[Senate Hearing 117-471]
[From the U.S. Government Publishing Office]


                                                       S. Hrg. 117-471

                 21ST CENTURY COMMUNITIES: CLIMATE CHANGE, 
                          RESILIENCE, AND REINSURANCE

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

                                HEARING

                               BEFORE THE

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

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             FIRST SESSION

                                   ON

    EXAMINING THE WAYS CLIMATE CHANGE PUTS THE AMERICAN ECONOMY AND 
                      AMERICAN COMMUNITIES AT RISK

                               __________

                             JULY 20, 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                    
49-451 PDF                 WASHINGTON : 2023                    
          
-----------------------------------------------------------------------------------     

            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

                         John Richards, Counsel

                 Dan Sullivan, Republican Chief Counsel

                  Alexander LePore, Republican Detail

                      Cameron Ricker, Chief Clerk

                      Shelvin Simmons, IT Director

                    Charles J. Moffat, Hearing Clerk

                                  (ii)


                            C O N T E N T S

                              ----------                              

                         TUESDAY, JULY 20, 2021

                                                                   Page

Opening statement of Chairman Brown..............................     1
        Prepared statement.......................................    29

Opening statements, comments, or prepared statements of:
    Senator Toomey...............................................     3
        Prepared statement.......................................    30

                               WITNESSES

Abdollah Shafieezadeh, Lichtenstein Endowed Professor of Civil, 
  Environmental, and Geodetic Engineering and Director of the 
  Risk Assessment and Management of Structural and Infrastructure 
  Systems Lab, The Ohio State University.........................     6
    Prepared statement...........................................    31
    Responses to written questions of:
        Chairman Brown...........................................   112
Rachel Cleetus, Policy Director, Union of Concerned Scientists...     7
    Prepared statement...........................................    36
    Responses to written questions of:
        Chairman Brown...........................................   117
        Senator Warren...........................................   121
Frank Nutter, President, Reinsurance Association of America......     9
    Prepared statement...........................................    65
    Responses to written questions of:
        Chairman Brown...........................................   122
        Senator Warren...........................................   123
        Senator Sinema...........................................   124
Roger Pielke, Jr., Professor, Environmental Studies, University 
  of Colorado....................................................    10
    Prepared statement...........................................    94
Jerry Theodorou, Director, Finance, Insurance, and Trade, R 
  Street Institute...............................................    12
    Prepared statement...........................................   110

              Additional Material Supplied for the Record

Statement of the National Association of Mutual Insurance 
  Companies......................................................   126
Statement of the Insurance Institute for Business & Home Safety..   129
Statement of the SmarterSafer Coalition..........................   136
Statement of the American Property Casualty Insurance Association   139
Statement of the SBP.............................................   162

                                 (iii)

 
 21ST CENTURY COMMUNITIES: CLIMATE CHANGE, RESILIENCE, AND REINSURANCE

                              ----------                              


                         TUESDAY, JULY 20, 2021

                                       U.S. Senate,
          Committee on Banking, Housing, and Urban Affairs,
                                                    Washington, DC.
    The Committee met at 10:02 a.m., via Webex and 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. This hearing is in the 
hybrid format. Our Members are in person but we will have 
witnesses testifying both in person--two of them are here--and 
by video--three of them are elsewhere.
    For those joining remotely, a few reminders. 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 it is your turn to speak or ask questions. 
You should all have one box on your screens labeled ``Clock'' 
that will show how much time is remaining. For those of you 
joining virtually you will hear a bell ring when you have 30 
seconds remaining and then again when your time has expired.
    If there is a technology issue we will move to the next 
witness until we can resolve it.
    As we are, the Members and two of the witnesses, here in 
person, our speaking order will be as is traditional, that is 
by seniority of the Members here when the gavel came down at 10 
o'clock, then by seniority of Members arriving later, 
alternating between Democrats and Republicans.
    This morning the Banking and Housing Committee again looks 
at the ways climate change puts the American economy and 
American communities at risk. Earlier, we examined the ways big 
banks' focus on short-term profit, while ignoring long-term 
climate risk, puts homes and businesses and the overall health 
of the American economy at risk.
    In April, we looked at all the opportunities for American 
workers and the benefits to the entire economy from investment 
in new, 21st century energy.
    Today's hearing will look at what cities and towns and 
businesses of all sizes can do to protect our infrastructure, 
including homes and transit systems, that are at risk from 
climate change.
    This Committee must do all we can to help our communities 
protect themselves and reduce the risk to taxpayers from 
climate disasters.
    We will hear from witnesses about cost-effective measures 
to ensure the infrastructure we rely on--from bridges to major 
highways, from water treatment plants to neighborhoods and 
office buildings--to ensure they can withstand more frequent 
extreme weather events.
    Pretty much every month we see another climate change-
fueled catastrophe, from the wildfires ravaging the western 
United States to the increasingly common coastal and river 
flooding.
    Historic heat melts streetcar cables in Portland, Oregon. 
Another polar vortex hits a woefully unprepared Texas and 
disables natural gas lines and the electrical grid. Last month, 
tropical storms that would have been unprecedented not too long 
ago devastated roads, and flooded homes through Ranking Member 
Toomey's Delaware and Chester Counties in the southeast part of 
his State.
    Last year, remnants of Tropical Storm Isaias hit the same 
area outside Philadelphia, floating large shipping containers 
and crashing them into a local bridge, flooding roads and 
homes, and shutting down service on SEPTA, one of America's 
great and largest transit systems.
    My State of Ohio is not immune. Recent landslides in 
Cincinnati closed heavily traveled highways and cut the value 
of some Ohioans' homes in half. The disaster resulted from the 
combination of the clay in that part of the country, and 
rainfall that has been more than 16 percent heavier than 
historical averages.
    Water levels and temperatures in Lake Erie are higher than 
they have ever been, and are on a steady two-decade rise. This 
affects power plant operation, contributes to flooding of 
homes, businesses, and farmland, and feeds harmful algae 
blooms, jeopardizing the water supply for more than a million 
people.
    All of these disasters affect the economy. They mean supply 
chain interruptions and power outages and damage to buildings 
and raw materials and transportation networks. It is just 
common sense--when disaster strikes the infrastructure our 
economy relies on, our economy gets interrupted, over and over 
and over again.
    It is the American people who pay. They pay in higher 
utility bills and higher prices, more tax dollars shelled out 
to afford repairs, and lost jobs and homes and opportunity.
    Our competitors around the world are taking this seriously. 
China plans to invest more than $2.5 trillion in more 
resilient, integrated transportation, energy, and information 
technology infrastructure by 2025, including 16 new Ultra High 
Voltage transmission routes to connect renewable generation in 
the countryside to the booming demand in its cities. That is 
all on top of their Government-funded clean energy R&D, where 
they invest more than the U.S., Japan, and India combined.
    Every time business grinds to a halt because an American 
factory was not built to withstand extreme heat, or because a 
road is blocked by landslides, or because a power grid is shut 
down, that is another opportunity for China and other foreign 
competitors to get ahead.
    Investment we can make now to shore up our infrastructure 
will both create jobs at home--jobs that cannot be outsourced--
and make our industries more competitive. And all the 
investments we make today will save taxpayers money in the 
future. It is a lot cheaper to build a stronger bridge now than 
to repair it every other year.
    This Committee oversees the stability of the economy, the 
homes Americans live in, and the transit systems that get 
people to work. It is our job to look at the risks that 
infrastructure faces, both the source of that risk, and the 
steps we must take to plan for it and prevent it. As we look at 
record high temperatures around the world, we should be worried 
that our grandchildren may look back at these days as ``the 
good old days.''
    We cannot continue on this path. Now is the time to tackle 
this problem, to protect our vital infrastructure and American 
competitiveness.
    I hope my colleagues will listen to today's testimony with 
the understanding that the health of our economy and the lives 
of our fellow Americans may very well depend on it.
    Ranking Member Toomey.

         OPENING STATEMENT OF SENATOR PATRICK J. TOOMEY

    Senator Toomey. Thank you, Mr. Chairman. Today, the 
Committee will discuss climate-related risks, including the 
ways in which the insurance and reinsurance industries are 
evolving and adapting in response. This hearing is meant to be 
about reinsurance, though apparently we will also hear 
proposals for massive new Federal infrastructure spending based 
in part on misleading claims regarding climate-related risks. 
To the extent that policy proposals are based on 
misrepresentations or misunderstandings of the actual science, 
they could lead to very bad results.
    Now at the outset, let me acknowledge that global warming 
is real. However, we must also recognize at least three 
important points. First, there is actual significant debate 
within the scientific community about global warming's impact 
on man and the economy. Second, direct economic damages 
associated with extreme weather events have actually decreased 
both globally and in the United States when measured against 
GDP. And third, insurance and reinsurance companies, whose very 
existence depends upon the presence of uncertain risks, have 
always adjusted to changing risks, and climate-related risks 
are no exception
    In March, all 12 Republicans on this Committee sent a 
letter to Fed Chairman Jay Powell expressing concern that 
financial regulators were seeking to impose costly new rules 
based on highly uncertain climate models. Unfortunately, 
proposals to assess climate-related risks to financial 
institutions are too often based on outdated scenarios and 
unrealistic assumptions.
    Even the Financial Stability Board acknowledges the massive 
uncertainty. They just issued a report earlier this month 
stating that, and I quote, ``financial institutions' exposures 
to climate-related risks are generally subject to greater 
uncertainty than those relating to other financial risks,'' end 
quote. The report notes that this uncertainty derives from the 
difficulty in modeling such risks and a lack of reliable 
historical data.
    Despite substantial modeling and data limitations, 
President Biden recently issued an unjustified Executive order 
directing financial regulators to consider integrating climate-
related risks into supervision and regulation.
    But good policy rests on a foundation of good science. As 
one recent publication in the leading science journal Nature 
stated, calls to integrate climate science into risk disclosure 
and economic decisionmaking, quote, ``has leap-frogged the 
current capabilities of climate science and climate models by 
at least a decade,'' end quote.
    Despite the great deal of uncertainty regarding climate-
related risks, many in the media and politics assert that the 
frequency and severity of extreme weather events are increasing 
as a result of climate change. This assertion misrepresents the 
data, including assessments by the IPCC, the organization 
widely considered to be the world's leading climate authority.
    The reality is that leading climate scientists do not agree 
on whether or not, or to what extent, climate change is causing 
an increase in the frequency or severity of weather events. 
There can be no debate, however, that economic damage from such 
events is shrinking as a portion of our economy, as one of 
today's witnesses, Dr. Roger Pielke, will explain in greater 
detail. And that decrease in economic damage is occurring is 
despite the tremendous amount of development in exposed areas.
    Further, the overwhelming reason for increased disaster 
losses, in absolute terms, is that locations exposed to loss 
have grown in wealth and population, not that global warming 
has increased the frequency or severity of extreme weather 
events.
    Behind the drive to impose climate-related regulations on 
financial institutions is a fatal conceit of progressivism, and 
that is that bureaucrats know the risks to business better than 
the businesses itself. But as we will hear from one of today's 
witnesses, insurance industry expert Jerry Theodorou, it 
actually has occurred to financial institutions that potential 
climate-related risks might affect their operations, and they 
have been responding accordingly.
    Perhaps no industry has done more to adapt and evolve than 
insurance and reinsurance. Among other things, large property/
casualty insurance companies covering about 70 percent of the 
U.S. market have been reporting climate risks for over 10 
years. They have modified their underwriting practices and they 
have diversified their investment portfolios.
    In addition, insurance policies and products are generally 
short term and are repriced annually or withdrawn as conditions 
change. Nevertheless, property/casualty insurance is readily 
available across the United States. Increased risk is not 
itself a prohibitive problem for insurance or reinsurance 
because their business models depend upon accurately pricing 
risk, at whatever level it occurs.
    Regulators must avoid the temptation to think that they are 
smarter than the market. Assessing and pricing risk is the core 
competency of insurance companies, and they will apply hundreds 
of years of experience as risks evolve.
    And when was the last time any major insurer or financial 
institution failed as a result of extreme weather, or any time 
an insurance company failed to pay a policy claim because of 
extreme weather?
    Finally, I would like to note that States, not the Federal 
Government, have been the primary regulators of insurance for 
the past 150 years. Congress explicitly endorsed this State-
based regulatory approach with the McCarran-Ferguson Act.
    State-based regulation has worked and it has worked well 
for both the insurance industry and, of course, more 
importantly, for the consumers it serves. It would be 
profoundly misguided for the Biden administration to throw the 
State-based insurance regulatory regime out in pursuit of its 
climate agenda.
    Let me conclude where I began: global warming is real, and 
it likely will present new risks. However, we simply have too 
little understanding of the near-term effects climate change 
will have on any particular place to justify imposing huge new 
regulatory costs on the consumers who would ultimately have to 
pay for them.
    Thank you, Mr. Chairman.
    Chairman Brown. Thank you, Senator Toomey.
    We will hear from five witnesses today. I will introduce 
the five and then we will begin the testimony. Dr. Abdollah 
Shafieezadeh, the Lichtenstein Endowed Professor of Civil, 
Environmental, and Geodetic Engineering, Director of the Risk 
Assessment and Management of Structural Infrastructure Systems, 
the RAMSIS Lab at The Ohio State University. He joins us 
remotely from Columbus. He is an Associate Professor in the 
Department of Civil, Environmental, Geodetic Engineering at The 
Ohio State University. His scholarship focuses on improving the 
resilience of a built environment against natural and manmade 
hazards. He is the Director, as I said, of OSU's RAMSIS Lab.
    Dr. Rachel Cleetus is Policy Director, Union of Concerned 
Scientists. She joins us today on video. She leads the climate 
and energy program at UCS, where she designs equitable policies 
to address climate change. She has more than two decades of 
experience in climate and clean energy policy, power sector, 
decarbonization, the risks and costs of climate impact, and 
improving climate resilience. She is author or co-author of a 
number of publications on topics such as climate impacts on 
coastal communities, especially.
    Mr. Frank Nutter is President of Reinsurance Association of 
America. He joins us in person. He is an expert on insurance 
and reinsurance. He currently advises OECD on financial 
management of large-scale disasters in the RAND Center on 
Catastrophic Risk Management. He is a member of the advisory 
board of the Carl Lender III Center for Insurance and Risk 
Management at his alma mater, the University of Cincinnati. He 
has been adjunct faculty at the Harvard School of Public 
Health.
    Dr. Roger Pielke is Professor of Environmental Studies, 
University of Colorado. He is our third remote witness. Dr. 
Pielke is an academic and author focusing on the intersection 
of science and public policy at the University of Colorado. 
Before joining the faculty, he studied extreme weather and 
climate at the National Center for Atmospheric Research.
    And our fifth witness, who is also joining us, is Mr. Jerry 
Theodorou. He is Director of Finance Insurance and Trade 
Program at the R Street Institute. Prior to his current job, 
Mr. Theodorou did insurance research for Conning, a global 
investment management forum. Before that, he worked in global 
underwriting and strategy for the American International Group.
    Dr. Shafieezadeh, you have 5 minutes, if you would begin 
your testimony. Thank you so much for joining us from my State 
capital.

   STATEMENT OF ABDOLLAH SHAFIEEZADEH, LICHTENSTEIN ENDOWED 
PROFESSOR OF CIVIL, ENVIRONMENTAL, AND GEODETIC ENGINEERING AND 
 DIRECTOR OF THE RISK ASSESSMENT AND MANAGEMENT OF STRUCTURAL 
   AND INFRASTRUCTURE SYSTEMS LAB, THE OHIO STATE UNIVERSITY

    Mr. Shafieezadeh. Thank you, Chairman Brown, Ranking Member 
Toomey, and Members of the Committee on Banking, Housing, and 
Urban Affairs. My name is Abdollah Shafieezadeh. I am an 
associate professor of Civil, Environmental, and Geodetic 
Engineering, at The Ohio State University. I am also the 
Director of Risk Assessment and Management for the Structural 
Infrastructure Systems at OSU. It is my great honor to be here 
today to share my insights on challenges and solutions for the 
resilience of our infrastructure and communities.
    We have a large set of infrastructure systems in the 
country. They are critical to the daily life of Americans, the 
long-term economic prosperity of the Nation, and the national 
security. The current state of our critical infrastructure is 
not good. According to a recent nationwide assessment, 
America's infrastructure scores a C-minus. These systems that 
expanded significant shortly after World War II have been 
challenged by a large set of factors, such as aging and 
deterioration, natural hazards, and cyber and physical attacks.
    As an example, parts of the power grid were built about a 
century ago, but a major expansion of the grid happened in 
1950s and 1960s, with components and systems that had the 
design lifetime of about 50 years. In many cities there are 
considerable portions of underground wastewater collection 
pipelines that are a century old.
    Resilience concerns are further compounded by climate and 
other extremes. Since 1980, the country has witnessed 298 
weather and climate disasters with a loss from each of them 
exceeding $1 billion. We call such events as billion-dollar 
disasters. The total cost of these events has exceeded $1.97 
trillion. The observed trends in these losses are even more 
concerning. The number of billion-dollar weather and climate 
disasters has increased from 2.9 events per year in the 1980s 
to 12.3 events per year in 2010s.
    Meanwhile, climate change is anticipated to increase risks 
to the built environment. As an example, projections indicate 
that an increase of only 14 inches in relative sea level along 
the coast of the U.S. may increase the annual frequency of 
damaging floods by 25 times. In addition, modern design codes 
for structures were developed in the late 1990s and early 
2000s. Many of our structures, however, were built long before 
and based on codes that are no longer considered adequate.
    Investment gap in the Nation's critical infrastructure is 
estimated at $2.59 trillion for this decade. The investment 
needs to be even larger if our infrastructure is to be prepared 
for future stresses and demands beyond this decade.
    Attending to risks to our infrastructure in a cost-
effective manner requires a national strategic vision that 
includes long-term planning with the flexibility included to 
adapt to uncertain conditions of the future. Mitigation of 
hazard risks to buildings and other infrastructure are among 
the most effective ways. However, infrastructure stakeholders 
may not be able to afford the upfront costs of resilience 
projects. Therefore, resiliency strategies will need to be 
incentivized through measures such as reduced insurance rates 
and premiums, Federal, State, or local grants, and improved 
resilience-based codes.
    Infrastructure decisions, we also need to consider the 
eventual impacts and benefits for different populations, 
especially vulnerable populations, as hazard exposure and 
disruption impacts are not uniformly distributed. We also need 
to equip the various stakeholders with the knowledge and tools 
to be able to navigate the risks with limited available 
resources. Toward this goal, we should increase investment in 
basic and applied research to address knowledge and technology 
gaps and community resilience.
    Thank you for your attention, and I would be happy to 
answer your questions.
    Chairman Brown. Thank you very much Dr. Shafieezadeh. Next 
is Dr. Cleetus. We recognize you for 5 minutes.
    Thank you for joining us.

    STATEMENT OF RACHEL CLEETUS, POLICY DIRECTOR, UNION OF 
                      CONCERNED SCIENTISTS

    Ms. Cleetus. Hello, and thank you, Chairman Brown, Ranking 
Member Toomey, and Members of the Committee, and thank you for 
providing the opportunity for me to testify remotely. My name 
is Rachel Cleetus and I am the policy director for the climate 
and energy program at the Union of Concerned Scientists.
    The science on climate change and the real-world evidence 
of worsening climate impacts are abundantly clear and sobering. 
I welcome the opportunity here today to talk about solutions 
solutions that are well within our grasp and can help safeguard 
people, critical ecosystems, our economy, and our future well-
being. We cannot delay action any longer.
    This is not about some distant future. As we look around 
our country we see communities faced with intense drought, wave 
upon wave of extreme heat, a fiery start to what is likely to 
be a terrible wildfire season, an early start to an above-
average hurricane season that is projected. Meanwhile, 
accelerating sea level rise and ocean acidification are slow-
moving disasters poised to unleash profound consequences. 
Underlying this all, the relentless rise in global average 
temperatures, fueled by heat-trapping emissions.
    Climate impacts are being felt by people all over our 
country, and communities of color and low-income communities 
bear a disproportionate toll. Many of these same communities 
also bear an outsized burden of the pollution from our 
dependence on fossil fuels. In addition, the COVID-19 pandemic 
and the economic crisis are far from over, both of which also 
have an equitable impact.
    Extreme heat is one of the most harmful and deadly hazards 
we have faced. UCS research shows that without global action to 
reduce emissions, the number of days per year when the heat 
index exceeds 100 degrees Fahrenheit will more than double from 
historical levels, and increase fourfold by midcentury, and 
increase fourfold by late century.
    We also found that, on average, by midcentury, U.S. 
military installations will experience nearly five times as 
many days with a heat index above 100 Fahrenheit as they have 
experienced historically.
    Our research also shows that under a high sea level rise 
scenario, by 2045, about 325,000 coastal properties, worth $136 
billion, will be at risk from chronic flooding. All along our 
coasts, Florida, New Jersey, New York, California, Louisiana, 
and South Carolina are among the most exposed.
    Military installations too, along the East and Gulf Coasts 
face risks of more frequent and extensive tidal flooding, land 
loss, and extensive storm surge. We analyzed 18 installations 
and found that by 2050, without action, most will see more than 
ten times the number of floods they see today, and four 
installations--Naval Air Station Key West, Joint Base Langley-
Eustis, Dam Neck Annex, and Parris Island--are at risk of 
losing between 75 and 95 percent of their land by the end of 
the century.
    Infrastructure disruptions due to climate impacts are very 
costly. We have seen, again and again, roads, bridges, our 
power infrastructure damaged or disrupted by extreme heat, 
floods, storms, wildfires. We must invest in upgrading and 
modernizing our infrastructure to ensure that it will be 
resilient in the face of worsening climate impacts. The past is 
simply not a good predictor of the future anymore.
    Communities must also be better prepared and protected. We 
need to ramp up funding for predisaster mitigation measures. 
Increased access to grants, loans, affordable insurance, public 
health protections for communities, workers, first responders 
grappling with extreme heat, smoke from wildfires, floods, and 
other harms is also vital.
    The Federal Government must lead on providing the research, 
data, and tools to help the public understand these risks, and 
we need coordination from the Federal to the State, Tribal, 
local sectors as well as the private sector.
    Climate change is a systemic and growing risk to our 
economy and yet it is not being priced adequately into the 
market today. A combination of short-sightedness, maladaptive 
policies, the outsized power of fossil fuel companies, and 
business-as-usual inertia is getting in the way. We need 
monetary, transparent, and uniform disclosure of climate risks 
in the marketplace. We must harness the power of the market.
    However, these approaches will not be enough on their own. 
We do need additional policies to foster equitable outcomes. We 
must ensure that 40 percent of Federal investments directly 
benefit marginalized and underserved communities. We cannot 
replicate or reinforce past harms. For example, our Nation's 
shameful history of mortgage redlining has led to lasting 
injustices and inequities, particularly for African-American 
households.
    Finally, it is important to note that there are limits to 
adaptation. We also have to make deep cuts in our emissions. We 
must get firmly on the path to at least 50 percent reduction, 
50 to 52 percent reductions below 2005 levels by 2030. We have 
to clean up our borrower transportation sectors. We have to 
work across the economy.
    This is an opportunity to build a clean energy and climate-
resilient economy that works for all, investing in domestic 
manufacturing, investing in a just transition for coal 
communities. We must meet this moment with a robust scale of 
investments to promote resilient, low-carbon infrastructure, 
good-paying jobs, environmental and economic justice, and we 
look to Congress to take these urgent actions.
    Thank you again for the opportunity to testify and for your 
work to advance climate action and protect our Nation.
    Chairman Brown. Thank you, Ms. Cleetus, or Dr. Cleetus. Mr. 
Nutter, you are recognized for 5 minutes.
    Thank you for joining us in person.

 STATEMENT OF FRANK NUTTER, PRESIDENT, REINSURANCE ASSOCIATION 
                           OF AMERICA

    Mr. Nutter. Chairman Brown, Ranking Member Toomey, and 
other distinguished Members of the Committee, thank you for the 
opportunity to testify, and we appreciate the interest of this 
Congress and this Committee in improving the resilience of 
communities across the United States.
    Climate change clearly is impacting the incidence and 
damage caused by climate and extreme weather. Congress can help 
improve resilience in the face of these risks to save lives and 
better protect our homes, businesses, communities, taxpayers, 
financial sector, and the economy.
    The RAA and its member companies have recognized the value 
of the science of climate change since the 1990s and adopted a 
formal policy in 2008. Our climate change policy has driven the 
RAA to engage with a range of public and private sector 
communities to advocate for scientific and data-driven research 
and analytics, the development of new financial products, and 
public policy that seeks to mitigate climate and natural 
disaster risk and its impact.
    The RAA has supposed coalitions that advocate for improved 
community resilience such as BuildStrong and SmarterSafe and 
the recently released Insurers' Principles for Climate Change 
Adaptation. We also supported initiatives such as the National 
Flood Insurance Program's Risk Transfer Program with 
reinsurers, which helped pay for Hurricane Harvey losses. 
Congressional enactment of the Disaster Recovery Reform Act of 
2018, which increased predisaster mitigation funds, and Federal 
lending institutions' regulators issuance of private flood rule 
to increase consumer flood insurance options.
    These are positive steps toward helping Americans and their 
communities increase resilience, but more must be done, 
especially given the increasing number of disasters and losses, 
including at least one billion-dollar disaster affecting each 
State since 1980.
    In the context of the infrastructure legislation being 
developed by this Congress, the RAA developed and is advocating 
for a proposal to address the impact of climate change through 
data-driven analysis, established community disaster resilience 
zones, or CDRZs, as we refer to them, and direct public and 
incentivize private sector investment to help improve 
infrastructure resilience, including affordable housing for 
CDRZ communities that are most in need and most at risk from 
natural disasters.
    Specifically, the proposal would codify, enhance, and 
utilize FEMA's National Risk Index for Natural Hazards, to find 
the intersection of risk, vulnerability, and low community 
resilience scores as the basis to identify and establish these 
zones that reflect diversity among the States by geography and 
type of peril.
    With our proposal, Congress can coalesce a variety of new 
funding mechanisms that focus Federal, State, local, 
charitable, and private sector investments in resilience 
projects in these zones, including taxable direct pay bonds, 
like Recovery Zone Economic Development Bonds, one of the three 
types of Build America Bonds created as part of the 2008-2009 
financial crisis economic recovery; tax-exempt private activity 
bonds, subject to a separate volume cap like the Recovery Zone 
Facility Bonds, also in the 2009 recovery legislation. And for 
communities that are unable to access the debt markets because 
they do not have a tax base to support additional borrowing or 
have reached their debt limits, our proposal includes Federal 
tax credits for charitable contributions by individuals and 
businesses and transferrable tax credits, similar to low-income 
housing tax credit, to encourage investors to help fund 
resilience improvements in these zones.
    Aligned with the CDRZ, the RAA supports the provisions in 
House Financial Services Chairwoman Waters' Housing is 
Infrastructure bill that would authorizing funding for 
affordable housing, climate, and natural disaster resilience. 
We are advocating for Congress and the Administration to enact 
disaster mitigation tax credits for homeowners and businesses; 
exempt homeowners from Federal taxation of State mitigation 
grants; improve research on building code standards and FEMA's 
new mitigation program, often referred to as BRIC; encourage 
nature-based solutions; include forward-looking climate and 
natural risk and analysis in Federal programs, initiatives, and 
regulation; enlist the insurance industry's risk assessment and 
financing capability related to climate and natural disasters; 
and reauthorize the National Flood Insurance Program for the 
long term and enact, part of the NFIP reforms, to increase 
public and private flood insurance options for consumers and 
align Federal agency private flood policies.
    There are a variety of ways Congress can address and 
increase resources to mitigate the impacts of climate and 
natural disasters on our communities, especially for 
homeowners, businesses, and our most vulnerable communities. 
The RAA looks forward to working with this Committee and others 
on our most recent proposal.
    Thank you for the opportunity to testify.
    Chairman Brown. Thank you, Mr. Nutter. Dr. Pielke from 
Boulder--I believe he is calling in from Boulder.

   STATEMENT OF ROGER PIELKE, JR., PROFESSOR, ENVIRONMENTAL 
                STUDIES, UNIVERSITY OF COLORADO

    Mr. Pielke. Yes. Chairman Brown, Ranking Member Toomey, and 
the entire Committee, thank you for the opportunity to share my 
perspectives today remotely.
    I am a professor at the University of Colorado Boulder that 
has studied the use of science and policy for more than 25 
years, including a long-term focus on climate. Unfortunately, 
key scientific guidance on climate that informs policy, 
including central bank climate stress testing and U.S. 
Government estimates of the social cost of carbon, has departed 
from basic standards of scientific integrity. A main reason for 
this departure is that climate science has increasingly been 
enlisted in support of policy advocacy rather than to inform 
policy debates and decisions.
    Today I have five points to make. First, I emphasize that 
human-caused climate change is real, it poses significant 
risks, and policy responses in mitigation and adaptation are 
necessary and make good sense.
    Second, the reality and importance of climate change does 
not excuse failures to provide up-to-date and accurate 
scientific advice to policymakers. In 1990, the U.S. Congress 
established the interagency Global Change Research Program to 
provide usable information on which to base policy decisions 
related to global change, the key product being the U.S. 
National Climate Assessment, produced every 4 years. In 
practice, however, the National Climate Assessment has been 
politicized in varying degrees by both Democratic and 
Republican administrations. It has been used less as a 
mechanism of science advice than as a tool for promoting the 
climate policy agenda of the President.
    Third, shortfalls in scientific integrity matter, because 
right now policymakers are being badly misled in a number of 
crucial areas. Here I will briefly cite just two examples.
    One, climate scenarios that underlie much of research on 
climate, its impact, and policy responses are badly outdated 
and no longer offer insight to plausible futures. It is 
analogous to focus our Nation's current foreign policy on the 
Soviet Union. Once that made sense, but today it would just be 
out of date. The out-of-date climate scenarios are not off by 
just a little. For instance, they assume the dramatic expansion 
of coal energy to a level six times that of today, such that it 
becomes our primary energy source, and we decide to use coal to 
fuel our cars. No one believes this is plausible, yet there it 
is, at the center of our most widely used climate scenarios.
    Second, economic losses associated with extreme events are 
routinely attributed to changes in climate while changes in 
society and its exposure and vulnerability, which also 
profoundly influence future risks, are largely de-emphasized. 
Every day, somewhere on Planet Earth, extreme weather events 
are happening. With 21st century communication technology and 
platforms, we are all able to witness disasters in ways that in 
earlier times just were not possible.
    But the visceral appreciation of extremes and their impacts 
is no substitute for data and evidence. These data and evidence 
indicate that since at least 1990, when data first became 
reliable, economic damages associated with extreme weather 
have, in fact, decreased when measured in the context of global 
GDP. This pattern has occurred in countries of all income 
levels. It is good news, and we want it to continue.
    In contrast, the National Oceanic and Atmospheric 
Administration, one of the Nation's leading science agencies 
with a strong staff and an important mission, routinely 
promotes a billion-dollar disaster list of events since 1980, 
to suggest that disasters and their costs are increasing 
dramatically due to climate change. What the dataset really 
indicates is growing wealth in locations exposed to loss. We 
should always use climate data to document climate trends, not 
economic data. Every time you see economic advantage invoked as 
evidence of human-caused climate change you should think 
instead about the state of scientific integrity in climate.
    Fourth, shortfalls in robust science advice on climate are 
more than just an academic issue. They also show up in 
important policy context. Here I will just cite two, which are 
discussed in more detail, with data, in my written testimony.
    Proposals for climate stress testing in the global and 
national financial systems are grounded in the use of outdated 
scenarios. These scenarios include those of the Network for 
Greening the Financial System and the International Monetary 
Fund. If the baseline scenarios used to project policy futures 
are out of date, so too will be any guidance that results from 
their use.
    The estimated social cost of carbon, of the Biden, Trump, 
and Obama administrations, each has similarly relied on 
outdated scenarios with roots decades ago. Again, following 
guidance from impossible futures is not a good recipe for 
useful science advice. Worse, it can mislead. These are 
problems that require immediate fixing.
    Fifth and finally, climate change is too important to allow 
shortfalls of scientific integrity and science advice to 
persist. Congress should enhance its oversight of the U.S. 
Global Change Research Program and the National Climate 
Assessment to ensure that the scientific advice that it 
receives is up to date and accurate. Mechanisms are in place. 
They need to be matched by a bipartisan commitment securing 
robust science advice.
    The bottom line. At present there are troubling signs that 
Congress and the Federal agencies are not receiving the high-
quality advice necessary to inform decisionmaking on climate 
mitigation and adaptation policies.
    Thank you very much.
    Chairman Brown. Thank you, Dr. Pielke. Mr. Theodorou, you 
are recognized for 5 minutes, in the room. Thank you.

STATEMENT OF JERRY THEODOROU, DIRECTOR, FINANCE, INSURANCE, AND 
                   TRADE, R STREET INSTITUTE

    Mr. Theodorou. Thank you, Chairman Brown, Ranking Member 
Toomey, distinguished Members of the Committee, for the 
opportunity to offer testimony on climate change, resilience, 
and reinsurance. These issues impact multiple public policy 
areas. They need to be understood to inform prudent responses 
to protect our economy.
    The three topics of climate change, resilience, and 
reinsurance are interrelated. We are witness to the effects of 
changing climate, in higher temperatures, melting ice caps, 
rising sea levels, more frequent and more catastrophic weather 
events.
    These trends call for resilience. Resilience is the ability 
to bounce back and to absorb shocks. Reinsurance is a financial 
shock absorber. It allows insurers and the people in the 
communities they protect and serve to bounce back, to recover. 
For example, a small insurance company in the northern 
panhandle of West Virginia, Municipal Mutual, paid $3.8 million 
in 334 claims from a wind event in March of last year. This was 
over 12 percent of its equity base.
    But reinsurance allowed it to recover $3 million of the 
$3.8 million, so the net loss was a bearable $800,000. 
Reinsurance protected the company and its policyholders. 
Without reinsurance, hundreds of insurance companies, millions 
of policyholders would be exposed to the crippling financial 
loss on top of catastrophic physical loss.
    The climate catastrophe event of the day is the complex of 
wildfires in a dozen Western States. Losses from wildfires are 
covered by standard homeowners, business owners, and commercial 
property policies. Wildfire is fire, the central peril covered 
by personal and commercial insurance. To be sure, the oldest 
continuously operating insurance company in the U.S., founded 
in 1752 by Ben Franklin, is the Philadelphia Contributionship 
for the insurance of homes from loss by fire.
    With the exception of flood, largely covered by FEMA's 
national flood insurance program, risks from climate, fire, 
hail, drought, and wind are covered by existing insurance 
policies. This is what the insurance industry does. It matches 
its capital to these kinds of risks.
    Collectively, the U.S. insurance industry and the global 
reinsurance industry are adequately capitalized to withstand 
the financial impact of today's climate-related risk. In the 
year when the most insured U.S. losses ever, 2005, when we had 
Hurricanes Katrina, Rita, and Wilma, there was $110 billion of 
insured losses. The U.S. property and casualty industry has 
$2.4 trillion of total assets. The global reinsurance industry, 
an additional $650 billion. This means that it would take a 
year with three times the losses of 2005 to dent the industry's 
capital by 10 percent.
    Reinsurance is critical for the insurance industry to play 
its role, as we saw in West Virginia. In addition to the 
capital base of the insurance and reinsurance industries 
providing coverage for climate risks, alternative capital 
sources are also taking on climate risk. This is coming from 
pension funds, sovereign wealth funds, university endowments, 
foundations, and family offices that seek to take on 
catastrophe risk because it is uncorrelated with equity and 
debt market risk. This is a really new phenomenon, and it is 
growing. Alternative capital provided about 4 percent of 
reinsurance industry capital in 2006. Now it is 15 percent, 
about $100 billion.
    Transferring climate risk onto the balance sheets of 
insurers and reinsurers and to alternative capital investors 
may be a source of comfort but it is not enough, because it 
kicks the can of climate risk down the road. Claims from losses 
will be paid, but premiums may rise as risks increase.
    The traditional reinsurance industry, supplemented by 
alternative capital, plays, and will continue to play, an 
important role in providing resilience through its role as a 
shock absorber, taking on climate risk, but it is only part of 
the long-term response. Public policy must also encourage and 
incentivize risk mitigation--incentives for sound construction, 
restrictions on building in catastrophe-prone areas, physical 
defenses and barriers, and working with authorities to 
introduce and to enforce codes and standards.
    In closing, thank for the privilege of testifying today, 
and for your interest in exploring how the reinsurance market 
and private capital solutions provide resilience to our economy 
in the face of growing climate risk taking a toll on our homes, 
our businesses, our health.
    Thank you. I look forward to your questions.
    Chairman Brown. Thank you, Mr. Theodorou.
    Mr. Nutter, even when some of my colleagues acknowledge 
climate change is real, too many of them downplay the economic 
risks--do not worry about it now, or they say the market will 
take care of it. No one has ever labeled your industry 
alarmist. Your members look at risk. They suggest financial 
decisions clients can make to weather them.
    So explain if you would, Mr. Nutter, to the Committee why 
we should take climate change seriously as a financial risk, 
and what steps Congress should take to protect ourselves, our 
families, our country?
    Mr. Nutter. Thank you, Mr. Chairman. Indeed, our sector, 
the insurance, and particularly the reinsurance sector, is very 
committed to providing financial relief for events related to 
climate and extreme weather.
    The industry does see climate change through the prism of 
extreme weather events. It is very dependent upon sound 
science. It is very dependent upon Government research related 
to science. The funding of NOAA, NASA, the National Science 
Foundation is a critical part of how we look at that.
    Our sector does engage both in the discussion about climate 
change and climate science, and many of the major companies 
have a very deep reservoir of people who are trained in the 
natural sciences to help them advise about the impacts of 
climate change as well as the analysis.
    What we have proposed, Mr. Chairman, is a proposal designed 
really to look at the infrastructure package that is being 
considered by this Congress, to see if there is a way to 
improve the investment, not just by the public sector but by 
the private sector. So the proposal that we had, the Community 
Disaster Resilience Zone proposal, is designed to bring more 
private sector investment into predisaster mitigation and 
improve social vulnerability as well as the resilience of the 
communities in our country.
    Chairman Brown. Thank you, Mr. Nutter.
    Dr. Cleetus, the New York Times reported a few weeks ago 
about the mayor of Des Moines and city leaders trying to 
increase the tree canopy in that city, particularly in low-
income neighborhoods. We know that a good tree canopy keeps 
homes cooler in the summer, improves air quality. And even in 
cities with fairly abundant tree canopy--Des Moines,
    Washington, DC, Cincinnati in my State--the relative lack 
of trees in lower-income, predominantly Black and Brown 
neighborhoods is startling. It often mirrors, as you suggest in 
your opening testimony, the redlining that happened in those 
communities throughout the 20th century.
    I know you have researched this. You have talked about 
increased premature mortality due to extreme temperatures and 
poor air quality. Talk about what a robust tree-planning 
program might mean for the lives of residents in those 
communities.
    Ms. Cleetus. Thank you, Chairman Brown. As you point out, 
many of our urban areas in the country are experiencing heat 
wave after heat wave, and what we are seeing is a 
disproportionate impact in low-income communities and 
communities of color, because of an exacerbated urban heat 
island effect. We have historically underinvested in these 
communities, including the lack of green space and tree canopy, 
but also the kind of asphalt and concrete infrastructure that 
traps heat and then releases it at night, so it just keeps 
those places hotter and hotter.
    This is very harmful to health, especially for the elderly, 
for very young kids, for those whose health is compromised. It 
is also very harmful for outdoor workers, like policy, like 
construction workers, et cetera.
    So we have an opportunity now to make the kinds of 
investments in urban areas as well as rural areas that can help 
mitigate some of these extreme heat impacts, including 
investments in the kind of infrastructure that will reduce 
these kind of harmful heat impacts, but also changing workplace 
requirements so that outdoor workers are protected, the have 
public health protections that allow them to be spared some of 
these extreme impacts. It is also very important for 
agricultural sector workers who are exposed to these impacts.
    We know that in cities like Baltimore this does follow the 
tragic history of mortgage redlining in our country. Those 
long-term effects, we can see this in cities around the 
country. These neighborhoods need investments. They need 40 
percent of Federal investments directed to these kinds of 
marginalized and underserved communities.
    Chairman Brown. Thank you. Dr. Shafieezadeh, you argue for 
the cost-effectiveness of investing to improve infrastructure 
resilience now. Dr. Cleetus, there is a phrase you use to 
describe why Congress has not gotten serious. It goes into the 
underinvest and pay more later, the business-as-usual inertia, 
you call it. We see the problem around.
    So I would like to ask the two of you, and Mr. Nutter, to 
weigh in on really the central question, I think, in the 
remaining seconds. What are the costs of doing nothing?
    So, Dr. Shafieezadeh, you would answer that briefly, and 
then two of the other witnesses. What is the cost of doing 
nothing?
    Mr. Shafieezadeh. So Senator, thank you for the question. 
Currently, even if we set aside the climate change impacts, we 
have a huge backlog of deferred maintenance that is impacting 
many of our infrastructure, so addressing those needs are in 
the order of $2.5 trillion for the coming decade. And a sign 
that it is needed to take care of these immediate needs as soon 
as possible is that the previous estimate, which was 4 years 
ago, was around $2.1 trillion. So in a matter of 4 years the 
needs have increased, estimates of needs has increased by $0.5 
trillion, because the issues that we have currently are 
becoming more and more severe, and if we do not take action 
this will lead to major problems with higher cost to address 
those.
    And when systems are experiencing these types of issues, 
their capacity to meet the challenges of the future, like 
climate extremes and weather extremes, is going to reduce 
further and further, and the systems are going to be more 
vulnerable to future hazards.
    Chairman Brown. Dr. Cleetus, briefly, if you would. The 
same question. What is the cost of doing nothing? And then Mr. 
Nutter.
    Ms. Cleetus. The cost is incalculable, and it is not just 
economic costs. We are talking about leaving our children and 
grandchildren with a planet that is gravely more unsafe if we 
fail to curtail our emissions sharply. And what I want to point 
out is the benefits of action are tremendous. We can build this 
clean energy climate-resilient economy. We can make it a fair 
economy that works for everyone. So let us embrace that 
opportunity. The costs of inaction outweigh, by far, the costs 
of embracing this vision.
    Chairman Brown. Mr. Nutter.
    Mr. Nutter. The people in our communities, and our 
communities are reliant on both public insurance programs and 
private insurance coverage. If, in fact, we do little to 
mitigate, premitigate if you will, the exposure of these people 
and communities to climate and extreme weather risks, we will 
eventually develop uninsurable communities, and our people will 
be reliant upon disaster assistance from the Federal 
Government, which has largely been proven to be inadequate to 
help people fully recover.
    Chairman Brown. Thank you, Mr. Nutter. Senator Toomey is 
recognized.
    Senator Toomey. Thank you, Mr. Chairman. Dr. Pielke, I want 
to start with you. It seems that nearly every day there is a 
new press report warning that weather events are more extreme 
and more frequent, and that they are a result of global 
warming, and that the attendant costs are skyrocketing. Your 
testimony suggests that this conclusion, the conclusion that 
climate change is the sole or primary cause of severe weather 
events, misrepresents the underlying data and evidence.
    So could you describe to us what the actual data tells us 
about the frequency and severity of extreme weather events in 
the United States over, say, the past 100 years?
    Mr. Pielke. Yeah, thank you. And talking about extreme 
weather is a little bit like talking about disease. We would 
not lump together cancer with obesity, with COVID. We break 
down disease into its constituent parts. And it is the same 
with extreme weather. Extreme weather is not a particularly 
useful category. And if we look at the United States over the 
long term, both the U.S. National Climate Assessment, in its 
Volume 1, and the IPCC, have done a nice job of summarizing the 
trends and the physical science metrics.
    And they are nuanced. So heat waves have increased in the 
United States, without a doubt, since the 1960s, but they have 
not since the 1930s. Drought, overall, in the United States, is 
down over the last century, but it is up in the Southwest. 
Hurricanes, to many people's surprise, hurricane landfall in 
the United States, both overall hurricanes and major 
hurricanes, have not increased over the last century. Flooding, 
similarly. There is no trend up or down in flooding, though if 
you pick a region I can find you an up or a down trend. Extreme 
precipitation, which is not the same thing as flooding, has 
increased, again, in some regions but not in other.
    So the relationship of the physical climate system and 
trends and extremes, and the damage that we witness is pretty 
complicated, but when we take a step back and take a look at 
what is driving the absolute cost of disasters, it is more 
property, more wealth in exposed locations, that happen to be 
vulnerable.
    So yes, we want to take actions to reduce our exposure and 
vulnerability, and we have to realize that it is not all driven 
by patterns of climate, whether it is variability or change.
    Senator Toomey. Right. You know, when you think about, I 
suppose, the many hundreds of thousands of miles of rivers 
around the world--and maybe it is millions--probably millions 
of miles of coastline, innumerable distinct geographies, 
different climates, different microclimates, from a purely 
statistical point of view, should not we expect a 1,000-year 
weather event to be occurring somewhere in the world on a 
fairly frequent basis, just statistically speaking?
    Mr. Pielke. This is where it gets very important to follow 
the science that the IPCC has recommended to us, and it 
involves two steps. One is the detection of changes over long 
terms, 30 to 50 years or longer, and once a trend is detected 
to attribute the trend to reasons. Something like flooding, as 
you say, is very complicated, because we pave the land surface, 
with agriculture we channelize rivers. And so identifying 
changes to one specific cause can be complicated.
    But again, the IPCC has concluded that overall, for reasons 
of incomplete data but also lack of a strong signal, flooding 
overall, globally, has not increased on climate time scales.
    Senator Toomey. So let me follow up then with a question, 
also for Dr. Pielke. The Federal Reserve recently joined the 
Network for Greening the Financial System. That is a coalition 
of central banks whose stated aim is to, and I quote, 
``mobilize mainstream finance to support the transition toward 
a sustainable economy,'' end quote. In other words, I think 
their mission is to allocate credit based on their perception 
of climate risks.
    But this network recently released climate scenarios 
designed to stress-test financial institutions, and as you 
point out, the scenarios they are use are predicated on several 
very dubious assumptions. For instance, is it not true that the 
Network for Greening the Financial System assumes a level of 
greenhouse gas emission that significantly outpaces current 
trends?
    Mr. Pielke. Yes. Climate stress-testing is a good idea. We 
want to make sure that our institutions are robust in an 
uncertain future. The NGFS, to their credit, was one of the 
first organizations to recognize that the scenarios of the IPCC 
are dated and unrealistic. So they came up with their own 
custom scenario, and it turns out that was too extreme and 
unrealistic. So just last month they released a Version 2.0, 
which again is too extreme.
    So stress-testing for risk makes good sense, but those risk 
estimates have to be grounded in empirical science that is 
defensible.
    Senator Toomey. Great. And a quick question for Mr. 
Theodorou. Contrary to the concern that insurers or reinsurers 
will be wiped out by huge losses associated with disaster 
costs, is it not the case that short-term policies which are 
repriced annually tend to be less susceptible to that kind of 
risk than even, say, banks or other kinds of financial 
institutions that take long-term exposure?
    Mr. Theodorou. Yes, thank you for your question, Senator. 
That is true. Most insurance policies are annual policies that 
gives the insurer the opportunity to change terms and 
conditions to respond, sometimes favorably. Unrelated to 
today's discussion, worker's compensation policy that has less 
payroll than was anticipated at the beginning of the year, as 
happened last year, results in returned premiums, more premiums 
back in the pockets of the policyholders.
    So there is a resilience there, and the insurance and 
reinsurance industries, although they have been buffeted by 
large disasters, have always recovered. This is the business 
that they are in, going back to the San Francisco fire early in 
the last century, to 2005, the catastrophes of 2017.
    So there is resilience in the insurance and reinsurance 
industry. This is not a unique event, the likes of which we 
have never seen, that would lead one to conclude that the sky 
is falling, that reinsurers will pack up and go home. Certainly 
not. This is the business that they are in, and it is their job 
to find ways to deal with it, to manage risk, assume risk, and 
mitigate it.
    Senator Toomey. Thank you. Thank you, Mr. Chairman..
    Chairman Brown. Thank you. Senator Tester of Montana is 
recognized.
    Senator Tester. Yeah, thank you, Mr. Chairman and Ranking 
Member Toomey, for having this hearing. I want to thank 
everybody who has testified today. This is an interesting 
concept that I have not heard until today, that the cost of 
climate incidents is less today when compared to GDP.
    In my real life I am a farmer, and so I just want to point 
out a couple of things. Number one, if I address climate from 
where I am sitting right now, this is a pretty nice room, 
pretty comfortable. Outside it is hot, it is humid, and it is a 
different world. That is Washington, DC.
    On my farm we can talk about ice cap melting and rising sea 
levels, but the truth of the matter is I am in north-central 
Montana. The ice cap is several thousand miles away, and the 
ocean is probably 800, 900 miles away. So I go off of that by 
what people tell me, because I have not seen it.
    But where I live right now, in the month of June, for 
example, we had 6 days that were above the temperature of 100 
degrees. Incidentally, my grandparents homesteaded this place. 
We have owned it for over 100 years. We have forest fires right 
now, I think you could say throughout the West, that are 
record. In Montana, if you take a look at where the fires are 
burning in our State, it is all over the damn State, except in 
the east, where there is grass, and that will probably be 
burning later, except we are in the middle of a drought, so the 
grass resource is not probably big enough to burn.
    We have a situation where my parents never, ever had crop 
insurance, never had a hailstorm in the 35 years they farmed, 
from 1943 to 1978. My wife and I have been on the farm, this is 
our 44th harvest, and it ain't going to be much of a harvest, 
because, quite frankly, between the drought and the hailstorm 
that came through a week ago, day before yesterday, there is 
not much left. OK?
    But there is crop insurance, something my folks never had 
to have, that almost every farmer has now, that, by the way, is 
highly subsidized by the Federal Government. So you add on 
flood but also include crop into that on subsidized insurance. 
And we also have hail insurance that some have. And I will tell 
you that I am not concerned about the hail insurance company, 
because, quite frankly, they have it pegged out. And next year 
I guarantee you that because of the hailstorm that went 
through, our premiums will go up, because that is what hail 
insurance companies do, and that is what they should do. That 
is what insurance companies do, and that is what they should 
do.
    So I am not as concerned about the insurance industry, 
because they will manage the risk. I am concerned about what I 
have seen over the last 43 years on our farm, and the last 100 
years overall. Let me give you an example. In 2000, when we had 
another extreme drought, my mom was still alive, a child of the 
1930s, and said, ``We got more moisture in the 1930s'' that we 
are getting at that moment in time, and now we have had another 
series of droughts.
    So I would just say this, and I have got a question in all 
this, by the way. I would just say that we can say that this 
does not have physical impacts, but I am going to tell you what 
it does have--food impacts. If we do not address this, there 
are going to be a lot of hungry people around here 100 years 
from now. In fact, there are going to be a lot less people on 
this Earth 100 years from now. I really believe that.
    And I will also tell you that I still think it is 
physically prudent, even though big houses are built in the 
middle of forests, which do not make a lot of sense to me, and 
built in the middle of floodplains, which do not make a lot of 
sense to me, but they have been doing that since I have been 
around, the 64 years I have been here.
    I want Dr. Cleetus to answer this question. On the claim 
that the cost of incidences is less today, of climate events, 
than it was in years past, compared to the GDP, could you 
respond to that, if that is something that you see as the same 
way, number one. And number two, if that means that climate 
change is less of a situation that we should be dealing with, 
or just let it go?
    Ms. Cleetus. Thank you, Senator Tester, especially for your 
personal testimony for what the people of Montana are bearing 
right now. I am finding myself deeply disturbed by the cherry-
picking of data and the misrepresentation of climate signs that 
I have heard here today. I would prefer to look to all major 
scientific organizations and institutions here in the U.S.--the 
National Academies of Science--these are the institutions of 
integrity that we should look to for independent science to 
help guide our policymaking. And every one of them is telling 
us that climate change is here, and its effects are going to 
get profoundly worse if we fail to curtail our heat-trapping 
emissions sharply.
    So please, please, let us not waste time debating the 
science. Let us take action now. People around the country 
depend on it. And I am not talking about people in boardrooms, 
fields, folks with multibillion-dollar paychecks. I am talking 
about ordinary people, the working people, who are finding 
their livelihoods wiped out, who are faced with terrible 
disasters, still trying to get back on their feet from the last 
one before the next one hits. Those are the people that we need 
to be protecting and looking out for, now and in the future. 
And I thank you for your calling attention to that today.
    Senator Tester. Thank you. I yield.
    Chairman Brown. Thank you, Senator Tester. Senator Cortez 
Masto from Nevada.
    Senator Cortez Masto. Thank you. Thank you, Chairman and 
Ranking Member Toomey, for this important conversation. I have 
to agree with my colleague from Montana. Something is happening 
there, and we cannot discount it as some sort of natural event 
that occurs and has occurred in the past.
    I will tell you this. I am from Nevada. We have wildfires 
now all the time. They are no longer seasonal wildfires. They 
happen. I was just home in Nevada. I was traveling through 
northern Nevada, where it is very, very dry. A thunderstorm 
came. Lightning hit. As soon as we drove up to where the 
lighting was, the Prison Hill Fire was happening, because of 
that lightning. I mean, it is immediate and it is something we 
cannot ignore.
    So, Dr. Cleetus, let me ask you this. I am introducing my 
wildfire bill, the Western Wildfire Support Act. One provision 
of this bill would provide assistance to at-risk communities to 
establish wildfire protection plans, to address local hazard 
and wildfire fuels reduction, and to assist homeowners with the 
disposal of brush in order to help communities, homeowners, and 
building owners in adapting homes property to decrease the 
harmful impacts from wildfire.
    So, Dr. Cleetus, can you talk about the importance of 
preparing communities and individual properties to mitigate 
against wildfire impacts, and how such assistance may 
financially help property owners impacted by the wildfires?
    Ms. Cleetus. Thank you, Senator Cortez Masto. I cannot 
agree more. We have to stop reacting to these as one-off 
disasters that we cannot predict. Now that we are seeing these 
long, hotter, drier conditions that are fueling these terrible 
wildfire seasons, we have to act in advance. And we know that 
climate change is contributing, of course, but also our history 
of mismanagement of our forests and fuels, the places in which 
development is happening, putting more people and property in 
harm's way are all contributing to worsening these disasters.
    So taking steps ahead of time, as you are proposing, are 
very, very important to protect communities so that they are 
not just left picking up the pieces after the disaster. We have 
to make sure that we are reducing these risks.
    Emergency responders on the front lines of this, wildfire 
firefighters, are just being pushed to the max by these seasons 
again and again. It is taking a terrible toll, both mental and 
physical. We cannot just continue business as usual, continue 
doing what we have done in the past. We have to do better.
    Senator Cortez Masto. Thank you. And then, Dr. 
Shafieezadeh, Nevada has 27 federally recognized Tribes, with 
numerous reservations in our State. When we discuss resilience 
we need to ensure our Tribal communities are part of that 
conversation.
    In your opinion, do you believe our Tribes have the 
resources available to cope with the impacts of climate change?
    Mr. Shafieezadeh. Thank you for the question, Senator, and 
usually socioeconomically vulnerable communities are not 
equipped to deal with disasters and preparing for disasters. 
Many studies have shown that when we look at the treatments of 
risk which is hazard, the impacts on the built environment, and 
the consequences of those failures for society, there are 
disparities at every elements of risk. And even some of the 
measures that we see and have been studied to show that they 
have very high benefit-to-cost ratios, those communities are 
not usually able to afford those measures. So there needs to be 
some assistance, in various forms, that could be made available 
to them, to be able to adopt those measures.
    Senator Cortez Masto. Thank you. Mr. Nutter, in your 
opinion, what types of investments should we target to our 
Tribal areas to promote resilience?
    Mr. Nutter. Senator, thank you for the opportunity to 
respond. Also to your comment about the introduction of your 
legislation, which we look forward to working you. In our 
testimony, we highlighted a proposal that we have developed 
that, in fact, would use the National Risk Index, which does 
look at social vulnerability, the nature of the communities, 
the community resilience, if you will, and it has a proposal 
that would allow more private sector investment in addition to 
public sector investment. Each of the Members of the Committee 
have in front of them a screen shot, if you will, of our effort 
to try and take the National Risk Index and look at community 
vulnerability on a variety of factors, including agriculture. I 
am sorry that Senator Tester is not here. I wanted to highlight 
that. And it would bring, in fact, more predisaster mitigation 
funding into communities, based on what the community believes 
is appropriate to help with its resilience. It also includes 
tax credits for individuals and tax credits for these 
communities that would be transferrable and tradeable.
    Senator Cortez Masto. Thank you. Thank you, Mr. Chairman.
    Chairman Brown. Thank you, Senator Cortez Masto. Senator 
Ossoff from Georgia is recognized.
    Senator Ossoff. Thank you, Mr. Chairman. Thank you for 
holding this hearing. Thank you to our panelists, both in 
person and those joining remotely.
    Dr. Shafieezadeh, I would like to address a couple of 
questions to you, if you please. First of all, just to set the 
table here, the National Oceanic and Atmospheric 
Administration, or NOAA, states that warmer oceans may result 
in stronger, wetter tropical storms and hurricanes, increased 
storm surge, and other events that threaten coastal 
settlements.
    The U.N. Intergovernmental Panel on Climate Change, or 
IPCC, states that sea level rise will likely result in more 
damaging coastal storm surge and flooding. And the Department 
of Defense cites climate change as a national security threat 
to its installations, including the Naval Submarine Base at 
Kings Bay, Georgia, which may suffer from increased flooding, 
damage from storm surge, and threats to naval operations there.
    Dr. Shafieezadeh, if these projections from NOAA, the IPCC, 
and the Department of Defense are correct, can you please speak 
to the climate risks faced by Georgia's coastal cities such as 
Savannah, Brunswick, and Georgia's barrier island chain, 
including Tybee, St. Simons, St. Catherines, St. Marys, Sapelo, 
and Cumberland Islands?
    Mr. Shafieezadeh. Thank you, Senator, for the question. 
There are overwhelming concerns in the community, in the 
research community, academic community, that there is upward 
trend in many hazards by climate. And we are not only are 
concerned about single events, single hazard types becoming 
more frequent or intense but we are also concerned about 
combination of the events, extreme events, becoming more 
likely. And that, coupled with aging and deterioration of the 
infrastructure, cyber and physical attacks, and changes in the 
service demands across the Nation may put some conditions for 
our infrastructure that are not designed for. That is the major 
problem.
    Some, as were mentioned earlier, there are some parts of 
the Nation that may see decrease in some of the hazards, but 
there are some, a lot of parts of the country we are seeing 
increases in the stresses, and those are the parts that are 
very concerning, because the infrastructures are not designed 
for those type of increases.
    So in many coastal regions we have the issues of flooding 
and sea level rise. Even small amount of sea level rise will 
substantially increase the frequency of damaging floods to 
these events, and when such hazard happens then we have 
significant stress on various infrastructures--housing, 
transportation, our power grid. And the other challenge there 
is that with sea level rise the exposure increases. Not only we 
are concerned about the frequency but also the exposure, 
meaning that many of our flooding events are going to go 
further inland, impacting areas that are not currently at high 
exposure to flooding events.
    So these compounding effects are something that we need to 
be very serious about in how we think about the future and 
preparing for the future hazards.
    Senator Ossoff. Well, thank you, Dr. Shafieezadeh. And 
considering these potential impacts on Savannah, Georgia, on 
our naval facility at Kings Bay, on our barrier island chain--
Cumberland Island, Sapelo Island, Tybee Island--it is vital, in 
my view, and I know I have discussed this with the Chairman as 
well, that this upcoming infrastructure bill includes 
significant investments in coastal resilience, to help 
communities in coastal Georgia, and coastal communities across 
the country, prepare for increased flooding, worse tropical 
storms, increased storm surge events.
    Can you speak to the kind of infrastructure that will help 
communities like Savannah, Georgia, adapt to what is coming?
    Mr. Shafieezadeh. So that is a great question. We have a 
whole host of solutions, at least from the engineering and 
science community, and then I would suggest that for every 
specific location we need to do a deeper study on the hazards 
that these areas are facing, what sorts of solutions need to be 
taken now. And one point I would like to make is that the risks 
you are facing are dynamic, not static, so we need to have 
strategies that are adaptive in time, meaning that some of the 
actions we need to take now, but we need to also have a plan 
for sustained funding so that as we hear more from the science 
community and climatologists about the trends of the future 
climate, we are able to make decision on the go and improve the 
state of infrastructure further.
    The type of solutions that might be available now for 
coastal communities can range from nature-based systems to 
flood walls and levels to improving the stormwater collection 
systems, to elevating homes or buying out some of the houses in 
the floodplains. And the good news is that the benefit-to-cost 
ratio for many of these measures are very high, and it is 
highly justified to take those actions.
    Senator Ossoff. Thank you, Dr. Shafieezadeh, and with the 
Chairman's permission just one final question for you, Dr. 
Cleetus, please. The impacts of climate change and these events 
will not be uniformly distributed. Low-income communities, 
vulnerable communities, communities in the floodplain, 
communities who already live in under-resourced neighborhoods, 
dilapidated housing, will be more severely impacted. I am 
thinking, for example, of the Geechee communities along 
Georgia's coastline, descendants of West African slaves, 
brought to Georgia and other parts of the Southeast to work in 
coastal plantations, who still endure a high level of poverty. 
These communities are going to be hit the hardest.
    What can we do to ensure that our investments in coastal 
resilience help and protect those who are most vulnerable, Dr. 
Cleetus?
    Ms. Cleetus. Thank you, Dr. Ossoff. I think you raise a 
very, very important point, and what is most important is that 
we understand that we need to engage with these communities 
directly. They need to be at the table as solutions are being 
developed that will benefit them, because they have very good 
ideas of what can work and what cannot.
    As you pointed out, there are places like St. Simons and 
Tybee Island where we have thousands of homes that are at risk 
from chronic inundation. We have places like Brunswick where 
nearly one-half of the residents are African American, nearly 
one-third live below the national poverty line. It is projected 
to have more than 800 homes at risk of chronic flooding, which 
would put 20 percent of this property tax base at risk.
    So we have to make sure that we are deliberately allocating 
funding programs and policies to these communities, reducing 
the barriers to access. Many of these communities are 
underinsured. They are not able to navigate the bureaucratic 
red tape to get assistance. Recent research has shown that FEMA 
funding is disproportionally inequitable along racial and 
income lines. This is very, very troubling. We need to be 
tracking this data to make sure that the people who need access 
to these resources are first in line.
    Senator Ossoff. Thank you, Dr. Cleetus. Thank you, Mr. 
Chairman.
    Chairman Brown. Thank you, Senator Ossoff. Senator Van 
Hollen from Maryland is recognized.
    Senator Van Hollen. Thank you, Mr. Chairman and Ranking 
Member Toomey. I thank all of our witnesses today.
    There was a March survey, March of this year, by the 
National Association of Insurance Commissioners. In that 
survey, more than a quarter of consumers said that they had 
trouble getting homeowner's insurance or renewing their 
policies due to natural disasters in their area. Over 25 
percent of homeowners said that insurance premiums had risen 
for the same reason, and nearly three-quarters of consumers 
said that most significant threats facing their homes today 
were weather related, not surprising when we see that in 2020, 
the United States experienced a record-breaking 22 incidents of 
over $1 billion in damage due to extreme weather disasters.
    I want to second the comments made by my colleague, Senator 
Ossoff, about the importance of the infrastructure 
modernization plan that Congress is considering to include 
investments in resilience to protect our communities.
    Mr. Nutter, what can the insurance industry do to help 
promote mitigation and resilience measures in response to the 
impact of climate-related risks?
    Mr. Nutter. Yes, Senator, thank you for the question. In 
our prepared statement and brief testimony we highlighted a new 
proposal that we have made about directing more public as well 
as private sector investment in communities that are socially 
vulnerable as well as have resilience issues and that are 
affected by natural disasters.
    The proposal takes FEMA's National Risk Index, which is 18 
perils, is across the country, and it would facilitate the 
issuance by local communities of both taxable and nontaxable 
bonds and provide tax credits associated with what the 
communities believe are improvements in resilience for those 
communities. Each of the Members of the Committee have before 
them a brief screen shot of a data analytics program that we 
have done showing how you can take this information, vulnerable 
communities, and direct investments, if you will, to deal with 
those communities.
    So our newest proposal is that, Senator. We have supported 
a host of tax credits as well, for both businesses and 
individuals, that would help encourage disaster mitigation, 
predisaster mitigation investments.
    Senator Van Hollen. Thank you. Thank you for that proposal. 
I will take a look at it.
    Another question related to the rising risks and costs of 
climate change, which is that those risks outpace insurance 
supply. Is there a way of transferring that risk more broadly 
so that catastrophic risk is not concentrated in a small number 
of insurers and that more balance sheet is freed up so that 
insurers can continue to offer coverage to as many households 
and businesses as possible? Do products like cat bonds have a 
useful role to play here?
    Mr. Nutter. Senator, thank you for that comment, and 
absolutely, the reinsurance sector has, as part of its 
strategic business model, the use of reinsurance as well as 
catastrophe bonds, that you referenced, as a way to tap into 
capital markets to supplement the traditional reinsurance 
indemnity process. That is almost $100 billion of capacity that 
is in place now with catastrophe bonds used by the National 
Flood Insurance Program and by a number of insurance companies. 
We do think that those are ways to transfer risk and to spread 
it, if you will, into the capital markets and not just on the 
Government's balance sheet.
    We also see creative proposals being made about parametric 
insurance, which is insurance that may be for communities or 
individuals that would provide financial recovery funds 
independent of the actual loss that an individual may have, but 
where the trigger is based upon the event, if you will--the 
wildfire, the flood, that sort of thing.
    Senator Van Hollen. I thank you. I do not know if any of 
the other witnesses want to comment on that. That was my final 
question.
    Mr. Theodorou. Thank you, Senator. I would like to comment. 
Indeed, there is diversification that is done by insurers so 
that they do not exceed their capacity in a particular area, 
just like decades ago there were pins on a map, and if there 
were too many houses in one particular area they would stop 
writing there. What is the maximum possible loss? They 
calculated that. And indeed, they do spread the risk. I 
mentioned a small West Virginia mutual insurance company that 
has less than $20 million in premium and that got a big return 
from the reinsurance recoverable. That company had over 10 
reinsurers. So even reinsurers are not overloaded with risk in 
a particular area.
    Since 1992, in Hurricane Andrew, the modeling industry, 
risk modeling, was born and has developed so that insurers can 
manage their accumulations and spread it, and it is a large 
market. There are hundreds of reinsurers, a couple thousand 
insurers, so that no one company has got too much of a 
concentration in one particular part of a State.
    Senator Van Hollen. Thank you.
    Chairman Brown. Thank you, Senator Van Hollen. Senator 
Menendez of New Jersey is recognized.
    Senator Menendez. Thank you, Mr. Chairman. Flooding is one 
of the most expensive and most frequent natural disasters in 
the United States. As we look to invest in our Nation's 
infrastructure for the 21st century, we need to ensure that our 
investments are protected from the challenges that lie ahead.
    In New Jersey, we are leveraging Federal resources from 
Community Development Block Grants to build state-of-the-art 
resilient infrastructure like Hoboken's Rebuild by Design 
project, a $230 million mitigation initiative which I helped 
secure funding for, and will help alleviate repetitive flooding 
and protect against damage from storm surges.
    Dr. Shafieezadeh, as Congress looks to enact historic 
infrastructure legislation, should we not be investing in more 
flood-resilient projects to programs like CDBG-DR, to ensure 
that our investments in infrastructure last for years to come?
    Mr. Shafieezadeh. Thank you very much for the great 
question. I believe that the project in New Jersey is a very 
good model because it took a multihazard view to the issue and 
had a long-term view, and it took a look at a whole host of 
solutions, both hard solutions to nature-based solutions to 
improving the capacities of the city itself.
    And related to flooding issues, we currently have a lot of 
problems from flooding to our infrastructure. Around 57 percent 
of 1,948 bridge collapses that were recorded in the U.S. have 
been related to hydrology problems where flooding and scouring 
are the major drivers there.
    So they have been putting a lot of pressure on our 
infrastructure, and we anticipate that these stressors are 
going to continue to increase. Under very mild climate 
projections it is estimated that 66,000 of our bridges are 
going to be vulnerable to increased peak flow rates, and 
addressing the vulnerable bridges would cost somewhere between 
$140 to over $200 billion. And that is just one liability due 
to increased peak flow. And that also applies to many other 
built environment that they have, for example, the power grid, 
telecommunication, and hospitals in coastal areas.
    But the good news is that the benefit-to-cost ratio of 
taking actions is very high. Studies have shown that 
retrofitting existing buildings with some common retrofit 
measures, in coastal areas has a benefit-to-cost ratio of 4-to-
1. And applying these measures to buildings where benefit-to-
cost ratio would cost somewhere around $500 billion, but the 
estimated benefits is over $2.2 trillion.
    Senator Menendez. Very good. So I would say the answer to 
my question is yes, based on what you said, right? Investing in 
flood resilience projects makes a lot of sense.
    Mr. Shafieezadeh. Yes.
    Senator Menendez. OK. Let me turn to Dr. Cleetus. In 2012, 
Superstorm Sandy devastated New Jersey's coastline in the 
greatest natural disaster in our State's history. It caused 
billions of dollars in damage, it took lives, including some 
sustained damage to home values. Sea levels continue to rise at 
alarming rates, exacerbating the potential damage from major 
storms like Sandy as well as more common rainfall events.
    As climate hazards continue to grow, this inevitably 
endangers the cornerstone of wealth building for so many 
American families, which is their home value. If, due to 
climate change, these homes become uninsurable and 
unmarketable, the value of these homes and the wealth of 
homeowners is at risk.
    So Dr. Cleetus, without bold action to mitigate the effects 
of climate change, do you expect coastal homes and homes facing 
other climate risks to lose value relative to the balances of 
home owners' mortgages, causing those mortgages to become 
financially under water?
    Ms. Cleetus. There is no question that we have billions of 
dollars of real estate along our coastlines, including in New 
Jersey, that are at risk of chronic inundation well within the 
lifetime of the 30-year mortgage issued today. And we have seen 
the leading edge of some of these challenges already in many 
coastal communities, including places like Ocean City and Cape 
May, Monmouth Beach, in New Jersey, Atlantic City.
    But right now the market is not pricing this risk 
adequately, and my sincere worry and concern is that when the 
market moves, the adjustment can be very harsh and abrupt, and 
it will really hurt fixed-income and low-income folks for whom 
their home is their single biggest asset. I urge policymakers 
to get out ahead of this problem, make the kinds of investments 
that will make communities' homeowners more climate resilient.
    And it is not just about individuals homes and homeowners. 
This is the property tax base of these communities. This is 
linked to our mortgage market. This is linked to many of our 
retirement portfolios that include real estate. The 
reverberations are wide for our economy. We do not know what 
can trigger this. It can be an extreme weather event, change in 
insurance rates, policies. But the physical risk is real.
    Our climate projections show that the physical risk is 
increasing due to accelerating climate change. So let us 
implement the policies ahead of time that will safeguard 
communities and their financial well-being.
    Senator Menendez. Thank you. Mr. Chairman, would you 
indulge me one other question?
    Chairman Brown. Of course.
    Senator Menendez. Thank you. Mr. Nutter, as we continue to 
pursue major infrastructure legislation, including investments 
to mitigate the impacts of climate change, we need to ensure 
that this funding finds its way to where it is most needed, 
like those communities facing outsized climate risk as well as 
those that have historically been underserved, from our low-
income urban communities to our rural communities and 
environmental justice communities.
    How can a data-driven approach guide our policy decisions 
here in Washington to ensure that our Federal investments have 
the maximum impact while reaching the communities that are most 
in need?
    Mr. Nutter. Senator Menendez, thank you for your question 
and your comment. We have promoted the idea that in this 
infrastructure package Congress should include a proposal to 
identify communities at risk and that are socially vulnerable 
by using the National Risk Index, which is a FEMA-prepared 
product that provides a number of factors related to community 
vulnerability and social vulnerability, and allow the local 
communities, consistent with your point earlier, to make 
decisions about what kind of investments would be appropriate 
in those communities to make them more resilient and protect 
the communities and the homeowners that are there, by using 
federally taxable as well as tax-exempt obligations and tax 
credits that would draw both public sector investment but also 
private sector investment.
    We look forward to working with you and your staff to 
include it in an infrastructure package. We think it does a lot 
to help draw additional resources to protect these communities 
and protect the homes and the homeowners that are there.
    Senator Menendez. Thank you, Mr. Chairman. This hearing is, 
for coastal States like my own, although not only coastal 
States, but for coastal States like my own this hearing is 
incredibly important to understand some of the challenges we 
have and some of the policy opportunities I hope we can pursue. 
Thank you.
    Chairman Brown. Thank you, Senator Menendez, for your 
always thoughtful comments.
    Thanks to our witnesses for joining us today, the three 
remote and the two here. For Senators who wish to submit 
questions for the record, these questions are due 1 week from 
today, Tuesday, July 27th. To our witnesses, per our Committee 
rules, we ask that you respond to any questions within 45 days 
from the day you have received them.
    Thank you again. With that the hearing is adjourned. Thank 
you so much.
    [Whereupon, at 11:29 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 morning the Banking and Housing Committee again looks at the 
ways climate change puts the American economy and American communities 
at risk.
    Earlier, we examined the ways big banks' focus on short-term 
profit, while ignoring long-term climate risk, puts our homes and 
businesses and the overall health of the American economy at risk.
    In April, we looked at all the opportunities for American workers 
and the benefits to the entire economy from investment in new, 21st 
century energy.
    Today's hearing will look at what cities and towns and businesses 
of all sizes can do to protect our infrastructure, including homes and 
transit systems, that are at risk from climate change.
    This Committee must do all we can to help our communities protect 
themselves and reduce the risk to taxpayers from climate disasters.
    We'll hear from our witnesses about cost-effective measures to 
ensure the infrastructure we rely on--from bridges to major highways, 
from water treatment plants to neighborhoods and office buildings--can 
withstand more frequent extreme weather events.
    Pretty much every month we see new climate change-fueled 
catastrophes, from the wildfires ravaging the Western United States to 
the increasingly common coastal and river flooding.
    Historic heat melts streetcar cables in Portland, Oregon. Another 
polar vortex hits an unprepared Texas and disables natural gas lines 
and the electrical grid.
    Last month, tropical storms that would have been unprecedented not 
too long ago devastated roads, and flooded homes throughout Delaware 
and Chester Counties in the southeast part of Ranking Member Toomey's 
home State of Pennsylvania.
    Last year, remnants of Tropical Storm Isaias hit the same area 
outside Philadelphia, floating large shipping containers and crashing 
them into a local bridge, flooding roads and homes, and shutting down 
service on SEPTA, one of America's largest transit systems.
    My State of Ohio is not immune.
    Recent landslides in Cincinnati closed heavily traveled highways 
and cut the value of some Ohioans' homes in half. The disaster resulted 
from the combination of the clay in that part of the country, and 
rainfall that's been more than 16 percent heavier than historical 
averages during this century.
    Water levels and temperatures in Lake Erie are higher than they 
have ever been, and are on a steady two-decade rise.
    This affects power plant operation, contributes to flooding of 
homes, businesses, and farmland, and feeds harmful algae blooms, 
jeopardizing the water supply for 11 million people.
    All of these disasters affect the economy. They mean supply chain 
interruptions and power outages and damage to buildings and raw 
materials and transportation networks.
    It's just common sense--when disaster strikes the infrastructure 
our economy relies on, our economy gets interrupted--over and over 
again.
    And it's the American people who pay for it. They pay in higher 
utility bills and higher prices, more tax dollars shelled out to afford 
repairs, and lost jobs and homes and opportunity.
    Our competitors around the world are taking this seriously. China 
plans to invest more than $2.5 trillion in more resilient, integrated 
transportation, energy, and information technology infrastructure by 
2025, including 16 new Ultra High Voltage transmission routes to 
connect renewable generation in the countryside to the booming demand 
in its cities.
    That's all on top of their Government-funded clean energy research 
and development, where they invest more than the U.S., Japan, and India 
combined.
    Every time business grinds to a halt because an American factory 
wasn't built to withstand extreme heat, or because a road is blocked by 
landslides, or because a power grid is shut down--that's another 
opportunity for China and other foreign competitors to get ahead.
    Investment we make now to shore up our infrastructure will both 
create jobs at home--jobs that can't be sent overseas--and make our 
industries more competitive.
    And all the investments we make today will save taxpayers money in 
the future. It's a lot cheaper to build a stronger bridge now than to 
repair it every other year.
    This Committee oversees the stability of the economy, the homes 
Americans live in, and the transit systems that get people to work and 
school and doctors appointments.
    It's our job to look at the risks that infrastructure faces--both 
the source of that risk, and the steps we must take to plan for it and 
prevent it.
    As we look at record high temperatures around the world, we should 
be worried that our grandchildren may look back at these times as ``the 
good old days.''
    We cannot continue on this path. Now is the time to tackle this 
problem, to protect our vital infrastructure and American 
competitiveness.
    I hope my colleagues will listen to today's testimony with the 
understanding that the health of our economy and the lives of our 
fellow Americans may depend on it.
                                 ______
                                 
            PREPARED STATEMENT OF SENATOR PATRICK J. TOOMEY
    Thank you, Mr. Chairman.
    Today, the Committee will discuss climate-related risks and the 
ways in which the insurance and reinsurance industries are evolving and 
adapting in response. This hearing is meant to be about reinsurance, 
though apparently we will also hear proposals for massive new Federal 
infrastructure spending based in part on misleading claims regarding 
climate-related risks. To the extent that policy proposals are based on 
misrepresentations of science, they could lead to very bad results.
    At the outset, let me acknowledge that global warming is real. 
However, we must also recognize three important points. First, there is 
actual significant debate within the scientific community about global 
warming's impact on man and the economy. Second, direct economic 
damages associated with extreme weather events have actually decreased 
both globally and in the United States when measured against GDP. 
Third, insurance and reinsurance companies, whose existence depends 
upon the presence of uncertain risks, have always adjusted to changing 
risk, and climate-related risks are no exception.
    In March, all 12 Republicans on this Committee sent a letter to Fed 
Chairman Jay Powell expressing concern that financial regulators were 
seeking to impose costly new rules based on highly uncertain climate 
models. Unfortunately, proposals to assess climate-related risks to 
financial institutions are too often based on outdated scenarios and 
unrealistic assumptions.
    Even the Financial Stability Board acknowledges the massive 
uncertainty. They just issued a report stating that ``financial 
institutions' exposures to climate-related risks are generally subject 
to greater uncertainty than those relating to other financial risks.'' 
The report notes that this uncertainty derives from the difficulty in 
modeling such risks and a lack of reliable historical data.
    Despite substantial modeling and data limitations, President Biden 
recently issued an unjustified executive order directing financial 
regulators to consider integrating climate-related risks into 
supervision and regulation. But good policy rests on a foundation of 
good science. As one recent publication in the leading science journal 
Nature stated, calls to integrate climate science into risk disclosure 
and economic decision-making ``has leap-frogged the current 
capabilities of climate science and climate models by at least a 
decade.''
    Despite the great deal of uncertainty regarding climate-related 
risks, many in the media and politics assert that the frequency and 
severity of extreme weather events are increasing as a result of 
climate change. This assertion grossly misrepresents the data, 
including assessments by the IPCC, the organization widely considered 
to be the world's leading climate authority.
    The reality is that leading climate scientists do not agree on 
whether or not--or to what extent--climate change is causing an 
increase in the frequency or severity of weather events. There can be 
no debate, however, that economic damage from such events is shrinking 
as a portion of our economy, as one of today's witnesses, Dr. Roger 
Pielke, will explain in greater detail. And that decrease is despite 
the tremendous amount of development in exposed areas.
    Further, the overwhelming reason for increased disaster losses is 
that locations exposed to loss have grown in wealth and population--not 
that global warming has increased the frequency or severity of extreme 
weather events.
    Behind the drive to impose climate-related regulations on financial 
institutions is a fatal conceit of progressivism: Bureaucrats know the 
risks to business better than the business itself. But as we will hear 
from one of today's witnesses, insurance industry expert Jerry 
Theodorou, it has actually occurred to financial institutions that 
potential climate-related risks might affect their operations, and they 
are responding accordingly.
    Perhaps no industry has done more to adapt and evolve than 
insurance and reinsurance. Among other things, large property/casualty 
insurance companies covering approximately 70 percent of the U.S. 
market have been reporting climate risk for over 10 years. They've 
modified their underwriting practices and they've diversified their 
investment portfolios.
    In addition, insurance policies and products are generally short 
term and are rericed annually or withdrawn as conditions change. 
Nevertheless, property/casualty insurance is readily available across 
the United States. Increased risk is not a prohibitive problem for 
insurance or reinsurance because their business models depend upon 
accurately pricing risk--at whatever level.
    Regulators must avoid the temptation to think they're smarter than 
the market. Assessing and pricing risk is the core competency of 
insurance companies, and they will apply hundreds of years of 
experience as risks evolve.
    When was the last time any major insurer or financial institution 
failed as a result of extreme weather? Or the last time an insurance 
company failed to pay a policyholder claim because of extreme weather?
    Finally, I'd like to note that States, not the Federal Government, 
have been the primary regulators of insurance for the past 150 years. 
Congress explicitly endorsed this State-based regulatory approach with 
the McCarran-Ferguson Act.
    State-based regulation has worked and it has worked well for both 
the insurance industry and more importantly for the consumers it 
serves. It would be profoundly misguided for the Biden administration 
to throw the State-based insurance regulatory regime out in pursuit of 
its climate agenda.
    Let me conclude where I began: global warming is real, and it 
likely will present new risks. However, we simply have too little 
understanding of the near-term effects climate change will have on any 
particular place to justify imposing huge new regulatory costs on the 
consumers who would ultimately pay for them.
                                 ______
                                 
              PREPARED STATEMENT OF ABDOLLAH SHAFIEEZADEH
 Lichtenstein Endowed Professor of Civil, Environmental, and Geodetic 
   Engineering and Director of the Risk Assessment and Management of 
  Structural and Infrastructure Systems Lab, The Ohio State University
                             July 20, 2021
    Chairman Brown, Ranking Member Toomey, and Members of the Committee 
on Banking, Housing, and Urban Affairs, my name is Abdollah 
Shafieezadeh. I am the Lichtenstein Associate Professor of Civil, 
Environmental and Geodetic Engineering at The Ohio State University 
(OSU). I am also the director of Risk Assessment and Management of 
Structural and Infrastructure Systems lab at OSU. It is my great honor 
to share with the Committee my insights on the state of the Nation's 
critical infrastructure, current and future risks, especially those 
that are imparted by climate and weather hazards, and some of the ways 
we can pursue to improve the resilience of our infrastructure and 
communities.
The Significance of the Nation's Infrastructure
    The daily life of Americans, the long-term economic prosperity of 
the Nation and the national security of the United States depend on the 
continued functioning of a large set of infrastructure systems in the 
country. These systems that form the backbone of our society are 
complex in terms of their scale, and system operations and 
interdependencies under normal conditions and when challenged by the 
stresses of the environment. Attending these risks in a cost-effective 
manner requires a strategic vision that includes long-term planning 
with a flexibility included to adapt to uncertain conditions of the 
future.
    The physical and operational scales of our infrastructure are 
significantly large. As an example, the power grid in the U.S., is 
widely considered the most complex engineered system in the world. It 
includes over 8,000 power plants, 600,000 miles of high and extra high 
voltage transmission lines and millions of miles of distribution lines. 
\1\ At every instant in time, this system balances electricity supply 
and demand, and delivers power from distant generation units to energy 
consumers through a web of transmission and distribution networks. We 
have over 4 million miles of public roadways and over 600,000 bridges 
across the United States. Together, they facilitated 3.2 trillion 
vehicle miles traveled in 2019. \2\ More than 16,000 wastewater 
treatment plants in the country and a web of tens to tens of thousands 
of miles of pipelines under small communities to large cities collect 
and process over 60 billion gallons of wastewater every day.\2\ 
Similarly, we have other vast interconnected and interdependent systems 
of telecommunication, water, dam, and levees, health care and emergency 
services, among many others, that provide immediate and long-term 
critical services to the society. \3\
---------------------------------------------------------------------------
     \1\ U.S. DOE, ``Dynamic Line Rating Report to Congress'', June 
2019, https://www.energy.gov/sites/default/files/2021/03/f83/
DLR%20Report%20-%20June%202019%20final%20-%20FOR%20PUBLIC%20USE.pdf.
     \2\ American Society of Civil Engineers, ``2021 Report Card for 
America's Infrastructure'' (Reston, VA), accessed July 14, 2021, 
https://infrastructurereportcard.org/wp-content/uploads/2020/12/
National-IRC-2021-report.pdf.
     \3\ DHS, ``Critical Infrastructure Sectors CISA'', accessed July 
13, 2021, https://www.cisa.gov/critical-infrastructure-sectors.
---------------------------------------------------------------------------
Challenges Facing Our Critical Infrastructure
    The current state of our critical infrastructure, however, is not 
good, and for many systems, the state is far from good. According to a 
nationwide assessment of the state of our critical infrastructure 
across the Nation by the American Society of Civil Engineers (ASCE), 
which I am a member of, America's infrastructure scores C-.\2\ \4\ A 
grade of C means that the infrastructure state is mediocre and requires 
attention, and a grade of D means that the infrastructure is poor and 
at risk.\2\
---------------------------------------------------------------------------
     \4\ The scoring is based on regular assessment of the state of the 
infrastructure and considers multiple factors including capacity, 
condition, funding, future need, operation and maintenance, public 
safety, resilience, and innovation. See ASCE Infrastructure Report Card 
2021 for more details.
---------------------------------------------------------------------------
    Our infrastructure, for a long time, has been a source of pride for 
the Nation. The vast power grid, highway systems, water and wastewater 
networks, among our other infrastructure systems have changed the way 
of life, created jobs and provided many opportunities for growth for 
rural and urban communities. These systems that expanded to a 
significant degree shortly after World War II, have been challenged by 
a large set of factors including, among others, aging and 
deterioration; natural hazards, primarily climate and weather extremes; 
cyber and physical attacks; and shifting, and in some parts, increasing 
demands for infrastructure services, partly, because of increasing 
urbanization. The infrastructure needs have been increasing with 
systems and components reaching or passing their intended design 
lifetime, as this transition increases the rate of failure, and 
subsequently, the required replacement or costly maintenance and 
rehabilitation actions. \5\ While local, State, and Federal Governments 
and public and private sectors have been investing in infrastructure, 
the needs have consistently exceeded investments, leading to a growing 
gap in infrastructure investments.\2\
---------------------------------------------------------------------------
     \5\ Yousef Mohammadi Darestani, et al., ``Life Cycle Resilience 
Quantification and Enhancement of Power Distribution Systems: A Risk-
Based Approach'', Structural Safety 90 (2021): 102075.
---------------------------------------------------------------------------
    The Nation's infrastructure was built long ago. As an example, 
parts of the power grid were built about a century ago, but a major 
expansion of the grid happened in 1950s and 1960s, with components and 
systems that had the design lifetime of about 50 years. Inspection of 
facilities built in 1960s and earlier have shown significant 
deterioration. \6\ The traffic volume on bridges and roadways has 
increased by 18 percent from 2000 to 2019.\2\ The increasing service 
demands along with aging have resulted in accelerated deterioration, 
which among other factors, have left 43 percent of our public roadways 
in poor or mediocre conditions and 7.5 percent of bridges (over 46,000 
bridges) in the Nation in poor conditions.\2\ In many cities, there are 
considerable portions of underground wastewater collection pipelines 
that are a century old. Infiltration, exfiltration and leakage are 
becoming more frequent, as these systems are aging and as traffic loads 
on our roadways are increasing, posing risks to public health and 
safety.\7\ \8\
---------------------------------------------------------------------------
     \6\ PJM Regional Transmission Operator (RTO), ``2019 Regional 
Transmission Expansion Plan (RTEP)'', 2020, https://www.pjm.com/
library/reports-notices/rtep-documents.aspx.
     \7\ Soroush Zamanian, Jieun Hur, and Abdollah Shafieezadeh, 
``Significant Variables for Leakage and Collapse of Buried Concrete 
Sewer Pipes: A Global Sensitivity Analysis via Bayesian Additive 
Regression Trees and Sobol'indices'', Structure and Infrastructure 
Engineering, 2020, 1-13.
     \8\ Soroush Zamanian, Mehrzad Rahimi, and Abdollah Shafieezadeh, 
``Resilience of Sewer Networks to Extreme Weather Hazards: Past 
Experiences and an Assessment Framework'', in Pipelines 2020 (American 
Society of Civil Engineers Reston, VA, 2020), 50-59.
---------------------------------------------------------------------------
    Resilience concerns of our increasingly deteriorating--yet 
increasingly vital--critical infrastructure are further compounded by 
climate and weather extremes. The built environment in the U.S. is 
exposed to a broad range of climate and weather hazards. Since 1980, 
the country has sustained 298 billion-dollar weather and climate 
disasters\9\ \10\ with the total cost of these events exceeding $1.975 
trillion. The observed trends in these losses are concerning. The 
number of billion-dollar weather and climate disasters has increased 
from 2.9 events per year in 1980s to 12.3 events per year in 2010s. In 
the same period, the average annual loss by such events has increased 
by a factor of 4.6 to $84.5 billion. In 2020, the number of billion-
dollar disasters reached 22 incurring $98.9 billion in losses. Impacts 
of climate and weather extremes on our infrastructure have been 
significant. Historical data indicate that extreme weather events are 
the leading cause of power grid outages. \11\ In the period of 1980 to 
2012, the Nation observed an alarming tenfold increase in the number of 
outages. \12\ The compounding effects of aging and deterioration and 
stresses from extreme events can substantially increase grid 
failures.\13\ \14\ The number of major power outages has remained high 
since 2012.\15\ \16\ Power outages inflicted an annual average loss on 
the U.S. economy of between $40 and $55 billion. \17\ The lasting 
outages have also had detrimental impacts on public health especially 
for vulnerable populations.\18\ \19\ Similarly, the impacts of climate 
and weather extremes on the transportation infrastructure have been 
significant. Over 57 percent of 1948 recorded bridge collapses in the 
U.S. until 2014 have been linked to hydraulic causes, e.g., flooding. 
\20\
---------------------------------------------------------------------------
     \9\ A billion-dollar disaster refers to an event with the total 
incurred loss across all impacted areas exceeding $1 billion.
     \10\ NOAA National Centers for Environmental Information (NCEI), 
``U.S. Billion-Dollar Weather and Climate Disasters'', 2021, DOI: 
10.25921/stkw-7w73, https://www.ncdc.noaa.gov/billions/.
     \11\ Executive Office of the President., ``Economic Benefits of 
Increasing Electric Grid Resilience to Weather Outages'' (IEEE USA 
Books and eBooks, p. 29., 2013).
     \12\ Alyson Kenward and Urooj Raja, ``Blackout: Extreme Weather, 
Climate Change and Power Outages'', Climate Central 10 (2014): 1-23.
     \13\ Abdollah Shafieezadeh, et al., ``Age-Dependent Fragility 
Models of Utility Wood Poles in Power Distribution Networks Against 
Extreme Wind Hazards'', IEEE Transactions on Power Delivery 29, no. 1 
(2013): 131-139.
     \14\ Yousef Mohammadi Darestani and Abdollah Shafieezadeh, 
``Multi-Dimensional Wind Fragility Functions for Wood Utility Poles'', 
Engineering Structures 183 (2019): 937-948.
     \15\ Sayanti Mukherjee, Roshanak Nateghi, and Makarand Hastak, ``A 
Multi-Hazard Approach To Assess Severe Weather-Induced Major Power 
Outage Risks in the U.S.'', Reliability Engineering & System Safety 175 
(2018): 283-305.
     \16\ Stephen A. Shield, et al., ``Major Impacts of Weather Events 
on the Electrical Power Delivery System in the United States'', Energy 
218 (2021): 119434.
     \17\ Richard J. Campbell and Sean Lowry, ``Weather-Related Power 
Outages and Electric System Resiliency'' (Congressional Research 
Service, Library of Congress Washington, DC, 2012).
     \18\ Joan A. Casey, et al., ``Trends from 2008-2018 in 
Electricity-Dependent Durable Medical Equipment Rentals and 
Sociodemographic Disparities'', Epidemiology (Cambridge, Mass.) 32, no. 
3 (2021): 327.
     \19\ Wangjian Zhang, et al., ``Power Outage: An Ignored Risk 
Factor for COPD Exacerbations'', Chest 158, no. 6 (2020): 2346-2357.
     \20\ Madeleine M. Flint, et al., ``Historical Analysis of 
Hydraulic Bridge Collapses in the Continental United States'', Journal 
of Infrastructure Systems 23, no. 3 (2017): 04017005.
---------------------------------------------------------------------------
    We are in a highly uncertain and increasingly volatile environment 
because of the changes in climate patterns, especially climate and 
weather extremes. We are not only concerned about single hazard types 
becoming more extreme, we are also concerned about the increasing 
likelihood of compound weather and climate events, \21\ where 
combinations of multiple climate drivers or hazards can lead to 
significant losses. \22\ Climate change is anticipated to impact many 
hazards to the built environment. Projections indicate that the 
relative sea level along the coasts of the U.S. may rise by over 14 
inches by 2080 under a low global mean sea level rise scenario. \23\ 
This scenario is very likely to be exceeded under various climate 
change projections. This small rise in relative sea level will increase 
the annual frequency of damaging flood events by 25 times,\23\ which 
will have devastating impacts on buildings, energy, and transportation 
infrastructure and other critical built and natural systems in coastal 
regions, and will extend the reach of coastal flooding to areas further 
inland. While there are differences in the projected impacts, studies 
generally indicate that stresses to the built environment in the United 
States will increase, and in some parts of the country the increase 
will be substantial. \24\
---------------------------------------------------------------------------
     \21\ Omid Mazdiyasni and Amir AghaKouchak, ``Substantial Increase 
in Concurrent Droughts and Heatwaves in the United States'', 
Proceedings of the National Academy of Sciences 112, no. 37 (2015): 
11484-89.
     \22\ Jakob Zscheischler, et al., ``A Typology of Compound Weather 
and Climate Events'', Nature Reviews Earth & Environment 1, no. 7 
(2020): 333-347.
     \23\ William Sweet, et al., ``Global and Regional Sea Level Rise 
Scenarios for the United States'', 2017.
     \24\ Donald J. Wuebbles, et al., ``Climate Science Special Report: 
Fourth National Climate Assessment (NCA4), Volume I'', 2017.
---------------------------------------------------------------------------
    Infrastructure design codes and standards have traditionally relied 
on statistical analysis of historical data to determine design loads 
for the intended service life of the systems. This approach would work 
well if the environment remains stationary meaning that there are no 
long-term temporal trends in loads. However, we are currently at a 
stage where we are observing trends that are changing loads. In 
addition, modern design codes for structures with new design 
philosophies and procedures were developed in late 1990s and early 
2000s based on the lessons learned from past failures and research on 
the performance of structures. \25\ Many structures in the Nation's 
built environment, however, were designed and constructed long before 
modern standards and based on codes that are no longer considered 
adequate. In addition, changes in the characteristics of the 
environment over time, e.g., land use and its impacts, can result in 
conditions that significantly differ from those assumed during the 
design of infrastructure, therefore, posing risks that were not 
accounted for in the design process.
---------------------------------------------------------------------------
     \25\ Jim Rossberg and Roberto T. Leon, ``Evolution of Codes in the 
USA'', ASCE. https://www.Nehrp.Gov/Pdf/UJNR-2013-Rossberg-
Manuscript.pdf (Sept. 29, 2019), 2013.
---------------------------------------------------------------------------
Projected Costs for Improving the Resilience of Critical Infrastructure
    Proactive management of risks is substantially more effective than 
reactive strategies; however, insufficient resources have prevented 
infrastructure owners and operators from applying proactive measures in 
many cases. Instead actions are taken when failures occur or when the 
state of the infrastructure reaches a critical condition. The American 
Society of Civil Engineers has estimated that the investment gap in the 
Nation's critical infrastructure has grown from $2.06 trillion for the 
period of 2016-2025 \26\ to $2.59 trillion for 2020-2029\2\ period. 
More detailed assessments of investment gaps by infrastructure type are 
available in ASCE's Report Card for America's Infrastructure.\2\ These 
estimates of investments are primarily to address current and immediate 
future needs and to comply with current regulations. The investment 
needs will grow, if these systems are to be prepared for the 
anticipated stresses and expected service demands of the future. As an 
example, depending on the emissions scenario, 66,000 to 117,000 of the 
Nation's bridges are estimated to be vulnerable to increased peak flow 
risks because of climate change. \27\ The total cost for adapting to 
these increased risks alone ranges from $140 to $250 billion. \28\
---------------------------------------------------------------------------
     \26\ American Society of Civil Engineers, ``2017 Report Card for 
America's Infrastructure'' (Reston, VA), accessed July 14, 2021, 
https://2017.infrastructurereportcard.org/wp-content/uploads/2019/02/
Full-2017-Report-Card-FINAL.pdf.
     \27\ Len Wright, et al., ``Estimated Effects of Climate Change on 
Flood Vulnerability of U.S. Bridges,'' Mitigation and Adaptation 
Strategies for Global Change 17, no. 8 (2012): 939-955.
     \28\ Multi-Hazard Mitigation Council, ``Natural Hazard Mitigation 
Saves: 2019 Report'' (Washington, DC: National Institute of Building 
Sciences, 2019), https://www.nibs.org/files/pdfs/NIBS-MMC-
MitigationSaves-2019.pdf.
---------------------------------------------------------------------------
Solutions to Infrastructure Challenges
    The Nation's infrastructure plays a critical role for many 
activities of the society, in supporting the economy and serving the 
public safety and national security. As elaborated earlier, these 
systems, however, face a wide spectrum of near-term and long-term 
challenges in an environment that is highly uncertain and increasingly 
volatile. In order to prepare our infrastructure for such environments, 
I recommend the following solutions.
Strategic Investments in Our Infrastructure
    We are in an environment where risks to our infrastructure are not 
static but dynamic, the needs are evolving, and the environment is 
uncertain. In response, we need a long-term national vision for the 
resilience of our infrastructure with sustained investment plans for 
adaptive, robust strategies. Mitigation of hazard risks to buildings 
and other infrastructure systems are among the most effective ways to 
reduce losses and enhance the resilience of the built environment. 
Cost-benefit studies of such investments have shown high benefit to 
cost ratios in the order of 11 to 1 for adopting the latest building 
codes, 4 to 1 for above-code design of buildings, and 4 to 1 for 
applying common and practical retrofit measures to our existing 
building stock.\28\ Every dollar spent on resilience investments for 
businesses has reduced business interruption losses under major hazards 
by over $4.5. Retrofitting bridges and hardening the power grid are 
shown to yield significant benefits over the life of these systems.\29\ 
\30\ \31\ To maximize gains, the mitigation investments must consider 
strategies that improve infrastructure resilience against multihazard 
risks.\30\ \32\ Moreover, early application of climate adaptation 
measures to deficient infrastructure can substantially reduce 
adaptation costs.\28\ A critical point to note here is that 
infrastructure stakeholders including owners, operators, and users may 
not be able to afford the upfront costs of resilience projects, even 
for cases where the benefit to cost ratio is high. Therefore, 
resilience strategies may need to be incentivized through measures such 
as reduced insurance rates and premiums; Federal, State, or local 
grants for resilience strategies; tax incentives; mortgages and loans 
for mitigation plans; and improved resilience-based codes. \33\
---------------------------------------------------------------------------
     \29\ Ehsan Fereshtehnejad and Abdollah Shafieezadeh, ``A Multi-
Type Multi-Occurrence Hazard Lifecycle Cost Analysis Framework for 
Infrastructure Management Decision Making'', Engineering Structures 167 
(2018): 504-517.
     \30\ Nariman L. Dehghani, Ashkan B. Jeddi, and Abdollah 
Shafieezadeh, ``Intelligent Hurricane Resilience Enhancement of Power 
Distribution Systems via Deep Reinforcement Learning'', Applied Energy 
285 (2021): 116355.
     \31\ Nariman L. Dehghani, Chi Zhang, and Abdollah Shafieezadeh, 
``Evolutionary Optimization for Resilience-Based Planning for Power 
Distribution Networks'', in Nature-Inspired Computing Paradigms in 
Systems (Elsevier, 2021), 47-61.
     \32\ Jieun Hur and Abdollah Shafieezadeh, ``Multi-Hazard 
Probabilistic Risk Analysis of Off-Site Overhead Transmission 
Systems'', in SMiRT-25 (Charlotte, NC: IASMiRT, 2019).
     \33\ Multi-Hazard Mitigation Council, ``Developing Pre-Disaster 
Resilience Based on Public and Private Incentivization'' (Washington, 
DC: National Institute of Building Sciences, 2015), https://
www.nibs.org/files/pdfs/NIBS-MMC-ResilienceIncentivesWP-2015.pdf.
---------------------------------------------------------------------------
    As resources are limited, the short- and long-term infrastructure 
needs must be characterized and prioritized.\34\ \35\ We must develop 
and apply tools for life-cycle cost and life-cycle performance (e.g., 
life-cycle resilience \36\) analysis to evaluate infrastructure 
projects. Future projects should have funding plans that cover 
maintenance, operation, and end of service life costs, in addition to 
the initial costs of projects. Reliable characterization and 
prioritization of needs require extensive data from the built 
environment. Facilitating the application of sensing technologies at 
large scales to various elements of our existing and new infrastructure 
along with broadband communication and technologies such as digital 
twin to collect, transfer, process, and learn from the data can enable 
highly effective proactive risk management for our infrastructure 
systems.
---------------------------------------------------------------------------
     \34\ Ehsan Fereshtehnejad, Abdollah Shafieezadeh, and Jieun Hur, 
``Optimal Budget Allocation for Bridge Portfolios With Element-Level 
Inspection Data: A Constrained Integer Linear Programming 
Formulation'', Structure and Infrastructure Engineering, 2021, 1-15.
     \35\ Ehsan Fereshtehnejad, et al., ``Ohio Bridge Condition Index: 
Multilevel Cost-Based Performance Index for Bridge Systems'', 
Transportation Research Record 2612, no. 1 (2017): 152-160.
     \36\ Nariman L. Dehghani, Yousef Mohammadi Darestani, and Abdollah 
Shafieezadeh, ``Optimal Life-Cycle Resilience Enhancement of Aging 
Power Distribution Systems: A MINLP-Based Preventive Maintenance 
Planning'', IEEE Access, 2020.
---------------------------------------------------------------------------
Integration of Equity Considerations in Risk Distribution Into 
        Infrastructure Decisions
    Apart from technical challenges, we face very important questions 
at the interface of science and policy about the distribution of risks. 
Socioeconomically vulnerable communities are taking a higher share of 
infrastructure disruption risks relative to the rest of the population. 
This disparity manifests in both hazard exposure and impacts of 
disruptions. In all stages of resilience response including predisaster 
mitigation projects as well as infrastructure and community recovery, 
we should consider the eventual impacts and benefits for different 
populations in the society, especially the vulnerable populations, to 
ensure that the risks are equitably shared.
Support Research and Development for Resilient Infrastructure and 
        Communities
    Infrastructure resilience is a highly complex problem with 
significant knowledge gaps in many areas including, among others, (i) 
evolving characteristics of hazards, (ii) physical and operational 
performance of the built environment during and in the aftermath of 
extreme, uncertain conditions of natural hazards, (iii) interactions of 
built, natural, and human systems over time and space, and (iv) 
innovative technologies and strategies that enable robust, adaptive, 
and cost-effective pathways to infrastructure resilience in the 
evolving uncertain hazard environment. We must increase investment in 
basic and applied research to address these gaps in science and 
technology. Moreover, critical infrastructure resilience research is 
often hampered by limited access to reliable integrated and spatially 
explicit data related to infrastructure and hazard impacts. Policies 
are needed to require critical infrastructure owners and operators to 
collect and make the data available. This step, in addition to 
benefiting research to understand and enhance resilience, will lend to 
a transparent environment where infrastructure stakeholders can learn 
about the performance of service providers and make informed decisions 
for risk management.
                  PREPARED STATEMENT OF RACHEL CLEETUS
             Policy Director, Union of Concerned Scientists
                             July 20, 2021
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

                   PREPARED STATEMENT OF FRANK NUTTER
             President, Reinsurance Association of America
                             July 20, 2021
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

                PREPARED STATEMENT OF ROGER PIELKE, JR.
        Professor, Environmental Studies, University of Colorado
                             July 20, 2021
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

                 PREPARED STATEMENT OF JERRY THEODOROU
      Director, Finance, Insurance, and Trade, R Street Institute
                             July 20, 2021
    Chairman Brown and Ranking Member Toomey: Thank you for the 
opportunity to offer testimony on climate change, resilience and 
reinsurance. These issues impact multiple public policy areas. They 
need to be understood to inform the development of prudent responses to 
protect our economy from great harm today and in the future. I am the 
director of Finance, Insurance & Trade for the R Street Institute. R 
Street is a nonprofit, nonpartisan public policy research organization 
whose mission is to engage in policy research and outreach to promote 
free markets and limited, effective Government. The issues covered in 
today's hearing are of interest to R Street because, since its founding 
R Street has analyzed the role of reinsurance, and climate change and 
resilience are among the most consequential issues of the day.
    The three topics of climate change, resilience and reinsurance are 
interrelated. The effects of climate change can be seen in the form of 
higher temperatures, melting ice caps, rising sea levels, and more 
frequent and severe catastrophic weather events, including tropical 
storms, hurricanes and convective storms. \1\ These trends are a 
clarion call for resilience, which is the ability to bounce back and to 
absorb shocks. Reinsurance is a financial shock absorber. It allows 
insurance companies and the people and communities they serve to bounce 
back and to recover. For example, a small insurance company in the 
northern panhandle of West Virginia--Municipal Mutual Insurance Company 
of West Virginia--paid $3.8 million in 334 claims, equivalent to 12 
percent of its equity, after a severe windstorm in March 2020. 
Reinsurance allowed it to recover $3 million of the $3.8 million, so 
the net loss was a more bearable $800,000. \2\ Reinsurance protected 
the company and the policyholders. Without reinsurance hundreds of 
insurers across the country and millions of policyholders would be 
exposed to crippling financial loss on top of catastrophic physical 
loss.
---------------------------------------------------------------------------
     \1\ S&P Global and Intelligent Insurer, ``Global Reinsurance 
Highlights 2020'', Newton Media Limited, 2020. https://
www.spglobal.com/-assets/documents/ratings/research/global-reinsurance-
highlights-2020.pdf.
     \2\ ``2020 Management Discussion and Analysis'', S&P Global, 2020. 
https://platform.marketintelligence.spglobal.com/web/
client?auth=inherit#company/documents?id=13229.
---------------------------------------------------------------------------
    My comments will focus on the response of the insurance and 
reinsurance market to risks from climate change. The climate 
catastrophe event of the day is the complex of wildfires in a dozen 
Western States. Wildfire is fire, which is the main peril covered by 
personal insurance and commercial insurance. In fact, the oldest 
continuously operating insurance company in the United States, the 
Philadelphia Contributionship, was founded in 1752 by Benjamin Franklin 
and his fellow firefighters to allow policyholders to share risk 
related to fire damage and loss. \3\ Since Franklin's day the insurance 
industry has expanded its product offerings to cover the needs and the 
risks of a changing economy with automobile insurance, workers 
compensation insurance, liability insurance, and cyber insurance.
---------------------------------------------------------------------------
     \3\ ``History'', The Philadelphia Contributionship, last accessed 
June 17, 2021. https://1752.com/blog/about-us/history.
---------------------------------------------------------------------------
    The risks associated with climate change--fire, flood, hail, 
drought, and wind--are covered by existing insurance products. This is 
what the insurance industry does. It matches its capital to risk. The 
one exception is flood insurance because flood risk is primarily 
covered by the Federal Emergency Management Agency's (FEMA) National 
Flood Insurance Program (NFIP). Unlike the insurance industry, which is 
well capitalized and financially sound, the NFIP operates 
uneconomically, having incurred $36 billion of debt since its founding. 
\4\ The NFIP is undertaking reforms to be introduced this fall, but it 
will be many years before the NFIP can approach financial health. In 
other countries with elevated flood risk, such as Australia and Japan 
flood coverage is available in their insurance policies. \5\ However, 
the market for private flood insurance in the United States is small 
because it is challenging for insurers to compete with artificially low 
and subsidized NFIP rates.
---------------------------------------------------------------------------
     \4\ Diane P. Horn, National Flood Insurance Program Borrowing 
Authority, Congressional Research Service, Oct. 2, 2020. https://
fas.org/sgp/crs/homesec/IN10784.pdf.
     \5\ Nicole Pederson-McKinnon, ``How To Tell If Your Insurer Covers 
You for Flood Damage'', The Sydney Morning Herald, March 27, 2021. 
https://www.smh.com.au/money/insurance/how-to-tell-if-your-insurer-
covers-you-for-flood-damage-20210326-p57ee4.html; Jiji, ``Japan Nonlife 
Insurers To Raise Premiums 6-8 percent in Wake of Disasters'', The 
Japan Times, July 8, 2020. https://www.japantimes.co.jp/news/2020/07/
08/business/japan-nonlife-insurers-raise-premiums-6-8-percent-wake-
disasters.
---------------------------------------------------------------------------
    Collectively, the U.S. insurance industry and the global 
reinsurance industry are adequately capitalized to withstand the 
financial impact of today's climate-related catastrophe risk. In 2005--
the year with the most insured U.S. losses--there was $110 billion of 
insured losses. \6\ The U.S. property and casualty insurance industry 
has $2.4 trillion of total assets; the global reinsurance industry an 
additional $600 billion. \7\ This means that it would take a year with 
three times the losses of 2005 to dent the industry's capital by 10 
percent.
---------------------------------------------------------------------------
     \6\ ``Facts + Statistics: U.S. Catastrophes'', Insurance 
Information Institute, last accessed July 17, 2021. https://
www.iii.org/fact-statistic/facts-statistics-us-
catastrophes#Loss%20Events%20
in%20the%20U.S.201980-2018.
     \7\ S&P Global and Intelligent Insurer. https://www.spglobal.com/-
assets/documents/ratings/research/global-reinsurance-highlights-
2020.pdf.
---------------------------------------------------------------------------
    Reinsurance is critical for the insurance industry to play its 
role, as demonstrated in the previously mentioned example in West 
Virginia. The reinsurance industry is global, allowing insurers that 
buy reinsurance to spread their risk to multiple counterparties, each 
protecting its own balance sheet by taking a sliver of risk. Only three 
of the top 25 reinsurers in the world are U.S.-based. The remaining 22 
are domiciled in reinsurance hubs in continental Europe, London, 
Bermuda, and increasingly, Asia.
    In addition to the capital base of the insurance and reinsurance 
industry providing coverage for climate-related risks, there is also 
alternative capital taking on insurance climate risk. \8\ This 
alternative capital comes from pension funds, hedge funds, sovereign 
wealth funds, university endowments, foundations and family offices 
that seek to take on catastrophe risk because it is uncorrelated with 
equity and debt market risk. This is a relatively new phenomenon, and 
it is growing. The volume of alternative capital in the reinsurance 
industry has grown from $17 billion in 2006, when it accounted for 4.4 
percent of global reinsurer capital, to $94 billion in 2020, when it 
accounted for $14.5 percent of global reinsurer capital. \9\
---------------------------------------------------------------------------
     \8\ Steve Evans, ``World Bank Climate Plan Highlights Cat Bonds & 
Risk Transfer'', Artemis, June 24, 2021. https://www.artemis.bm/news/
world-bank-climate-change-plan-highlights-cat-bonds-risk-transfer.
     \9\ ``Aon's Reinsurance Aggregate: Results for the Year to 
December 31, 2020'', Aon Empower Results, 2021. http://
thoughtleadership.aon.com/Documents/ARA-FY-20210415.pdf.
---------------------------------------------------------------------------
    U.S. pension funds have over $32 trillion in assets. \10\ To give 
an example of pension funds taking on catastrophe risk, the Arkansas 
Teacher Retirement System, a $20 billion fund, invests $330 million, 
equivalent to 1.7 percent of its total assets, in catastrophe bonds. 
\11\ To the extent the large pool of private capital gets more 
comfortable with insurance catastrophe risk as a diversifying asset 
class, there would be less need for taxpayer-funded disaster recovery 
expenditure.
---------------------------------------------------------------------------
     \10\ F. Norrestad, ``Total Assets of Pension Funds in the United 
States From 2009 to 2019'', Statista, Dec. 7, 2020. https://
www.statista.com/statistics/421729/pension-funds-assets-usa.
     \11\ Steve Evans, ``Pension Funds Investing in Insurance-Linked 
Securities (ILS)'', Artemis, last accessed July 17, 2021. https://
www.artemis.bm/pension-funds-investing-in-insurance-linked-securities-
ils; Michael R. Wickline, ``Teacher Fund Ends Quarter $783M Higher'', 
Northwest Arkansas Democrat Gazette, June 8, 2021. https://
www.nwaonline.com/news/2021/jun/08/teacher-fund-ends-quarter-783m-
higher.
---------------------------------------------------------------------------
    Transferring climate risk onto the balance sheets of insurers and 
reinsurers and into the investment portfolios of third-party investors 
may be a source of comfort, but it is not enough because it kicks the 
can of climate risk down the road. Claims from losses will be paid, but 
premiums will rise as the risk increases. The traditional reinsurance 
industry, supplemented by alternative capital, plays and will continue 
to play an important role in providing resilience through its role as a 
shock absorber, taking on climate risk, but it is only part of the 
long-term response. Public policy must also encourage and incentivize 
risk mitigation-incentives for sound construction, restrictions on 
building in catastrophe-prone areas, defenses and barriers, and working 
with authorities to establish and enforce codes and standards.
    In closing, thank you for the privilege of testifying today, and 
for your interest in exploring how the reinsurance market and private 
capital solutions provide resilience to our economy in the face of 
growing climate risk taking a toll on our homes, businesses and health.
        RESPONSES TO WRITTEN QUESTIONS OF CHAIRMAN BROWN
                   FROM ABDOLLAH SHAFIEEZADEH

Q.1. Value of Infrastructure at Risk--Dr. Shafieezadeh, would 
you be able to share with the Committee current reliable data 
pinpointing the value of U.S. infrastructure at risk from 
climate change?

A.1. One of the areas of need for assessing risks and 
developing effective mitigation and adaptation strategies in 
response to the changing climate is the data of the built 
environment and its conditions. Climate change will impact many 
stressors to our infrastructures in different ways and to 
different degrees, with the impacts varying spatially over the 
United States and over time. Moreover, depending on the type 
and conditions of the infrastructure, the impacts may vary 
considerably. Moreover, failure of a component within an 
infrastructure can have cascading effects within the same 
system and across multiple infrastructure systems. The 
compounding effects of aging infrastructure and climate change 
effects can also increase system vulnerabilities. These factors 
lead to a highly complex problem that will need to be captured 
in the analyses in order to reliably analyze the infrastructure 
at risk. Extensive multidisciplinary research is needed to 
address these challenges, uncover yet-unknown effects of 
climate change on the built environment and develop innovative 
strategies for communities and the Nation in order to 
effectively prepare and respond to upcoming challenges.
    Several studies, e.g., \1\ \2\ \3\ have investigated 
climate change impacts on the elements of the built environment 
in the United States. While these investigations provide 
valuable insights into the risks posed to the infrastructure, 
they have considered a subset of the key complexities of 
climate change impacts. Therefore, their risk estimates can be 
regarded as a lower bound for infrastructures at risk and the 
actual risks may be higher.
---------------------------------------------------------------------------
     \1\ James E. Neumann, et al., ``Climate Change Risks to U.S. 
Infrastructure: Impacts on Roads, Bridges, Coastal Development, and 
Urban Drainage'', Climatic Change, 131.1 (2015), 97-109.
     \2\ April M. Melvin, et al., ``Climate Change Damages to Alaska 
Public Infrastructure and the Economics of Proactive Adaptation'', 
Proceedings of the National Academy of Sciences, 114.2 (2017), E122-31.
     \3\ Charles Fant, et al., ``Climate Change Impacts and Costs to 
U.S. Electricity Transmission and Distribution Infrastructure'', 
Energy, 195 (2020), 116899.

Q.2. In the absence of a nationwide accounting of all elements 
of critical infrastructure, can you share with the Committee 
whatever relevant sectoral assessments of which you are aware 
on the value of infrastructure at risk from climate change with 
respect to----
    Electricity generation, transmission, and distribution 
infrastructure?

A.2. The power grid is a vast infrastructure system. It 
includes over 8,000 power plants, 600,000 miles of high and 
extra high voltage transmission lines and millions of miles of 
distribution lines. \4\ The depreciated value of the U.S. power 
grid is estimated to range between $1.5 and $2 trillion and 
replacing this system to cost nearly $5 trillion. \5\ Climate 
change may impact many elements of this vast system. Heatwaves, 
droughts, rain, lightning, wildfires, sea level rise, storm 
surge, floods, high winds, freezing temperatures, and ice and 
snow storms are among the key stressors for the power grid that 
are impacted by climate change. A recent study\3\ that analyzed 
the impacts of a subset of these stressors on the grid 
estimated the discounted total costs incurred by climate change 
impacts to range from $120 to $380 billion through 2099 (based 
on $ 2017) considering different general circulation models 
(GCMs), emission scenarios, and adaptation strategies. The 
study also found that proactive adaptation strategies can 
reduce costs by as much as 50 percent compared to no adaptation 
for a given emissions scenario. Not considered in the study are 
the compounding effects of stressors, cascading effects of 
failures, and some key elements of the power grid including 
generation plants, and the impacts of climate change on the 
production of electricity beyond immediate infrastructure 
impacts (e.g., high environment temperatures may lead to the 
shutdown of power plants as the available water cannot be used 
for cooling the plants). These factors can substantially 
increase the estimates of the impacts of climate change on the 
power grid.
---------------------------------------------------------------------------
     \4\ U.S. DOE, ``Dynamic Line Rating Report to Congress'', June 
2019 (https://www.energy.gov/sites/default/files/2021/03/f83/
DLR%20Report%20-%20June%202019%20final%20-%20FOR%20PUBLIC%20USE.pdf) 
[accessed 13 July 2021].
     \5\ Joshua D. Rhodes, ``The Old, Dirty, Creaky U.S. Electric Grid 
Would Cost $5 Trillion To Replace. Where Should Infrastructure Spending 
Go?'', The Conversation (http://theconversation.com/the-old-dirty-
creaky-us-electric-grid-would-cost-5-trillion-to-replace-where-should-
infrastructure-spending-go-68290) [accessed 12 September 2021].

---------------------------------------------------------------------------
Q.3. Ports or inland waterway infrastructure?

A.3. Seaports are one of the pivotal nodes in transportation 
networks and serve as critical gateways for national and 
international trade. Past experiences have shown that any 
disruption in the activities of port infrastructure may lead to 
significant losses from secondary economic effects in addition 
to direct losses associated with physical port damage. \6\ 
These systems are disproportionately vulnerable to climate 
change effects due to their high exposure to stressors that are 
affected by climate change. Sea level rise and increasing 
frequency and intensity of extreme wind, storm surge and wave 
events, precipitation, droughts, heatwaves, and riverine floods 
are among significant evolving stresses for seaports. 
Projections indicate that the relative sea level along the 
coasts of the U.S. may rise by over 14 inches by 2080 under a 
low global mean sea level rise scenario. \7\ This scenario is 
very likely to be exceeded under various climate change 
projections. This rise in relative sea level is expected to 
increase the annual frequency of damaging flood events by 25 
times,\7\ which will have devastating impacts on coastal 
infrastructure including seaports. To the best of my knowledge, 
no nationwide estimates of value of seaports at risk of climate 
change are currently available.
---------------------------------------------------------------------------
     \6\ Abdollah Shafieezadeh and Lindsay Ivey Burden, ``Scenario-
Based Resilience Assessment Framework for Critical Infrastructure 
Systems: Case Study for Seismic Resilience of Seaports'', Reliability 
Engineering & System Safety, 132 (2014), 207-219.
     \7\ William Sweet, et al., ``Global and Regional Sea Level Rise 
Scenarios for the United States'', 2017.

Q.4. Flood control infrastructure adjacent to our Nation's 
---------------------------------------------------------------------------
major rivers?

A.4. Levees and other flood control infrastructures are vital 
for mitigating risks of coastal and riverine flooding for large 
populations in vulnerable regions. Indeed, levees protect 
millions of people and $2.3 trillion of property. \8\ The total 
length of levees in the U.S. is estimated at 40,000 miles with 
30,000 miles included in the National Levee Database maintained 
by the U.S. Army Corps of Engineers (USACE) and about 10,000 
miles of levees outside of this portfolio with limited 
information available. \9\ The costs of maintaining and 
improving the moderate to high-risk levees in the USACE 
portfolio is estimated at $21 billion. \10\
---------------------------------------------------------------------------
     \8\ American Society of Civil Engineers, ``2021 Report Card for 
America's Infrastructure'' (Reston, VA) (https://
infrastructurereportcard.org/wp-content/uploads/2020/12/National-IRC-
2021-report.pdf) [accessed 14 July 2021].
     \9\ U.S. Army Corps of Engineers, ``U.S. Army Corps of Engineers 
Levee Portfolio Report: A Summary of Risks and Benefits Associated With 
the USACE Levee Portfolio'', March 2018 (https://
www.mvk.usace.army.mil/Portals/58/docs/LSAC/USACE-Levee-Safety-
Report2018.pdf).
     \10\ Congressional Research Service, ``Levee Safety and Risk: 
Status and Considerations'', 7 December 2017.
---------------------------------------------------------------------------
    Climate change poses additional direct and significant 
risks to our flood control infrastructure requiring adaptation 
strategies to address the evolving threats. The high 
significance of risks stems from the anticipated high impacts 
of climate change on sea level rise as well as increasing 
intense precipitation in many parts of the U.S. However, to the 
best of my knowledge, no estimates of the value of flood 
control infrastructure at risk due to climate change are 
currently available.

Q.5. Any significant portion of the Interstate Highway system, 
or any other federally or State-funded highway that has been 
determined to be nationally or regionally economically 
significant?

A.5. There are over 4 million miles of public roadways and over 
600,000 bridges across the United States. \11\ Together, they 
facilitated 3.2 trillion vehicle miles traveled in 2019. The 
needs to address current risks to the transportation 
infrastructure are significant. Based on the National Bridge 
Inventory (NBI) database of the U.S. Department of 
Transportation (DOT), about 36 percent of bridges (220,000 
bridges) need repair and about 8 percent of bridges (79,500) 
need replacement. Among bridges in need of repair are over 
17,000 Interstate Highway bridges. The bridge investment 
backlog representing all bridge improvements needed to meet the 
current conditions and operational performance of the highway 
system (i.e., excluding expansion needs as well as mitigation 
and adaptation needs in response to climate change) is 
estimated at $125 billion (based on $ 2014). \12\
---------------------------------------------------------------------------
     \11\ American Society of Civil Engineers.
     \12\ U.S. Department of Transportation, ``Status of the Nation's 
Highways, Bridges, and Transit: Report to Congress'' (Washington, DC, 
21 November 2019) (https://www.fhwa.dot.gov/policy/23cpr/chap7.cfm).
---------------------------------------------------------------------------
    Climate change poses additional risks to the existing 
portfolio of transportation infrastructure. Depending on the 
emissions scenario, it is estimated that 66,000 to 117,000 of 
the Nation's bridges will be vulnerable to the impacts of 
climate change when only increases in the peak flow are 
considered. \13\ The total cost of adapting to these risks 
ranges from $140 to $250 billion.\13\ These estimates, however, 
do not account for the impacts of increases induced by climate 
change in stressors other than peak flow, the amplifying 
effects of bridge deterioration for the impacts of climate and 
weather stressors, and the cascading effects of bridge failures 
for transportation systems.
---------------------------------------------------------------------------
     \13\ Len Wright, et al., ``Estimated Effects of Climate Change on 
Flood Vulnerability of U.S. Bridges'', Mitigation and Adaptation 
Strategies for Global Change, 17.8 (2012), 939-955.

Q.6. Please share with the Committee any analyses assessing the 
effect on the U.S. economy from the loss of all or significant 
component parts of the infrastructure elements in the previous 
---------------------------------------------------------------------------
question?

A.6. As indicated in response to the previous questions, 
climate change impacts on the built environment is expected to 
be significant. Assessing the collective impacts of climate 
change on critical infrastructures and the U.S. economy is very 
challenging and requires further studies. In the meantime, past 
hazard incidents and their impacts can provide valuable 
insights into current trends of risks by climate and weather 
extremes and the evolving characteristics of these risks. Since 
1980, the country has experienced 298 weather and climate 
disasters with the total loss of each event exceeding $1 
billion. \14\ The collective loss of these events has exceeded 
$1.975 trillion. The observed trends in these losses are very 
concerning. The number of billion-dollar weather and climate 
disasters has increased from 2.9 events per year in 1980s to 
12.3 events per year in 2010s. In the same period, the average 
annual loss by such events has increased by a factor of 4.6 to 
$84.5 billion. In 2020, the number of billion-dollar disasters 
reached 22 incurring $98.9 billion in losses.\14\ These trends 
are anticipated to continue, thus indicating a dire situation 
for our built environment and communities in many parts of the 
United States.
---------------------------------------------------------------------------
     \14\ NOAA National Centers for Environmental Information (NCEI), 
``U.S. Billion-Dollar Weather and Climate Disasters'', 2021, DOI: 
10.25921/stkw-7w73 (https://www.ncdc.noaa.gov/billions/) [accessed 13 
July 2021].

Q.7. Compounding Risks--This Committee is concerned about any 
threat to the economy. Climate change creates a significant 
range of challenges for the economy, but the situation is 
particularly daunting when those potential impacts are 
compounded by the challenges of an aging infrastructure, long-
term underinvestment in maintenance and upkeep of that 
infrastructure, and cyberbased threats from increasingly 
sophisticated actors.
    What recommendations would you make to the Committee and 
Congress, generally, to address compounding risks?

A.7. Climate change, aging and their compounding effects create 
an environment where the consequent impacts on the 
infrastructure are expected to be significant. At the same 
time, uncertainties in the specific manifestations of 
vulnerabilities are high and evolving. To address these 
pressing challenges, first and foremost, we need a long-term, 
national, strategic plan for our critical infrastructure to 
support adaptive risk management strategies as new threats are 
uncovered, projections of risks are updated and new 
infrastructure technologies emerge.
    Even in the absence of climate change impacts, there are 
significant gaps in knowledge and practice vis-a-vis the 
performance of new and aging built environment under extreme 
stresses of natural hazards and the most effective ways to 
mitigate the risks. Climate change imposes additional 
significant complexities that the engineering and science 
community has only recently begun to analyze. While Federal 
entities such as National Science Foundation, Department of 
Energy, National Oceanic and Atmospheric Administration, and 
Department of Defense have recently initiated programs in 
support of research and development (R&D) for issues concerning 
climate change, support for such programs especially in areas 
related to the nexus of infrastructure and climate change 
should increase to address the significant knowledge gaps. 
Furthermore, impacts of climate change on critical 
infrastructures and the subsequent socioeconomic consequences 
will vary across the United States. To investigate specific 
challenges posed by climate change and aging infrastructure to 
regional built environment and support the decision needs of 
regional economies and communities, regional research hubs 
fostering collaborations between universities, national labs, 
the private sector and communities can be established, which 
can also serve as a platform for the much needed workforce 
development.
    In managing risks of climate change, currently there are a 
set of solutions available for each infrastructure. The 
particular designs of the strategies depend on the 
characteristics and conditions of the infrastructure and the 
projected risks of climate and weather extremes, among other 
factors. Although such solutions are known to be effective, 
infrastructure stakeholders including owners, operators, and 
users may not be able to afford the upfront costs of these 
projects. Therefore, resilience strategies may need to be 
incentivized through measures such as reduced insurance rates 
and premiums; Federal, State, or local grants for resilience 
strategies; tax incentives; mortgages and loans for mitigation 
plans; and improved resilience-based codes. \15\ While there 
are known effective solutions, support must continue and 
increase for improving existing and developing disruptive 
technologies. New green technologies or those that address 
practical limitations of existing green technologies are 
important in adapting to climate change. As an example, the 
intermittency of renewable energy resources (e.g., wind and 
solar power) can be addressed by coupling these systems with 
emerging nuclear power technologies such as small modular 
reactors, microreactors, or fission batteries, \16\ which are 
safe, carbon-free, and economically competitive means of energy 
production.
---------------------------------------------------------------------------
     \15\ ``Multi-Hazard Mitigation Council, Developing Pre-Disaster 
Resilience Based on Public and Private Incentivization'' (Washington, 
DC: National Institute of Building Sciences, 2015) (https://
www.nibs.org/files/pdfs/NIBS-MMC-ResilienceIncentivesWP-2015.pdf) 
[accessed 15 July 2021].
     \16\ Elmar Eidelpes, et al., ``Fission Battery Initiative: Siting 
and Transportation Workshop Report'' (Idaho National Lab, August 2021).

Q.8. As a faculty member at The Ohio State University and a 
resident of the Columbus area, are there threats to our State's 
infrastructure that are of particular concern to you, whether 
from likely impacts of climate change or other pervasive 
---------------------------------------------------------------------------
challenges?

A.8. Ohio is exposed to several climate and weather hazards. 
Since 2000, Ohio has experienced many billion-dollar disasters 
including 33 severe storms, 4 floods, 3 winter storms, 5 
droughts, 3 tropical cyclones, and 1 freezing temperature 
event.\14\ Climate change impacts on the built environment will 
be spatially and temporally stochastic, and each region in the 
country will face particular types and degrees of challenges. 
In Ohio, climate change is anticipated to increase the 
frequency and intensity of extreme precipitation and floods as 
well as the number of extremely hot days, which may pose risk 
to public health in urban areas and the agriculture sector in 
rural areas. \17\ Climate change is also anticipated to 
increase the intensity of summer droughts in Ohio.\17\
---------------------------------------------------------------------------
     \17\ NOAA National Centers for Environmental Information, State 
Climate Summaries: Ohio (Revised 2019), 2019 (https://
statesummaries.ncics.org/downloads/OH-screen-hi.pdf) [accessed 12 
September 2021].
---------------------------------------------------------------------------
    Of particular concern in Ohio is the vulnerability of our 
levees and other flood protection systems such as dams. In 
spring 2019, severe flooding in the Midwest incurred over $20 
billion in damages to public and private property and losses to 
the agriculture sector. During this event, over 700 miles of 
levees sustained damage and more than 80 levee systems in the 
USACE levee portfolio failed due to overtopping or breach. \18\ 
Repairing damaged levees is estimated to cost approximately $1 
billion.\18\ Although this event did not particularly impact 
Ohio, the State is vulnerable to such events.
---------------------------------------------------------------------------
     \18\ Federal Emergency Management Agency, Hazard Mitigation 
Assistance (https://www.fema.gov/hazard-mitigation-assistance.)
---------------------------------------------------------------------------
    The increasing intensity and frequency of extremely hot 
days and humidity in Ohio will likely challenge the energy 
security of the State. Such environments on the one hand will 
increase the energy demand of households and industries, and on 
the other hand will challenge the ability of the grid to 
generate and transmit electricity. Analyzing climate change 
risks for Ohio must also account for the impacts of compound 
hazards such as flood, tornado, or downburst that can induce 
damage to the grid followed by extreme temperatures and 
humidity that put additional stresses on the system.
    Increasing temperatures and precipitations, in addition to 
acting as shocks to the built environment in Ohio, may 
accelerate the deterioration of some of infrastructure 
components, thus further increasing the vulnerabilities of 
systems. In developing adaptation strategies, these gradual 
impacts of climate change must also be considered.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF CHAIRMAN BROWN
                      FROM RACHEL CLEETUS

Q.1. Dr. Cleetus, if we are being honest about the goal of 
addressing climate change, and we want to ensure that our 
solutions lean into not only our energy use and emissions 
reductions, but also community resilience and environmental 
equity, what scale of resources do we need to dedicate to our 
collective response to the ongoing climate crisis?

A.1. Thank you for the question. Yes, the reality is we have to 
work on aggressively on both fronts: sharply cutting our heat-
trapping emissions and investing in equitable climate 
resilience. Because we have delayed action on climate change 
for so long, we have locked in some pretty significant climate 
impacts in the decades ahead. Right now, we are dealing with 
climate-related extreme events--such as intensifying storms, 
floods, droughts, wildfires and heatwaves--as if they are one-
off disasters instead of the worsening trend that the science 
shows. We are spending billions of dollars in postdisaster aid 
for communities and businesses ravaged by climate impacts. We 
would be much better off if we also invested upfront, prior to 
these disasters, to better protect people and our 
infrastructure. Investing upfront will help keep people safer 
and lessen rebuilding costs.
    A study from the National Institute of Building Sciences 
shows how the benefits of preventive measures and investments 
far outweigh the costs for a range of climate-related risks 
(see Figure 1 below). \1\
---------------------------------------------------------------------------
     \1\ https://www.nibs.org/projects/natural-hazard-mitigation-saves-
2019-report
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

    We know we will have to invest in our response to the 
climate crisis in a sustained way for many decades to come and 
that inaction is the most harmful and costly path forward, as 
the latest IPCC report confirms. \2\ This year Congress must 
pass a $3.5 trillion reconciliation bill with significant 
climate provisions, as a downpayment on climate action. We must 
invest here at home, and also contribute in a robust way to 
international climate finance to help developing countries also 
make a low carbon transition and invest in climate resilience. 
Along with other groups, UCS has sent a letter to Congress 
calling for at least $3.3 billion in climate finance to be 
appropriated this year and are calling on President Biden to 
commit to at least $12 billion a year by 2024. \3\
---------------------------------------------------------------------------
     \2\ https://www.ipcc.ch/report/sixth-assessment-report-working-
group-i/
     \3\ https://ucsusa.org/about/news/un-general-assembly-convening-
critical-climate-action-robust-us-climate-finance-1

Q.2. This summer the Congress may consider Infrastructure in 
multiple pieces of legislation. You have undoubtedly seen media 
reports talking about what the total cost of the bipartisan 
bill might be, and what a Budget Reconciliation bill might add 
to the total level of investment. What range of Federal 
investment must be considered in order to allocate the 
resources mentioned above, so that we don't miss a once-in-a-
generation opportunity to create more resilient and equitable 
---------------------------------------------------------------------------
communities?

A.2. There is no question that the scale of funding for the 
reconciliation package must be on the order of at least $3.5 
trillion, including significant investments in climate related 
priorities alongside other pressing social and economic needs. 
We need transformative climate action now, that will put us on 
a firm path to meeting the goal of cutting U.S. emissions 50-52 
percent below 2005 levels by 2030 and ensure that our 
communities and infrastructure are climate resilient. This year 
alone, people in our Nation have been reeling from a series of 
unprecedented climate-related disasters, with a mounting human 
and economic toll. There is no time for delay and we cannot 
just take incremental steps that will leave us vastly 
underprepared.
    We are encouraged to see the House committees pass a 
package that includes several important priorities, including:

    The Clean Energy Payment Plan (CEPP) and extending 
        and expanding clean energy tax incentives over the next 
        10 years to help ensure that 80 percent of the 
        electricity that's produced in the United States by 
        2030 comes from clean sources.

    Tax credits, grants, and rebates to support the 
        transition to electric heavy-duty vehicles to reduce 
        pollution in overburdened communities and the 
        deployment of charging infrastructure to improve access 
        to EV charging.

    An updated EV tax credit including equity 
        provisions and strong domestic manufacturing and labor 
        standards.

    A fee on methane emissions.

    Robust investments that directly benefit 
        environmental justice communities, including 
        environmental and climate justice block grants; funding 
        to reduce greenhouse gases and local pollution; 
        increased monitoring of toxic air pollution in 
        frontline communities; solar projects that serve low-
        income households; and investments in healthy ports, 
        affordable housing, climate resilience, and much more.

    Funding for an affordability program for the 
        National Flood Insurance Program (NFIP).

    Funding for the Civilian Climate Corps.

    These provisions must remain strong and robustly funded as 
the package moves toward final passage. We also urge greater 
attention to funding programs to benefit workers who may be 
dislocated by the transition from fossil fuels to clean energy.
    I would like to share with you a few blogposts that my 
colleagues and I have written on these topics to provide more 
detail on the level of funding and the investments needed 
across the economy: https://blog.ucsusa.org/rachel-cleetus/
priorities-for-congress-climate-change/; https://
blog.ucsusa.org/rachel-cleetus/we-have-an-infrastructure-bill-
we-still-need-bold-climate-action-urgently/; https://
blog.ucsusa.org/jonna-hamilton/zero-emission-transportation-
must-be-included-in-congressional-priorities/; https://
blog.ucsusa.org/john-rogers/the-cepp-clean-energy/.

Q.3. With respect to Banking and Housing jurisdiction--the 
financial services sector, housing, transit--how would you 
recommend this Committee work to influence future legislation 
to achieve the goals I mentioned--environmental performance, 
resilience, and equity--what will do the most good for the most 
people? What policy proposals will best position us to avoid 
the most catastrophic climate scenarios, and importantly, help 
to close the resilience gap that you mentioned in your 
testimony?

A.3. The Senate Banking and Housing Committee has a vital role 
to play in helping to elevate and advance climate action. Three 
specific areas for action that should be prioritized:

    Legislation to ensure transparent, standardized 
        climate risk disclosure in the marketplace, and 
        specifically to help ensure fossil fuel companies are 
        held accountable. Currently, climate risks are not 
        being appropriately accounted for in the marketplace 
        and that is leading to business-as-usual actions that 
        increase climate risks and costs--with a 
        disproportionate impact on low-income households and 
        communities.

    Investments to help ensure that our Nation's 
        housing and transit infrastructure is climate-
        resilient, low-carbon and energy efficient, safe, 
        accessible, and affordable. Oversight of the FHFA and 
        GSEs is also vital to help ensure the housing market is 
        proactively taking into account climate risks, and 
        ensuring equitable access to safe, affordable housing. 
        Federal investments should be made in line with 
        President Biden's Justice40 Initiative to help ensure 
        that communities that have long been marginalized and 
        disadvantaged benefit directly and equitably from these 
        investments. Across the Nation, communities are being 
        forced to contend with the compounding effects of 
        climate-related disasters, longstanding social and 
        economic inequities and structural racism. Climate 
        solutions must be responsive to this and not reinforce 
        existing injustices.

    Ensuring that the National Flood Insurance Program 
        is updated to reflect the latest science, ensure 
        affordability provisions, and encourage investments in 
        flood mitigation measures at the individual and 
        community level.

    To close the resilience gap, we will need to work on both 
fronts, to cut heat-trapping emissions and build climate 
resilience, while prioritizing historically disadvantaged 
communities. I would like to offer one additional resource to 
help answer the question of what policies are most needed in 
the United States to help limit some of the worst impacts of 
climate change: A Transformative Climate Action Framework: 
Putting People at the Center of Our Nation's Clean Energy 
Transition.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARREN
                      FROM RACHEL CLEETUS

Q.1. How does the United States compare to other Nations in its 
regulation of climate change-related financial risks, 
particularly with respect to the insurance industry?

A.1. The reality is the United States is currently falling well 
short on regulating climate change related financial risks, 
particularly behind the U.K. and European Union--and this is to 
our detriment since it potentially increases risks to our 
financial system and our markets, which ultimately affects the 
well-being and prosperity of all of us. Further, it is 
entrenching and elevating narrow profit interests of fossil 
fuel companies, instead of the broad interests of the public 
which is to move as quickly as possible to a clean energy 
economy. UCS strongly supports mandatory disclosure rules for 
climate risk to avoid untenable growth of climate and ESG risk 
within our markets that harms investors, spurs the improper 
allocation of capital, and may increase the cost of capital for 
U.S. companies. Mandatory disclosures should address companies' 
stewardship of a just and equitable transition to a low-carbon 
economy; human capital management; impacts on and strategies 
related to racial, economic, environmental, and climate 
justice; accounting of country-by-country tax payments; and 
disclosure of political activity including direct and indirect 
spending on elections and lobbying.
    We have submitted comments to the Securities and Exchange 
Commission, the Commodity Futures Trading Commission \1\ and 
the Federal Housing Finance Agency \2\ to highlight each body's 
role in ensuring these outcomes. We have also endorsed 
Congressional action, including organizing a letter of support 
for the Climate Risk Disclosure Act of 2021 (introduced by Rep. 
Sean Casten, D-IL) signed by 82 environmental and social 
justice groups, faith-based and public interest organizations 
and socially responsible investors. \3\
---------------------------------------------------------------------------
     \1\ Pinko, N., R. Cleetus, and K. Mulvey. 2020. Union of Concerned 
Scientists Submission to the Climate-Related Market Risk Subcommittee 
Under the Market Risk Advisory Committee of the CFTC. Online at https:/
/comments.cftc.gov/PublicComments/ViewComment.aspx?id=
62482&SearchText=.
     \2\ Cleetus, R. and S. Udvardy. 2021. Union of Concerned 
Scientists Response to the FHFA RFI on Climate Risk. Online at https://
www.fhfa.gov/AboutUs/Contact/Pages/input-submission-
detail.aspx?RFIId=1426.
     \3\ Letter in support of the Climate Risk Disclosure Act. 2021. 
Online at https://casten.house.gov/sites/casten.house.gov/files/
Climate%20Risk%20Disclosure%20Act
%20Support%20051121.pdf.

Q.2. Congress created the Financial Stability Oversight Council 
(FSOC) to identify risks to financial stability and coordinate 
responses to these risks amongst regulators.
    Is the existing macroprudential regulation of insurance 
companies sufficient to protect the financial system from 
distress if one of these companies were to fail due to climate 
risk?

A.2. In brief, no. Insurance companies are still largely 
operating in a backward-looking sense in evaluating risks but 
the reality is that climate change is a systemic risk that is 
worsening and accelerating. We are already seeing the 
challanges, as insurance companies struggle to adapt to 
catastrophic wildfire seasons, worsening flooding, and more. 
The past is no longer a good guide for the future and the FSOC 
should help identify and foster a forward-looking risk 
evaluation and management regime that takes into account the 
latest scientific projections of climate risks.

Q.3. How should FSOC evaluate the financial stability risks 
associated with the exposure of the insurance industry to 
climate change?

A.3. The FSOC should be guided by the latest science and also 
be very mindful of worsening and compounding climate risks--for 
example, extreme heat and extreme flooding colliding or the 
cascading risks when extreme events result in critical 
infrastructure failures that magnify impacts on insured assets. 
Spatially downscaled data is vital to help understand the 
geography of risk and how that intersects with socioeconomic 
and demographic factors that can result in disproportionate 
impacts for some. Too many communities are underinsured or do 
not have access to affordable insurance at all. With climate 
change, this gulf could worsen.

Q.4. Please describe how the various tools at FSOC's disposal 
can help mitigate these risks.

A.4. The FSCOC can play a vital role by:

    Assembling the data, tools, and platforms to help 
        evaluate and communicate financial risks posed by 
        climate change in a uniform and transparent way

    Coordinating across Federal Government agencies to 
        ensure that climate risks are appropriately accounted 
        for in their actions

    Providing nonbinding expert advice and 
        recommendations to regulators

    Helping ensure than equity considerations are 
        centered in how climate risk disclosure and actions to 
        mitigate those risks are implemented

    To fulfill these functions well, FSOC must also have the 
necessary staffing levels and resources.
    I am grateful for the opportunity I had to testify before 
the Committee. Please do reach out if the Union of Concerned 
Scientists can be a resource on these topics or anything else 
in the future.
    Thank you for your efforts to advance just and equitable 
climate action in this crucial moment.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF CHAIRMAN BROWN
                       FROM FRANK NUTTER

Q.1. Mr. Nutter, the impacts of climate change are clear: Power 
goes out; water supplies are cut; crops are threatened; smoke 
from wildfires keeps kids from playing outside and jeopardizes 
the health of our first responders; and people lose their homes 
and jobs, and sometimes, their lives.
    Your industry is data-driven and also has significant skin 
in the game when it comes to paying for losses resulting from 
extreme weather disasters.
    Does the data your member companies see and analyze 
demonstrate both that the number of natural disasters and the 
costs of losses are increasing?

A.1. Yes, the frequency, severity, and costs of many natural 
disasters continue to increase due to climate change. In my 
written testimony, please see pages 2 and 3, specifically 
tables one through four by Aon's Catastrophe Insight division, 
which demonstrate the increase in the number of natural 
disaster events and overall and insured losses in the U.S. and 
globally from 1980 to 2020.

Q.2. What would you suggest Congress do about it?

A.2. In addition to encouraging traditional solutions, like 
property insurance protections for homeowners, my written 
testimony highlights several bills and proposals. Pages 8 
through 12 feature the RAA's legislative proposal to establish 
Community Disaster Resilience Zones (CDRZ) and direct public 
and incentivize private sector investment to help improve 
infrastructure resilience, including affordable housing 
resilience, for communities that are the most in need and most 
at risk from natural disasters. Reducing risk and improving 
resilience in communities can help reduce the loss of lives and 
property, natural disaster recovery costs, and the cost of 
insurance.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARREN
                       FROM FRANK NUTTER

Q.1. Congress created the Financial Stability Oversight Council 
(FSOC) to identify risks to financial stability and coordinate 
responses to these risks amongst regulators. How can improved 
Federal and State coordination of regulation help mitigate 
climate-related risks?

A.1. Insurers and reinsurers are regulated by the States in the 
U.S. The FSOC includes three insurance members, including a 
State insurance commissioner, an independent member having 
insurance expertise, and the Treasury's Director of the Federal 
Insurance Office (FIO). President Biden issued Executive Order 
14030, pursuant to which FSOC is required to conduct an 
analysis and issue a report on climate-related financial risk, 
and FIO also has climate-specific directives.
    In 2011, for the FSOC, Federal Reserve, and others, the RAA 
prepared a substantial analysis about the systemic nature of 
property casualty reinsurance. The analysis demonstrated that 
rather than being a potential source of systemic risk, property 
casualty (re)insurance is a material mitigant of systemic risk 
in the financial markets and broader economy. Further to this 
point, in my written testimony, please see pages 2 through 4 
and pages 14 and 15 for a more detailed discussion about 
climate change, natural disasters, reinsurance, and risk 
transfer. Expanded utilization of (re)insurance would reduce 
systemic risk, including climate-related risk. Pages 8 through 
12 feature the RAA's legislative proposal to establish 
Community Disaster Resilience Zones (CDRZ) and direct public 
and incentivize private sector investment to help improve 
infrastructure resilience, including affordable housing 
resilience, for communities that are the most in need and most 
at risk from natural disasters. Reducing risk and improving 
resilience in communities can help reduce the loss of lives and 
property, natural disaster recovery costs, and the cost of 
insurance.
    There also is strong coordination by ``Team USA'' between 
State regulators and the Federal Government (including the 
Treasury's Federal Insurance Office) in advocating U.S. 
positions at the International Association of Insurance 
Supervisors (IAIS) and other relevant international fora. 
Critically, this coordination helps to ensure that any 
international insurance standards that are developed and 
expected to be adopted in the U.S. are constructed in a manner 
that works for the current insurance regulatory structure. The 
RAA supports FIO's international work.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR SINEMA
                       FROM FRANK NUTTER

Q.1. Can you share specific instances where Government can use 
or has used risk transfer to lower exposure to taxpayers and 
mitigate systemic risks, such as climate risk? What can 
Congress do to encourage diversification of systemic risk?

A.1. Examples of successful State and Federal risk transfers 
programs can be found on pages 14 through 15 of my written 
testimony. The best example of an ongoing Federal risk transfer 
program is the Federal Emergency Management Agency's National 
Flood Insurance Program Reinsurance Program. In the program's 
first year (2017), FEMA transferred $1.042 billion of NFIP's 
financial risk to 25 reinsurers, and FEMA collected the full 
amount to help pay the cost of NFIP losses and claims resulting 
from Hurricane Harvey. This 2017 coverage, which also improved 
NFIP's financial viability and protected taxpayers, cost $150 
million, and the program successfully renewed the subsequent 
year and currently has reinsurance coverage through 2024. This 
example is a true testament of successful private-public 
partnerships.
    Like NFIP, the Export-Import Bank of the United States and 
others, Congress can explicitly authorize and/or encourage 
Federal agencies with risk to diversify that risk by 
transferring it, as is cost-effective, to the private 
reinsurance sector and the capital markets. Government risk can 
and should be transferred voluntarily to the private market. 
The use of private capital will protect consumers, taxpayers, 
and communities, while spreading risk throughout the globe to 
insurers and other capital providers who are willing to assume 
such risk. Risk transfer will strengthen Government programs by 
giving them the financial flexibility to ensure they continue 
to remain viable in the long term.

Q.2. Do you believe that there is appetite among the insurance 
industry and in the insurance market to transfer publicly held 
risk to the private market? To what extent does that remain 
true if insurance markets harden further?

A.2. Risk transfer, including reinsurance, is a successful 
solution used by both the public and private sector including 
(re)insurers, financial institutions, and Government programs. 
Reinsurers believe the private sector can and should assume 
more Federal Government risk. Reinsurers are willing to offer 
reinsurance options to a wide variety of Government programs to 
help manage their exposure to losses. The graph, ``Global 
Reinsurer Capital'', below demonstrates the previous decade of 
reinsurance industry capital growth despite extreme events.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

              Additional Material Supplied for the Record
  STATEMENT OF THE NATIONAL ASSOCIATION OF MUTUAL INSURANCE COMPANIES
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

    STATEMENT OF THE INSURANCE INSTITUTE FOR BUSINESS & HOME SAFETY
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

                STATEMENT OF THE SMARTERSAFER COALITION
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

   STATEMENT OF THE AMERICAN PROPERTY CASUALTY INSURANCE ASSOCIATION
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

                          STATEMENT OF THE SBP
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

                          [all]