[Senate Hearing 117-776]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 117-776


  REAUTHORIZATION OF THE NATIONAL FLOOD INSURANCE PROGRAM: PROTECTING 
                      COMMUNITIES FROM FLOOD RISK

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

                                HEARING

                               BEFORE THE

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

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             SECOND SESSION

                                   ON

 EXAMINING THE REAUTHORIZATION OF THE NATIONAL FLOOD INSURANCE PROGRAM
                               __________

                             JUNE 16, 2022
                               __________

  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
                    
55-788 PDF                 WASHINGTON : 2024   


            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 G. WARNOCK, Georgia          KEVIN CRAMER, North Dakota
                                     STEVE DAINES, Montana

                     Laura Swanson, Staff Director

                 Brad Grantz, Republican Staff Director

                       Elisha Tuku, Chief Counsel

                 Dan Sullivan, Republican Chief Counsel

                      Cameron Ricker, Chief Clerk

                      Shelvin Simmons, IT Director

                        Pat Lally, Hearing Clerk

                                  (ii)


                            C O N T E N T S

                              ----------                              

                        THURSDAY, JUNE 16, 2022

                                                                   Page

Opening statement of Chairman Brown..............................     1
        Prepared statement.......................................    26

Opening statements, comments, or prepared statements of:
    Senator Toomey...............................................     3
        Prepared statement.......................................    27

                               WITNESSES

Jana N. Henderson, CFM, Office of Mitigation Director/State 
  Hazard Mitigation Officer, Mississippi Emergency Management 
  Agency.........................................................     5
    Prepared statement...........................................    29
    Responses to written questions of:
        Chairman Brown...........................................    86
        Senator Sinema...........................................    86
Peter Van Doren, Senior Fellow, The Cato Institute...............     6
    Prepared statement...........................................    47
    Responses to written questions of:
        Senator Sinema...........................................    87
Jerry Theodorou, Director, Finance, Insurance, and Trade Policy 
  Program, R Street Institute....................................     7
    Prepared statement...........................................    69
    Responses to written questions of:
        Senator Sinema...........................................    87
Douglas E. Quinn, Executive Director, American Policyholder 
  Association....................................................     9
    Prepared statement...........................................    80
    Responses to written questions of:
        Chairman Brown...........................................    88
        Senator Sinema...........................................    90
Sam Brody, Professor, Texas A&M University, Director of the 
  Institute for a Disaster Resilient Texas.......................    10
    Prepared statement...........................................    81
    Responses to written questions of:
        Chairman Brown...........................................    90
        Senator Sinema...........................................   100

              Additional Material Supplied for the Record

Statement submitted by the American Property Casualty Insurance
  Association....................................................   103
Letter submitted by the Credit Union National Association........   110
Letter submitted by the National Association of Federally-Insured 
  Credit Unions..................................................   112
Letter submitted by SmarterSafer.org.............................   113
Robert G. Rash, PE, PLS, CEO and Chief Engineer, St. Francis 
  Levee District of Arkansas, West Memphis, Arkansas.............   116
Statement submitted by Professional Insurance Agents.............   131
Letter submitted by American Academy of Actuaries................   141

                                 (iii)

 
  REAUTHORIZATION OF THE NATIONAL FLOOD INSURANCE PROGRAM: PROTECTING 
                      COMMUNITIES FROM FLOOD RISK

                              ----------                              


                        THURSDAY, JUNE 16, 2022

                                       U.S. Senate,
          Committee on Banking, Housing, and Urban Affairs,
                                                    Washington, DC.
    The Committee met at 10 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 Committee on Banking, Housing, 
and Urban Affairs will come to order. The hearing on 
reauthorization of the National Flood Insurance will be in the 
hybrid format. This hearing is a continuation of our efforts to 
enact a long-term reauthorization of NFIP. This Congress, 
Senator Toomey, and I, are both interested in finding a path, 
as difficult and as convoluted as that has been, on flood 
insurance, through a number of Congresses.
    Flooding is the most common and most costly natural 
disaster, we know, facing families, businesses, and 
communities. Our failure to combat climate change is only 
making it more common, more frequent, not just on the coasts, 
but inland too, all over the country. We see that.
    This week in Montana and Wyoming, along the Yellowstone 
River basin, one of our great national parks is shut down, 
businesses are closed, and families forced out of their homes. 
The park director, I heard the other day on the radio, saying 
people should go home. Our colleagues Senator Tester from 
Montana, Daines from Montana, and Lummis from Wyoming know this 
too well.
    Flooding is taking families' homes and memories, it is 
wrecking their finances, it is shuttering small businesses, it 
is devastating entire communities, and it is destroying 
infrastructure. Disasters often fall hardest on low-income 
families that are more likely to live in floodplains and 
lowlands, and communities that have fewer resources to prepare 
for and respond to them.
    No matter where you live, everyone pays for the financial 
fallout, as the country spends tax dollars to help families and 
communities recover, and as floods disrupt our economy.
    Just this morning, a baby formula plant in Michigan shut 
down--again--after flooding. Yet too many people in our 
Government fail to acknowledge that climate change causes much 
of this.
    The National Oceanic and Atmospheric Administration has 
predicted an above-normal hurricane season for 2022. Halting 
the trajectory of our changing climate will be a long-term, 
multigenerational effort.
    We also need to help our families and communities become 
more resilient to the flooding we face now and in the coming 
decades, and whenever possible, avoid it altogether.
    The NFIP is critical. It provides over $1.3 trillion in 
coverage to nearly 5 million homes and businesses in 20,000 
communities.
    As we have discussed in this Committee many times, the NFIP 
is not just an insurance program. Its job is not just to help 
with recovery, but to prevent and minimize the damage in the 
first place.
    NFIP combats the overall threat of flooding through four 
related components: flood insurance, to help property owners 
and renters recover quickly; floodplain management, to minimize 
the damage, including through the adoption of local ordinances 
and building codes; floodplain mapping, to identify and 
communicate risks, so we can mitigate or avoid hazards all 
together; and mitigation, to help protect and remove property 
from harm's way.
    The Bipartisan Infrastructure Bill offers a down payment on 
new opportunities for communities to help homeowners out of 
harm's way.
    But we need to do more. That means reauthorizing and 
strengthening NFIP, and investing in flood mitigation. Because 
of repeated denials by Members of the Senate and our failure to 
fight climate change, the investment in the infrastructure bill 
surely will not be enough.
    Last year, we heard from stakeholders and we heard from 
FEMA. Today we will hear from additional stakeholders, 
including practitioners working with communities and families, 
and I thank the four of you for being here. I am interested in 
their recommendations for ways we can help strengthen the NFIP 
so that it can provide reliable access to insurance for 
property owners and renters, so we could address affordability 
concerns, so we can ensure that more people are aware of their 
flood risk and insured against losses, and we can help 
communities reduce the overall level of flood risk, through 
investments and improvements in mapping, floodplain management, 
and mitigation.
    Next week we will once again invite FEMA to discuss the 
status of the program, including ideas for long-term 
reauthorization and the implementation of FEMA's new Risk 
Rating 2.0 initiative.
    With 21 short-term reauthorizations--21 short-term 
reauthorizations--it is no secret that NFIP has proven to be a 
challenge. It is a complex program with multiple goals, with 
implications for many of the things people care about most--
their homes and their communities. I believe it is possible for 
us, however, to come together to reauthorize and improve this 
program.
    I look forward to continuing to work with Ranking Member 
Toomey and the Members of the Committee to strengthen the NFIP 
and the country's comprehensive approach to mitigating flood 
risk through the reauthorization bill.
    Senator Toomey.

         OPENING STATEMENT OF SENATOR PATRICK J. TOOMEY

    Senator Toomey. Thank you very much, Mr. Chairman, and I am 
very encouraged by your sentiment about seeking to work 
together to get a long-term reauthorization in place. The last 
one was in 2012, and as you have pointed out, Mr. Chairman, 
Congress has repeatedly, time and time again, extended these 
short-term provisions to keep this program going.
    But the fact is NFIP is a broken program. It is a heavily 
subsidized program, but it is fundamentally broken. Since 2000, 
NFIP has borrowed from the Treasury in 11 out of 22 years. So 
that means literally half the time, this unsustainable 
``insurance'' program actually requires additional Federal 
taxpayer funds to subsidize policyholders.
    Today, NFIP's current debt to the Treasury stands at $20.5 
billion, and that excludes the $16 billion that was arbitrarily 
forgiven in 2017.
    Some folks suggest that, well, NFIP policyholders are 
incapable of repaying this debt so the rest needs to be 
forgiven too. Before we consider such a drastic action we 
should ask ourselves, how did we end up in this scenario in the 
first place?
    Well, the answer is relatively straightforward. NFIP 
systemically underprices flood insurance. And regrettably, it 
is the policies of Congress, more than FEMA, that are the root 
causes of NFIP challenges. FEMA has worked to improve NFIP by 
implementing a new price rating for flood insurance premiums, 
known as Risk Rating 2.0, that better aligns policyholders' 
premiums with their actual flood risk. Risk Rating 2.0 is 
producing rates that are more equitable also, by phasing out 
most of the NFIP subsidies. Twenty-three percent of 
policyholders, over a million families, were overpaying for 
their flood insurance. These families will now see a decrease 
in their monthly premiums under Risk Rating 2.0. Compare that 
to only 3.8 percent of policyholders who will have an increase 
of more than $20 per month to their premiums.
    Risk Rating 2.0 is an important step in the right direction 
to not only more fair NFIP but also a more fiscally sound NFIP. 
Congress should work toward strengthening the Risk Rating 2.0 
elements and eliminate any subsidies that do not align price 
with risk.
    As I stated at our NFIP hearings a year ago, I am ready, 
willing, and eager to work with our Chairman and my colleagues 
to enact another long-term reauthorization bill.
    Let me reiterate several of my priorities for 
reauthorization.
    First, I think we should encourage more private capital in 
the form of private policies and private reinsurance. My home 
State of Pennsylvania has been a leader on this front. It is my 
understanding that there are roughly 15,000 private flood 
policies in Pennsylvania. Private flood insurance brings more 
capacity to the market and may very well bring better products. 
My top priority for NFIP reauthorization is to eliminate any 
barriers that exist to obtaining private flood insurance.
    A second is to ``do no harm.'' We should be protecting the 
transition to actuarially sound premiums. Any effort to slow or 
interrupt that progress must be rejected, including proposals 
to lower the 18 percent rate on premium increases.
    Third, if subsidies do persist they must be better 
targeted. FEMA is proposing a new Means-Tested Assistance 
Program for current and future low- and moderate-income 
households.
    I am open to finding ways to help current low-income 
homeowners afford flood insurance. Today, properties with 
subsidized NFIP premiums are overwhelmingly located in our 
wealthiest communities, and subsidized NFIP premiums are seldom 
in lower-income communities. However, let me be clear that any 
means-tested subsidy should replace existing cross-subsidies 
within NFIP.
    I acknowledge that over the past 50 years NFIP has 
acclimated homeowners to a world in which these cross-subsidies 
are very prevalent, but adding another subsidy on top of 
existing cross-subsidies moves us further away from actuarially 
sound premiums.
    Fourth, we should improve communication with homeowners and 
homebuyers--and I think the Chairman alluded to this very 
point--so that they have a better understanding of the flood 
risk of properties that they are considering buying, or, in 
fact, own. A small step is to raise awareness on the true flood 
risk to new homeowners and renters.
    I was glad to see FEMA recently submit to Congress a NFIP 
reauthorization package that includes several encouraging 
proposals. One proposal would prohibit coverage for a new 
category of excessive loss properties, which are properties 
that have flooded multiple times. This is a very good policy 
that is worthy of very serious consideration.
    As a general principle, we should not provide flood 
insurance subsidies that encourage people to live in a flood-
prone area. While excessive loss properties are not the 
majority of homes in NFIP, they do constitute a highly 
disproportionate share of losses. And it sends the wrong 
message when taxpayers are continuously footing the bill to 
bail out properties time and time again in these risky areas.
    Another promising FEMA proposal prohibits coverage for 
commercial properties and new construction in high-risk areas. 
This helps to mitigate the risk in NFIP by eliminating coverage 
in heavy flood-prone areas over time, and also encourages 
competition in the private market for non-residential policies.
    A long-term reauthorization must continue to move NFIP in a 
positive direction. I recognize that we cannot fix all the 
problems overnight, but we should use reauthorization as an 
opportunity to move us in the right direction.
    In its current form, NFIP is bad for taxpayers who have to 
bail it out year after year. I stand ready to work with my 
colleagues to make it a better program.
    Thank you, Mr. Chairman.
    Chairman Brown. Thank you, Senator Toomey.
    Thank you to the five witnesses, one calling from his 
office or home, I believe.
    Jana Henderson served as the Director of Mitigation, the 
State Hazard Mitigation Officer at the Mississippi Emergency 
Management Agency since 2012. She helps communities implement 
mitigation and flood management plans. She has worked more than 
30 declared disasters, including Katrina. Thank you for joining 
us.
    Dr. Peter Van Doren is a Senior Fellow and Editor in Chief 
of the quarterly journal Regulation at the Cato Institute, an 
expert in the regulation of housing, land, and the environment. 
He has taught at Princeton, Yale, and Chapel Hill. Welcome.
    Mr. Theodorou, Jerry Theodorou, is the Director of the 
Finance, Insurance, and Trade Policy Program at the R Street 
Institute. He worked for the American International Group as 
the Director of Insurance Research and at Conning, an insurance 
asset management and research firm. Welcome, Mr. Theodorou.
    Mr. Douglas Quinn is Executive Director of the American 
Policyholder Association, where he assists victims of carrier-
side insurance fraud. Mr. Quinn is a Marine Corps veteran who 
began his involvement with these issues after experiencing 
insurance fraud while rebuilding his home during Superstorm 
Sandy in 2012. An interesting path to being a witness here. 
Thank you.
    Professor Sam Brody is a Regents Professor and Director for 
the Institute for a Disaster Resilient Texas at Texas A&M, 
Galveston Campus. He served as the lead technical expert for 
the Governor's Commission to Rebuild Texas in response to 
Hurricane Harvey. He is joining us, I believe, from Texas.
    Ms. Henderson, if you would begin, and thanks for your 
years of public service, doing this for more than a decade.
    So nice to see you, and if you would proceed.

   STATEMENT OF JANA N. HENDERSON, CFM, OFFICE OF MITIGATION 
DIRECTOR/STATE HAZARD MITIGATION OFFICER, MISSISSIPPI EMERGENCY 
                       MANAGEMENT AGENCY

    Ms. Henderson. Good morning. Good morning, Chairman Brown, 
Ranking Member Toomey, and Members of the Committee. My name is 
Jana Henderson and I am very grateful to address this Committee 
on matters that are extremely important to me and the State of 
Mississippi.
    As Secretary of the Association of State Floodplain 
Managers and the State Hazard Mitigation Officer, Director of 
Mitigation for the State of Mississippi, it is my goal to use 
all available resources when it comes to breaking the cycle of 
disaster damage and reconstruction.
    Unlike most States, Mississippi is unique in that the 
Office of Mitigation houses grants, mitigation planning, and 
floodplain management. While this may seem not very 
significant, creating a cohesive mitigation operation can prove 
to be very viable before, during, and after an incident.
    I am honored to testify on several mitigation efforts, 
including the Flood Insurance Program, a program that the 
Association of State Floodplain Managers and its members 
consider essential to our nation's flood loss reduction 
efforts.
    Our written statement identifies over 20 reform ideas for 
your consideration.
    The State of Mississippi has 334 participating communities 
in the National Flood Insurance Program and 31 communities that 
participate in the Community Rating System Program. I am very 
passionate about the success of the NFIP as I know, firsthand, 
how it has helped citizens to be more resilient and out of 
harm's way.
    However, oftentimes local communities lack the capability 
to fully implement the program. It is not that communities are 
not willing. They sincerely know the importance of 
participating bur are only able to enforce the basic NFIP 
standards. Why? Well, in most rural and underserved communities 
the local floodplain administrator is often an elected 
official, which can change each election cycle. Due to the 
uncertainty that often accompanies election outcomes, this 
causes a huge interruption in many national flood insurance 
programs.
    The State floodplain management staff continues to educate 
rural communities on the rules and regulations of the NFIP. 
However, with such a large area of communities not as advanced 
as others, it is nearly impossible to reach every community in 
a timely manner.
    According to Mississippi State University Extension 
Service, 54 percent of Mississippi's population is rural. This 
lack of local capability is harmful to the citizens when 
ensuring that they are building, renovating, or moving 
structures that are compliant with just basic NFIP standards.
    Some rural areas depend on volunteers to fulfill the 
floodplain administrator duties. How to enhance the local 
community's capability must be addressed to effectively enforce 
the NFIP, especially in socioeconomically disadvantaged areas.
    As much as the program grows for States, rural and local 
income communities remain underserved because of the lack of 
resources available to them. Incentives within the Community 
Assistance Program grant for socioeconomically disadvantaged 
communities may be the key for better NFIP-enforced 
regulations. It would be helpful to expand the CAP program and 
authorize this in the statute.
    Another noteworthy key point is there seems to be a 
disconnect between floodplain management and flood insurance 
emerging as FEMA implements Risk Rating 2.0. What is required 
for flood insurance does not always align with floodplain 
management. Effective floodplain management should impact 
insurance premiums. More cohesive training must be developed 
and delivered for floodplain managers and insurance agents.
    With Mississippi being deemed an advanced State by the 
Community Assistance State Support Services, the CAP grant 
tiered framework system, we are committed to maintain our 
status by exceeding State transformation activities.
    In conclusion, the reauthorization of the National Flood 
Insurance Program will enhance our support mechanism for 
building State capability to efficiently and effectively assist 
communities to manage and mitigate their flood risk.
    Thank you.
    Chairman Brown. Thank you, Ms. Henderson. Dr. Van Doren.

STATEMENT OF PETER VAN DOREN, SENIOR FELLOW, THE CATO INSTITUTE

    Mr. Van Doren. Chairman Brown, Ranking Member Toomey, and 
Members of the Committee, thank you for holding today's hearing 
and providing me the opportunity to testify before you. My 
testimony draws heavily on my published Cato Policy Analysis 
titled ``The National Flood Insurance Program: Solving 
Congress' Samaritan's Dilemma''.
    So the question for the policymakers in this room is who 
should pay for the damages caused by natural disaster? 
Historically, private charity played a very important role. 
Then Congress used to appropriate monies after floods occurred. 
Congress created the National Flood Insurance Program in 1968 
to reduce post-disaster, ad hoc Federal aid and protect 
taxpayers while providing prospective flood victims financial 
protection against loss. Lawmakers intended for the NFIP to be 
largely free of subsidies, thus protecting taxpayers.
    The 1966 HUD task force report that gave rise to the NFIP 
originally estimated that subsidies of flood insurance premiums 
for existing properties would end after approximately 25 years. 
In 2015, the National Research Council said the expectation was 
that over time properties receiving subsidized premiums would 
eventually be lost to floods and storms, and subsidized 
premiums would disappear through attrition.
    That has been partially fulfilled, but the hardest nuts 
remain. The percentage of structures receiving subsidies fell 
dramatically over the first five decades of the program. Some 
75 percent of covered properties received the subsidy in '78, 
but only 28 percent in 2004, and now 13 percent in September 
2018.
    In 2012, Congress reaffirmed their original intent to 
curtain NFIP subsidies by enacting the Biggert-Waters Flood 
Reform Act. But in 2014, Congress retreated from the subsidy 
reform with the 2014 Homeowners Flood Insurance Affordability 
Act.
    Federal flood insurance was intended to reduce the use of 
post-disaster congressional appropriations for disaster relief 
and to impose the cost of rebuilding on owners through 
premiums. The Congress should re-embrace these goals.
    Thank you.
    Chairman Brown. Thank you, Dr. Van Doren.
    Mr. Theodorou, nice to see you. Welcome.

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

    Mr. Theodorou. Thank you. Thank you, Chairman Brown, 
Ranking Member Toomey, Members of the Committee, for the 
opportunity to offer testimony on reauthorization of the 
National Flood Insurance Program. I am Jerry Theodorou, 
Director of the Finance, Insurance, and Trade Program at the R 
Street Institute, a nonprofit, nonpartisan public policy 
research organization.
    Issues in today's hearing are of special interest to R 
Street because since its founding R Street has analyzed the 
NFIP, including contributing to the development of the 2012 
Biggert-Waters Flood Insurance Reform Act.
    We believe that a long-term reauthorization would afford 
Congress the opportunity to conduct thorough review of the 
program's performance and catalyze reforms.
    The NFIP was created with two main objectives--to encourage 
State and local governments to constrict development of flood-
exposed land, and to provide flood insurance with equitable 
cost-sharing between the public and private sectors. The two 
objectives have not been met.
    First, development in flood-prone areas is not constricted. 
It is expanding. The population living in coastal counties has 
grown by 15 percent since the year 2000.
    Second, there is not equitable cost-sharing between the 
public and private sectors. The private sector administers the 
program but bears minimal flood risk.
    Flood-related economic loses are rising. In the past 
decade, U.S. economic losses caused by flooding were $943 
billion, compared to $211 billion in the prior decade.
    In this testimony we point to five areas that stand in the 
way of the NFIP achieving its mission, and propose solutions.
    In one area, progress has already been made. The five areas 
are development of a private flood insurance market; reduction 
of subsidies; using actuarially sound rates; dealing with 
repetitive loss properties; and long-term reauthorization.
    The private flood insurance market is dwarfed by the NFIP. 
The private flood market measures $300 million in premium, 
compared to the NFIP's $3.5 billion. Private insurers are 
unable to compete effectively with the NFIP because NFIP 
policies are largely priced below actuarially sound rates. If 
private market insurers competed with the NFIP of rates, they 
would operate at a loss.
    The market for flood insurance can be encouraged by NFIP 
pricing reflecting actuarially sound rates. If NFIP rates were 
risk-based, private insurers could compete on the basis of 
service and product offerings. NFIP policies are rigid. For 
example, the homeowner's limit is $250,000. Private insurers 
would be able to offer more choice, more coverage, more 
deductible options. The practice of subsidizing premiums sends 
false market-distorting price signals and encourages unsound 
behavior, such as building in coastal areas.
    FEMA subsidies should be replaced with means-tested 
assistance programs. Means testing would allow low-income 
policyholders with properties in high flood risk areas to 
afford flood insurance.
    The most significant development in the recent history of 
the NFIP is the introduction of Risk Rating 2.0, replacing the 
legacy NFIP methodology. Risk Rating 2.0 went live for new 
business last October and for renewal policies in April of this 
year. Risk Rating 2.0 equips the NFIP with sharper tools to 
address inherently overpriced or underpriced business by 
incorporating more flood risk variables into risk calculation. 
It is a step in the right direction.
    Among the most significant contributors to the NFIP's poor 
financial results is properties with numerous losses. 
Repeatedly flooded properties account for only 1 percent of 
NFIP policyholders but close to 40 percent of flood loss 
dollars. Cumulatively, repeatedly flooded properties have cost 
the NFIP over $12 billion.
    The most recent reauthorization of the NFIP was in 2012. 
The NFIP's 5-year reauthorization ended in September of 2017, 
and since then, as we heard, it has been extended with 21 
short-term extensions. Congress must reauthorize the NFIP by 
September 30th to avoid a lapse in authority. We believe that a 
multi-year reauthorization, combined with substantive reforms, 
will enable the NFIP to continue its good work to reduce flood 
risk.
    Thank you, and I look forward to your questions.
    Chairman Brown. Thank you, Mr. Theodorou.
    Mr. Quinn, welcome. You are recognized.

  STATEMENT OF DOUGLAS E. QUINN, EXECUTIVE DIRECTOR, AMERICAN 
                    POLICYHOLDER ASSOCIATION

    Mr. Quinn. I am Douglas Quinn, the Executive Director of 
the American Policyholder Association. We are a nonprofit 
watchdog group that tracks and reports criminal fraud 
perpetrated by insurance companies as well as the engineers and 
third-party administrators they hire. I am also a victim of 
Superstorm Sandy, where I experienced engineering fraud like so 
many others.
    With me today is my daughter, Megan, who had the last years 
of her childhood turned into chaos. Despite having $250,000 of 
flood insurance, it took us 7 years to rebuild our home. FEMA 
failed to pay myself and other Sandy victims an honest claim in 
the aftermath of the storm.
    We need a resilient flood insurance program with integrity 
and affordability. Senator Menendez's bipartisan NFIP RE Act 
can accomplish this. This bill eliminates fraud, waste, and 
abuse in the program, which is a more effective strategy than 
raising premiums to offset costs.
    We learned from Sandy that without adequate protections 
both the program and policyholders will be taken advantage of 
by unethical insurers, engineers, and defense attorneys. NFIP 
allows penalties for insurance companies that lowball claims, 
adds an independent appeals process, and allows FEMA to eject 
vendors who have exhibited detrimental conduct such as the 
Nielsen Law Firm and US Forensics Engineering who were 
embroiled in the Sandy engineering fraud scandal. These 
companies are still earning millions of dollars through the 
NFIP program even after a Federal judge in Superstorm Sandy 
levied a fine for evidence of widespread fraud and covering up 
fake documents to cheat policyholders.
    The founder of US Forensics, Gary Bell, has been linked in 
the public record to acts of defrauding homeowners all the way 
back to Hurricane Katrina. His company does this, and he has 
bragged to a reporter that more homeowners are forced to 
litigate for benefits the more his company makes. NFIP lawyer, 
Gerald Nielsen, whose law firm covered up instances of fraud, 
boasted he would bill $100 million to defend this conduct.
    Nearly half-a-billion dollars was wrongfully denied to 
policyholders by companies diverting funds from victims and 
destroying lives to line their pockets. The head of claims of 
the largest flood insurers in the NFIP plead the Fifth 
Amendment when asked if his company participated in defrauding 
policyholders. CBS, ``60 Minutes'', and PBS ``Frontline'' 
reported on this scandal and questioned why these companies are 
still paid today by the NFIP. This bill provides the mechanism 
to protect policyholders from such bad actors.
    In short, NFIP RE provides savings by eliminating the 
fraud, waste, and abuse that has put the program deep into debt 
and ruined disaster victims' lives.
    Affordability and higher participation rates are critical 
to the NFIP's success. Rising premiums force people to drop 
coverage. Risk Rating 2.0 is already creating problems. Next 
month my flood premium will go up 14 percent, despite the fact 
that I rebuilt my house 10 feet in air. Most policyholders will 
see their premiums increase by 18 percent this year, and many 
will increase by a compounding 18 percent year after year. 
FEMA's own study predicts 20 percent of NFIP policyholders will 
drop coverage over the next 10 years.
    You cannot force working-class Americans to choose between 
flood insurance premiums and putting food on the table. We 
should not be pricing people out of their communities.
    Mitigation is another essential element of reauthorization 
that is addressed in the act. A Wharton study shows that every 
dollar spent on mitigation saves $6 in restoration. We have to 
be proactive and make cost-saving investments in protecting our 
communities from disaster.
    In closing, the NFIP RE Act would have made a huge 
difference for us after a flood destroyed our home. This is not 
just a New Jersey problem. I have been active in disaster zones 
all over the country, including Hurricanes Florence and Dorian 
in North Carolina as well as Laura and Ida in Louisiana. I am 
regularly face-to-face with disaster victims, and it breaks my 
heart to know so intimately what the next years of their lives 
will look like. NFIP RE Act will not only save these victims 
years of struggle but will also provide big savings to the NFIP 
as a national safety net that supports both resilient 
communities and consumer confidence.
    Thank you.
    Chairman Brown. Thank you, Mr. Quinn.
    Professor Sam Brody is joining us, I believe, probably from 
Galveston. Professor Brody.

   STATEMENT OF SAM BRODY, PROFESSOR, TEXAS A&M UNIVERSITY, 
    DIRECTOR OF THE INSTITUTE FOR A DISASTER RESILIENT TEXAS

    Mr. Brody. Chairman Brown, Ranking Member Toomey, 
distinguished Members of the Committee, it is a distinct 
privilege to participate in this timely hearing on the 
reauthorization of the National Flood Insurance Program and 
flood risk reduction in general, and I want to thank the 
Committee for the opportunity to testify and share my 
experience.
    I have been teaching, researching, and advising in the 
field of flood risk reduction for over 20 years, and my biggest 
concern is that despite our best efforts the cost of flooding, 
the impact to communities is spiraling upward, whether it is 
deluges like Hurricane Harvey in 2017, which pretty much broke 
every flood record, to chronic events that we see in the news 
almost every day. By all accounts, the problem is getting worse 
and it is a national priority to reduce our losses.
    And we also know that these flood losses are spiraling not 
solely because of changing rainfall patterns, sea level rise, 
or climate change, but also the human-built environment. 
Parking lots, roadways, rooftops, and other impervious surfaces 
are fragmenting our drainage patterns and putting more water 
downstream, which means in the people's homes. And this trend 
is especially problematic in urban areas where stormwater 
infrastructure is aging, under capacity, and in need of repair.
    So now is the time to make some important changes to 
strengthen the existing NFIP program. Right now we are 
overemphasizing what I call a recovery approach to risk 
reduction. That is we focus on payments and assistance after a 
disaster occurs, which stands in contrast to a proactive, 
protective-centered mitigation policy where the damage and 
losses are illuminating before a disaster occurs. So this 
reduces the strain on the fiscal coffers, it reduces the chance 
of this disaster loss recovery cycle.
    In Houston, for example, Hurricane Harvey in 2017, was the 
third time people had water in their homes in the same number 
of years.
    A proactive approach to flood risk reduction, in addition 
to the existing programs we have in place, I think is the only 
way we are going to get out of the spiraling upward cost of 
flooding.
    Fortunately, I do not think there is a need today to start 
entirely new programs and new legislative efforts. We have an 
existing program I want to point your attention to, called 
FEMA's Community Rating System, CRS. It has been around since 
1990, and it incentivizes local communities to adopt mitigation 
avoidance strategies in exchange for insurance premium 
reductions up to 45 percent. And so now we are balancing 
mitigation and protection with recovery, so our recovery 
programs become much stronger.
    I have spent 10, 15 years studying the effectiveness of the 
CRS program, and the reason I am proposing an emphasis and 
expansion of that program today is because it works. We did a 
comprehensive national study a couple of years ago, my 
institute, as we found that CRS communities experienced over 50 
percent reduced losses per year compared to non-CRS 
communities. That is an average savings of over half a million 
dollars per community per year.
    And it is not just the program that works. It is what it 
entails. It tends to focus on what I call avoidance strategies, 
whether that is building higher, freeboard above base flood 
elevation or peeling back from these vulnerable areas through 
open space protection. Freeboard, elevating structures we 
found, on average, saves a community over $800,000 per year 
nationally.
    The other reason I am proposing an expansion of this 
program is because we are finding that community effort and 
mitigation translates into savings at the household level. On 
average, in Houston, a community that pursues higher standards, 
a la freeboard, translates savings, reduces losses, to 
approximately $21,000 at a household level. So imagine you are 
living in a community, you have got reduced insurance premiums 
because your community is spending more effort on flood risk 
reduction, and you are also reducing your losses. It is a win-
win.
    So that being said, I am proposing that we expand our 
effort on a more protection-based approach via the CRS, 
particularly providing resources to local communities to have 
coordinators be in place to adopt and monitor these programs.
    Thank you.
    Chairman Brown. Thank you, Professor Brody, for joining us.
    Let me start with you, Ms. Henderson. Lower-income 
homeowners often have fewer resources to mitigate their 
properties, making mitigation assistance even more important. 
Talk, if you would, about the barriers to lower-income 
homeowners or those with lower-value homes who are 
participating in these programs. What can we do to remove those 
barriers?
    Ms. Henderson. Thank you. There are several mitigation 
grant programs that are available for lower-income homeowners. 
However, the cost share seems to be a hindrance to some of them 
sometimes. You know, some grants are 75/25 percent match. They 
just do not have the money for that. I know we are 
participating in the Swift Current program, and it has varying 
cost shares.
    So homeowners have the opportunity of participating in 
these programs and they do not have to spend as much money to 
get out of a bad situation. That is one option. They make look 
at some grants or something that has varying cost shares that 
the lower income can afford.
    With Swift Current you also have 100 percent cost share. 
However, some of those homes are not going to be eligible. 
Maybe programs where those lower-income families are eligible 
to participate in, that is going to be one thing. Another thing 
is if they do participate in these particular programs they 
have to know what happens after.
    You know, our funds, mitigation dollars, FMA dollars, they 
are there to actually elevate a structure or acquire a 
structure from those low-income families, but if they 
participate in these programs they have nothing after. A lot of 
times their homes do not really qualify for a lot of money that 
they are receiving in pocket, and so they have nowhere to go so 
they choose just to stay there and not participate at all.
    So looking at the what happens if they do participate in 
these particular programs, with the lower cost shares, that 
could kind of get some of these lower-income homeowners that 
repeatedly flood, get them out of bad situations.
    Chairman Brown. Thank you.
    Professor Brody, you focus on helping communities 
understand the interaction between changing climate and the 
built environment. This morning, as I assume you are aware, the 
Abbott Lab formula factory in Michigan is shutting down again 
for week because extreme rain overwhelmed the community's 
stormwater systems.
    You testified that the Community Rating System can boost 
awareness and community and citizen actions to lower flood 
risks. How do we help communities take advantage of sub-
community ratings so that we can reduce that overall flood 
risk? Professor?
    Mr. Brody. The Community Rating System has several 
activities that provide incentives to tell the story of risk, 
tell the story of risk to decisionmakers, to residents, through 
better web-faced programs, through hazard disclosure. In Texas, 
we created a website called buyersbewhere.com, w-h-e-r-e, and 
that is essentially Zillow meets risk, so that a homeowner can 
log on and see the risk of flooding for their properties. And 
so this is translating the best technology and data and mapping 
services to something that is more actionable and 
interpretable.
    And so I really think communication through hazard 
disclosure, technical assistance, making both decision-makers 
and residents being aware is critical. We know it works. We are 
doing it in Texas. Texas also recently passed the most 
ambitious flood risk real estate disclosure regulation in the 
country, which requires, during a real estate transaction 
process, homeowners and buyers to be more aware of different 
features of flood risk, making better decisions, and putting 
ourselves more on a path for flood resilience over the long 
term.
    Chairman Brown. Thank you. Let me go to you for another 
question, Professor. Of course, knowing who might flood is key 
to being able to mitigate these risks or avoid them altogether. 
What are your recommendations for improving FEMA's mapping 
efforts to better inform communities and homeowners about the 
likelihood of flooding, and can FEMA's non-regulatory products 
under Risk MAP actually help?
    Mr. Brody. I do. I think mapping is critical and should 
remain critical in the future. Where we can make improvements 
is not just spending hundreds of millions of dollars on better 
maps and models but making sure those products are 
interpretable, understandable, and actionable to both 
decisionmakers and residents.
    So I think more work can be done, as FEMA notes itself, in 
communicating these products in a way that leads to more flood-
resilient behavior.
    Chairman Brown. Thank you. Senator Toomey.
    Senator Toomey. Thank you, Mr. Chairman. Mr. Theodorou, in 
your written testimony you highlight, and I think you mentioned 
during your oral testimony, that while repetitive-loss 
properties account for about 1 percent of properties, they 
absorb close to 40 percent of the flood loss dollars. It seems 
to me this is the heart of the problem here.
    You mentioned in your written testimony an egregious 
example of repetitive loss. It was a Mississippi home that was 
valued at about $69,000, it flooded 34 times over the course of 
32 years, and it cost the NFIP $663,000 in claim payments for a 
house worth about $69,000. This is ridiculous.
    But it is not the only example. We found several others. 
There is a property in Kingwood, Texas. It is valued between 
$600,000 and $800,000, so a pretty nice house. It flooded 22 
times at a cost to NFIP of $1.8 million in payments.
    Now sometimes a picture is worth a thousand words, and the 
Chairman seemed disappointed that when we last spoke that I was 
not using posters frequently enough, so I am going to try to 
remedy that.
    Now these properties are meant to be representative. They 
are not the actual properties in question here. But there was 
property in St. Louis, Missouri, valued at $90,000. It flooded 
34 times, and it cost the NFIP $608,000 in claim payments. The 
house on the left is not the house in question. It is meant to 
be representative of a house in St. Louis that is worth 
approximately that amount. It actually looks a lot like the 
house I grew up in--$90,000 value, and $600,000 spent to just 
keep on rebuilding this house.
    Now my purpose is not to suggest that we should have simply 
bought that house for this family instead of repeatedly 
rebuilding this one, but that actually would be a much better 
outcome for the family, in many ways, absurd as that is.
    My point is we have a very, very badly flawed program that 
spends money this way, and Mr. Theodorou, I wonder if you would 
address how important it is that we address this issue of the 
incredible number of repetitive losses that are, nevertheless, 
funded through this program.
    Mr. Theodorou. Thank you, Senator Toomey, for the question. 
Indeed, this is a very serious problem. The numbers speak for 
themselves, to have such a small percentage of policyholders 
accounting for close to 40 percent of the claims dollars paid.
    And the reason why this is allowed to continue is because 
there are not incentives. The policyholders, the homeowners are 
not communicated to through the message of risk. A private 
insurer would recommend measures for remediation--sandbags, 
sump pumps. There are numerous ways to floodproof a home, not 
100 percent, but to a large percent. So this is indeed an area 
that is contributing very strongly to the financial results of 
the program.
    What should be introduced are incentives whereby if 
measures are not implemented--remediation and protective 
measures--then the premium would become prohibitively 
expensive. And as our witness from Mississippi has said, the 
grant programs that are available for the least able to afford 
the insurance, to take those measures, means-tested assistance 
so that they could execute those measures to reduce the risk to 
mitigate, and in extreme cases, removal, elevation, demolition.
    The house that you referenced, Senator Toomey, in 
Mississippi, that is, what, $69,000 and cost close to $1 
million if it were moved to a place that was above the base 
elevation flood zone it would survive and the U.S. taxpayers 
would have saved a lot of money.
    Senator Toomey. Thank you. Met me address Dr. Van Doren. 
One form of subsidy within NFIP has been grandfathering, as you 
are aware. My understanding is that when flood maps are 
updated, FEMA allows some properties to retain their previous 
risk rating, based on the old map, even when they know that 
that no longer accurately reflects the flood risk.
    Prior to implementation of Risk Rating 2.0, about 9 percent 
of NFIP policies had this grandfathered premium, where they 
were certainly guaranteed to be paying much less than what the 
actual risk was.
    Could you speak about what the associated incentives are 
when you have this kind of grandfathering, and to the extent 
that Risk Rating 2.0 moves us away from grandfathering 
gradually but it does, how important do you think that is.
    Mr. Van Doren. Extremely important. Grandfathering is, as 
you said, the source of the problem, and once people are used 
to the kinds of subsidies they receive under grandfathering the 
incentives for them to change their behavior are delayed.
    And then, as you said earlier in your opening testimony, 
your statement, the problem is not FEMA. It is probably the 
Congress. It is called the commitment problem in the economics 
literature. So Congress is what is called time-inconsistent. It 
says you need to be better in the future, and then once we get 
there, Congress says, oh, it is not time yet to be better. It 
is sort of like a weight loss problem, and I should know. I am 
on the heavy side.
    And basically it is always better to try to diet tomorrow 
than it is today, and the removal of grandfathering in the 
subsidies associated with repetitive losses is a commitment 
problem. It is not a scientific problem. You do not need a PhD 
to understand what I am talking about. It is when the Congress 
said, in 1968, we want these subsidies to be gone within 25 
years, well notice that was the early '90s, and it is just 
never the right time to get rid of them. I mean, I understand 
the position of homeowners in floodplains. If I were there and 
I was subsidized I would not want to get rid of it either. But 
someone eventually has to stop.
    Senator Toomey. Thank you, Mr. Chairman.
    Chairman Brown. Thank you, Senator Toomey.
    Senator Menendez, from New Jersey, is recognized.
    Senator Menendez. Mr. Chairman, thank you for holding this 
very important hearing.
    You know, I hear too often from both FEMA and special 
interest groups who are completely out of touch with disaster 
victims, that premiums need to be raised sky-high on 
policyholders to bring down costs. But these calls to raise 
premiums foolishly ignore the fact that FEMA's huge 
administrative costs should be reformed to provide premium 
savings.
    Insurance companies that bear none of the financial risk 
receive 30 cents for every premium dollar written as 
compensation. What is worse is that the insurance companies 
also get to use high-priced attorneys that drag out claims 
litigation and force FEMA and policyholders to pick up the tab. 
Pretty incredible.
    Mr. Quinn, do you find that policyholders are getting their 
money's worth on these administrative costs that they are 
paying for?
    Mr. Quinn. No, Senator. In most cases, and I will speak as 
a policyholder, we are outraged that our premium dollars are 
being wasted by engineering firms, insurance companies, and law 
firms who are committing fraud to cheat the program and cheat 
policyholders. We see this over and over. And certainly 30 
cents on the dollar going to the insurance companies, 10 cents 
on the dollar going to pay for the debt to the Treasury, just 
to service the debt--how are you going to operate a program 
with 60 cents on the dollar, sir?
    So what we are finding is this program is not necessarily 
actuarially unsound, it is the fact that it is being built by 
politically connected attorneys, engineering firms, and 
insurance companies. And, of course, the policyholders get to 
go for the ride.
    Senator Menendez. My bipartisan NFIP RE Act lowers their 
compensation, the insurance entities, to 22.46 percent, the 
same costs that FEMA incurs to run the program in-house. It 
also overhauls the claims process so that FEMA and Government 
lawyers handle claim lawsuits so that they act in the best 
interest of all parties.
    We had outrageous realities of engineering companies who 
changed their studies in order to avoid payment, dictated by a 
Federal judge in New York, as such. We had lawyers who racked 
up huge bills, all to fight the policyholders.
    You know, FEMA's new Risk Rating 2.0 premium methodology is 
starting to take effect around the country, and Congress still 
has no idea how much in premiums FEMA will be charging our 
constituents.
    Here is what we do know. FEMA has projected that an 
overwhelming amount of policyholders will face compounding--
compounding--18 percent per year annual increases for years to 
come. FEMA and CBO estimate that nearly 20 percent of 
policyholders will drop NFIP coverage due to Risk Rating 2.0. I 
mean, it does not take a rocket scientist to understand that 
insurance is about spreading the risk over the widest pool 
possible. If 20 percent of the policyholders drop it you have 
now dramatically limited the pool and you have increased the 
costs.
    Mr. Quinn, can working families handle these types of 
increases? What will happen to those families who are forced to 
drop their flood insurance coverage and later suffer damage in 
future disasters?
    Mr. Quinn. What we see, sir, is as premiums rise more 
people will drop their insurance. A 20 percent loss for the 
NFIP would be devastating. And it will certainly be devastating 
in the communities to working-class families who have no 
insurance. And in the end we should not kid ourselves that we 
are saving money. When we lose these families, the Federal 
Government will wind up coming in later with aid packages, and 
certainly we know that mitigation is the solution, and having 
affordable premiums is a solution to having a viable flood 
insurance program.
    Senator Menendez. Yeah, I want to talk about mitigation in 
the last minute or so that I have. Look, this does not even 
deal with people who have a mortgage in which they must have 
flood insurance in order to sustain their mortgage or they are 
in default. I can imagine how many families in America we are 
going to put in default, at the end of the day.
    Any long-term reauthorization must include robust funding 
for mitigation to decrease the risk profile of the NFIP and 
provide a sound financial path forward for families and the 
program. If we know right now which homes are most at risk we 
should not wait until a flood to step in and help. For every 
dollar spent on mitigation, it has been proven the Federal 
Government saves $6 on the back end.
    So, Mr. Quinn, as a homeowner, would you not want 
mitigation assistance up front to protect your home, rather 
than waiting until disaster strikes and finding yourself, as 
you were, as someone who served our country as a Marine, 
honorably, as someone who went through Superstorm Sandy, you 
would have wanted to have mitigated the possibility of that 
risk for your home. Is that a fair statement?
    Mr. Quinn. Absolutely, sir, especially knowing the kind of 
devastation that families go through after they are flooded.
    Senator Menendez. Well, that is what my NFIP RE Act boost 
increases cost of compliance coverage and make it available for 
policyholders to elevate their homes, for example, before the 
next storm happens. In addition, our legislation repurposes 
existing post-disaster program to make billions of dollars in 
mitigation funds available today. We are going to come in, when 
these disasters strike, have flood insurance, do not have flood 
insurance. You know that the Federal Government is going to 
come in. So why not mitigate before?
    I have one last question, if I may I have the indulgence of 
the Chair.
    FEMA has taken the unusual step of proposing an unsolicited 
NFIP reauthorization bill to Congress. I find that interesting. 
When I looked through the text it was familiar to me. That is 
because it mirrors the past administration proposal as well as 
members who really have no desire to see the national flood 
insurance continue.
    One of FEMA's provisions is to bar new, small businesses 
and vulnerable homes from any type of NFIP coverage. What would 
happen to communities if there was no longer NFIP coverage for 
vulnerable homes and small businesses?
    Mr. Quinn. Sir, I cannot imagine why we would ever think to 
restrict small businesses and not encourage them to grow and 
flourish. Their impact on local communities, having local small 
businesses, is very big on the local economy, and certainly 
losing our small businesses or having them at risk for flood, 
with no ability to recover afterwards, would hurt communities 
that are impacted by flood.
    Senator Menendez. Thank you, Mr. Chairman.
    Chairman Brown. Thanks, Senator Menendez.
    Senator Kennedy, from Louisiana, is recognized.
    Senator Kennedy. Thank you, Mr. Chairman. Dr. Van Doren and 
Mr. Theodorou, have either of your think tanks hired outside 
expertise to review the algorithm used by FEMA to set these new 
rates? Have either of you done that?
    Mr. Theodorou. We have not.
    Mr. Van Doren. No.
    Senator Kennedy. Why not?
    Mr. Theodorou. I have read the----
    Senator Kennedy. I mean, why not? How do you know they are 
accurate? You do not know they are accurate, because FEMA will 
not show them to you. If I refer to Milliman, I am talking 
about company last year that had about $1.2 billion revenues, 
4,000 employees. They are risk management experts. They 
represent large institutions, mostly insurance companies. 
Milliman designed this algorithm, did it not?
    Mr. Theodorou. It is my understanding that Milliman did. I 
have reviewed the----
    Senator Kennedy. OK. That is all I need. I am sorry. I do 
not mean to cut you off but I have only got 5 minutes.
    Who owns the algorithm? Does Milliman own it or does FEMA 
own it? You are both experts. Do you know?
    Mr. Theodorou. I would say it is the NFIP.
    Senator Kennedy. Do you know that for a fact?
    Mr. Theodorou. I do not know that for a fact.
    Senator Kennedy. And you do not know that for a fact 
because FEMA will not share this algorithm with anybody. They 
tell you, ``If we show it to you, we have got to kill you.'' 
They will not even show it to Congress, but yet we are supposed 
to place blind trust in the Federal Government. What could 
possibly go wrong?
    Now let me ask you a question, Mr. Theodorou, for whom I 
have great respect. I want to talk about the people that are 
not in this 1 percent that have repetitive flooding. We can all 
find examples that make our point. Let me talk to you about 
these people who are not in the 1 percent, and this is pretty 
typical in my State, people that buy flood insurance.
    You have got a mom and a dad and they each make, let's say, 
$40,000 a year. They have two children. They get up every day, 
they go to work, they obey the law, they pay their taxes, they 
try to do the right thing by their kids, try to teach their 
kids morals, they want their kids to have a better life than 
they have. They work their ass off.
    They live in a $200,000 home with a mortgage. And here 
comes FEMA with this magical algorithm that they will not show 
you--if they do, they have to kill you--and their flood 
insurance goes up 18 percent. And then it goes up the next year 
another 18 percent, and another 18 percent, and this is 
compounded. OK? And they have never flooded.
    And then all of a sudden the value of the home goes down 
and they cannot afford it anymore, and so they have to sell 
their home, at a loss. And the mortgage company, which Milliman 
probably represents, gets a default judgment against them. And 
they are supposed to do what, Mr. Theodorou?
    Mr. Theodorou. Thank you, Senator Kennedy, for the 
question. The data, which have been promulgated by the NFIP, 
using Risk Rating 2.0, show that the hypothetical family that 
you talked about would benefit from reductions in premium.
    Senator Kennedy. Yes, sir, but that is based on their 
algorithm, and they will not show anybody their algorithm. And 
if you trust Government, Mr. Theodorou, particularly on this 
program, you failed history class.
    Now this is not right. I want to see this program fixed. 
Maybe the way to do it is to expand the risk and other natural 
disasters. OK? But my mama did not raise a fool, and if she did 
it was one of my brothers. And when the Federal Government 
comes to me and says, ``We have got an algorithm designed by 
Milliman,'' I know Milliman. Good company. Making a lot of 
money. Their people do not make $45,000 a year. Neither do you. 
Neither do I. But we are talking about real people here. And 
the Federal Government comes and says, ``We have got this new 
way to price things but we cannot tell it to you.''
    Do you think that is fair?
    Mr. Theodorou. Senator Kennedy, the technical documentation 
for Risk Rating 2.0 is available in the NFIP.
    Senator Kennedy. Not the algorithm. Your think tank--you 
are both from extraordinarily well-regarded think tanks. You 
have not even hired help to try to understand the algorithm. 
And you know why? They will not show it to you.
    Can I ask one more question, Mr. Chairman?
    Chairman Brown. Proceed, Senator Kennedy.
    Senator Kennedy. Why does FEMA, Mr. Quinn, repeatedly keep 
hiring these lawyers and engineers who act like thieves? How 
much did U.S. Forensic make last year off of FEMA?
    Mr. Quinn. I do not know but I know they do very, very 
well, as does the Nielsen Law Firm, and they get paid quite 
well for perpetrating or supporting fraud, sir.
    Senator Kennedy. And they get paid for not paying claims, 
not for paying them, right?
    Mr. Quinn. That is correct.
    Senator Kennedy. Why does FEMA keep doing this?
    Mr. Quinn. We have asked that question over and over. FEMA 
has told us that they do not have the ability to remove these 
fraudsters from the program. The NFIP RE Act gives them the 
mechanism to----
    Senator Kennedy. I know I introduced a bill to try to give 
them the authority.
    Mr. Quinn. Yes, sir.
    Senator Kennedy. Some of my colleagues do not want to 
support that bill.
    Mr. Quinn. I cannot imagine the amount of wreckage that 
these organizations are doing in communities. I have personally 
lived through it. I have seen it in the bayous of Louisiana. I 
have seen it all over America.
    Senator Kennedy. You have seen it in New Jersey, have you 
not?
    Mr. Quinn. Yes, sir, I have.
    Senator Kennedy. It is unconscionable----
    Mr. Quinn. Yes, sir.
    Senator Kennedy. ----to have these outside entities that 
come in and repeatedly abuse policyholders, figuratively rape 
them, and FEMA keeps using them, time and time and time again. 
I wonder why?
    Thank you, Mr. Chairman.
    Chairman Brown. Thank you, Senator Kennedy.
    We will begin a second round. Senator Toomey will go, and 
then I will go. We have a couple other Senators that are coming 
back, and we will then conclude. Senator Toomey.
    Senator Toomey. Thank you, Mr. Chairman, and I think this 
discussion this morning is underscoring the importance of 
having reforms built into a reauthorization, and one of them 
certainly should include an obligation for FEMA to fully 
disclose their methodology, their algorithms, whatever process 
they use to establish premiums, as well as these egregious 
problems that Senator Kennedy has alluded to.
    Let me ask you a question, Mr. Theodorou. If FEMA has a 
flawed methodology, for whatever reason, and the result of that 
are the premiums are too high, what role could private 
insurance play as a mechanism of relief? If there were a 
vibrant, competitive, private market, would FEMA really be able 
to charge an actuarially excessive premium?
    Mr. Theodorou. Thank you, Senator Toomey, for the question. 
No, it would not. The competitive nature of the marketplace, 
competition would drive business to companies that would price 
it at a lower rate, which is not excessive.
    And I would say also that, you know, why do we trust a 
report done by a consulting actuarial firm? The actuaries that 
do these kinds of contracts, these projects, are fellows of the 
Casualty Actuarial Society, which has four operating 
principles, and they include that rates are not excessive, they 
are not inadequate, and they are not unfairly discriminatory. 
And it is a profession so they would be open to errors and 
omissions insurance.
    Senator Toomey. And whatever the merits of that, it just 
seems to me, there is a mechanism that we know works, because 
it works in every product and service that we have in our 
economy. A competitive, private market, ends up competition 
drives prices down to something that generates a sort of 
standard rate of return, and you do not get to charge huge, 
excessive prices, and neither would the NFIP, would it?
    Mr. Theodorou. That is right, Senator Toomey. And if I may 
introduce a historical footnote, the first attempt to introduce 
a national flood insurance program in the Truman 
administration, Harry Truman, in the early 1950s, following the 
Midwest floods of 1951, indicated that there should be private 
sector participation, with the Government as a reinsurance 
backstop. And in the first 10 years of the program, from 1968 
to 1978, there was private sector participation. After that, 
the program was put under FEMA, and NFIP bore all the risk.
    So the private market was there at some times, and in that 
period it was run more efficiently. It did not have those kinds 
of deficits. So there is a precedent for the private market.
    Senator Toomey. So the obvious question is what drove the 
private market out of this space? And I want to ask Dr. Van 
Doren to also comment. But Mr. Theodorou, you can take a first 
shot at it.
    Mr. Theodorou. Yeah. Administratively, it was taken out of, 
I think it was Housing and Urban Affairs, and put under FEMA, 
and the private market was taken out and it was given the role 
of being a servicing agent to do the administration and not 
bear any risk.
    Senator Toomey. Dr. Van Doren, what do you think about the 
ability of the private market to ensure that NFIP cannot 
overcharge?
    Mr. Van Doren. Well certainly my understanding of FEMA 2.0 
is that FEMA was very threatened by the provisions of the 2012 
reform, which directed FEMA to allow private insurers to offer 
policies as long as they were equivalent to what FEMA offered. 
And FEMA knew, because of congressional direction, that cross-
subsidies within the NFIP system and anyone--it is not Econ 101 
but a little beyond that you learn that cross-subsidies are not 
sustainable unless entry is restricted. So FEMA faced no 
competition, but then it did, and then everyone at FEMA said, 
``Oh, my goodness.''
    Their own data show that their policies in Texas, 
Louisiana, and Florida, the vast majority of single-family 
homes in those States were overcharged, and they knew that 
private competition would cherry-pick them.
    So FEMA 2.0 is actually FEMA's response to the possibility 
and extent of private competition. And again, the vast majority 
of policies under FEMA are actually overcharged, and then, as 
you stated earlier, a small minority of both repetitive flood 
houses and people that live in floodplains are subsidized 
through these cross-subsidies but they are not sustainable in a 
private market.
    Senator Toomey. Right. So I think the important bottom 
line, and I think you said it, is in a truly competitive market 
where there are not artificial barriers to entry, you cannot 
sustain artificially high prices.
    Mr. Van Doren. Right. I mean, FEMA 2.0 could be as terrible 
as the Senator from Louisiana said, and if so, private 
competitors now allowed to come in will come in and make money 
and have FEMA's lunch.
    Senator Toomey. Thank you, Mr. Chairman.
    Chairman Brown. Thank you, Senator Toomey.
    Senator Tester is recognized from his office, I believe.
    Senator Tester. Yeah. Thank you, Senator Brown. Look, if 
you have turned on the news you know that my home State of 
Montana, the southern part, is seeing some pretty severe 
floods, and there are going to be more floods up in the 
northwestern part of the State. The Yellowstone River south is 
rapidly approaching record water levels, and currently 
experiencing the greatest floods we have had in a couple of 
decades. And put on top of that, smaller communities like 
Gardiner and Mammoth and Livingston and Red Lodge, Cooke City, 
they are all being blasted by this flood.
    Yellowstone National Park closed entrances and they will be 
closed all summer, in the northern part of the park. The mine 
cannot get workers to the mine, and we have got a bunch of 
folks who have been airlifted because they have been stranded.
    So, Ms. Henderson, having been in similar positions at many 
times in your home State, what are the most important things to 
do to get the recovery on track right now?
    Ms. Henderson. I am sorry. I could barely hear the end of 
your question.
    Senator Tester. OK. So the question becomes, Ms. Henderson, 
is having been a similar position to this many times in your 
home State, what are the most important things that we need to 
be doing immediately to get recovery back on track?
    Ms. Henderson. Well, right now the first thing is to make 
sure that the area is coordinating with the local floodplain 
administrators as well as your State floodplain administrators, 
and once that happens then that coordination and your recovery 
can begin. It is going to be very, very important that the 
local floodplain administrator is on board with the local EMA 
director, because once the water recedes, that is when you want 
to get in to start looking at these structure that have been 
flooded. Right now is the time to start talking to them about 
mitigation efforts, to start talking to them about recovery, 
but that communication and that working together with those two 
entities, EMA and your floodplain administrator, that is the 
most important part in your recovery right now.
    Senator Tester. OK. Mr. Brody, do you have anything to add?
    Mr. Brody. I agree with the distinguished panelists. 
Getting in as soon as possible, doing damage assessments, 
making that information available for other people to do 
further analysis to fight out how to recover, but also how to 
mitigate for the next time this happens. So not get into this 
repetitive flood loss, recovery, costing taxpayers more and 
more money. Think about what could be done upstream. Could we 
have protected naturally occurring wetlands, which hold, store, 
and slowly release waters? Could we have used parks associated 
with schools, even, to hold, store, and slowly release water, 
so you do not have this deluge going downstream and flooding 
properties, roads, and affecting the economy.
    So yeah, I am all for recovery but also focusing on 
mitigation so we do not have the damage, we do not have to jack 
up the insurance rates to make them actuarially sound as much. 
We kind of cut the heat off the snake before we experience the 
pain.
    Senator Tester. I appreciate that. I am sorry I joined this 
hearing late because it is a very, very important issue. Flood 
and flood insurance and climate change and the disasters that 
revolve around climate change, like we are seeing in Montana, 
is real and it is part of the reason why we need to do 
something sooner rather than later on climate.
    I have also been involved with flood for the last decade 
and how we are going to get the flood insurance program 
solvent, and how we move forward. And, in fact, it has been 
about 8 years ago, in a bipartisan way, we had a proposal that 
was gaining great steam, and it was turn this mostly over to 
the private sector, if not totally over to the private sector. 
And where it lost steam was when the projection of rates came 
out and they were considerably higher than the rates we were 
going to pay right now for flood insurance.
    And I would like Mr. Van Doren, or anybody, to respond to 
that, because the reality is that if rates go up significantly 
if this is privatized it is going to be really tough 
politically to get this through. And by the way, from my 
perspective, personally, I am in the middle of a drought, so I 
could use some moisture, OK? So could I get somebody to kind of 
respond to that? Do they really think rates are going down, 
because that is not what the projections were a decade ago, and 
if it is not projected now, what has changed?
    Mr. Van Doren. My understanding, I mean, under FEMA 2.0 
about 70 percent of the single-family homes that are insured, 
their rates will go up, and 20-some-odd percent will go down. 
And Ranking Minority Member Toomey has talked about the shift 
from general subsidies to some sort of means-tested subsidy as 
maybe part of the congressional solution to this dilemma.
    Senator Tester. Yeah, well, I appreciate that. And, by the 
way, I do appreciate trying to find a solution, because there 
are a lot of taxpayer dollars that go into flood insurance. It 
just becomes really hard if we are really, in earnest, talking 
about rates going up significant.
    With that I will kick it back to you, Mr. Chairman. Thank 
you for the opportunity.
    Chairman Brown. Thank you, Senator Tester.
    I will do my second round, as Senator Toomey did, and then 
Senator Smith may or may not arrive--we are not sure--and then 
we will wrap up.
    Ms. Henderson, I would like to question you again. Senator 
Toomey noted that some lower-value properties have experienced 
repetitive losses. You responded to me earlier that low-value 
homes often do not qualify for enough help to allow the 
families to move elsewhere in the community. Could this be an 
example of why we should reexamine how we calculate mitigation 
assistance and cost-share requirements?
    Ms. Henderson. Absolutely, yes, sir, it should be, simply 
because in my State we do have a lot of communities that have 
repetitive flooding, do not have insurance, and some do. They 
are willing to move. They are willing to participate. They just 
do not have the funds. So yes, sir, absolutely, we should 
relook at how we offer mitigation, grants or just mitigation, 
period, especially to those areas that are low-income and 
disadvantaged areas.
    We do have a particular area where we did buy out a lot of 
homes. We did have more properties that wanted to participate. 
This particular grant that they were participating in was a 75/
25 percent cost-share, yet some of the homes only valued at 
maybe $10,000, $12,000. So once you are looking at that 
homeowner paying 25 percent of that, they actually had nothing. 
They had nothing that they could go and buy another home with, 
buy another home for.
    Oftentimes there are other grants that we can partner with 
local governments, for instance, the Community Development 
Block Grant. But by the time our funds kick in, those grants 
already have been allocated because of our slower process when 
it comes to offering mitigation grants.
    So I think in addition to looking at the cost shares and 
looking at how we actually offer those grants, we might want to 
look at, as well, the timing of those grants, if they are being 
offered.
    Chairman Brown. Thank you. A couple of the five witnesses 
have spoken about the pilot program called Swift Current. 
Mississippi is one of four States in that flood mitigation 
assistance pilot. Its goal is to speed up offers of mitigation 
so they can help homeowners while they are still recovering 
from flooding rather than well after. And Mr. Quinn certainly 
more than touched on this.
    Ms. Henderson, do you expect that the pilot will expedite 
the mitigation progress, will reach survivors soon after the 
disaster?
    Ms. Henderson. The Swift program is an excellent program. 
The timing of it is a little off for the State of Mississippi, 
simply because it was supposed to have been after Hurricane 
Ida. Speed it up? Yes. I think eventually it will. However, we 
have run into some challenges, and one challenge is the local 
communities receiving the actual information, the critical 
information, the data that they actually need to be able to 
offer the homeowners this grant funding. For instance, the 
repetitive loss lease and severe repetitive loss lease, you 
know, that information. We have to ask for it. It is a delay in 
them receiving it.
    I was just talking to a community last week. They asked for 
this list over a year ago, and they have not actually gotten 
it.
    I cannot say that Swift is supposed to speed that process 
up. I have not witnessed it yet, simply because we are early 
into the Swift grant program. So I am going to be anxious to 
see if, indeed, the intent of Swift really happens.
    Chairman Brown. Good comments.
    Professor Brody, last question. Too often we hear that 
homeowners or renters had no idea their properties had 
previously been flooded. Talk to us about the benefits of real 
estate disclosures--Senator Kennedy had some comments about 
that--real estate disclosures for renters and property owners. 
And speak, if you would, during that answer, and you touched on 
it in your testimony, about the Texas real estate disclosure 
law that came out of the Governor's Commission after Hurricane 
Harvey. If you would, Professor?
    Mr. Brody. Yeah. We are big believers in getting the right 
information to prospective homeowners, buyers, renters, so they 
can make the best decision possible. And there is a lot of 
distortion in the communication of flood risk, particularly 
down at the household level.
    My institute has done a lot of work, and there are other 
groups out there, trying to get the best information about 
flood risk, previous flood history, which is one of the best 
predictors of future flood risk, for people at the right time, 
which is during the real estate transaction process. That is a 
critical time.
    And recognizing that the State, during Hurricane Harvey 
recovery, with support from the real estate industry, because 
they want transparency around these issues, they used the most 
advanced hazard risk disclosure regulation as a baseline--that 
was California--and then we went above that. And so now, today, 
if you are going to buy a home or even rent a home in Texas, 
you need to know if you are not just in the 100-year floodplain 
but the 500-year floodplain, are you on a reservoir pool, have 
you had a history of flooding? Now that is limited to the 
owner, so if the owner owned it for 5 seconds that is 
problematic.
    I would like to see, for every parcel in this country, the 
ability of an interested party to get online, click on a 
parcel, put in an address, and see a complete risk disclosure 
analysis, including when and the amount of flooding that 
occurred, if it had an insurance policy, or even if a damage 
assessment was done outside of NFIP insurance, because that is 
going to help people make better decisions. And rather than 
regulate people out of the floodplain I see this happen. People 
will take themselves out by their purchasing decisions.
    Not a week goes by that somebody, a friend or colleague, 
calls me up and says, ``Hey, Sam, I am looking at this home. 
Can you do a risk analysis?'' and I usually do that for them as 
a favor. There is no reason we cannot automate that so that 
everyone can get that expertise, anywhere in the country.
    Chairman Brown. Thank you. And the last question, Mr. 
Quinn, briefly if you would, and sorry to do that to you, you 
mentioned your new rates under Risk Rating 2.0 are going up 
despite elevating your house by, I believe, 10 feet. Do 
consumers have enough information now to understand how 
mitigation decisions affect rates in the new system?
    Mr. Quinn. I think they have a vague understanding. People 
understand that, you know, if you elevate obviously, you know, 
it will make a huge difference. I mean, I made it a point to 
raise my house 10 feet. I do not mind getting flooded once. I 
never expected it. My home had never been flooded since it had 
been built in 1955. But I made darn sure that it was never 
going to happen again.
    So certainly we could do more to educate homeowners on the 
need for mitigation and how it would impact their premiums. You 
know, we think that is a big, big factor. And we certainly 
talked about, Senator Toomey has talked about houses that did 
not proceed with mitigation and the impact of that. And I 
cannot imagine who would ever do that, because again, from my 
situation, sir, once was enough, and I certainly would not want 
the taxpayers to have to pay for any more than that.
    Chairman Brown. I think your comments, from a very personal 
position, on what it means when you lose your home and the 
days, weeks, months, years of putting your life back together 
were really poignant, so thank you for your contribution.
    Thanks to the witnesses for being here today. Senators who 
wish to submit questions are due 1 week from today, or June 
23rd. For the witnesses, you have 45 days to respond to these 
questions. With that, the hearing is adjourned. Thank you.
    [Whereupon, at 11:22 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
    Flooding is the most common and most costly natural disaster facing 
families, businesses, and communities across the country. And our 
failure to combat climate change is only making it more common--not 
just on the coasts, but inland too, all over the country.
    This week in Montana and Wyoming, along the Yellowstone River 
basin, one of our great national parks is shut down, businesses are 
closed, and families are being forced out of their homes--as our 
colleagues Senator Tester, Senator Daines, and Senator Lummis know too 
well.
    Flooding is taking families' homes and memories, it's wrecking 
their finances, it's shuttering small businesses, destroying 
infrastructure, and devastating entire communities. And disasters often 
fall hardest on low-income families and communities who have fewer 
resources to prepare for and respond to them.
    And no matter where you live, everyone pays for the financial 
fallout from flooding, as the country spends tax dollars to help 
families and communities recover, and floods disrupt our economy.
    Just this morning, a baby formula plant in Michigan shut down--
again--after flooding.
    Yet too many people in our Government fail to acknowledge that 
climate change is causing this.
    The National Oceanic and Atmospheric Administration has predicted 
an above-normal hurricane season for 2022.
    Halting the trajectory of our changing climate will be a long-term, 
multigenerational effort.
    But we also need to help our families and communities become more 
resilient to the flooding we face now and in the coming decades--and 
whenever possible, avoid it altogether.
    The NFIP is critical to that effort. It provides over $1.3 trillion 
in coverage to nearly 5 million homes and businesses in over 22,000 
communities.
    As we have discussed in this Committee many times, the NFIP is not 
just an insurance program--its job isn't just to help with recovery, 
but to prevent and minimize the damage in the first place.
    The NFIP combats the overall threat of flooding through four 
related components:
    Flood insurance--to help property owners and renters recover 
quickly after a flood and reduce the need for Federal emergency 
spending;
    Floodplain management--to minimize the damage, including through 
the adoption of local ordinances and building codes;
    Floodplain mapping--to identify and communicate risks, so we can 
mitigate or avoid hazards all together; and
    Mitigation--to help protect and remove property from harm's way.
    The Bipartisan Infrastructure Bill offers a down payment on new 
opportunities for communities to help homeowners out of harm's way.
    But we need to do more--that means reauthorizing and strengthening 
NFIP, and investing in flood mitigation. Because of repeated denials by 
Members of the Senate and our failure to fight climate change, the 
investment in the infrastructure bill will not be enough.
    Last year, we heard from stakeholders and the Federal Emergency 
Management Agency.
    Today, we will hear from additional stakeholders, including 
practitioners working with communities and families.
    I am interested in their recommendations for ways we can help 
strengthen the NFIP so that it can:
    Provide reliable access to insurance for property owners and 
renters,
    Address affordability concerns,
    Ensure that more people are aware of their flood risk and insured 
against losses, and
    Help communities reduce our overall level of flood risk, through 
investments and improvements in mapping, floodplain management, and 
mitigation.
    And next week, we will once again invite the Federal Emergency 
Management Agency to discuss the status of the program, including their 
ideas for long-term reauthorization, and the implementation of FEMA's 
new Risk Rating 2.0 initiative.
    With 21 short-term reauthorizations, it is no secret that NFIP 
reauthorization has proven to be a challenge.
    It's a complex program, with multiple goals, with implications for 
many of the things people care about most--their homes and their 
communities.
    However, I believe it is possible for us to come together to 
reauthorize and improve this program.
    I look forward to continuing to work with Ranking Member Toomey and 
the Members of the Committee to strengthen the NFIP and the country's 
comprehensive approach to mitigating flood risk through a long-term 
reauthorization bill this Congress.
                                 ______
                                 
            PREPARED STATEMENT OF SENATOR PATRICK J. TOOMEY
    Mr. Chairman, thank you.
    The National Flood Insurance Program--or NFIP--was last 
reauthorized on a long-term basis in 2012. That reauthorization expired 
in 2017.
    Since then, Congress has repeatedly reauthorized the program on a 
short-term basis. I hope this Committee can work out a long-term NFIP 
reauthorization, so that we don't have our twenty-second extension in 5 
years.
    Simply put, NFIP is a broken, subsidization program. Since 2000, 
NFIP has borrowed from the Treasury in 11 out of 22 years. That means 
that half the time, this unsustainable ``insurance'' program requires 
additional Federal taxpayer funds to subsidize policyholders.
    Today, NFIP's current debt to the Treasury stands at $20.5 billion, 
and that excludes the $16 billion that was arbitrarily forgiven in 
2017.
    Some of my colleagues have argued that NFIP policyholders are 
incapable of repaying this debt so even the rest should be forgiven. 
Before considering such drastic action, we should ask ourselves: ``How 
did we end up in this scenario in the first place?''
    Well, the answer is relatively straightforward. NFIP systemically 
underprices flood insurance.
    Regrettably, it is the policies of Congress--not FEMA--that are the 
root causes of NFIP challenges. FEMA has worked to improve NFIP by 
implementing a new price rating for flood insurance premiums--known as 
Risk Rating 2.0--that better aligns policyholders' premiums with their 
actual flood risk.
    Risk Rating 2.0 is producing rates that are more equitable by 
phasing out most NFIP subsidies. Twenty-three percent of policyholders, 
over a million families, were overpaying for flood insurance. These 
families will now see a decrease in their monthly premiums under Risk 
Rating 2.0--compared to only 3.8 percent of policyholders who will have 
an increase of greater than $20 per month to their premiums.
    Risk Rating 2.0 is an important step in the right direction to not 
only a fairer NFIP but also a more fiscally sound NFIP. Congress should 
work towards strengthening Risk Rating 2.0 and eliminate any subsidies 
that do not align price with risk.
    As I stated at our NFIP hearings a year ago, I stand ready to work 
with the Chairman and my colleagues to enact another long-term 
reauthorization bill. I'd like to reiterate several of my priorities 
for reauthorization.
    First, we should encourage more private capital in the form of 
private policies and private reinsurance. My home State of Pennsylvania 
has been a leader on this front.
    To my knowledge, there are roughly 15,000 private flood policies in 
Pennsylvania. Private flood insurance brings more capacity to the 
market and may bring better products. My top priority for NFIP 
reauthorization is to eliminate any barriers that exist to obtaining 
private flood insurance.
    Second, ``do no harm.'' We should be protecting the transition to 
actuarially sound premiums. Any effort to slow or interrupt that 
progress must be rejected, including proposals to lower the 18 percent 
rate cap on premiums.
    Third, if subsidies persist, they must be better targeted. FEMA is 
proposing a new Means-Tested Assistance Program for current and future 
low- and moderate-income households.
    I am open to finding ways to help current low-income homeowners 
afford flood insurance. Today, properties with subsidized NFIP premiums 
are overwhelmingly located in our wealthiest communities, and 
subsidized NFIP premiums are rare in lower-income communities. However, 
let me make clear that any means-tested subsidy should replace existing 
cross-subsidies within NFIP.
    I acknowledge that over the past 50 years, NFIP has acclimated 
homeowners to a world in which these cross-subsidies exist. But adding 
another subsidy on top of existing cross-subsidies moves us further 
away from actuarially sound premiums.
    And fourth, we should improve communication with homeowners and 
homebuyers so that they understand the flood risk of properties. A 
small step is to raise awareness on the true flood risk to new 
homeowners and renters.
    I was glad to see FEMA recently submit to Congress a NFIP 
reauthorization package that includes several encouraging proposals. 
One proposal would prohibit coverage for a new category of excessive 
loss properties, which are properties that have flooded multiple times. 
This is an inherently good policy that is worthy of consideration.
    As a general principle, we should not provide flood insurance 
subsidies that encourage people to live in flood prone areas. While 
excessive loss properties are not the majority of homes in NFIP, they 
do constitute a highly disproportionate share of losses. And it sends 
the wrong message when taxpayers are continuously footing the bill to 
bailout properties in these risky areas.
    Another promising FEMA proposal prohibits coverage for commercial 
properties and new construction in high-risk areas. This helps to 
mitigate risk in NFIP by eliminating coverage in heavy flood-prone 
areas, and it also encourages competition in the private market for 
nonresidential policies.
    A long-term reauthorization must continue to move NFIP in a 
positive direction. I recognize that we can't fix NFIP overnight, but 
we should use reauthorization as an opportunity to move it in the right 
direction.
    In its current form, NFIP is bad for taxpayers who must bail it out 
year after year. I stand ready to work with my colleagues to make it 
better.
                                 ______
                                 
                PREPARED STATEMENT OF JANA N. HENDERSON
  CFM, Office of Mitigation Director/State Hazard Mitigation Officer, 
                Mississippi Emergency Management Agency
                             June 16, 2022

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                 PREPARED STATEMENT OF PETER VAN DOREN
                   Senior Fellow, The Cato Institute
                             June 16, 2022

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                 PREPARED STATEMENT OF JERRY THEODOROU
   Director, Finance, Insurance, and Trade Policy Program, R Street 
                               Institute
                             June 16, 2022

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                 PREPARED STATEMENT OF DOUGLAS E. QUINN
         Executive Director, American Policyholder Association
                             June 16, 2022
    My name is Douglas Quinn. I am the Executive Director of the 
American Policyholder Association, a nonprofit watchdog group that 
tracks and reports criminal fraud perpetrated by insurance companies as 
well as the engineers and third party administrators they hire. I am 
also a victim of Superstorm Sandy, where I experienced engineering 
fraud like so many others. With me today is my daughter, Megan who had 
the last years of her childhood turned into chaos. It took us 7 years 
to rebuild our home despite the fact that we had $250,000 of flood 
insurance. Simply put, FEMA failed to pay myself and other Sandy 
victims the honest claim we rightfully deserved in the aftermath of the 
storm.
    Flood victims need a resilient, proactive flood insurance program 
containing both integrity and affordability. Senator Menendez's 
bipartisan NFIP Re Act can accomplish much of this. The bill eliminates 
fraud, waste, and abuse in the program. This is a more effective 
strategy than raising premiums to deal with program costs. What we 
learned from Superstorm Sandy is that without adequate protections, 
both the program and policyholders will be taken advantage of by 
unethical insurers, engineers, and defense attorneys. NFIP Re allows 
penalties for insurance companies that lowball claims, adds an 
independent appeals process, and allows FEMA to eject vendors who have 
exhibited detrimental conduct such as the Nielsen Law firm and US 
Forensics Engineering who were embroiled in the Sandy Engineering Fraud 
Scandal. These companies are still earning millions of dollars through 
the NFIP program even after a Federal Judge in Superstorm Sandy levied 
a fine for being involved in evidence of widespread fraud and covering 
up fake documents to cheat homeowners. The founder of US Forensics, 
Gary Bell, has been linked in the public record to acts of defrauding 
homeowners going all the way back to Hurricane Katrina. His company 
faked an engineering report to deny coverage on my home. Why would 
these companies do this? Well, Gary Bell bragged to a newspaper that 
the more homeowners are forced to litigate for benefits, the more his 
company makes. NFIP lawyer Gerald Nielsen, whose law firm covered up 
instances of fraud, bragged he was going to make 100 million dollars to 
defend this conduct. Almost a half-a-billion dollars was wrongfully 
denied to policyholders by companies actively diverting funds from 
victims and destroying lives to line their pockets. The head of claims 
from one of the largest flood insurers in the NFIP plead the 5th 
amendment when asked if his company participated in defrauding 
policyholders. CBS, ``60 Minutes'', and PBS ``Frontline'' documentaries 
reported on these bad acts and questioned why these companies are still 
being paid today by the NFIP. This bill provides the mechanism to 
protect policyholders from such bad actors.
    In short, NFIP Re provides cost savings by eliminating the fraud 
waste and abuse that has helped put the program deeply into debt and 
ruined countless disaster victims' lives.
    Affordability and the resultant higher participation rates are 
critical to the NFIP's success. As premiums rise, more people are 
forced to drop coverage. Risk Rating 2.0 is already creating problems. 
Next month my flood premium will go up 14 percent, and that's despite 
fact that I just rebuilt my house 10 feet in air. Most policyholders 
will see their premiums increase by 18 percent this year, and many will 
see their premiums increase by a compounding 18 percent year after 
year. FEMA's own study predicts 20 percent of NFIP policyholders will 
drop coverage over the next 10 years. You cannot force working class 
Americans to choose between flood insurance premiums and putting food 
on the table. We should not be pricing people out of their communities.
    Mitigation is another essential element of reauthorization that is 
addressed in the NFIP Re Act. A Wharton study shows that every dollar 
spent on mitigation saves $6 in restoration. We have to be proactive, 
and make cost saving investments in protecting our communities from 
disaster.
    In closing, as I read the NFIP Re Act I see facets that would have 
made a world of difference in the lives of myself and my daughter after 
a flood wiped out our home. This is not just a New Jersey problem. I 
have been active in disaster zones all over the country, including 
Hurricanes Florence and Dorian in North Carolina as well as Hurricanes 
Laura, Delta, and Ida in Louisiana. I am regularly face to face with 
disaster victims, and it breaks my heart to know so intimately what the 
next years of their lives will look like. NFIP Re Act will not only 
save these victims years of struggle, but will also provide big savings 
to the NFIP as a national safety net that supports both resilient 
communities and consumer confidence.
                                 ______
                                 
                    PREPARED STATEMENT OF SAM BRODY
   Professor, Texas A&M University, Director of the Institute for a 
                        Disaster Resilient Texas
                             June 16, 2022
    Chairman Brown, Ranking Member Toomey, distinguished Members of the 
Committee: it is a distinct privilege to participate in this timely 
hearing on the reauthorization of the National Flood Insurance Program 
(NFIP) and flood risk reduction in general. I want to thank the 
Committee for the opportunity to testify today and share my expertise.
    I am a Regents Professor and holder of the George P. Mitchell '40 
Chair in Sustainable Coasts in the Department of Marine and Coastal 
Environmental Science at Texas A&M University at Galveston. I serve as 
director of the Institute for a Disaster Resilient Texas (IDRT) and was 
the Lead Technical Expert for the Governor's Commission to Rebuild 
Texas as part of the State's response to Hurricane Harvey. I have been 
teaching, researching, advising, and leading initiatives on flood risk 
reduction for over 20 years. I have published numerous scientific 
articles on this topic, as well as the books Rising Waters: The Causes 
and Consequences of Flooding in the United States and most recently, 
Coastal Flood Risk Reduction: The Netherlands and the U.S. Upper Texas 
Coast.
    I would like to focus my comments today the broader role the NFIP 
can play towards more effectively reducing flood losses in the United 
States (U.S.).
Growing Impact of Flooding
    Floods continue to be the most deadly, disruptive, and costly 
natural hazard in the U.S., from chronic deluges of rainfall to 
catastrophic storm surge events, the toll of persistent inundation, 
especially in low-lying coastal areas, continues to spiral upward. 
Increasing physical risk combined with rapid land use change and 
development in flood-prone areas has amplified the adverse economic and 
human impacts in recent years. Never before have the repercussions from 
storm events driven by both coastal surge as well as rainfall been so 
damaging to local communities to the point where curbing their impacts 
has become State and national priorities.
    Since 1970, the NFIP has received approximately 2.4 million 
insurance claims and paid out almost $70 billion. Based on Federal 
Emergency Management Agency (FEMA) data, insured losses increased, on 
average by $109 million per year (adjusted to 2018 dollars) from 1978 
to 2018 (Brody et al., 2022). Moreover, average annual property damage 
due to flooding has multiplied roughly 54-fold over the past four 
decades (Brody et al., 2011). For many households, such as in my 
hometown of Houston, TX, flood waters in residents' homes have been an 
annual occurrence leading up to Hurricane Harvey in 2017, which 
inundated over 150,000 residential structures and inflicted 
approximately $125 billion in overall damages. The rising costs of 
floods in the U.S. help to solidify the notion that floods pose a major 
risk to property, and with expanding development in low-lying coastal 
areas the problem appears to be getting worse.
    We also know that the increasing economic impact of floods are 
driven not solely by rainfall, sea-level rise, or wind-driven coastal 
surge. Rather, these mounting losses are often exacerbated, or entirely 
created by conditions set by the human-built environment. Parking lots, 
roadways, rooftops, and other impervious surfaces are fragmenting 
natural drainage patterns and compromising the ability of these systems 
to store and slowly release water (UMD/TAMUG, 2018). The result is more 
water pushed downstream and into people's homes. This trend is 
especially problematic in low-lying urban areas, where storm-water 
infrastructure deterioration, population growth, and development have 
accelerated over the last several decades (Bertilsson et al., 2019). 
Much of this flooding occurs in more densely occupied urban areas where 
infrastructure is aging and lacks adequate capacity to handle storm-
water runoff. In the past, this type of flooding, known as ``urban 
flooding,'' was considered to have relatively minor impacts, but has 
become increasingly more severe in recent years (Rainey et al., 2021). 
In this newer category of flooding, risk and impacts are no longer tied 
to the FEMA-defined floodplains derived by analyzing stream channels or 
bayous. Instead, significant flood losses can also occur miles from a 
delineated floodplain where they are embedded in a highly developed 
landscape (Highfield and Brody 2013; Blessing, Sebastian, and Brody, 
2017). In Houston, TX, for example, over half of NFIP claims filed 
since the program's inception have occurred outside of the 100-year 
floodplain boundary, which is considered the primary marker of risk in 
the U.S. In fact, during Hurricane Harvey in 2017 almost 46 percent of 
the losses were outside even the FEMA 500-year floodplain (GCRT, 2018).
Overemphasis on a Recovery-Based Approach to Flood Management
    The NFIP has had several successes in managing floods, including 
more widespread identification of flood hazards and increased 
development standards in floodplain areas (U.S. Interagency Floodplain 
Management Review Committee, 1994). The program was initially 
established to reduce the financial burden on the Federal Government to 
pay for the cost of flood events across the country. The program 
focuses on economic recovery post-flood events more so than proactive 
mitigation to reduce the risk in the first place (Brody et al., 2022). 
In fact, the vast amount of funding for coastal flood-related issues is 
provided by the Federal Government only after a disaster occurs, 
through emergency supplemental appropriations. A recovery-based 
approach predicated upon insurance payments and other forms of post 
disaster payments is at its essence an acceptance of failure when it 
comes to avoiding adverse impacts from floods (Brody et al., 2019). 
This strategy continually strains the Federal fiscal coffers (something 
the program was supposed to avoid).
Need for a More Proactive and Protective Approach to Flood Risk 
        Reduction
    While the NFIP provides important recovery resources to homeowners, 
a protection-based strategy focuses on mitigating flood risk before an 
event even takes place or eliminating it altogether. This more 
proactive approach to risk reduction assumes that residents should 
never bear the burden of inundation and associated loss, regardless of 
where they are located within coastal landscapes. Such an approach 
favors both systems-based structural interventions and land use 
planning techniques that seek to remove or avoid structures from areas 
most at risk.
    Under this notion, damage to property or other adverse impacts are 
considered failures in the system rather than expected consequences. 
Structural and non-structural flood mitigation techniques are 
implemented to eliminate vulnerability to flood impacts as much as 
possible, as well as incorporate contingencies if a disaster were to 
occur. This approach lends itself more towards the implementation of 
avoidance strategies that can reduce the constant repetitive loss and 
disaster-recovery cycle, thereby stemming the impacts of flood loss 
over the long term.
The Promise of the FEMA Community Rating System (CRS)
    Fortunately, there is no need to establish a new Federal policy or 
initiative within the NFIP to pursue proactive flood mitigation. FEMA's 
Community Rating System (CRS) is an established program focusing on a 
mitigation-based approach to flood risk reduction, that, if expanded, 
would make a significant impact on reducing losses and provide a 
pathway for flood resiliency in the United States.
    The CRS was established in 1990 to encourage communities to exceed 
the NFIP's minimum standards for floodplain management. Communities 
participating in the CRS adopt various flood mitigation measures in 
exchange for Federal flood insurance premium discounts for policy 
holders, ranging from 5 to 45 percent. The nonstructural orientation of 
the CRS program categorizes planning and management activities into the 
following four ``series'' containing 18 mitigation ``activities'':

  1.  Public information (Series 300) activities informing residents 
        about flood hazards, the availability of insurance, and 
        household protection measures.

  2.  Mapping and regulation activities (Series 400) containing both 
        critical data needs and regulations that exceed NFIP minimum 
        standards.

  3.  Damage reduction (Series 500) activities focusing on reducing 
        flood damage to existing buildings, and may entail acquiring, 
        relocating, or retrofitting existing structures.

  4.  Flood preparedness (Series 600) activities implementing 
        strategies associated with warning and response to minimize the 
        adverse effects of floods.

    Credit points are assigned to participating CRS communities based 
on the degree to which different flood mitigation activities are 
implemented, but not all activities carry the same amount of points 
(FEMA, 2013). While the participating jurisdiction takes responsibility 
for adopting and implementing each mitigation activity, the individual 
homeowner receives the discount on their national flood insurance 
premium. The CRS program incentivizes local communities to focus on 
avoiding flood risk at the outset, increasing public awareness of this 
risk to encourage protective household behaviors, and preparing for the 
impact before a flood event occurs.
    CRS program communities not only pay lower insurance premiums, they 
also significantly reduce their flood losses. A comprehensive national 
study conducted by IDRT at Texas A&M University found that 
participating CRS communities experienced significantly less overall 
flood losses than communities that do not participate (Highfield and 
Brody, 2013). On average, CRS communities experienced 50 percent 
reduced losses per year than non-CRS communities. This reduction 
translated to, on average, approximately $500,000 in savings per 
community, per year across the United States.
Why Is the CRS So Effective in Reducing Losses and Fostering Flood 
        Resiliency at the Local Level?
    First, the program incentivizes flood avoidance practices versus 
recovery from storm events. Two avoidance-based mitigation activities 
incorporated into the CRS program were found to be most effective in 
reducing observed flood losses: freeboard, the distance between the 
estimated 100-year level of inundation (we call this ``vertical 
avoidance'') and open space protection (we call this strategy 
``horizontal avoidance'') that keeps structures out of harm's way and 
maintains the natural absorptive capacity of natural systems, such as 
wetlands and riparian areas. Considering the average amount of credit 
points CRS participating communities received, freeboard requirements 
(listed as Higher Standards) led to the highest overall reduction in 
flood damages among all mitigation activities with an estimated average 
avoided losses of $800,000 per year. Similarly, the average savings per 
year for each CRS community in the U.S. pursuing open space protection 
through buyouts, development restrictions, structural removal, and 
other means was approximately $591,436.
    Second, mitigation activities adopted at the community level 
translate into significant savings for households located in flood-
prone areas. One of our studies in the Houston region where NASA is 
located found that jurisdictions implementing higher regulatory 
standards (activity 430), such as freeboard requirements and the 
prohibition of fill in the floodplain passed on approximately $21,000 
in avoided losses per household in the study area (Highfield, Brody, 
and Blessing, 2014). We showed that homeowners can benefit greatly in 
communities that engage in practices beyond the NFIP and that the 
minimum regulatory requirements of the NFIP may be too low given the 
substantial gains that can be made.
    Third, the CRS program also emphasizes activities that provide the 
public with information on the location of flood risks, how to protect 
their homes from flood impacts, and requirements for real estate 
professionals to disclose risks during the property transaction process 
(series 300). We found that just providing residents with flood 
protection information (activity 350) can avoid over $18,000 in flood 
losses per household. Communicating critical information about flood 
hazards often stimulates behavioral changes among homeowners, ranging 
from moving contents to a second floor to flood proofing bottom floors 
and basements. Risk disclosure also helps inform the homebuying or 
renting process. Flood risk communication and hazard disclosure are 
powerful tools to reduced flood losses experienced by residents because 
they do not require adopting costly regulations that are difficult to 
implement (Highfield and Brody, 2013). In response to this issue, IDRT 
created an online tool called Buyersbewhere.com where users can look up 
a property's flood risk using the most advanced models and technology. 
Subsequently, the Governor's Commission to Rebuild Texas proposed and 
helped pass the most ambitious State-level real-estate flood risk 
disclosure requirement in the U.S. Both these actions are facilitating 
more transparent, interpretable, and actionable communication of flood 
risk to those needing it the most.
    Fourth, the CRS participating communities not only help residents 
avoid potential flood losses, but they also make it less expensive to 
live in flood-prone areas even in the absence of a storm event. In 
fact, communities that expend a lot of effort in the CRS program can 
offset increases in insurance premiums paid by homeowners while at the 
same time reducing the majority of expected losses through sound 
mitigation tactics (Blessing et al., 2019).
    Finally, it is important to note that the CRS is an incentive-based 
program. Participation is voluntary and communities that implement a 
greater number of mitigation strategies reap the greatest economic 
rewards in terms of lower insurance premiums and significantly less 
flood losses. In this way, FEMA can influence local flood mitigation 
efforts without imposing strict regulations that infringe upon a 
locality's local economic development opportunities.
Conclusions
    Without a continued investment in proactive mitigation strategies, 
we will continue to experience upwardly spiraling flood losses and 
continued drain on local and national economies. Incorporating into the 
current program a more proactive and protective strategy for flood risk 
reduction is imperative if the nation is to address its growing flood 
loss problem driven by development, changing rainfall patterns, sea 
level rise, and other issues. Fortunately, the existing FEMA-CRS 
program can meet this challenge without additional legislation, 
mandates, or regulatory requirements at the Federal level. A CRS-styled 
program provides an opportunity to increase mitigation activities 
focusing on avoidance, planning, and risk communication that can 
effectively reduce losses while at the same time make insurance more 
affordable to homeowners. While flood insurance policies and mapping 
programs should remain critical components of the NFIP, they will not 
by themselves reverse the increasing trend of flood losses nor set the 
Nation on a course for developing more flood resilient communities in 
the future.
Recommendations
    Given my testimony above, there are several actions Congress and/or 
relevant agencies could consider to reform and reauthorize the NFIP so 
that it is more effective at reducing flood impacts:

  1.  Recognize that our Federal system focused on recovering from 
        flood disasters needs to take a more protection-based approach 
        when dealing with economic impacts, and support existing as 
        well as future initiatives that seek to prevent flood losses 
        from occurring in the first place.

  2.  Recognize that the human-built environment is exacerbating and at 
        times entirely creating flood impacts, and that urban flooding 
        is a major problem that needs to be addressed by the CRS and 
        other existing programs. To this end, the Congress and the 
        Administration, in coordination with State governors, and 
        regional, local, and tribal officials, should develop 
        appropriate mechanisms to fund necessary repairs, operations, 
        and upgrades of current stormwater and urban flood-related 
        infrastructure.

  3.  Expand participation in the FEMA-CRS by removing barriers to 
        entry and better promoting the effectiveness of the program. 
        Currently, there are about 1,500 CRS communities out of over 
        22,000 eligible to join the program. One of the major issues 
        facing interested communities is the lack of resources needed 
        to hire a local coordinator and monitor the implementation of 
        mitigation activities. Congress should allocate financial and 
        technical resources to localities as a further incentive to 
        join and successfully manage a CRS program to proactively 
        reduce flood impacts over the long term. The goal should be 
        that all NFIP communities become CRS communities and that what 
        are now considered ``higher standards'' should become the 
        baseline for localities managing flood risk across the United 
        States.

  4.  Promote and encourage increased effort for communities currently 
        participating in the CRS. Effort matters when it comes to 
        realizing the benefits of the CRS, both in terms of lower 
        insurance premium rates and reduced flood losses over time. CRS 
        communities already cover more than 65 percent of existing NFIP 
        policies. However, most jurisdictions make minimal effort and 
        tackle only the ``low hanging fruit'' of mitigation activities 
        (Brody et al., 2009). Incentivizing added effort within the CRS 
        by increasing the weight of points earned for more robust and 
        effective strategies is one approach. For example, additional 
        points could be assigned to adopting higher freeboard standards 
        or open-space protection activities that most effectively avoid 
        future flood losses. Another approach could be to subdivide 
        activities into smaller, more incremental steps, with points 
        attached to each step to make mitigation effort a less daunting 
        proposition at the local level.

  5.  Emphasize flood risk communication, outreach, and disclosure 
        either through the CRS or ongoing programs for riverine, urban, 
        and coastal flooding. Localities should receive additional 
        resources and incentives for integrating flood risk 
        communication, mapping, and risk disclosure into the real 
        estate transactions process in a way that is accessible, 
        interpretable, and actionable.
Acknowledgments
    I would like to acknowledge in developing this statement the 
helpful counsel of Dr. Wesley Highfield, Dr. Russell Blessing, and Dr. 
William Merrell at the Institute for a Disaster Resilient Texas, Texas 
A&M University; Michael J. Hardy, Texas A&M University; Dr. Gerald 
Galloway, Brig Gen (U.S.-Army Retired), Glenn L. Martin Institute 
Professor of Engineering (Retired) at the University of Maryland; and 
Korin Brody at Rice University.
References
Bertilsson, L., Wiklund, K., de Moura Tebaldi, I., Rezende, O.M., 
    Verol, A.P., and Miguez, M.G. (2019). ``Urban Flood Resilience--A 
    Multi-Criteria Index To Integrate Flood Resilience Into Urban 
    Planning''. Journal of Hydrology, 573, 970-982.
Blessing, Russell, Sebastian, Antonia, Brody, Sam. (2017). ``Flood Risk 
    Delineation in the U.S.: How Much Loss Are We Capturing?'' Natural 
    Hazards Review 18(3), 04017002.
Blessing, Russell, Brody, S.D., Highfield, W.E. (2019). ``Valuing 
    Floodplain Protection and Avoidance in a Coastal Watershed''. 
    Disasters 43(4), 906-925.
Brody, S.D., Zahran, S., Highfield, W.E., Bernhardt, S.P., and Vedlitz, 
    A. (2009). ``Policy Learning for Flood Mitigation: A Longitudinal 
    Assessment of the Community Rating System in Florida''. Risk 
    Analysis: An International Journal, 29(6), 912-929.
Brody, S.D., Highfield, W.E., and Kang, J.E. (2011). ``Rising Waters: 
    The Causes and Consequences of Flooding in the United States''. 
    Cambridge, U.K.: Cambridge University Press.
Brody, Samuel D., Highfield, W.E., Merrell, W., and Lee, Y. (2019). 
    ``Recovery Versus Protection-Based Approaches to Flood Risk 
    Reduction: Working Towards a Framework for More Effective 
    Mitigation in the United States''. In M. Lindell (Ed), The 
    Routledge Handbook of Urban Disaster Resilience: Integrating 
    Mitigation, Preparedness, and Recovery Planning, 1st Edition. New 
    York: Routledge.
Brody, S., Highfield, W.E., and Blessing, R. (2022). ``The Role of 
    Insurance in Facilitating Economic Recovery From Floods''. In 
    Brody, Lee, Kothuis (eds.), Coastal Flood Risk Reduction (pp. 109-
    118). Amsterdam: Elsevier.
Federal Emergency Management Agency (2017) National Flood Insurance 
    Program Community Rating System Coordinator's Manual. FIA-15/2017. 
    Washington, DC: FEMA.
Governor's Commission to Rebuild Texas (GCRT). 2018. Eye of the Storm. 
    College Station, TX: Texas A&M University System.
Highfield, W., Brody, S.D. (2013). ``Evaluating the Effectiveness of 
    Local Mitigation Activities in Reducing Flood Losses''. Natural 
    Hazards Review 14(4), 229-236.
Rainey, J.L., Brody, S.D., Galloway, G.E., and Highfield, W.E. (2021). 
    ``Assessment of the Growing Threat of Urban Flooding: A Case Study 
    of a National Survey''. Urban Water Journal, 18(5), 375-381.
UMD/TAMUG. (2018). ``The Growing Threat of Urban Flooding: A National 
    Challenge''. College Park and Galveston: University of Maryland and 
    Texas A&M University.
U.S. Interagency Floodplain Management Review Committee. Federal 
    Interagency Floodplain Management Task Force. (1994). ``Sharing the 
    Challenge: Floodplain Management Into the 21st Century: Report of 
    the Interagency Floodplain Management Review Committee to the 
    Administration Floodplain Management Task Force''. Washington, DC: 
    U.S. GPO.
        RESPONSES TO WRITTEN QUESTIONS OF CHAIRMAN BROWN
                     FROM JANA N. HENDERSON

Q.1. Your agency requires staff that have functions in 
floodplain management to be Certified Floodplain Managers, a 
professional accreditation by the Association of State 
Floodplain Managers. How important is training to local 
floodplain administrators, and should they be required to pass 
basic training to be familiar and capable in fulfilling 
responsibilities in the role?

A.1. Training and education are a very important part of our 
Floodplain Management Bureau. Not only are our State Floodplain 
staff required to pass the Certified Floodplain Managers test 
and become Certified Floodplain Managers within one year of 
employment, but they are also required to have at least 40 
hours of training yearly. Yes, local Floodplain Administrators 
should be required to pass basic training to be able to do day-
to-day functions that are required of the job. Local Floodplain 
Administrators should be required to be Certified Floodplain 
Managers based on the populations they serve. Local rural 
Floodplain Managers without large populations should be 
required to have at least 20 hours of training yearly.

Q.2. The Infrastructure Investment and Jobs Act provides 
increased funding for flood mitigation. FEMA's floodplain 
management standards haven't been updated in several decades 
and do not account for climate change future risk. How 
important is this moment for FEMA to promulgate rules that 
reflect the conditions that will be experienced during the 
design life of the mitigation project?

A.2. FEMA's floodplain management standards do not account for 
more than just climate change. It is imperative the standards 
are updated to effectively reduce vulnerability and support 
safer more resilient communities. The consequences of climate 
change are very different in each situation, in each event, in 
each mitigation project. FEMA must make changes to address 
these diverse situations. Too much uncertainty and 
inconsistently exist now with the current standards.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR SINEMA
                     FROM JANA N. HENDERSON

Q.1. In what ways would the certainty of a longer-term 
reauthorization of the National Flood Insurance Program reduce 
costs for the Government and policyholders alike?

A.1. To know there will be a sure funding source to continue 
providing citizens the best available advice for building 
resilient based on the best available information will be a 
breath of fresh air to local Floodplain Administrators as well 
as citizens alike. Even a short period of time without funding 
assistance from the National Flood Insurance Program would be 
detrimental to most local communities and the Floodplain 
Management Offices. The long-term effects of a longer 
reauthorization bill would be huge. The National Flood 
Insurance Program is the primary source of flood insurance 
coverage for residential properties in the United States. 
Without the reauthorization of the program and the ability to 
continue flood insurance coverage, the amount of funding 
provided to citizens during a disaster will rise tremendously. 
Each year agencies and citizens are feeling uneasy of the 
uncertainty of funding. A long-term reauthorization of the 
program eases that burden. Congress should consider reforms 
that don't endlessly put the NFIP at financial risk and at the 
same time will also assure that the program remains consistent 
with a primary reason for having a Federal flood insurance 
program in the first place--to reduce the need for disaster 
declarations.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR SINEMA
                      FROM PETER VAN DOREN

Q.1. In what ways would the certainty of a longer-term 
reauthorization of the National Flood Insurance Program reduce 
costs for the Government and policyholders alike?

A.1. The Congress implemented the National Flood Insurance 
Program to reduce the use of post-disaster congressional 
appropriations for disaster relief and to impose the cost of 
rebuilding on the owners through premiums. This has been 
partially successful. The percentage of structures receiving 
subsidies fell from 75 percent of covered properties in 1978 to 
about 28 percent in 2004 \1\ and 13 percent in September 2018. 
\2\
---------------------------------------------------------------------------
     \1\ ``Federal Flood Insurance: The Repetitive Loss Problem'', 
Congressional Research Service, June 2005, p. 15 https://fas.org/sgp/
crs/misc/RL32972.pdf.
     \2\ ``National Flood Insurance Program: The Current Rating 
Structure and Risk Rating 2.0'', Congressional Research Service, 
R45999, April 2022, p. 4 https://crsreports.congress.gov/product/pdf/R/
R45999/13.
---------------------------------------------------------------------------
    Longer-term reauthorization should embrace Risk Rating 2.0 
premium rate reform as well as continued private insurance 
competition with FEMA. Those two policies would reduce future 
burdens on Government expenditures and premiums for those 
homeowners who currently cross subsidize other homeowners 
within the Federal flood insurance program. \3\ The complete 
elimination of subsidized premiums under Risk Rating 2.0 would 
result in increases for the majority of NFIP insureds. \4\ But 
to the extent these premiums are excessive relative to the 
risk, private insurers will offer lower rates.
---------------------------------------------------------------------------
     \3\ A modeling exercise that examined premiums for single-family 
homes in Louisiana, Florida, and Texas suggested that 77 percent of 
single-family homes in Florida, 69 percent in Louisiana, and 92 percent 
in Texas would pay less with a private policy than with the NFIP; 
however, 14 percent in Florida, 21 percent in Louisiana, and 5 percent 
in Texas would pay over twice as much. ``Private Flood Insurance and 
the National Flood Insurance Program'', Congressional Research Service, 
R45242, December 2021, p. 17 https://crsreports.congress.gov/product/
pdf/R/R45242/12.
     \4\ According to FEMA, 23 percent of policyholders would see 
immediate decreases in their premiums and 75 percent of primary 
residences would see an increase greater than 18 percent if the 
statutory limit did not exist. ``National Flood Insurance Program: The 
Current Rating Structure and Risk Rating 2.0'', Congressional Research 
Service, R45999, April 2022, p. 16 https://crsreports.congress.gov/
product/pdf/R/R45999/13.
---------------------------------------------------------------------------
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR SINEMA
                      FROM JERRY THEODOROU

Q.1. In what ways would the certainty of a longer-term 
reauthorization of the National Flood Insurance Program reduce 
costs for the Government and policyholders alike?

A.1. Longer-term reauthorization of the National Flood 
Insurance Program (NFIP) would reduce costs for the Government 
and policyholders in four main ways.
    First, longer-term reauthorization would demonstrate the 
Government's commitment to the program, which would allow 
prospective policyholders to purchase NFIP policies with 
confidence. Without longer-term reauthorization, homeowners who 
do not have NFIP policies would have less certainty in 
continuation of the program, and would remain uninsured. 
Homeowners without insurance would lead to the Government 
providing post-flood disaster relief, which is a cost burden. 
With longer-term reauthorization, flood losses would be paid 
from the accumulated premiums of policyholders.
    Second, without longer-term reauthorization, homeowners not 
buying NFIP insurance because of a lack of confidence in the 
program's continued existence, but who are receiving disaster 
relief following a flooding loss, are not completely covered by 
relief payments. The shortfall between cost of reconstruction 
and disaster relief would be borne by homeowners.
    Third, without longer-term reauthorization, the uncertainty 
concerning the program's continued existence would drive 
homeowners contemplating buying flood insurance to buy from 
other flood insurance providers, who have higher premiums than 
the NFIP.
    Fourth, long-term reauthorization would encourage 
homeowners to participate in Federal Emergency Management 
Agency grant programs that fund resilience projects, yielding 
savings for the Government as well for policyholders.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF CHAIRMAN BROWN
                     FROM DOUGLAS E. QUINN

Q.1. Mr. Quinn, in instances in which a property owner has a 
mortgage, flood insurance claims payments are issued with the 
lender listed as a copayee. What are the consequences for 
homeowners if the banks or lenders are delayed in their release 
of funds for repairs? Do you have recommendations for 
increasing the speed and certainty of lender release of 
insurance payments so that homeowners can make repairs in a 
timely way?

A.1. When a mortgagor/policyholder is impacted by a natural 
disaster or property loss, there can be many parties involved 
in the recovery: Lenders, attorneys, public adjusters, 
restoration contractors, insurance companies, and of course, 
the property owner themselves. All these various entities must 
work together toward the common goal of getting the affected 
property rebuilt/repaired in the quickest, most efficient 
manner possible and restore the property owner and their family 
to a normal life while minimizing bureaucratic impact. This 
goal is to be accomplished with all parties understanding that 
the policyholder has already suffered a severe traumatic event, 
is living under very difficult circumstances, and this can lead 
to a diminished capacity to accomplish many administrative 
tasks.
    While the mortgage company has every right to hold a 
portion of insurance/litigation proceeds in trust to ensure 
such assets are put to their intended use, we have seen 
instances where this process has been inconsistent, inefficient 
and in some cases, abusive. Problems reported by consumers 
include holding an excessive portion of proceeds, failure to 
pay interest, bureaucratic runaround, lack of consistent 
policies designed to facilitate rebuilding, and unnecessary 
delays in distributing proceeds. These issues add an extra 
layer of bureaucratic nightmare to an already traumatized 
population that is just seeking a return to normalcy.
    Lenders and other stakeholders in the process should not be 
concerned with protecting their own interests to the detriment 
of the property owner. It is the consumer who services the 
debt, pays the insurance premiums and takes responsibility for 
repairing the property. Making the consumer whole should be the 
number one priority for all parties involved. Funds need to be 
made available in conjunction with work being done on the home. 
This process should be undertaken with continuity and 
consistency and in a smooth, compassionate manner. With these 
guiding principles in mind, the American Policyholder 
Association has developed a set of guidelines to protect the 
mortgagor/policyholder in their efforts to get back home.

  1.  Consumers must be treated in a professional and courteous 
        manner.

  2.  Consumers have the right to a clear and consistent policy 
        regarding how the claim funds are allocated and 
        released for repair.

  3.  Consumers have the right to be furnished with a copy of 
        this policy.

  4.  All lenders must follow the same formula to determine 
        share of claim proceeds held.

  5.  Consumers shall earn reasonable market rates of interest 
        on any monies held in trust by the mortgage company.

  6.  Lender-withheld claim proceeds will only be used for the 
        repair of the damage to property and not used to pay 
        principal, interest, or fees associated with the loan 
        unless the consumer requests this in writing.

  7.  Consumers will be provided with a single point of contact 
        with their lender: a knowledgeable case manager who is 
        empathetic to their plight and will work as a teammate 
        to help get the property owner back home.

  8.  Consumers will have any decisions impacting their 
        recovery to be explained in a clear and understandable 
        manner.

  9.  Consumers have the right to appeal any decisions they 
        feel are contrary to the goal of getting them back home 
        and restored to a normal life in an efficient manner.

  10.  The distribution of withheld funds should be 
        accomplished in a manner to maximize the ease of 
        recovery/rebuilding.

  11.  All lenders must follow the same formula regulating the 
        distribution of withheld funds.

  12.  Once property owner-retained claim proceeds have been 
        used in the rebuilding process, lender withheld funds 
        will be distributed in advance, rather than as 
        reimbursement.

  13.  Lenders should track their success in maintaining 
        customer satisfaction while expediting distributions to 
        facilitate property repair.

    When this is approached as a collaborative effort, all 
parties' interests are represented, the disaster/loss impacted 
family can resume fulfilling their financial obligations, and 
our communities can be restored to normalcy in the most 
efficient manner possible.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR SINEMA
                     FROM DOUGLAS E. QUINN

Q.1. In what ways would the certainty of a longer-term 
reauthorization of the National Flood Insurance Program reduce 
costs for the Government and policyholders alike?

A.1. A consistent, fair, and long term reauthorization of the 
national flood insurance program (as outlined in the NFIP-Re 
act) would not only ass stability and integrity to the program 
but would also reduce costs for the Government and 
Policyholders alike. The American Policyholder Association 
strongly advocates for the passage of the NFIP-Re act. It is 
the most prudent and financially responsible option to fix the 
National Flood Insurance Program that is critical to American 
citizens trying to cope with the increased risks brought on by 
climate change.
    As with all insurance based risk management programs, the 
higher the participation rates, the lower the per unit costs. 
FEMA's own study predicts that Risk Rating 2.0 would lose 20 
percent of existing policyholder from the NFIP.
    The long-term elimination of fraud, waste, and abuse in the 
NFIP is critical to cost savings in the program. Flood 
insurance in and of itself is not actuarially unsound. Rather, 
it is the actions of greedy insurers, engineering firms, and 
defense attorneys that bilk the program out of the money that 
should be allocated to covering losses by flood impacted 
families. The Financial responsibilities for losses are then 
transferred to the Government, tax payers, and policyholders.
    NFIP-Re caps insurer profits, includes penalties for 
insurers who cheat policy holders, allows FEMA to remove 
unethical vendors from the program, and eliminates the need for 
overpriced insurer hired defense firms by having the DoJ defend 
lawsuits. This will prevent unscrupulous private law firms from 
overbilling taxpayers and engaging in frivolous legal 
activities.
    These changes, as well as several others included in the 
bill that are designed to restore efficiency and integrity to 
the NFIP, will translate into huge cost savings. The resulting 
long term stability will allow for a National Flood Insurance 
program that is both affordable and resilient.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF CHAIRMAN BROWN
                         FROM SAM BRODY

Q.1. Professor Brody, we often focus on so-called gray 
infrastructure--levees, sea walls, storm drainage--to protect 
our homes and communities from flood damages. What role can 
increasing our green infrastructure--such as restoration of 
wetlands, increased tree canopy, or recognition of natural 
floodplains--play in protecting our communities and homes from 
damage due to storms and flooding?

A.1. The use of natural or semi-natural process to protect the 
natural function of watersheds, often called Green 
Infrastructure (GI), is increasingly being relied upon to 
reduce flood risk. This approach employs a wide range of 
techniques, from the protection of open space and tree canopy 
to green roofs and bioswales, all aimed at mimicking natural 
hydrologic processes in a way that effectively manages surface 
water runoff (Weber et al., 2020). GI is a particularly strong 
complement to more structurally focused approaches (Gray 
Infrastructure), especially within developed flood-prone 
landscapes because it helps restore a more natural flood 
response typical of pre-urbanized conditions (Green et al., 
2021).

Open Space Protection

    The most effective type of GI for reducing the risk and 
impacts of flooding is protection of open space (Brody et al., 
2017). In general, open space protection in the floodplain 
(where there is a one-percent chance of inundation every year) 
is considered as a key element of an ``avoidance'' strategy of 
flood mitigation for several reasons. First, open space land 
use designations remove people and structures (aside from some 
recreational buildings and agricultural industry support 
implements) from the most flood-prone areas. The opportunity 
for property loss and economic disruption is thereby 
eliminated. Setbacks from or buffers around riparian areas make 
space for natural fluctuations of riverine systems and reduces 
adverse impacts to structures that would otherwise be placed in 
harm's way. Linear protected areas associated with rivers and 
streams can be considered the horizontal equivalent of 
elevating structures above the 100-year inundation level in 
that it spatially extricates development from floodplain areas. 
Second, protecting or restoring natural landscape components 
maintains pervious surface cover that more effectively catches, 
stores, and slowly releases rainwater runoff to reduce flooding 
downstream. Even smaller areas, such as parks with tree cover 
embedded within an urban setting will help absorb water that 
would otherwise inundate surrounding homes and business (Brody 
et al., 2015).

Value of Naturally Occurring Wetlands

    There is no type of protected area more effective in 
reducing the amount and impact of flooding than naturally 
occurring wetlands. Wetlands have long been being highlighted 
for their role in protecting property from flooding events by 
reducing flood velocities, flood peaks, and providing areas for 
storing precipitation-based flood waters (Acreman and Holden, 
2013). A large body of research demonstrates that freshwater or 
``palustrine'' wetlands, even those seemingly disconnected from 
navigable waters, can significantly reduce the amount of flood 
losses to residential communities. More recent research has 
demonstrated the value of wetlands in not only reducing 
stormwater runoff, but also the amount of flood loss impacting 
local communities. For example, a comprehensive study of 2,692 
watersheds and over 372,000 insured flood losses along the Gulf 
of Mexico found that a percent increase in palustrine wetlands 
was the equivalent to, on average, a $13,975 reduction in 
insured flood losses per year, per watershed (Brody et al., 
2015). Protected freshwater wetlands, even in developed areas, 
have been shown to significantly reduce flood losses all the 
way down to the property level (Brody et al., 2014). In 
summary, almost 20 years of peer-reviewed research conducted at 
multiple scales, time periods, and study areas converge on the 
same result: that freshwater wetlands, even when disconnected 
from main-stem river channels or their tributaries, 
significantly reduce observed flood losses. The role of 
wetlands in attenuating the adverse impacts of floods from the 
watershed down to the parcel scale should not be overlooked by 
planners and policy makers as they clearly provide an important 
protective and economic benefit to coastal communities. These 
natural features provide not only wildlife habitat and 
increased biological diversity in flood-prone areas, but also a 
critical buffer to storms, which translates into significant 
dollar savings.

Flooded Property Buyouts

    Federal, State, and local decision makers have multiple 
tools at their disposal to maintain and establish GI to reduce 
flood impacts. Incentive-based activities within the FEMA-CRS, 
State-flood watershed planning initiatives, land acquisition 
programs, and establishment of local parks and building codes 
can all contribute to the protection of natural areas and the 
development of a GI network (Brody et al., 2011). One 
increasingly used strategy relying on Federal and local 
collaboration is the public purchase of flood-prone properties 
to remove residents from harm's way while compensating them 
financially, usually called a buyout. Buyouts can protect 
natural habitats and return the land to its natural flood 
function while creating open space amenities for nearby 
residents. It is important to note that most publicly funded 
buyouts are voluntary, and only the most chronically and 
severely damaged properties should be considered.
    Protecting land for flood mitigation also supports 
ecological functions, such as wetland protection and floodplain 
restoration, and forest lands. After acquisition, parcels of 
land can be used for maintaining services, such as restoration 
of native vegetation and tree canopy, recreation, environmental 
education, habitat restoration, reducing soil erosion, 
improving water quality, minimizing urban heat island effects, 
etc. For example, in their research of quantifying the 
ecological benefits of property acquisition, Zavar and Hagelman 
III (2016) examined buyout sites across the United States 
(U.S.) and found that communities participating in the HMGP 
buyout-funded programs restored about 6.9 percent of acquired 
land to wetlands. In addition to the ecological restoration of 
these sites, significant economic benefits could result from 
buyouts targeting areas with high ecological value, such as 
increased property values as a result of proximity to green 
space and opportunities for recreation.
    The open spaces that result from buy-out programs may 
return to their natural functions and have the potential of 
reducing flood losses for adjacent properties. Atoba et al. 
(2020) tested a framework that identified candidate parcels for 
acquisition along a spectrum of ecological and proximity 
variables in Harris County, TX. The authors demonstrated that 
including ecological criteria in the selection process does not 
reduce the cost-effectiveness of buyouts, and that acquiring 
parcels for flood risk reduction can be combined with 
protecting ecological values in a way that helps communities to 
become more resilient over the long term.
    Since 1989, approximately 41,000 properties have been 
``bought-out'' across the United States (U.S.), primarily 
through FEMA programs that set minimum selection criteria. Up 
to this point, these properties have been acquired with little 
regard for non-monetary benefits, such as ecological and 
aesthetic values. Instead, buyout programs have been almost 
always driven by a cost-benefit calculus that leads to a 
reactionary, ad hoc selection process conducted after a flood 
event has already occurred (Siders, 2019), especially since 
Federal buyouts funding are often tied to presidentially 
declared disasters. This approach can also result in an 
uncoordinated, checker-board pattern of open spaces that does 
little to protect environmental assets or remove groups of 
structures from areas vulnerable to flooding over the long 
term. Previous studies have also raised concern about how 
scattered patterns of buyouts limit the opportunity for 
creating open space clusters and the cost of maintaining small, 
isolated parcels in residential neighborhoods (Freudenberg et 
al., 2016). Atoba et al. (2021) quantified the benefits of 
acquiring vacant private properties in flood-prone areas rather 
than acquiring such properties after they are built up. The 
authors show that cumulative avoided flood losses exceed the 
cost of vacant land acquisition by a factor of nearly two to 
one, and up to a factor of ten to one in some areas. This study 
emphasizes the benefits of proactive property buyouts that 
focus on acquiring parcels before they are built up, while also 
avoiding the social and institutional problems associated with 
traditional buyout programs.
    Regardless of the mechanism, protecting and restoring open 
spaces to help establish a GI network in developed regions is 
an important component for reducing flood risk and impacts. 
Taking advantage of the absorptive capacity of natural areas to 
effectively manage stormwater and reduce losses will also 
generate other values, including biodiversity, recreation and 
tourism, tree cover to reduce heat islands, etc. GI techniques 
should be a central part of any strategy to facilitate more 
flood resilient local communities across the U.S. Providing 
funds for proactive buyouts or acquisition of open spaces at 
the local level would go a long way towards achieving this 
goal.

References

Acreman, M., and Holden, J. (2013). ``How Wetlands Affect 
    Floods''. Wetlands 33(5):773-786.
Atoba K., Brody S.D., Highfield W.E., Shepard C.C., Verdone 
    L.L. (2020). ``Strategic Property Buyouts To Enhance Flood 
    Resilience: A Multi-Criteria Spatial Approach for 
    Incorporating Ecological Values Into the Selection 
    Process''. Environmental Hazards. 1-19.
Atoba K., Newman G., Brody S., Highfield W., Kim Y., Juan A. 
    (2021). ``Buy Them Out Before They Are Built: Evaluating 
    the Proactive Acquisition of Vacant Land in Flood-Prone 
    Areas''. Environmental Conservation 48:118-126.
Brody, S.D., Blessing, R., Sebastian, A., Bedient, P. (2014). 
    ``Examining the Impact of Land Use/Land Cover 
    Characteristics on Flood Losses''. Journal of Environmental 
    Planning and Management 57(9):1252-1265.
Brody, S.D., Highfield, W., Blessing, R. (2015). ``An Empirical 
    Analysis of the Effects of Land Use/Land Cover on Flood 
    Losses Along the Gulf of Mexico Coast From 1999 to 2009''. 
    J. of the American Water Resources Association (JAWRA) 
    51(6):1556-1567.
Brody, Samuel, Highfield, W., Blessing, R., Makino, T., 
    Shepard, C. (2017). ``Evaluating the Effects of Open Space 
    Configurations in Reducing Flood Damage Along the Gulf of 
    Mexico Coast''. Landscape and Urban Planning 167:225-231.
Brody, S.D., Highfield, W.E., Kang, J.E. (2011). ``Rising 
    Waters: Causes and Consequences of Flooding in the United 
    States''. Cambridge, U.K.: Cambridge University Press.
Green, D., O'Donnell, E., Johnson, M., Slater, L., Thorne, C., 
    Zheng, S., and Boothroyd, R.J. (2021). ``Green 
    Infrastructure: The Future of Urban Flood Risk 
    Management?''. Wiley Interdisciplinary Reviews: Water: 
    8(6):e1560.
Siders A.R. (2019). ``Social Justice Implications of U.S. 
    Managed Retreat Buyout Programs''. Climatic Change 152:239-
    257.
Webber, J.L., Fletcher, T.D., Cunningham, L., Fu, G., Butler, 
    D., and Burns, M.J. (2020). ``Is Green Infrastructure a 
    Viable Strategy for Managing Urban Surface Water 
    Flooding?'' Urban Water Journal, 17(7):598-608.
Zavar E, Hagelman III, R.R. (2016). ``Land Use Change on U.S. 
    Floodplain Buyout Sites, 1990-2000. Disaster Prevention and 
    Management 25(3):360-374.

Q.2. What role can institutions of higher learning play in 
supporting communities' flood risk communication and floodplain 
management and decision support efforts, particularly in small, 
rural, and underserved communities, or areas affected by urban 
flooding? Could these efforts also support professional 
development of students? What, if any, types of Federal 
assistance could help these institutions support communities in 
their efforts to increase resilience?

A.2. As the adverse impacts from floods continue to mount 
across the United States (U.S.), communities are searching for 
assistance, support, and solutions to their specific problems. 
This issue is especially pronounced in small, underserved 
jurisdictions that are often impacted as much or to a greater 
degree but lack the resources and technical expertise to 
effectively address flood. For example, a large city such as 
Houston, TX, receives the bulk of Federal assistance in 
response to a regional disaster event. This city also has the 
resources and technical staff to apply for additional 
assistance through multiple channels, run their own updated 
hydrologic models, and then implement solutions with large 
contracts to private-sector entities. In contrast, small towns 
fringing this expansive metropolitan area may receive the same 
amount of rain or storm surge but lack the capacity to mitigate 
and respond to these events in the same way. As flooding 
becomes more regular and widespread, a growing gap has emerged 
between the ``have and have-nots'' of resources to address 
flood issues at the local level.
    A key opportunity to narrow this growing disparity in the 
ability to manage flood risk and impacts lies with institutions 
of higher learning. Universities and colleges across the U.S. 
have the capacity and interest to provide support to local 
communities that are complementary. The Institute for Disaster 
Resilience at Texas A&M University at Galveston is one such 
example. Several characteristics of higher learning 
institutions make them extremely well-positioned to provide a 
critical service to underserved localities that are often left 
out of Federal and State assistance programs.

  1.  Innovative Data, Models, and Technology: Institutions of 
        higher learning are constantly pushing the boundaries 
        of innovation. To this end, they house the most up-to-
        date data on flood risk, inundation models, and 
        technological resources. From supercomputing centers 
        and wave pools to data repositories and computer 
        algorithms, universities and colleges are the epicenter 
        of the best information and resources to address flood 
        problems.

  2.  Public-Facing and Open Source: Institutions of higher 
        learning focus on generating transparent, publicly 
        available, open-source datasets and products. This 
        approach makes it easier for communities to use data 
        and replicate analyses related to flood risk. Well-
        established universities and colleges are also stable 
        organizations, so data and associated knowledge 
        produced for a specific project tends to endure and be 
        made available over the long term. These reasons 
        motivated the General Land Office in Texas to invest in 
        a consortium of universities to develop and implement a 
        comprehensive Disaster Information System meant to 
        store, analyze, and share data that foster more 
        resilient decisions at all levels throughout the State.

  3.  Collaborative and Interdisciplinary: Institutions of 
        higher learning have a tradition of tackling problems 
        by bringing together multiple disciplines and 
        organizations. Difficult flood problems demand a high 
        level of collaboration and formation of partnerships. 
        Universities and colleges often act as objective 
        conveners for addressing interdisciplinary issues, such 
        as increasing flood risk.

  4.  Established Cohorts of Problem-Solving Faculty and 
        Researchers: Institutions of higher learning often have 
        research clusters focusing on solving real-world 
        problems, such as flooding. While some faculty remain 
        steeped in the theoretical, more than ever, 
        universities are emphasizing collaborative projects 
        that address different aspects of disasters.

  5.  Emphasis on Societal Impact: Institutions of higher 
        learning are emphasizing research and training that 
        results in a positive societal impact. No longer are 
        universities and colleges purely academic with little 
        regard for the helping solve real-world problems. Such 
        a shift is in part due to the changing focus of 
        research calls from organizations such as the National 
        Science Foundation (NSF), as well as the struggle to 
        stay relevant in a society that increasingly demands 
        action-oriented solutions in educational settings. 
        Addressing flood impacts resulting from climate change, 
        the built environment, and other factors fits extremely 
        well into the purview of modern-day higher education. 
        Furthermore, these institutions are more centered on 
        knowledge creation than profit making, which better 
        caters to the needs of small, under-resourced 
        communities interested in reducing their flood risk.

  6.  Place-Based and Community Engaged: Institutions of higher 
        learning are geographically embedded in areas that 
        experience flooding. They seek to understand and act 
        upon the problems surrounding their campuses. These 
        placed-based learning communities, or living 
        laboratories make ideal partners for communities 
        looking for technical assistance and decision support. 
        Universities as distributed knowledge centers across 
        the U.S. that facilitate community engagement are 
        ideally positioned to serve local jurisdictions.

  7.  Training and Educating the Next Generation of Decision 
        Makers: Institutions of higher learning are producing 
        the next generation of flood managers and resilience-
        based decision makers. Involving students in local 
        projects for flood risk reduction will facilitate 
        workforce training because participants see how 
        classroom learning applies to real-world problems and 
        gain experience working with diverse groups of 
        stakeholders.

The Disaster Risk Infrastructure Program (DRIP)

    While there are many examples of institutions of higher 
learning engaging with local communities around resilience 
issues, one model is the Texas A&M University Disaster Risk 
Infrastructure Program (DRIP). DRIP is a 2-year program funded 
by the Texas Legislature, in coordination with the Governor's 
Office, that seeks to empower under-resourced Texas communities 
with digital tools and training to make informed disaster 
mitigation decisions, secure funding, and reduce future losses. 
This program will help Texas communities that experience 
chronic and acute flood events better use data and 
visualizations to aid local decisionmaking and improve 
communication to outside funders. DRIP will initially partner 
with 5-10 small under-resourced Texas communities to better 
understand their data needs and flood risk reduction goals and 
develop and test technical products and services. DRIP 
participants adhere to the following key principles:

  1.  Engage: Listen and learn from communities through 
        collaborative engagement.

  2.  Identify: Identify specific local data/decision support 
        gaps and needs.

  3.  Build: Build technical data/analytics product(s) that 
        support local capacity.

  4.  Support: Provide ongoing training/technical assistance 
        and collaboration.

  5.  Leverage: Integrate and build on existing TAMU's 
        Institute for a Disaster Resilient Texas (IDRT) 
        projects and those of key partners to build the program 
        into the future.

    Many universities and colleges are already engaging with 
local communities around resilience through various extension 
programs, ad hoc Federal research grants or appropriations, and 
other mechanisms. However, most grant programs, such as NSF or 
National Institute of Health (NIH) are focused on basic 
research; applied or community-facing analysis around flood 
risk is usually an afterthought on these projects and specific 
funding to accomplish meaningful translation of research to 
practice is rare. There remains no Federal funding mechanism 
that specifically enables institutions of higher learning to 
leverage their analytical power in a way that helps communities 
understand and reduce their flood risk over the long term. 
Conducting such meaningful programs requires significant 
program management, stakeholder outreach, and technical 
assistance components that are not usually funded in 
traditional flood research or Government grant programs. Such 
funding would enable both under-resourced communities in flood-
prone areas, as well as institutions of higher learning focused 
on training the next generation of decision makers. Providing 
funding to connect these two domains will effectively increase 
resilience in the face of increasing flood impacts across the 
United States.

Q.3. What role do decisions about the built environment play in 
creating or exacerbating the effects of flooding? How can the 
NFIP help communities make choices that protect homes and 
businesses from flood risk in the future?

A.3. Increasing flood impacts are often attributed solely to 
changing precipitation patterns, sea level rise, and other 
types of environmental change. However, a longstanding body of 
evidence suggests that environmental and climate-related 
changes are only partially to blame for exponential increases 
in losses from storm events, especially across the United 
States (U.S.). Instead, an often-times quicker and more 
powerful driver of increasing flood risk comes in the form of 
the human-built environment and resulting development decisions 
(Brody et al., 2011).
    Several factors contribute to the role of the built 
environment in exacerbating or even creating flood losses:

    1. As population and associated development continue to 
expand, especially in coastal regions, more people, structures, 
and economic assets are being placed in flood-prone areas. 
While development is, in many cases, a sign of healthy local 
economies, rising population in flood-prone areas is one the 
largest contributors to increased flood losses. Simply put, 
population growth in areas subject to both tidal and rainfall 
flood events put more people in harm's way.
    Even areas devastated by flood events become catalysts for 
subsequently more population and associated development. For 
example, in the wake of Hurricane Harvey in 2017, the largest 
urban flood event in U.S. history, new development is still 
taking place on the most flood-prone parcels of land. In fact, 
one in five new homes permitted in Houston in the year after 
the 2017 storm were in a FEMA-designated floodplain. A recent 
analysis estimated that nearly 750,000 additional acres are 
likely to be developed in the Houston-Galveston (Texas) area by 
2050. Furthermore, the amount of development in the floodplain 
could nearly double from 2001 levels, the same year Tropical 
Storm Allison dumped on Houston what at the time was record 
rainfall (GCRT, 2018). Placing more people and structures in 
locations most likely to flood translates into exponentially 
greater economic losses.
    2. The expanding-built environment (e.g., structures, 
roads, rooftops, public infrastructure, pavement, etc.) is 
exacerbating the problem by compromising the ability of the 
natural landscape to store and absorb flood waters (Hemmati et 
al., 2020). Impervious surfaces associated with new development 
increases the volume and velocity of storm-water runoff, 
causing unintended flood-impacts for downstream communities. 
The conversion of open space to impervious surfaces (typically 
represented by roads, rooftops, parking lots, and other paved 
surfaces), and the inability of public infrastructure to 
accommodate subsequent runoff is widely considered a major 
contributor to flood impacts.
    Land Use and Land Cover (LULC) change is often linked to 
increased surface runoff, flooding, and associated property 
damage, particularly in relation to the built environment (Gori 
et al., 2019). Urbanization and the proliferation of impervious 
surfaces across watershed units have long been considered a 
major contributor to adverse impacts associated with flood 
events (Hall, 1984). For example, Brody et al. (2008) found 
that, on average, each square meter of impervious surface added 
in the Houston, TX, area translated into approximately $3,602 
of added property damage caused by floods per year from 19972-
001. Houston area development, especially upstream, increases 
the volume of water entering downstream neighborhoods and 
expands the 100-year floodplain, putting more structures at 
risk (Gori et al., 2019).
    Recent observational research also indicates that flood 
impacts are driven not solely by the amount of impervious 
surface, but by its pattern and intensity across a given 
landscape. That is, the specific form of the built environment 
is the more important trigger for flood losses over time. In 
general, it appears that older, denser urban development is 
generally located outside of areas exposed to flooding (such as 
the floodplain), and that high-density urban areas may be more 
likely to have a coordinated system of flood mitigation 
infrastructure to handle large amounts of runoff. In contrast, 
large amounts of sparsely developed areas consistent with 
``sprawl'' exacerbate property damage from flooding. In this 
scenario, outwardly expanding, low-density development patterns 
can fragment hydrological systems and amplify surface runoff by 
spreading-out impervious surfaces over a larger area (Brody et 
al., 2013). This form of development is also more likely to 
infringe upon flood-prone areas that were previously left 
untouched. Brody et al. (2014) corroborated this finding in a 
parcel-level study south of Houston, where a percentage 
increase in surrounding low-intensity development translates 
into, on average, approximately $1,734 in additional property 
damage caused by floods. The study found that low-density 
development patterns can compromise hydrological systems and 
amplify surface runoff by spreading out impervious surfaces 
across a watershed, placing more structures and residents at 
risk from flooding over a larger area.
    3. Engineered structures, such as sound walls, railroads, 
highways, and bridges can become obstacles that back up 
overland flow and cause flooding when the capacity of storm-
water infrastructure is overwhelmed by episodes of heavy 
rainfall. Rapid, sprawling development that does not account 
for regional drainage patterns or downstream impacts can create 
flood hazards where they previously did not exist. During major 
rainfall events, features of the built environment can become 
barriers that impede both overland and channel flow. These 
unintended obstacles can act as dams, backing water up into 
resident's homes, even if they are miles outside the known 
floodplain boundaries. Sound walls acting as a buffer between 
residential neighborhoods and highways were especially 
implicated during Hurricane Harvey in 2017 when many of these 
structures blocked the path of storm-water runoff and 
exacerbated flood losses in neighborhoods bordering major 
transportation corridors.
    4. Aging or inadequate storm-water infrastructure further 
compound the flood risk and losses experienced across local 
communities. In addition to alterations of the natural 
landscape, the infrastructure put in place to reduce flood risk 
and protect communities from flood impacts is outdated. For 
example, many urban communities across the U.S. built street 
drainage systems to handle only a 2-5-year design storm, which 
may no longer accommodate even regular rainfall events. The 
National Research Council (2013) has warned that the Nation's 
existing flood control infrastructure is inadequate to protect 
against future flooding, and that many U.S. communities face 
unacceptably high risks. Built in the early mid-20th century, 
most of these structures are approaching or already exceeding 
their design lives. The Association of State Floodplain 
Managers (ASFPM) similarly warns that we are moving into a 
``triage phase'' that will require repeated repairs to failing 
infrastructure under emergency conditions. Recent and 
increasingly common flood events have underlined the 
inadequacies of storm water infrastructure. Many urban and 
suburban areas require significant upgrades to keep up with 
rising runoff rates, due both to development and increasingly 
intense rainfall events.

Looking to the NFIP for Solutions

    Achieving higher standards through the NFIP, as 
incentivized by the FEMA's Community Rating System (CRS) will 
provide expanded opportunities for communities to make choices 
that protect homes and businesses from flood impacts in the 
future. The two most effective activities within the CRS are 
freeboard (elevating structures above base flood levels) and 
open space protection. Both techniques relate to the built 
environment, where one is based on structural adaptation and 
the other avoidance of flood prone areas by directing 
development to other areas. Other existing CRS activities 
should be further emphasized through an NFIP reauthorization, 
including protection of natural floodplain functions, improving 
drainage system maintenance, and flood-proofing existing 
structures.
    Expanding participation in the FEMA-CRS will require 
removing barriers to entry. Currently, there are about 1,500 
CRS communities out of over 22,000 eligible to join the 
program. One of the major issues facing interested communities 
is the lack of resources needed to hire a local coordinator and 
monitor the implementation of mitigation activities. Congress 
should allocate financial and technical resources to localities 
as a further incentive to join and successfully manage a CRS 
program to proactively reduce flood impacts over the long term. 
The goal should be that all NFIP communities become CRS 
communities and that what are now considered ``higher 
standards'' should become the baseline for localities managing 
flood risk across the U.S.
    Congress should also recognize that the human-built 
environment is exacerbating and at times entirely creating 
flood impacts, and that urban flooding is a major problem that 
needs to be addressed. To this end, there must be appropriate 
mechanisms to fund necessary repairs, operations, and upgrades 
of current stormwater and urban flood-related infrastructure.
    Finally, the NFIP should better integrate flood risk 
reduction into infrastructure investments. Green and grey 
infrastructure projects, such as urban plazas, green roofs, 
bioretention systems, etc., have been shown to be effective 
ways to augment existing stormwater systems that alone cannot 
handle increasing runoff from upstream developments.

References

Brody, S.D., Blessing, R., Sebastian, A., Bedient, P. (2014). 
    ``Examining the Impact of Land Use/Land Cover 
    Characteristics on Flood Losses''. Journal of Environmental 
    Planning and Management 57(9):1252-1265.
Brody, S.D., Highfield, W.E., Kang, J.E. (2011). ``Rising 
    Waters: Causes and Consequences of Flooding in the United 
    States''. Cambridge, U.K.: Cambridge University Press.
Brody, S.D., Kim, H.J. and Gunn, J. (2013). ``The Effect of 
    Urban Form on Flood Damage''. Urban Studies 50(4):789-806.
Brody, S.D., Zahran, S., Highfield, W.E., Grover, H. and 
    Vedlitz, A. (2008). ``Identifying the Impact of the Built 
    Environment on Flood Damage in Texas''. Disasters 32(1):1-
    18.
Gori, A., Blessing, R., Juan, A., Brody, S., and Bedient, P. 
    (2019). ``Characterizing Urbanization Impacts on Floodplain 
    Through Integrated Land Use, Hydrologic, and Hydraulic 
    Modeling''. Journal of Hydrology, 568: 82-95. https://
    doi.org/10.1016/j.jhydrol.2018.10.053.
Governor's Commission to Rebuild Texas (GCRT). 2018. ``Eye of 
    the Storm''. Texas A&M University System, College Station, 
    TX.
Hall, M.J., 1984. Urban Hydrology. London, England: Elsevier.
Hemmati, M., Ellingwood, B.R., and Mahmoud, H.N. (2020). ``The 
    Role of Urban Growth in Resilience of Communities Under 
    Flood Risk''. Earth's Future 8, e2019EF001382. https://
    doi.org/10.1029/2019EF001382.
National Research Council. (2013). ``Levees and the National 
    Flood Insurance Program: Improving Policies and 
    Practices''. Washington, DC: National Academies Press.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR SINEMA
                         FROM SAM BRODY

Q.1. In what ways would the certainty of a longer-term 
reauthorization of the National Flood Insurance Program reduce 
costs for the Government and policyholders alike?

A.1. The most effective way to reduce costs for the Government 
and policyholders is to bolster the protection-based mitigation 
elements of the National Flood Insurance Program (NFIP). 
Reducing the economic burdens of increasing and repetitive 
flood losses through known mitigation techniques will reduce 
costs born by the Federal Government when it provides disaster 
assistance, avoid losses at the household level, and eventually 
stabilize insurance premium rates. Even up-front investments in 
flood avoidance activities will translate into significant 
savings over the long term. Avoidance can be vertical in 
direction, whereby structures and people are lifted above zones 
of inundation, or it can be horizontal, whereby critical assets 
are either set back, moved away, or prevented from being placed 
in flood-prone areas from the start.
    The existing FEMA Community Rating System (CRS) contains 
all the elements of proactive flood mitigation that, when 
implemented, result in reduced costs from flood impacts and 
yearly insurance premiums:
    First, mitigation strategies adopted at the local level 
significantly reduce flood losses. For example, a national 
study conducted by the Institute for a Disaster Resilient Texas 
(IDRT) at Texas A&M University found that participating CRS 
communities experienced significantly less overall flood losses 
than communities that do not participate (Highfield and Brody, 
2013). On average, CRS communities experienced 50 percent 
reduced losses per year than non-CRS communities, equating to, 
on average, approximately $500,000 in savings per community, 
per year across the U.S. Those communities requiring higher 
standards in the form of freeboard (distance the distance 
between the estimated 100-year level of inundation and the 
first floor of a structure) avoided, on average, $800,000 of 
losses per year. CRS communities that pursued open space 
protection through buyouts, development restrictions, 
structural removal, and other means avoided approximately 
$600,000. Mitigation activities adopted at the community level 
also translate into significant savings for households located 
in flood-prone areas. (Highfield, Brody, and Blessing, 2014).
    Second, because increasing mitigation efforts by 
participating CRS communities results in discounted insurance 
premiums for policy holders (between 5 and 45 percent), 
mitigation under this program reduce yearly household costs and 
makes it less expensive to live in flood-prone areas, even in 
the absence of a storm event. In fact, communities that expend 
a lot of effort in the CRS program can offset increases in 
insurance premiums paid by homeowners while at the same time 
reducing most expected losses through sound mitigation tactics. 
For example, a recent study of the Clear Creek Watershed just 
south of Houston, TX, demonstrated that if CRS communities 
improved their rating by just one class, it would not only 
offset the increases in Federal insurance premium rates, but 
also the damage experienced by homeowners by as much as 84 
percent over a 10-year period. Total savings over a 30-year 
mortgage time frame would be, on average, between $72,676 and 
$87,212 per homeowner (Blessing, Brody, and Highfield, 2019). 
Furthermore, the study found that dollar savings associated 
with damage avoided by increasing points within CRS activities 
far outweigh the costs borne by FEMA (that is, lower revenue as 
a result of premium deductions).
    Currently, there are about 1,500 CRS communities out of 
over 22,000 eligible to join the program. Expanding 
participation in the FEMA-CRS by removing barriers to entry and 
better promoting the effectiveness of the program will reduce 
costs to the Government and policyholders alike, especially 
over the long run. One of the major issues facing interested 
communities is the lack of resources needed to hire a local 
coordinator and monitor the implementation of mitigation 
activities. Congress should allocate financial and technical 
resources to localities as a further incentive to join and 
successfully manage a CRS. Non-matching funds granted to 
committed CRS jurisdictions for structural and nonstructural 
mitigation activities (e.g., elevating or removing structures 
from flood prone areas) will also encourage local decision 
makers to avoid flood losses in advance of a major storm event.

References

Blessing, Russell, Brody, S.D., Highfield, W.E. (2019). 
    ``Valuing Floodplain Protection and Avoidance in a Coastal 
    Watershed''. Disasters 43(4): 906-925.
Highfield, W., Brody, S.D. (2013). ``Evaluating the 
    Effectiveness of Local Mitigation Activities in Reducing 
    Flood Losses''. Natural Hazards Review 14(4): 229-236.
Highfield, W., Brody, S.D., Blessing, R. (2014). ``Measuring 
    the Impact of Mitigation Activities on Flood Loss Reduction 
    at the Parcel Level: The Case of the Clear Creek Watershed 
    Along the Upper Texas Coast''. Natural Hazards 72(2): 687-
    704.
              Additional Material Supplied for the Record
    STATEMENT SUBMITTED BY THE AMERICAN PROPERTY CASUALTY INSURANCE 
                              ASSOCIATION

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


       LETTER SUBMITTED BY THE CREDIT UNION NATIONAL ASSOCIATION

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


   LETTER SUBMITTED BY THE NATIONAL ASSOCIATION OF FEDERALLY-INSURED 
                             CREDIT UNIONS

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


                  LETTER SUBMITTED BY SMARTERSAFER.ORG

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


  ROBERT G. RASH, PE, PLS, CEO AND CHIEF ENGINEER, ST. FRANCIS LEVEE 
              DISTRICT OF ARKANSAS, WEST MEMPHIS, ARKANSAS

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


          STATEMENT SUBMITTED BY PROFESSIONAL INSURANCE AGENTS

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


           LETTER SUBMITTED BY AMERICAN ACADEMY OF ACTUARIES

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]