recognized 
for 5 minutes.
    Senator Cortez Masto. Thank you. I so appreciate the 
opportunity, and please, excuse the delay. I was in another 
hearing this morning, as you can see.
    So let me ask a couple of questions here. In certain areas 
of Nevada, such as Washoe County, which has experienced heavy 
flooding in previous years, some community maps are seriously 
out of data, and letters of map revision by the community are 
the only way these maps are being updated. My office has 
received some feedback that this revision process is cumbersome 
on the community level and very expensive on the individual 
level.
    So can I ask, what are the consequences to taxpayers and to 
policyholders when we have outdated maps, number one, but also 
too, what progress has FEMA made in implementing reforms that 
would make it easier and less costly to appeal a map?
    Mr. Maurstad. So when it comes to outdated maps, as I 
indicated we are required, every 5 years, to address whether or 
not a community's maps need to be updated. Our regional offices 
work with communities to determine that and go through that 
process. And if there is change then we start a new map 
evaluation on those.
    So I think that the maps are not as outdated as what some 
folks might think. There certainly are some that are. And we 
want to work with communities, and we will work with community 
that want to have their maps updated. Generally speaking, 
communities do not want us to have their maps updated. But we 
certainly will work with communities that want to have their 
maps updated to make sure that they can be as useful a tool as 
possible in managing the floodplain in their community, and 
managing development in the high-risk areas. So that is the 
updated issue.
    What can we do more to simplify the process, we are looking 
at ways that that can be done. It is a public process that is 
laid out, quite frankly, so that the community and members of 
the community can participate in that change process. But we 
are----
    Senator Cortez Masto. How long is that process going to 
take?
    Mr. Maurstad. How long does it take? It varies. Let's say 
in those circumstances where there is a hard time coming to 
agreement on the map, it can take 5 to 7 years. So we need to 
look at ways where, in those circumstances, it can be simpler, 
and we are open to those ideas.
    Senator Cortez Masto. Thank you. The other thing I come 
across is a 2012 study by the GAO that noted that FEMA has not 
placed a high priority on mapping rural areas, including many 
Tribal areas, for flood risk, and most Tribal lands remain 
unmapped. Now that was a 2012 study. Is that still accurate 
today?
    Mr. Maurstad. Most of the maps that do not meet the new 
validated engineering standard are in less-populated areas, and 
that is a resource issue in which we work with each of the 
regions in identifying the areas that need to be mapped in 
their region that would have the greatest impact to the 
National Flood Insurance Fund. And so those areas have lagged 
behind. We continue to want to work to address those, and I 
appreciate the continued support of the mapping appropriation 
for the program, and we are committed to making progress in 
those areas.
    Senator Cortez Masto. So let me ask you this, because it 
sounds like it is still accurate, the 2012 study. And what I am 
also hearing is that the Tribes may lack the resources and 
administrative capacity that they need to administer the 
National Flood Insurance Program requirements, and NFIP 
premiums are often too high for low-income Tribal members.
    So are you looking to address and work with the Tribes 
specifically, and if you are, how are you doing so?
    Mr. Maurstad. Yeah. So let me take that back and we will 
get you a more robust answer than I can provide right now. But 
certainly we are committed to assisting those vulnerable 
communities to be able to fully participate in the program, and 
again, would be open to ways that we can achieve that. 
Certainly the means-tested assistance program to help those 
that earn 85 percent or less of the average mean income that is 
being proposed by the Administration would help with the 
affordability issue that you have mentioned, on Tribal lands. 
And so I think that will also be of help in getting more low-
income individuals that are at flood risk to have the necessary 
coverage they need.
    Senator Cortez Masto. Thank you.
    Chairman Brown. Thank you, Senator Cortez Masto.
    We will begin a second round. We have votes at 11:30, so, 
Senator Kennedy, if you would make sure you keep it to 5 
minutes. We may have a couple of other Senators coming back 
too. But proceed, Senator Kennedy, for 5 minutes, if you would.
    Senator Kennedy. Thank you, Mr. Chairman, and thank you 
again, Mr. Administrator, for being here.
    You referenced, in answering Senator Tillis' question a 
private company that had quarterbacked this for you that is 
also a consultant to other insurance companies. What private 
company is that?
    Mr. Maurstad. Milliman.
    Senator Kennedy. Milliman.
    Mr. Maurstad. Yeah. And they did not spearhead this. They 
worked for FEMA, in helping us make sure that we are in line 
with the way that a private sector company would go about 
achieving a modern, risk-based, actuarially sound rating 
system.
    Senator Kennedy. Right. And how much did Milliman charge 
FEMA?
    Mr. Maurstad. I will have to get back to you on that.
    Senator Kennedy. Was it $10 million?
    Mr. Maurstad. I will have to get back to you.
    Senator Kennedy. You do not know?
    Mr. Maurstad. I will get back to you.
    Senator Kennedy. Was it more than $10 million?
    Mr. Maurstad. I am not going to guess, sir.
    Senator Kennedy. OK. Why didn't FEMA allow for public 
comment? You have had this epiphany and you have decided that 
after all these years you have been doing it wrong, and 
Milliman has now shown you how to do it correctly, why would 
you not subject that to public comment?
    Mr. Maurstad. So not to be argumentative with you, sir, I 
mean, we were not doing it wrong for all those years. It was 
just a different time, and a different way in which to 
fundamentally price insurance. It was determined that we had 
inadvertently, over the years----
    Senator Kennedy. Yes, but not to interrupt you, why haven't 
you allowed for public comment?
    Mr. Maurstad. As I said before, we have made all the 
information available. We are charged with the responsibility--
--
    Senator Kennedy. Yes, sir.
    Mr. Maurstad. ----charged with the responsibility of 
developing a risk-based, actuarially sound, site-specific 
pricing methodology. That is what you have told us to do, and 
that is what we have done.
    Senator Kennedy. But by your own admission, this 200-page 
report that you put on your website--I wrote down what you said 
here. You said you have to be an actuary to evaluate it. Did I 
misunderstand you?
    Mr. Maurstad. No, sir. I mean, you would not have a plumber 
do an appendectomy either. I mean, it is done on the basis of 
the way in which a rating filing----
    Senator Kennedy. But don't you want people to understand 
the change?
    Mr. Maurstad. So there are other tools that we have also 
put on the website also. We have put a Fundaments of Risk 
Rating 2.0, we have put a video on there. So we have provided 
that information also, in addition to all the stakeholders that 
assist us in communicating our program----
    Senator Kennedy. Is Milliman going to put in a toll-free 
number, where people can call and say, ``OK, here is my house 
at 26 Main Street, Bucksnort, America. You increased my 
premiums,'' because premiums are going to go up by 80 percent. 
They are. I mean, you might as well be honest with people.
    Mr. Maurstad. No. Premiums go up right now an average of 
about 10 percent a year, not 80 percent.
    Senator Kennedy. And as I understand what you are saying is 
Milliman, in its wisdom, has decided they can look at a 
property and decide the risk, in an absolute sense, and you 
cannot increase premiums immediately to achieve a premium 
commensurate with that risk because Congress has stepped in and 
said, look, you have got to consider your customers, for God's 
sake. That is who this is for.
    So you are going to have to do it gradually. But will I be 
able to call Milliman and say, ``Milliman, you have now been 
able to assess the risk, and you can look 20, 30, 40, 50 years 
in the future and see it. Can you tell me what my risk is and 
how long I am going to have these premiums? And, by the way, 
could I get your advice about the stock market?'' Are they that 
good?
    Mr. Maurstad. So I maybe have not been clear. Milliman did 
not do what you just articulated.
    Senator Kennedy. That is not what I hear.
    Mr. Maurstad. Well, then----
    Senator Kennedy. I hear Milliman fathered this child.
    Mr. Maurstad. No. No. They did not. And we used multiple 
sources, and it was led by the FEMA chief actuary. And so FEMA 
drove this process. Milliman supported us in this endeavor.
    Senator Kennedy. Last question. A lot of people buy 
insurance because they have to. I am glad they do. They should 
buy it. The mortgage lender says, yep, it is in place, so let's 
close on the loan, and they drop the insurance.
    To follow up on Senator Warren's question, why don't we do 
a better job of requiring our mortgage lenders to do their job 
to make sure that people keep their insurance?
    Mr. Maurstad. Sure. And, of course, the mortgage lenders 
are responsible for that, and their regulators, and we do want 
people to have the coverage and keep the coverage. And as I 
indicated you before, I want to continue to have discussions 
with you, because I know how important the NFIP is to 
Louisiana. There have been 260,000 claims paid to Louisiana 
policyholders to the tune of $17.7 billion, to help those 
policyholders on the road to recovery over the course of the 
last 15 years. So I want this program, and it will work for 
Louisiana in the future, as it has in the past.
    Senator Kennedy. Thank you, Mr. Chairman.
    Chairman Brown. Thank you, Senator Kennedy. Senator Van 
Hollen of Maryland is recognized for 5 minutes.
    Senator Van Hollen. Thank you, Mr. Chairman, and Mr. 
Maurstad, thank you for your testimony. Let me start with a 
question related to the Building Resilient Infrastructure 
Communities program, which was announced recently by the Biden 
administration, and directs $1 billion in additional funds into 
that account.
    I can tell you, many communities in my State of Maryland 
are excited about the possibilities from this program, but a 
lot of our smaller communities who need funding for resiliency 
projects do not have the resources or the technical expertise 
that is needed to complete very complex applications. And many 
of them have applied for prior FEMA grants, different varieties 
of FEMA grants, been rejected without any explanation as to why 
their prior applications were rejected.
    So I just have two questions for you. What are you doing at 
FEMA to extend technical assistance to those smaller 
communities, to help them be able to fill out these 
applications, number one, and number two, could you also start 
explaining to communities that have been denied FEMA grant 
applications why they were denied, so that when they apply in 
the future they can make any necessary adjustments?
    Mr. Maurstad. Sure. You know, of course, as you know the 
Building Resilient Infrastructure Communities is under the 
Disaster Recovery Relief Act, so it is slightly off of the 
focus of this hearing, although mitigation is certainly a part 
of the flood program. And it is within my portfolio, so I will 
answer the question at a high level, and then we can get back 
to you with some more specific information.
    So one of the things that we did this year, in the first 
go-around of BRIC, is we selected ten smaller communities to 
work with them to get a better idea and understanding of what 
their needs are and the manner in which we could best help 
small communities. So we are going to learn, and continue to 
learn, how we can address the issue that we raised, because it 
is an important one. And we want to--in fact, Administrator 
Criswell has challenged us to do a better job in providing 
technical assistance to smaller communities, and we are going 
to meet that challenge.
    As far as the second issue, we have instituted a more 
robust catalog of projects, what projects are successful, why 
they were successful, that we hope will help communities that 
are not successful there yet. We encourage them to work with 
their State Hazard Mitigation Officer to make sure they put 
forward good applications, along with our FEMA regions. So we 
are certainly cognizant of that concern.
    It is a national competitive program, and so part of the 
challenge is how far can you go in making sure that you keep a 
level playing field. But we are going to work that nuance and 
do what we can to address the two concerns that you raise. We 
are well aware of them.
    Senator Van Hollen. No, I appreciate that, because smaller 
communities do not have any lesser risks, but they often have a 
lot less resources.
    Mr. Maurstad. I was a mayor of a community of 12,500 people 
that wrestled with the issues that you are talking about.
    Senator Van Hollen. All right. Well, I appreciate that, and 
again, if you do not get any feedback, zero feedback, it is 
hard to know if it was something wrong with your application or 
the money ran out. So really, I think individual feedback, at 
least, ``It was fine but we just didn't have the money,'' or 
there were technical problems, that would be very helpful.
    Mr. Maurstad. And we will get back to you with a more 
robust answer to your questions.
    Senator Van Hollen. Thank you. I appreciate that.
    So as you have noted and been discussed in this hearing, 
you know, currently FEMA maps to the 100-year floodplain 
standard, 1 percent chance of annual flooding. In Maryland, 
that standard has not been sufficient to cover the risks that 
are due to changes in rainfall and climate change, especially 
in Baltimore City, I am told that the current standards do not 
adequately meet their risks of flooding in an urban area.
    Can you talk a little bit about how your Future of Flood 
risk Data initiative might be helpful to places like Baltimore 
City?
    Mr. Maurstad. Sure. And so a couple of points to start with 
is, of course, the standard, the 1 percent annual chance 
standard that communities adopt in their local ordinance that 
they will regulate to that standard, enforce building in the 
high-risk area to the 1 percent annual chance, is a minimum 
Federal standard, and we encourage communities to go beyond 
that minimum standard and have higher standards, and many 
communities do that.
    Future of Flood Risk Data is going to help in situations 
like that in that it will look to partner with local 
communities on how we can depict the risk in their community in 
a graduated fashion. As we have talked earlier, what are the 
different causes of flooding in the community? What may happen, 
based on changes in development in the community? You know, if 
you put in a lot of pavement you are going to get runoff and 
cause new issues associated with that.
    So again, I think that where we are moving is currently 
within our ability to do it, but our regulatory authority is 
the 1 percent annual chance. So we want to work with the
    Committee on what we can do to better depict flood risk and 
communicate flood risk in the future through our Flood Risk 
Initiative.
    Senator Van Hollen. Thank you. I appreciate it.
    Chairman Brown. Thank you, Senator Van Hollen. Senator 
Tester of Montana is recognized for 5 minutes.
    Senator Tester. Thank you, Mr. Chairman. Thank you for 
being here, Mr. Maurstad. You have been with FEMA for quite a 
while, right, off and on?
    Mr. Maurstad. I was with FEMA from 2001 to 2008, and I 
returned in 2016.
    Senator Tester. OK. Were you in the flood insurance in the 
first gig, 2001 to 2008?
    Mr. Maurstad. Yes, 2004 to 2008.
    Senator Tester. So I am going to throw you a curve ball 
here. I want you to give me some insight on how much money FEMA 
has put out for disaster for flood. Has it been a pretty static 
figure over the years, or has it gone up, compared to the early 
parts of this century, compared to '01-'02, compared to 1920?
    Mr. Maurstad. From 1985 to 2003, we really did not have any 
major disasters like we have had since the start of 2004, the 
four Florida hurricanes in 2004, then Katrina, then, of course, 
Sandy and Harvey and others. And so certainly the last 20 years 
there has been a far greater frequency and severity of flood 
events.
    Senator Tester. And would you say that that has increased 
FEMA's outlay of cash by 10 percent, 20 percent, 50 percent, 
100 percent?
    Mr. Maurstad. I will get you the specific numbers, but just 
to give you----
    Senator Tester. A ballpark?
    Mr. Maurstad. In 2004, four Florida hurricanes was the 
first year that there was $2 billion of claims paid in a single 
year. That was a record. Of course, that got blown out of the 
water in 2005, when we approximately $18 billion in claims that 
year. And so certainly over the course of the last 15, 16 
years, far more has been paid out. I think the total paid in 
claims the entire 50 years of the program is like $77, $78 
billion.
    Senator Tester. OK. Why do you think that we are putting 
out more money in the last 20 years than we did in the previous 
20?
    Mr. Maurstad. Again, strictly because of the severity and 
the increased number of flood events.
    Senator Tester. Yeah. So it is not like people are getting 
more coverage. It's the fact that we have more events, they are 
more severe, they tend to last longer, in the case of fires.
    Mr. Maurstad. Yeah, unfortunately, and that is why we are 
working so hard to transform the program by developing new 
policy forms, new products. We believe we are improving our 
product. We believe we are improving our pricing methodology so 
that we can change the dynamic associated with the number of 
homeowners, renters, and small business owners that have flood 
insurance.
    Senator Tester. Good. So when are talking about, just from 
your view, from a FEMA point of view--and I know you are not in 
the climate industry and you are not probably a scientist, 
although maybe you might be--but from a pure fiscal standpoint, 
is not doing anything on climate change, you are doing the bare 
minimum, or just scratching the surface, going to help with the 
amount of money we put out each and every year, not only by 
FEMA but a lot of other agencies dealing with disasters?
    Mr. Maurstad. Certainly, again, as the severity and the 
frequency of the events increase we have to look at what are 
the future conditions, what are the changing conditions, what 
impact the changing climate, what is the impact of increased 
weather events, what does that have on the resiliency of the 
Nation, and we need to make investment in that. And clearly we 
are not making enough of an investment.
    Senator Tester. OK. Yeah, I would agree with you 100 
percent, maybe even more.
    There are communities on our rivers, and Montana has a few 
of them, that are facing significant challenges when homeowners 
have to pay higher flood insurance rates because of flood 
hazard zones, and the Army Corps of Engineers, which kind of 
compounds this problem, has refused to carry our certifications 
of the levees, for a number of reasons. Some of them are valid.
    You being an expert in this area, how would you address 
these challenges so that folks, Montanans, but folks overall--
like I said, I think it deals with every one of our drainages--
are unfairly penalized?
    Mr. Maurstad. I am not sure I understand your question.
    Senator Tester. Well, the question is we have got levees 
that cannot be certified. It puts folks into a situation where 
their rates go up significantly for flood insurance, and the 
reason they will not be certified is because the Army Corps is 
not doing it. They do not have the time anymore.
    Mr. Maurstad. Right. So I am not an expert in that area, 
but I would say--again, back to one of the topics that we have 
today--Risk Rating 2.0 looks at levees in a different way than 
what they were looked at before. Before, a levee had to be 
certified or accredited for the area that was protected by that 
levee to receive the benefit associated with the levee. And so 
it was, again, a light switch, off or on.
    Under the graduated way that we are doing it now, if the 
levee is just slightly under being certified or accredited, it 
will get credit for the amount----
    Senator Tester. Protection.
    Mr. Maurstad. ----if it is 90, 95 percent, it will credit 
for that protection.
    Also, on the other end, those levees, and certainly Senator 
Kennedy has some in his State, that are beyond the minimum 
Federal standard, they only got a certain amount of credit for 
that. Going forward, if they have a levee that is twice as good 
as the minimum Federal standard, they will get credit for that 
being a better levee in the future.
    Senator Tester. Yeah, but they have to be rebuilt in order 
to do that. Correct?
    Mr. Maurstad. I mean, there has already been a significant 
investment made in New Orleans, for example, in improving their 
levees.
    Senator Tester. Right. I got you. But that is what I meant. 
They have to be rebuilt in order to----
    Mr. Maurstad. It is a resource issue.
    Senator Tester. Right. Exactly right. It might be good to 
have an infrastructure package, Senator Kennedy.
    So with that I will yield to Mr. Chairman.
    Chairman Brown. Thank you, Senator Tester. I hear you are 
working on one. At least that is what I read.
    Senator Tester. I am hearing there is a lot of action. If 
there is action, I guarantee you Kennedy is a part of that 
action.
    [Laughter.]
    Chairman Brown. He keeps his name out of the papers, 
though, doesn't he?
    Thank you. Senator Kennedy, the second round, I think 
Senator Cortez, but nobody else has. I have a couple more 
questions and then we will wrap up. There are votes called now 
at 11:45.
    And then partly in follow-up to Senator Tester's comments, 
he noted that NFIP was not structured to pay for catastrophic 
events and that borrowing to cover such events is a more recent 
practice in the program. How should Congress approach covering 
these events in the future?
    Mr. Maurstad. Well, I would suggest that we have to start 
with the premise that there would be some kind of an 
understanding that the five million policyholders themselves 
cannot pay for the entire portfolio of what the National Flood 
Insurance Program does. And so if there is an understanding 
that that is the case, that there needs to be, or there is 
going to be taxpayer support, in what form should that taxpayer 
support come? I would suggest having the program borrow more 
and more money is not the answer.
    And so, yes, part of what we are looking at is to develop a 
sound financial framework to address the issue of how best for 
that taxpayer support to come to the program. And we look 
forward to having additional conversations with you on those 
solutions.
    Chairman Brown. Thank you. And last question, and a bit of 
a take-off on Senator Kennedy's comments and Senator Menendez 
and Senator Tester. Risk Rating 2.0 will lower the cost of 
premiums for some policyholders, and according to FEMA, as you 
know, it will also increase the cost of flood insurance for 
some policyholders, up to 18 percent per year for many years. 
That is our understanding. A lot of people we know cannot 
afford that. We know that low-income communities and 
communities that were the victims of redlining from Jim Crow to 
redlining, we know what that meant in many communities of color 
in this country. Too often they are in some of the most 
hazardous flood areas, not necessarily by choice, and certainly 
not knowing they were flood areas.
    So how do we assist homeowners facing escalating costs, 
particularly those with low incomes?
    Mr. Maurstad. Yeah. I mean, there is a legislative proposal 
that we have been working with the Administration on that we 
certainly support, that would establish a means-tested 
assistance program for one- to four-family residences. It will 
be a sliding scale type of assistance, starting at 125 percent 
of the average mean income in the area where the policyholder 
lives, down to 85 percent of the average mean income.
    So affordability has been a problem for a number of years, 
and without a program as being proposed it will continue to be 
an issue going forward. Where many of those people that are in 
the areas that you described that do not have--and it is a 
burden for them to have flood insurance because of the cost of 
the premium, regardless of what that premium is, more of those 
individuals need to have access to the program, and that is a 
way to provide it to them.
    Chairman Brown. Thank you. Mr. Maurstad, thank you for 
joining us. We will have many more conversations about this. I 
am hopeful, with Senator Kennedy's interest and Senator 
Menendez and all people in between, in both parties, that we 
can come up with some real solutions here.
    For Senators who wish to submit questions for the record, 
those questions are due 1 week from today, Thursday, June 24th. 
And to Mr. Maurstad, you have 45 days to respond to any 
questions after you receive them. Thank you, again.
    With that, the hearing is adjourned.
    [Whereupon, at 11:49 a.m., the hearing was adjourned.]
    [Prepared statements and additional material supplied for 
the record follow:]
              PREPARED STATEMENT OF CHAIRMAN SHERROD BROWN
    Today's hearing is the second in our effort to enact a long-term 
reauthorization of the National Flood Insurance Program this Congress.
    In May, we heard from a panel of experts who emphasized that we 
need to do more to improve flood mapping and mitigation in the face of 
climate change.
    Flooding is the most common and most costly natural disaster facing 
families, businesses, and communities across the country.
    We hear from our constituents how it takes families' homes and 
memories, it wrecks their finances, it shutters small businesses, and 
it destroys communities' infrastructure. Disasters also often fall 
hardest on low-income and families of color, and communities that have 
fewer resources to prepare for and respond to them.
    And no matter where you live, everyone pays for the financial 
fallout from floods, as the country spends tax dollars to help families 
and communities recover.
    As the climate continues to change, we can only expect flooding to 
get worse, and become even more common.
    Spring snow melt, increasingly powerful storms, ``sunny day'' 
flooding in coastal communities, and extreme rainfall can overwhelm our 
Nation's aging infrastructure and the land's capacity to absorb water.
    Reversing the trajectory of climate change is going to be a long-
term effort. While we work on that, we also need to help our families 
and communities become more resilient to the flooding we face now and 
in the coming decades. And whenever possible, we need to prevent that 
flooding altogether.
    The NFIP is critical to that effort. The program provides over $1.3 
trillion in coverage to more than 5 million homes and businesses in 
more than 22,000 communities.
    It's not just an insurance program--NFIP's job isn't just to help 
communities after the floods, but to prevent and minimize the damage in 
the first place.
    Through NFIP reauthorization, we have an opportunity to improve the 
NFIP, to make our families, businesses, and communities safer and more 
resilient, and to meet the challenge posed by a changing climate.
    Today, our witness, Mr. David Maurstad, the Deputy Associate 
Administrator at FEMA, will provide the agency's perspective on what 
this Committee should consider as we work on that effort. I am 
interested in the Administration's recommendations for ways we can help 
strengthen the NFIP so that it:

    Can provide reliable access to insurance for property 
        owners and renters,

    Can address affordability concerns,

    Can ensure that more people are aware of their flood risk 
        and insured against losses, and

    So it can help the Nation predict and reduce our overall 
        level of flood risk, through investments and improvements in 
        mapping, floodplain management, and mitigation.

    I also look forward to discussing the NFIP's Risk Rating 2.0 
effort, which would change rate setting in the NFIP. We also want to 
hear more about how FEMA is communicating with stakeholders about these 
changes, and to better understand how these rates will affect low and 
moderate income communities, many of whom lack the resources to 
renovate or move out of harm's way.
    I look forward to continuing this work with the Members of the 
Committee to strengthen the NFIP and take a comprehensive approach to 
mitigating flood risk through a long-term reauthorization bill.
                                 ______
                                 
            PREPARED STATEMENT OF SENATOR PATRICK J. TOOMEY
    Thank you, Mr. Chairman. Thank you, Administrator Maurstad. Today 
we hold our second NFIP reauthorization hearing. As I mentioned at our 
last hearing, finding a consensus on reauthorization will be 
challenging, and time is tight. Nevertheless, I am ready to work and 
hope we can reach agreement on a long-term reauthorization that 
improves the program.
    First, let me take a moment to remind everyone of the scope of 
NFIP's challenges. In the last 16 years, NFIP has had to borrow nearly 
$40 billion to pay claims. In other words, NFIP has lost an average of 
about $2.25 billion per year over the last 16 years. Those losses are 
particularly shocking in the context of NFIP's annual premiums 
collected: $4.6 billion. Clearly, NFIP systemically underprices flood 
insurance. Frustratingly, the policies of Congress--not FEMA--are the 
root causes of NFIP challenges.
    During our last hearing, I discussed several of my priorities in 
reauthorization. First, do no harm. Right now under existing law, NFIP 
is moving toward actuarially sound premiums. We should not interrupt 
that progress. Second, we should encourage more private capital in the 
form of private policies and private reinsurance. Third, if subsidies 
persist, they must be better targeted. Fourth, we should improve 
communication with homeowners and homebuyers so that they understand 
the flood risk of properties. I'd like to take few moments to discuss 
some of these priorities in more detail.
    First, ``do no harm.'' As our understanding of flood risks change, 
we must allow NFIP to keep up. For instance, I have long heard 
complaints about mapping. I agree. We need better flood maps, and I 
support taking steps to improve maps. But better mapping is a means to 
an end--not an end unto itself.
    Mapping is the easy part. The hard part is using those improved 
maps to better plan development, mitigate risk, and price flood 
insurance premiums appropriately. Fortunately, FEMA is moving in the 
right direction with its development of Risk Rating 2.0.
    FEMA has worked for years to build a better risk rating model. It 
incorporates far more granular data in setting premiums, including 
geography, flooding frequency, flooding types--that is, rivers versus 
oceans--and building characteristics.
    When Risk Rating 2.0 is implemented, we'll have not only a fairer 
NFIP but also a more fiscally sound NFIP. Reauthorization must not 
interrupt the implementation of Risk Rating 2.0. Of course, 
implementation of Risk Rating 2.0 will be a challenge. After all, NFIP 
has been using more-or-less the same old system for the last half-
century.
    Administrator Maurstad, I urge you to work hand-in-glove with the 
Write Your Own insurers who sell and service NFIP policies. I fear that 
a turbulent roll-out will be used as an excuse to kill this important 
improvement by defenders of the status quo.
    While successful implementation of Risk Rating 2.0 will make NFIP a 
better program, NFIP still will not be perfect. That is why we must 
continue to facilitate expansion of the private flood insurance market. 
My home State of Pennsylvania has been a leader on this front. As of 
January 2021, there were nearly 13,000 private flood policies in 
Pennsylvania. That means almost 20 percent of Pennsylvania flood 
policies are now private.
    Private uptake should come as no surprise. NFIP data on Risk Rating 
2.0 implementation reveals that millions of policyholders are 
overpaying for flood insurance. Over 200,000 NFIP policyholders are 
overpaying by at least $100 per month. That's $1,200 per year.
    Besides competing on price, private flood may bring better 
products, such as All Peril Coverage, which would mean no more debating 
whether a claim resulted from water on wind damage. Further, private 
flood insurance brings more capacity to the market. That means more 
uptake by more homeowners, which is undoubtedly a good thing. It also 
means more resources to process claims after a major flooding like 
Super Storm Sandy, an event that--as my colleagues know all too well--
overwhelmed FEMA.
    Finally, I'd like to briefly touch on subsidies within NFIP. As a 
general principle, I do not think we should be encouraging people to 
live in flood prone areas by providing flood insurance subsidies. I 
acknowledge that over the past 50 years, NFIP has acclimated homeowners 
to a world in which these subsidies exist. And therefore, it would be 
unfair to suddenly and completely remove them. However, in the interest 
of fairness and program solvency, property based subsidies must be 
phased out over time.
    Today, properties with subsidized NFIP premiums are overwhelmingly 
located in our wealthiest communities, and subsidized NFIP premiums are 
rare in lower-income communities. I am open to finding ways to help 
current, low-income homeowners afford flood insurance. But such help 
should not interrupt a long-term trend towards true, risk-based NFIP 
premiums.
    In conclusion, NFIP is broken. It's bad for the taxpayers who must 
bail it out year after year, and it's bad for homeowners and future 
homebuyers from whom NFIP obscures true flood risk. I recognize that we 
cannot fix NFIP overnight, but I hope that we use reauthorization as an 
opportunity to move it in the right direction.
                                 ______
                                 
                PREPARED STATEMENT OF DAVID I. MAURSTAD
   Deputy Associate Administrator, Federal Insurance and Mitigation 
          Administration, Federal Emergency Management Agency
                             June 17, 2021
    Good morning Chairman Brown, Ranking Member Toomey, and Members of 
the Committee. My name is David Maurstad and I am the Deputy Associate 
Administrator for Insurance and Mitigation--responsible for directing 
the Federal Emergency Management Agency's (FEMA) risk management, 
mitigation, and flood insurance programs. Thank you for the opportunity 
to testify today about the National Flood Insurance Program (NFIP, or 
the Program). Thanks to the NFIP, communities and individuals have 
bolstered their resilience to flood events. The Nation's flood loss 
experience over the past 17 years, however, tells us that we can and 
need to do better. It is time to rethink the NFIP's fundamental 
approach to reducing losses from floods and increasing investment in 
mitigation. The NFIP is committed to meeting the challenges to our 
Nation posed by climate change and changing conditions, and we have 
identified a number of initiatives to improve our ability to address 
heightened flooding risks, affordability of our product, and equity. 
Our ability to improve the NFIP begins with the certainty associated 
with reauthorization, and I urge Congress to approve a multiyear 
reauthorization of the NFIP with meaningful reforms by September 30, 
2021.
NFIP Structure
    The NFIP is administered by FEMA's Federal Insurance and Mitigation 
Administration (FIMA). Flooding is the most common and costly type of 
disaster in the United States because where it can rain, it can flood. 
The NFIP is designed to decrease the impact of future floods, reduce 
the costs and adverse consequences of flooding, reduce the need for and 
cost of disaster assistance after floods, and preserve and restore the 
natural and beneficial values of floodplains. FEMA addresses the 
challenges of flooding by identifying areas where the flood hazard is 
greatest; by implementing minimum standards for communities to minimize 
risk; by making flood insurance available in participating communities; 
and by providing access to flood mitigation grants.
NFIP Milestones and Challenges
    The NFIP is a voluntary program that enables property owners in 
participating communities to purchase insurance protection against 
losses resulting from physical damage to or loss of building property 
and personal property from flooding. To participate in the NFIP, a 
community must adopt and enforce sound land use ordinances in the 
floodplain that meet or exceed minimum NFIP floodplain management 
standards. FEMA has worked closely with local communities to identify 
and communicate flood hazards through scientific and engineering 
methods to inform action to reduce the risk of life and property from 
flooding.
    The NFIP holds an impressive 52-year history that includes 
servicing more than 5 million policyholders currently and $1.3 trillion 
in flood insurance coverage in more than 22,500 participating 
communities in all 50 States, the District of Columbia, and six 
territories. The NFIP has grown to be the largest single-peril 
insurance operation in the world. Since 1978, the program has paid over 
$72 billion in claims, helping approximately 2 million policyholders 
recover from disaster. The NFIP enables insured survivors to recover 
quicker and more fully from a flood event than their uninsured 
neighbors. The NFIP's minimum floodplain management standards alone 
save almost $2.4 billion in avoided losses annually. Furthermore, the 
Flood Mitigation Assistance, Repetitive Flood Claims, and Severe 
Repetitive Loss grant programs have distributed nearly $1.5 billion in 
flood grant assistance to communities to mitigate their most vulnerable 
insured structures.
    The Nation's flood loss experience over the past 17 years, however, 
highlights the failures of our current flood policy. As a Nation we 
need to break the cycle of limited investment in resilience, 
``unprecedented'' flooding, and repeated disaster suffering by the same 
impacted communities and populations. Inaction will result in continued 
risky development in floodplains, low take-up of flood insurance 
coverage, mounting NFIP debt to the U.S. Treasury, and ballooning 
supplemental appropriations.
    The frequency and impact of disasters is rising nationwide and 
disaster suffering continues. Flooding and coastal storms account for 
roughly 70 percent of all Presidential Disaster Declarations over the 
past decade. \1\ In 2020, the Nation saw 47 major disaster declarations 
across all natural hazards and 22 separate weather and disaster events 
with losses that exceeded $1 billion each--the previous high was 16 
(2011 and 2017). The historic 2020 hurricane season started earlier 
than ever, saw the most storms in the shortest amount of time in 
history, and finished with a record-breaking 30 named storms. Every 
mile from Texas to Maine was under a storm surge, Tropical Storm or 
Hurricane Watch or Warning. Hurricane Laura became one of 10 hurricanes 
on record to make landfall in the U.S. with winds of 150 mph or higher 
and only the third of this strength to strike Louisiana since records 
began in 1851. \2\
---------------------------------------------------------------------------
     \1\ FEMA, ``Open FEMA Data Sets, Disaster Declaration Summaries'', 
https://www.fema.gov/about/openfema/data-sets.
     \2\ https://www.tallahassee.com/story/news/2020/08/29/hurricane-
laura-shatters-records-more-storms-tap-weathertiger-forecast/
5634246002/
---------------------------------------------------------------------------
    The NFIP needs to transform to adapt to the changing climate and to 
meaningfully increase flood mitigation investment. FEMA is making 
transformational improvements so that in the aftermath of a flood, 
whether a Presidentially Declared Disaster or a smaller localized 
flooding event, there is less disaster suffering.
    Disasters have a disparate impact on socially vulnerable or 
marginalized communities--making their road to recovery longer and more 
difficult, exacerbating existing issues, exposing resource constraints, 
and revealing inequities in land use and development patterns. FEMA 
must also integrate concepts of equity and climate change 
considerations as it seeks to increase our Nation's resilience.
Recent NFIP Improvements
    Over the past few years, FEMA has undertaken a number of internal 
operational improvements to transform the NFIP to reduce complexity and 
increase transparency and fairness. Let me share a few of the many 
steps taken in recent years under current authorities to make the 
program more efficient and effective:
Risk Rating 2.0
    On April 1, 2021, FEMA formally released Risk Rating 2.0: Equity in 
Action, a new pricing methodology with equitable pricing for each 
property's unique flood risk. The NFIP's rating methodology has not 
been updated in more than 40 years. Risk Rating 2.0 delivers a more 
equitable and risk informed NFIP.
    Risk Rating 2.0 builds on years of investment in flood hazard 
information by incorporating private sector data sets, catastrophe 
models, and evolving actuarial science. FEMA adopted a multimodel 
approach to determine flood risk using a suite of models, in much the 
same way as the National Oceanic and Atmospheric Administration (NOAA) 
uses models to determine potential hurricane tracks and magnitudes. The 
improved rating methodology incorporates existing FEMA mapping data and 
NFIP policy and claims data. Blending catastrophic models sourced from 
both the Government and commercial entities will ensure the most 
accurate flood risk rating that the NFIP has ever produced. This allows 
FEMA to set actuarially sound rates and communicate flood risk more 
comprehensively than ever before, enabling us to fulfill our obligation 
to clearly communicate flood risk and allowing policyholders to make 
more informed decisions about mitigation actions.
    By incorporating technological and mapping advances, we can 
identify individual policyholder risk. We now know that within current 
rating classes, policyholders with lower-value homes are paying more 
than they should based on their actual risk profile, and policyholders 
with higher-value homes are paying less than they should. Risk Rating 
2.0 will address this inequity. Under the new methodology, rate 
increases will not continue indefinitely as it does now. Once a policy 
reaches its full-risk rate, the increases stop.
    Risk Rating 2.0 will change the landscape of flood insurance, 
enhance risk communication, and enable better floodplain management--
ultimately resulting in greater resilience. Risk Rating 2.0 will help 
put the NFIP on a financially sound path; and will help disaster 
survivors recover more quickly after floods.
Customer Experience
    NFIP Claims
    FEMA has redesigned its insurance claim process to be less 
complicated, more comprehensive, and easier for customers to understand 
with the goal of providing policyholders clear information in a timely 
manner.

    In recent years, FEMA streamlined and expedited the process 
        for total loss claims. FEMA offers advance claim payments of up 
        to $20,000, which can be made before an adjuster inspects the 
        property.

    FEMA has bolstered our field presence following a disaster. 
        From the onset, FEMA representatives from the NFIP are on-site 
        with State insurance officials and in a FEMA disaster field 
        office for more immediate support for daily flood-related 
        activities.

    FEMA designed and implemented a new claims appeals process 
        to improve customer service and transparency to policyholders. 
        This included separating the claims and appeals functions into 
        two distinct branches in order to provide for a nonadversarial 
        review of claim denials, avoid the perception of a conflict of 
        interest, and maintain organizational integrity.

    The NFIP developed and provided guidance to stakeholders on 
        the use of services provided by subject-matter experts, to 
        ensure transparent and consistent claims handling for all 
        policyholders.

    In 2018, FEMA released a user-friendly NFIP Claims Manual. 
        The NFIP Claims Manual improves the clarity of claims guidance 
        given to NFIP WYO companies, flood vendors, flood adjusters, 
        and examiners, so policyholders experience consistent and 
        reliable service. The NFIP Claims Manual has seen two 
        subsequent revisions, in 2019 and 2020, with the next planned 
        release in October 2021.

    Starting in the COVID-19 pandemic, the NFIP encouraged 
        adjusters to remotely adjust claims for the first time in 
        program history, adapting to the environment and giving 
        customers the option to have their claim adjusted without 
        coming into contact with adjusters.
    NFIP Forms Redesign
    The NFIP must provide a range of insurance products that customers 
value and agents can easily sell. To comply with the National Flood 
Insurance Act of 1968, FEMA adopts the Standard Flood Insurance Policy 
in regulation. The NFIP is continuing its Policy Forms Redesign 
initiative to modernize its insurance offerings to ensure they are 
customer-centric and responsive to flood events. Modern consumers 
expect to have choices and want services tailored to meet their needs, 
which our current forms do not provide. Further, by requiring the 
customer to make choices about their coverage, we can better 
communicate their flood risk and inform the customer about the extent 
of our policy coverage. We are continuing our research and development 
efforts and expect to develop a suite of flood insurance products that 
can serve not only our existing policyholder base but also reach those 
homeowners and businessowners who may currently be at risk of financial 
ruin after a flood.
    Litigation
    FEMA established an oversight team in the Office of Chief Counsel 
to ensure that Federal law and policy are advanced through claims 
litigation under the NFIP. The oversight team seeks to ensure that the 
legal strategies that are employed by insurers under the NFIP follow an 
approach that is nationally coherent and consistent with the NFIP. The 
team also seeks to ensure that claims litigation under the NFIP 
achieves maximum value for the American public. In this respect, the 
oversight team seeks to support settlement of litigation for amounts 
that are fair both to policyholders and to insurers. The team also 
seeks to ensure that the private companies that participate in the NFIP 
are reimbursed by the U.S. Treasury for the companies' litigation 
expenses only when those expenses are reasonable considering the goals 
of the NFIP. Finally, the team is considering means to avoid litigation 
where less costly means of dispute resolution are available and where 
those alternative means would be as or more effective in achieving 
Congressional objectives.
    Open FEMA
    FEMA is committed to increasing the transparency and accessibility 
of the agency's data. In 2012, the agency began the OpenFEMA 
initiative, which provides approved mission-relevant data which 
stakeholders can use in value-added ways--such as research, analysis, 
and application development. The NFIP uses this platform to publish 
over 60 million records, consisting of 40 years of claims history and 
10 years of policy history at the point level. Since the release of 
this information, FEMA has seen this data used by major media outlets, 
top universities, policy makers, and even individual communities to 
better understand flood risk and influence flood policy. Likewise, this 
data is being used across all markets to include realty, lending, 
education, and reinsurance to not only build flood insurance industry 
confidence but consumer confidence. With almost 40,000 downloads of 
this data in just the last week alone, we are inspiring broader program 
participation and more insightful engagement, including from those 
outside of the typical flood channels. Even in the midst of the 
pandemic, emergency managers are using our data to help drive 
conversations around preparedness, resiliency and disaster response.
    Office of the Flood Insurance Advocate
    Since the Office of the Flood Insurance Advocate was established in 
2014 to advocate for the fair treatment of policyholders and property 
owners, over 2,800 citizens have reached out for assistance with all 
aspects of the NFIP, including floodplain mapping, floodplain 
management, rate verification, claims handling, and Hazard Mitigation 
Assistance.
Financial and Individual Resilience
    Reinsurance
    In 2017, for the first time, FEMA exercised a Congressional 
provision allowing the program to secure reinsurance from the private 
markets to help reduce the amount of the NFIP's financial losses. The 
program recovered $1.042 billion from this coverage following the 
losses from hurricane Harvey. FEMA remains committed to further 
reinsurance purchases to manage the program's risk. Effective Jan. 1, 
2021, FEMA secured $1.153 billion in traditional reinsurance to cover 
any qualifying flood losses occurring in calendar year 2021. FEMA 
currently has $1.2 billion in reinsurance coverage through three 3-year 
reinsurance agreements with the capital markets, $500 million of which 
will expire in August 2021.
    Mapping
    The National Flood Mapping Program is modernizing flood hazard 
identification from one focused on probabilistic floods--like the 1-
percent-annual-chance-event--to a conversation about structure-specific 
risk based on a more comprehensive risk profile and that accounts for 
other types of flood hazards. FEMA identifies flood hazards related to 
rivers, coasts, lakes, and rainfall using the best available scientific 
data, the latest technology, and proven engineering methods. As 
directed by the Biggert-Waters Act of 2012, FEMA is looking to expand 
the flood hazard mapping inventory (identifying the 100-year and 500-
year floodplain in all areas necessary), address climate change/future 
conditions, analyze areas of residual risk and inundation due to 
overtopping and/or failure of levees and dams, and modernize its IT 
infrastructure to make comprehensive flood information more readily 
available. The Future of Flood Risk Data initiative will provide a more 
complete risk profile. This initiative is exploring how to provide more 
comprehensive flood risk data that reflects a range of potential 
flooding scenarios instead of just the 1-percent-annual chance flood. 
By moving to a graduated risk analysis, one that depicts multiple 
sources of flooding--like heavy rainfall, or levee risk beyond the 1 
percent annual chance event--we hope to change the misconception that 
areas outside of the 100-year flood zone have little to no flood risk.
    Acquisitions of Flood-Prone Properties
    FEMA continues to work with local officials throughout the country 
to reduce flood risk by acquiring flood-prone properties. From 1989 to 
2020, FEMA mitigation grants funded the purchase of more than 49,000 
homes, effectively protecting lives and property from future flooding. 
The cost to acquire the properties was $3.4 billion and is estimated to 
have saved more than $6.49 billion in losses.
    Additional FEMA Improvements Impacting Flooding
    The National Mitigation Investment Strategy provides a 
        single strategy for the Nation to more effectively and 
        efficiently advance mitigation investment.

    The Disaster Recovery Reform Act of 2018 (DRRA), enacted in 
        October 2018, reduces the complexity of FEMA and builds the 
        Nation's capacity for the next catastrophic event. DRRA 
        authorized the Building Resilient Infrastructure and 
        Communities (BRIC) program, which shifts mitigation forward to 
        occur before a flood disaster and establishes a reliable stream 
        of funding for a nationwide grant program. Recently, resilience 
        received a big boost for FEMA's Building Resilient 
        infrastructure and Communities Program's (BRIC) second year. 
        President Biden has announced $1 billion will be made available 
        for Fiscal Year 2021 funding to State, local, tribal, and 
        territorial governments to assist with undertaking hazard 
        mitigation projects and planning to reduce the risk they face 
        before the next disaster strikes. The BRIC Program provides a 
        critical opportunity for Governments to invest in a more 
        resilient Nation, reduce disaster suffering and avoid future 
        disaster costs. Additional information will be available once 
        the Fiscal Year Notice of Funding Opportunity is released in a 
        few weeks.

    FEMA launched the National Risk Index (Index) in November 
        2020 to encourage mitigation actions and investment by 
        providing reliable and understandable risk information tools. 
        The Index identifies communities nationwide most at risk to 18 
        natural hazards and makes it easier for communities to have 
        conversations about how to reduce the impacts of natural 
        disasters. This combination of information on hazards and 
        social vulnerability marks the first time the Federal 
        Government has taken such a sweeping view of community risk and 
        susceptibility to disasters.

    FEMA's landmark study, ``Building Codes Save: A Nationwide 
        Study'', \3\ shows that modern building codes would avoid at 
        least $32 billion in losses from natural disasters over a 20-
        year period when compared to jurisdictions without modern 
        building codes.
---------------------------------------------------------------------------
     \3\ FEMA, ``Building Codes Save: A Nationwide Study of Loss 
Prevention''. November 2020.
---------------------------------------------------------------------------
NFIP Reauthorization
Affordability
    Affordability--Closing the Insurance Gap and Means-Tested 
Assistance
    Flood insurance affordability is complex, touching on the intricate 
challenges of equity and risk management. FEMA defines affordability as 
policyholders' and potential policyholders' ability to (1) pay for 
flood insurance, or (2) manage the cost burden posed by flood 
insurance. FEMA measures this ability to pay or cost burden in terms of 
the policyholder's household income compared to Area Median Income, or 
the median income for the county in which they live.
    Under current FEMA authorities, the NFIP cannot offer means-tested 
discounts or consider policyholders' ability to pay in its rate-setting 
process. Instead, the NFIP makes rates ``reasonable'' by offering 
discounts and cross-subsidies, primarily based on a building's age or 
map changes at a building's location, or by considering mitigation 
activities undertaken by the property owner or community. FEMA does not 
currently consider a policyholder's ability to pay for coverage when 
setting discounts on premium rates. This structure does not target 
households who struggle to maintain coverage or address households who 
cannot afford a policy in the first place. It leaves vulnerable 
households underinsured and exposed to extreme hardship from flooding 
events. Such discounts and cross-subsidies make it harder for the NFIP 
to communicate risk through the price of flood insurance. They also 
inhibit the NFIP's transition to full-risk rates to achieve a sound 
financial framework for the program.
    In the Homeowner Flood Insurance Affordability Act, Congress 
directed FEMA to develop a framework to help policymakers consider 
creation of a flood insurance affordability program. FEMA's April 2018 
Affordability Framework for the NFIP provides a data-driven analysis of 
the cost burden that flood insurance poses for policyholders and 
nonpolicyholders. The most acute flood insurance affordability 
challenge lies with low income, homeowners (or renters) in the SFHA who 
are heavily burdened by the cost of insurance and either forced to 
purchase the product as a condition of a loan or choose to go bare and 
suffer the consequences in a flood disaster. FEMA identified that 26 
percent of current NFIP residential policyholders and 51 percent of 
prospective residential policyholders in the highest risk areas meet 
Department of Housing and Urban Development (HUD) low income 
definitions, meaning their income is less than 80 percent of Area 
Median Income. These policyholders and potential policyholders need 
assistance to purchase flood insurance for their homes to be 
financially protected.
    A forthcoming legislative proposal will address the need to provide 
affordability assistance to some homeowners as FEMA moves forward with 
putting the NFIP on more sustainable financial footing. This would be 
accomplished through a targeted means-tested affordability program to 
offer premium assistance based on income or ability to pay, rather than 
location or date of construction.
    This legislative proposal would establish a targeted means-tested 
affordability program for 1-4 family primary residences where the 
household income is such that Federal flood insurance under the 
National Flood Insurance Program is unattainable or difficult to 
maintain. The HUD defines households earning 80 percent or less than 
area median income as ``low income'' and households earning 120 percent 
or less than area median income as ``moderate income.'' This targeted 
affordability program would serve to offer low- and moderate-income 
households a graduated risk premium discount benefit. The discount 
received would vary by household income. As household income increases, 
the discount benefit received decreases. FEMA would implement the 
program such that eligible policyholders see both the full-risk price 
and the affordability assistance they receive so they understand their 
true flood risk. In addition, the proposal will use a portion of the 
appropriation to provide mitigation assistance to eligible 
policyholder's properties. This effort will limit eligible 
policyholders' exposure to future disasters and potentially reduce 
premiums.
Sound Financial Framework
    The sustainability of the NFIP is often called into question, 
noting the Program's $20.5 billion debt to the U.S. Treasury after 
catastrophic flood events in the last 17 years and the limited private 
sector involvement. According to the Government Accountability Office 
(GAO), the Federal Government must address the long-term financial 
exposure of disaster assistance programs and ``fully implement measures 
that promote resilience.'' \4\
---------------------------------------------------------------------------
     \4\ GAO, ``High-Risk Series: Dedicated Leadership Needed To 
Address Limited Progress in Most High-Risk Areas'', GAO-21-119SP, March 
2, 2021.
---------------------------------------------------------------------------
    To the critics of the NFIP's debt, it is important to understand 
the historical context. The lack of severe storms between 1986 and 2003 
allowed the NFIP to rely on premium payments to pay claims without 
substantial borrowing. After flood losses began escalating in 2004, 
Congress authorized the NFIP to borrow billions of dollars from the 
U.S. Treasury when needed, but that model was intended to be a short-
term solution and is not sustainable.
    Congress did not design the NFIP to pay for catastrophic flood 
events without additional financial assistance. Even if the NFIP 
collects revenue sufficient to meet long-term expected losses, the 
magnitude, volatility, and geographic concentration of flood risk pose 
unique challenges. Raising premiums to make up the deficit from extreme 
events would put an unreasonable burden on current policyholders to pay 
for past claims. Fundamental challenges to the NFIP's financial 
solvency remain, including discounted insurance premiums, interest 
costs associated with borrowing from the Treasury, and reliance on 
policyholders to fund wider public benefits.
    After the 2017 hurricanes, Congress canceled $16 billion of the 
NFIP's debt, provided as an emergency supplemental. Although an 
important step in aiding the Nation's disaster response and recovery, 
debt cancelation was intended to accompany program reform and further 
emphasized the critical need for reform. To service the $20.5 billion 
debt, FEMA continues to pay the U.S. Treasury over $400 million in 
interest expenses annually. This is the third largest NFIP activity by 
cost. The NFIP is simply not fiscally sustainable in its present form.
    Long term and sustainable fiscal soundness will require additional 
program advances to sustain the NFIP's capabilities to manage a large 
flooding event FEMA's Risk Rating 2.0--Equity in Action, Reserve Fund, 
and reinsurance are key factors, and the Administration is currently 
assessing whether additional authorities may be required.
Conclusion
    Congress established the NFIP to address escalating Federal 
expenditures following frequent and severe flooding events around the 
country. FEMA remains committed to continuous improvement of the NFIP 
to better serve our customers and account for both current and future 
conditions. Reauthorization of the NFIP must encompass innovations that 
improve the customer experience by reducing complexity and increasing 
transparency, transforming the communication of risk and improving the 
accessibility of flood insurance, strengthening local floodplain 
management minimum standards and addressing repetitive loss properties, 
and put the NFIP on a sustainable fiscal path.
               RESPONSES TO WRITTEN QUESTIONS OF
            SENATOR MENENDEZ FROM DAVID I. MAURSTAD

Q.1. Risk Rating 2.0 is one of the largest changes to the 
National Flood Insurance Program since its inception. According 
to FEMA, nearly 80 percent of policyholders nationwide will see 
increases in the first year of implementation. FEMA has also 
released data showing the size of the increases. However, this 
information has the statutory rate caps applied, giving no 
insight into how much a policyholder's actuarial rate will 
increase.
    If not for the statutory rate caps, what percent of all 
NFIP policies under Risk Rating 2.0 would see premium increases 
higher than 18 percent of their premium in their first year?

A.1. The NFIP actuaries created a policy-by-policy capping 
projection to estimate when policies will reach their full 
rates. This projection uses growth caps specific to categories 
such as Newly Mapped policyholders, Pre-Flood Insurance Rate 
Map (Pre-FIRM) homes that are primary residences and Pre-FIRM 
homes that are secondary residences. Some of these categories 
are capped at growth rates lower than 18 percent and some at 
higher rates; the vast majority are capped at 18 percent. This 
question and the following question are answered using these 
actuarial projections.
    Approximately 71.9 percent of policies would see increases 
greater than 18 percent in the first year in the absence of 
rate caps.
    The increase for most policyholders (66 percent) will be 
$10/month or less. Additionally, 23 percent of policyholders 
will see decreases. This is because Risk Rating 2.0 is right 
sizing insurance rates with the actual risk of flooding. There 
are many policyholders paying far too much in insurance today; 
they will see decreases. There are also many policyholders 
already paying what it costs to insure their risk. Typically, 
the policies that have been underpriced the most are high value 
homes in high risk areas. Their artificially low premium prices 
are due to the inequities of the current rating system.
    If Risk Rating 2.0 is not implemented, rates will still 
increase, but they will not increase in a way that is 
commensurate with the risk or the replacement cost value of the 
structure. Attached is a spreadsheet that compares rate changes 
under the current methodology and RR2.0 in year one. 
Additionally, we created the same comparison for Louisiana, for 
both levee-only and all of Louisiana. As mentioned in the 
response to Question 4 [from Sen. Kennedy], under the current 
rating plan rate increases are currently focused on lower value 
homes, as can be seen by the comparing the average replacement 
cost value for increases between $50 and $100 per month to the 
average for all policyholders. These rate increases stop under 
Risk Rating 2.0. Furthermore, Risk Rating 2.0 greatly reduces 
the number of policyholders with increases greater than $100 
per month, from 45,012 policyholders under the current rating 
plan to only 3,199 under Equity in Action.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

Q.2. For the policies seeing increases under Risk Rating 2.0, 
what percent of policies would be at their full actuarial risk 
rate in year one? What percent of policies would reach their 
full actuarial rate by year five? In addition, what percent of 
policies would reach their full actuarial rate by year ten?

A.2. Approximately, 28.1 percent of policyholders are at their 
full risk rate at year one. After 5 years, that percentage 
moves to 55.3 percent, and after 10 years to approximately 87 
percent.
    In the first year, FEMA will collect slightly less than 
current collections. By the third year, collections are back at 
current levels. By approximately the 15th year, FEMA will 
collect roughly 1.5 times the current premium level. Premium 
collections would have gone up to the same level under the 
current methodology. So overall premium collection is the same 
under both methodologies, but Risk Rating 2.0 delivers the 
premium increases in an equitable manner.

Q.3. Could you please provide a detailed analysis of how 
premiums of grandfathered properties nationally will be 
impacted under Risk Rating 2.0? Could you provide the same 
analysis for grandfathered properties in New Jersey?

A.3. See attached Excel spreadsheet which details the year one 
changes for grandfathered policies nationwide, in New York, and 
in New Jersey.
    Note that nationwide, grandfathered policies have a similar 
distribution of changes to the nationwide total. The percent of 
decreases in year one is actually greater than the percent for 
all nationwide policies (28.5 percent of grandfathered policies 
decreasing vs. 23.3 percent of all policies; 22.0 percent of 
grandfathered single family home policies vs. 18.6 percent of 
all single family home policies). At the same time, slightly 
more grandfathered policies will see increases greater than $20 
(4.9 percent of grandfathered policies increasing more than $20 
vs. 3.9 percent of all policies; 9.5 percent of grandfathered 
single family home policies vs. 2.9 percent of all single 
family home policies). But it should be noted that fewer than 5 
percent of single-family home policies are grandfathered, 
meaning that the single family home grandfathered policies 
increasing more than $20 represent approximately 0.3 percent of 
all policyholders.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

       RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARNOCK
                     FROM DAVID I. MAURSTAD

Q.1. Over the years, FEMA has allowed midterm cancelations of 
NFIP policies with pro rata refunds when non-NFIP replacement 
coverage was confirmed. However, NFIP policyholders today who 
are struggling with affordability challenges have no such 
optionality or recourse. Beginning in 2012, NFIP established 
Cancellation Reason Code 16 that allowed policyholders to 
cancel mid-term and receive prorated refunds if they found 
alternative non-NFIP coverage. Three years later, in 2015, NFIP 
rescinded this option for policyholders. In 2017, in response 
to a written question regarding this change to NFIP's 
cancelation policies, then Deputy Associate Administrator for 
Insurance and Mitigation, Roy Wright, testified that FEMA's 
regulations restrict its ability to issue refunds for canceled 
policies. He went on to say that ``FEMA is seeking regulatory 
changes to allow FEMA to cancel the NFIP policy with premium 
refund when the insured has obtained a replacement flood 
insurance policy through the private company.''
    As forecast by Mr. Wright, in the spring of 2018 FEMA 
announced that it would, in effect, reimplement the terms of 
Code 16 as Cancellation Reason Code 26. However, when Code 26 
was published in 2018, it bore little resemblance to Code 16 
even though under Code 16 no detrimental outcomes were ever 
reported. In March of 2019, Code 26 was minimally revised but 
continues to be a major impediment to consumer choice in flood 
insurance.
    Can you provide an update on FEMA's current review of this 
issue?

A.1. The current 44 CFR 61.5(c) limits mid-term premium 
refunds. It provides that only a policy holder canceling 
because their ownership in the property has ended will be 
entitled to pro-rata premium refunds. In other words, a policy 
holder who purchases a private non-NFIP policy mid-term and 
then cancels their NFIP policy cannot receive a refund. In 
outlining this prohibition, 44 CFR 61.5(c) specifically 
mentions the seasonal nature of flooding. Although premium is 
paid on a yearly basis, the highest risk of flooding is limited 
to certain months (i.e., the ``seasonal nature''). Accordingly, 
there is an actuarial concern with mid-term cancelations.
    Effective October 1, 2021, guidance on nullifications, 
cancelations and refunds will be consolidated at 44 CFR 62.5. 
This consolidation provides for refunds in certain scenarios 
but will not allow for a refund when a non-NFIP private policy 
is purchased.
    FEMA supports legislative action to allow refunds for 
policy holders who cancel mid-term after purchasing a private 
non-NFIP policy. Additionally, FEMA will continue to explore 
the possibility of rulemaking to allow for such refunds through 
regulation.

Q.2. How does FEMA's current position square with the federal 
requirement that lenders accept compliant non-NFIP flood 
insurance whenever tendered?

A.2. FEMA supports purchase of any flood insurance, but its 
current regulations do not provide the authority to allow for 
refunds when a policy holder purchases a non-NFIP flood policy.

Q.3. At a time when affordability of flood insurance is a top 
concern, what precisely led FEMA to twice reverse this policy?

A.3. FEMA supports purchase of any flood insurance, but its 
current regulations do not provide the authority to allow for 
refunds when a policy holder purchases a non-NFIP flood policy.

Q.4. Will FEMA give priority to revisiting this change to allow 
policyholders that find a more affordable flood insurance 
policy to receive the savings immediately as previously allowed 
under Code 16?

A.4. FEMA supports legislative action to allow cancelations of 
NFIP policies midterm due to purchase of a private policy and 
would like the opportunity to provide technical drafting 
assistance for any legislative action that supports mid-term 
cancelations due to private policy purchase.
                                ------                                


       RESPONSES TO WRITTEN QUESTIONS OF SENATOR KENNEDY
                     FROM DAVID I. MAURSTAD

Q.1. Public involvement and policy holder interests do not seem 
to be a consideration in the formulation of Risk Rating 2.0. 
Risk Rating 2.0 proponents speak about fairer rates, but there 
has been no meaningful public involvement during the 5 years it 
has taken FEMA to establish this proposal. Prior to this once-
in-a-generation overhaul of the National Flood Insurance 
Program (NFIP), how has the general public been notified or 
consulted about these major changes?
    As FEMA began developing Risk Rating 2.0 did FEMA ever 
consider doing a rulemaking process with public notice and 
comment before this once-in-a-generation NFIP overhaul takes 
effect beginning in October of this year?
    The Administrative Procedure Act ensures that the public is 
guaranteed a voice and proper insight into proposed Government 
agencies' rules/regulations. Pursuant to the Administrative 
Procedure Act, why haven't the underlying assumptions, models, 
and data used to formulate Risk Rating 2.0 been released for 
public comment and input?
    Why must policy holders wait until August to learn more 
about their rates?
    Will FEMA make rate available to the public at this time?

A.1. Since 1968, the National Flood Insurance Act has required 
the Federal Emergency Management Agency (FEMA) to periodically 
review, and if necessary, revise the way we set nondiscounted 
premium rates. The requirement to estimate and charge actuarial 
rates, also referred to as, nondiscounted premium rates is 
outlined at 42 U.S.C 4014(a)(1); 4015(c).

        The Administrator is authorized to undertake and carry 
        out such studies . . . as may be necessary to estimate, 
        and from time to time estimate on an area subdivision 
        or other appropriate basis (1) the risk premium rates 
        for flood insurance which--(A) based on consideration 
        of--(the risk involved and accepted actuarial 
        principles . . . [that] would be required in order to 
        make such insurance available on an actuarial basis . . 
        . [42 U.S.C. 4014(A)(1)].

    The Act identifies properties for which FEMA shall charge 
actuarial rates as Post-FIRM properties: properties built after 
FEMA has mapped the base flood for an area. 42 U.S.C. 4015(c). 
While the Act does outline certain rulemaking requirements, 
notably 42 U.S.C. 4014(f)(3), it makes no such requirement for 
estimation of actuarial rates. As such, there is no statutory 
mandate for rulemaking.
    Even if the rulemaking requirements outlined in the 
Administrative Procedures Act (APA) at 5 U.S.C. 553 were 
directly applicable, the APA offers exceptions to rulemaking 
for matters relating to ``benefits and contracts'' 5 U.S.C. 
553(a)(2), and for rules of ``procedure and practice'' 5 
U.S.C. 553(b)(3)(A)--thus offering a considerable amount of 
discretion as to when rulemaking is undertaken.
    After two earlier delays in implementation, the new 
Administration decided to take a phased approach to the 
implementation of Risk Rating 2.0: Equity in Action (Risk 
Rating 2.0) to ensure existing policyholders have ample time to 
make informed decisions. The approach was announced in April 
2021 and allows existing policyholders, beginning in October, 
to choose to transition to Risk Rating 2.0 if it is financially 
advantageous. All policyholders, beginning in April 2022, will 
be transitioned, giving existing policyholders at least one 
year to understand the transition to Risk Rating 2.0. 
Additionally, in the current rating paradigm, all policyholders 
have been and would continue to experience rate increases, 
whereas with Risk Rating 2.0, 23 percent of existing 
policyholders would see rate decrease upon the transition to 
the new rating methodology and all other policyholders would 
see the gradual statutory increases mandated by Congress.

    In Phase I: New policies beginning Oct. 1, 2021, 
        will be subject to the new rating methodology. Also 
        beginning Oct. 1, 2021, existing policyholders eligible 
        for renewal will be able to take advantage of immediate 
        decreases in their premiums at the next policy renewal.

    In Phase II: All remaining policies renewing on or 
        after April 1, 2022, will be subject to the new pricing 
        methodology, with renewing policyholders either 
        immediately decreasing or increasing from their current 
        premium to their full risk premium over time.

    This phased approach allows more time for both industry and 
policyholders to prepare. The agency has spent significant time 
over the last 3 years on outreach and engagement with a variety 
of industry and nonindustry stakeholders, including 
professional and trade associations, State insurance 
regulators, State insurance commissioners, various Government 
agencies, and the media. To date, FEMA has conducted more than 
500 outreach and engagement activities around Risk Rating 2.0.
    Major National Flood Insurance Program changes are 
announced to the public twice a year, in April and October. 
Annual rate changes are announced every October, effective the 
following April. These changes are announced via bulletin to 
our industry partners and posted to floodsmart.gov. In concert 
with the NFIP's general practice of announcing major program 
changes semi-annually, on April 1, 2021, FEMA issued W-21003 
bulletin. The bulletin provided notification of the change to 
the new pricing methodology, the overall timeline for 
implementation, and FEMA's expectations of NFIP insurers (i.e., 
WYO companies and NFIP Direct).
    Additionally, FEMA has released several sets of data and 
information, listed below, for the public to understand the 
changes that will be made once Risk Rating 2.0 is fully 
implemented. FEMA released:

    ``Risk Rating 2.0 Methodology and Data Sources'', 
        released in April of this year provides a consolidated 
        description of the methodology and data sources used to 
        develop Risk Rating 2.0 and information describing how 
        the work complies with relevant actuarial standards . . 
        . The report also provides the Risk Rating 2.0 
        algorithm, rates, and rating factors, as well as 
        examples that illustrate how premiums are calculated 
        under the new rating plan.

    ``Risk Rating 2.0 State Profiles''. These State 
        profiles provide a detailed report of the Risk Rating 
        2.0 transformation on the insurance policies within 
        that State, as well as county level and zip-code level 
        premium change analysis.

    ``Risk Rating 2.0 Methodology and Data Sources'', 
        this document provides a complete overview of the 
        technical methodology and data used to build Risk 
        Rating 2.0.

    ``Premium Calculation Worksheets''. A workbook that 
        shows how the rating calculation produces a premium.

    ``Appendix D Rating Factor Tables''. A workbook 
        that encompasses all the rating factors for the 
        variables.

    FEMA will continue to release additional information 
regarding Risk Rating 2.0. At this time, NFIP policyholders can 
contact their insurance company or insurance agent to learn 
more about what Risk Rating 2.0-Equity in Action means to them. 
FEMA has also provided the Write Your Own companies and NFIP 
Direct the guidance necessary to implement Risk Rating with 
their agent workforce. Final guidance was released on September 
1, 2021, though industry partners have seen this material in 
draft form since April. As our efforts move forward, FEMA will 
continue to partner with the Write Your Own companies and NFIP 
Direct to ensure their staff, agents, business processes, and 
technology are implementing the Risk Rating 2.0 changes for 
both new business and current policyholders.

Q.2. According to FEMA's website, FEMA is developing flood 
hazard models using private sector data sets, catastrophe 
models, and evolving actuarial science. For the public, it is 
not enough to just describe and cite a model. How does FEMA 
plan to communicate to policy holders that their premiums are 
derived from their flood risks in plain English?
    Are policy holders aware of their flood risk's influence 
over the cost of premiums? And are they aware of the 
correlation between the two?

A.2. FEMA will deliver flood insurance rates under Risk Rating 
2.0 that are easier to understand and better reflect a 
property's unique flood risk. Risk Rating 2.0 uses a series of 
rating variables to describe the flooding risk at the structure 
level, such as the structure's distance from a flooding source, 
elevation, and the cost to rebuild a property. Therefore, the 
connection between a policyholder's flood risk and insurance 
premium should be clearer than in the past.
    For the last 3+ years, FEMA has spent significant time on 
outreach and engagement with a variety of industry and 
nonindustry partners as well as the media. This has ensured 
these groups can effectively assist the public in understanding 
both Risk Rating 2.0 and the factors that drive the price of 
flood insurance. In addition, insurance agents are essential 
partners in communicating the value of flood insurance to the 
public. FEMA has worked to ensure the agent community is well-
versed in Risk Rating 2.0 and are ready to communicate to their 
customers in plain language how flood insurance works. FEMA 
continues to work with multiple stakeholders on refining 
implementation and fully operationalizing RR 2.0. As part of 
this process, we're reviewing various ways to utilize the new 
information and insights available to us to best communicate 
flood risk to individuals, communities, other Government 
agencies, and external third parties.
    As of September 3, 2021, FEMA has trained over 15,258 
agents on the fundamentals of Risk Rating 2.0., so they can 
begin to work with current and prospective policyholders. 
Beginning August 2021, current National Flood Insurance Program 
policyholders have had the ability to contact their insurance 
company or insurance agent to learn more about what Risk Rating 
2.0-Equity in Action means to them.

Q.3. Insurance companies have been required by FEMA to sign 
Non-Disclosure Agreements (NDA) before seeing the details on 
Risk Rating 2.0.
    Please provide a detailed explanation regarding why FEMA 
decided to require insurance companies to sign an NDA. 
Additionally, please provide my office with a copy of the NDA.

A.3. Write Your Own (WYO) industry partners are critical in 
delivery of the NFIP, and FEMA worked closely with them 
throughout the development of Risk Rating 2.0.
    Given that the development of Risk Rating 2.0 was a fluid 
process and FEMA wanted to include industry expertise from the 
WYOs, it was necessary to put a Non-Disclosure Agreement (NDA) 
in place prior to the official release of any implementing 
guidance. FEMA wanted to ensure that when the design of Risk 
Rating 2.0 was complete, FEMA and industry partners could 
implement it in a consistent fashion. The NDA was designed to 
keep deliberative information confidential as well as ensure 
that information regarding the methodology and the 
implementation timeline was consistent and disseminated only 
once decisions were finalized. FEMA lifted the NDA requirement 
in April of this year. At that time, FEMA had provided public 
notification of the change to the new pricing methodology, the 
overall timeline for implementation, and FEMA's expectations of 
NFIP insurers. A copy of the NDA is attached.

Q.4. I am deeply concerned with the affordability of flood 
insurance under the Risk Rating 2.0 proposal. This proposal 
will significantly raise premiums for policy holders in 
Louisiana. In some cases, homeowners will see over a 70 percent 
increase.
    As you were creating RR 2.0, was flood insurance 
affordability a consideration in the pricing structure? As was 
intended with the creation of the NFIP, is FEMA planning to 
continue to balance the need for affordable rates with 
capturing risk?

A.4. FEMA recognizes and shares concerns about flood insurance 
affordability. Pursuant to 42 U.S.C. 4014(a)(1); 4015(c), FEMA 
is required to estimate and charge actuarial rates, also known 
as nondiscounted premium rates. Accordingly, rates must be risk 
based. FEMA will continue to ensure that the transition to new 
rates under Risk Rating 2.0 is reasonable, equitable, and 
complies with the gradual 18 percent statutory rate increase 
limits put in place by Congress. In April 2018, FEMA delivered 
an Affordability Framework to Congress to assist policymakers 
in considering how to provide targeted assistance to 
policyholders and potential policyholders.
    The President's Budget in Fiscal Years 2019, 2020, and 2021 
included a proposal that was intended to be a first step in 
developing a comprehensive affordability program. In 2021, FEMA 
developed its NFIP Means-Tested Assistance Program proposal 
that would offer a graduated discount benefit to current and 
potential policyholders whole households make at or below 120 
percent of area median income. This proposal was included in 
the President's FY22 Budget. FEMA urges Congress to ensure that 
more individuals are covered by flood insurance by making 
insurance more affordable to low-and-moderate income 
policyholders residing in 1-4 family dwellings used as primary 
residences.
    Rates will increase at the same overall levels under either 
the current rating plan or Risk Rating 2.0, but under the 
current rating plan they will increase inequitably. Under Risk 
Rating 2.0 they will increase fairly.
    Under the current rating plan, lower value homes pay more 
than they should for flood insurance, subsidizing higher value 
homes. And these same low value homes are currently bearing 
larger increases in premium than higher value homes. Without 
implementing Risk Rating 2.0 the inequity of the current rating 
plan will continue to grow, making flood insurance for lower 
value homes less affordable.
    As shown in the attached summary, both at a national level 
and in Louisiana, under the current rating plan thousands of 
policyholders are currently seeing increases between $50 and 
$100 per month. And the average replacement cost value for 
these homes is around $250,000, well below the average 
replacement value of approximately $400,000 in Louisiana and 
$450,000 nationally. Under Risk Rating 2.0, fewer structures 
will see increases above $50, the few that do have replacement 
cost values well in excess of the national and State average.
    Furthermore, without Risk Rating 2.0, thousands of 
policyholders who are currently overpaying for flood insurance 
will not see reduced premiums. The attachment also shows that 
the average replacement cost value for those with the largest 
decreases is likewise below the nationwide and State average. 
Under the current rating plan rates will continue to increase, 
with large, inequitable increases that are particularly focused 
on older, lower value homes. Risk Rating 2.0 was designed to 
address these inequities, not only halting these increases for 
many of the lower value homes, but actually decreasing their 
premiums.
    Under the current methodology, premiums for all 
policyholders would continue to increase by an average of 10 
percent per year indefinitely, with no upper bound that limits 
costs on the highest end of the spectrum. Without a transition 
to Risk Rating 2.0, inequitable rates will remain in place, and 
many policyholders will continue to pay more than they should.
    FEMA champions the Biden administration's budget proposal 
for Fiscal Year (FY) 2022 aimed at helping address flood 
insurance affordability for low-to-moderate income households. 
FEMA developed its NFIP Means-Tested Assistance Program 
proposal, based on years of research, to provide flood 
insurance premium discounts to current and prospective 
policyholders whose household incomes are less than 120 percent 
of area median income. The program was designed to pay a 
percentage of a low- to moderate-income policyholder's flood 
insurance premium, with the discount percentage falling as 
household income rises.

Q.5. To help keep insurance rates affordable, isn't it 
essential that we examine not just program revenues but also 
program costs? Do you believe, in order to maintain 
affordability, both the program's expenses and revenue should 
be taken into consideration?

A.5. FEMA is undertaking three efforts to manage the expenses 
of the program:

  1.  Expense Analysis Working Group--This working group will 
        perform annual analysis of WYO companies' income and 
        expenses to derive implied profit or loss.

  2.  Future of Insurance Study--DHS S&T awarded a contract in 
        the last quarter of FY2021 to study the effects of 
        technological advancements on the future of insurance, 
        including: (a) Product offerings; (b) Pricing 
        paradigms; (c) Delivery mechanisms; (d) New 
        technologies; and (e) Future of agent and adjuster 
        commission. The study will commence in the first 
        quarter of FY2022 and is expected to take 1 year to 
        complete.

  3.  WYO Compensation Study--FEMA has established a working 
        group and placed a contract with RAND to examine WYO 
        compensation. The study will lead to new rulemaking 
        regarding WYO Compensation. FEMA awarded the contract 
        in the last quarter of FY2021 and the study commenced 
        at the end of FY2021. The study is projected to take 1 
        year to complete.

Q.6. Why is it that the only solution to address the solvency 
of the program is to raise rates on existing policy holders 
without trimming the costs run up by agencies and their 
contractors?
    Why will policy holders experience a rise in the cost of 
their premiums, but contractors and the agencies will see 
minimal to no change?

A.6. FEMA is continuously undertaking efforts to manage 
expenses of the program. For example, the recently completed 
modernization of our IT system saves the NFIP over $22 million 
per year in operations and maintenance expenses. Risk Rating 
2.0 is essential to reducing costs as it is expected to create 
efficiencies through simplification of delivery.

Q.7. Over the past decade, the NFIP's debt has shot up 
exponentially. To reduce or eliminate the NFIP debt, do you 
feel that we also need to reform payments to write-your-own 
insurers, NFIP operating expenses, and interest on NFIP debt 
payments to the U.S. Treasury?

A.7. As discussed above, FEMA is undertaking efforts to manage 
programmatic expenses to WYO insurers, and this includes 
examination of the most appropriate way to compensate WYO 
companies. Though important, WYO compensation and 
administrative costs are not what is driving the NFIP's debt, 
it is the payment of claims on large, catastrophic events. 
Addressing the debt requires a comprehensive approach, which 
addresses structural flaws in the way the NFIP is designed. We 
look forward to working with Congress on a sound financial 
framework that addresses interest payments to the U.S. Treasury 
that cost current NFIP policyholders $287 million annually.
    The NFIP's structural flaws have been apparent since the 
historic 2005 hurricane season. Since that time, a series of 
catastrophic floods have highlighted the failures of current 
flood policy, including the fact that the NFIP is not fiscally 
sustainable in its present form. The NFIP manages most of its 
financial risk through authority to borrow from the U.S. 
Treasury, the repayment of which is beyond the NFIP's current 
capabilities. Congress did not design the program to handle 
catastrophic losses from events such as Hurricane Katrina 
(2005), Hurricane Sandy (2012), and Hurricane Harvey (2017). 
When disasters have exceeded the NFIP's capacity to pay, 
Congress has repeatedly raised the NFIP's borrowing authority 
(from its 2005 level of $1.5 billion to the current level of 
$30.425 billion) rather than address this structural flaw of 
the program.
    Historically, the NFIP's borrowing authority limit has only 
been raised when significant disaster events occur causing 
large levels of loss. Reliance on increasing borrowing 
authority to pay for valid claims is not sustainable. Large 
debt accrues large accrued interest payments, hampering the 
NFIP's balance sheet. Since 2005, the NFIP has paid $5.26 
billion in interest payments alone. In the current NFIP 
financial situation, even with Risk Rating 2.0 premiums, there 
is only a 4 percent chance of ending a 10-year window with a 
positive net balance.
    Establishing a sound and transparent financial framework 
for the NFIP would require statutory changes that would require 
the Administrator to strive to manage the NFIP to the 1-in-20 
occurrence exceedance loss level (approximately $10.5B) 
utilizing the following: the National Flood Insurance Fund, 
Reserve Fund, annual Congressional Equalization Payments, 
reinsurance, and any other funds made available to the 
Administrator through appropriations or otherwise for carrying 
out the flood insurance program. If the Administrator finds 
that a flooding event will exceed the flood insurance program's 
1-in-20 occurrence exceedance loss level, emergency 
supplemental appropriation should be instituted. If the NFIP 
were to institute necessary reforms for a sound financial 
framework, there is a 75 percent chance of ending a 10-year 
window with a positive net balance. Looking 18-years out, there 
is only a 5 percent chance of having a negative net balance, 
with a $16B positive average balance.

Q.8. How much has FEMA paid Milliman for their work in 
developing Risk Rating 2.0?

A.8. FEMA paid Milliman $10,988,650 from June 2017 to October 
2020. Milliman is the leading actuarial consulting firm for 
natural catastrophic insurance perils. In addition of providing 
valuable insight into industry best practices, they provided 
top actuarial and geospatial talent to assist the FEMA 
actuaries in developing a nationwide flood rating plan, which 
is a very complex natural catastrophe peril.

Q.9. FEMA has acknowledged significant gaps in reliable levee 
risk data. It is my understanding that only one of the five or 
six Risk Rating 2.0 models could be adapted for use on levees.
    Please provide a detailed explanation about why FEMA's 
evaluation will be able to accurately determine risk and risk-
rated premiums behind levees.

A.9. Prior to undertaking Risk Rating 2.0, there were 
significant gaps in consistent levee data across the nation 
that could be used to assess flood risk for the purposes of 
rate setting. For Risk Rating 2.0, FEMA partnered with the 
United States Army Corps of Engineers (USACE) to close those 
gaps by identifying and using credible and consistently 
available data and methods to account for the level of risk 
reduction provided by levees. Through the partnership with 
USACE, FEMA was able to provide the first comprehensive 
modeling of flood risk reduction provided by levees, leading to 
a more reliable quantification of the remaining risk behind the 
nation's levees. The rates for Risk Rating 2.0 were set using 
this information.

    Five key data points were used to assess the risk 
        reduction provided by a levee: levee centerline, levee 
        crest profile, leveed area, overtopping frequency, and 
        levee performance.

    FEMA used readily available data from the USACE-
        maintained National Levee Database (NLD) and the Levee 
        Screening Tool (LST). All levees identified in the NLD 
        (Spring 2020) were considered for Risk Rating 2.0. The 
        NLD is a dynamic database that is continually updated.

    The quantity and quality of levee information in 
        the NLD and LST varies, and FEMA used the most detailed 
        and highest quality data available from these sources. 
        Levees that USACE routinely inspects generally have 
        more high quality and detailed information available, 
        and that data was used for Risk Rating 2.0. For other 
        levees lacking that detailed information, available 
        data from the NLD was used and enhanced using 
        consistent methods.

    For each levee, the overtopping frequency and levee 
        performance were directly incorporated into the 
        catastrophe models to determine average annualized 
        losses. Leveed areas have a separate rating algorithm 
        than nonleveed areas.

    USACE and FEMA jointly developed an approach that 
        increased the ability to evaluate risk behind 42 
        percent of levees in the country, which account for 90 
        percent of buildings behind levees.

    FEMA will continue working with USACE to improve 
        levee data and to refine risk assessment methodologies 
        in support of annual rate updates and a risk-informed 
        NFIP.

Q.10. How can FEMA ensure that Risk Rating 2.0 will offer 
accurate pricing for policyholders and their premiums?

A.10. As described in FEMA's detailed documentation of the 
analytical basis for the rating plan found here: Risk Rating 
2.0 Methodology and Data Sources Final Report (fema.gov). By 
using flood risk models and data from commercial catastrophe 
models as well as data from FEMA, USACE, the National Oceanic 
and Atmospheric Administration, and the United States 
Geological Survey, FEMA can ensure that rates reflect the best 
available data. Furthermore, the rating plan has been tested 
using historical data to ensure the flood risk aligns with 
NFIP's best and complete analysis.

Q.11. Technology exists today that can provide highly accurate 
and timely observational flood data that provides insight into 
what's happening on the ground during and immediately after a 
flood. This includes building-level flood depth and extent of 
the floodwaters within 24 hours of the water's peak. Leveraging 
this technology could be used to cut costs associated with 
boots-on-the-ground claims adjusting, but most importantly, it 
can be used to provide much faster payouts to Louisianans 
impacted by devastating flooding.
    What is FEMA doing to leverage technology for remote 
claims? Are you experiencing any obstacles that Congress can 
assist FEMA in deploying this technology or move forward with 
remote claims and faster payouts?

A.11. FEMA's recently modernized System of Record--Pivot--
allows for instantaneous validation of information, including 
eligibility for coverage, acceptance of claim information, 
documentation of advance payments, and business process 
confirmation. We can track payments to policyholders in a near 
real time manner and can target insurers to remove impediments, 
clarify guidance, and ensure policyholders are taken care of 
quickly.
    FEMA responded to the challenges posed by the pandemic by 
coordinating with our privacy and cybersecurity experts, to 
establish guidance that would enable the NFIP Direct and our 
WYO partners to adjust claims remotely, and ensure adherence to 
the Centers for Disease Control and Prevention guidelines for 
the safety of both the policyholder and the adjuster when in 
person inspection was necessary.
    FEMA published Bulletin W-20004 on April 2, 2020; it set 
minimum standards for remote adjusting and made such adjusting 
available for use by the NFIP Direct and WYOs regardless of 
technology formats in use. FEMA also ensured that policyholders 
chose remote adjusting only if it was right for them.
    FEMA found that remote adjusting complimented its 
previously implemented process improvements. Remote adjusting 
helped policyholders recover sooner by expediting advance 
payments. When a physical inspection was necessary, remote 
adjusting allowed insurers to issue larger advance payments 
prior to the onsite visit. Additionally, FEMA found that many 
program partners were eager to take on the challenge of remote 
adjusting as they do in their other lines of business.
    FEMA has an interest in ensuring that Program partners and 
the adjusting community adopt processes that are consistent 
with FEMA claims guidance and ensuring that policyholders 
receive an equitable claim settlement to deliver on our promise 
to provide exceptional customer service, whether the claims 
were adjusted remotely or not. FEMA met with companies in 
advance to view the types of software to be used in remote 
adjusting claims. We were impressed with the type and quality 
of the available products including the relative ease of use.
    WYOs provided product demonstrations of the third-party 
technology solutions they leveraged in adjusting flood and 
other claims, and this sector of the industry is providing high 
quality, easy to use products. The proprietary software 
utilized existing smart technology including smart phones and 
tablets. Adjusters interacted directly with policyholders, 
walking them through the process to gather the information 
necessary to complete the timely adjustment of claims. Using 
the camera on the policyholder's smart device, the policyholder 
would open a link that allowed the adjuster to see what the 
policyholder sees. Adjusters can capture photographs of water 
heights, damage, and confirm the type and quality of finishes. 
Most of the software we viewed allowed the adjuster to remotely 
capture room measurement and anything that could not be 
captured would be manually measured and provided by the 
policyholders. The adjuster would take the information and 
create an estimate to repair the documented and covered flood 
damage. The policyholder always has the option to request a 
physical inspection. FEMA does not endorse or recommend 
specific software but understands that this is a mature and 
widely used technology that will see continuous increased use 
and growth.
    We are not experiencing any obstacles but appreciate the 
offer to assist.
              Additional Material Supplied for the Record
 STATEMENT SUBMITTED BY JEFFREY C. WILEY, PRESIDENT AND CEO, FORT BEND 
            ECONOMIC DEVELOPMENT COUNCIL, SUGAR LAND, TEXAS
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

                             [all]