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REAUTHORIZATION OF THE NATIONAL FLOOD 

INSURANCE PROGRAM 

HEARING 

BEFORE THE

COMMITTEE ON 

BANKING, HOUSING, AND URBAN AFFAIRS 

UNITED STATES SENATE 

ONE HUNDRED FIFTEENTH CONGRESS 

FIRST SESSION 

ON 

EXAMINING THE REAUTHORIZATION OF THE NATIONAL FLOOD 

INSURANCE PROGRAM 

MARCH 14 AND MAY 4, 2017 

Printed for the use of the Committee on Banking, Housing, and Urban Affairs 

( 

Available at: http://www.fdsys.gov/ 

COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS 

MIKE CRAPO, Idaho, Chairman 

RICHARD C. SHELBY, Alabama 

BOB CORKER, Tennessee 

PATRICK J. TOOMEY, Pennsylvania 

DEAN HELLER, Nevada 

TIM SCOTT, South Carolina 

BEN SASSE, Nebraska 

TOM COTTON, Arkansas 

MIKE ROUNDS, South Dakota 

DAVID PERDUE, Georgia 

THOM TILLIS, North Carolina 

JOHN KENNEDY, Louisiana 

SHERROD BROWN, Ohio 

JACK REED, Rhode Island 

ROBERT MENENDEZ, New Jersey 

JON TESTER, Montana 

MARK R. WARNER, Virginia 

ELIZABETH WARREN, Massachusetts 

HEIDI HEITKAMP, North Dakota 

JOE DONNELLY, Indiana 

BRIAN SCHATZ, Hawaii 

CHRIS VAN HOLLEN, Maryland 

CATHERINE CORTEZ MASTO, Nevada 

GREGG RICHARD, Staff Director 

MARK POWDEN, Democratic Staff Director 

ELAD ROISMAN, Chief Counsel 

TRAVIS HILL, Senior Counsel 

JARED SAWYER, Senior Counsel 

BRANDON BEALL, Professional Staff Member 

GRAHAM STEELE, Democratic Chief Counsel 

LAURA SWANSON, Democratic Deputy Staff Director 

BETH COOPER, Democratic Professional Staff Member 

ERIN BARRY, Democratic Professional Staff Member 

MEGAN CHENEY, Democratic Legislative Assistant 

DAWN RATLIFF, Chief Clerk 

CAMERON RICKER, Hearing Clerk 

SHELVIN SIMMONS, IT Director 

JIM CROWELL, Editor 

(II)

C O N T E N T S 

TUESDAY, MARCH 14, 2017 

Page 

Opening statement of Chairman Crapo ................................................................. 1 

Opening statements, comments, or prepared statements of: 

Senator Brown .................................................................................................. 2 

WITNESS 

Roy E. Wright, Deputy Associate Administrator for Insurance and Mitigation, 

Federal Emergency Management Agency .......................................................... 3 

Prepared statement .......................................................................................... 36 

Responses to written questions of: 

Senator Shelby ........................................................................................... 41 

Senator Heller ........................................................................................... 45 

Senator Tillis ............................................................................................. 48 

Senator Kennedy ....................................................................................... 52 

Senator Donnelly ....................................................................................... 56 

ADDITIONAL MATERIAL SUPPLIED FOR THE RECORD

Letter submitted by the National Multifamily Housing Council and the National Apartment Association .............................................................................. 60 

Statement submitted by the Property Casualty Insurers Association of 

America ................................................................................................................. 64 

Testimony submitted by the Consumer Mortgage Coalition ................................ 72 

THURSDAY, MAY 4, 2017 

Page 

Opening statement of Chairman Crapo ................................................................. 111 

Opening statements, comments, or prepared statements of: 

Senator Brown .................................................................................................. 112 

WITNESSES 

Steve Ellis, Vice President, Taxpayers for Common Sense, on behalf of the 

SmarterSafer Coalition ........................................................................................ 113 

Prepared statement .......................................................................................... 139 

Michael Hecht, President and Chief Executive Officer, Greater New Orleans, 

Inc., on behalf of the Coalition for Sustainable Flood Insurance ..................... 115 

Prepared statement .......................................................................................... 144 

(III)

Page

IV 

Larry Larson, Director Emeritus, Association of State Floodplain Managers, 

Inc. ......................................................................................................................... 117 

Prepared statement .......................................................................................... 149 

Responses to written questions of: 

Senator Scott ............................................................................................. 161 

Senator Heitkamp ..................................................................................... 161 

ADDITIONAL MATERIAL SUPPLIED FOR THE RECORD

SmartSafer National Flood Insurance Program Reform Proposal, February 

2017 ....................................................................................................................... 166

An Illustration of the Benefits of Private Market Depopulation and Reinsurance Risk Transfer ............................................................................................... 177 

Statement of the Reinsurance Association of America ......................................... 180 

Letter submitted by the Consumer Federation of America ................................. 181 

(1) 

REAUTHORIZATION OF THE NATIONAL 

FLOOD INSURANCE PROGRAM—PART I 

TUESDAY, MARCH 14, 2017 

U.S. SENATE, COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS, Washington, DC. 

The Committee met at 10:03 a.m., in room SD–538, Dirksen Senate Office Building, Hon. Mike Crapo, Chairman of the Committee, 

presiding. 

OPENING STATEMENT OF CHAIRMAN MIKE CRAPO 

Chairman CRAPO. This hearing will come to order. 

We are joined by Roy Wright, Deputy Associate Administrator of 

Insurance and Mitigation at the Federal Emergency Management 

Agency. Mr. Wright, thank you for being here with us today. He 

returns to the Committee following his testimony last September 

on recommendations from the Technical Mapping Advisory Council. 

Today he will provide testimony on the operations and financial 

condition of the National Flood Insurance Program, steps FEMA 

has taken to implement legislative reforms, and to recommend potential legislative reforms. 

Our Nation has seen some of the most devastating natural disasters in its history the last two decades. These catastrophes displace 

families, harm businesses, and disrupt lives. 

The NFIP was created nearly five decades ago as the rising cost 

of providing post-disaster relief fell on taxpayers. The program’s 

mission is to expand homeowners’ access to flood insurance in exchange for local communities reducing their exposure to flood risk. 

Currently, the NFIP administers approximately 5.1 million poli- cies, totaling $1.25 trillion in coverage across 22,000 communities. 

Unpredictable weather and changing topography leave businesses and households across thousands of communities vulnerable. Since 2005, Hurricanes Katrina, Irene, Superstorm Sandy, 

and others have overwhelmed gulf and coastal communities and 

drastically increased claims. 

But flood disaster is not unique to the coasts and gulf as nearly 

one-fifth of all NFIP claims come from outside of high-risk areas. 

The frequency and scale of recent catastrophes have pushed the 

program to amass $24.6 billion in debt with the United States 

Treasury Department. The program’s structural issues must continually be addressed so that it can better withstand strenuous 

conditions. 

Throughout its history, Congress has acted to significantly reform the program to make it more efficient and effective. Since 

2 

2012, legislative action has improved communication of actual flood 

risk and spurred communities toward better floodplain management while also balancing affordability to promote widespread flood 

insurance adoption. 

But there is still work to do. Today Mr. Wright will provide recommendations on how to improve the program, for example: how 

FEMA can use technology, such as LIDAR, to create maps that better reflect true flood risk; how to best promote the growth of the 

private insurance market so that policyholders have more options— 

and in some cases, more affordable options than offered through 

the NFIP—and risk is shared by both the Government and the private sector; and how long the program should be reauthorized to 

ensure that reforms can be implemented and the market has greater certainty. 

Senator Brown and I have started working together on a bipartisan basis to hear the thoughts and concerns of various stakeholders and Members of the Committee, and we look forward to 

working with FEMA to understand the legislative changes that can 

help the NFIP achieve its goals. 

Senator Brown. 

STATEMENT OF SENATOR SHERROD BROWN 

Senator BROWN. Thank you, Mr. Chairman, for calling this hearing today on the reauthorization of the NFIP. Mr. Wright, thank 

you for joining us again. Your comments were helpful last time. We 

look forward to that again. 

The most common and costly natural disaster facing our constituents is flooding, yet it is hard to insure against that. There was almost no private market before the advent of the NFIP almost 50 

years ago. 

With a growing population and with a changing climate, our entire Nation will continue to grapple with this issue in the years 

ahead. We will have a direct impact on Ohioans and on other 

Americans who experience flooding. We will also have an indirect 

impact on all taxpayers no matter where they live as the country 

seeks to help families and communities recover from these events. 

NFIP is a critical component of our Nation’s response to the 

threat of flooding. It seeks to combat the effects of flooding through 

four interrelated components: flood insurance to help property owners recover quickly after a flood and reduce the need for Federal 

emergency appropriations; second, floodplain management to minimize damage to people and property through the adoption of local 

ordinances and building codes; third, floodplain mapping to identify 

flood hazards and communicate that risk to homeowners and communities; and, fourth, mitigation to help remove property from 

harm’s way through property-level and community investments 

that reduce the overall level of risk. 

Today Mr. Wright will share FEMA’s views about reauthorization of the path forward for NFIP. To help inform this process, I 

would like to get a sense of where FEMA is in implementing reforms Congress enacted in 2012 and 2014. I would also like to hear 

about FEMA’s progress in implementing its administrative transformation efforts to improve the NFIP following Superstorm Sandy. 

3 

I look forward to working with Chairman Crapo and the Members of this Committee to strengthen NFIP and the country’s comprehensive approach to mitigating flood risk through a timely reauthorization. Welcome back. Thank you. 

Chairman CRAPO. Thank you, Senator Brown. 

Mr. Wright, you may proceed. 

STATEMENT OF ROY E. WRIGHT, DEPUTY ASSOCIATE ADMINISTRATOR FOR INSURANCE AND MITIGATION, FEDERAL 

EMERGENCY MANAGEMENT AGENCY 

Mr. WRIGHT. Good morning, Chairman Crapo, Ranking Member 

Brown, and Members of the Committee. Thank you for the opportunity to testify today. 

I want to discuss four core principles for reauthorization today: 

first of all, on-time, multiyear reauthorization; second, we need to 

increase the flood insurance coverage across the Nation through 

both an expansion of the private flood insurance markets as well 

as the National Flood Insurance Program; we need to address barriers to meeting the needs and demands of our customers; and, 

fourth, we need to bring transparency to the financial framework 

of the National Flood Program. 

As both Mr. Crapo and Mr. Brown mentioned, flooding is the 

most frequent and expensive disaster; 98 percent of the Nation’s 

population are in the 22,000-plus communities that rely on the National Flood Insurance Program. And we deliver for 5.1 million policyholders through 73 private insurance companies that participate 

with us. 

Due to the nature of flooding, impacts can vary significantly each 

year. After 15 years of lower-than-expected damages, Hurricanes 

Katrina, Rita, and Wilma hit the Nation in 2005. These three catastrophic events resulted in NFIP claims totaling 8 times the size 

of any prior year in the history of the program. 

Rather than directly providing the funds to meet these requirements, Congress directed the NFIP to pay for the catastrophic 

losses through funds borrowed from the Treasury. Paying the insured losses in 2005 required the NFIP to borrow $17.5 billion. 

In 2012, Hurricane Sandy hit the east coast and resulted in more 

than 144,000 claims. The program paid out an initial $8.4 billion 

to policyholders. With the corrective actions FEMA took, the NFIP 

has since paid out an additional $350 million. 

Since Hurricane Sandy, FEMA has been transforming the NFIP 

customer experience and improving oversight and engagement of 

our Write Your Own companies. FEMA, using its own authorities, 

has implemented a new appeals process, improved oversight of 

Write Your Own companies, with special attention to litigation. We 

have streamlined the process for making regular changes to 

FEMA’s relationship with the private sector partners. And we have 

begun to modernize the product to better provide the coverages 

that policyholders want and expect. 

The NFIP has also implemented changes to take a more 

proactive role in disaster readiness and response. 2016 is a case in 

point. We issued advance payments to policyholders of up to 

$10,000 while their full claims were processed. We increased the 

coordination with State insurance commissioners. We deployed our 

4 

insurance staff directly down range as part of the field operations. 

And we had far more proactive communication with policyholders 

and Write Your Own insurers. 

I would assert that FEMA’s performance in 2016 demonstrates 

the corrective progress we have made. While there was no single 

catastrophic disaster in 2016, the multiple flooding events in Louisiana, Texas, and several other States during Hurricane Matthew 

resulted in the third largest payout in the NFIP’s history. The incurred losses from 2016 events will total more than $4 billion. 

The residual debt from Katrina plus Sandy and then this past 

year’s loss leaves the program with liabilities to the Treasury now 

totaling $24.6 billion. Moving forward, the annual interest-only 

payments are nearing $400 million. So we are going to return to 

the core principles for reauthorization that I highlighted. 

First, the NFIP needs an on-time, multiyear reauthorization. 

Simply, the stability of the real estate and mortgage markets depend on this. 

Second, the reauthorization should recognize the need to increase 

flood insurance coverage across the Nation in both high- and moderate-risk areas. 

FEMA recognizes that there is a growing interest by private insurers to offer flood insurance protection. FEMA supports this because an insured survivor—regardless of whether they purchase 

their coverage through the NFIP or on the private market—will recover more quickly and more fully. To these ends, we must realize 

it will take time for the private market to adapt to the market currently served by a public program. 

If the private market were to glean only our lower-risk policies, 

the NFIP would be left with all of the highest-risk policies. This 

could lower NFIP premium revenue while increasing potential 

claims payouts. Such an action would leave the program with even 

more financial risk, with greater reliance on taxpayers and the 

Treasury each and every year. 

As we look forward, a number of opportunities could be explored. 

Congress could identify a future point in time by which flood policies for all new construction would be provided solely by the private market. When coupled with ongoing floodplain management 

and building code enforcement, these new residential structures 

would be built to insurable levels for risk that the private market 

could assume. 

Third, we need to remove barriers to providing policyholders the 

coverages they want and need, addressing higher coverage limits, 

single deductibles, and losses, including basements. 

And, finally, we would be better off in the future regarding the 

National Flood Insurance Program if we truly had a sound financial framework. We need to price the risk, make it plain, whether 

this is done through increasing premiums, reducing risk through 

mitigation grants, or discounts directed by Congress. The solvency 

of the program depends on it. 

Thank you, Mr. Chairman, for the opportunity to speak with you 

today, and I look forward to the conversation. 

Chairman CRAPO. Thank you very much, Mr. Wright. 

Before we begin the questions, I want to ask all of our Members 

to please stay very close to your 5 minutes. In the last hearing, 

5 

which I started doing this, we all started taking a minute or two 

more, and ultimately some of our newer Members had to sit around 

for a long time before we got to them. So I will follow this rule. 

I started it last time. But I just ask you, if you get close to the end 

of your 5 minutes, to wrap it up. 

Mr. Wright, between 2008 and 2012, the NFIP saw 17 short-term 

extensions and 4 expirations. What are the consequences for existing and prospective policyholders of letting the program expire? 

Mr. WRIGHT. We absolutely need to do everything in our power 

to ensure that this is done on time and for a multiple set of years. 

When this program expires or lapses, we put ourselves in a position that we have a dampening effect or even an absolute limiting 

effect on the real estate and mortgage markets. Any structure, any 

residential home that is going to have a federally backed mortgage 

needs to have the availability of flood insurance. When the program lapses, we cannot write new policies. 

Chairman CRAPO. All right. Thank you. Many States across the 

country have experienced the devastation of wildfires in recent 

years. In Idaho, recent wildfires have destroyed businesses, caused 

health problems, and scarred public lands. I am concerned that 

wildfires also make certain areas at a higher risk of flooding. 

Mr. Wright, can you walk the Committee through the impact 

wildfires have on flood risk? 

Mr. WRIGHT. Absolutely. So for those of you who are not from 

areas of the country where we deal with wildfires, after you have 

a fire there in that wildland area, you see those black scars. Those 

scars are ostensibly an asphalt slip-and-slide. When water hits it, 

nothing absorbs, everything conveys. And so for the 3 to 5 years 

immediately after a wildfire, the flooding risk in those adjacent 

areas at the bottom of that watershed increases. 

One of the things that the Committee did in 2012 was ensure 

that we had authorities related to post-wildfire, and so when a 

wildfire has been on public lands, our normal 30-day wait period 

is waived and homeowners can move promptly to have the coverages they need. Really, it is that 3- to 5-year period of time until 

that can regenerate and grow, but it clearly exacerbates the flood 

risk, sir. 

Chairman CRAPO. And is the authority that was already granted 

adequate? 

Mr. WRIGHT. I do think that from a flood insurance perspective, 

those authorities have proven useful. I think what I am not yet 

seeing is enough of an uptick after the event, after that fire, to ensure that there is sufficient coverage. So the ability to sell, the ability to make it available immediately, the authorities are there. We 

think we need to continue to collaborate on ways to make sure that 

people understand that risk and that they should be buying insurance in the immediate period afterwards. 

Chairman CRAPO. And if there were authorities that would help 

to mitigate the risk itself, that would be helpful as well. 

Mr. WRIGHT. It is, and so through some of the other authorities 

that FEMA has that have since expired under the Stafford Act, we 

ran a pilot so that post-wildfires, when many States or communities get the Fire Mitigation Assistance Grants, we were making 

available fire mitigation immediately afterwards. We considered it 

6 

an emergency protective measure, and there were a series of 

projects that could be done to stabilize that area to minimize that 

flood risk going forward. While outside of the Flood Insurance Act, 

the other part of my job related to the Stafford Act, I think that 

is the kind of authority that we could truly use again. 

Chairman CRAPO. Thank you. And in October 2012, Pew Charitable Trust noted that historically repeatedly flooded properties 

have accounted for just 1 percent of the properties within the National Flood Insurance Program policies, but about 25 to 30 percent 

of the claims. To what extent are repetitive loss properties and severe repetitive loss properties responsible for the program’s current 

financial problems? 

Mr. WRIGHT. So I want to take this from two angles. At the top 

forward piece, these repetitive properties are a drag on the program. They constitute a disproportionate kind of payout, and we 

need more authorities, I would say, to address that. I would highlight, though, that today there are multiple definitions of ‘‘repetitive loss’’ in the National Flood Insurance Act. We would do well 

to harmonize those, first of all; make it clear where we should go 

from a mitigation perspective; and I would assert to you we need 

to look at are there points by which they have experienced enough 

damage that if they are not willing to take the offer of mitigation 

and have us acquire that property, we need to look at whether or 

not we should still be making flood insurance available to them at 

the discounted prices that many of them receive with 

grandfathering subsidies. 

Chairman CRAPO. Thank you very much. 

Senator Brown. 

Senator BROWN. Thank you, Mr. Chairman. 

Mr. Wright, we have seen media reports that the Administration 

is considering cuts to the FEMA budget of 11 percent in order to 

fund the Mexican wall, the border wall. Regardless of your personal 

view of the wisdom of building the wall, tell us, if you would, what 

the effects of an 11-percent cut would be on FEMA’s flood mapping 

efforts. And how would cuts to the mapping budget square with the 

effort to improve flood mapping in order to better identify and mitigate the risk of flooding? 

Mr. WRIGHT. Senator Brown, I have seen the reports, and I think 

that at this point I am not aware that the final decisions have been 

made from the President’s budget, and so I think it is premature 

for me to speak about those specifics. I would refer you to the Office of Management and Budget. Once we see those, I would be 

happy to talk through those specifics. 

I think to your point, though, about mapping, we need to look at 

a couple of the elements. So this Committee helped insert an authorization level related to the mapping so that we would understand risk. That is at $400 million a year under the current act. 

We have never been appropriated equal to that level. For this past 

year, we had a combined mapping budget of about $311 million; 

$190 million of that was directly appropriated, and the balance of 

that was paid for by fees. 

We will see where the budget proposal comes down the road on 

this, but, clearly, the investment in mapping is one that requires 

7 

resources. And when we are looking broadly across a budget, that 

includes tradeoffs. 

Senator BROWN. Considering the pressure on the budget with a 

defense spending increase of whatever the President has called for, 

$50 billion up, and a major capital expenditure like the wall, it is 

hard to believe there is not going to be some hit that you are going 

to need to figure out when you determine these questions. 

One of the TMAC recommendations was developing a 5-year plan 

for map development. Talk to us about this plan and how it would 

further mapping improvements that we discussed at the hearing 

back 6 months ago. 

Mr. WRIGHT. Absolutely. So since that point, we have actively 

begun implementing that recommendation. It is being advanced in 

two ways. 

First of all, I am looking holistically at where does the program 

need to go. We are looking at technologies, what kind of investments. I would highlight particularly our attention to ensure that 

there is elevation data available across the Nation. 

But the second piece I think really gets to the root of the element 

that the Technical Mapping Advisory Committee asked us to address. This spring we are engaging with States across the country 

to begin to lay out what the sequencing of maps would be, because 

as we had done in the past and given the budget uncertainty that 

had been suspended, we used to go through a process so they could 

see it coming and they knew when we would be coming to their 

community next. Regardless of what happens in the budget, we are 

moving with the States to implement that recommendation now. 

Senator BROWN. In the September hearing, we discussed the tension between risk-based flood-insurance rates and affordable rates 

for low- and moderate-income homeowners. Congress 3 years ago 

directed FEMA to develop a draft affordability framework for the 

NFIP. What is the status of the affordability framework? And when 

do you expect to send it to us? 

Mr. WRIGHT. So the affordability framework is due to the Committee in September of this year. We have worked with the Government Accountability Office as well as the National Academies of 

Science in terms of building this. 

One of the things that we have been able to do since I saw you 

last fall was to begin a partnership with the Census Bureau by 

which we are going through and doing data matching of our policyholders against what we can know from census data. It is a controlled environment that is going to give us some better insights 

into it. We are already seeing very clear data that say that those 

who live in the high risk of flooding make tens of thousands dollars 

less than those who live outside on average. 

At this point, though, we are just at the beginning of getting 

those data. That is then being brought together with a series of 

policy options. I look forward to wrapping up that initial work inside the agency here in the next couple of months, and then we will 

begin the process of collaborating with the Administration in order 

to be able to transmit a report to you this fall. 

Senator BROWN. Thank you. 

Thank you, Mr. Chairman. 

Chairman CRAPO. Thank you. 

8 

Senator Kennedy. 

Senator KENNEDY. Thank you, Mr. Chairman. 

Mr. Wright, do you know a company by the name of U.S. Forensic? 

Mr. WRIGHT. I am aware of the company. 

Senator KENNEDY. I believe they got in a little bit of trouble representing some of the companies after Hurricane Sandy. Is that 

correct? 

Mr. WRIGHT. That is correct. 

Senator KENNEDY. What was that trouble? 

Mr. WRIGHT. And so they were involved in some of the cases 

where engineering reports were required after the event, and some 

of their work was sloppy at best or dead wrong at worst. 

Senator KENNEDY. They altered some reports, didn’t they? 

Mr. WRIGHT. That is my understanding. 

Senator KENNEDY. OK. And they were sanctioned by a Federal 

judge. Is that correct? 

Mr. WRIGHT. So there were a couple of companies from the engineering space that were involved in this. Given some things that 

played out with this, there were some sanctions that were done. 

What we have done is collaborate with the Attorneys General in 

both New York and New Jersey, as well as with the Department 

of Homeland Security’s Inspector General. Those are the folks who 

have the authorities and powers to follow through on those questions. 

I would highlight that one of the companies—not the one you are 

mentioning now—was convicted, given some work by the—— 

Senator KENNEDY. Well, you are familiar with the flooding we 

had in March and April last year in Louisiana. 

Mr. WRIGHT. Very much so. 

Senator KENNEDY. What is U.S. Forensic still doing engineering 

work now in Louisiana? 

Mr. WRIGHT. So I cannot prohibit the use of the company unless 

we have gone through a complete debarment process. The convicted 

company has been debarred. Otherwise, that is the collaboration 

that we are doing with the Inspector General. 

What I can do and have done is fundamentally change the quality control of all of the work that is done by engineers, so that as 

the various companies are involved in it, I can be assured of the 

outcomes. 

Senator KENNEDY. Well, the Federal judge in New Jersey accused this particular firm—these are the judge’s words, not mine— 

of ‘‘reprehensible gamesmanship.’’ That is not enough to get you off 

the list? 

Mr. WRIGHT. Based on that, we worked and are continuing to 

supply information to the State Attorneys General in New York 

and New Jersey who have the law enforcement capabilities to take 

actions against them. 

Senator KENNEDY. OK. Are you familiar with an attorney by the 

name of Gerald Nielsen? 

Mr. WRIGHT. I am. 

Senator KENNEDY. I believe he had some difficulties in representing some clients after Hurricane Sandy, too, did he not? 

Mr. WRIGHT. That is my understanding. 

9 

Senator KENNEDY. Could you tell me about that? 

Mr. WRIGHT. So I have never met Mr. Nielsen. My understanding 

is that he is employed by some of the Write Your Own companies 

to represent them in litigation. 

Senator KENNEDY. His firm that he was representing was sanctioned $1 million for violating discovery orders in litigation after 

Hurricane Sandy. Is that right? 

Mr. WRIGHT. I am not aware of the specifics related to sanctions 

related to him. 

Senator KENNEDY. OK. You are not familiar at all with that? 

Mr. WRIGHT. You listed a dollar value. I am not aware—I understand that he was called in to account by a judge, and based on 

this, I will tell you that more holistically, not just that action, I 

have looked at and continue to collaborate with the Inspector General to look holistically at the actions of these lawyers. 

Senator KENNEDY. Well, he is still representing the WYO companies, is he not? 

Mr. WRIGHT. My understanding is there are Write Your Own 

companies who still use him, yes. 

Senator KENNEDY. And why is that? 

Mr. WRIGHT. So they have choices to use lawyers. As they do 

that process—again, this goes back to the engineering side—if a 

lawyer has been debarred or disbarred, then I can prohibit their 

use. What I can do and did roll out last summer was fundamental 

changes to how we oversee all of the litigation work that is done. 

And so while I do not get to choose the lawyers, I do get to influence and ultimately direct the litigation strategy about when we 

should pursue that in court and when we should step back and say 

the right thing to do is settle on this case. 

Senator KENNEDY. Well, if I understand your testimony, you do 

not do anything unless somebody is disbarred if they are an attorney, or if they are an engineer unless they are what? 

Mr. WRIGHT. I can change the quality standards. I can hold them 

to those from a control perspective. The ultimate selection of those 

is left to the Write Your Own companies unless they have been 

debarred. 

Senator KENNEDY. And you do not have any influence whatsoever? You cannot pick up the phone and call these companies and 

go, ‘‘Hey, we have got some problems here’’? 

Mr. WRIGHT. Sir, I think the companies know my opinion of 

these various actors. The kind of open questions given their actions 

that brought on questions of the credibility of the program, I have 

spoken very plainly about that. But, again, sir, folks have rights to 

due process, and I do not have the ability single-handedly to remove any one player. 

Senator KENNEDY. Thank you, Mr. Chairman. 

Chairman CRAPO. Senator Menendez. 

Senator MENENDEZ. Thank you, Mr. Chairman. 

I am pleased that we are starting the process to reform and reauthorize the National Flood Insurance Program early so that we 

have enough time to fix this complex program once and for all. For 

231,000 New Jerseyans, this is an incredibly important program, 

as we saw in Sandy. And in the aftermath of Sandy, I saw firstVerDate Nov 24 2008 10:49 Dec 14, 2017 Jkt 046629 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 L:\HEARINGS 2017\03-14 ZZFLOOD DISTILLER\31417.TXT JASON
10 

hand all the problems with the program and the work that needs 

to be done. 

Sandy was a natural disaster, but the delays, the denials, the 

disputes they encountered throughout the flood insurance claims 

process, that was a man-made disaster—the arbitrary rules, inflexible deadlines, the gaping loopholes, the ‘‘gotcha’’ clauses, the 

chronic underpayments, the constant run-around. 

So with this experience fresh in mind, I am eager to lay out the 

reforms that I hope the Committee will fight for in the days and 

weeks ahead. Certainly I will. My goal is to make the Flood Insurance Program simple, affordable, fair, efficient, and accountable to 

consumers and taxpayers. Americans deserve a program that is 

sustainable for taxpayers, affordable for homeowners, and accountable to everyone. 

Now, I would like to follow up on Senator Kennedy’s questions 

about the Nielsen firm. In the aftermath of Sandy, thousands of 

New Jerseyans faithfully paid their flood insurance premiums for 

years, often decades, without ever making a claim, and then had 

the rug pulled from underneath them when they were significantly 

underpaid by FEMA’s private insurance contractors. And the appeals process, which was fundamentally broken at the time, many 

were forced to go through the frustrating, time-consuming, and expensive process of going to court to get what they were entitled to. 

FEMA’s private contractors account for more than 90 percent of 

the cases the Nielsen law firm did everything in its power to drag 

out the proceedings, draining time, resources, and money from 

Sandy victims who had little to spare of each. Rather than work 

in the interests of justice, the Nielsen law firm filed countless frivolous motions seeking to run up their legal fees, which Nielsen himself bragged would surpass $100 million. 

To add insult to injury, these millions of dollars came partially 

from the very policyholders he was fighting in court. He dealt with 

Sandy victims like they were the perpetrators, enriching himself as 

their expense, bullying, scaring people out of court, hiding documents. And when they finally got caught and were excoriated by 

a Federal judge for a ‘‘shocking effort to curtail inquiry’’ and a level 

of admonishment rarely seen in Federal litigation, the judge said, 

‘‘I find that counsel for Wright violated its obligations to comply 

with this Court’s discovery orders . . . unreasonably prolonging 

this litigation, imposing unnecessary costs upon plaintiffs and further contributing to the unwarranted delays.’’ There is not a morsel 

of regret by that firm. 

So to my knowledge, this law firm is still representing Write 

Your Own’s in lawsuits. Isn’t that true, Mr. Wright? 

Mr. WRIGHT. That is my understanding as well. 

Senator MENENDEZ. So a firm with such a troubled and possibly 

illegal past can be given the opportunity to represent FEMA even 

though they have such a record? 

Mr. WRIGHT. Yes, sir. 

Senator MENENDEZ. Well, so are you telling me that FEMA does 

not have hiring and firing authority for these attorneys, even 

though FEMA is on the hook financially and has its reputation on 

the line? 

Mr. WRIGHT. We do not. Instead, what we have is two things. 

11 

In the aftermath of Sandy—and you were involved with my predecessors to move much of this along the road—FEMA withdrew all 

of the cases so that we could personally manage those with our 

staff. 

And, second, we changed the way by which litigation oversight 

takes place going forward. 

Senator MENENDEZ. Would giving FEMA the authority to choose 

or at the very least approve a private attorney’s representing them 

help you control legal expenses and speed up the resolution of lawsuits? 

Mr. WRIGHT. I think it is one of the elements, sir, that we need 

to look at. 

Senator MENENDEZ. Let me ask you in a different context, Write 

Your Own’s, FEMA contracts with private insurance companies to 

sell and service its flood insurance policies. Despite taking on none 

of the risk, these Write Your Own’s, as they are known, reap significant profits from the program. In fact, estimates show that the 

Write Your Own’s pocketed more than 43 cents of every dollar in 

premiums in the year Sandy hit. That is an awful lot of money for 

an insurance company that does not bear any of the risk. 

Is it appropriate for these private companies that have no skin 

in the game to receive more than a third of all premiums collected? 

Mr. WRIGHT. Mr. Menendez, we need to pull down the costs; we 

need to make all of this far more efficient. I would want to highlight for you, though, as we look at compensation, you know, as we 

look at the standard compensation of 30.5 cents, the first 15 to 17 

cents go to agents who are small business owners in your State. I 

want to make sure that we are fair to them. They are the sales 

force we need on the ground. We then look at the State taxes we 

also pay out of that. So I can look at the dimensions of it. You guys 

have directed us in the last cycle to change this. We are in the 

process of taking that on from rulemaking. We have collaborated 

with the Government Accountability Office whose report on this, I 

think in December, is one that I have learned quite a bit from. 

But to simply say it, sir, we need to pull down the costs. We need 

to make this more efficient as we go forward. 

Senator MENENDEZ. Well, Mr. Chairman, 43 cents on every dollar to a private insurance company that is not on the hook for anything does not seem to me to be a system that ultimately works 

in the interest of the taxpayer. I have a lot more questions. I will 

submit them for the record. 

Chairman CRAPO. Thank you, Senator Menendez. 

Senator Rounds. 

Senator ROUNDS. Thank you, Mr. Chairman. 

Let me provide a little bit of the other side of this. In my former 

life, I was a property and casualty agent, and the agency that we 

had actually participated in the Write Your Own Program, and we 

wrote flood insurance through a private carrier, and we did it as 

much as a service for those individuals that we wrote their other 

property and casualty for. It was a challenging part, and yet writing it through a carrier that you also did other business with made 

it easier to work through the processes. 

I agree with you that the reauthorization is critical and that it 

should be timely and that it should be one that runs over a period 

12 

of years. I also agree with you that there should be more insurance 

coverages being written, particularly those in areas in which you 

are actually collecting a fair premium for a fair risk, meaning those 

with less hazards. 

Personally, I have flood insurance on my home, and in looking 

at how that was written, it is in a category which is the least expensive of the categories. But there is a limit on it of $250,000 for 

structure, and at one time I think that would probably cover a lot 

of the structures that are out there. But as homes have continued 

to increase, if you look at the insurance values, most insurance 

companies that write homeowners’ coverages will tell you that they 

want to be able to insure to the value of a home, and the reason 

is because, in the case of a loss, you are always going to, as the 

carrier, pay for that part of the loss, unless you have a contract in 

place that says if you are not fully insured they are only going to 

pay a percentage of the loss involved. 

I am wondering if the National Flood Insurance Program should 

perhaps take a look at either increasing the total amount of structure coverage, particularly in those areas where it would be perhaps more profitable to write and, thus, gain more premium dollars, and also it looks to me like since you have a larger risk in 

some of your homes, you avoid the adversity of insuring the first 

$250,000 of any loss that occurs. 

Have you thought about that in terms of what your options 

might be? 

Mr. WRIGHT. Yes, sir, and I appreciate the question and the nu- ance that you have offered inside of this. The $250,000 limit is set 

by statute. It was last adjusted in 1994. Very clearly, the value of 

homes has gone up over the last 20-some-odd years. 

We would benefit from an increase in that. I think at the time 

that number was calibrated to the kind of Freddie/Fannie side of, 

you know, those conforming loans. That number sets up at 

$427,000 today. And there is a very real problem, in my estimation, 

related to underinsurance that you are highlighting there by which 

ostensibly a $250,000 full payout on that policy could very well just 

be a 50-percent loss. 

And so this is an adjustment that I would be happy to work with 

you all on. It is one that should be addressed. 

Senator ROUNDS. It most certainly would bring more what I 

would call ‘‘healthy’’ or ‘‘profitable’’ premium dollars into the program. 

Mr. WRIGHT. Well, and I think this is an important point. To the 

degree that we allow that to go up, I would assert that it should 

only be on the actuarially sound rates only—— 

Senator ROUNDS. Yes. 

Mr. WRIGHT. ——so that we are not increasing the risk on the 

grandfathered and pre-firm side of the equation, and it would increase the revenue into the program and help us remain more financially sound. 

Senator ROUNDS. It would seem to me, though, also that you may 

be working at odds against yourself if all new construction you 

were looking at—if you simply allowed that to be written outside 

the program, it would appear to me that you are basically taking 

older homes then and you are not taking newer homes that may 

13 

very well be in areas with appropriate flood protection. I think I 

would caution against a broad approach suggesting that the flood 

insurance not participate in those markets as well. 

Mr. WRIGHT. So I appreciate that, sir. As I look at it, there has 

been a desire from many to see the private market expand. And 

from a public policy perspective, the more people who are covered, 

the better. I want people covered whether it is through private or 

through—— 

Senator ROUNDS. But if you are taking the risk on the rest of it, 

you have to spread the risk. If you take the healthiest, as I would 

call it, of the premium dollars, the most profitable, and allowing 

the outside market to have that, that hurts you in the long run 

with the National Flood Program. 

Mr. WRIGHT. Over a 10-year horizon, it would. You are correct. 

Senator ROUNDS. Thank you. 

Thank you, Mr. Chairman. 

Chairman CRAPO. Senator Tester. 

Senator TESTER. Let us follow on with that conversation, and 

that is, if private insurers are allowed into the marketplace, then 

we have a bill to do that. And they take up the lowest-risk policies 

and leave you with the highest-risk policies. And I know you said 

that the more people insured, the better. Doesn’t that put your 

NFIP in a greater risk situation? 

Mr. WRIGHT. Whatever we do down this line needs to be measured in terms of what it sees to go forward. Ceding some space to 

the private markets, which has been—and I know that you have 

advocated for that in your bill—there are a lot of folks who do not 

have the coverages they need. And so I will approach the entry, or 

expansion because they already exist in the market today on the 

private sector side from a mutual gain theory, as long as we mutually gain. 

What I have to see us guard against is a point by which they 

start culling through my book, which is why I looked at the new 

risk and said if we are going to give some space, let us give it on 

the new side. What I do not want them doing is arbitrarily culling 

through the book, taking the lowest risk, and leaving us—we are 

already the residual market. We would move to the insurer of last 

resort. And at that point, Mr. Tester, I am convinced we would be 

in a position by which we would require infusions of cash every single year. 

Senator TESTER. So—and if you do not today, I would not expect 

you to have—do you have any recommendation on language that 

could prevent that kind of culling through the books? 

Mr. WRIGHT. So I can follow up with you. I think one of the elements has to do with what we do with the ‘‘noncompete provision’’ 

that is in our current arrangement. Some people misunderstand 

this. Agents have no prohibitions. The only people who sell policies 

are agents, and they can sell whatever product they want to sell. 

Senator TESTER. Yes. 

Mr. WRIGHT. What we say to the Write Your Own’s, frankly, the 

way any business would work, is you have all of our proprietary 

data; it is covered in our instance, because we are a Government 

program, under the Privacy Act. You cannot arbitrarily cull 

through that and say we want to take one-third of the policies and 

14 

shift them off the book because you have an insight that no one 

else has. 

Senator TESTER. Got you. OK. 

You talk about an on-time, multiyear reauthorization. I assume 

you are talking 5 years, or are you talking a different number? 

Mr. WRIGHT. Senator Tester, multiyear is what matters to me. 

You know, I look at the kind of complexity of this that sits in front 

of us. Multiple years. 

Senator TESTER. OK. So the recommendation from NFIP is you 

do not really care if it is 3, 5, or 7, just so long as—— 

Mr. WRIGHT. As long as we have multiple years. We need to see 

consistency in the marketplace. 

Senator TESTER. All right. 

Mr. WRIGHT. The last time, Congress did some work in 2012, 

came back in 2014. I am less concerned about that than in showing 

there is stability in the marketplace. 

Senator TESTER. OK. You also talked about pricing risk, and a 

lot of that risk pricing deals with maps. We have gotten a lot of 

feedback on the accuracy of the maps from the people who live 

there in different places, and maybe some of them are wrong, but 

some of them are probably right, too. 

Do you guys have any idea on how accurate the maps are at this 

moment in time as far as your ability to price risk? Are they 10 

percent accurate, 90 percent accurate, or 75 percent accurate? 

Mr. WRIGHT. So I believe that the maps today are credible. In 

2014, you all directed us to work with the Technical Mapping Advisory Committee to look at this, and last fall, the Administrator of 

FEMA certified the credibility of the product. 

There is an open question related to precision, which I think is 

where you are going with this. 

Senator TESTER. That is correct. 

Mr. WRIGHT. And precision comes down to how much can we afford to buy. It is a resource question. Precision costs more money. 

So what we have tried to do is collaborate with communities, ensure that we are getting the data from them so that we are not duplicating any effort, and continuing to build on this. I am convinced 

that the technology can help us, but one of the predicates on that 

requires us to have digital elevation data in all of these all across 

the country. 

Senator TESTER. Very quickly so I do not not obey the Chairman, 

but the map revision process for communities, are you happy with 

that? Is it timely? 

Mr. WRIGHT. So the map revision process can and needs to go 

faster. 

Senator TESTER. Yes. 

Mr. WRIGHT. But let me nuance it down two lines. I am particularly looking—I think we should work with the Committee on this. 

When a community is submitting data and it is submitted and it 

goes through the early processes without objection, I would like to 

see us hit the accelerator on it. 

Senator TESTER. OK. 

Mr. WRIGHT. I want to be careful not to remove the due process, 

because a community may think this is a good idea, but an affected 

property owner wants to be able to appeal. We have got to hold 

15 

that tension together. But when the community is bringing me the 

data, we do not see objection, we should hit the accelerator. 

Senator TESTER. Thank you, and I apologize, Mr. Chairman. 

Chairman CRAPO. That is all right this time. 

Senator Scott. 

Senator SCOTT. On behalf of Senator Tester, I will yield back 21 

seconds before I am finished here. Do not worry. 

[Laughter.] 

Senator SCOTT. Mr. Wright, thank you for being here this morning, and my question really does piggyback on Senator Tester’s and 

your conversation around technology, where we are and what kind 

of technology are we using today, what kind of technology are we 

going to, and how will that technology open the door for the private 

sector to become, the private insurers to become more involved in 

it. Because as I look at the State of South Carolina, we are in desperate need of remapping, and you are going through that process, 

which, of course, causes consternation and challenges as well. 

Communities like Beaufort County, where Hilton Head is—most 

of us know where that is—has not been remapped in about 20 

years, which is consistent, I think, throughout the State. 

The 1,000-year flood that we had in 2015—and I will say that 

FEMA did a pretty darn good job, so thank you for your participation and your assistance during that challenging storm. The reality, however, is that most of us would assume that in South Carolina the coastal exposures received a lot of the pain and suffering, 

when, in fact, as you know, the inland communities—Florence and 

Columbia because of the dams that were broken and other situations—challenged folks who never heard the words ‘‘flood insurance’’ from their agent—— 

Mr. WRIGHT. Right. 

Senator SCOTT. ——because there was never a thought that it 

would be needed. I think about the same situation in Louisiana 

and around the country where the flood impact is now in areas 

that are likely not mapped for it, perhaps impossible to do so, but 

if we are going to have more private insurers coming into the market hopefully to help reinforce the market, and we are going to 

have better predictions on where the possibility of the impact will 

be, the last few storms suggest that we have some ways to go, or 

perhaps it is just not possible at this point to get there. 

Mr. WRIGHT. So there are maps under development, and so in 

the case of South Carolina, we pass 100 percent of those funds directly to the State through a Cooperating Technical Partnership, 

and they provide the leadership on the ground for this. So even in 

Beaufort County, those maps are in draft and working with the 

community, but they are not yet in effect. 

Let me talk about the inland piece, and let me go to technology. 

From an inland perspective, you are absolutely right. It is interesting. I talk to the folks on the coast, and they go, ‘‘Well, we survived this.’’ I am, like, ‘‘Whoa, whoa, whoa. What you survived is 

not what the communities in Florence and Columbia and others 

did.’’ 

From an insurance perspective, it did go well beyond the highhazard area that was mapped, but I would tell you we had an inVerDate Nov 24 2008 10:49 Dec 14, 2017 Jkt 046629 PO 00000 Frm 00019 Fmt 6633 Sfmt 6633 L:\HEARINGS 2017\03-14 ZZFLOOD DISTILLER\31417.TXT JASON
16 

surance problem inside the high-risk area, way too little participation and penetration. 

Senator SCOTT. Always do. 

Mr. WRIGHT. And particularly in the neighborhoods that I was 

in. I know that you traveled through that area as well. A lot of 

these were renters, so they were landlord-owned. And so I look at 

the renter side of the equation. Only 1 percent of my book is sold 

to renters. And how do we help them understand that for $100 or 

$150 they could have an amazing amount of coverage so that they 

could rebuild their lives? 

To the technology point, when you do a map, you have got to 

have a ground elevation; you have got to know how much water is 

going to come and how deep it is going to be. And then, finally, how 

does it interact with the built environment? We have to have good, 

solid ground elevation data. We do that with LIDAR technology. 

Frankly, we need that across the country, and right now we buy 

that in piecemeal. But if we had that combined with where the 

structure locations are—and we are making progress there, but not 

fast enough across the country. I think technology takes a much 

larger bump. At that point we could literally have people with their 

smartphones showing us pictures of where their base floor is. We 

could write it in a much simpler way. I do agree with Senator 

Menendez we need to have a simpler product than we have today. 

It is far too complex, and technology helps us get there. But technology even helps meet the point of the claim. High-end claims still 

need an adjuster on the ground, but if I am looking at a wet carpet 

style claim for $10,000 to $15,000, some pictures taken in an app 

on your phone is absolutely sufficient for us to be able to move. 

Senator SCOTT. Having sold flood insurance for a while, I thank 

God that I no longer sell it. But it was an important part of what 

we did for a living, and trying to find a way to mitigate the concerns of the average person in the average place in the country, 

and specifically in South Carolina, is a troubling task for the private sector. 

Mr. WRIGHT. Yes. 

Senator SCOTT. Socioeconomic impact, a lot of folks think about 

Hilton Head, Kiawah, many of the coastal exposures, and think 

about the colossal palaces built on the coast. The reality of it is 

that there are a number of heirs property where you have small 

structures with folks who simply cannot afford—since Tester has 

left, I am going to reclaim my 21 seconds—any real increases in 

flood insurance. 

Is there a method to measure and/or compensate for the socioeconomic areas or no? 

Mr. WRIGHT. So today under the act, I do not have any authority 

to look at socioeconomic impacts. As we look at the affordability 

study that I was asked about a bit earlier, we are looking at these 

dimensions. We will be able to bring more information forward to 

you. 

Senator SCOTT. Thank you. 

Chairman CRAPO. Senator Schatz. 

Senator SCHATZ. Thank you, Mr. Chairman. 

17 

As you know, by statute FEMA is required to reevaluate the 

flood insurance maps every 5 years. What is the percentage of 

maps that are actually redrawn every 5 years? 

Mr. WRIGHT. So at the 5-year piece, we do an evaluation of them. 

In many cases we find that they are sound and can be maintained. 

At other points the investment needs to be made. 

Senator SCHATZ. Are you reevaluating all of the maps every 5 

years? 

Mr. WRIGHT. We are doing that evaluation every 5 years. The flip 

side of this goes to the mapping side. Once I know that, I then 

have to have the resources to invest. Today about 59 percent of the 

stream miles meet standards. So once we get to that point, I have 

got a gap that I need to fill. 

Senator SCHATZ. So 59 percent are meeting your standard, 41 

percent need—— 

Mr. WRIGHT. Require additional investments and engineering 

and analysis, yes, sir. 

Senator SCHATZ. OK. And you are saying that the map—the 

maps are credible but not precise. Is that correct? 

Mr. WRIGHT. Yes, sir. 

Senator SCHATZ. What does it mean to be credible but not precise? 

Mr. WRIGHT. So we have a way, given what we know about the 

ground elevation, given what we know about the amount of water 

and where the structures are, we draw a map. We start looking at 

things structure by structure by structure, and there is a level of 

precision when they do that radar-based elevation. And we have 

some parts of the country where, you know, 6 inches means you are 

in or you are out, and many of these kinds of pieces start getting 

into I want you to know that my ground floor is actually 3 inches, 

6 inches higher than what we were able to do in our watershedbased analysis. 

Senator SCHATZ. And in the big picture, obviously, the more precise, the lower the risk, and the better the risk pricing is. Is that 

correct? 

Mr. WRIGHT. The more precise is actually going to move people 

in and out, so when you get to—— 

Senator SCHATZ. Sure, there will be winners and losers for sure. 

Mr. WRIGHT. Precision increases our ability to address the concern about exactly who belongs—— 

Senator SCHATZ. To price risk accurately. 

Mr. WRIGHT. Yes, sir. 

Senator SCHATZ. And what you are saying is it costs money to 

do the redrawing of the maps. 

Mr. WRIGHT. Yes, sir. 

Senator SCHATZ. And that is something that the Committee has 

to authorize and then has to be appropriated? How does that work? 

Mr. WRIGHT. Correct. So in the current—based on the 2012 authorization, Congress authorized $400 million a year; that is paid 

in a combination of appropriated dollars and fee. Today, or at least 

in 2016, there were—$311 million was as much as we brought. 

Senator SCHATZ. So your current funding allows you to do about 

a little less than two-thirds of what needs to be done. 

Mr. WRIGHT. Yes, sir. 

18 

Senator SCHATZ. OK. And according to the American Action 

Forum, of the approximately 1.5 million structures in the special 

flood hazard areas that are required to have flood insurance, almost half are not in compliance with the law. First of all, do you 

agree with those numbers? 

Mr. WRIGHT. So as we look at this element, there are a lot of 

data regarding how many structures are or are not under the mandatory—— 

Senator SCHATZ. Well, let me ask the question this way: What 

is your estimation of the rate of compliance? 

Mr. WRIGHT. So I have seen reports from 35 percent to 55 percent in terms of the compliance. It varies different places across the 

country. 

Senator SCHATZ. Is it your job to get that number up? 

Mr. WRIGHT. Sir, I do not under the act have the responsibility 

or authorities related to mandatory purchase. Those belong to the 

lending regulators, including the Office of the Comptroller of the 

Currency. 

Senator SCHATZ. OK. And I am sure you are aware the number 

of billion-dollar disasters has grown significantly in recent years, 

from an average of fewer than 3 per year in the 1980s to 15 last 

year. As you know, FEMA does not have the luxury to pretend climate change does not exist because it deals with consequences on 

a daily basis. Without getting you into a political conversation, how 

does the NFIP account for sea level rise and the increased severity 

of storms that are coming with climate change? 

Mr. WRIGHT. Thank you for the question. We have responsibilities and authorities under both the Stafford Act as well as the National Flood Insurance Act to concern ourselves with future risk. 

Climate is one of those. I would also point out the continuing development in the built environment also is part of that risk. Those authorities are very plain, and they continue to be ones that we implement. 

The Technical Mapping Advisory Committee brought me a series 

of recommendations related to future risk last year. Some of them 

require new science to frankly be developed, but we are beginning 

to make progress on that. 

I would draw the distinction, though, on future risk, whether it 

is climate or through changes in the built environment. We only 

charge premiums based on today’s risk. I do not charge someone 

a premium based on a risk they will not experience for 20 years. 

But the other side of the program has to do with land use, and the 

point by which future risk needs to be absolutely taken hold of says 

we are building today knowing that these risks continue to change, 

and we expect them to grow in some particular areas. We should 

be building higher and stronger every single time so that those who 

live there, those who own those homes going forward, will be able 

to withstand whatever comes their way. 

Senator SCHATZ. Thank you, and I will just add that with respect 

to the built environment, point taken. With respect to climate 

change, it is both a current and a future risk at this point. 

Thank you, Mr. Chairman. 

Chairman CRAPO. Thank you. 

Senator Heller. 

19 

Senator HELLER. Mr. Chairman, thank you. And, Mr. Wright, 

thank you for being here also. 

A quick question. How familiar are you with the current flooding 

situation in Nevada? 

Mr. WRIGHT. I am familiar with what has played out in recent 

weeks, both up in the Carson City area, particularly there in that 

whole western part around Reno. 

Senator HELLER. Thank you. We have four counties right now 

that have submitted for Federal help and have received it from the 

Administration. We are certainly appreciative of it. We have had 

200 percent precipitation after 5, 6 years of drought. It is kind of 

nice to see it. We would wish that, you know, it would not come 

all at once, but it did and we are not going to complain about it. 

But we have the obvious concerns that are going to occur. 

Last week, I joined with my colleague Senator Masto, the Governor, and Congressman Amodei on a second request. Are you familiar with this second request? 

Mr. WRIGHT. I understand that a second request is being reviewed at this point. No decision has been made. 

Senator HELLER. And I am aware of that also. My biggest fear 

right now is going to be runoff this spring. We have got 200 percent 

snowpack up in the mountains, what that is going to bring, and if 

it is unusually warm this spring, you can imagine the concerns 

that we might have. 

What I guess I need from you is a commitment that FEMA will 

be proactive in helping these Nevada communities as they prepare 

for flooding soon. 

Mr. WRIGHT. In much the same way as we did for the events in 

the prior weeks, we will be there. We will partner with the Governor in terms of the requests that come this way. My brother lives 

in Carson City. I saw the pictures from this last piece, the water 

literally coming down the road. It is clearly a place by which we 

need to cooperate with those local emergency managers, but also 

for those who have flood insurance, I want to make sure that there 

is timely payment of any claims that come in for those—— 

Senator HELLER. That was my next question, the commitment 

for those timely payments to these local communities. 

Mr. WRIGHT. Absolutely. And so the kind of changes we have 

made to push out advance payments early to them so they have 

early dollars on the ground, and the commitment you can have 

from me is as we see those pieces coming forward, we will stay in 

touch with you and make sure that all the needs are met. 

Senator HELLER. And I appreciate those comments. We have in 

northern Nevada a combination of Reno, Sparks, Washoe County, 

and the U.S. Corps of Engineers, they have been working on a flood 

control program for the Truckee River as long as I have been here 

in Congress. And it is progressing, but obviously funding is the 

mechanism by which they can complete that particular project. 

Obviously, the U.S. Corps of Engineers plays a major role, but 

how can FEMA provide more mitigation, financing resources for 

community-level flood control projects? 

Mr. WRIGHT. So there are two separate lines on this. When we 

are looking at projects the Corps of Engineers is authorized to do, 

without violating the duplication of programs, I cannot commingle 

20 

with them. Congress has to appropriate those dollars and move 

them forward. There are other projects in the affected area, and we 

do have grant programs that the States can avail themselves to 

specifically related to flood mitigation. But if it is that specific larger-scale project that the Corps of Engineers is doing, I can only 

work through their appropriation lines. 

Senator HELLER. All right. Mr. Wright, thank you very much for 

your time. Thank you for being here today. 

Mr. Chairman, I will turn it over. 

Chairman CRAPO. Thank you, Senator. 

Senator Van Hollen. 

Senator VAN HOLLEN. Thank you, Mr. Chairman. Thank you, 

Mr. Wright, for your testimony. 

I want to talk a little bit about the Flood Insurance Program 

through the lens of a really bad flood not far from here in Ellicott 

City, Maryland—not a coastal area, an inland area. And the title 

of an article that came out after the flood last summer was, ‘‘Flood 

insurance woes push Ellicott City businesses under heavy water.’’ 

And it documents a number of scenarios. One are the people who 

did not buy flood insurance; they thought it was too expensive. But 

I want to focus on some that did buy either flood insurance or 

thought they were covered by other insurance. 

Some that bought flood insurance say that the companies were 

reneging on their promises, shirking claims, and offering limited 

coverage, leaving many small businesses unsure of how they will 

recover from uninsured losses that are in the thousands of dollars. 

These are small businesses on Main Street in Ellicott City. 

One person in particular, Robin Holliday, who is the owner of 

HorseSpirit Gallery, which is a fine art gallery, said she had been 

duped by her flood insurance provider. She purchased a policy that 

covered $150,000 in damages, but the company only covered $2,500 

for art damaged by the flood. 

A couple questions. One, where is the recourse for one of these 

people who feels that they have been totally taken advantage of? 

Is it through the State insurer? Is it through you? Is it a combination? How do we make sure people get recourse without people 

pointing fingers at one another? 

Mr. WRIGHT. Absolutely. So a very deep flood in the historic section of Ellicott City. We had about 70 insurance claims that were 

filed with the National Flood Insurance Program. We talked a bit 

earlier about the private markets, but I want to touch on this because many businesses buy their coverage on the private market, 

not from me. And so the first thing we have got to find out is: Was 

it through the National Flood Insurance Program? Or did they buy 

this through their broader commercial policy? 

That said, we stood up an improved appeals process last year. To 

the degree that they are not satisfied with the adjudication of that 

claim, they have rights to come into our appeals process and have 

that absolutely reconsidered. 

Senator VAN HOLLEN. Good. We are going to want to work with 

you on that. 

Now let me ask you about business interruption insurance because, as I understand it, the current Flood Insurance Program 

does not cover that. Is that correct? 

21 

Mr. WRIGHT. That is correct, sir. 

Senator VAN HOLLEN. And there are a lot of people who they 

may not have flood insurance, but they bought this business interruption insurance in the event that their business is hit by a catastrophic event. And just to quote somebody who had major losses 

as a result of that, the owner of the Southwest Connection and 

Fudge Shop, again, on Main Street, found out that that business 

interruption policy would have covered civil unrest, it would have 

covered fire, it would have covered an earthquake, but it did not 

cover flood. 

So my question to you is: In order to avoid confusion, should we 

consider allowing you, through the Federal insurance program, to 

offer some kind of product with respect to business interruption insurance? And would that not, number one, protect people who 

thought that they were covered? Because there is a lot of confusion 

here. And could it also maybe help you increase your pool? 

Mr. WRIGHT. So I absolutely think—and this goes—that we need 

to explore this. Today the act requires me to list all the terms and 

conditions of the policy, standard flood insurance policy, in the 

Code of Federal Regulations. My agency is not fast to do rulemaking. On average, it takes 7 years. And so one of the steps we 

could do through reauthorization is remove the requirement for me 

to have all the terms and conditions in regulation. It still should 

go through a public process and be transparent. But that would 

open up these opportunities, and we can look at any other kind of 

barriers so that we can offer the coverages people want. 

I think as we look at this, when too many people are not covered—and we saw much of that in Ellicott City. But when people 

do have the coverage and they do pay for that, it is the kind of 

piece by which we should offer them on an actuarial basis the coverage they want. 

Senator VAN HOLLEN. I look forward to working with you on this, 

Mr. Chairman, because as you can imagine, there are a lot of people who they have been paying their premiums, and then, you 

know, disaster strikes. They say to themselves, ‘‘Hey, you know 

what? This is why I have been paying these premiums day in and 

day out for my business interruption insurance,’’ only to discover 

that that is not covered. And it would be very helpful and avoid 

a lot of the confusion if we could work with you so you could provide that kind of product. 

Just a comment with respect to the intensity of weather events 

and costs driven by climate change. I would say that in my State 

of Maryland, Mr. Chairman, in Annapolis, we have the Naval 

Academy. We had a hearing there maybe a year and a half ago, 

and the superintendent of the Naval Academy, the Admiral, testified about much increased flooding in Annapolis that was causing 

more severe damage to his facility, which he attributed—this is the 

Admiral—to climate change and the intensity of weather events 

such that we have been seeing. 

So I would point out and I think you know, Mr. Wright, that a 

lot of actuaries are now talking about the importance of costing in 

the impact of climate change, and it sounded to me from your answer like you are taking into account those costs and those risks. 

Is that the case? 

22 

Mr. WRIGHT. We do take into account the future expected losses. 

For me—and part of this was the nuance I was trying to drive— 

you highlight a place—and we see this play out in places like Annapolis where they are having sunny-day flooding that are playing 

out for them. Those kinds of pieces absolutely demonstrated in the 

maps, brought into the cost. 

There are risks that have not yet been realized. Those are the 

kind that we try to do through land use, hoping to ensure that people are not there or they are built higher and stronger, rather than 

waiting until the day that we have to raise their premium. 

Senator VAN HOLLEN. Thank you. Just to Senator Schatz’s point 

then, those costs you are already seeing them obviously in places 

like Annapolis. 

All right. Thank you, Mr. Chairman. 

Chairman CRAPO. Senator Tillis. 

Senator TILLIS. Thank you, Mr. Chair. I apologize for being late. 

We have a competing Senate Armed Services hearing that I am 

bouncing to and from. 

Mr. Wright, thank you for being here. In North Carolina, we had 

the Matthew event not long ago and other water events that have 

really demonstrated the challenges that we have around trying to 

mitigate the future risk of flooding in the urban areas and rural 

areas across the State. Could you talk a little bit to me about what 

we should—what you would like for us to do or what the Department or what FEMA is going to do to possibly increase some of the 

work that would come under ICC, particularly in communities 

where we are trying to go into Fayetteville where we have got a 

clear indication of threats after Matthew, and in Mecklenburg 

County, what more we need to do there? I know when you were 

asked the question over in the House committee, you were saying, 

‘‘It sounds like a great idea. I would need more revenue.’’ But has 

there been any work done to project what the long-term savings 

may be if we were able to make that investment? 

Mr. WRIGHT. So we have not fully studied the various increments 

of increase. So the increased cost of compliance is a mini-grant program inside an insurance program that we run. It is 30,000 today. 

It does not—and this is very clear to us. It does not cover the full 

cost of elevating a home to bring it into compliance. It is simply 

assisting with that. 

For me, this goes down to should we continue to view it as a 

grant program or should we view it as an insurance provision the 

way that laws and ordinances coverage might look. Clearly, for the 

homeowner that lives there, that kind of investment would not only 

raise the value of their home but ensure that they could withstand 

the—— 

Senator TILLIS. What about an instance where maybe a local 

county is trying to acquire property that does not have a building 

on it to basically—to reduce the risk of any sort of flood damage 

when and if that particular property is flooded in the future? 

Mr. WRIGHT. So I would not view that one through the increased 

cost of compliance, but I would look at in terms of the other grant 

programs we offer through flood mitigation and the like. We have 

partnered—I think Charlotte–Mecklenburg is actually held up as 

one of the best examples in the country in terms of what does it 

23 

mean to acquire property. Essentially, how do you make room for 

the river as a way to mitigate those future losses? 

Senator TILLIS. I would like to talk a little bit about your IT 

modernization projects within FEMA and then also talk about 

what you would consider to be the best way to get the topological 

data that we need going forward in terms of mapping. You are 

probably familiar with North Carolina. We are using different 

kinds of techniques to do mapping, LIDAR being one of them, 

versus the traditional send a surveyor out and capture data. So it 

is a two-part question. One, let us just talk about your general IT 

modernization. The other one is maybe increased collaboration with 

States and different techniques getting the information we need to 

have a better handle on the future risk. 

Mr. WRIGHT. So on the IT modernization piece, let me go to my 

insurance operations dimension. We continue to use a mainframe, 

and so we have kicked off—and have done a lot of reviews over the 

last 2 years. There had been a couple of attempts at modernization 

that had not produced the successes that were necessary. We have 

changed our approach on this, and recently we were given approval 

last fall from the Department of Homeland Security and Office of 

Management and Budget to proceed. Rather than do the big Waterfall overflow, we are doing an Agile Development Process, and the 

first couple epochs will begin to come out this spring, starting with 

data analysis, but then we will move to the financial dimensions 

and the like. 

On the technology related to mapping, the LIDAR-based technologies that are used in the State of North Carolina are the only 

technologies that meet our standards any longer, so there are no 

surveyors going out and doing metes and bounds. North Carolina 

has been a leader in this space. In fact, John Dorman chairs my 

Technical Mapping Advisory Committee, and many of those kinds 

of pieces have been adopted over the last decade, and he has advocated for those in the recommendations. 

The related element I would highlight, though, is—and we saw 

this in the Matthew event—the best maps are important input, but 

we then need to translate that into insurance uptake, because as 

we saw, far too few have the insurance they need, even those that 

were in the identified areas for the highest risk. 

Senator TILLIS. Thank you. 

Thank you, Mr. Chair. 

Chairman CRAPO. Senator Heitkamp. 

Senator HEITKAMP. Mr. Chairman, I see my colleague Senator 

Reed is here. I know they have an important hearing. If he wants 

to go ahead of me, that is OK. 

Senator REED. I thank the Senator very much. Am I preempting 

anybody else? Forgive me. Thank you. You are incredibly gracious. 

No, we are not. 

Thank you, Mr. Wright, for your testimony. Thanks for coming 

up to Rhode Island last year. You did a superb job. 

One issue that is very important is mitigation to avoid some of 

these costs. We have been thinking about a program that is similar 

to the Clean Drinking Water Act Revolving Fund where States 

would be able to have the ability to lend out to homeowners and 

to properties to mitigate under the supervision of FEMA. But just 

24 

in general, can you talk about mitigation and how it plays a role 

in the Flood Program? 

Mr. WRIGHT. Absolutely. So the mitigation investments are clearly the way that we buy down these risks across the country. You 

know, we have had studies in the past, a dollar invested has a $4 

return. 

FEMA uses three different programs. Today one of them is directly tied to the Stafford Act post-event. The second one is a predisaster one. And then I have one called ‘‘Flood Mitigation Assistance’’ that we do that is funded by policyholders. The hard part 

about mitigation is we all know that higher and stronger is better. 

I want to see more neighborhood-scale mitigation play out. Yes, we 

need to do the individual structures, but what does it mean to see 

a community and how do we define ‘‘green and gray infrastructure’’? 

And so this idea related to some kind of revolving fund, we would 

have to see the details of that. But I think it is those kinds of elements as we look at infrastructure investments across the country; 

we have got to find ways to ensure that those investments are 

made in a way that a community scale really buys down this risk. 

Senator REED. And you said what is one of the magic words 

these days, ‘‘infrastructure.’’ So you would see part of any infrastructure plan that we would agree with and move forward as including flood mitigation as an important infrastructure? 

Mr. WRIGHT. It would be premature for me to speak to specifics 

related to an infrastructure plan. That said, I do think as this is 

being developed, it is an important element related to whatever investments we make related to infrastructure. We should do them 

expecting them to provide service and protection for the next 50 to 

75 years, and we should take all that we know about the science 

related to future risk. I particularly pay attention to the flooding 

side as well as the seismic dimensions in those parts of the country. 

Senator REED. Thank you. 

You testified last week about support for flood risk disclosure. 

Could you give us an idea of what things should be disclosed? 

Mr. WRIGHT. So today most States require disclosure at the point 

of sale, and I was asked in the House hearing a bit about this, and 

I demur a bit because I really do think this is something that 

States are best positioned to understand and govern. I do not have 

the ability to an enforcement element. 

That said, when someone is purchasing their home, they should 

know what the risk of flooding is. They should know what their 

earthquake risks are. They should have the risks related to a dam 

or levee that may fail. I just think that we are best positioned to 

do that in a way that collaborates with the States and the communities who understand that best. 

Senator REED. But the risk disclosure should be broad, not just 

narrow, not the 100-year but the 500-year—— 

Mr. WRIGHT. I would agree. 

Senator REED. Yes, thank you. And just a final point. The National Flood Insurance Program does a lot more than just reimburse people for damage. 

Mr. WRIGHT. Yes, they do. 

25 

Senator REED. They do floodplain mapping assistance; they do 

mitigation assistance, as you pointed out, because it is the premiums that are paying for what you are doing, oversight, et cetera. 

Sometimes there is discussion of just substituting the Federal plan 

with private insurers. How do we do that and still maintain the 

ability to do these other activities? 

Mr. WRIGHT. Well, I think as we look at this—and I have seen 

a couple proposals. I do not have a specific one to make today. But 

I will tell you that I look at the investments that are made into 

mapping, into floodplain management, into the grant programs. 

And over the last 25 years, billions of dollars have been paid by 

policyholders. To the degree that other markets are taking that, I 

do believe we need to very carefully consider how they would benefit from what is now a public good and how those bills should be 

paid. 

Senator REED. Thank you very much, and let me again thank 

Senator Heitkamp for her extraordinary generosity. Thank you. 

Chairman CRAPO. Thank you. 

Senator Cotton. 

Senator COTTON. Thank you, Mr. Chairman. And, Mr. Wright, 

thank you for your appearance before us today to talk about how 

we can fix the Flood Insurance Program. 

Like many other Federal programs, I think the Federal Flood Insurance Program was started with the very best of intentions. 

Farmers and other Americans of limited means who could not afford private insurance could use a helping hand. Today, though, 

this program also helps many of them stay out of bankruptcy when 

disaster strikes, and that is a good thing. But it is time to acknowledge some hard truths. It is $25 billion in debt. And while the program does help some Americans with moderate incomes, as well as 

farmers, it also takes money from working-class Americans to subsidize beach homes for the rich. 

In one wealthy Massachusetts town, 150 properties received $60 million in payouts over time. That works out to about $400,000 

each. A single $1 million home has been rebuilt 10 times, so we are 

not talking here about the poor or the downtrodden. If you can afford a $1 million beach estate in Nantucket, you do not need middle-class workers to foot the bill for your flood insurance. You 

should be buying your own insurance with your own money from 

a private insurance company. 

In fact, if the Government was not offering such lavish support, 

there would be private plans to choose from. But because the Government program can run up billion-dollar deficits, it is difficult for 

any private insurance company to compete. No private insurer has 

access to the unlimited credit line known as the U.S. Government. 

So, Mr. Chairman, I agree that we need to work to fix this program on behalf of fairness, on behalf of efficiency, and on behalf of 

hardworking taxpayers who pay into this program every year and 

do not get value for their dollars. Mr. Wright, the program is spending $25 billion more than it is 

taking in. It is fair to say it is subsidizing homeowners. Is that correct? 

Mr. WRIGHT. There are subsidies and grandfathering that are 

provided for under the statute. 

26 

Senator COTTON. And there is no cap on the value of a home that 

can get a Federal policy. Is that right? 

Mr. WRIGHT. That is correct. 

Senator COTTON. So you can get a plan no matter how much 

money you make? 

Mr. WRIGHT. There are no income-based thresholds under the 

Flood Insurance Act. 

Senator COTTON. You can get a home no matter how rich you 

are? 

Mr. WRIGHT. There are no economic elements in the National 

Flood Insurance Act for me to discriminate. 

Senator COTTON. You can get a policy no matter how expensive 

your home is. 

Mr. WRIGHT. We are capped at the amount of coverage we would 

offer. We would only offer $250,000 worth of coverage. 

Senator COTTON. But that is a cap on the value, not a cap related 

to the overall price of the home? 

Mr. WRIGHT. Correct. But it caps how much I would pay back to 

them. 

Senator COTTON. So if you are a rich billionaire who has a beach 

home, then you can get a coverage policy from the Flood Insurance 

Program for the first $250,000, and then surely you would buy private insurance for the remaining value of your home. Is that right? 

Mr. WRIGHT. Presumably so. 

Senator COTTON. Is there any reason that rich billionaire could not buy private insurance for the first $250,000? 

Mr. WRIGHT. If they would like to avail themselves of the private 

market, they could do so. 

Senator COTTON. It seems they would have the means to do so 

if they can afford the multimillion-dollar beach home and the private coverage over the $250,000 cap, wouldn’t they? 

Mr. WRIGHT. It seems reasonable. 

Senator COTTON. You state in your testimony that private insurers are gaining increasing interest in offering such insurance. Is 

that right? 

Mr. WRIGHT. Yes, sir. 

Senator COTTON. Do you think that there is some tendency for 

private insurers to be crowded out of the market by the National 

Flood Insurance Program, which can run a $25 billion deficit? 

Mr. WRIGHT. I do not know that we are crowding out. I think 

there are a lot of properties that need the insurance that do not 

have it. And so as I said earlier, I think a mutual gain approach 

on this is one by which we could all collectively benefit. We do need 

to make sure that we do not create an environment by which we 

cull off the cheapest risk in my book so that I would require an infusion of cash every single year because I am left simply as the insurer of last resort. 

Senator COTTON. I think we can all agree that we would not like 

to see an infusion of taxpayer cash repeatedly into the program, 

that we would like the program to focus on those Americans who 

need it most or who are most financially vulnerable and who live 

in places that may not be as pretty and scenic as America’s beautiful beaches, but not subsidize rich billionaires and their beach 

homes to the extent that we are doing now. 

27 

Thank you, Mr. Wright. Thank you, Mr. Chairman. 

Mr. WRIGHT. Thank you. 

Chairman CRAPO. Thank you. 

Senator Heitkamp. 

Senator HEITKAMP. Thank you, Mr. Chairman. A couple quick 

questions. 

Obviously, we are concerned about flooding in the northeast corner of my State. Drayton continues to struggle with the order from 

FEMA to take down the levee. They have sent you a request. Have 

you acted on that? 

Mr. WRIGHT. I understand that the request has arrived at 

FEMA. We have not taken action yet on it. 

Senator HEITKAMP. And when can I expect that action? 

Mr. WRIGHT. So right now I am looking—we need to read 

through that. We have another month in terms of the period of 

time that is in front of us. And as I discussed with you earlier, I 

also need a sense of what the solution is that is going to follow, 

and we will continue to collaborate with you and the rest of the delegation on that. 

Senator HEITKAMP. Well, there is a famous saying: Winter is 

coming, but in North Dakota, spring is coming. 

Mr. WRIGHT. Absolutely. 

Senator HEITKAMP. And if you could expedite the review, I do not 

think that we can solve all the problems with that levee in this review, but, you know, getting an approval or an extension so that 

we can assure the people of Drayton that they are going to have 

flood protection during what looks like increasingly will be necessary given their flood situation. 

Mr. WRIGHT. And the very clear commitment that I will make to 

you, Senator Heitkamp, is we will not be taking any adverse action 

while there is any flood fight that is going on. 

Senator HEITKAMP. But it would be nice to know that in writing, 

and so please expedite your review. 

The second issue is basement exemptions. 

Mr. WRIGHT. Yes. 

Senator HEITKAMP. Obviously, we have a number of communities 

in North Dakota—of the 53 nationwide, 14 are in North Dakota— 

where these homeowners have taken extra precautions to qualify 

for the basement exemption. We have a very high water table in 

a lot of our flood areas. 

What is your personal position on continuing the basement exemption? 

Mr. WRIGHT. I think the basement exemption makes sense. I 

think that the examples there in North Dakota are a case in point, 

and when the maps were updated in those communities, over the 

last year, I reissued that exemption. 

Senator HEITKAMP. Yes. I think we would like to see a continuing 

commitment to do that, especially because what we end up doing 

is waterproofing those basements and reducing your risk. And 

so—— 

Mr. WRIGHT. I think the current practice makes good sense in 

this context. I think there is a narrow set of communities where 

this applies. These that you are highlighting are included there, 

and I have no interest in changing that policy. 

28 

Senator HEITKAMP. Terrific. Thank you so much. 

Let us get back to private flood insurance because I think that 

one of the concerns that I have as we go forward is what we have 

been talking about here, which is cherry-picking. But we do see a 

desperation from people to try and figure out how they can lower 

costs. Whether we can spread the risk beyond the taxpayers, as 

Senator Cotton explained, we are, in fact, subsidizing this program. 

I think the 500-pound gorilla that we have not talked about yet in 

this Committee hearing is: Is there a political will to continue to 

subsidize the same way we subsidize crop insurance for farmers? 

Will we ever get to—I mean, if we could ever get to a risk pool that 

would, in fact, be broad enough that private insurance could, in 

fact, enter the market, make money, and provide the coverage, we 

do not need this program. Is that correct? 

Mr. WRIGHT. If we were in a position by which flood cover was 

included in a homeowner’s policy the way that they are in some 

other countries, you are correct. 

Senator HEITKAMP. Have you ever looked at a process whereby 

we could cover catastrophic loss, you know, what that would be, 

and then leave the kind of day-to-day kind of operations of flood 

insurance, you know, up to $250,000 to the private insurance market? 

Mr. WRIGHT. So this is a piece from a historical perspective that 

was experimented with. There is an authority that still exists 

under the National Flood Insurance Act that was used up until 

1986 by which they did that. The companies do not appear interested in that, to my knowledge, in terms of categorically taking 

over all the first $250,000. 

I think that whatever steps we take in this reauthorization need 

to put us on a vector, and if that is the choice of where Congress 

wants us to go, we can develop it in that way. 

Senator HEITKAMP. Well, I think that was the choice they made 

in Biggert–Waters, but now you see we are all here screaming that 

did not work, because when we take the participation of the Federal taxpayer out of this, what we see is maps that include more 

property, and that is probably a product of what is actually happening day to day, more and more flooding. But we also see increased premiums. And so at some point, we have to make a decision in Congress what exactly this Flood Insurance Program should 

look like. And I think that your job would be to present a range 

of options so that we can best evaluate which one fits and we can 

know what the risk is to the American taxpayer. 

I am out of time. Thank you so much, and thank you for your 

commitment to Drayton. 

Mr. WRIGHT. Thank you. 

Senator BROWN [presiding]. Senator Warren. 

Senator WARREN. Thank you, Mr. Chairman. 

After Hurricane Katrina and Superstorm Sandy, Congress recognized that it needed to modernize the National Flood Insurance 

Program, NFIP, to make it more financially sound. And now we are 

about to reauthorize this program, and I think it is critical for us 

to remember that NFIP is not just an insurance program. It is a 

comprehensive flood risk reduction program that is comprised of insurance, flood mapping, floodplain management, and flood mitigaVerDate Nov 24 2008 10:49 Dec 14, 2017 Jkt 046629 PO 00000 Frm 00032 Fmt 6633 Sfmt 6633 L:\HEARINGS 2017\03-14 ZZFLOOD DISTILLER\31417.TXT JASON
29 

tion. Each of these four missions plays an important role in reducing flood risk, and each is at least partially funded by user fees and 

surcharges. 

Now, by contrast, we have been talking about private flood insurance; it does not pay any of these user fees and surcharges, which 

means that as this market expands, there will be fewer contributions that will help pay for the flood mapping, the floodplain management, and flood mitigation. 

I support private sector insurance, but only if the playing field 

is level for Government insurance and private insurance. 

Mr. Wright, do you believe that private primary policies should 

include NFIP equivalency fees and surcharges to ensure that the 

private sector is sharing in the national costs of flood mapping and 

floodplain management? 

Mr. WRIGHT. Thank you, Senator Warren. I absolutely think that 

requires consideration in this reauthorization. 

Senator WARREN. I did not ask if it required consideration. I 

asked if you think that is what we ought to do. 

Mr. WRIGHT. I think it has to look at what the implementation 

would look like. It would require us to work across 50 insurance 

commissioners. So the implementation side I would need to work 

on, but, yes, these are public goods that should be paid for. 

Senator WARREN. Good. That is what I want to know, because I 

think that is exactly right. 

Now, if the private market significant expands, how will that affect NFIP’s ability to carry out some of its core missions? 

Mr. WRIGHT. So to the degree that the private market expansion 

comes by a mutual gain—because there are millions of structures 

at risk that do not carry the insurance today. As long as we have 

mutual gain, I actually think all of us are better off. If that gain 

in the private market comes by simply culling and reducing my policy base, that is a point by which the income and revenue goes 

down, and the concerns you highlight become realized. 

Senator WARREN. All right, because I think this is a very important part of this, that we have got to make sure that we are still 

maintaining these other functions, that we have enough resources 

to be able to do them. Someone has to pay for fund mapping and 

for plain management, and over time letting private plans crowd 

out Federal plans and at the same time skip out on the bill could 

destroy this funding. And I think that is a bad idea. 

There have also been recent media reports that President Trump 

is thinking of charging flood insurance policyholders to build his 

dumb wall between the U.S. and Mexico. Mr. Wright, this Trump 

tax on flood insurance would increase the cost of flood insurance 

for all policyholders, rich or poor, and do nothing to minimize flood 

risk. Is that right? 

Mr. WRIGHT. So I am aware of the reporting that you are referencing. I have not seen the final decisions made related to the 

budget, and so I cannot speak to those specifics. I have got to refer 

that to the Office of Management and Budget. Once we have the 

budget in hand, I would be happy to discuss the specifics with you. 

Senator WARREN. Well, OK. I understand that we do not have 

the specifics yet, but we changed the law in 2014 because hundreds 

of thousands of families said they could not afford higher payVerDate Nov 24 2008 10:49 Dec 14, 2017 Jkt 046629 PO 00000 Frm 00033 Fmt 6633 Sfmt 6633 L:\HEARINGS 2017\03-14 ZZFLOOD DISTILLER\31417.TXT JASON
30 

ments. And now it appears that at least one of the options that 

Donald Trump is considering for paying for the wall between the 

United States and Mexico that he wants to advance would be to do 

that by raising millions of dollars from people who are currently 

paying for flood insurance. So we would be building this wall at the 

expense of families who are already struggling to pay for flood insurance. Isn’t that right? 

Mr. WRIGHT. Clearly, I am concerned about the affordability 

piece of this, and anything that increases the rates, whether it is 

because the actuarial tables tell me to do so or that these are surcharge have an impact on their ability to retain the coverage they 

need. 

Senator WARREN. All right. You know, this is not the only dumb 

idea we have seen for funding this wall. Apparently, the Administration is also considering slashing funding for airport security, for 

port security, and for the Coast Guard. I understand that the 

President may be embarrassed that his ridiculous wall plan is outrageously expensive. And I understand that he might be embarrassed that Mexico is obviously not going to pay for it. But Congress should not cut funding for vital security or raise premiums 

on homeowners just to help bail him out on his very bad idea. 

Thank you, Mr. Chairman. 

Senator BROWN. Thank you, Senator Warren. 

Senator Cortez Masto. 

Senator CORTEZ MASTO. Mr. Wright, good morning. 

Mr. WRIGHT. Good morning. 

Senator CORTEZ MASTO. Nice to meet you. An hour and a half. 

The questions are almost done. 

I want to follow up, though. The senior Senator from Nevada 

asked you questions about the flooding. Obviously, that is a concern of mine as well, and I kind of want to put it in perspective. 

And I know it is something you are reviewing, but on March 9th 

of this year, Governor Sandoval requested that a major disaster 

declaration be made for the State of Nevada as a result of severe 

winter storms, straight-line winds, flooding, and mudslides beginning on February 5th and continuing. 

The Governor specifically requested individual assistance for the 

counties of Elko and Washoe; public assistance, including direct 

Federal assistance, for the counties of Douglas, including the 

Washoe Tribe of Nevada and California; Elko, including the South 

Fork Band of Te-Moak Tribe of Western Shoshone; Humboldt and 

Washoe and the independent city of Carson City; and, three, hazard mitigation statewide. 

FEMA indicates that about 40 claims under the National Flood 

Insurance Program have been filed so far by Nevada homeowners. 

I know you have promised to cooperate with the Governor, and you 

stated to my colleague that you would ensure there is timely payment for claims. But does FEMA yet have a sense of how many 

homeowners impacted by the recent flooding in northern Nevada 

were National Flood Insurance Program policyholders? 

Mr. WRIGHT. So there are ongoing preliminary damage assessments that were done cooperatively obviously that will influence 

the declaration decision. On the insurance side of the equation, you 

have laid out the numbers in terms of what we have seen so far. 

31 

We usually hear from people once they are back in their homes, so 

I began to see initial claims filed somewhere around day 3 to 5, 

and the majority of those claims are in during that first month. 

Clearly, anytime during the first 60 days after an event, they can 

file a claim. As we see those numbers change, I will make sure you 

that you are aware of that. 

Senator CORTEZ MASTO. OK. I appreciate that. And as part of 

your analysis, will you also be determining how many homeowners 

were not mapped into mandatory purchase areas and, therefore, 

may not be insured by the program? 

Mr. WRIGHT. So as we look at this in—I keep going between the 

two sides of our authorities, the National Flood Insurance Act and 

the Stafford Act. So on the Stafford Act side, as we look in those 

reviewed in terms of the declaration request, the uninsured side 

does come into play on that dimension, and I know that my colleagues have been working with the State to pay attention to that. 

Senator CORTEZ MASTO. OK. And so for that reason, and just 

what you said, can I have a commitment—obviously, at times it is 

hard when policyholders are filing claims and it takes time for 

them to go through that process—that you would consider extending the date, as you have done in other—— 

Mr. WRIGHT. So let look at the progress up to this point, and if 

there appears to still be a stream of them coming in, we will take 

the appropriate action with the extensions. 

Senator CORTEZ MASTO. OK. Thank you. 

If FEMA faces cuts under President Trump’s upcoming budget, 

as we have heard, how might that impact your ability to fulfill policyholder claims? 

Mr. WRIGHT. So it is premature for me to speak related to the 

budget. What I can tell you is the claims are paid specifically out 

of premiums, and so I have never seen a budget proposal that has 

tried to take those premium dollars. Those are dedicated under the 

National Flood Insurance Act to pay claims. 

Senator CORTEZ MASTO. All right. So it is safe to say that my 

homeowners may not be impacted at all based on the claims that 

they made in the flooding that has happened to them. Is that correct? 

Mr. WRIGHT. We signed a contract with the folks who have flood 

insurance. It has the full faith and credit of the United States behind it. We will meet our commitments. 

Senator CORTEZ MASTO. Great. Thank you. And then in 2014, 

Congress created the Office of the Flood Insurance Advocate to advocate for fair treatment of policyholders and property owners. Can 

you tell me how you work with the Flood Insurance Advocate to address some of the issues they identified in the recent reports? 

Mr. WRIGHT. Yes. So I appointed David Stearrett as the Flood Insurance Advocate. He has a whole office behind him. He has an element of independence that is kept, and so he submits he reports 

both to me as well as to the FEMA Administrator. I get reports and 

input from him every 60 days in terms of the throughput of issues 

that are coming in from a case management perspective. And then 

once a year, he has a broader report that is directed to me and 

then made public. 

32 

You have obviously and your team has looked at those elements. 

They particularly highlight ensuring that people get the refunds 

that they need. They look to make sure people are getting the right 

underwriting costs on the way through. 

I will tell you that I find this to be one of the most important 

parts of the recent legislation. I think people having a final place 

where they can go, where they are frustrated and confusing dealing 

with our program, can go get a fair shake. It is a relief valve that 

is there. I have found it very beneficial, not just for the hundreds 

of folks who have come through it, but maybe even more important 

to me, as I look at my responsibilities across the program, it turns 

us into a learning organization. When I get those reports, when I 

get those highlighted issues, we go to solve them so that future policyholders will not have that frustration. 

Senator CORTEZ MASTO. Thank you. And I have to run to a competing committee meeting. Mr. Chair, I have one more question, 

with your indulgence. 

Senator BROWN. Of course. 

Senator CORTEZ MASTO. This involves our rural and tribal communities, because I know in 2012 there was a study by the Government Accountability Office that noted that FEMA has not placed 

a high priority on mapping rural areas, including many tribal 

areas, for flood risk; and most tribal lands remain unmapped. Can 

you comment on any progress FEMA has made in this area since 

the 2012 study? 

Mr. WRIGHT. Yes. So it is true that the unmodernized products 

are in a rural context, the places where we have not got those updates maps. So 96 percent of the Nation’s population have modernized products, but that remaining 4 percent is on one-third of the 

land mass across the country. And so this is a place that requires 

resources. We should finish modernizing those products. We absolutely should, and that may be something we should look at in reauthorization. 

As we work with tribes, we try to do this with a true appreciation and understanding of the sovereignty that they have. And so 

I try to do this in a way where, when they are in the watershed 

that is there, we consult with them. We have authorities to map. 

We also have authorities about whether or not they come into the 

program. And I want to do that in a collaborative way with the 

tribal leadership so that they can avail themselves of all of the 

kind of support that FEMA may be able to do—some of this under 

the National Flood Insurance Act, some of it under Disaster Relief 

Fund and the Stafford Act. 

Senator CORTEZ MASTO. So you have a plan to do just that? 

Mr. WRIGHT. Yes, ma’am. 

Senator CORTEZ MASTO. Thank you. 

Senator BROWN. Thank you, Senator Cortez Masto. 

Senator Menendez. 

Senator MENENDEZ. Thank you. Let me thank the Chairman for 

indulging and keeping the hearing open, and thank you as the 

Ranking Member for staying. I know you have other issues to deal 

with. But for over a quarter of a million New Jerseyans, this is an 

incredibly important program, so I just have a couple other questions. 

33 

Currently, FEMA can deny funds to repair the foundation of a 

structure if it determines the foundation was damaged due to what 

is called ‘‘earth movement’’ rather than by flood waters. This is the 

case even though the flood waters likely caused the earth movement that damaged or destroyed the foundation. We had a lot of 

arbitrary decisions that all of a sudden there was a denial for policyholders because there was earth movement. But the earth never 

moved until the flood came. And so countless claims were denied, 

and it led to disparate results since the determination of whether 

the damage was caused by flood or earth movement is unclear and 

difficult to assess. 

Wouldn’t you agree, Mr. Wright, that this is an area that needs 

a better definition, as technical as it is, because it seems to have 

been used arbitrarily and capriciously a fair number of times? 

Mr. WRIGHT. It is a point that would benefit from far more clarity. Frankly, for me the distinction here is whether or not it was 

a preexisting condition to the structure, and so I acknowledge this 

‘‘earth movement’’ term causes a lot of confusion. 

When you look at the specifics of how we are directed to implement this, from an indemnification perspective I only pay for a 

claim that was caused. And so if the flood waters caused any kind 

of structural movement, we should pay. And if this is a 70-yearold home that has settled over the preceding 70 years and has 

cracks in the foundation that precede the flood event, well, then I 

should not pay for that. That is not a coverage that was included 

under the standard flood insurance policy. 

Senator MENENDEZ. All right. I appreciate that distinction, but 

making it clear is going to be critically important because there are 

many people who did not have cracks in their foundations before, 

but suddenly they were denied based upon this. So it is something 

I would like to work on with you all as we have reauthorization. 

Mr. WRIGHT. You have my commitment. 

Senator MENENDEZ. I appreciate that. 

Now, I am glad to hear that you embrace the independent advocate. It is something that I helped created. 

Mr. WRIGHT. You did. 

Senator MENENDEZ. Would it be fair to say that the reforms that 

FEMA undertook, both with your predecessor and you as a result 

of the appeals process, is something that you would embrace incorporating into a new reauthorization? 

Mr. WRIGHT. So the appeals process that is there is something 

that I would embrace codifying. I think that clearly it was authorities that even go back to 2004 that created this. The way it was 

implemented, as I have spoken to you in the past, was insufficient 

and did not have sufficient credibility from where I sat. We made 

those changes. I think they are proving beneficial, but codifying 

that so that any future person who is leading this program would 

not be able to change that basis. 

Senator MENENDEZ. I appreciate that, because as a result of our 

work in the aftermath of Sandy and the denial of many claimants, 

I think we came to a better process and a fairer process. And it is 

something that I would like to see incorporated in the final new 

legislation. 

34 

Let me ask you one last question. The NFIP has borrowed nearly $25 billion to pay claims for large disasters, $17 billion from 

Katrina. And I think one of the things we never mentioned here 

is the fact that about $10 billion of that debt was incurred by a 

cause of the Army Corps’ levee failure during Katrina. So I do not 

understand why current policyholders should pay for that mistake. 

It is the mistake of another Federal agency that has a tremendous 

burden on this program. So it is something to be considered here, 

because you are now paying, as I understand it—and correct me if 

I am wrong—about $400 million in interest on the debt last year 

alone, which is 10 percent of the premiums that you receive on an 

annual basis, that $400 million paid by policyholders, real people 

who are struggling to afford their flood insurance. 

Do you not believe that we should be looking at how that debt 

is dealt with, especially in the fact that so much of it is caused by 

the errors of another Federal entity? How much would premiums 

have to increase, for example, in order to pay down the debt? 

Mr. WRIGHT. So there is no practical way for us to pay the nearly $25 billion in debt. Full stop. If I was to do that with premium 

holders, I would have to make an exponential shift in premiums in 

order to make that happen. And you are correct. You know, as we 

look back, nearly $10 billion of that loss in Katrina we can attribute to those levee failures. And you are also correct about the 

interest, because ultimately I am not positioned to make principal 

payments, but I am required to service that debt. 

So I have a generally favorable interest rate with the Treasury 

that, combined, about 1.6 percent is what my interest rate is today. 

But as interest rates go up, that continues to be a burden. And it 

is not just $400 million a year. Over the last dozen years, we are 

approaching $4 billion that we have paid simply servicing the debt. 

Those are dollars I simply take out of my premium revenues and 

transfer. That burden alone is to the point by which my recent borrowing in January included borrowing so that I could make my interest payment this month. 

Senator MENENDEZ. So, in essence, Mr. Chairman, what we are 

doing is we are paying ourselves interest on a debt that we have 

largely created in great part by the levee failures, $10 billion right 

there alone. And so instead of having this type of money either be 

invested in the program or ultimately reducing the debt, we are 

paying interest to ourselves because it is the Federal Government, 

FEMA, paying the Treasury at the end of the day. 

So it is pretty amazing to me that when I borrow—if I lend myself money and then I ultimately pay myself interest, that normally 

does not happen. We are robbing from Peter to pay Paul, but, unfortunately, it is the policyholders that get affected here at the end 

of the day. So I appreciate your insight to that. 

Thank you, Mr. Chairman. 

Senator BROWN. Thank you, Senator Menendez. 

Mr. Wright, thank you for your testimony and your public service. 

All Members of the Committee will have 1 week to send you letters and questions and more comments, and we would appreciate 

it if you would answer those requests and questions as quickly as 

possible. And thank you again. 

35 

Mr. WRIGHT. Thank you. 

Senator BROWN. The Committee is adjourned. 

[Whereupon, at 11:45 a.m., the hearing was adjourned.] 

[Prepared statements, responses to written questions, and additional material supplied for the record follow:] 

36 

PREPARED STATEMENT OF ROY E. WRIGHT 

DEPUTY ASSOCIATE ADMINISTRATOR FOR INSURANCE AND MITIGATION, FEDERAL

EMERGENCY MANAGEMENT ADMINISTRATION

MARCH 14, 2017 

Introduction 

Good morning Chairman Crapo, Ranking Member Brown, and Members of the 

Committee. My name is Roy Wright and I am the Deputy Associate Administrator 

for Insurance and Mitigation—responsible for directing the Federal Emergency 

Management Agency’s (FEMA) risk management, mitigation, and flood insurance 

programs. Thank you for the opportunity to testify about the National Flood Insurance Program (NFIP), including FEMA’s efforts to transform the program in recent 

years and to request considerations for Congress’ reauthorization of the NFIP before 

it expires in September 2017. 

NFIP Background 

Flooding is the most frequent and expensive disaster in the United States; 90 percent of natural disasters in the United States involve a flood. Homeowners insurance does not typically include coverage in the event of flooding, and historically 

flood insurance was not widely available. If it was, it was very expensive. Congress 

established the NFIP in 1968, which FEMA’s Federal Insurance and Mitigation Administration (FIMA) administers. 

There are four key elements of the NFIP: 

Identifying and Mapping Flood Risk: Working closely with communities, FEMA 

identifies flood hazards through scientific and engineering methods. FEMA then 

maps those hazards on a Flood Insurance Rate Map (FIRM). The FIRM is used to 

help communicate flood risk to communities and the public, and is used for floodplain management and flood insurance requirements. 

Floodplain Management: Floodplain management includes actions that communities can take to reduce flood damage to both new and existing buildings and infrastructure. The NFIP plays a role in encouraging communities to adopt and enforce 

floodplain management regulations including zoning codes, subdivision ordinances, 

building codes, or special purpose floodplain management ordinances. By law, 

FEMA can only provide flood insurance to those communities that adopt and enforce 

floodplain management regulations that meet or exceed minimum NFIP requirements. 

NFIP floodplain management requirements are a cost-effective way to reduce the 

flood risk to new buildings and infrastructure. Internal FEMA studies have found 

structures built to NFIP standards experience 73 percent less damage than structures not built to these standards; as a result, the standards reduce flood losses by 

$1.9 billion per year. 

Flood Insurance: The NFIP makes flood insurance available for homeowners, renters, and business owners in for 5.1 million policyholders in 22,235 NFIP-participating communities in all 50 States and 6 territories. Seventy-three private insurance companies participate in the NFIP’s Write Your Own (WYO) Program, selling 

and servicing NFIP policies under their own names. FEMA also writes and services 

some policies outside the WYO Program through NFIP Direct, a vendor that FEMA 

contracts with and oversees. The NFIP underwrites, and bears the risk, on all NFIP 

policies, whether sold by private companies or NFIP Direct. 

The NFIP functions like other insurance programs, in which policyholder premiums help cover insured losses. Flood insurance helps homeowners recover following a flood. For example, following the flooding in Louisiana in August 2016, insured survivors filed 29,557 claims and, to date, the NFIP has paid more than $2.3 

billion in claims. Conversely, FEMA’s Individual Assistance grant program has paid 

more than $758 million to more than 82,000 individuals and households. The average NFIP payment in Louisiana (for the August 2016 flooding) is approximately 

$86,500 per policyholder while the average individual assistance payment is approximately $9,150. FEMA’s Individual Assistance program is not designed to compensate for all losses that a survivor may have experienced. The NFIP is a far more 

comprehensive program to help homeowners get back on their feet. Homeowners 

should not rely on potential grant programs to support them following a flood, as 

they only provide emergency assistance and are not designed to repair or rebuild 

damaged property. 

Incentivizing Risk Reduction Through Grants and Premium Discounts: FEMA 

manages the Flood Mitigation Assistance (FMA) grant program, authorized by the 

National Flood Insurance Act. This program, designed to reduce or eliminate claims, 

provides funding to State, local, tribal, and territorial communities for projects that 

37 

reduce or eliminate long-term risk of flood damage to structures insured under the 

NFIP. Typical projects may include acquisition of repetitive loss properties, elevation of buildings, and neighborhood-scale flood defense investment. One hundred 

percent of the funding for this program is paid through premiums on NFIP policies. 

The National Institute of Building Sciences’ Multi-Hazard Mitigation Council estimates that for every dollar FEMA invested in mitigation between 1993 and 2003 

(which includes, but is not limited to, FMA programs), society as a whole saved four 

dollars due to reduced future losses. Mitigation programs save the American public 

an estimated $3.4 billion dollars annually through a strategic approach to natural 

hazard risk management, including the value of more stringent building codes. 

FEMA also created the NFIP Community Rating System (CRS) in 1990 as a voluntary program for recognizing and encouraging community floodplain management 

activities that exceed the minimum NFIP standards. Any community in full compliance with the minimum NFIP requirements may apply to join the CRS. More than 

1,400 communities around the Nation participate in the CRS, accounting for 3.8 million policyholders. Under the CRS, FEMA discounts NFIP policyholders’ flood insurance premium rates to reward community actions that meet the three goals of the 

CRS, which are: (1) reduce flood damage to insurable property; (2) strengthen and 

support the insurance aspects of the NFIP; and (3) encourage a comprehensive approach to floodplain management. Lower flood-insurance rates are just one of the 

benefits of joining the CRS; CRS floodplain management activities also provide enhanced public safety and reduced damage to property. 

The Financial Impacts of Catastrophic Disasters on the NFIP 

While Congress appropriates funds for flood mapping, FEMA covers the vast majority of NFIP costs—including operations, floodplain management, risk mapping, 

and grants—through premiums, fees, and surcharges from the 5.1 million policyholders participating in the program. 

Due to the nature of flooding, impacts can vary significantly each year. After 15 

years of lower than expected damages, Hurricanes Katrina, Rita, and Wilma hit the 

Nation in 2005. These three catastrophic events resulted in an annual NFIP claims 

total eight times the size of any prior year in the program’s history. 

As a mandatory Federal program, the NFIP met its commitment to policyholders 

and paid all claims as outlined in their insurance policies. However, to meet these 

requirements Congress directed the NFIP to pay for the catastrophic losses through 

funds borrowed from the U.S. Department of Treasury (Treasury). By the end of the 

claims process for these events, the NFIP had borrowed $17.5 billion. 

In 2012, Hurricane Sandy hit the East Coast and resulted in more than 144,000 

NFIP claims. The program paid out an initial $8.4 billion to policyholders. As a result, the NFIP borrowed an additional $6.25 billion from the Treasury to ensure 

proper payment of all claims. The volume of claims in the aftermath of Hurricane 

Sandy was much larger than NFIP typically encounters, and policyholders had concerns that FEMA and WYO companies were not handling their claims fairly. FEMA 

subsequently set up a Sandy Claims Review process to contact all policyholders who 

had claims and offer them an additional examination of their claim. The NFIP has 

since paid out an additional $350 million to policyholders, and based on this experience, FEMA took steps to reform key aspects of the program to be more customercentric. 

While there was no single ‘‘catastrophic’’ disaster in 2016, the multiple flooding 

events in Louisiana, Texas, and several States during Hurricane Matthew resulted 

in the third largest claims payout year in the NFIP’s history. Though the NFIP is 

still processing claims, projected payouts from 2016 flood events total more than $4 

billion. In January 2017, the NFIP borrowed an additional $1.6 billion from the 

Treasury to cover claims, pay interest on the debt, and ensure capacity to pay future 

claims. Liabilities to the Treasury now total $24.6 billion and, moving forward, require annual interest-only payments of nearly $400 million dollars. 

It is important to note that the latest private sector catastrophe modeling demonstrates that none of these events is outside the expected range of NFIP losses. 

A single storm that results in a loss to the NFIP of the size that occurred in Hurricane Katrina ($16.3 billion) has a 1 to 2 percent chance of occurring in any given 

year, while a single storm that results in a loss as large as the one that occurred 

in Hurricane Sandy has a 4 to 5 percent chance of occurring in any given year. 

NFIP losses experienced during an event such as the August 2016 storm that 

caused inland flooding in Louisiana has a 4 percent chance of occurring each year. 

Moving forward, FEMA anticipates having another loss year like those cited above 

within the next decade. 

38 

NFIP Transformation and Lessons Learned 

Following Hurricane Sandy, FEMA has taken steps to transform the NFIP customer experience and improve oversight and engagement with WYO companies. 

FEMA designed and implemented a new appeals process to improve customer 

service and transparency to policyholders. The Agency established an Appeals 

Branch in the Policyholder Services Division, which remains independent from the 

Product Delivery Division that oversees the claims process. 

FEMA also improved its oversight when WYO companies respond to litigation to 

ensure that policyholders are treated fairly. FEMA established the Office of Chief 

Counsel WYO Oversight Team. This team works with FEMA’s Industry Management Branch to enhance FEMA’s oversight of the WYO program and WYO litigation 

to include oversight of expenses and implementation of a national legal strategy for 

flood insurance claim litigation with an emphasis on early alternate dispute resolution. Further, FEMA removed the NFIP’s Financial Assistance/Subsidy Arrangement with WYO companies from regulation. It is no longer necessary to include a 

copy of the Arrangement in Title 44 of the Code of Federal Regulations. This process 

was time-consuming and created a delay to make any administrative updates or 

changes in regulation. Now, the process is streamlined to improve the ability of 

FEMA and its industry partners to negotiate operational adjustments and corrections more quickly and efficiently. 

The NFIP has also implemented changes to take a more proactive role in disaster 

readiness and response. During recovery from the Louisiana floods and Hurricane 

Matthew, FEMA successfully executed components of the new Flood Response Playbook to support insured survivors, including: 

• Issuing advance payments to policyholders of up to $10,000 while the NFIP 

processes their full claims; 

• Coordinating with State insurance commissioners and WYO companies to ensure the NFIP meets policyholder needs; 

• Deploying FIMA staff to directly support field operations; 

• Providing analytical support to assist FEMA operational leadership in making 

resource decisions; and 

• Proactively communicating with WYO insurers and with policyholders through 

disaster-specific bulletins, webpages, and fact sheets. 

In 2016, the NFIP made more than $4 billion claim payments to 83,000 insured 

survivors. This major year of flood losses highlighted the success of recently implemented NFIP reforms, as well as the importance of continuing to improve customers’ experience with the program. By the end of 2016, FEMA closed 92 percent 

of the claims from the mid-summer severe storms in Louisiana. In the first 30 days 

of the incident, FEMA authorized and issued almost $300 million in advance payments to the NFIP policyholders in Louisiana who sustained damages by the flood, 

providing expedited relief to disaster survivors. 

FEMA continues to work on other initiatives to support policyholders, including: 

• Simplifying the claims process through improved proof of loss and other forms; 

• Modernizing the underwriting process; and 

• Redesigning the risk rating system to help customers better understand their 

flood risk. 

Successes From Recent Legislative Reforms 

Recognizing the need for NFIP reforms in 2012, Congress acted by passing the 

Biggert–Waters Flood Insurance Reform Act of 2012 (BW12). This statute served as 

a key first step to strengthen the NFIP’s fiscal soundness by addressing discounted 

premiums and giving FEMA new tools to manage risk exposure. In March 2014, 

Congress passed the Homeowner Flood Insurance Affordability Act of 2014 (HFIAA), 

repealing certain provisions of BW12 and modifying components of the NFIP including flood insurance, flood hazard mapping, grants, and floodplain management. 

FEMA has completed implementation of several of key provisions of these laws, 

including: 

• Establishing the Technical Mapping Advisory Council: BW12 directed the creation of the Technical Mapping Advisory Council (TMAC). The Council reviews 

FEMA’s mapping program and develops recommendations for improving it. During its assessment, the TMAC found that the mapping program, when applied 

as designed, results in technically credible flood hazard data in areas where 

FIRMs are developed or updated, and also provided recommendations to enhance the program in the future. FEMA has established a consistent, inteVerDate Nov 24 2008 10:49 Dec 14, 2017 Jkt 046629 PO 00000 Frm 00042 Fmt 6621 Sfmt 6621 L:\HEARINGS 2017\03-14 ZZFLOOD DISTILLER\31417.TXT JASON
39 

grated, and transparent process to assess and respond to all TMAC recommendations. FEMA has fully implemented 4 of the Council’s 22 recommendations outlined in the 2015 report through current operations or ongoing initiatives, and has initiated implementation on an additional 17 recommendations. 

This year, we began implementation of a TMAC recommendation to develop a 

national 5-year operations plan to help us bridge operations from our current 

status to where we are headed in the future. 

• Designating an Office of the Flood Insurance Advocate (OFIA): HFIAA directed 

FEMA to establish the OFIA in 2015, and the office has experienced significant 

growth and increased capability since its inception. The OFIA provides assistance to policyholders who are unable to get the support they need after using 

other existing resources. The OFIA helps coordinate referrals, verify insurance 

rate information, educate on flood risks and rates, and communicate program 

changes. Through a new customer relationship management tool, OFIA is able 

to capture data and provide insights into issues faced by policyholders in order 

to inform program improvements. 

• Unifying the FMA Grants Programs: Prior to the passage of BW12, there were 

three flood grant programs: FMA, Repetitive Flood Claims, and Severe Repetitive Loss. BW12 eliminated the Repetitive Flood Claims and Severe Repetitive 

Loss programs and added funding for the mitigation of repetitive loss and severe repetitive loss properties under the FMA program. Since unification of the 

programs, demand for FMA grants has exceeded available funds so FEMA 

awards grants to those projects that provide the most risk reduction benefit. 

• Establishing a Reserve Fund: BW12 directed FEMA to set up a reserve fund 

for meeting the expected future obligations of the NFIP, including payment of 

claims, claim adjustment expenses, and the repayment of amounts outstanding 

under any note or other obligation issued by the Administrator. In 2016, the 

Reserve Fund paid out $1.3 billion in claims to insured survivors. The NFIP has 

also paid for reinsurance through the Reserve Fund, consistent with its designated purpose for meeting expected future obligations. 

• Managing Risk through Reinsurance: BW12 gave FEMA the authority to obtain 

reinsurance from the private reinsurance and capital markets. Reinsurance is 

an important financial risk management tool used by private insurance companies and public entities to protect themselves from large financial losses by diversifying risk across multiple markets. FEMA executed a 1-year agreement, effective January 1, 2017, with a consortium of 25 reinsurers. Under the agreement, reinsurers agreed to indemnify FEMA for flood claims paid during 2017 

on an occurrence basis. The layer is structured to cover 26 percent of losses between $4 billion and $8 billion. This agreement transferred a combined total of 

$1.042 billion of the NFIP’s flood risk to the private reinsurance market. This 

reinsurance placement stands as a first of its kind for a Federal program. 

FEMA’s Core Principles for Reauthorization 

Through internal analysis and lessons learned, FEMA offers the following principles that would improve NFIP effectiveness as Congress considers reauthorization. 

First, the NFIP reauthorization should be enacted before the September 30, 2017 

expiration of the program, and should extend the program for multiple years. The 

stability of the real estate and mortgage markets depend on an on-time, multiyear 

reauthorization. All federally backed mortgage lenders are required to verify that 

properties in special flood hazard areas (SFHA) have flood insurance policies prior 

to approving a mortgage. During periods in the past when the NFIP’s authorization 

lapsed, or was only extended for a short period, uncertainty about flood insurance 

availability impacted property owners’ ability to buy and sell homes in high risk 

flooding areas. 

Second, the reauthorization should recognize the need to increase flood insurance 

coverage across the Nation. At a national scale, estimates lead us to believe as little 

as one third of residential properties in the SFHA have NFIP policies. Yet flooding 

can happen anywhere. Floods are not wholly contained within SFHAs. Over the past 

10 years, approximately 20 percent of all NFIP claims come from low to moderaterisk policyholders. 

Flood insurance facilitates the ability of a property owner or renter to recover 

after a flood, whether the insurance is provided by the NFIP or private insurers. 

FEMA recognizes that there is a growing interest by private insurers to offer flood 

insurance protection. FEMA supports this because an insured survivor—regardless 

of where they purchase their coverage—will recover more quickly and more fully. 

Two related areas require attention. First, it will take time for the private market 

to adapt to a market currently primarily served by a public program. Second, if the 

40 

private market were to glean only the lower-risk policies, the NFIP would be left 

with all of the highest-risk policies. This could lower NFIP premium revenue while 

increasing potential claims payouts. Such actions would leave the program and taxpayers with even more financial risk. 

As we look forward to the next several years, a number of opportunities should 

be explored that could provide for the growth of the private market for flood insurance. Improving the Nation’s overall flood resiliency will depend on finding an appropriate balance between reducing risk to the taxpayer through a greater private 

sector role while sustaining a robust and affordable Federal program. Among the 

ideas to explore would be identifying a future point in time by which flood policies 

for all new construction would be provided by the private market. When coupled 

with ongoing floodplain management and building code enforcement, these new residential structures would be built to insurable levels of risk for the private market. 

In some States, the private flood market already provides excess and surplus coverage as well as ‘‘flood riders’’ on some homeowner’s policies. While the private markets are expanding, FEMA is exploring improving the suite of options available for 

NFIP policies, such as including increased policy limits deck and basement coverage, 

and various deductible levels. The NFIP would collect additional premiums commensurate with any extra coverage policyholders select. Moreover, by providing coverage 

options that customers need, the additions could attract new NFIP customers improving the program’s financial stability expanding the number of Americans with 

flood insurance. FEMA also recognizes the unique challenges that farmers may experience when navigating the NFIP’s current requirements with regards to agricultural structures. These agricultural needs can be addressed through this re-authorization. 

Additionally, the statutory definitions of ‘‘repetitive loss’’ must be brought into 

alignment so that there is consistency across program elements. Properties that experience multiple losses have an increasingly adverse impact on the financial stability of the program. Congress has previously acknowledged this circumstance, and 

should explore caps on cumulative losses that well exceed policy limits and the 

value of the structure. As the program moves forward, NFIP premiums should reflect a property’s true risk. We need to move from today’s program, which delivers 

only a final premium which may be lower than a current estimate of the full risk 

rate, to a program which clearly communicates the full risk rate and any discounts 

(such as pre-firm subsidy, newly mapped subsidy, or grandfathered rates). Given 

concerns related to affordability, it may take some time, but the program needs to 

be on a course to eventually arrive at full risk rates for all policyholders. This includes addressing grandfathered and subsidized rates. 

Ultimately, the premium paid for flood insurance must reflect the risk—whether 

this is done by increasing premiums, reducing risk through mitigation grants, or a 

combination thereof—the fiscal solvency of the program depends on it. This is central to a sound financial framework for the NFIP. The NFIP currently carries a debt 

of $24.6 billion dollars which is serviced through increasingly large interest payments. It is important to note that nearly all of the flood programs mandated by 

law—programs to reduce risk, the administrative costs of WYO companies, and the 

payment of interest on the debt—are funded solely through the payment of premiums. 

Conclusion 

To reiterate, flooding continues to be the most common and costly natural disaster 

in the United States, with the greatest damage potential of all natural disasters 

worldwide. Over the past 50 years, the NFIP has helped communities, households, 

and businesses reduce flood risk, supported flood risk analysis and mapping 

projects, expanded sound floodplain management practices across the country, and 

reduced the financial burden to survivors when floods occur. We recognize that the 

Nation faces broad public policy questions around flood insurance affordability, continued development in flood-prone areas, the soundness of the NFIP’s financial 

framework, and greater private sector participation in flood insurance markets. 

Through all of this, FEMA’s priority is to increase flood insurance coverage so 

that disaster survivors can recover more quickly and fully after flood events. 

Through a timely, multiyear reauthorization, Congress would enable FEMA to continue supporting those who take steps to protect their homes and businesses. 

Thank you again for affording me the opportunity to speak with you today about 

this program. I am happy to respond to any questions you may have. 

41 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR SHELBY 

FROM ROY E. WRIGHT 

Q.1. Mr. Wright, we have discussed on several occasions the accuracy of the information that determines risk in the National Flood 

Insurance Program (NFIP). 

What is the status of FEMA’s attempt to have a Flood Insurance 

Program with accurate actuarial data, and what further steps is 

FEMA taking to achieve this goal? 

A.1. As part of FEMA’s efforts to improving the quality of data 

used in the delivery of the NFIP, FEMA is looking to redesign its 

approach to risk rating. To ensure FEMA follows leading practices 

used in the industry for rating natural catastrophe risk, including 

considerations of the actuarial data used, FEMA is conducting market research through a Request for Information (RFI) that was 

issued on January 24, 2017. The RFI can be found here: https:// 

www.fbo.gov/index?s=opportunity&mode=form&id=557d24817170f 

7475b0f 445f44f9c73d&tab= core&lcview=1 

In addition to the RFI, FEMA conducted market research calls 

to identify data tools and models that should be used for risk rating, including tools to determine replacement cost values. The market research was conducted to determine industry capabilities in 

the following areas: 

1. Assessment of the current state of catastrophic risk rating 

and classification programs; 

2. Design of alternate risk rating models; 

3. Testing of the alternate risk rating models; and 

4. Implementation of alternate models. 

FEMA is working to develop a new rating methodology. Once developed, FEMA will begin a multiyear implementation of the new 

methodology, which will be carried out in tandem with a redesign 

of our IT systems and will be aligned with improvements to our insurance product. 

Q.2. Mr. Wright, FEMA is not the only Federal agency that is actively tracking real-time data to assess flood risks in different communities across the nation. However, it appears that this information is often not communicated across all agencies, even though 

many are working towards the same goal. 

Would it be helpful for all agencies that track floodplain data to 

work together to share and communicate this data? 

A.2. FEMA is working and collaborating with the other Federal 

agencies that are involved in the collection, evaluation, and use of 

flood risk data to promote sharing of floodplain data. Together, we 

are working to improve the ways that we develop, share, and communicate this information, so that communities will be better able 

to understand their flood risks. Interoperable datasets that are collected and consolidated using consistent and clear standards across 

the Federal family will yield higher quality floodplain data more efficiently, for both real-time assessments and hazard identification. 

This would also lead to simpler, consistent outputs from the Federal agencies informing more effective decisions at the state and 

local level. The availability of this data could also better incentivize 

innovation. 

42 

One area where FEMA is modeling this behavior is topographic 

data acquisition. FEMA recognizes that quality topographic data is 

not only essential for credible flood hazard mapping but for a multitude of other functions of the Federal Government, states, local 

communities, and others. Thus, FEMA’s formal policy is to ensure 

that all topographic information acquired to support flood hazard 

mapping is compliant with U.S. Geological Survey (USGS) 3D Elevation Program (3DEP) standards to ensure that the information 

can be leveraged across Federal agencies. 

There are a multitude of datasets that routinely inform real time 

response, short term planning, and long term strategic decisions 

and come from a number of agencies across the Federal family. For 

FEMA to achieve its mission, ‘‘To support our citizens and first responders to ensure that as a Nation we work together to build, sustain and improve our capability to prepare for, protect against, respond to, recover from and mitigate all hazards’’, numerous resources are required. These resources include, for example, gauge 

data from the National Oceanic and Atmospheric Administration 

(NOAA) and USGS, critical infrastructure information from the 

U.S. Army Corps of Engineers (USACE) and others, land use 

change datasets, demographic and population information, power 

grid information from the Department of Energy, and many other 

sources which must come together routinely. One venue, in particular, where these datasets can and should come together to improve operational efficiency across the Federal family during times 

of flood related disaster is the National Water Center within 

NOAA. Similarly, in the coastal communities, many of these 

datasets come together on NOAA’s Digital Coast website. FEMA is 

committed to continued collaboration with its Federal Partners and 

welcomes efforts to ensure that agencies are incentivized and encouraged to work together and share and communicate this data 

more routinely and consistently. 

Q.3. Mr. Wright, since the enactment of Biggert–Waters, FEMA 

has attempted to strike an appropriate balance between protecting 

individuals and the stability of the NFIP. 

Can you commit to fully evaluating further policy proposals to 

improve the NFIP? 

A.3. We commit to fully evaluating further policy proposals to improve the NFIP. 

The Affordability Framework is due to Congress in September 

2017. FEMA is working diligently to meet the deadline. 

Q.4. Mr. Wright, the Technical Mapping Advisory Council (TMAC) 

created a list of 22 recommendations to improve FEMA’s flood 

mapping data. 

What is the status of implementing TMAC’s recommendations? 

A.4. The 22 recommendations generally fall into 3 key categories: 

(1) credible flood data, (2) improved access and ease of use of 

FEMA mapping products, and (3) more customer-oriented products. 

FEMA has communicated a fundamental agreement with all 22 of 

the recommendations and is currently working toward implementation of each. While FEMA has used existing mechanisms to implement several of the recommendations related to credible flood data, 

we are actively building a better infrastructure to ensure increased 

43 

simplicity and ease of use of NFIP products and services. Currently, FEMA is working to implement a 5-year mapping, planning, 

and prioritization framework and improved measures for FEMA 

hazard mapping, and finishing several ongoing improvements to 

our Cooperating Technical Partners (CTP) program, consistent with 

the TMAC’s recommendations. In addition, FEMA is exploring how 

to implement some of the customer-oriented product recommendations that are transformative in nature. FEMA has taken on two 

Customer Experience endeavors; one for NFIP policyholders and 

one for communities. FEMA is leveraging the findings from the 

Customer Experience for Policyholders effort to kick off an effort to 

redesign flood risk-rating to better meet identified needs of NFIP 

policyholders. The outputs of these ongoing initiatives are currently 

being used to refine and add clarity to the long-term trajectory of 

the mapping program and the larger NFIP. Each of these 22 recommendations are addressed in greater detail in a response to Congress that will be delivered this summer. 

Q.5. When considering a reauthorization of the NFIP, what steps 

would you recommend that Congress take to improve the accuracy 

of flood mapping information? 

A.5. The most critical and foundational element of credible flood 

mapping is high-resolution topography. For this reason, FEMA has 

and will continue to make targeted investments, consistent with 

USGS 3DEP standards, in high-resolution topography prior to all 

flood mapping efforts that FEMA undertakes. These data offer 

value beyond just the NFIP and should always be considered when 

evaluating the needs of any flood hazard mapping program. 

While we continue to make these strategic investments and to 

deliver credible flood hazard information, these efforts must be met 

with the complementary advances we are making in our actuarial 

underwriting practices so that insurance premiums better reflect 

the risk that our mapping analyses yield. Nothing is more powerful 

to communicate the risk than a pricing signal. 

Q.6. Mr. Wright, an important feature of the NFIP is FEMA’s role 

in communicating the real risks of certain floodplains. 

In addition to the work FEMA is doing to implement more actuarially sound rates, what steps is FEMA taking to use the latest 

technology to inform individuals of the actual risk associated with 

living in certain floodplains? 

A.6. As you mentioned, the Federal Insurance and Mitigation Administration (FIMA) is beginning to update the National Flood Insurance Program’s (NFIP) risk rating model. The NFIP’s current 

approach to risk rating was modeled on insurance industry practices at the time the NFIP was established. Since that time, the insurance industry has developed more efficient and accurate approaches to risk rating. FIMA has an opportunity to modernize its 

risk rating approach to deliver accurate, cost-effective ratings of 

flood risk to property owners. While this transformation may take 

up to five years to design and fully implement, it will have lasting 

impacts across FIMA operations and result in long-term program 

stability, increased simplicity and ease of use of NFIP products and 

services, and an improved value proposition for customers. A new 

risk rating approach could influence not only the rating of insurVerDate Nov 24 2008 10:49 Dec 14, 2017 Jkt 046629 PO 00000 Frm 00047 Fmt 6602 Sfmt 6602 L:\HEARINGS 2017\03-14 ZZFLOOD DISTILLER\31417.TXT JASON
44 

ance, but also flood hazard mapping and the implementation of 

floodplain management requirements. 

In addition to risk rating, FEMA continues to work in a variety 

of other ways to provide accurate risk information and increase 

risk awareness. The FEMA Risk Mapping, Assessment, and Planning (Risk MAP) program was designed to align efforts within 

FEMA to help individuals and communities understand and take 

actions to manage their flood risk. Risk MAP defined new digital, 

geospatial mapping products to communicate flood hazards and 

flood risk more effectively than the traditional flood maps that 

have been used for years to administer the legal requirements of 

the NFIP. These products include maps of flood depths that allow 

individuals to envision the direct impact on their property of floods 

of various magnitudes and detailed risk assessments that quantify 

the potential losses for communities and neighborhoods over time. 

FEMA continues to work with our stakeholders on how to improve 

these products to communicate flood risks more effectively. 

The Technical Mapping Advisory Council (TMAC) established by 

the Biggert-Waters Flood Insurance Reform Act of 2012 has also 

made several transformative recommendations of ways that FEMA 

can further leverage technology to fundamentally shift how FEMA 

communicates risk. These recommendations include shifting the delivery of FEMA’s flood mapping information to a fully databasedriven digital display environment and moving to structure-specific 

risk assessments. FEMA currently maintains the regulatory flood 

hazard information for the nation in the National Flood Hazard 

Layer (NFHL) geospatial database. This data is updated daily as 

revisions and amendments are processed and FEMA provides a 

database-driven viewer for this data online. Over the next few 

years, FEMA will design and construct a new system that builds 

on existing capabilities, leverages the innovative projects its partners are currently undertaking, integrates the new Risk MAP products, and provides the foundation for the future of the mapping 

program. FEMA will also evaluate technologies, data sources, and 

trends for flood risk quantification aimed at moving to a structurespecific risk assessment model in the context of the overall effort 

to redesign our risk rating methodology. 

Another foundational element of credible flood mapping is highresolution topography. For this reason, FEMA has and will continue to make targeted investments, consistent with USGS 3DEP 

standards, in high-resolution topography prior to undertaking all 

flood mapping efforts. 

Finally, FEMA has directed the Write Your Own (WYO) Insurance Companies to review all NFIP policies to determine the current risk information for each property. While the grandfathering 

rating procedure remains in place, this will allow FEMA to communicate the current flood risk to NFIP policyholders. FEMA is also 

able to explain the current policy rating to policyholders and discuss how and when an Elevation Certificate can be useful. 

45 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR HELLER 

FROM ROY E. WRIGHT 

Q.1. In your testimony you stated that FEMA recognizes that there 

is a growing interest by private insurers to offer flood insurance 

protection. Does FEMA support current legislative efforts to clarify 

that lenders can accept private flood insurance as meeting mandatory purchase requirements? Would eliminating the noncompete 

clause for companies that write flood insurance through the NFIP’s 

Write Your Own program help provide more flood insurance coverage options for homeowners and businesses? 

A.1. In helping the Nation prepare for, mitigate against, respond 

to, and recover from flood disasters, FEMA’s priority is to extend 

opportunities for flood insurance coverage. Survivors of flood disasters can recover more quickly and more fully if they were insured 

against flood losses, whether they purchase that insurance from 

the NFIP or through private flood insurance markets. There is 

great opportunity to increase levels of flood insurance coverage 

around the Nation given that a large percentage of homes in high 

and moderate risk areas remain uninsured. Private sector providers of flood insurance can play an important role in increasing 

coverage. 

To that end, FEMA would be happy to work with Congress on 

legislative efforts to clarify that federally regulated lenders and 

Federal agencies can accept private flood insurance to meet the 

mandatory purchase requirements. 

An individual can purchase an NFIP flood insurance policy either: (1) directly from the Federal Government through a direct 

servicing agent (known as NFIP Direct), or (2) from a private insurance company through the Write Your Own (WYO) Program. 

FEMA enters into a standard Financial Assistance/Subsidy Arrangement (Arrangement) with the WYO companies, which addresses the terms and conditions for administering NFIP policies. 

Article XIII of the Fiscal Year 2017 Arrangement, entitled ‘‘Restriction on Other Flood Insurance,’’ restricts WYO companies from 

selling certain competing standalone flood insurance products. This 

provision traces back to the inception of the WYO Program in 1984 

and is intended to prevent WYO companies from deriving undue 

advantage from participating in the WYO program. The restriction 

does not prevent: 

1. Independent agents from offering both NFIP flood policies and 

private flood policies at the same time; 

2. WYO companies from offering coverage in excess of NFIP 

flood policies; or 

3. WYO companies from offering a non-NFIP endorsement of 

flood coverage to a homeowner insurance policy. 

FEMA encourages WYO companies to offer private flood coverage 

through these avenues commensurate with the flood risk. Some 

WYO companies currently offer coverage through these avenues, 

though many do not, despite the fact that all WYO companies are 

free to do so. Accordingly, it is unclear at this time how much removing the restrictions in Article XIII of the Arrangement will help 

increase the availability of private flood policies. 

46 

Q.2. Earlier this year FEMA announced it had secured more than $1 billion in reinsurance from 25 reinsurers. This was only the second time in history reinsurance had been secured for the NFIP. 

Does the NFIP plan on purchasing any more reinsurance from the 

private market this year? 

A.2. In January 2017, FEMA made a cornerstone placement of reinsurance to establish a multiyear NFIP Reinsurance Program. 

FEMA does not intend to buy more reinsurance in 2017. FEMA 

will evaluate its opportunity to renew and expand upon the cornerstone placement in January 2018. 

In practice, this looks like: 

• Upgrading the Reinsurance Program’s vision, strategy, and operations based on 2017 lessons learned to optimize a future 

multiyear program. 

• Expanding the NFIP’s flood modeling capabilities. 

• Engaging industry partners to incorporate best practices from 

the private sector. 

The multiyear Reinsurance Program vision is: 

• Financial Strength: To strengthen the NFIP’s financial standing by sharing financial risk with private industry at a price 

that is fair to the Federal Government. 

• Level of Risk: To manage claims exposure by lessening the 

need to incur additional Treasury debt. 

• Stability: To stabilize NFIP’s annual expenditures in order to 

operate within a predictable and defensible annual budget. 

• Customer Experience: To foster strong trust-based relationships with policyholders based on delivering consistently outstanding support during and after major floods. 

• Efficiency: To institutionalize effective program and financial 

management discipline to ensure informed, data-based decision 

making. 

• Transparency: To enhance the credibility of the NFIP with 

Federal, state, and local decision-makers and the private sector 

thought leaders through bilateral learning and sharing of detailed risk information. 

Q.3. The NFIP has eliminated the ability for a consumer to cancel 

their NFIP policy if it is being replaced by a similar non-NFIP policy. This basically disincentives homeowners to purchase a private 

flood insurance policy to replace a more expensive NFIP policy. Is 

the NFIP aware of the impact this policy is having and how soon 

will the NFIP reinstate the needed cancellation code to allow homeowners to receive a pro rata refund for cancellation due to purchase 

of a duplicate policy at any time? 

A.3. FEMA’s current regulations restrict the agency’s ability to 

issue refunds for cancelled policies. As explained in 44 CFR 61.5(c), 

the seasonal nature of flooding may encourage some policyholders 

to only maintain policies during time of the year more prone to 

flood and then cancel policies during lower risk months. Accordingly, FEMA’s regulations only permit refunds after an insured 

sells their interest in the insured property. 44 CFR 62.5 also describes circumstances allowing for refunds related to changes in apVerDate Nov 24 2008 10:49 Dec 14, 2017 Jkt 046629 PO 00000 Frm 00050 Fmt 6602 Sfmt 6602 L:\HEARINGS 2017\03-14 ZZFLOOD DISTILLER\31417.TXT JASON
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plicable flood maps and the ending of mandatory purchase requirements. These regulations do not provide for refunds related to policyholders obtaining a private flood insurance policy. 

FEMA understands the impact of the current regulation and is 

seeking regulatory changes to allow FEMA to cancel the NFIP policy with premium refund when the insured has obtained a replacement flood insurance policy through the private company. In the 

interim, FEMA currently notifies policyholders at 45 days prior to 

the expiration date of the NFIP policy. This should allow policyholders sufficient time to coordinate the end of their NFIP policy 

with the beginning of their private policy. 

Q.4. Currently, the NFIP does not consider actual replacement 

costs when establishing a customer premium, but it is my understanding that FEMA is working to develop methods to obtain a 

verifiable replacement cost value when a policy is sold. I also understand that FEMA must redesign its rating systems in order to 

implement actual replacement costs. What is the current status of 

FEMA’s efforts to obtain the necessary data and development of 

new rating systems? Also, what is your current timeline for completion for each of these initiatives? 

A.4. As you mentioned, FIMA is beginning to update the NFIP’s 

risk rating model. The NFIP’s current approach to risk rating was 

modeled on insurance industry practices at the time the NFIP was 

established. Since that time, the insurance industry has developed 

more efficient and accurate approaches to risk rating. FIMA has an 

opportunity to modernize its risk rating approach to deliver accurate, cost-effective ratings of flood risk to property owners. While 

this transformation may take up to five years to design and fully 

implement, it will have lasting impacts across FIMA operations 

and result in long-term program stability, increased simplicity and 

ease of use of NFIP products and services, and an improved value 

proposition for customers. A new risk rating approach could influence not only the rating of insurance, but also flood hazard mapping and the implementation of floodplain management requirements. 

To ensure FEMA follows industry best practices for rating natural catastrophe risk, including considerations of the actuarial data 

used, we are conducting market research through a Request for Information (RFI) issued on January 24, 2017. The RFI can be found 

here: https://www.fbo.gov/ index?s=opportunity&mode= form&id= 

557d24817170f7475b0f 445f44f9c73d&tab= core&lcview=1 

In addition to the RFI, FEMA conducted market research calls 

to identify data tools and models that should be used for risk rating, including tools to determine replacement cost values. The market research was conducted to determine industry capabilities in 

the following areas: 

1. Assessment of the current state of catastrophic risk rating 

and classification programs; 

2. Design of alternate risk rating models; 

3. Testing of the alternate risk rating models; and 

4. Implementation of alternate models. 

48 

FEMA is working to develop a new rating methodology. Once developed, FEMA will begin a multiyear implementation of the new 

methodology, which will be carried out in tandem with a redesign 

of our IT systems and will be aligned with improvements to our insurance product. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR TILLIS 

FROM ROY E. WRIGHT 

Q.1. Mr. Wright, you stated that Increase Cost of Compliance (ICC) 

is a ‘‘mini-grant’’ mitigation program and there is an obvious assumption that when a structure is brought into compliance the 

flood risks are reduced; however, they are not eliminated. If the 

ICC program only funds elevations and demolitions, it seems the 

NFIP is incentivizing people and property to remain in some hazardous locations that may not be compatible with community 

plans. Wouldn’t it be more effective to provide owners and the community a choice to eliminate the flood risk by allowing the comparable ICC amount to be used for demolition and acquisition costs 

as a means of compliance? This would eliminate the risk in appropriate situations and allow for greater coordination on the distribution of ICC funds to ensure the property owner is fully aware of 

all mitigation opportunities that exist, as well as, the risks and 

building restrictions that still remain if the property owner elects 

to elevate. 

A.1. The Increased Cost of Compliance (ICC) provision of the 

Standard Flood Insurance Policy (SFIP) provides policyholders an 

individual choice to mitigate flood damaged property through elevation, relocation and demolition. The original intent of ICC was 

set forth in the National Flood Insurance Reform Act of 1994, Section 555, which required the NFIP to provide insurance coverage 

for the increased cost of complying with local and State land use 

laws that require elevation of structures that have been substantially or repetitively damaged by a flood event. In general, substantial damage means ‘‘damages from any origin sustained by a structure whereby the cost of restoring the structure to its before damage condition would equal or exceed 50 percent of the property’s 

market value before the damage.’’ Therefore, ICC provides additional funding to policyholders for the consequential cost to comply 

with state or local building laws during reconstruction. Prior to 

ICC, a policy holder was only reimbursed for the cost to repair the 

actual physical damages to the structure, but did not receive funding for mitigation opportunities to protect the structure against future flooding. Instead of encouraging people to remain in the flood 

hazard area, ICC provisions added mitigation options of elevation, 

demolition and relocation to reduce future flood risk. 

Currently, ICC claims payments are limited to $30,000. In most 

cases, this would not cover the entire costs of a property acquisition. In addition, there is no buyout authority within the ICC program to enable property acquisition and ownership transfer to a 

community that would allow the property to be maintained as open 

space. 

However, ICC is available to be used for acquisition if the local 

community chooses to participate in a Federal grant program. In 

49 

a FEMA grant, ICC funding can be used as the non-Federal cost 

share to support a homeowner’s decision for acquisition. One such 

FEMA grant program, Flood Mitigation Assistance (FMA) provides 

funding for reducing or eliminating the long-term risk of flood damage to structures insured under the NFIP. FMA funding is appropriated by Congress out of the National Flood Insurance Fund 

(NFIF). After a flood event, many homeowners bring their homes 

in compliance with the local flood standard, through the use of ICC 

funds toward elevation, relocation, demolition or acquisition, thereby removing or reducing their flood risk. 

Q.2. If FEMA cannot pay back its debt, what percentage of an increase in policy premiums would it take to pay back that debt? 

A.2. Given the current state of the program, on average, premiums 

would need to at least double to repay the debt within ten years. 

This estimate comes with two important caveats: 

1. repayment of the debt cannot be guaranteed if the NFIP sustains a large event within the ten year period, and 

2. such large, unprecedented premium increases to the entirety 

of NFIP policyholders would probably greatly reduce the number of policies in force due to policyholders leaving the program, and therefore, the NFIP would still not have the revenue necessary to pay back the debt. 

For a detailed examination of the NFIP’s ability to repay the 

debt, please refer to our December 17, 2014 report to Congress, in 

which we outlined four different ten year repayment strategies in 

the Appendix D. Two scenarios looked at increases in the reserve 

fund assessment to pay off the debt, and two scenarios explored 

debt forgiveness. At that time, we would have needed to either implement an immediate 76 percent reserve fund assessment, whereby premiums would almost double, or phase in a reserve fund assessment that would increase to 113 percent, whereby premiums 

would comply with the statutory 15 percent premium increase limitation but would more than double over the ten year period, to 

repay that debt within ten years. Since the issuance of that report, 

the NFIP’s policyholder base has declined and our debt has increased following the flooding of Calendar Year 2016. 

Q.3. What is FEMA doing to modernize its IT systems? In April of 

2016, the GAO did a study recommending that FEMA fully define 

its investment board’s roles and responsibilities and procedures for 

selecting and overseeing investments, update its strategic plan and 

complete plans for IT modernization, and establish time frames for 

completing workforce planning efforts. In addition the GAO also 

recommended that FEMA should establish policies and guidance 

for implementing key IT management controls & DHS concurred 

with those recommendations. How is FEMA comporting with the 

GAO study? Do you agree with the GAO’s assessment of the NFIP 

particularly relating to IT issues? What efforts have you taken to 

work with FEMA management on IT issues? What recommendations would you make to help improve the NFIP program and move 

it off of the high-risk list? 

A.3. FEMA’s Component Acquisition Executive (CAE) is leading 

the management and response for the April 2016 Government AcVerDate Nov 24 2008 10:49 Dec 14, 2017 Jkt 046629 PO 00000 Frm 00053 Fmt 6602 Sfmt 6602 L:\HEARINGS 2017\03-14 ZZFLOOD DISTILLER\31417.TXT JASON
50 

counting Office (GAO) study for overseeing investments. The CAE 

has put into place several processes and procedures to improve our 

oversight of investments and modernization efforts, such as conducting FEMA Acquisition Review Boards (ARB) and establishing 

CAE Executive steering committees. For Information Technology 

(IT) modernization, FEMA is participating as one of the five Department of Homeland Security’s (DHS) Agile Pilot Programs. 

These programs are subject to routine oversight by the DHS Financial Systems Modernization Executive Steering Committee, as well 

as the DHS ARB. The ARB recently approved the NFIP IT Modernization Program, known as PIVOT, to enter the Obtain Phase 

and is running several months ahead of schedule due to the deep 

engagement and commitment from FEMA and DHS to make sure 

this program is successful. 

We do agree with the GAO study that IT issues must be addressed for the NFIP to be more effective and efficient, and to that 

end, not only have we launched the NFIP IT Modernization Program (PIVOT) mentioned above, but as FIMA has reorganized, we 

invested in developing a Federal oversight staff and establishing an 

Insurance Systems Branch. 

Q.4. Mr. Wright, in your testimony, you stated that ‘‘the program 

needs to be on a course to eventually arrive at full risk for all policyholders [and] [t]his includes addressing grandfathered and subsidized rates.’’ 

This could take some time to achieve, how long do you think it 

would take to resolve this matter and arrive at a property’s true 

risk? In the marketplace, especially at a local community level, 

there is significant fear of the unknown-what is your ideal 

timeline? 

A.4. Some policyholders’ rates are far below the rate that reflects 

their current flood risk. Under current law, the rates on certain 

pre-FIRM subsidized policies—including those for nonprimary 

homes, severe repetitive loss properties, businesses, and substantially damaged structures—are required to increase by 25 percent 

annually. The rates on all other pre-FIRM subsidized policyholders 

must increase at least 5 percent per year but no more than 15 percent as a class and 18 percent per policy on an annual basis. 

But not all policyholders are on track to move to rates that reflect their current risk. For example, while subsidies for pre-FIRM 

structures and unfunded discounts for newly mapped policies are 

being removed, other discounts, including grandfathered discounts, 

have not yet been phased out. Also, towards the lower end of the 

range allowable for the mandatory annual rate increases (e.g., an 

increase of 5 percent per year), it could take much longer than 10 

years to move to full-risk rates. 

In short, consideration should be given to phase out discounts for 

all policyholders not paying rates that reflect their current risk. 

And, as I stated in my testimony, this is especially true for those 

that have incurred multiple losses. Furthermore, addressing affordability for low-income policyholders can ameliorate rate increases 

for those individuals for whom NFIP rates present a true financial 

burden. 

51 

But, as you point out, giving policyholders and markets predictability about the timeline for phasing out subsidies and discounts 

is important. We are exploring options for phasing out remaining 

subsidies and discounts over a realizable timeframe, such as a ten 

year horizon. 

Q.5. What legislative changes are needed to ensure that FEMA has 

adequate safeguards and controls in place to prevent improper payments from its flood insurance and disaster recovery programs? 

A.5. There is a robust statutorily-required process in place to address improper payments in flood insurance and disaster recovery 

programs. The Improper Payments Information Act of 2002 (IPIA) 

requires Federal agencies that are susceptible to issuing significant 

improper payments to take specific steps to identify and prevent 

improper payments. Congress later added the Recovery Audit Act 

that replaced and consolidated the requirements of both IPIA and 

the Recovery Audit Act. The Improper Payments Elimination and 

Recovery Act of 2010 (IPERA) amended the Act and required an increase in diligence of auditing Federal agencies to prevent improper payments. A subsequent statute, the Improper Payments 

Elimination Recovery Information Act of 2012 (IPERIA), was also 

enacted. It requires Federal agencies to improve the quality of 

oversight for high dollar and high-risk programs. It mandates that 

agencies share data on improper payments they recovered and 

identify ways to increase recovered amounts. To comply with these 

laws, the FEMA Office of the Chief Financial Officer leads the 

IPIA/IPERA/IPERIA efforts to assess the National Flood Insurance 

Program and to identify and recover overpayments. 

Furthermore, FEMA Hazard Mitigation Assistance (HMA) programs have regulatory (2 Code of Federal Regulations) and programmatic procedures, including internal controls, to prevent improper payments to the extent possible. 

FEMA will continue to identify and eliminate improper payments, in accordance with statutory requirements and regulations. 

Q.6. Does FEMA maintain a central data warehouse or database 

where it might be able to undertake data analysis to better understand its program performance and effectiveness? Would better, 

more complete data help FEMA in the administration of these programs? 

A.6. FEMA does centrally manage the transactional history of the 

NFIP policies and claims, though we are working to update our 

system for these data. The NFIP’s IT Modernization effort (known 

as PIVOT) will improve access to the historical record of the NFIP 

for data analysis, performance management, and program policy 

development. The new system will not only provide near-real time 

access to NFIP claims and policy data, it will also enable industry 

standard practices—such as Customer Relationship Management 

and case tracking—to help give FEMA better insight into the customer experience and program performance. In addition, we will 

have much timelier insight on the program’s financial position. 

As we have awarded our new NFIP Direct contract, we have created a ‘‘laboratory’’ to test potential program and product changes 

to determine how they affect the customer experience and program 

performance. We have also established an Industry Management 

52 

Branch and a Program Management Branch to improve our coordination and oversight efforts to ensure that contractors meet program and contractual performance standards. Lastly, we have established an Analytics and Policy Branch, charged with the dual 

mission to ‘‘serve as the data hub and analytic center for Federal 

insurance’’ and ‘‘promote the continuous improvement of NFIP 

practices and policies.’’ The analytics and policy functions are within the same branch to enable policy decisions to consider data insights. 

To support the above efforts, FEMA staff are committed to developing requirements for and building an Enterprise Data Warehouse, which will enable us to leverage ‘‘big data’’ from numerous 

sources to perform data analytics and gain insight on the impacts 

of flooding, potential program changes, and ensure that we are supporting the response and recovery efforts post-disaster. Better and 

more complete data pertaining to policyholder characteristics, flood 

risk, and the built environment will enhance FIMA’s ability to undertake data analysis to better understand its program performance and effectiveness. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR KENNEDY 

FROM ROY E. WRIGHT 

Q.1. Under the Homeowner Flood Insurance Affordability Act of 

2014, Congress required FEMA to develop a Draft Affordability 

Framework ‘‘that proposes to address, via programmatic and regulatory changes, the issues of affordability of flood insurance sold 

under the National Flood Insurance Program, including issues 

identified in the affordability study . . . ’’ 

When will FEMA complete this study? 

A.1. The Affordability Framework is due to Congress in September 

2017. FEMA is working diligently to meet the deadline. 

Q.2. The Homeowner Flood Insurance Affordability Act of 2014 requires gradual rate increases to properties now receiving artificially low (or subsidized) rates instead of immediate increases to 

full-risk rates required in certain cases under BW-12. FEMA is required to increase premiums for most subsidized properties by no 

less than 5 percent annually until the class premium reaches its 

full-risk rate. With limited exceptions, flood insurance premiums 

cannot increase more than 18 percent annually. 

What percentage do you anticipate premium rates increasing for 

these subsidized properties by over the coming years and what considerations will be taken into account to reach this decision? 

How many policyholders are paying subsidized rates? What percentage of the total policyholders do these subsidized ratepayers 

represent. 

A.2. Under the current statute, certain pre-FIRM subsidized policies-including those for nonprimary homes, Severe Repetitive Loss 

properties, businesses, and substantially damaged structures-are 

required by statute to increase 25 percent annually until they 

reach full actuarial rates (42 U.S.C. 4015 (e)(4));(42 U.S.C. 

4014(a)(2)(A)-(E). All other pre-FIRM subsidized policyholders, including primary single family residences, must increase at least 5 

53 

percent but no more than 15 percent as a class and 18 percent per 

policy (42 U.S.C. 4015 (e)(1) through (3)). The increase for any 

given year is a balance of many factors, primarily a balance between affordability to the property owner and program solvency of 

the insurance fund. Premium increases at the higher end of the 

range would tend to increase the overall amounts collected from 

policyholders, unless the increases induce policyholders to drop 

their coverage. Premium increases at the lower end of the range 

will barely exceed inflation and could take years, even decades, to 

reach full risk for some, but will retain more policyholders. Each 

year, the Federal Insurance and Mitigation Administration sets the 

increase factor for the following year’s rate changes. This year, 

FEMA increased premiums for pre-FIRM primary single family 

residences at the lower end of allowable range with average increases of 5.5 percent beginning on April 1, 2017. On October 1, 

2017, we will announce rate increases that will become effective on 

April 1, 2018. 

As of the beginning of Fiscal Year 2017, roughly 800,000 or 16 

percent of policyholders pay pre-FIRM subsidized rates, roughly 

200,000 or 4 percent of policyholders pay Newly Mapped subsidized 

rates, and roughly 20,000 or less than 1 percent of policyholders 

pay rates in the other subsidized categories. 

Q.3. Flood insurance policyholders are often unaware of the exclusions and limitations in their policies until they have a claim. In 

contrast, these same people have a much better understanding of 

their homeowners insurance policy and the various optional coverages and benefits the homeowners policy provides. The consumer’s lack of understanding about their flood policy results in 

complaints, coverage disputes and sometimes lawsuits when they 

become aware at the time of claim that there is no coverage under 

the NFIP flood policy for loss to their basement, for building code 

upgrades during repair, or for additional living expenses to pay for 

alternative lodging when their home becomes uninhabitable due to 

flooding. They cannot understand why these coverages are available under their homeowners policy but not the NFIP policy. Many 

complaints about flood insurance arise from coverage disputes and 

the fact that the NFIP policy’s coverage is not as robust as consumers expect. 

What steps are you taking to minimize coverage disputes and improve customer satisfaction? 

A.3. FEMA is committed to making our products and procedures 

easier-to-understand for the policyholder. Under the Bunning-Bereuter-Blumenauer Flood Insurance Reform Act of 2004 (FIRA), 

Public Law 108-264, 118 Stat. 725, 42 U.S.C. 4001, Congress requires the NFIP to ensure that policyholders receive important information about their flood insurance coverage. In October 2005, in 

an attempt to help policyholders understand their coverage prior to 

a flood, FEMA began providing policyholders with: (a) the property’s flood loss history information, as required by FIRA, Section 

202 (a)(4); (b) the claims handbook, as required by FIRA, Section 

204; (c) the acknowledgement, as required by FIRA Section 203; (d) 

a summary of coverage; (e) a copy of the flood insurance policy; and 

(f) a cover letter referencing these enclosures. 

54 

FEMA is also currently re-writing the NFIP Claims and Underwriting Manuals in plain language to provide consistent guidance 

for adjusters and insurance examiners as they interact with NFIP 

policyholders. Additionally during recent flooding events, FEMA 

prepared and distributed an ‘‘NFIP Claims Process Fact Sheet’’ 

that guides policyholders through the claims process and clearly explains the steps to take if they do not agree with the adjuster’s estimate. 

FEMA also improved our appeals process to better serve our customers—providing greater transparency, access, and accountability. 

FEMA has dedicated insurance examiners specializing in appeals. 

FEMA tracks each step of the appeals process to increase accountability, assure quality, and make the process more timely and efficient. 

During the appeal review, FEMA ensures the adjustor and Write 

Your Own (WYO) company or NFIP Direct Servicing Agent applied 

FEMA’s rules correctly. FEMA begins with the materials submitted 

by the customer, either by mail or using a new email option 

(FEMA-NFIP-Appeals@fema.dhs.gov), in support of the appeal. 

FEMA identifies the information needed to resolve the appeal at 

the outset, and works with the WYO companies to ensure that information is received as quickly as possible. FEMA encourages carriers to resolve issues in favor of policyholders based on FEMA’s 

input whenever possible. Regardless of whether FEMA upholds or 

overturns the original denial, FEMA explains every detail of the 

decision to the policyholder in writing at the completion of the review. The decision sets forth the key facts, the relevant rules, and 

how those rules apply to the situation presented on appeal. 

Q.4. Can you assure us that every person who lives in a special 

flood hazard zone and has a federally backed mortgage has flood 

insurance? 

If not, can you estimate it? 

What prevents you from knowing this figure? 

A.4. Section 102 of the Flood Disaster Protection Act of 1973 (42 

U.S.C. 4012a) requires Federal lending regulators and Federal 

agencies that provide direct housing assistance, including mortgage 

loans, to require properties located in a Special Flood Hazard Area 

(SFHA) to obtain flood insurance. As such, FEMA has a very limited role in the monitoring and implementation of the mandatory 

purchase requirement. As explained below, FEMA does not have 

current, definitive information on the compliance rate for mandatory purchase properties, because FEMA does not regulate or carry 

out the mandatory purchase requirement. 

From FEMA’s perspective, flood insurance take-up is much 

broader than the mandatory purchase requirement. While the mandatory purchase requirement is one way to increase participation 

in the National Flood Insurance Program, it only targets those 

homeowners in the SFHA with federally backed mortgages. FEMA 

considers its market for flood insurance to include all potential 

flood insurance purchasers, regardless of their mortgage status. 

Flood insurance take-up or market penetration is not synonymous 

with those people subject to the mandatory purchase requirement. 

55 

FEMA commissioned an analysis in 2014 that explored penetration rates and mandatory purchase compliance, but we do not currently have a basis to validate the compliance rate in that analysis. 

In the three years since FEMA commissioned the analysis, FEMA 

has learned more about its own data and the potential limitations 

of the analysis. 

Other entities have examined mandatory purchase compliance. 

For example, the National Academies of Sciences (NAS) Report: 

Levees and the National Flood Insurance Program notes that estimates of the mandatory purchase requirement compliance have 

been between 50 and 78 percent. However, the NAS study also 

notes that ‘‘studies indicate that estimates of both market penetration in the SFHA and compliance with the mandatory purchase requirement have varied considerably and are very sensitive to the 

assumptions made in the study process.’’ 

FEMA does not know which properties are subject to the mandatory purchase requirement. We obtain no data on insurance requirements beyond those who may receive a FEMA grant under 

the Stafford Act following a disaster. FEMA does not track compliance with the mandatory purchase requirements primarily because 

we have no available data on which residential structures have a 

federally backed mortgage. 

While FEMA does not have access to mandatory purchase compliance rates, we do have estimated market penetration rates for 

NFIP flood insurance. Market penetration is a measure of flood insurance take-up and we calculate this penetration rate based on 

the number of NFIP insured residential structures compared to the 

number of residential structures overall. This includes NFIP insurance only, and does not include private flood insurance policies. 

FEMA does not define market penetration in terms of mandatory 

purchase compliance, because the NFIP total market includes all 

potential flood insurance purchasers, regardless of their mortgage 

status. 

FEMA estimates that market penetration in SFHAs varies state 

to state, ranging from 6 percent to 65 percent with a national average of 30 percent. In other words, FEMA estimates that nationwide, approximately 30 percent of the residential structures in the 

SFHA carry NFIP insurance. FEMA believes that the statewide totals provide an accurate market penetration estimate for the majority of states. Regardless of how well mandatory purchase is enforced, this low rate indicates that the majority of homes at high 

risk of flood do not have NFIP flood insurance policies. In case of 

a major flood, uninsured residents will not be able to recover as 

quickly or as fully as insured individuals will. 

FEMA will continue to refine its methodology and utilize additional data to provide more accurate state and county-level estimates of NFIP market penetration in the future. 

Q.5. Prior to Biggert Waters 12, were all of the post firm policyholders paying actuarial rates for FEMA flood insurance policies? 

Given the fact that BW12 forced the inclusion of catastrophic lost 

years in the actuarial rate calculations, would you say that post 

BW12 the post firm policyholders are paying greater that the actuarial rates? 

56 

A.5. In response to the first question in this QFR, post-FIRM policyholders in the following classes paid less than actuarial rates 

prior to enactment of the Biggert-Waters Flood Insurance Reform 

Act of 2012: 

• Pre-1981 V-Zone Policies: Pre-FIRM and Post-FIRM properties 

in a V zone, built before FEMA introduced wave height into its 

coastal maps. 

• Zones AR and A99: Pre-FIRM and Post-FIRM Policyholders in 

areas with levees under construction or reconstruction were 

rated as if the levee was complete. 

• Group Flood Insurance Policy: Low-cost policy issued to homeowners who did not have NFIP coverage prior to receiving Federal disaster assistance for flood damage. These were issued to 

both pre-FIRM and post-FIRM structures. 

• Emergency Program: Policyholders in a community in the initial phase of participating in the NFIP when flood hazard information was not yet available. (This category is not technically post-FIRM, since the community had not yet adopted a 

FIRM, but is included in this answer to complete the list of 

subsidized rates other than pre-FIRM rates that were in effect 

prior to the Biggert-Waters Flood Insurance Reform Act of 

2012). 

In response to the second part of the question, FEMA has always 

considered the full range of all possible loss years, including catastrophic years, in its calculation of actuarially rated policies. Both 

the likelihood that catastrophic years occur and the possibility of 

higher damages resulting from catastrophic events are included in 

FEMA’s rate setting practices. Therefore, the statutory requirement to reflect catastrophic loss years did not alter FEMA’s rate 

setting practices. 

Q.6. How much money does FEMA pay annually in interest to the 

Federal treasury for its debt? 

A.6. The NFIP carries $24.6 billion in debt to the Department of 

Treasury. The program pays nearly $400 million per year in interest to the Treasury on these borrowed funds. Since Hurricane 

Katrina, the NFIP has paid over $3.4 billion in interest to the Department of Treasury. In FY17, FEMA anticipates that it will pay 

an additional $390.2 million in interest. 

RESPONSES TO WRITTEN QUESTIONS OF 

SENATOR DONNELLY FROM ROY E. WRIGHT 

Q.1. Mr. Wright, in recent years, communities across my state have 

shared with me their frustrations with FEMA, NFIP, and the flood 

mapping process. The mapping program, particularly when it needs 

amending, can be costly and time-consuming for communities, who 

often have difficulty getting suitable answers or assistance when 

complicated situations arise. 

Do you believe recent internal changes, such as the Technical 

Mapping Advisory Council (TMAC), have improved FEMA’s coordination and communication with impacted communities? 

57 

A.1. Yes, FEMA’s coordination and communication with communities expanded significantly and continues to improve as a result 

of a number of internally-driven initiatives. Several TMAC recommendations have enhanced those efforts. In particular, two recommendations in the 2015 TMAC Annual Report, Recommendations No. 1 and No. 15, focus on ensuring that FEMA’s products 

meet the needs of their users and that FEMA’s communication conveys the importance of addressing flood risk for more resilient communities today and in the future. Many of these recommendations 

are intended to ensure that FEMA provides better data and information so that communities can make better risk-informed decisions. FEMA is actively implementing both of these recommendations through our Customer Experience for Communities initiative, 

a multiyear effort that was initiated in 2016. 

FEMA can help a community become more resilient provided the 

community is prepared to be an active and full partner in planning 

and implementation. As users of flood risk data and products, communities are also customers. Thus, excellent communication and 

strong relationships are crucial in our engagement with communities. FEMA aspires to provide clear, direct, and timely communication as well as products and processes that are easy to navigate, and to foster trusting relationships with our state, local, tribal, and territorial partners. 

We have made significant progress toward this goal. In 2015, 

FEMA created the Community Engagement and Risk Communication (CERC) initiative to help FEMA do a better job of talking and 

working with communities nationwide to help them understand 

and manage their flood risk in a way that is participatory and productive. As mentioned above, FEMA is implementing the Customer 

Experience for Communities initiative to determine how we might 

better improve our engagement with communities. Our exploratory 

efforts, which included a number of community interviews and site 

visits, resulted in the proposal of several new initiatives aimed at 

improving how we work with communities through the National 

Flood Insurance Program (NFIP). Over the next year, FEMA will 

continue to act upon lessons learned via the Customer Experience 

for Communities effort, while re-designing the approach FEMA follows when working collaboratively with communities to update 

flood risk. It is important for FEMA to do so in a manner that is 

flexible enough to account for communities with varying capabilities of assessing and managing their risks. 

Q.2. What are the most common concerns and complaints heard 

from communities about the mapping process? What more can be 

done to assist small and rural communities concerned by the costs 

and time-consuming nature of challenging flood hazard maps? 

A.2. As part of our ongoing multiyear Customer Experience for 

Communities effort, FEMA has had a number of conversations with 

National Flood Insurance Program (NFIP) participating communities regarding the challenges they face while working with FEMA 

to update their flood insurance rate maps. Most often, communities 

asked for increased engagement and public education, shorter map 

development timelines, and the flexibility to tailor our processes 

and procedures to better align to their individual needs. As a result 

58 

of this feedback, FEMA is taking a comprehensive look at how we 

engage with communities during a Risk MAP project and designing 

a streamlined and segmented approach to support the needs of 

communities with varying capacities and capabilities. Under this 

new approach, we would provide more flexibility for our customers 

that seek to take a more active role in updating their flood risk assessment data and associated products, while providing additional 

support to small and rural communities that might not have the 

same levels of expertise or resources. We are also identifying ways 

to shorten the process while engaging more members of a community, introducing and/or leveraging tools that afford more visibility 

into our process. Later this summer we will test these new streamlined approaches with communities; we plan to roll out successful 

changes in FY18. 

Q.3. Mr. Wright, I have repeatedly heard complaints from homeowners, small businesses, and even realtors, about the cost-prohibitive nature of the appeals process. If you are drawn into a flood 

map, the financial burden is on the taxpayer to prove their case 

and successfully challenge. If they don’t win the appeal, it will have 

been very expensive. That is a financial risk many families and 

businesses cannot afford to take. 

Are there ways to improve the appeals process to eliminate the 

financial disincentives to challenging a potentially erroneous flood 

map? 

A.3. Throughout an ongoing flood study to update a Flood Insurance Rate Map (FIRM), better communication with the affected 

communities during the study process can avoid the need for an appeal or, in the event of an appeal, help reduce the costs of challenging potential errors on a FIRM. In accordance with 44 C.F.R. 

δ 67.6, appeals must be accompanied by data supporting the view 

that the flood hazard information proposed by FEMA is scientifically or technically incorrect. This technical data to support an appeal must be provided by licensed professionals. Helping communities during and after a flood study to understand the requirements for submitting an appeal, including the need for technical 

data, may help reduce their costs for providing this information. 

The most efficient way for local communities to contribute to enhancing their updated flood map is to participate in the mapping 

process during an ongoing study and to alert FEMA at that time 

to any additional relevant information that they want it to consider, preferably before or while the preliminary maps are being 

prepared. Community officials are given several opportunities prior 

to the statutory 90-day appeal period to understand the engineering methodologies and techniques that will be used to update the 

FIRM. Participation in Flood Risk Review meetings can be valuable to all parties, including and giving communities the opportunity to present information to FEMA that may guide the depiction of revised floodplains. Through the early involvement of a community in the mapping process, resources can be saved by avoiding 

the need for potential challenge after the FIRM is prepared. 

Flood hazards change over time, as do the available technologies 

and methodologies for studying them. FEMA’s goal in this area is 

to provide communities across the Nation with high-quality flood 

59 

maps and other tools that they can use to identify and mitigate 

their flood risk and the potential impacts of flooding. Using more 

precise flood hazard mapping, residents and businesses are better 

equipped to make informed decisions about their flood risk and 

take appropriate measures to protect themselves and their property. 

It should be noted that a FIRM can be revised at any time, and 

community officials may submit scientific or technical data to 

FEMA to support specific map revisions after an updated FIRM 

goes into effect. All requests for map revisions should be submitted 

through the Chief Executive Officer of the community as the community must adopt any changes to the FIRM to maintain its participation in the NFIP. To help communities compile the data required to support map revision requests, FEMA has developed 

step-by-step instructions and forms, which are available on the 

FEMA website at http://www.fema.gov/mt-2-application-forms-andinstructions. Following a review of the community’s map revision 

request and supporting data, FEMA will revise the FIRM and the 

Flood Insurance Study report, if appropriate. This type of revision 

is generally issued within 90 days of the date all required data are 

received, and most revisions will be effective within 120 days of the 

date they are issued. For questions about FEMA’s map revision 

processes, your constituents can contact the FEMA Map Information exchange at 1-877-336-2627. 

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ADDITIONAL MATERIAL SUPPLIED FOR THE RECORD

LETTER SUBMITTED BY THE NATIONAL MULTIFAMILY HOUSING 

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STATEMENT SUBMITTED BY THE PROPERTY CASUALTY INSURERS 

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(111) 

REAUTHORIZATION OF THE NATIONAL 

FLOOD INSURANCE PROGRAM—PART II 

THURSDAY, MAY 4, 2017 

U.S. SENATE, COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS, Washington, DC. 

The Committee met at 10:04 a.m., in room SD–538, Dirksen Senate Office Building, Hon. Mike Crapo, Chairman of the Committee, 

presiding. 

OPENING STATEMENT OF CHAIRMAN MIKE CRAPO 

Chairman CRAPO. This hearing will come to order. 

During our last flood insurance hearing, Mr. Wright outlined 

FEMA’s four core principles for reauthorization, including: an ontime, multiyear reauthorization; increasing flood insurance coverage through both the NFIP and the private markets; addressing 

barriers to meeting the needs and demands of their customers; and 

enhancing the transparency of the program’s financial framework. 

Another takeaway from the hearing was that FEMA is still in 

the process of implementing some of the 2012 and 2014 reform’s 

major provisions. 

FEMA also continually receives recommendations for more improvements from groups that were created by the laws. For instance, both the re-established Technical Mapping Advisory Council and the newly established Office of the Flood Insurance Advocate recently released their annual reports outlining additional 

changes for mapping and consumer experience. 

I encourage FEMA to continue its important work implementing 

previous reforms and making appropriate improvements. Even so, 

there is still much work to do. 

The NFIP expires at the end of September unless reauthorized 

by Congress. Working together and balancing reforms that protect 

taxpayers and assist consumers, we can reauthorize the program 

on time. 

To build upon our previous hearing, organizations representing 

a diverse set of the program’s stakeholders join us today to provide 

their recommendations. 

I look forward to engaging our witnesses on a number of important questions, including: how to offer consumers more choice by 

growing the private market and ensuring shared risk by both the 

Government and the private sector; how new and better technologies, such as LIDAR, can be more incorporated in mapping; 

how to continue toward risk-based rates while balancing affordability; and how long the program should be reauthorized. 

112 

Senator Brown and I continue, on a bipartisan basis, to receive 

the thoughts and concerns from the program’s stakeholders. We 

have also been gathering priorities for the program from Committee Members. 

I want to thank each of our witnesses today for joining us today 

and look forward to hearing your ideas. 

Senator Brown. 

STATEMENT OF SENATOR SHERROD BROWN 

Senator BROWN. Thank you, Mr. Chairman. I appreciate your 

having this hearing today. 

This is the Committee’s second hearing on reauthorization of 

NFIP. As we have discussed before, flooding is the most common 

and costly natural disaster facing our constituents today. At my 

every Thursday morning coffee, there were a number of people 

there today interested in it. In my State, it may not be as important on the surface as a number of other States, but it clearly matters in pretty much every State of the Union. So thank you to the 

witnesses. Thank you for the work you have done. 

With a growing population and a changing climate, our entire 

Nation will continue to grapple with this issue in the years ahead. 

Many often associated flooding with coastal States that bear the 

brunt of devastating hurricanes, like Katrina and Superstorm 

Sandy. We know this is an issue that affects people in my State 

and all other States. The sheer power of heavy rainfall combined 

with a river, stream, or other body of water can have tragic and 

costly results, as we are seeing right now in the Midwest. 

In my own State, northwest Ohio, the flattest part of the State 

and generally the lowest part of the State, is also under threat of 

flooding today. 

NFIP seeks to combat the effects of flooding through four interrelated components: flood insurance, floodplain management, floodplain mapping, and mitigation. Because these activities are intertwined, it will be important for us to be aware of how policy 

changes in one area can affect others. 

Today we will hear stakeholders’ views about reauthorization 

and the path forward for NFIP. I am also interested to hear your 

views about the implementation of authorizing bills we enacted in 

2012 and 2014. FEMA is still working to implement many of these 

changes. 

I look forward to continuing to work with Chairman Crapo and 

the Members of this Committee to strengthen the NFIP and the 

country’s comprehensive approach to mitigating flood risk through 

a timely reauthorization, and we recognize, of course, the date of 

expiration. It is important for homebuyers that Congress not let 

this program expire. 

Thank you. 

Chairman CRAPO. Thank you, Senator Brown. 

Today we will first receive testimony from Steve Ellis, vice president of Taxpayers for Common Sense, on behalf of the 

SmarterSafer Coalition. 

Next we will hear from Michael Hecht, president and CEO of 

Greater New Orleans, Inc., on behalf of the Coalition for Sustainable Flood Insurance. 

113 

And then, finally, we will hear from Larry Larson, director emeritus and the senior policy advisor for the Association of State Floodplain Managers. 

I want to remind our witnesses that we ask you to keep your oral 

testimony to 5 minutes. Your written testimony will be included in 

the record, and you will have ample opportunity to respond and 

supplement your first statements. 

I also want to remind our Senators to honor the 5-minute rule 

in their questioning. 

With that, please proceed, Mr. Ellis. 

STATEMENT OF STEVE ELLIS, VICE PRESIDENT, TAXPAYERS 

FOR COMMON SENSE, ON BEHALF OF THE SMARTERSAFER 

COALITION 

Mr. ELLIS. Thank you, Mr. Chairman. Good morning, Chairman 

Crapo, Ranking Member Brown, Members of the Committee. I am 

Steve Ellis, vice president of Taxpayers for Common Sense, a national nonpartisan budget watchdog. Thank you for inviting me to 

testify on the National Flood Insurance Program. With the recent 

flooding in several States, this hearing is tragically timely. My 

sympathies are with those who are affected by those floods. 

Taxpayers for Common Sense is allied with SmarterSafer, a coalition in favor of promoting public safety through fiscally sound, environmentally responsible approaches to natural catastrophe policy. 

The coalition ranges from free market and taxpayer groups to consumer and housing advocates to environmental and insurance industry groups. The NFIP is nearly $25 billion in debt and must be reformed to 

ensure it is financially sustainable, has sufficient incentives for reducing future flood damages and vulnerabilities, provides better 

protection for taxpayers, and that it promotes mitigation solutions 

that have long-term benefits. 

SmarterSafer released a reform proposal in February. TCS supports this proposal and I request it be included in the record. 

Chairman CRAPO. Without objection. 

Mr. ELLIS. The four main recommendations are: 

Risk analysis and mapping must be up to date and must provide 

property level elevation data. 

Rates must be tied to risk, with assistance for mitigation and 

premium support for low-income homeowners. 

Increased Federal investments and efforts on mitigation both at 

a property level and community wide so that we are reducing rates 

by reducing risk. 

And ensuring consumer choice and private sector competition 

which will also reduce taxpayer exposure. 

To help people understand their risk and ensure proper NFIP 

rates, maps must be up to date and accurate, and property elevations or effective proxies must be known. Private companies already perform assessments of risk to individual properties—something that is not currently reflected in FEMA maps. FEMA must 

be required to update its maps, include the best science on known 

conditions and risks, but also conduct (or purchase) property-level 

(or close to) risk assessments. FEMA should be required to assess 

elevation at a higher resolution or conduct more granular analysis. 

114 

This is something that is possible. The State of North Carolina has 

undertaken a mapping effort where they have not only gotten property level data at a reasonable cost, but they have a digital system 

to allow property owners to search and understand their risk, potential flood premiums, and mitigation options. 

The Government Accountability Office has documented large 

cross-subsidies in the program, many of which benefit high-income 

homeowners, finding that over 78 percent of subsidized properties 

in NFIP are located in counties with the highest home values, 

while only 5 percent of subsidized properties are in counties with 

the lowest home values. 

Rates in the program must over time be linked to risk while understanding that there may be some in the program who will need 

assistance in order to pay higher rates or reduce risk. Masking subsidies with lower rates prevents policyholders from understanding 

their true level of risk. A 2014 FEMA report noted that the presence of subsidies ‘‘removes the incentive to undertake mitigation efforts, thereby encouraging ever increasing societal costs.’’ 

Instead, premium assistance should be targeted to those who 

need it and encourage and fund mitigation measures that could 

serve to reduce rates by reducing risk. These mitigation efforts 

should be targeted at higher-risk and lower-income property owners. 

In April, the GAO noted: ‘‘Prioritizing mitigation over premium 

assistance could address the policy goal of enhancing resilience because it would involve taking steps to reduce the risk of the property, thus reducing the likelihood of future flood claims and potentially reducing long-term Federal fiscal exposure.’’ 

Also, as rates gradually increase, there is more incentive for individuals and communities to mitigate. We know that each dollar of 

mitigation reduces post-disaster costs by $4 or more. 

The private sector is now writing first dollar flood insurance, 

even in the highest-risk areas. There are roughly 20 companies 

writing private flood insurance in Florida, home to nearly 40 percent of NFIP policies. A majority of these are writing flood coverage 

in the highest risk areas. 

Competition provides consumers choice in flood policies, instead 

of forcing homeowners into a one-size-fits-all Government policy. It 

also takes risk off of taxpayers. I request to include for the record 

a recent analysis done by the Reinsurance Association of America 

on Florida Citizens Property Insurance Corporation, a State-run, 

subsidized wind insurer. 

Chairman CRAPO. Without objection. 

Mr. ELLIS. They reviewed an initiative to get the private sector 

to ‘‘take out’’ policies, resulting in a two-third policy reduction for 

the program. Instead of choosing only low-risk properties, private 

insurers took out properties across the risk spectrum, including 

those along the coast in the highest-risk areas. This left a smaller, 

stronger insurance program that could meet its obligations. 

Senators Heller and Tester’s Flood Insurance Market Parity and 

Modernization Act clarifies that private flood insurance can be used 

to meet mandatory purchase requirements and puts the regulatory 

responsibility where it belongs—on the State insurance commissioners. A version of this bill passed the House last year 419–0. 

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I strongly believe the burgeoning flood insurance industry will 

lead to more homeowners purchasing needed flood coverage. 

Finally, there is no need for the Federal Government to further 

extend into the catastrophe insurance market through reinsurance 

or increasing coverage limits or other means. 

Thank you very much for the opportunity to testify today. I look 

forward to your questions. 

Chairman CRAPO. Thank you very much, Mr. Ellis. 

Mr. Hecht. 

STATEMENT OF MICHAEL HECHT, PRESIDENT AND CHIEF EXECUTIVE OFFICER, GREATER NEW ORLEANS, INC., ON BEHALF OF THE COALITION FOR SUSTAINABLE FLOOD INSURANCE 

Mr. HECHT. Thank you. Good morning, Chairman Crapo, Ranking Member Brown, and Members of the Committee. I am honored 

to speak to you today about reforming and modernizing the National Flood Insurance Program. My name is Michael Hecht, and 

I am president and CEO of Greater New Orleans, Inc., the 10-parish economic development organization for southeast Louisiana. 

Since April 2013, GNO, Inc. has led the Coalition for Sustainable 

Flood Insurance, a national alliance of approximately 250 organizations across 35 States. We were formed in the wake of the implementation of the Biggert–Waters Act, when homeowners across the 

Nation began to see skyrocketing rate increases due to a combination of the removal of grandfathering and new and often inaccurate 

maps. CSFI became a driving force behind the passage of the 

Homeowner Flood Insurance Affordability Act, which was signed 

into law in March 2014. 

As was made clear in these previous debates, there is no simple 

answer to the complex puzzle of flood insurance. Simultaneously 

maintaining premium affordability, keeping the NFIP on sound financial footing, and accurately communicating risk is indeed a 

challenge. But it is in the national interest to recognize that, first 

of all, all 50 States have experienced floods in the past 5 years; 

and, second, that many of these communities exposed to flood risk 

are vital hubs of domestic energy production, international trade, 

finance, agriculture, and other nationally significant economic and 

defense activities. Simply put, affordable and sustainable flood insurance is integral to ensuring that these communities continue 

their vital contributions to America. With this in mind, CSFI is focused on advocating for a better framework, recognizing the complexity but also the importance to America for getting it right. 

There are four primary areas in which we are advocating for this 

framework. We denote them by the acronym of AP, or MMAP. 

The first ‘‘M’’ is mitigation. The long-term solution to flood insurance absolutely lies in mitigation—reducing the risk of flood losses 

before a disaster occurs. This is clearly the best means of reducing 

economic loss and protecting taxpayer interests, and it is vastly 

preferable to ejecting households and businesses from NFIP via 

unaffordable flood insurance premiums. 

The second ‘‘M’’ is mapping. Enhancing the way we assess and 

communicate risk through improvements to the mapping process 

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will protect communities and the NFIP over the long term. The 

more accurate information that we have, the better. 

The ‘‘A’’ is for affordability. Premiums must remain affordable in 

order to keep communities across America economically viable. 

And the final ‘‘P’’ is for program participation. Adopting policies 

that encourage more people to buy flood insurance will make both 

the program more financially sustainable and help communities recover more quickly after an unexpected event. 

Of note, last week, Senator Bill Cassidy and Senator Kirsten 

Gillibrand released a discussion draft that includes many of the 

provisions for which CSFI is advocating, and I strongly urge the 

Committee to give the legislation thoughtful consideration as we 

move toward reauthorization. 

In terms of mitigation, despite our current coordinated, multilayered approach to flood mitigation, substantial sums of taxpayer 

funds are appropriated each year in response to disaster damage 

caused by flooding. Aggressively addressing flood risks at the regional and community levels while providing homeowners options 

and resources to lower flood risks will save lives and properties and 

reduce flood damage, claims, and premiums. A policy that could be 

included would be redirecting premium insurance surcharges included in HFIAA actually toward mitigation in the first place. That 

could be $400 million annually for mitigation. 

In terms of mapping, accurate mapping is fundamental to assessing and communicating risk and pricing it appropriately. The current mapping process often results in communities having to fight 

inaccurate maps that do not take into account locally built protection features or building off inadequate mapping. 

So, for example, in the 2016 floods in Baton Rouge, Louisiana, 

over 80 percent of flood victims did not have flood insurance. I 

know it is easy for those of you not from Louisiana to question why 

they did not have flood insurance given what has occurred in Louisiana over the past 12 years. The answer is that many of those 

communities were not mapped into a flood zone or were only in optional purchase areas. More accurate mapping would have prevented this. 

In terms of affordability, this is the bedrock of our policy. When 

homeowners across the Nation face skyrocketing premiums, legislators reasserted the long-held view that premium affordability is 

fundamental. So in policies to maintain affordability, preserving 

grandfathering is most key. 

And then, finally, under program participation, we have to recognize that, unfortunately, NFIP participation is declining. According 

to FEMA, we have gone down from 5.7 million in 2009 to only 5.1 

million now, almost an 11-percent decline. A policy to potentially 

address this would be to offer a default opt-out flood policy as a 

standard part of the homeowners flood insurance package. NFIP 

could be directed to test offering consumers a default flood insurance option whereby homeowners would be required to actively decline, or opt out of, flood insurance coverage when they get their 

general homeowners insurance. 

Finally, we do think that the private market can play an important role in terms of bringing discipline into this market. We 

should just do it in a thoughtful and considerate way. 

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In closing, four parts of MMAP: mitigation, mapping, affordability, and participation. I thank you for the opportunity to speak 

with you today about reauthorizing and reforming the National 

Flood Insurance Program and for your service to America. The Coalition for Sustainable Flood Insurance stands ready and willing to 

assist the Committee as we work to reauthorize by September 

30th. 

Thank you, Chairman. 

Chairman CRAPO. Thank you, Mr. Hecht. 

Mr. Larson. 

STATEMENT OF LARRY LARSON, DIRECTOR EMERITUS, 

ASSOCIATION OF STATE FLOODPLAIN MANAGERS, INC. 

Mr. LARSON. Thank you, Chairman Crapo, Ranking Member 

Brown, and the Committee, for holding this important hearing. I 

am Larry Larson, director emeritus of the ASFPM, whose 17,000 

members include many of the boots-on-the-ground State and local 

people who actually implement this program and working with 

their private sector partners. 

I will begin by emphasizing that the NFIP is not an insurance 

program. It is the Nation’s major flood risk management program 

that happens to have four legs to it, and we have talked about 

those already this morning: mapping, floodplain management, flood 

mitigation, and flood insurance. All of those work together, and you 

cannot upset one without making sure the others are not adversely 

impacted. 

The program benefits not only policyholders but all taxpayers 

and communities. For example, building compliant with NFIP 

standards saves nearly $2 billion a year, most of which would be 

picked up in disaster relief by the Federal taxpayers. The 1.2 million miles of flood mapping in the country will allow not only policyholders but citizens, emergency managers, insurance agents, and 

the rest to have the information they need to take action to reduce 

that risk. 

The mitigation programs in the NFIP—Increased Cost of Compliance, part of the policy, and Flood Mitigation Assistance program 

are cost-effective, resulting in $5 saved for every $1 invested. These 

programs have provided $1.3 billion in mitigation since 1997. They 

not only help individual property owners, but strengthen neighborhoods, communities, and reduce blight. And while the NFIP can always be improved, we do not believe it is broken, and it does not 

need massive reform, but it can use some reforms. 

We are pleased to see the bipartisan comprehensive NFIP reauthorization discussion draft from Senators Cassidy and Gillibrand 

that was previously mentioned. It has some good ideas that we 

would like to see pursued. At the same time, we are concerned 

about the 10-year reauthorization timeframe. We do not believe 

that it is appropriate, and I think Congress needs some more oversight during that period of time. 

Our written testimony today, while it covers 20 specific reform 

ideas, I am going to concentrate now on four of them. 

First is to deal with the debt, not only the current debt but the 

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solved after Katrina, the NFIP would have been able to handle 

Sandy without additional borrowing. That is the reality. 

Second is to reaffirm your commitment to and enhance the Flood 

Mapping Program. The 2012 act had an excellent mapping section. 

I think Congress did a great job on that, and we need to continue 

and finish the job of mapping. Many maps in rural districts, for example, in your States have not even yet been developed. Only a 

third of the Nation’s streams and coasts have been mapped. We 

need to get mapping ahead of development. If we do not get it 

ahead of development and development occurs without regulation, 

without guidance, then FEMA comes in and maps it, and then everybody gets upset. People not only are annoyed because they think 

they were put in a floodplain, which was always, of course, there, 

but now they have built too low and their flood insurance premiums are too high. So we need to get ahead of that development. 

Third is to strengthen the mitigation components of the NFIP. 

ICC has some existing authority in the law that is not being fully 

implemented. We think that that is important and that ICC must 

be available in addition to the basic policy beyond the limits. 

Finally, there are many interested in promoting private flood 

that we have heard about this morning. Congress must ensure the 

other three elements of the NFIP are not weakened and that the 

NFIP and private flood are on an equal footing. We can grow the 

policy base, but to do that, two critical reforms. 

First is the requirement that private flood policies must meet the 

mandatory purchase requirements of the NFIP and pay an equivalency fee because they use the maps and they use the data that are 

necessary. Currently, the fee pays for 100 percent of the floodplain 

management to help 22,000 communities, and it pays for roughly 

half on the flood mapping. For every million policies lost to the 

NFIP, the NFIP will lose $50 million to run the program. The policy fee is not a tax. It is a user fee, and we need to make sure that 

we understand that. 

Second is the requirement that private flood policies should only 

be sold in NFIP-participating communities so that we do not lose 

that policy base and the communities belonging to the program so 

we can guide future development in losses. We need to do that to 

make sure we do not increase future disaster costs. 

Thank you very much. 

Chairman CRAPO. Thank you very much, Mr. Larson. 

I am going to switch places with Senator Scott on our list on the 

Republican side here and let him go first. He has got something he 

has got to get to right away. So, Senator Scott, please proceed. 

Senator SCOTT. Thank you, Mr. Chairman. And thank you, Mr. 

Chairman, for hosting this hearing that is very important to my 

State of South Carolina. I will tell you that I have spent about 15 

years as an agency owner for Allstate writing flood insurance policies, responding to flood insurance claims, going to homes that 

have been flooded, and watching the families try to piece their lives 

back together. 

As a Senator in 2015, we had the 1,000-year flood in South Carolina that devastated so many families, and, unfortunately, as I was 

going door to door in Sumter, South Carolina, some of the folks did 

not have flood insurance. I would venture to say almost no one had 

119 

flood insurance policies in Sumter, South Carolina, because they 

did not think they needed flood insurance policies because, based 

on the maps, they did not need flood insurance policies. 

This is very concerning to me as we want the NFIP to be there 

not only for South Carolina but for States all across the Nation. 

Mr. Hecht, you testified that all 50 States had experienced flooding. And if I heard you correctly, 40 percent of all those policies, 

so about 5.1 million policies in force, two out of five of all the policies written are in the State of Florida. That means that Florida 

and South Carolina and other States are disproportionately represented, along with North Carolina, but at the same time, in Louisiana, at the same time, when you circle those three or four 

States, you probably have 75 to 85 percent of all the policies, which 

means that we are carrying a disproportionate burden on the flood 

issue, though the flood experience is nationwide. 

Did I understand that correctly? 

Mr. HECHT. Yes, Senator, that is correct, that the vast majority 

of the policies are in Louisiana and Florida and some parts of the 

east coast. But we do know now that we can experience flood across 

the country, and that really nowhere, even areas in the mountains, 

can experience flooding. 

Senator SCOTT. Does that not reinforce the necessity—and the 

panel can discuss this, if you would like—for nationwide mapping 

and for it to be as clear and accurate as possible? 

Mr. HECHT. Yes, sir, I would agree for nationwide mapping, and 

I think the issue of accuracy is critical. We want to know to as 

granular a level as possible, using new technology, the actual risk 

of actual individual properties. 

Senator SCOTT. Mr. Ellis. 

Mr. ELLIS. Absolutely, Senator Scott. I think that we all agreed, 

I think, in our testimony that mapping is critical, and doing it nationally, and then also, as I cited, you know, leadership from States 

like North Carolina where they did LIDAR data down to higherrisk areas, that this is actually possible and it is actually reasonable pricing. 

Senator SCOTT. Yes, sir. Any comments, Mr. Larson, before I go 

on? 

Mr. LARSON. Yes, I agree with you. Our mapping report indicates that the entire Nation should be mapped and can be for about $4 

billion, what we have already spent for mapping, because we have 

a lot better technology, and LIDAR mapping will really make it accurate. 

Senator SCOTT. Thank you, sir. 

Another concern of mine is that everyone has talked about the 

importance of mitigation, and my understanding is that about 1 

percent of the policies in the NFIP represent about 30 percent of 

the claims, and that the repetitive loss conversation and issue, that 

some properties, those properties actually have had two or more 

claims in the last 10 years, and a part of mitigation should be considered as it relates to those policies that have loss after loss after 

loss and are rebuilding and rebuilding and rebuilding. 

I am not much for mandates, but is there any conversation about 

voluntary buybacks or something where we would eliminate that 

exposure? 

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Mr. HECHT. Senator, I think that for some properties, that might 

be an appropriate conversation. For many others, it might simply 

be an issue of increasing the Increased Cost of Compliance coverage so that individuals do have adequate funds to raise their 

homes or otherwise mitigate and prevent future incidents. 

Senator SCOTT. Thank you. 

Mr. LARSON. Increased Cost of Compliance is the most effective 

mitigation tool the NFIP has. It is there immediately for the property owner, and it helps them recover quickly, and we do need to 

expand it and use it broadly. 

Senator SCOTT. Mr. Chairman, I am running out of time, but I 

do want to submit a question for the record and perhaps get the 

answer later, because you have been very kind and gracious with 

your time. But I know in South Carolina there are parts of our 

State where zoning regulations have allowed for more construction 

that appears to have exacerbated the situation for homeowners 

where apartments have been built and the easements and the way 

that you design the drainage system, it drains down in the neighborhoods. I would love to hear your response to the need for us to 

coordinate with local officials to prevent and/or absorb some of the 

costs associated with those changes in zoning that have an impact 

on others. 

Thank you. 

Chairman CRAPO. Thank you. And to the witnesses, you can answer that question in writing afterward, and you probably will receive other questions from Senators that we will ask you at the 

conclusion of the hearing to respond to. 

Senator SCOTT. Thank you, Chairman. 

Chairman CRAPO. Thank you, Senator. 

Senator Brown. 

Senator BROWN. Thank you, Mr. Chairman. 

This is a question for all three of you, starting with Mr. Larson, 

and then Mr. Hecht and Mr. Ellis, if you would. Some have proposed means-tested subsidies like vouchers to help lower-income 

homeowners afford flood insurance. Starting with you, Mr. Larson, 

give us your thoughts on such an approach. If you support it, how 

do you think it should be structured and how would we administer 

it? 

Mr. LARSON. We like that idea of low-cost loans for mitigating 

the properties. Rather than subsidized insurance, which goes on 

forever and ever, as you know, we have already done 48 years in 

the NFIP. If we help subsidize mitigation, then the property is 

safer; the property owner can afford the insurance, and the taxpayer helps pay off that loan in some ways. But then the process 

is over, and we do not have to keep going back and back. 

So I think it can work. It may have to happen outside the NFIP. 

But the process, as you know—— 

Senator BROWN. What do you mean outside—— 

Mr. LARSON. In other words, rather than cross-subsidizing that 

money out of the fund, flood insurance fund, it may need to be appropriated funding, because there are benefits to the taxpayer as 

well as the other policyholders. 

Senator BROWN. OK. Mr. Hecht. 

121 

Mr. HECHT. Senator, I do agree as well that since affordability 

is the fundamental issue, this is one way to get at that by helping 

low- and moderate-income individuals. We do not have a framework right now, and I apologize. We can come back with some 

thoughts on how to implement that. But I would like to emphasize 

what Mr. Larson said, and that is that to the degree that we can 

put funds into mitigation up front and outlay that expense today, 

we are going to save the need to subsidize down the road. Longterm mitigation is the solution for this challenge. 

Senator BROWN. OK. Mr. Ellis. 

Mr. ELLIS. Thank you, Senator Brown. We certainly agree, I 

mean, the best way to reduce rates is by reducing risk and make 

the insurance more affordable. That said, what we have supported 

and is in our policy proposal, both SmarterSafer and Taxpayers for 

Common Sense, is some means-tested assistance for homeowners 

that need it, and so we have done it at 80 percent of the median 

income, and basically our housing allies in the SmarterSafer Coalition have pointed to, you know, working with—being creative in 

setting up loan programs or using existing loan programs, for instance, with the FHA to help homeowners do their mitigation up 

front, and then also—but in some cases, we are going to have to 

provide subsidies. 

And the last thing I would say is what is really critical is to have 

that done outside the rate structure so that the rate is a risk indicator to people so that people need to know what their risk is, and 

the way you know that is if you see you have a high rate, you still 

may be paying less, but you actually have that risk communication 

factor. So we also would say that is critical, too, Senator. 

Senator BROWN. How did you settle on the 80 percent of median 

income? 

Mr. ELLIS. My understanding is that is the standard for a lot of 

the housing programs, as far as for low-income assistance, and so 

I really would rely on—we can get back to you on that more, but 

I would really rely on the National Housing Council Coalition, 

which is a member of SmarterSafer. 

Senator BROWN. OK. Thank you. And also, for the whole panel, 

we hear about FEMA’s existing Cooperating Technical Partners 

Program meant to increase local participation in the data-gathering 

and mapping process. Each of you in written testimony expressed 

the need to improve flood map accuracy and increase outreach to 

local communities in the mapping process. Mr. Larson especially 

talked about obviously the more and more useful technology. 

My questions are this: Has the Cooperating Technical Partners 

Program given communities sufficient opportunity to contribute 

data and knowledge of local conditions in the mapping process? 

And, second, are there ways that we could improve this to get the 

full benefit of the local expertise to build local capacity and limit 

expensive appeals? Mr. Ellis, do you want to start with that? 

Mr. ELLIS. I have not been as much involved in the mapping 

process. We have made recommendations as far as improving it, 

and so as far as the communities, I think that Mr. Hecht and Mr. 

Larson would actually be better able to answer that question for 

you, sir. 

Senator BROWN. Mr. Hecht. 

122 

Mr. HECHT. Thank you, Senator. I think that the impulse to have 

locals provide more information is better because it will give us 

more data and also, of course, locals understand what their manmade and natural features are. 

The challenge that we see in southeast Louisiana is that those 

communities that have more funds and more bandwidth are able 

to do this. Those that simply do not have the funds or the manpower to do so simply do not. And so increasing their capacity 

through some type of grant or other funding mechanism might be 

a way to help increase the data coming from local counties. 

Mr. LARSON. We strongly support the CTP program. Some communities, usually the ones that have capability, and States being 

CTPs know what is going on in their communities within their 

States. Having them help with the mapping programs makes for 

making sure everything is included up front, so we are not missing 

areas that are going to be developed tomorrow and all those sorts 

of things. CTP is a very good program that needs to be expanded. 

Senator BROWN. Thank you, Mr. Chairman. 

Chairman CRAPO. Thank you. 

I will take my questioning period now. First I want to focus on 

prioritization. Between 2008 and 2012, our program, the NFIP, 

sought 17 short-term extensions and lapsed four times in 2010. 

That process was not healthy for policyholders or for the market. 

During this reauthorization effort, we must work together and deliver an on-time product. 

To each of you, I would like you to just respond on how we narrow the set of issues, if that is what becomes necessary, and deliver 

an on-time product. In other words, how would you balance between taxpayer protection reforms and affordability and mitigation 

reforms, balance or prioritize among them? Why don’t we start 

with you, Mr. Ellis? 

Mr. ELLIS. Thank you very much, Mr. Chairman. We certainly 

support and want to see the reauthorization done before September 

30th of this year. But it is also very critical to get it right because 

it is likely to be a 5-year reauthorization, and so we are going to 

be stuck with that for that period of time. 

And so, as you listen to the panel, I think that we have highlighted areas of mapping, mitigation, affordability, but also continue to move toward risk-based rates, and then, last, private competition. So, for instance, the legislation that passed the House last 

year 419–0, we think that should be a critical part of it as well. 

Chairman CRAPO. Thank you. 

Mr. Hecht. 

Mr. HECHT. Thank you, Senator. I do think that getting this 

done and continuing is critical. I will remind everybody as well that 

September 30th is the middle of the flood season, so that timing 

is very particular to those of us that are in those areas, and the 

market is looking for reassurances so that they can continue and 

homes can continue to close. 

In an attempt to try to get our arms around this to prioritize, we 

did come up with the acronym of MMAP, or AP. Within that, I 

would say that the ‘‘A,’’ the affordability, is kind of the fundamental bedrock of this program working going forward. That being 

said, long term, the first ‘‘M,’’ mitigation, is the way that we actuVerDate Nov 24 2008 10:49 Dec 14, 2017 Jkt 046629 PO 00000 Frm 00126 Fmt 6601 Sfmt 6601 L:\HEARINGS 2017\03-14 ZZFLOOD DISTILLER\31417.TXT JASON
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ally work our way out of this over time. And then within that, 

mapping using improvements in technology and participation, getting individuals who should have flood insurance to carry it, are incremental improvements we should try to make by September 

30th. 

Chairman CRAPO. All right. Thank you. 

Mr. Larson. 

Mr. LARSON. Yes, if we look at those four legs, I concur with 

much of what has been said. Mapping, let us get the mapping done. 

Let us get that mapping ahead of development, and that means let 

us invest in the mapping. We now have the technology to do that. 

Flood risk management, let us make sure all 22,000 communities 

that are now in the program stay in the program and not drop out 

because, oh, they can go to the private sector and get their insurance. 

So then let us get on to mitigation, and I agree with what Mr. 

Hecht has said. That is how we work our way out of this affordability issue. So we have got to be able to help those who cannot 

make it, because most of the unaffordable stuff is properties that 

have been there for a long time, long before there was an NFIP. 

So we have got to help them get out of that process. So by doing 

that, I think we start on that process, and then we balance that, 

because that is how the taxpayer reduces their long-term cost. This 

program was created to reduce disaster costs. So those ties must 

be together. 

Chairman CRAPO. Thank you. And, Mr. Larson, a consistent recommendation we hear from stakeholders is to modify mapping for 

better accuracy and risk assessment. We have heard it here today. 

Significant attention was given to mapping in the 2012 and 2014 

reforms, and FEMA is continually receiving feedback from the 

Technical Mapping Advisory Council. Is it a question now of simply 

providing adequate funding to get the job done? Or do we need additional reforms and improvement of the mapping programs? 

Mr. LARSON. By and large, FEMA is now in a position to produce 

good, accurate maps. Technology has done that. LIDAR is a big 

issue. So funding LIDAR and getting that completed for the Nation 

through USGS—they are doing a fabulous job, but that needs 

about 8 year’s worth of funding for that digital elevation program. 

The technology in hydrology and hydraulics is there. Remember, 

in your 2012 act, you said, FEMA, you need to make sure you take 

into account future conditions. So that has not yet been incorporated, but needs to be—sea level rise, for example. 

Chairman CRAPO. All right. Thank you very much. 

And one last question. It is no secret that the NFIP is in poor 

financial condition. Mr. Wright testified in our last flood insurance 

hearing that there is no practical way for FEMA to repay the $24.6 

billion in debt that they have amassed. Some of you have talked 

about in your testimony the structural challenges the program still 

faces. Mr. Ellis, can you provide—and I am just about out of time, 

so very quickly, please—additional details on your top two priorities to strengthen taxpayer protections in the program? 

Mr. ELLIS. Well, certainly it is to continue the movement toward 

risk-based rates and to actually only provide subsidies to those who 

124 

actually need it, and then funding mitigation. So those would be 

the top priorities. 

Chairman CRAPO. All right. Thank you. 

Senator Menendez. 

Senator MENENDEZ. Thank you, Mr. Chairman. Thanks to the 

panel. I am glad we are still focusing on this issue on behalf of the 

Committee. I appreciate the Committee’s leadership in this regard. 

In the aftermath of Superstorm Sandy, we experienced the best 

and the worst of the National Flood Insurance Program—painful 

frustrations, endless delays, in some cases outright fraud on behalf 

of private contractors of FEMA. 

Now, many have said that we should eliminate the NFIP and 

simply leave homeowners and communities at the mercy of private 

insurance companies. I think property values would drop, causing 

a housing crisis, housing stock that is coming back. So while some 

might think privatizing the program is a simple solution, the truth 

is far more complicated and dangerous. 

Mr. Larson, what would be the impact on rates, accessibility, and 

community resiliency if the NFIP was eliminated? 

Mr. LARSON. Well, it would be dramatic, not only for the real estate industry but for the people involved. So I do not think—we 

need to go much further to incorporate the private sector. In the 

end, someday we may want community-based insurance where the 

communities do the right things in order to keep their insurance 

rates down, tying those things together. But in the meantime, we 

have got to make slow transitions toward that and making sure we 

do not lose the NFIP along the way, and those other key three legs. 

It is important to do that. You cannot just eliminate the NFIP. 

Senator MENENDEZ. So when we talk about the financial state of 

the program, much has been made of the debt largely occurred as 

a result of failures of flood levees by the Army Corps of Engineers 

in Louisiana in Hurricane Katrina. It is about $12 billion. And 

some have argued that premiums should be increased dramatically 

to get the program back on sound financial footing. 

I for one think the rates are already incredibly high for so many 

families, and instead of continuing to ask them to pay more, we 

should do better to control costs and make the program run more 

efficiently. 

One of the biggest costs to the program is fees paid to private 

insurance companies to service policies and adjust losses. In fact, 

approximately one-third of all premiums goes to these private insurance companies and their vendors, with that number reaching 

42 percent after Sandy. And what makes this number even more 

egregious is the fact that these insurance companies do not bear 

any risk. The NFIP covers all losses and insurance companies profit risk-free. 

In fact, the GAO has found repeatedly that FEMA does not know 

the actual costs of their contractors, nor how much profit they are 

bringing in. As the report said last December, I quote, ‘‘FEMA continues to lack the information it needs to determine whether its 

compensation payments are appropriate and how much profit is included in what it pays Write Your Own companies.’’ 

125 

So it is no surprise then that policyholders as a whole are paying 

over 50 percent more for private insurance companies to administer 

policies than for FEMA to do it themselves. 

So, Mr. Hecht, are homeowners getting their money’s worth with 

private insurance companies serving the NFIP? 

Mr. HECHT. Thank you, Senator, for that question. I think that 

there is a lot of complexity to this that has to be looked at. If you 

look at the commissions that the Write Your Owns are getting, the 

largest percentage of that I think is what is getting paid to the individual agents, in some cases upwards of 20 percent. And the 

question is: Is that the appropriate amount? 

Another question is: Should you get paid the same amount for 

writing a policy as you get for simply renewing it year after year? 

We should also consider about whether as premiums go up, 

maybe the percentage should go down because you are doing the 

same work, but you are getting more funds. 

And then, finally, on the flip side, I think there is a consideration 

to can we do things to actually reduce the complexity of the program itself so that the administration of it in the field requires less 

steps and is inherently less expensive. A lot of ways to take a bite 

of this apple. 

Senator MENENDEZ. When you have no liability and all the upside, you know, that is—we would all like to have that business. 

But it is also challenging to me when we talk about increasingly 

moving to a more private-sector based insurance that at the end of 

the day, what happens when you get companies that will cherrypick the properties that are the least possible loss consequence and 

then what is left. 

I just do not know how we ask homeowners to pay higher pre- miums to cover $400 million per year in interest payments to ourselves, to the Federal Government, mostly because of that levee 

failure in Louisiana. That is pretty crazy. 

And a final point. We need to do, I would say, Mr. Chairman, a lot more on mitigation. If we look at what we spend, we spent $277 

billion on disaster assistance from 2005 to 2014, with FEMA only 

designating a mere $600 million to its pre-disaster mitigation program. That is 461 times more money that we spent on recovery 

from a flood than mitigating against one. And I think we need to 

be looking at that mitigation element significantly as part of controlling costs, and I appreciate the Chair’s attention. 

Chairman CRAPO. Thank you, Senator Menendez. We appreciate 

your interest and help on this. 

Senator Rounds. 

Senator ROUNDS. Thank you, Mr. Chairman. 

First of all, I think there is a real need for the nationwide mapping to be expedited and then maintained. In my former life, I was 

a insurance agent. We had an insurance agency with multiple locations around the State of South Dakota, and we were one of the 

agencies that actually sold the Write Your Own products, I believe, 

through separate carriers, and it truly simplified the process of 

being able to assist our clients, our customers, who were writing 

homeowner policies. 

I am just curious because it seems to me that—and I should also 

say this: I am also a recipient of a flood insurance policy. I have 

126 

a flood insurance policy that I purchased on a home in 2011, and 

I continue it in effect. And in doing so, I kind of learned a little 

bit more about the program than what I really wanted to at one 

point, and I can tell you that while I have never had a loss on a 

homeowner’s policy, I thought I was going to with regard to the 

National Flood Insurance Program. 

There is a provision, and particularly with those in the areas 

that have been identified as having a lower risk than other areas— 

and I am going to lay this out, and maybe you can look at this. 

But in a Category A situation, as an example, you can buy a quarter-million dollars of insurance coverage for flood for about $300 a 

year, with about a $5,000 deductible, or something like that, if my 

memory serves me correct. And yet a lot of homes today, particularly newer homes going up, easily exceed $250,000 in value. 

One of the rules that any insurance underwriter will tell you is 

that you insure to value or you have a coinsurance clause of some 

sort placed on the policy, because if you do not, regardless of which 

part of the risk is lost, the company actually pays from dollar one 

or after a deductible. 

So you could have a half-million-dollar home sitting in a fairly 

protected class that still buys flood insurance, but you have committed yourself, when you buy or sell a quarter-million-dollar policy, that you are going to pick up the first quarter-million dollars 

in losses. 

There is no insurance company out there that does that on any 

other type of a risk. Every underwriter out there understands that 

if you want more premium dollars, particularly, as I call it, 

‘‘healthy premium dollars,’’ you allow the value in those areas, in 

those areas which are actually healthy premium dollars, profitable 

premium dollars, to go up. 

I think one of the simple ways to actually bring more premium 

dollars into the program is to invite higher limits to be sold in 

some of those areas. You are going to pick up the first quarter-million no matter what, and yet you ought to be able to collect premium dollars on closer to the full value of a home. 

This was first done, these numbers, a quarter-million, was put 

in in 1984. Even at 2 percent, you should easily be at $400,000 as 

an upper limit. And, remember, you are going to pay the first quarter-million no matter what you do today. So why not collect the 

premium dollars based upon more dollars actually at risk, but with 

a higher percentage of not having to pay anything out, if you follow 

me. 

And then along with that, it seems to me that—and I would like 

your thoughts on that, but along with that, it seems to me that we 

ought to be making it easier for the rest of those private carriers 

out there to write a flood insurance, particularly in those areas 

that have a lower risk across the country, every homeowner policy, 

whether it is a special form or a broad form policy—most of them 

write a special form today—all have an exclusion for flood insurance—or flood. But if there was a provision to allow for an add-on 

feature in those areas that have the least amount of risk but for 

people that want to be risk averse to buy that product as a part 

of a homeowner’s policy as an add-on, it seems to me that we could 

add a lot of, once again, healthy premium dollars back into the mix 

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to help offset the losses in those higher-risk areas. And I would like 

your thoughts on that, if you could. And, once again, I have used 

up most of my time making a statement, but I would like that. And 

if we run out of time, I will ask it for the record. 

Mr. ELLIS. Thank you, Senator Rounds. We do not support expanding the program. The private sector is there. There are private 

sector alternatives to add on to carry that extra dollar. I understand your point, but from our perspective, it is better to limit the 

risk to the taxpayers. 

And then on your second point, just trying to be brief, we definitely think that there should be the ability to do add-ons to the 

policy. But we also think that the private sector can write in a lot 

of these areas, both the high-risk areas and the lower-risk areas. 

Mr. HECHT. Thank you, Senator. I actually agree with your 

point, spoken like somebody with years of experience in the industry. I believe that the Cassidy–Gillibrand bill does actually double 

potential coverage to $500,000 for homes and $1 million for business. 

And then to your second point, the idea that we are exploring 

this, could you have actually an opt-out that is there by default 

when you are closing on your home as part of your homeowner’s 

insurance that many people would simply opt in by default to carrying flood as part of their overall policy? Maybe you could modify 

RESPA to make that happen. 

Mr. LARSON. I agree on the caps, increasing the limit. Private insurance is already being sold by numerous companies, so I am a 

little confused about why we need to open up the market more. It 

is already happening. 

Senator ROUNDS. Thank you. 

Thank you, Mr. Chairman. 

Chairman CRAPO. Thank you. 

Senator Van Hollen. 

Senator VAN HOLLEN. Thank you, Mr. Chairman. I thank all of 

you for your testimony today. 

I want to dig a little deeper into the issue of the flood maps and 

the accuracy of the flood maps. As I understand it, a few years ago 

there was an Executive order from the Obama White House that 

requires FEMA to take into account the impact of climate change 

in projecting flooding. Is that the case? Mr. Larson. 

Mr. LARSON. Well, all the agencies, it was said in your decisionmaking process try to include climate change in that Executive 

order. It was also in BW–12 that essentially said you need to look 

at future conditions when you are doing the mapping. 

Senator VAN HOLLEN. Right. And so, in your opinion, are we adequately taking into account all those future conditions, including 

sea level rise at this point in time? 

Mr. LARSON. As you know, the maps that were done, for example, 

after Sandy still do not include sea level rise. FEMA has not yet 

been able to incorporate those issues. There are some steps that 

need to happen. We also, in terms of climate, need to have some 

agreement across the Federal agencies and the experts upon 

what—you know, are you going to use this number, this number, 

or this—you know, we need to have some agreement on that process. 

128 

Senator VAN HOLLEN. In terms of the level of sea level rise projected? 

Mr. LARSON. Correct, for example. 

Senator VAN HOLLEN. And do you know of any process ongoing 

now that would do that? After all, President Trump recently eliminated an Executive order from the previous Administration that 

was supposed to look at mitigating the impact of climate change. 

I do not know if that is impacting this program at all at this point. 

Mr. LARSON. I think at this point we need to get the processes 

into place, and that really has not started yet. I do not know that 

it will be—— 

Senator VAN HOLLEN. So let me just ask, because this is obviously—as you pointed out, adequately projecting for the impact of 

sea level rise is directly related to, you know, the accuracy of the 

mapping. So do you have any recommendations as to what needs 

to be done in order to do this and do it as fast as we need to do 

it? 

Mr. LARSON. I think the agencies—the Corps of Engineers, 

FEMA, USGS—those technical agencies can get together and 

agree. What are going to use for sea level projections? Are we going 

to use the upper-middle? Are we going to pick the middle? What 

is the appropriate one? They agree on it, we all start to use that. 

Same thing with increased intensity of storms. As we know, storm 

intensity has gone up 45 percent in some areas, 60 percent in others, in the Northeast. So we need to have some agreement on the 

process we are going to use and the appropriate hydrology we are 

going to use for those. And it is broad across-the-board increases 

amongst the players involved. 

Senator VAN HOLLEN. I do not know if any of the other witnesses 

have—— 

Mr. HECHT. Well, I would just add one kind of corollary point to 

this, Senator, that we also need to allow for partial mapping. We 

need to allow counties, or parishes in our case, to adopt parts of 

the map that they think do reflect current and future conditions 

while they still work on the others. I think more granularity as 

well as better projections will give us better mapping over time. 

Senator VAN HOLLEN. Mr. Ellis. 

Mr. ELLIS. We certainly agree, Senator Van Hollen, on the granularity, and then also about really trying to adjust to where the 

maps are not just a static line on a piece of paper or a digital line, 

but actually risk assessment and getting more toward that characterization, which is what we have testified on. 

Senator VAN HOLLEN. Right, and I think especially in Louisiana 

and other places, we have seen dramatic flooding outside—you 

know, more than the 100-year flood projections would suggest, especially with these heavy-rain downfalls. 

Let me ask you all a question. The Trump administration’s skinny budget that was submitted calls for a $190 million cut to the 

appropriation for mapping of NFIP programs. Can you all let us 

know what impact that would have on our ability to do what all 

of you gentlemen are talking about the need to move forward? 

Mr. LARSON. Well, essentially what is happening is that appropriated money is kind of what is paying for new maps. The fee income that is coming in kind of keeps the program running and 

129 

works with the communities and the maps. So appropriated money 

is really needed to get mapping done in the Nation. That is why 

we support the Cassidy–Gillibrand that says let us do $500 million 

a year for 10 years and get the mapping done for the entire Nation 

and get ahead of that development. 

Mr. ELLIS. Senator Van Hollen, I will just add that I think in the 

skinny budget it failed to recognize—I mean, they claim that it was 

because all the costs should be internalized to the program and 

failed to recognize the benefit to communities and to outside that 

are not necessarily in the program, but knowing what the flood 

zones are, whether you are going to place a hospital, and knowing 

that you do not want to put that in a special flood hazard area or 

other infrastructure. And so there is greater benefit than just to 

the people who are paying NFIP policies. 

Senator Van Hollen. I appreciate it. Thank you. Thank you all. 

Chairman CRAPO. Thank you. 

Senator Tillis. 

Senator TILLIS. Thank you, Mr. Chair. Gentlemen, thank you for 

being here. I am from North Carolina and proud to have been, as 

part of the State legislature, on the forefront of getting funding to 

advance mapping in the State, and hopefully we can make progress 

on a national basis. 

Mr. Hecht, you made a comment that I want to go back, and 

some of my questions are in line with Senator Menendez’s. If you 

accept that half of the $24 billion debt right now is related to the 

events from Katrina and Rita, then the other $12 billion may speak 

to some of the business practices that we need to take a look at 

compensation structures for the Write Your Own, for the insurance 

companies that are working in the program. 

Do you feel like we have adequate controls, or do you feel like 

that at least our relationship with these third parties is similar to 

the kinds of relationships other insurers have with third parties in 

terms of compensation models and reimbursement models? I will 

start with you, but anybody who would like to opine on it. 

Mr. HECHT. Thank you, Senator. I think it is clear that we need 

more information and better data and comparisons to the private 

sector in this. We do not get from the GAO and others enough data 

to understand really the fidelity of that relationship. 

Senator TILLIS. The sort of fundamental process, as you alluded 

to, in terms of compensation structures, sound like they were 

maybe circa 1970s compensation structures. Mr. Ellis. 

Mr. ELLIS. Senator Tillis, certainly we agree that we need to 

have more data and we need to be able to compare to the private 

sector. I would also—and make sure that we are in alignment and 

recognizing the amount of risk, or not risk, that these companies 

are taking on. And I am speaking for Taxpayers for Common Sense 

here. 

But, also, you know, I think that Senator Menendez’s argument 

also makes the case for more private sector involvement in flood insurance. I mean, then you do not have the Government making 

some of these decisions about what are the compensation structures, what is this? It is actually a competitive marketplace, and 

companies are going to pay their agents what is going to get them 

to be able to sell more policies. 

130 

Senator TILLIS. I would tend to agree with that. 

I want to move on to something else and stay within time, and 

that is the ICC program. I have received a fair amount of feedback 

from various governmental agencies that feel like they would like 

to see some changes that really allow for more demolition and acquisition, and we have actually proposed to the Banking Committee a few things, one having to do with claim limits, and I was 

just trying to go through some of the major provisions, raising—the 

claim limits should be raised to at least 60,000. I will not get into 

the specifics of the provisions. 

But what they are saying is we would like to actually acquire 

property, demolish buildings, remove the threat. Do you all generally think the changes to the ICC program that would lead to 

that end are something we should consider? Mr. Larson. 

Mr. LARSON. I think definitely the ICC should be moving in that 

direction. We have communities in Charlotte–Mecklenburg that are 

trying to use ICC for those purposes, and it is—— 

Senator TILLIS. I live in Mecklenburg. 

Mr. LARSON. Yes, right. And so the ICC can be that tool, but it 

needs to be opened up to allow the tool to be used. 

Senator TILLIS. Yes, and I think we need it to be more agile. One 

thing that we have suggested is waiving rulemaking requirements 

so that it could be—remove impediments, basically, to making ICC 

changes so that we could act more swiftly. 

Mr. Hecht. 

Mr. HECHT. I agree as well. Mr. Larson made a subtle but very 

important point up front, which is that the National Flood Insurance Program is not really an insurance program. It is a land-use 

policy. I think as part of that, we should be smart about how we 

manage our lands and our building going forward. 

Senator TILLIS. You see that in Mecklenburg County, down in 

Fayetteville, which was hard hit by Matthew. There are a number 

of instances where, if we reform this program, we can remove the 

future threat in flood-prone areas, and that is why I am hoping the 

Committee will indulge us on some of the suggestions that we have 

made for the program changes. 

Also, with respect to mapping, you said something important, 

and that is having the level of granularity so that you can really 

rate for the risk. When I first moved to North Carolina in 1998, 

I bought a house on Lake Norman, and I had to get flood insurance. Now, my physical structure was 12 feet above a 1-mile dam 

down the river on Lake Norman, and there was maybe about a 10- 

square-foot part of my beach that was in the floodplain, and I had 

to get insurance. So that is actually an area where perhaps I did 

not—or if I had to get it, it should not be at the level that others 

that are sitting at the level of the dam. And I think that granularity with mapping is the way that we get through those disparities. 

Mr. HECHT. As well, Senator, with structures and the type of 

structure and whether it is integral to your primary residence. 

Senator TILLIS. Yeah, so if there is no structure there—— 

Mr. LARSON. And the new mapping does that. LIDAR will do 

that. It will get that granularity. 

131 

Senator TILLIS. It may have been one of the reasons why I supported the funding at the State level. 

[Laughter.] 

Senator TILLIS. Thank you, Mr. Chair. 

Chairman CRAPO. Thank you. 

Senator Tester. 

Senator TESTER. Yes, thank you, Mr. Chairman. Thank you for 

having this hearing. 

I have just got a couple questions, and this is for you, Mr. Ellis. 

You spoke of the bill that Senator Heller and I have. I just want 

to get your perspective on if you believe Congress should pass a 

multiyear authorization. And if that reauthorization were to pass, 

would that help us build out a private insurance program, working 

in tandem with NFIP, or would it not? 

Mr. ELLIS. I certainly think that it would help build out a private 

insurance program, and your legislation, which we strongly support, simply clarifies something that was already in Biggert– 

Waters that said that you can have a private flood policy to meet 

the mandatory purchase requirement. 

And then, second—and I think this is really important—it does 

have the provision about that you can go back and forth from NFIP 

to the private sector back to NFIP without losing any 

grandfathering or anything else like that. 

And then, last, it is important that it puts it into the insurance 

commissioners—the State insurance commissioners are the ones 

who will be regulating it. 

Senator TESTER. So we have got two different lines to go on this. 

The first one is I think there is some heartburn with our bill or 

with the private insurance that if the event comes, the insurance 

will not be there to the degree that they need it. Could you talk 

about that and how we can ensure that the private insurance 

would be just as good as any other insurance that is out there? 

Mr. ELLIS. Well, that is certainly going to be the job of the State 

insurance regulators, making sure that policyholders are not being 

duped or are getting a bad product. 

And then the other thing, I think—and this kind of came up 

when I was talking about having sort of a policy rider added on. 

Senator Rounds was talking about this. You know, the more we 

make flood insurance to be a normal insurance product, something 

that people just get or their insurance agent asks them, ‘‘Do you 

want this?’’ we are going to get more people covered. I mean, right 

now we already have a problem with adverse selection. The only 

people buying flood insurance are the people who are the most likely to need it. We should see more people buying flood insurance, 

as Senator Scott mentioned about the people in South Carolina, 

how so many of them did not have flood insurance, and that is the 

real tragedy. And it was pointed out by FEMA in previous testimony that in the flooding that happened in Louisiana a year or so 

ago, the average NFIP payment was about $87,000. If you did not 

have flood insurance, you got about $9,000 in disaster assistance. 

And so that is a real problem, and so we want to see more and 

more people buying flood insurance. 

Senator TESTER. OK. So has anybody done any actuarials on if 

private insurance competition would help bring down the rates? 

132 

Mr. ELLIS. Certainly it seems—you know, the only reason why 

you would go to a private sector policy over an NFIP policy is if 

you got a better rate or a better policy or both. And so certainly 

that is what we are seeing, and we have seen—you know, as I mentioned in my testimony, there are about 20 companies writing private flood insurance in Florida, where there is 40 percent of the 

NFIP policies. And so, clearly, there is some interest because somebody is buying those policies. 

Senator TESTER. One last question, and any of you can respond 

to these, by the way. I am picking on Mr. Ellis, but it does not necessarily have to be that way. 

There are some that will say if the private insurers get in the 

market, they will cherry-pick the policies that have less potential 

for a claim, and it will leave the National Flood Insurance Program 

with only the policies that have the most likelihood of flooding. 

Could you respond to that? 

Mr. ELLIS. Well, the Reinsurance Association of America, their 

analysis—and we are trying to look at this as an analog of the 

Florida windstorm insurance and the depopulation of that where 

they had the private sector come in and take out policies, about 

two-thirds of the policies out of the program. We found that they 

took policies from coastal areas, from all over the place. And then, 

second, the flood insurance companies that are writing in Florida, 

more than half of them are writing in the V zones, so in the higherrisk areas. So, clearly, there is an appetite for risk. 

And that gets to the last point, which is if you are an insurance 

company, if you do not take on risk, you are not going to make 

money. And so, clearly, that is part of the incentive, because a lot 

of the flooding—and FEMA will tell you this—occurs outside of the 

high-risk areas. So you are writing a lower insurance rate policy, 

but you are still going to have to pay claims. So you want to get 

a higher rate of return by writing higher-risk policies. 

Senator TESTER. OK. And so we have—and I live on the Northern Plains, OK? So flooding is not something that we have much 

of—not that it could not change with climate change. But we have 

a situation where storms are happening in places they have not 

happened before, and then flood insurance is like, for instance, crop 

hail insurance, if you do not get hailstorms very often, you pay a 

pretty low rate. I would imagine it is the same thing for flood insurance. 

What do you say for those companies that may be insuring in 

places where the flood is very unlikely, but it seems like those unlikely events are happening with more regularity, 100-year events 

are happening with more regularity? 

Mr. LARSON. Well, we see more of that happening all the time. 

Storm intensity is happening. I mean, we call things ‘‘a 1,000-year 

flood.’’ Well, it is not a 1,000-year flood at all. It may be a 1,000- 

year rainfall, but not a flood. So we will see companies dealing— 

the advantage of private is adding to the base. As long as we do 

it in a way that does not upset the four legs of the NFIP and pulls 

it out so that communities start dropping out of the NFIP, because 

if they do that, we will not be guiding future development, and that 

needs to happen in a balanced fashion. 

133 

Senator TESTER. Well, I just want to thank you all for your testimony and appreciate your answers. 

Chairman CRAPO. Thank you. 

Senator Kennedy. 

Senator KENNEDY. Thank you, Mr. Chairman. I want to thank 

all three of you gentlemen. I have learned a lot listening to you 

today. I especially want to thank Mr. Hecht. He has become an expert the Flood Insurance Program and is recognized as such in my 

State, and I think here in Washington, DC. 

Mr. Ellis, let me ask you, I will start with you, if I could. As I 

appreciate it, you want to give more authority to the State insurance commissioners? 

Mr. ELLIS. We want to, in the Heller–Tester bill, essentially have 

them be the regulators of the private insurance market. Yes, sir. 

Senator KENNEDY. OK. They have done a good job with health 

insurance. In my State—I cannot speak for other States, but in my 

State, the main job of our insurance commissioner is to hold fundraisers with the insurance industry. I am just going to be blunt. 

Mr. ELLIS. Well, I can say, Senator, you know, earlier Senator 

Menendez talked about the experience of his constituents dealing 

with FEMA and the Write Your Owns, and in that case, they 

would have been able to go to the State insurance commissioner to 

hold those companies to account, which was not happening with 

FEMA, sir. 

Senator KENNEDY. Right. 

Mr. LARSON. I would like to remind people that the fraud that 

happened in Sandy was done by the private sector. It was not 

FEMA changing the reports. So is there—the concern with this will 

upset the national program by not looking at how this will apply 

to four legs of a stool. So insurance commissioners in all 50 States 

will now treat it differently? That is a little concerning. 

Senator KENNEDY. Yeah, if they will do their job, and if they are 

willing to make the insurance industry mad sometimes. 

How much do you think, gentlemen, we could knock that $25 billion debt down if we stopped paying interest to ourselves? 

Mr. HECHT. Senator, I think that the amount is about $400 million a year of that interest that could get applied to that, or we 

could apply it toward mitigation to make the program more sound 

over time. What we are doing right now, taking it out of one pocket 

and putting it in the other, does not seem to be serving anybody 

best interests over the long term. 

Senator KENNEDY. And that $25 billion, it is not like we went 

down to the local bank and borrowed $25 billion and we have got 

to pay interest. We are paying interest to ourselves, right? 

Mr. LARSON. About $4 billion so far, and like I say, if the debt 

after Katrina would have been forgiven, the NFIP could have handled Sandy without additional borrowing. 

Mr. ELLIS. I would just flag, Senator, that is how intergovernmental debt is treated across the board, including things like Social 

Security and other areas. 

Now, if we wanted to talk about not paying interest, I would certainly entertain that at Taxpayers for Common Sense. But I just 

want to flag that is the standard for how Government operates. 

134 

Senator KENNEDY. OK. And, Mr. Ellis, I am not disagreeing with 

you. You make really good points. I am all for—I mean, I am a taxpayer, and I believe in common sense, too. So I am with you. 

[Laughter.] 

Mr. ELLIS. I appreciate that, Senator. 

Senator KENNEDY. If you do not mind me asking, where do you 

live? 

Mr. ELLIS. I live in DC. 

Senator KENNEDY. OK. Do you carry flood insurance? 

Mr. ELLIS. No. I rent a condo, and so I am well above—— 

Senator KENNEDY. OK. Well, let me tell you part of the problem. 

I am going to make a—— 

Mr. ELLIS. One thing I would just add, sir, is that I was an officer in the Coast Guard, and so I have definitely dealt with flooding 

and those issues. And so I understand that. 

Senator KENNEDY. I did not mean to insinuate you are not— 

please, that is not what I meant. 

Let me make a prediction on your condo, OK? You get 26 inches 

of rain in 2 days, you are going to flood. You are not in a floodplain. 

You live on Mount Everest, you get 26 inches of rain in 2 days, you 

are going to flood. And that is what makes this whole situation difficult. 

But in my State, I will tell you what the—it does not do any good 

to give people insurance if they cannot afford it. We tried that with 

the Affordable Care Act. It did not work. So you have got to start 

with affordability, and there is nothing wrong with starting with 

affordability. 

I want to ask Mr. Hecht a question. Can you explain what would 

happen in Louisiana, Mr. Hecht, if—we have got over 100,000 policyholders. What would happen if the lower-risk policies were 

moved to private insurers and the commercial properties were exempted? What do you think would happen? 

Mr. HECHT. We would see slowly the decimation of our coastal 

communities. 

Senator KENNEDY. Kind of like with Biggert–Waters. 

Mr. HECHT. What we began to see was a spiraling where people 

could not afford their homes. They were going to walk away from 

them. That was going to impact the banks. That would then impact 

the tax base. It is a cascading effect, sir. 

Senator KENNEDY. Look, I think everybody was well intentioned 

with Biggert–Waters. But 150 years ago, doctors used to believe 

their patients with the best of intentions. If it killed their patients, 

they stopped doing it. So it is really easy to talk about risk-adjusted rates, but we do not live in ‘‘La La Land.’’ That is a movie. 

Mr. ELLIS. I would just add, Senator, we have talked about affordability, and affordability is part of our proposal. We want to 

make sure that people are able to have flood insurance, and we 

would like to see more Americans carry flood insurance. 

Senator KENNEDY. You ought to buy some. 

Mr. ELLIS. Thank you very much, Senator. 

[Laughter.] 

Senator KENNEDY. Thank you, Mr. Chairman. 

Chairman CRAPO. Thank you, Senator. 

Senator Reed. 

135 

Senator REED. Well, thank you very much, Mr. Chairman, and 

thank you, gentlemen. I apologize. I have a simultaneous hearing 

in Armed Services, so I could not be here for the entire testimony. 

Mr. Larson and Mr. Hecht, the Flood Insurance Program does 

much more than just provide flood insurance. It provides flood assistance, flood mapping. It provides mitigation assistance, outreach, 

oversight. If we go more toward a private marketplace of flood insurers, can you comment on or suggest actions we can take to 

maintain these other aspects of the Flood Insurance Program? Mr. 

Hecht, please. 

Mr. HECHT. I apologize. Could you repeat the beginning of the 

question? I was talking to the Senator as you—I apologize. 

[Laughter.] 

Senator REED. Let me repeat it. The Flood Insurance Program 

provides much more than simply reimbursement to people who suffer damage: flood mapping, mitigation, a whole host of issues that 

are critical to communities and critical to resiliency. If there is a 

more pronounced private insurance aspect, how do we in Congress 

maintain those activities for the National Flood Program? Do you 

have any ideas or suggestions? 

Mr. HECHT. I think it is a critical point that we understand that 

those structures remain in place and that FEMA is mandated and 

is funded to do so, mapping and mitigation, again, being the two 

key things that over time are going to reduce the risk for the entire 

system. And so I do think it is critical that we do not simply say 

we are going to leave this to the private sector, that we go toward 

a hybrid model that increases competition and the discipline of the 

program, but does not abandon those pillars of long-term sustainability. 

Senator REED. Mr. Larson, please. 

Mr. LARSON. Yes, you know, some of the private sector insurance 

industry is saying, well, there should not be a policy fee on the private sector, and that the taxpayers should fund that through appropriations. My answer to them is as soon as you get Congress to 

appropriate $250 million to take care of those other activities, we 

will get rid of the policy fee. But unless we have a level playing 

field, the whole house of cards comes down. 

Senator REED. Thank you. 

Mr. Ellis, you are looking at a private sector that you would and 

I think we would all suggest has more flexibility. Do you think we 

should give the NFIP more flexibility in terms of insurance, what 

they can do so they can be more competitive with the private sector, so that people really do have choices? 

Mr. ELLIS. I think that there is, Senator, problems and challenges within the NFIP, and it is a program that exists—I do not 

think that exists to provide flood insurance to people, but I think 

that expanding it and trying to compete with the private sector, it 

kind of gets away from what the initial intent was. Basically, the 

reason why we created NFIP in 1968 or Congress created NFIP in 

1968 was because of the failure in the private marketplace. The 

private marketplace now wants to write flood, so why are we trying 

to crowd them out or outcompete them with the NFIP program? 

Senator REED. Well, they want to write private flood insurance 

if they can make money on it. But as 1968 suggested, there are 

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many parts of the country and areas where they do not think they 

can make money, and then that leaves not an opportunity but, I 

would argue, an obligation for us to step in. 

One of the issues, too, you know, you have pointed out how in 

Florida, for example, there is a very active private market. Coming 

from a coastal State, the Ocean State, I have noticed that a lot of 

the homes around the coast are quite expensive, and I believe there 

are limits on what the NFIP can write. I think it is $250,000 for 

the structure, $100,000 for contents. So, frankly, a lot of the private sort of flood insurance are necessitated because the value of 

the home is way beyond what could be done. So, you know, that 

is where I think the private insurers are coming in, and they are 

doing very well because they can charge rates to those homeowners 

that are, you know, cost-effective for them. 

Mr. ELLIS. But they are actually doing first dollar insurance in 

Florida, Senator, and we assume—and part of it is because just 

like NFIP reflects, 40 percent of NFIP is in Florida because that 

is—I mean, as much as it is the Ocean State in Rhode Island, you 

know, there is a lot more—— 

Senator REED. But, again, I think when we look at this private 

participation, some of it is as a result of very expensive real estate 

located—and it is not just Rhode Island. It is the gold coast of Florida and other places where the NFIP program, if it would be taken 

up by these—but they are too expensive, the homes. 

So, again, I want to thank you gentlemen for your testimony and 

for what you have been doing to help us go through this and think 

about it. Thank you. 

Chairman CRAPO. Thank you, Senator Reed. 

Senator Warren. 

Senator WARREN. Thank you, Mr. Chairman. 

So Congress enacted the Biggert–Waters Flood Insurance Program Reform Act to make the National Flood Insurance Program 

more financially sound and to accurately reflect the true cost of 

flood insurance. 

Now, as part of the plan to achieve those goals, right now some 

Senators want to dramatically increase the number of private policies. And I am not against private sector insurance, but there 

would be real costs to simply turning over the Federal program to 

the private sector. 

The NFIP has a four-pronged comprehensive flood risk reduction 

program that is comprised of insurance, flood mapping, floodplain 

management, and flood mitigation. And these four missions, each 

of them is critical to reducing the impact of dangerous floods. And 

each is funded, at least in part, by user fees and surcharges added 

to the Federal premium. 

So private insurance companies benefit from those services, but 

private flood insurance does not contribute to any of these other 

critical missions. As the number of private policies grow, it is critical that the private sector contributes its fair share to the flood 

management functions of NFIP. 

So, Mr. Ellis, let me just start with you. You have previously testified before Congress, stating that—and I am going to quote you 

here—‘‘The primarily private sector program is where flood insurance is heading, but Congress should be intentional about this deVerDate Nov 24 2008 10:49 Dec 14, 2017 Jkt 046629 PO 00000 Frm 00140 Fmt 6601 Sfmt 6601 L:\HEARINGS 2017\03-14 ZZFLOOD DISTILLER\31417.TXT JASON
137 

velopment and ensure the mitigation benefits achieved by NFIP 

are retained and funds for mapping maintained.’’ 

Do you believe that private primary policies should include NFIP 

equivalency fees and surcharges to ensure that the private sector 

is sharing the national costs of flood mapping and floodplain management? 

Mr. ELLIS. Taxpayers for Common Sense certainly believes that, 

yes, Senator. 

Senator WARREN. Thank you. 

Mr. Hecht, do you agree? 

Mr. HECHT. Senator, I agree completely. If we consider that mapping and mitigation are the long-term solutions for all of America, 

then all of America should be supporting these initiatives. 

Senator WARREN. All right. And, Mr. Larson, do you agree? 

Mr. LARSON. Yeah, the private sector should be on a level playing 

field and pay the policy fee. 

Senator WARREN. So either everybody pays the fee or nobody 

pays it, right? 

Mr. ELLIS. But, Senator Warren, one thing I would flag is that 

it should be specifically delineated so that people know. That is one 

of the problems with the Flood Insurance Program now, that that 

fee has been kind of hidden into the overall rate rather than actually being explicit. 

Senator WARREN. Fair enough. I am all for transparency with 

consumers so they know what they are paying for. But those who 

buy private insurance and those who buy public insurance should 

be paying the same set of fees to get us forward in the future. 

OK, good. I think this is just really important because shifting 

to private insurance is not going to work if private insurance does 

not contribute the fees we need to flood mapping and floodplain 

management and flood mitigation. 

So I want to ask another question, if I can, in the time I have 

left. As we have heard, mitigation is a vital part of NFIP’s floodresilient efforts. And, in fact, the GAO recently reported that it estimated that for every dollar spent on mitigation, losses were reduced by an average of about $4. 

Now, Congress currently subsidizes NFIP rates to make flood insurance more affordable, but mitigation loans could be another tool 

to lower the cost of flood insurance. A Wharton University study 

that you may be familiar with has shown that low-interest loans 

to elevate or flood-proof structures in high-risk areas could lower 

flood insurance premiums for many homeowners and also decrease 

the Government subsidization assistance. 

So, Mr. Larson, when it is economically appropriate, do you believe that offering mitigation loans to elevate flood-proof or floodproof high-risk homes can be an effective way for NFIP to minimize 

flood risk and damage for homeowners? 

Mr. LARSON. Absolutely. Subsidizing mitigation rather than subsidizing insurance is—— 

Senator WARREN. Right. 

Mr. LARSON. ——actually the way you want to go, and, in fact, 

the other side of that coin is those repeat losses, right now, you 

know, the NFIP has no ability to ultimately say no, no matter 

138 

whether you have had claims five times the value of your structure. 

Maybe that is something that should be considered, too. 

Senator WARREN. I think this point about mitigation is kind of 

opening a new lens that we should be looking at this. You know, 

the Government typically offers low-interest SBA loans to help 

homeowners rebuild after a disaster has damaged their homes. I 

think it would be a smart idea for the Government to do more to 

help homeowners prevent damage by making their homes more resilient before damage strikes. 

Mr. Hecht, you wanted to add on that? 

Mr. HECHT. I did just want to say, Senator, we visualized this 

about getting on the left side of the disaster curve. We tend to always operate in the acute moment, and then in the aftermath, we 

need to pull back to the left side, and everybody is going to win— 

the Government, the taxpayer, the citizen. 

Senator WARREN. That sounds like a much more cost-effective 

way to deal with this problem. Thank you very much. 

Thank you, Mr. Chairman. 

Chairman CRAPO. Thank you very much, Senator Warren. 

That concludes the Senators’ questioning, and that will be the 

end of the hearing. I would like to thank our witnesses again. Both 

your written and your testimony here today at the hearing has 

been very helpful to us. We are going to continue to proceed to 

meet the deadline and to beat the deadline and get a reauthorization done on time. And we will continue to seek your assistance, 

the witnesses, as we work on that process. In fact, you can expect 

questions from Senators, I assume. 

I will tell all the Senators that we have 7 days in order to submit 

those questions, and I will not put a time limit on you, but please 

respond to the questions very promptly as we will be moving ahead 

on this rapidly. 

With that, the hearing is adjourned. 

[Whereupon, at 11:25 a.m., the hearing was adjourned.] 

[Prepared statements, responses to written questions, and additional material supplied for the record follow:] 

139 

1Full list of groups is available at www.smartersafer.org. 2P.L. 90-448. 

3 U.S. Task Force on Federal Flood Control Policy. ‘‘A Unified National Program for Managing 

Flood Losses’’. August 1966. p17. http://www.loc.gov/law/find/hearings/floods/floods89- 

465.pdf 

PREPARED STATEMENT OF STEVE ELLIS 

VICE PRESIDENT, TAXPAYERS FOR COMMON SENSE, ON BEHALF OF THE

SMARTERSAFER COALITION

MAY 4, 2017 

Good morning, Chairman Crapo, Ranking Member Brown, Members of the Committee. I am Steve Ellis, Vice President of Taxpayers for Common Sense (TCS), a 

national nonpartisan budget watchdog. Thank you for inviting me to testify on opportunities and challenges facing the National Flood Insurance Program (NFIP). 

With the recent flooding in several States just in the past week this hearing is tragically timely. My sympathies are with those affected by the floods. TCS has worked 

on flood insurance issues and reform of the program for our entire 21 years of existence and I’ve been involved in flood issues dating back to my days as a young Coast 

Guard officer dealing with the aftermath of the Great Midwest Flood of 1993. This 

is a critical issue for taxpayers and smart public policy that protects people and 

property. 

Taxpayers for Common Sense is allied with SmarterSafer, a coalition in favor of 

promoting public safety through fiscally sound, environmentally responsible approaches to natural catastrophe policy. The groups involved represent a broad set 

of interests, from free market and taxpayer groups to consumer and housing advocates to environmental and insurance industry groups. 1 For a decade the coalition 

has advocated reforms in the National Flood Insurance Program that ensure the 

program is smarter and safer for those in harm’s way, the environment, and for 

Federal taxpayers. 

Though the NFIP provides critical insurance coverage to those at risk, the program must be significantly reformed to ensure it is financially sustainable, that 

there are sufficient incentives for reducing future flood damages and vulnerabilities, 

that it provides better protection for taxpayers who have repeatedly backstopped the 

program, and that it better protects the environment and promotes the use of nature-based mitigation solutions that have a long term benefit for homeowners and 

the taxpayers. 

SmarterSafer released a comprehensive flood insurance reform proposal in February that is attached to this testimony as an addendum. TCS supports this proposal and I request it be included in the record. The recommended reforms are 

grouped in four main areas: 

1. Risk analysis and mapping must be up to date and must provide property level 

elevation data. 

2. Rates must be tied to risk, with support for mitigation and premium support 

for low-income homeowners. 

3. Increased Federal investments and efforts on mitigation both at a property 

level and community wide, so that we are reducing rates by reducing risk. 

4. Ensuring consumer choice and private sector competition which will also reduce taxpayer exposure. 

Background on the National Flood Insurance Program 

It is important to understand the context of how the Nation got into the flood insurance business. After years of ad hoc disaster aid being meted out by Congress, 

the National Flood Insurance Program (NFIP) was established in 1968 to create ‘‘a 

reasonable method of sharing the risk of flood losses through a program of flood insurance which can complement and encourage preventative and protective measures.’’ 2 The program was to make up for a perceived lack of available flood insurance. But even at that time Congress was warned that it was playing with fire. The 

Presidential Task Force on Federal Flood Control Policy wrote in 1966: 

A flood insurance program is a tool that should be used expertly or not at 

all. Correctly applied it could promote wise use of flood plains. Incorrectly 

applied, it could exacerbate the whole problem of flood losses. For the Federal Government to subsidize low premium disaster insurance or provide 

insurance in which premiums are not proportionate to risk would be to invite economic waste of great magnitude. 3

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4Federal Emergency Management Agency. Available at: https://www.fema.gov/statistics-calendar-year. 5Government Accountability Office. ‘‘Flood Insurance: More Information Needed on Subsidized Policies’’. July 2013. 

With the program nearly $25 billion in debt to taxpayers, it is clear that the program has resulted in a waste of great magnitude and not promoted a wise use of 

floodplains. In fact it represents a significant lost opportunity to strengthen our 

country’s protections against natural disasters. Although subsidies were largely envisioned to be limited and short-term, they weren’t. And while the program has encouraged standards and construction that help reduce flood risks for participating 

communities, the availability of subsidized Federal flood insurance over the last several decades made it financially attractive to develop in high risk areas. Along with 

other factors, NFIP helped fuel the coastal development boom that increased the 

program’s risk exposure and losses. 

$25 Billion in Debt and Subsidized Rates 

There is a general misperception that NFIP is financially healthy but for a couple 

of large storms—namely Katrina and Sandy. However, for years prior to Katrina, 

NFIP teetered on either side of solvency, covering shortfalls with Treasury borrowing and repaying the loans in years of surplus. Then in 2005, the inevitable happened—a catastrophic loss year—and after Katrina, Rita, and Wilma, the program 

was roughly $18 billion in debt to the Treasury. That was followed by the 

Superstorm Sandy losses in 2012 which resulted in the program being $23 billion 

in debt to taxpayers. 

Losses continue to grow, however, with 2016—as a result of Hurricane Matthew 

and several other rain events—representing one of NFIP’s largest loss years with 

$3.7 billion in payouts triggering additional borrowing from the Treasury. The program is now nearly $25 billion in debt to U.S. taxpayers. As storms and flooding 

become more frequent and more severe, the debt in this program will only continue 

to grow. Nuisance flooding, disaster declarations, and billion dollar disasters are all 

on the rise; leaving the flood program as is basically guarantees additional borrowing from the Treasury. 

To put the program’s debt into perspective, FEMA data indicates that in 2016 the 

5.1 million policies resulted in $3.3 billion in premium to insure $1.25 trillion worth 

of property. 4 The Government Accountability Office has estimated that approximately 20 percent of policies are explicitly subsidized and paying only 35–45 percent 

of their actual full-risk level premiums. 5 These numbers have likely changed some 

subsequent to the enactment of the Homeowners Flood Insurance Affordability Act 

of 2014, also known as Grimm–Waters. 

As this Committee well knows, reforms to the NFIP were enacted in the Biggert– 

Waters Flood Insurance Reform Act of 2012 to align premiums with risk, which 

would not only help program solvency, but also help policyholders better understand 

their risk and take measures to mitigate that risk. Despite some concerns, TCS and 

SmarterSafer supported the 2012 legislation while also favoring additional efforts 

to help address affordability. Unfortunately, in Grimm–Waters, Congress rolled 

back many of the reforms that would have led to more actuarial rates. The rollbacks 

actually exacerbated the inequities in the program, placing surcharges on policies 

to pay for continued subsidies. 

The authorization for NFIP expires September 30, 2017. Before the long-term reauthorization in 2012, NFIP required 17 extensions after the 2004 reauthorization 

expired in 2009 and even occasionally lapsed only to be temporarily reauthorized 

retroactively. We think all involved should work together so the program doesn’t 

lapse again. That said, TCS believes that a 5-year reauthorization schedule is preferable to a longer one that would delay adjustments and reforms to the program. 

To put it in perspective, if the 2004 reauthorization would have been for 10 years, 

the 2005 storm season and Superstorm Sandy would have occurred in that time period with no opportunity to make clearly needed reforms. 

Risk Analysis and Mapping 

FEMA is required to map the Special Flood Hazard Area (SFHA). This delineates 

the area considered to have a one percent chance of flooding in any given year (socalled 100-year floodplain) and therefore has a mandatory purchase requirement for 

federally backed mortgages. These maps are the backbone of the NFIP and are used 

to determine rates. However, the flood maps do not look at property level risk or 

elevation, and this means that there is a lack of confidence in maps and the risk 

analysis provided by those maps. The current lack of confidence in the flood maps 

hobbles FEMA implementation of the program. 

141 

6Dedman. ‘‘Why Taxpayers Will Bail Out the Rich When the Next Storm Hits U.S.’’. http:// 

www.nbcnews.com/news/investigations/why-taxpayers-will-bail-out-rich-when-next-storm-hitsn25901-NBC-News 7 Beider. ‘‘Understanding FEMA’s Rate-Setting Methods for the National Flood Insurance Program’’. Congressional Budget Office. October 7, 2014. Available at: https://www.cbo.gov/sites/ 

default/files/presentation/49441-femaratemethodsnfip.pdf. 

Mapping is both a challenge and an opportunity. Technology has enabled greater 

level of detail and accuracy in mapping. It also can be used by the private sector 

for more intensive risk analysis and modeling that can benefit private sector flood 

insurance alternatives (and NFIP as well) particularly in providing risk-based coverage in areas outside the SFHA. In addition, flood claims should inform mapping. 

While it is true that just because a property has never flooded in no way guarantees 

it won’t flood, the converse does provide an indicator. Absent significant mitigation 

action for structural changes, a property that has flooded is certainly at risk of 

flooding again. Yet, in a three-part series published in early 2014, NBC News documented instances where FEMA agreed to remap out of the floodplain large condominiums built in previously flooded areas. 6 One company head that made the remapping program his business (only for commercial properties, not residential) 

dubbed himself Robin Hood. Hardly. Maps have to be accurate for both sides. Taxpayers and ratepayers. 

Mapping also has to be smarter. Private companies are using tools that enable 

property level mapping and elevation. The SmarterSafer reform proposal includes 

requiring FEMA to move to a system of more granular, property level mapping. This 

would not only ensure proper risk analysis and rates, but it would take the onus 

off of homeowners who now have to go through a burdensome and expensive process 

if they believe they are mapped incorrectly. To ensure that maps are accurate and 

inform property owners, Government officials, and the public at large, SmarterSafer 

urges Congress to make revisions to FEMA’s mapping requirements. Many of these 

recommendations are consistent with those of FEMA’s own Technical Mapping Advisory Council. 

To help people understand their risk and to ensure proper NFIP rates, maps must 

be up-to-date and accurate, and property elevations (or effective proxies) must be 

known. Private companies already perform assessments of risk to individual properties—something that is not currently reflected in FEMA maps. FEMA must be required to update its maps, include the best science on known conditions and risks, 

but also conduct (or purchase) property level (or close to) risk assessments. The Government must continue to map for purposes of the Special Flood Hazard Area designation (which triggers mandatory purchase requirements); however, this is not 

enough. FEMA should be required to assess elevation at a higher resolution or conduct more granular risk analysis. This is something that is possible—the State of 

North Carolina has undertaken a mapping effort where they have not only gotten 

property level data at a reasonable cost, but they have a digital system to allow 

property owners to search and understand their risk, potential flood premiums and 

mitigation options. FEMA should be required to move in this direction. 

There are also many different Federal agencies that engage in mapping. This 

should be more coordinated and shared among agencies to avoid duplication. This 

is also where—and I know this is also outside the committee’s jurisdiction—the Nation’s mitigation and pre-disaster programs have to dovetail with NFIP and postdisaster response. 

More needs to be done for the public to have a greater understanding of their 

flood risk. As discussed earlier, FEMA is tasked with mapping the SFHA for the 

mandatory purchase requirement. That is a Federal mandate that isn’t likely to 

change. However these maps are static—lines on a map designating various flood 

risk areas and charging various rates based on those risks. If a homeowner has an 

elevation certificate that proves they are elevated ‘‘out’’ of the floodplain they can 

have those rates adjusted. But the creation of the rates are sort of a black box and 

it is not entirely clear that even ‘‘full-risk’’ rates are actuarially sound. 7 In some 

cases there are significant cross-subsidies where lower risk properties pay more to 

maintain subsidies for higher risk properties. 

Risk-Based Rates, Targeting Mitigation, and Premium Support 

NFIP has subsidized rates in the program virtually since its inception, regardless 

of need. FEMA estimates 20 percent of properties in the program pay subsidized 

rates, but that doesn’t include properties with grandfathered rates where the flood 

zone designation has changed. Even with the properties that are paying supposed 

risk-based premiums, the fact that the program can borrow from the Treasury is 

a built in subsidy. The GAO has documented large cross-subsidies, many of which 

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8Supra note 5. 

9 U.S. Government Accountability Office. July 2013. Flood Insurance: More Information Needed on Subsidized Properties. (Publication No. GAO-13-607). Retrieved from: http:// 

www.gao.gov/assets/660/655734.pdf. 10Oliver Wyman. Flood Insurance Risk Study: ‘‘Options for Privatizing the NFIP’’. P60 Available at: http://www.floods.org/ace-files/documentlibrary/2012lNFIPlReform/ReinsuringlNFIPlInsurancelRisklandlOptionslforlPrivatizinglthelNFIPlReport.pdf. 11Government Accountability Office. ‘‘Flood Insurance: Comprehensive Reform Could Improve 

Solvency and Enhance Resiliency’’. April 2017. 12Multi-Hazard Mitigation Council. ‘‘Natural Hazard Mitigation Saves: An Independent 

Study To Assess the Future Savings From Mitigation Activities’’. Available at: https:// 

c.ymcdn.com/sites/www.nibs.org/resource/resmgr/MMC/hmslvol1.pdf. 

benefit high-income homeowners. 8 The Government Accountability Office found that 

over 78 percent of subsidized properties in NFIP are located in counties with the 

highest home values (the top three deciles), while only 5 percent of subsidized properties are in counties with the lowest home values (the bottom five deciles). 9 This 

represents a real challenge to the program’s sustainability. 

TCS and SmarterSafer believe that rates in the program must over time be linked 

to risk while understanding that there may be some in the program who will need 

assistance in order to pay higher rates or reduce their risk. Currently subsidies are 

effectively hidden from the homeowner, which eliminates any price signal of risk or 

incentive to mitigate to reduce the risk and thereby the premium. Masking subsidies with lower rates prevents policyholders from understanding their true level 

of risk. As was noted in the FEMA privatization report mandated by Biggert– 

Waters, subsidized rates ‘‘can promote (and have promoted) poor decisions on the 

part of property owners and political representatives . . . they also create a moral 

hazard, especially when the subsidies are not well targeted.’’ 10 The report continues 

that the presences of subsidies ‘‘removes the incentive to undertake mitigation efforts, thereby encouraging ever increasing societal costs.’’ 

A far better approach is to target any premium assistance to those who need it, 

and to encourage and fund mitigation measures that could serve to reduce rates by 

reducing risk. These mitigation efforts should be targeted at higher risk and lower 

income property owners. 

While affordability must be addressed, we must also separate out those who truly 

cannot afford their risk based rates and those who need time to plan for rate increases, but for whom those rates would not cause a substantial hardship. TCS and 

SmarterSafer recommends that as rates move to risk-based, Congress ensure that 

there is assistance for those in need—but it must be done in a means-tested, targeted, and time-limited manner outside the rate structure. Under the SmarterSafer 

proposal, low-income property owners would be eligible for this premium support. 

However, premium support is not the preferred option for reducing premiums—we 

should be doing more to reduce premiums by reducing risk. 

While noting some of the challenges of creating a premium assistance program, 

an April 2017 Government Accountability Office report on flood insurance noted: 

‘‘Prioritizing mitigation over premium assistance could address the policy goal of enhancing resilience because it would involve taking steps to reduce the risk of the 

property, thus reducing the likelihood of future flood claims and potentially reducing 

long-term Federal fiscal exposure.’’ 11

We believe FEMA should be working to conduct cost-benefit analyses so that subsidies can be used for mitigation where cost-effective. In addition, FEMA should be 

required to work with private lenders as well as the Federal Housing Administration to develop or modify existing loan products that homeowners could use to mitigate thus reducing their flood-insurance rates. 

Increased Emphasis on Property and Community Wide Mitigation 

Subsidized rates provide a disincentive to mitigation, but as rates gradually increase there is more incentive for individuals, and by extension communities, to 

mitigate. This should be encouraged by further Federal investment. We know that 

each dollar of mitigation reduces post-disaster costs by four dollars or more. 12 Instead of providing premium subsidies the goal should be to reduce rates by reducing 

risk. Conversely, subsidizing rates does not reduce risk to people and property, in 

fact it encourages people to develop or stay in high risk areas. FEMA’s subsidies 

should be used for mitigation where possible and cost-effective. SmarterSafer’s proposal also includes a number of recommendations to better target mitigation funds 

to homeowners and communities most at risk, to provide additional flexibility for 

increased Cost of Compliance funds and to strengthen the Community Rating System to incentivize nature-based mitigation approaches. 

143 

13 Reinsurance Association of America. ‘‘Private Flood Improves NFIP’s Stability’’. 

There is a greater benefit from larger scale, community wide mitigation efforts 

than mitigating house by house or property by property. In addition, this type of 

mitigation often becomes a community amenity that can actually increase home values beyond the flood damage reduction benefits alone. FEMA should establish a system to promote mitigation of groups of adjacent properties in order to maximize 

flood damage reduction and provide additional opportunities for preservation of wetlands and other natural buffers against storm surge and other flooding. Under the 

SmarterSafer reform proposal, FEMA would be required to identify ‘Flood 

Hotspots’—communities with clusters of, or significant numbers of, severe repetitive 

loss properties and areas with a significant number of properties at high flood risk. 

These areas would be required to work with FEMA to develop plans to reduce flood 

risk, with a priority for nature-based, nonstructural mitigation. 

Consumer Choice and Private Sector Competition 

Though for many years NFIP was the only viable option for flood insurance, the 

private sector has begun to write first dollar flood insurance, even in the highest 

risk areas. For instance, there are at least 19 companies writing private flood insurance in Florida, home to nearly 40 percent of the NFIP policies. A majority of these 

are writing flood coverage in the highest risk areas, and many are providing much 

higher coverage limits. 

This provides needed competition in the flood marketplace—it provides consumers 

choice in flood policies, instead of forcing homeowners to purchase a one-size-fitsall Government policy that is significantly limited. It also takes risk off of the Federal Government, helping to stabilize the flood program and reduce the burden on 

taxpayers. I request to include for the record a recent analysis done by the Reinsurance Association of America (RAA) of a comparable public insurance system for hurricane risk—Florida Citizens Property Insurance Corporation, a State-run, subsidized wind insurer. This analysis reveals the results of an effort to get the private 

sector to ‘‘take out’’ policies from the program—an exodus of nearly a million policies 

out of a million and half total. But instead of choosing only low risk properties, private insurers took out properties across the risk spectrum, including those along the 

coast in the highest risk areas. This left a smaller, stronger State run insurance 

program that could meet its obligations. While it is an extrapolation, the RAA analysis concludes that private sector engagement in flood insurance would ‘‘be extremely beneficial to both policyholders, taxpayers, and NFIP.’’ 13 Through private 

competition, purchase of reinsurance and a continued move toward risk based rates, 

NFIP would be able to meet its obligation in a 100-year flood with little Treasury 

borrowing. 

S. 563, The Flood Insurance Market Parity and Modernization Act—introduced by 

Committee Members Sens. Heller (R-NV) and Tester (D-MT)—is the first step towards leveling the playing field for private sector flood insurance and bringing competition and consumer choice to the flood insurance marketplace. TCS and 

SmarterSafer believes that private sector participation would increase coverage 

while decreasing the cost for consumers, and should be encouraged. Consumers 

should be able to choose private flood insurance policies, potentially with terms and 

coverage that can be tailored to the interests of the consumer, as well as better incentives for mitigation. In fact, private flood policies could allow property owners to 

purchase enough coverage to ensure they can rebuild after a storm, not constrained 

by NFIP limits or by the amount of the mortgage. 

S. 563 would ensure that private flood insurance counts for purposes of the mandatory purchase requirements, and would also provide an important consumer protection that ensures rate stability for consumers if they leave NFIP for private coverage and then come back to NFIP. This bill is merely a clarification that Congress 

never intended for homeowners to be required to purchase flood coverage through 

the Federal Government, only that they had to have coverage if they were in the 

100-year floodplain and had a federally backed mortgage. An identical version of 

this bill passed the House of Representatives 419-0 last year. This represents a 

broad, bipartisan recognition that consumers should be given choices in flood coverage and the unanticipated regulatory hurdle to acceptance of private flood coverage should be addressed. 

The idea is not that private companies will only compete for the 5 million polices 

in NFIP already covered by flood insurance. The goal is to ensure that more people 

around the Nation purchase needed flood coverage. Recent flooding events have 

sadly demonstrated that many people who need coverage do not have it. The average NFIP payment for the 2016 flooding in Louisiana was $86,500, the average individual aid payment was $9,150. Absent flood insurance the homeowner is left with 

144 

14http://quickfacts.census.gov/qfd/states/00000.html 15Oliver Wyman. Flood Insurance Risk Study: ‘‘Options for Privatizing the NFIP’’. P52 Available at: http://www.floods.org/ace-files/documentlibrary/2012lNFIPlReform/ReinsuringlNFIPlInsurancelRisklandlOptionslforlPrivatizinglthelNFIPlReport.pdf. 16Kousky, Michel-Kerjan, Raschky. ‘‘Does Federal Disaster Assistance Crowd Out Private Demand for Insurance?’’ Available at: http://opim.wharton.upenn.edu/risk/library/WP2013- 

10lFedDisasterAssistance.pdf. 

low interest Small Business Administration loans to rebuild. Piling a loan on top 

of a mortgage to rebuild a currently uninhabitable house is not conducive to efficient 

and resilient rebuilding. 

Also, there is no need for the Federal Government to further extend into the catastrophe insurance market through reinsurance or other means. 

Additional Thoughts 

Adverse Selection—The simple fact is that most of the people who are purchasing 

flood insurance are those most likely to get a payout. As I indicated there are 5.1 

million policies in the program. According to the U.S. Census Bureau there are 134 

million housing units 14 in the country and even leaving out multi-unit structures— 

that could be purchasing flood insurance—and commercial properties, roughly 5.4 

percent of the houses in the country have flood insurance. Just about everybody has 

some level of flood risk, but for the most part, unless it’s acute, they don’t buy it. 

This means that NFIP as currently structured is essentially a high risk pool covering the most at-risk properties; the $25 billion in debt shows this to be the case. 

This concentration of risk has put significant strain on the program, particularly 

given the lack of risk based rates. The private sector would most likely not concentrate all of their risk in flood, but would have diverse risk pools; in addition they 

could write multi-peril insurance that includes flood and other risks, making the 

pricing for the peril less, and they can also lay off risk on the worldwide reinsurance 

marketplace. 

Reinsurance—FEMA’s recent purchase of reinsurance demonstrated that there is 

interest and capacity in the reinsurance markets to take on U.S. flood risk. Obviously industry will have to gain a greater understanding of the nature of the underlying flood risk in the NFIP portfolio, but that can be managed through responsible 

data sharing. Laying off risk on the private sector will help protect taxpayers from 

debts racked up by future large storms. 

Disaster Assistance—NFIP’s inter-relationship with Federal disaster aid programs 

under the Stafford Act is both an opportunity for reform and a challenge to a more 

rational holistic Federal approach. 

An observation from a the 2014 FEMA privatization report ‘‘ . . . highly publicized instances of Federal aid following catastrophic events have also created a 

public perception that individual property owners do not need to insure against lowprobability high severity flood events, effectively creating moral hazard.’’ 15 What 

people are not realizing is that the vast majority of the aid goes to rebuild public 

and Federal infrastructure, not individuals to help them move on after disaster. A 

2014 study by the Wharton Center for Risk Management and Decision Processes at 

the University of Pennsylvania found that increasing disaster assistance by $1,000 

reduced subsequent insurance coverage by $6,000. 16

Conclusion 

There are a number of reforms that Congress should make when it reauthorizes 

the NFIP to ensure the program is sustainable in the long term. With better, property level mapping, a focus on mitigation and risk reduction, a move to risk based 

rates with targeted subsidies, and private sector competition, we believe NFIP will 

be strengthened and more people will purchase needed flood coverage. 

PREPARED STATEMENT OF MICHAEL HECHT 

PRESIDENT AND CHIEF EXECUTIVE OFFICER, GREATER NEW ORLEANS, INC., ON

BEHALF OF THE COALITION FOR SUSTAINABLE FLOOD INSURANCE

MAY 4, 2017 

Good Morning Chairman Crapo, Ranking Member Brown, and Members of the 

Committee. I am honored to speak to you today about reforming and modernizing 

the National Flood Insurance Program (NFIP). My name is Michael Hecht, and I 

am the President and CEO of Greater New Orleans, Inc., the 10-parish economic 

development organization for Southeast Louisiana. Since April 2013, GNO, Inc. has 

led the Coalition for Sustainable Flood Insurance (CSFI), a national alliance of apVerDate Nov 24 2008 10:49 Dec 14, 2017 Jkt 046629 PO 00000 Frm 00148 Fmt 6621 Sfmt 6621 L:\HEARINGS 2017\03-14 ZZFLOOD DISTILLER\31417.TXT JASON
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proximately 250 organizations across 35 States. CSFI was formed in the wake of 

the implementation of the Biggert–Waters Act, when homeowners across the Nation 

were facing skyrocketing rate increases through a combination of the removal of 

grandfathering and new maps, which often times were inaccurate. CSFI was a driving force behind the passage of the Homeowner Flood Insurance Affordability Act 

(HFIAA), which was signed into law in March 2014. 

As was made clear in those debates, there is no simple answer to the complex 

problem of maintaining premium affordability, keeping the NFIP on sound financial 

footing, and accurately communicating risk. And it is in the national interest to recognize that many communities exposed to flood risk are hubs of domestic energy 

production, international trade, national and international finance, agriculture production, and other nationally significant economic and defense activities. Affordable 

and sustainable flood insurance is an integral component of ensuring these communities continue their vital contributions to America. CSFI is now focused on advocating for a stronger policy framework for the NFIP that recognizes the economic, 

cultural, defense, and other national contributions made by communities exposed to 

flood risk. 

There are four primary policy areas CSFI has focused on that will provide for this 

stronger framework, denoted by the acronym ‘‘MMAP’’: 

• Mitigation—A comprehensive approach to reducing flood losses before a disaster 

occurs is a more effective means to reducing economic loss and protecting taxpayer interests, than ejecting households and businesses from NFIP via 

unaffordable flood insurance premiums 

• Mapping—Enhancing the way we assess and communicate risk through improvements to the mapping process will protect communities and the NFIP over 

the long-term 

• Affordability—Premiums must remain affordable in order to keep communities 

across America economically viable 

• Program Participation—Adopting policies that encourage more people to buy 

flood insurance will help to bring the program’s costs in line with revenues in 

a responsible way and help communities recover more quickly following a flood 

event 

My testimony today will explain the policy suggestions we’ve proposed in this 

framework. CSFI has also produced a whitepaper series, which has been submitted 

for the record, that makes the case for these proposals in greater detail. 

Of note, last week, Senator Bill Cassidy and Senator Kirsten Gillibrand released 

a discussion draft that includes many of the provisions for which CSFI is advocating. The Cassidy–Gillibrand legislation will reform and modernize the NFIP; improve how risk is assessed and communicated; keep insurance affordable; increase 

options for mitigation; and, allow for some responsible private market entry provisions, among other policy priorities. I strongly urge this committee to give the legislation thoughtful consideration as we move towards reauthorization on September 

30. 

Mitigation 

Flooding is the most common natural disaster in the United States, affecting communities in each of the 50 States and territories. Across the Nation, States and municipalities have worked diligently to reduce the frequency and impact of flooding 

in their communities even while resources to reduce flood losses remain limited. 

Effective flood mitigation is a multifaceted enterprise. The Federal and State governments share significant responsibilities in the planning, design, construction, and 

maintenance of major flood control projects that protect hundreds of millions of 

homes and businesses. At the community level, particularly those communities participating in the National Flood Insurance Program (NFIP), Governments adopt and 

enforce floodplain management standards and building codes. County and parish 

governments that adopt stronger standards and participate in the Community Rating System (CRS) achieve a greater level of flood protection for the community that 

is reflected in reduced flood insurance premiums. 

Property owners have a key responsibility to reduce flood damage and secure resources to comply with floodplain management and building code requirements. 

Property owners may fulfill this responsibility to protect property by purchasing 

flood insurance and Increased Cost of Compliance (ICC) coverage. Appropriate flood 

insurance and ICC coverage ensures flood damage is repaired and that damaged 

structures are restored to a higher level of flood protection if required by current 

floodplain management standards and building codes. Property owners further have 

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the obligation to work through local, State, and Federal programs to mitigate highrisk structures having sustained repetitive flood loss events. 

Despite this coordinated, multilayered approach to flood mitigation, substantial 

sums of taxpayer funds are appropriated each year in response to disaster damage 

caused by flooding. This raises important questions about the efficacy of the national flood loss mitigation strategy and the efficiency of deploying substantial taxpayer funds for disaster response while making limited investments in disaster mitigation by comparison. Aggressively addressing flood risks at the regional and community levels, while providing homeowners options and resources to lower flood 

risks will save lives and property, reducing flood damage, flood insurance claims, 

and flood insurance premiums. 

Federal policymakers must work with State and local governments and individual 

property owners to reduce the frequency and expense of flood losses. This necessarily requires allocating resources for disaster prevention and flood loss mitigation. Reducing the exposure of our communities, homes, and businesses to flood 

losses is a more efficient and effective use of taxpayer resources and will reduce future disaster costs and preserve flood insurance affordability. 

Policies that would increase mitigation include: 

• Redirecting Premium Surcharges Included in HFIAA—The Cassidy–Gillibrand 

legislation would require FEMA to reallocate the existing surcharges established in HFIAA to better finance the Pre-Disaster Mitigation and the Flood 

Mitigation Assistance Programs. This proposal to redirect existing fees would 

yield approximately $400 million annually for flood mitigation activities 

• Modernize Increased Cost of Compliance (ICC) Coverage—Currently, ICC 

claims payments must be used to fund up to $30,000 in compliance costs associated with State or local floodplain management laws or ordinances, which typically require structure elevation. The limit of $30,000 is inadequate to elevate 

most structures. Under the Cassidy–Gillibrand legislation, FEMA will be required to increase ICC coverage to $75,000 with $30,000 of ICC payments allowed to occur outside policy limits 

• Provide a Premium Credits to Offset the Cost of Obtaining an Elevation Certificate—This proposal would offer policyholders without an elevation certificate a 

one-time rate credit of $500 for the cost of obtaining elevation data. Knowledge 

of flood risk and accuracy of a structure’s base flood elevation information will 

be enhanced by removing or reducing the financial barrier associated with the 

acquisition of elevation certificates. This policy proposal is included in the Cassidy–Gillibrand legislation 

• Facilitate Mitigation Credits that Reduce Premium Rates—The Cassidy–Gillibrand legislation would require FEMA to develop meaningful cost reductions, 

in excess of 10 percent of the current risk premium rate for a property, for flood 

mitigation activities undertaken on properties in all zones, including moderate 

risk zones 

• Partner with participating communities and State Governments to obtain elevation data—NFIP should offer Community Rating System (CRS) credit for participating jurisdictions that require an elevation certificate to be prepared at a 

subsequent transfer of title for structures in a flood zone where elevation data 

are not available 

• Provide Effective Oversight of the U.S. Army Corps of Engineers—While this 

is not germane to reauthorizing the NFIP, I want to urge Congress to conduct 

effective oversight of U.S. Army Corps of Engineers (USACE) procedures and 

project approval timelines to ensure authorized flood control projects do not languish, needlessly putting communities, homes, and businesses at risk of flood 

damage 

Mapping 

Accurate mapping is fundamental to assessing and communicating risk, and to 

pricing it appropriately. The current mapping process often results in communities 

having to fight inaccurate maps that do not take into account locally built flood protection features and communities building off of outdated mapping, which results 

in artificially inflated risk. We must question whether we can truly determine actuarial rates if they are based on flawed mapping. Further, many areas of the country 

are not mapped or mapped accurately, which results in communities who are at risk 

of flooding unaware of the risk. 

For example, in the August 2016 floods in Baton Rouge, Louisiana, over 80 percent of flood survivors did not have flood insurance. I know it is easy for those of 

you not from Louisiana to question why these people did not have flood insurance 

147 

given what has occurred in Louisiana over the last 12 years. Here’s the answer: 

many of those communities were not mapped into a flood zone or were only in optional purchase areas. Updated and accurate mapping and better communication 

about risk when purchasing property could have limited the number of uninsured 

properties significantly. This in turn could have resulted in these affected communities needing less post-disaster funding, thus saving the taxpayer. Technology 

around assessing and communicating risk is also rapidly evolving, and FEMA 

should embrace this technology to provide more accurate maps for America. 

Proposals that could improve the way we assess and communicate risk include: 

• Increasing the authorization for the National Flood Mapping Program to 

$500M—The Government funding bill currently being debated provides $177M 

for the National Flood Mapping Program, which is a good start. For the next 

funding cycle, I urge Congress to increase the authorization of the National 

Flood Mapping Program to $500M, which would allow FEMA to accelerate the 

completion of mapping of the entire country, would help communities better understand and plan for risk 

• Allowing Counties to Adopt Portions of Maps at a Time—Congress should require FEMA to allow communities to adopt portions of a flood map that they 

agree with at one time while still allowing for map appeals in other areas of 

the community. The current policy puts the entire county’s new map on hold 

during the appeals process, which results in the entire community planning 

land use policies around outdated maps and some residents paying higher than 

necessary rates 

The Cassidy–Gillibrand legislation also includes several policy suggestions that 

would enhance the mapping process and should be included in reauthorization, including: 

• Provide Mapping Standards and Guidelines for Nongovernmental Entities— 

This proposal would authorize the Technical Mapping Advisory Council (TMAC) 

to develop map standards for FEMA and nongovernment entities, thereby giving communities additional avenues to streamline the FEMA mapping process 

and develop maps that use updated community data & technology 

• Encourage the Use of High-Resolution Mapping Technology—This proposal 

would instruct FEMA to facilitate, partner, and leverage current high-resolution 

topographic data (e.g., Light Detection and Ranging [LIDAR] data, or other new 

and emerging technologies) in the development of flood insurance rate maps 

• Improve the Flood Mapping of Levee-Protected Areas—This proposal would require FEMA to replace its ‘‘Zone D’’ designation (defined as an area of undetermined/undefined risk) in levee-protected areas with risk zones that are more appropriate for the level of protection that the flood mitigation features afford 

Affordability 

Following the Biggert–Waters Act, when homeowners across the Nation faced skyrocketing premiums, legislators reasserted the long-held view that premium affordability is a fundamental tenet of national flood insurance. In HFIAA, policymakers 

addressed premium affordability concerns by restoring the practice of rate 

‘‘grandfathering’’, reversing the elimination of pre-FIRM subsidized (PFS) policies, 

eliminating the property sales trigger, and increasing damage and improvement 

thresholds. Those policies must be maintained in reauthorization. 

In HFIAA, Congress revised key policies driving substantial increases in flood insurance premiums yet retained the Biggert–Waters Act imperative to reduce or 

eliminate certain premium subsidies. In general, HFIAA limits year-over-year premium increases to 18 percent for individual properties and 15 percent for the average of all premium increases within a risk classification. Premiums for most subsidized policies must, by law, increase at least 5 percent on an annual basis, subject 

to the overall limitation that NFIP not charge rates greater than a classification’s 

determined risk. Further, certain property classifications will see premium increases 

designed to rapidly eliminate subsidies. 

Policies to maintain affordability include: 

• Formalizing 1 percent cost to value ratio—This proposal means that no premium could be more than 1 percent of the policy value. So, for example, a policy 

worth $250,000 could never cost more than $2,500. Language was included in 

the Homeowner Flood Insurance Affordability Act that FEMA should strive to 

accomplish this policy, and the Cassidy–Gillibrand legislation strengthens that 

language. Congress should consider this policy as a way to easily address affordability 

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• Maintaining Current Rate Structure—Proposals to increase the floor of rate increases from 5 percent to 10 percent or up should be avoided. According to 

FEMA, beginning April 1, 2017, premiums are increasing an average of 6.3 percent. Increasing the floor rate of increases to 10 percent or higher would represent a substantial premium increase on homeowners 

• Preserving grandfathering—Preserving grandfathering is of critical importance. 

Meaning, if you built your house to according to FEMA’s base flood elevation 

at the time of construction, you will not be penalized when new maps are introduced. The confluence of removing grandfathering and the introduction of new 

maps are what drove skyrocketing rates post Biggert–Waters, which was unfair 

to homeowners who built as they should. Congress must maintain 

grandfathering permanently. The Cassidy–Gillibrand legislation maintains this 

provision 

• Addressing the NFIP’s debt—Congress should consider forgiving the NFIP’s 

debt, which currently stands at $24.6 billion, at least the portion related to the 

Federal levee failures following Hurricane Katrina. At a minimum, Congress 

should stop the requirement of FEMA to pay interest on this debt, which next 

year will cost $400M.That $400M could be used to build reserves or provide 

greater funding for mitigation. To require the NFIP to pay this debt back to 

the U.S. Treasury is robbing Peter to pay Paul 

The Cassidy–Gillibrand legislation also includes some additional affordability proposals, including vouchers for low to moderate income Americans that are worthy 

of consideration. 

Program Participation 

Sustainability and affordability of flood insurance coverage is a growing concern 

as NFIP is experiencing a year-over-year decline in several key metrics. According 

to FEMA data, NFIP policies-in-force peaked in 2009 at 5,700,235. As of June 30, 

2016, the number of policies-in-force was 5,083,071, a decline of almost 11 percent 

from 2009. Total coverage-in-force is also in decline after peaking at approximately 

$1.3 trillion in 2013 and as of June 30, 2016, is approximately $1.25 trillion. For 

only the second time since 1978, total premium earned has fallen from the previous 

year, with $3.54 billion of premium earned in 2014 compared to $3.44 billion in 

2015. 

This is not sufficient evidence to validate a long-term forecast of year-over-year 

decline for NFIP, but policymakers must be mindful of data showing declines in core 

program variables over the short-term. It must also be noted that key coverage-inforce and premium earned declines have largely occurred post-Biggert–Waters Act. 

For policymakers to more fully achieve the core purposes of national flood insurance—floodplain management, limiting Government disaster costs, and facilitating 

property owner purchase of insurance—the NFIP must be designed with the interests of end users as preeminent. Increases in both policies written and coverage in 

force will bring greater stability to communities and provide greater protection for 

the Federal treasury. Simply put, with both the severity and frequency of floods increasing, we need more people buying flood insurance. 

Policies to increase program participation include: 

• Offering a default ‘‘opt-out’’ flood policy as standard part of homeowners insurance package—NFIP should be directed to engage in product testing that offers 

consumers a ‘‘default’’ insurance option where consumers are required to actively decline (opt-out) flood insurance coverage. Based on the outcome of consumer testing, NFIP and NAIC should move to expand ‘‘default’’ options that 

include NFIP coverage as appropriate 

• Expanding the definition of the Special Flood Hazard Area—Congress should 

authorize a study to assess the effectiveness of the mandatory purchase requirement; assess the benefit of mandatory purchase to taxpayers, communities, and 

households; and identify areas outside designated SFHAs or adjacent thereto 

where mandatory purchase would have a demonstrable, positive cost-benefit impact for taxpayers and property owners 

• Mandatory purchase of flood insurance for properties that have experienced a 

loss and Federal disaster assistance was accepted to repair or replace the structure—Congress should consider requiring mandatory purchase of flood insurance for at least ten years for properties that have experienced a flood loss 

event and Federal disaster assistance was accepted to repair or replace the 

damaged structure and contents. The mandatory purchase requirement should 

attach to the structure and the requirement should be noted in local land 

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records in a manner that is readily apparent to title researchers, lenders, appraisers, borrowers, and other parties interested in the transfer of property 

The Role of the Private Market 

Another concept being widely discussed as we move towards reauthorization is the 

role of the private market. While a fuller entry of the private market would bring 

needed competition and discipline to the flood insurance market, I urge Congress 

to be mindful of the risk of cherry-picking. A scenario where the private market 

comes in and takes all of the low risk properties while leaving the NFIP with nothing but high risk properties will not serve the policy holder well and leaves the 

NFIP open to needing further loans from the U.S. Treasury. An increase in private 

market coverage should occur parallel to a healthy and sustainable NFIP. 

The Cassidy–Gillibrand legislation includes policy solutions to ease private market reentry in a responsible way, and those proposals should be included in reauthorization. One policy related to the private market that must be included in reauthorization is: 

• Including continuous coverage language in reauthorization—Language should 

be included in reauthorization that allows policyholders to maintain continuous 

coverage, which would allow them to leave the NFIP for the private market and 

subsequently return to the NFIP while proving continuous coverage, and thus 

maintain a grandfathered rate. This policy is key to providing consumers with 

the assurance needed that the NFIP will be available should they be priced out 

of the private market or should private flood insurance become unavailable. 

Under current law, policy holders who may have access to more affordable, comprehensive private market coverage are not incentivized to leave the NFIP. 

Multiyear Reauthorization 

It is critically important that we reauthorize the NFIP for a multiyear period. 

Short-term extensions, and especially lapses in authorization, have real world implications. Lapses in authorization stall or kill home closings. Particularly with a September 30 expiration—in the middle of hurricane season—American home and business owners need to be able to rest assured that the flood insurance they have purchased and relied on will be available should a flood happen. A multiyear reauthorization is needed to bring certainty to consumers and real estate markets. 

Again, thank you for the opportunity to speak to you today about the reauthorizing and reforming the National Flood Insurance Program, and for your service. 

CSFI stands ready and willing to assist the Committee as we work to reauthorize 

the NFIP by September 30. 

PREPARED STATEMENT OF LARRY LARSON 

DIRECTOR EMERITUS, ASSOCIATION OF STATE FLOODPLAIN MANAGERS, INC. 

MAY 4, 2017 

Introduction 

The Association of State Floodplain Managers is pleased to participate in this 

hearing about the reauthorization of the National Flood Insurance Program (NFIP). 

We appreciate the opportunity to discuss our views and recommendations for the 

future of the program. We thank you, Chairman Crapo, Ranking Member Brown, 

and Members of the Committee for your interest in this important subject. 

The ASFPM and its 36 chapters represent more than 17,000 local and State officials as well as other professionals engaged in all aspects of floodplain management 

and flood hazard mitigation including management of local floodplain ordinances, 

flood risk mapping, engineering, planning, community development, hydrology, forecasting, emergency response, water resources development, and flood insurance. All 

ASFPM members are concerned with reducing our Nation’s flood-related losses. For 

more information on the association, its 14 policy committees and 36 State chapters, 

our website is: www.floods.org. 

Floods are this Nation’s most frequent and costly natural disasters and the trends 

are worsening. The NFIP is the Nation’s most widely used tool to reduce flood risk 

through an innovative and unique mix of incentives, requirements, codes, hazard 

mitigation, mapping, and insurance. At the same time, we understand the four main 

pillars of the NFIP are interconnected; and making significant changes to one pillar 

without thoughtful consideration of the other three can erode the program overall. 

While we are under no illusion that the NFIP is the only tool in the toolbox, it is 

one that serves 22,000 communities, policyholders, taxpayers, and the public well. 

150 

ASFPM’s testimony is intended to provide a better description of these interdependencies as well as 24 recommendations for Congress to consider to reform the NFIP. 

The NFIP Is a National Comprehensive Flood Risk Reduction Program 

The NFIP was created by statute in 1968 to accomplish several objectives. Among 

other things, the NFIP was created to: 

• Provide for the expeditious identification of and dissemination of information 

concerning flood-prone areas 

• Require States and communities, as a condition of future Federal financial assistance, to participate in the NFIP and to adopt adequate floodplain ordinances 

consistent with Federal flood loss reduction standards 

• Require the purchase of flood insurance by property owners who are being assisted by Federal programs or by federally supervised, regulated, or insured 

agencies in special flood hazard areas 

• Encourage State and local governments to make appropriate land use adjustments to constrict the development of land exposed to flood damage so homes 

and businesses are safer and to minimize damage caused by flood losses 

• Guide the development of proposed future construction, where practicable, away 

from high risk locations threatened by flood hazards 

• Authorize nationwide flood insurance program through the cooperative efforts 

of the Federal Government and private insurance industry 

• Provide flexibility in the program so flood insurance may be based on workable 

methods of distributing burdens equitably among those protected by flood insurance and the general public who benefit from lower disaster costs 

Beyond merely providing flood insurance, the NFIP is unique as it integrates multiple approaches to identify flood risk, communication of the risk, and reduction of 

flood losses. It is a unique collaborative partnership enlisting participation at the 

State and local level. It is a multifaceted, multiple objective program—a four legged 

stool as it is often called. The four legs of the stool are (1) floodplain mapping, (2) 

flood standards, (3) flood hazard mitigation, and (4) flood insurance. Altering one 

leg without careful consideration of impacts on the other three legs can have serious 

repercussions on reducing flood losses. NFIP on the whole provides substantial public benefits as our testimony will further detail. 

A Pivotal Time for the NFIP—Current Status 

At the end of 2016 the NFIP, which is 50 years old, had paid $56.4 billion in 

claims. But beyond paying insurance claims, the NFIP has also mapped 1.2 million 

miles of streams, rivers and coastlines. It has invested more than $1.3 billion in 

flood hazard mitigation for older, at-risk structures. Because of the program, over 

22,000 communities adopted local flood risk reduction standards, which results in 

nearly $2 billion of flood losses reduced annually. The NFIP has provided innumerable public benefits as well as direct monetary ones to taxpayers. 

At the same time, based on historical flooding and dealing with ongoing development, future conditions are and will continue to change, perhaps quite significantly. 

While floodplain managers know upstream development often results in increased 

flood heights, we also observe changing weather patterns that result in shifting 

snowmelt/rainfall in the West. Nationally, more intense short duration storms are 

causing more flash floods, and unrelenting sea level rise (SLR) is beginning to affect 

communities from Florida to Virginia to Alaska. A recent NOAA report added a new 

upper boundary for SLR this century up to 2.5m (8 feet) by 2100 due to new data 

on the melting of the Greenland and Antarctic ice sheets. This new data is getting 

the attention of our State and community members. For example, a recent article 

shows Rhode Island State officials discussing how to deal with these new scenarios. 

Luckily the NFIP, as it exists today, can help States and communities address these 

problems with its innovative mix of incentives, requirements, data, and tools. 

Still, improvements can be made. NFIP reform legislation in 1994 and 2004, in 

addition to other measures, outlined reforms focused on reducing repetitive loss 

properties. Today those remain problematic. Reform legislation in 2012 focused on 

flood mapping. Today the National Flood Mapping Program provides important authorities for FEMA and cooperating technical partners to map all flood hazard areas 

across the country. Reform legislation in 2004, 2012, and 2014 addressed deficiencies in the insurance element of the NFIP. There is still more work to be done. 

It is important to note that the 2012 and 2014 reform legislation resulted in 80 new 

sections of law that are not yet fully implemented. ASFPM hopes Congress will be 

thoughtful about reforms that might be considered in 2017 as we do not yet fully 

know the program outcomes that will result from the previous two reform bills. 

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1Dr. Len Shabman with Resources for the Future has been researching this topic in-depth 

and will be soon developing a paper detailing the history and specifically the financial arrangement of the NFIP from 1968–1978 as well as the strengths and weaknesses of the public–private 

loss sharing model that actually still exists today. 2 According to the Congressional Budget Office, the Federal outlays for crop insurance is expected to average $8.8 billion per year from FY2015–FY2024 based on the 2014 farm bill 

changes. It is also interesting to note that the Federal Government subsidizes approximately 

62 percent of the crop insurance premium; that the subsidy was expressly increased to stimulate 

participation in the crop insurance program in order to avoid disaster assistance; and that premium subsidies, administration and operating expenses, and underwriting losses/gains are considered mandatory spending in the Federal budget. (Congressional Research Service: Proposals 

to Reduce Premium Subsidies for Federal Crop Insurance, 2015.) 

So what will the NFIP of tomorrow look like? ASFPM believes the Nation will 

continue to need a robust, fiscally strong NFIP to comprehensively reduce flood risk. 

We also believe a strong NFIP can co-exist with a developing private market. But 

at the end of the day we must acknowledge that at least today’s NFIP is far more 

than an insurance program. It is the Nation’s primary tool to identify and map flood 

hazard areas used by a multitude of agencies. The program is also a tool to assess 

flood risk, used to work with communities and States to implement strong land use 

and building standards to prevent future disaster losses, and works with property 

owners and communities to undertake mitigation to reduce damage to older at-risk 

buildings, in addition to providing flood insurance. While we have witnessed several 

narrowly focused reform proposals since the convening of the 115th Congress, we 

are particularly encouraged by the recent release of the bipartisan Cassidy–Gillibrand discussion draft which is a comprehensive reform bill with several good ideas. 

We look forward to working with the committee on comprehensive NFIP reform bill 

that serves policyholders, communities, and taxpayers. 

A Long-Term Sound Financial Framework Is Needed 

The NFIP had generally been self-supporting until 2005. In the 1980s the pro- gram went into debt a few times and ultimately Congress forgave approximately $2 

billion. But from the mid-1980s to 2005, the NFIP was largely self-sustaining and 

when borrowing from the U.S. Treasury, the debt was repaid with interest. However, due to catastrophic floods in 2004, 2005, and 2012, and now due to a high 

claims year in 2016, the program does currently owe $24.6 billion to the treasury. 

Unfortunately, we heard this past March in testimony to the House from FEMA, 

that this past January, the program had to even borrow to pay the interest on the 

debt (and today’s debt is financed at historically low rates). This was done only one 

other time back in 2008 after Hurricane Ike. When interest rates eventually cycle 

back to more historic levels, the interest on the debt payments will destabilize the 

program. 

The NFIP was never designed to pay for catastrophic events. In fact, from 1968 

to 1978 the concept was one of risk sharing with the private sector with the program actually paying a subsidy to private insurers for pre-FIRM structures. As recently as the late 1980s, internal communications show that the Administration reaffirmed the Federal treasury was essentially the reinsurer of last resort. 1 It seems 

this history has been forgotten. Further, the NFIP is being held to a much different 

standard than another disaster loss management program that Congress annually 

subsidizes, the Federal crop insurance program. How can it be that a program like 

crop insurance, with a primary purpose is to encourage insurance as an alternative 

to ad hoc disaster spending, be annually subsidized at $6.5 billion annually, 2 with 

strong Congressional support? 

Important progress toward putting the program on a more sound financial footing 

was made as part of the past two NFIP reforms in 2012 and 2014, which ASFPM 

supported. Under BW–12, reforms (later modified by HFIAA–14) were made to the 

rate structure to move subsidized policies to actuarial premium rates, to allow the 

NFIP to purchase reinsurance and to establish a reserve fund. All of these help reduce the financial risk to the program and ultimately to the American taxpayer. 

But what has been very frustrating to ASFPM is Congress’ unwillingness to address the program debt and any long term framework of stability should a truly catastrophic event happen again (such as another Katrina). After reviewing FEMA’s 

interest and principle payments after 2005 and based on FEMA’s analysis of cash 

flow, if Congress had promptly dealt with the debt amassed from the 2004–2005 

hurricane seasons, then the NFIP wouldn’t have had to borrow from the treasury 

to pay Hurricane Sandy claims and would have likely not had to borrow for claims 

in 2016. Those pointing to today’s debt in the NFIP as evidence that the NFIP is 

irreparably broken do not understand that if the 2004–2005 debt had been resolved 

in a timely manner by Congress (as had been done in the 1980s and consistent with 

152 

the program’s design), the NFIP would be functioning well with little or no debt 

today. 

• ASFPM recommends Congress forgive the current NFIP debt 

• Congress should also develop a threshold above which the Federal Government 

will backstop claims resulting from catastrophic events for the NFIP based on 

an evaluation of the program’s current financial capacity and level of risk transfer to the private sector given the financial risk management tools Congress has 

asked FEMA to implement 

Floodplain Mapping 

Floodplain mapping is the foundation of all flood risk reduction efforts, including 

design and location of transportation and other infrastructure essential to support 

businesses and the Nation’s economy. Today FEMA has in place right policies and 

procedures (i.e., requiring high-resolution topography (LIDAR) for all flood map updates), and is using the best available technology to produce very good flood studies. 

For example, FEMA is doing some pilot studies in Minnesota and South Dakota 

using very precise topographic mapping and automated flood study methods to develop base level engineering that can be used as an input into future flood studies. 

This gives communities data immediately to use for planning and development rather than waiting years for the data. In coastal studies, FEMA now uses the stateof-the-art ADvanced CIRCulation (ADCIRC) model for storm surge analysis. Unfortunately, due to the length of time it takes from initiation of a flood study to final 

production, some maps coming out today may have been started a decade ago and 

are not being produced to today’s specifications. It is important to distinguish between these legacy mapping projects and those meeting today’s guidance and specifications. ASFPM is also pleased that FEMA has prioritized eliminating remaining 

pure ‘‘paper’’ maps that have never been modernized with newer flood study procedures. 

Recently there has been confusion around whether or not sophisticated risk assessment modeling developed by the private sector can be a suitable replacement 

for FEMA flood maps and data. However, this is comparing apples to oranges. First, 

FEMA flood maps and data are already produced by the private sector (under contract to FEMA). Second, the private sector risk assessment methods largely developed to assist the reinsurance industry are not publicly available. Those models do 

not produce a ‘‘map’’ the community can use for multiple purposes and cannot inform the other needs of the program including hazard mitigation and floodplain 

management. Such methods can complement FEMA maps for the purposes of rating 

flood insurance, but do not replace FEMA maps. Further, those developing such 

models have indicated they depend on FEMA maps to calibrate their models. 

Today, flood risk maps only exist for about 1⁄3 of the Nation—only 1.2 million of 

3.5 million miles of streams, rivers and coastlines have been mapped. Even today 

some of the maps are many decades old, or were updated before the current standards to redraw boundaries based on more accurate study data and topography. 

Many areas have never been mapped, so there is no identification of areas at risk. 

The development occurs with no flood standards. This is what is happening in thousands of subdivisions across the country: areas are developing into tens of thousands 

of housing units that use to be cornfields and cow pastures. Later, after there is 

significant development at risk and often after a flood or two, FEMA comes in and 

maps it. Then the dynamic changes and everything becomes adversarial. People 

think FEMA put a floodplain on them when it was there all along. The property 

owner is mad because they have to buy flood insurance at high premiums because 

flood elevations were unknown. Realtors are upset because it is a surprise and may 

have an impact on the future salability of homes. And local elected officials fight 

to minimize the size of the mapped floodplain, spending thousands of dollars on 

competing flood studies that are often minimal changes. 

The point is it doesn’t have to be like this, but we have to start changing our mapping priorities. The entire dynamic can change if maps showing risk are available 

before development starts. We must map today’s corn fields and cow pastures to get 

mapping ahead of development. 

The National Flood Mapping Program (NFMP) authorized by Congress in 2012 

Reform Act was one of the most important elements of the legislation and is the 

right approach. While FEMA has not made much progress on mapping residual risk 

areas, failure inundation areas or areas of future development, FEMA is making 

progress, paying attention to recommendations made by the Technical Mapping Advisory Council. Now we need 2.3 million miles of unidentified flood hazard areas, 

and maintain the existing inventory of 1.2 million miles of flood studies. ASFPM 

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supports Section 501 of the Cassidy–Gillibrand bill to increase the authorization for 

flood mapping to $500 million annually. 

Another key issue is mapping areas below dams and behind levees to show the 

residual risk areas that will be flooded when the dam or levee overtops, fails or a 

spillway is used. This was an issue with the recent flooding below Oroville Dam in 

California. While local emergency management officials had access to these maps, 

two hundred thousand evacuated property owners did not. People need to know they 

are living or buying in a residual risk area so they can take preparedness and mitigation measures such as buying a low cost flood insurance policy. In just the last 

2 years, South Carolina alone has had 80 dam failures due to increasingly intense 

flooding events. Unfortunately, DHS policy has continued unchanged since 9/11 

which is that inundation maps for Federal dams and levees are classified as For 

Official Use Only and not publicly available. This means citizens living there do not 

know they are at risk until law enforcement knocks on their door in the middle of 

the night and orders them to evacuate. In recent years, a Federal Policy Fee associated with NFIP policies ($50 for high- risk policies; $25 for lower-risk policies) has paid between 30–60 percent of the flood 

mapping program and appropriations paid for the remainder. The highest level of 

appropriations in the past 5 years has fallen far short of the $400 million per year 

authorized in BW–12. So funding from the Federal Policy Fee is an important part 

of the funding for map updates and corrections. Fewer NFIP policies means less 

funding for updated maps. 

• ASFPM recommends the reauthorization of the National Flood Mapping Program (NFMP) 

• ASPFM supports an increased authorization for the National Flood Mapping 

Program to accelerate the completion of the job of initially mapping the Nation 

in 5 years and getting to a steady-state maintenance phase 

• ASFPM recommends that Congress require Federal dam and levee inundation 

maps be publicly available and cease their classification as For Official Use 

Only 

Finally, ASFPM would like to comment on the Cooperating Technical Partners 

(CTP) program. The CTP program. The CTP program is an innovative approach to 

creating partnerships between the Federal Emergency Management Agency (FEMA) 

and participating NFIP communities, regional agencies, State agencies, tribes and 

universities that have the interest in becoming more active participants in the 

FEMA flood hazard mapping program. Just this past Monday, at the ASFPM annual conference, FEMA presented its first annual CTP award to the San Antonio 

River Authority (SARA). SARA, a CTP since 2003, manages its own floodplain mapping projects for watersheds in the San Antonio River Basin, and also processes its 

letter of may revisions. By incorporating its local knowledge and data into the flood 

mapping process, FEMA maximizes its leveraging of local knowledge and data, and 

the community produces more acceptable mapping products for its citizens. In short, 

it is huge benefit for both FEMA and SARA. ASFPM strongly supports the continuation and expansion of the CTP program. ASFPM is concerned that the CTP program is focusing on communities that are already capable versus helping those communities which need assistance building mapping capabilities. 

Floodplain Regulations, Standards, and Codes 

More than 22,200 communities participate in the NFIP, which basically means 

they have adopted minimum development and construction standards to reduce 

flood losses. As floodplain areas are identified and mapped throughout the Nation, 

NFIP participating communities must adopt and enforce local floodplain management standards that apply to all development in such areas. In urban and rural 

areas alike, these standards have for decades set a minimum level of protection for 

development occurring in identified floodplains. 

States are required to apply similar standards for State funded, financed and undertaken developments. In fact, NFIP standards are the most widely adopted development/construction standards in the Nation as compared to building codes, subdivision standards or zoning. FEMA has estimated that for approximately 6,000 of the 

NFIP participating communities, the only local codes they have adopted are their 

floodplain management standards. Today it is estimated nearly $2 billion of flood 

losses are avoided annually because of the adoption and implementation of minimum floodplain management standards. Often communities decide to adopt standards that exceed the Federal minimums. For example, over 60 percent of the population in the United States lives in a community that has adopted a freeboard— 

which is an elevation that is higher than the base flood (or 100-year flood) where 

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struction safer, but it can have a tremendous impact on flood-insurance rates. A 

freeboard of 3 feet can reduce premiums by more than 70 percent. 

In 2016, ASFPM participated in an agricultural floodplain ordinance task force 

which was formed to identify and develop refinements of the NFIP in agricultural 

and leveed agricultural areas. ASFPM’s Chair Ceil Strauss, the State floodplain 

manager for Minnesota participated in this group, and was supported by floodplain 

managers from several States where agriculture is a significant element of the economy. While ASFPM supported several recommendations of that task force, including 

FEMA’s update of Technical Bulletin 7–93, ASFPM urged caution to broader considerations to change NFIP standards to exempt certain classes of activities from needing floodplain development permits or needing to elevate certain agriculturally related structures. One only needs to remember the carnage of Hurricane Floyd in 

North Carolina in 1999 where over $2 billion in agricultural losses occurred including the loss of 30,000 hogs, 700,000 turkeys and 2.4 million chickens. If anything, 

NFIP minimum standards need strengthened to address modern agricultural methods including large concentrated animal feeding operations (CAFOs). 

Why do communities participate in the NFIP and adopt local standards? State 

floodplain managers around the Nation who have enrolled nearly all of the communities in the past 40 years know a major reason is to make flood insurance available 

to their citizens. If a community hasn’t joined (there are still about 2,000 communities not in the NFIP), it is usually compelled to do so when a resident gets a federally backed mortgage and needs to have flood insurance. While there are some nonparticipation disincentives in terms of restrictions on some forms of disaster assistance, such disincentives are weak and very limited. For most communities, they are 

not much of a disincentive at all, but getting flood insurance is. 

The entire floodplain management budget (100 percent), which includes staffing, 

community and State technical assistance, and the Community Assistance Program 

(CAP–SSSE), comes out of the Federal Policy Fee. 

• ASFPM recommends almost all forms of disaster assistance (especially public 

assistance) be tied to a community’s participation on the NFIP 

Flood Hazard Mitigation 

NFIP has two built in flood mitigation programs: Increased Cost of Compliance 

(ICC) and Flood Mitigation Assistance (FMA). These NFIP funded mitigation programs have resulted in more than $1.3 billion in funds to reduce risk to thousands 

of at-risk, existing structures. The Multi-Hazard Mitigation Council in its research 

of FEMA flood hazard mitigation projects determined that such projects resulted in 

$5 in benefits for each $1 spent. ICC and FMA have mitigated, on average, 1,850 

buildings annually between 2010 and 2014. ASFPM strongly supports both programs. 

ICC is the fastest way to get flood mitigation done and is paid for 100 percent 

through a separate policy surcharge. Since it isn’t run like a typical grant, funds 

are available much quicker. It is a transaction between the insured and insurance 

company. Sixty percent of ICC claims are used to elevate a building and 31 percent 

of the time it’s used to demolish a building. Other techniques used are floodproofing 

or relocation of the building out of the floodplain altogether. From 1997 to 2014, ICC 

has been used to mitigate over 30,000 properties. 

ASFPM has been frustrated for several years over the pace of FEMA’s implementation of its existing authority to make ICC much more useful. In 2004 ASPFM 

worked with Congress to add triggers to ICC, so now there are four of them: 

• A building being substantial damaged, 

• A building classified as a repetitive loss, 

• A building where an offer of mitigation is being made, and 

• The administrator’s discretion to offer ICC when it is in the best interest of the 

flood insurance fund. 

Of these four, only one trigger is being utilized—when a structure has been determined to be substantially damaged. While FEMA will claim it also applies ICC to 

repetitive loss properties it, is only that subset of them that have also been substantially damaged. The point is that there are three triggers—in existing law—that 

could be used in a pre-disaster sense. ASFPM would note that this past fall, FEMA 

has finally convened an internal working group to look at ICC and evaluate how 

to make it more effective. ASFPM urges the committee to monitor the progress of 

this group to ensure that the congressional intent has been carried out. 

Another frustration with how ICC is currently being implemented is the determination of how the surcharge is set by FEMA’s actuaries. Currently funding for 

ICC is through a congressionally mandated surcharge capped at $75 per policy. The 

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latest data ASFPM has is for calendar year 2014 where ICC brought in approximately $74 million for mitigation. On average this equals about $15 per NFIP policy—which is far below the statutory cap. However, as ASFPM has been discussing 

changes to ICC including increasing the ICC claim limit beyond $30,000, a response 

we often get is that the FEMA would have a tough time making the changes because it is collecting as much as it can under the existing cap and that the surcharge rate is set using actuarial principles. 

However, in its 2010 rate review, FEMA discussed how it was collecting more in 

ICC than it was spending and therefore adjusted the amount it would collect per 

policy down in 2011. The result? In 2010 the surcharge collected $84.5 million and 

in 2011 the surcharge collected $78.2 million. The point of this is that the rate setting becomes a self-fulfilling prophesy—FEMA’s inability to implement ICC’s other 

triggers result in the program not being fully used. And its low utilization in turn 

led to FEMA determining that the rates should be lowered. So it gives the appearance there is room under the existing cap. ASFPM believes there is room under the 

existing cap and suggests Congress look at setting a tiered amount that would be 

consistent with the existing cap limit and reflective of risk. For example, ASFPM 

calculates that under such an approach an ICC surcharge set at $25 for BCX-Zone 

properties, $50 for actuarially rated A- and V-Zone properties and $75 for subsidized 

A- and V-Zone properties, would generate approximately $227 million in revenue 

that could be used by policyholders to mitigate their flood risk. 

ASFPM believes ICC needs two other adjustments by Congress to be more effective. First, while ICC is collected on every policy, FEMA believes the statute requires the ICC claim be counted toward the total claim limit. This means a home 

that gets a $250,000 damage claim, the amount available for ICC is $0. Second, the 

ICC claim limit is too low. Estimates to elevate a home range from $30,000 to 

$150,000 with an average closer to $60,000. While $30,000 is very helpful, it often 

does not come close enough to cover enough of the mitigation cost. ASFPM is very 

supportive of Section 203 in the Cassidy–Gillibrand bill that increases the coverage 

limits of ICC to $75,000. 

• ASFPM recommends the ICC claim limit be in addition to the maximum claim 

limit under a standard flood insurance policy 

• ASFPM recommends the ICC claim limit be raised to $60,000 or higher 

• ASFPM recommends Congress specifically allow FEMA to utilize the available 

ICC amount for both demolition and acquisition costs as a means of compliance, 

when the claim is assigned to the community and deed restricted as open space 

• ASFPM recommends FEMA clarify to Congress whether or not expanding ICC 

to utilize pre-disaster triggers, raising the claim limit and allowing demolition 

and acquisition costs would necessitate increasing the cap and based on that 

information either raise the cap or set a tiered surcharge within the existing 

cap 

• ASFPM recommends Congress waive any rulemaking requirements that may be 

an impediment to quickly implementing the pre-disaster triggers for ICC and 

allowing demolition and acquisition costs 

FMA operates like a typical grant program where a community applies through 

the State through a grant application. Further, FMA also funds other types of mitigation that can address issues on the neighborhood- or community-scale such as 

stormwater management systems to reduce flood risk and flood mitigation plans. In 

recent years, the priority for the FMA program has been repetitive loss and severe 

repetitive loss properties. While this is an important objective, ASFPM worries that 

an exclusive focus on such projects is increasingly resulting in a gap where no assistance is available for properties that desperately need assistance, such as older 

pre-FIRM nonrepetitive loss structures for which insurance rates may be increasing 

significantly. ASFPM recommends that accommodations be made for these types of 

properties as well when FEMA formulates its new policy guidance. As our testimony 

will go into more detail below, one approach to flood insurance affordability is to 

subsidize flood hazard mitigation or at least give property owners a chance to mitigate. Another idea for Congress to consider is a mitigation surge where Congress 

would supplement FMA funds with a large one-time or multiyear appropriation to 

either address the growing number of repetitive loss properties, or specifically address pre-FIRM properties where affordability of flood insurance has become untenable. 

Repetitive loss claims continue to drain the National Flood Insurance Fund and 

today, there are at least 160,000 repetitive loss properties. Hazard mitigation efforts 

have been insufficient to reduce flood damage to older structures and ultimately reduce the overall number repetitive loss properties. Current mitigation programs 

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3 ‘‘The Impact of Climate Change and Population Growth on the National Flood Insurance 

Program through 2100’’. 2013. 4 ‘‘FloodSmart Flood Facts’’. Webpage accessed 3/14/17. 

within the NFIP are underfunded and not reducing the overall number of repetitive 

losses in the country. 

Flood Insurance 

Flood insurance is the easiest way for a property owner to manage their flood 

risk. It was also viewed by the original authors of the program as a way to more 

equitably share risks and costs of development decisions. Yet too few property owners and renters carry flood insurance. Today it is estimated 10 percent of the population lives in an identified floodplain and that number is projected to grow to 15 

percent by the year 2100 based on natural population growth and future conditions 

(land use, development, and climate change). It is also estimated the number of policies increasing by 100 percent and the average loss per policy increasing by 90 percent in 2100. 3 The point is that these trends show growth in the human occupation 

of flood hazard areas and the potential damage that may result. As we have pointed 

out earlier, there are many more miles of rivers, streams and coastlines that aren’t 

even yet mapped (which is why it is unsurprising that 20 percent of NFIP claims 

and 1⁄3 of Federal disaster assistance come from outside of mapped floodplains). 4

The Push for Expansion of a Private Flood Insurance Market 

In 2012 and today, there appears to be much interest in expanding the private 

flood insurance market. Many believe the private sector is a cure-all and can get 

the taxpayer off the hook for flood losses. And there seems to be a belief that if not 

for Congressional intervention in 2017, a robust private market would develop. 

ASFPM believes that the private sector can be a partner to the NFIP in growing 

the policy base nationally, but any reforms to the law to do so should be done with 

care. For example, ASFPM rejects the notion that the NFIP should be a program 

of ‘‘last resort’’ only insuring the worst risks, and strongly urges Congress to consider reforms that do not lead to cherry-picking of the risks that maximize the private industry’s profits—to the detriment of the NFIP. ASFPM has the following observations related to expanding the private flood insurance market. First, private 

flood insurance has always been part and will continue to be allowed under the 

NFIP. Currently, robust private markets exist for policies in excess of NFIP limits. 

The private market has almost all of the commercial and industrial flood risk in the 

country. And robust private markets exist for forced place properties. Too often in 

2012 and again this year, conversations in Congress about private flood insurance 

imply private companies are not currently writing policies. Not true! Both industry 

leaders and even testimony by the CEO of the Nation’s largest private flood insurance agency to the House in March indicated very strong growth, especially over the 

past 2 years. 

Second, the reforms to stimulate more private market participation in 2012 have 

worked as intended. ASFPM strongly disagrees with those who believe that somehow the 2012 reforms were badly written or somehow missed its intent. ASFPM has 

spoken with numerous industry sources, as well as had extensive conversations with 

private sector companies interested in offering private flood insurance and former 

State insurance commissioners. This industry is growing and in the past 2 years has 

expanded significantly. For example, private flood policies today are required to contain a flood mitigation coverage that is similar to ICC because the 2012 reforms required that private policies have coverage ‘‘at least as broad as’’ NFIP policies. This 

ensures that property owners have funds to elevate flood prone homes and that communities are not faced with owners who just walk away from the property because 

it is too expensive to elevate. The 2012 reforms are ensuring that the private market is growing in an orderly way with appropriate safeguards that ensure protections for policyholders, lenders, taxpayers, and communities. 

Current law requires private policies to include six key provisions: coverage that 

is at least as broad as coverage under a standard flood insurance policy under the 

NFIP including deductibles, exclusions, and conditions; a notice of cancellation requirement; information about availability of flood insurance coverage under the 

NFIP; a mortgage interest clause similar to that found in a NFIP policy; a time limitation for filing a lawsuit after a denial of a claim; and cancellation provisions as 

restrictive as those under a NFIP policy. ASFPM has significant concerns from both 

a policyholder and community perspective about recent legislative proposals to 

eliminate these provisions, especially the two that pertain coverage/exclusion requirements and the mortgage interest clause requirements. To offer a policy for half 

the NFIP price might sound good but if the coverage is only 25 percent of the NFIP 

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5Last year ASFPM testified before the Senate Committee on Small Business and Entrepreneurship on flood insurance rate increases which also included detailed thoughts on H.R. 2901, 

which can be found here or on ASFPM’s website at www.floods.org. 6 It should be noted that in testimony before the House, Evan Hecht, CEO of the Nation’s 

largest provider of private flood policies thought that such an equivalency fee was fair and was 

supportive of it. 

policy or if the deductible is beyond the ability of the property owner to pay it is 

a very bad deal (as the consumer will find out when a flood hits). Taxpayer costs 

of disaster relief will also explode if weak coverage is allowed in the private market. 

ASFPM urges that these six provisions be retained in any comprehensive NFIP reform legislation. 

• As a result of the successful 2012 reforms to stimulate the private flood insurance market, ASFPM does not believe any further stimulation of the private 

market is needed at this time 5

• If Congress does consider additional changes to stimulate the private market, 

ASFPM urges that the six requirements for private flood policies be retained. 

If these provisions are retained to ensure that a private policy is at least equivalent to that of an NFIP policy, ASFPM supports legislative proposals to ensure 

seamless continuous coverage between private policies and NFIP 

Third, ASFPM strongly believes a strong NFIP can coexist with the private market offering flood insurance as long as both are on equal playing fields. In other 

words, neither the NFIP nor the private market should be at a competitive disadvantage. As explained earlier in this testimony, private insurers depend on NFIP 

maps and agrees local floodplain regulations help all insurance, yet private policies 

do not have to include the Federal Policy Fee to help pay a share of these costs. 

The wholly unfair PAYGO surcharge has allowed private policies to be written using 

FEMA rate tables and the private sector is profiting on the difference between the 

loaded NFIP policy (with surcharges and fees) and private sector policy that does 

not have to charge such fees. 

Fourth, ASFPM believes that to preserve the many public benefits of the NFIP, 

to ensure fairness and to prevent erosion the NFIP, two changes must be made to 

the existing law to ensure private flood policies are paying their fair share of floodplain management and mapping costs, and to ensure that communities continue to 

participate in the NFIP. 

The private insurance industry uses FEMA flood maps in various ways: sometimes to calibrate their risk assessment models, and sometimes to determine basic 

eligibility of their private flood insurance product. Industry officials ASFPM talks 

with all support the floodplain management efforts in a community that provide a 

meaningful program of risk reduction. Given that 100 percent of the Federal Policy 

Fee goes to mapping and floodplain management, it is only equitable that private 

policies help pay for these functions and that they are not just borne by policyholders. ASFPM strongly supports Section 404 of the Cassidy–Gillibrand bill that 

would assess a surcharge or user fee on private flood policies to pay for mapping 

and floodplain management and for ICC, especially if provisions of current law that 

require private policies to have comparable coverages are eliminated. 

• ASFPM recommends an equivalency fee, equal to the Federal Policy Fee, be assessed on private flood insurance policies and remitted to the NFIP, and that 

fee be specifically dedicated for flood mapping and floodplain management 

The equivalency fee is not unlike TSA security fee which helps fund TSA’s airport 

security measures. For the traveling public, this fee supports critical security measures and ensures the safety of the commercial airline industry. And while from a 

purely philosophical standpoint one could argue that the Federal Government 

should pay this through appropriations, it does not. And as members of the flying 

public, we certainly do not object to paying such a fee to keep us safe. Similarly, 

some might argue that that floodplain management and floodplain mapping should 

be wholly supported by Federal appropriations as flood maps and floodplain management are public benefits. But for decades this has not been the case and that 

burden has been shared between the taxpayer at large and those with NFIP policies. And the simple fact is that private flood policies and those companies selling 

private flood policies, for a variety of reasons, need accurate flood maps and depend 

on having local flood codes adopted and enforced. It is entirely unfair that taxpayers 

and NFIP policy holders today are subsidizing private policies which is what is happening now in absence of such a fee. 6

As private flood insurance becomes more widely and easily available, provisions 

must be made to ensure such policies can only be made available to meet the manVerDate Nov 24 2008 10:49 Dec 14, 2017 Jkt 046629 PO 00000 Frm 00161 Fmt 6621 Sfmt 6621 L:\HEARINGS 2017\03-14 ZZFLOOD DISTILLER\31417.TXT JASON
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datory purchase requirement if the community participates in the NFIP. Why? For 

thousands of communities in the NFIP, the primary reason for joining the program 

is the availability of flood insurance to meet the mandatory purchase requirement. 

As a requirement of joining, communities agree to adopt and enforce local floodplain 

management standards. As a result, floodplain management standards are the most 

widely adopted in the United States—exceeding the coverage of building codes, subdivision regulations and zoning. The adoption and enforcement of these codes, in 

turn, reduces future flood risk to the individual, businesses, communities and taxpayers. ASFPM members understand that once you remove the incentive for joining 

(flood insurance availability) thousands of communities may rescind their codes, 

drop out of the NFIP, and rely on the private policies to meet needs of property owners without the administrative burden of adopting and enforcing local codes. Particularly susceptible to this are small communities with low policy counts. As stated 

earlier in this testimony, most communities in the Nation already participate in the 

NFIP. And while the private industry is still emerging, let’s be partners in persuading communities to comprehensively reduce flood losses. Finally, this fee has 

no cost to the private insurance industry. 

• ASFPM recommends that private flood insurance policies meeting the mandatory purchase requirement and can only be sold in NFIP participating communities 

As stated earlier, ASFPM is concerned about private industry cherry-picking the 

best risks from the NFIP leaving the portfolio of the program more adversely selected. Because of this concern and the growth that is occurring in the private flood 

market which could lead to such a state for NFIP, ASFPM can only support, at 

most, a five-year reauthorization of the NFIP to ensure that Congress will exercise 

its oversight in a reasonable period of time. 

Flood Insurance Affordability 

Despite the longer glide path for premium increases set in HFIAA, rates may 

again reach high levels in another three or four years and a long-term solution to 

affordability was not included in either BW–12 or HFIAA. Also, to meet House 

PAYGO rules, there was a large surcharge imposed on nonprimary residences, small 

businesses and other nonresidential structures. The surcharge is neither risk-based 

nor need-based. Premium increases and surcharges have led to a notable reduction 

in policies in force, declining from a high of 5.5 million to about 5.1 million today. 

On one hand ASFPM supports pricing flood insurance premiums to accurately reflect risk. Premiums reflecting risk inform individuals as to the level of hazard in 

flood prone areas and encourage investment in flood mitigation measures. On the 

other hand, many low and middle income homeowners living in older homes in flood 

prone areas may not be able to afford flood insurance if premiums are priced to reflect risk. ASFPM believes that it is imperative that issues of affordability be addressed, but not necessarily by only subsidizing premiums. The University of Pennsylvania Wharton Risk Management and Decision Process Center has developed a 

conceptual approach that would pair a needs based voucher program with implementation of a low interest mitigation loan program. ASFPM supports approaches 

like this that emphasize mitigation as part of the solution. We recognize and commend the Cassidy–Gillibrand bill for presenting a concrete proposal to address affordability and would strongly urge the approach taken to incorporate mitigation 

where it is cost effective to do so. 

ASFPM notes that congressionally mandated studies on flood insurance affordability have been completed and now look forward to FEMA’s completion of the affordability framework. However, we are also concerned about timing of the FEMA 

framework relative to the reauthorization deadline and whether any meaningful reforms will be developed and considered. 

• ASFPM recommends considering a shorter multiyear reauthorization of 2–3 

years so FEMA can more fully develop affordability recommendations for Congress to consider 

• ASFPM recommends the elimination of the PAYGO surcharge established in 

2014 from the standpoint of flood insurance affordability and equity with private flood policies 

• ASFPM recommends that subsidies be focused on mitigation, rather than subsidizing insurance and that any subsidy be paid for outside of the NFIP (do not 

create a new cross-subsidy rather fund through appropriations) 

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7The authors did try to make an estimate of 75–80 percent; however, stakeholders largely 

thought this number was high. Data source: ‘‘NFIP’s Market Penetration Rate: Estimates and 

Policy Implications’’. RAND Corporation. 2006. 8 ‘‘NFIP’s Mandatory Purchase Requirement: Policies, Processes and Stakeholders’’. Tobin and 

Calfee. 2005. 

Mandatory Purchase Requirement and Compliance 

When first enacted in 1968, the NFIP did not have a mandatory purchase requirement. By 1973, only 200,000 property owners had flood insurance policies. Following 

a series of catastrophic floods, Congress enacted the Flood Disaster Protection Act 

of 1973, instituting the mandatory purchase requirement, obligating property-owners seeking a loan from a federally regulated lending institution to obtain flood insurance if their assets were within a special flood hazard area. As a result, these 

reforms led to a dramatic increase in insurance penetration and by 1977, more than 

1.4 million properties had flood insurance. In short, mandatory purchase works! 

Even as you pass the 2017 omnibus spending bill which contains over a billion dollars in supplemental funding for storm and flood disaster recovery, consider that if 

there wasn’t an NFIP and there wasn’t a mandatory purchase requirement, the supplemental appropriations you provide would be much larger and the burden on the 

Federal taxpayer greater. 

That is why ASFPM is concerned about some proposals circulating that would exempt some classes of properties (such as commercial properties) from the mandatory 

purchase requirement. This makes no sense and would end up costing taxpayers 

more through disaster assistance. In fact, ASFPM supports changing the mandatory 

purchase requirement to include more classes of properties. 

• Expand the mandatory purchase requirement to include all flood risk areas including: Erosion zones, areas behind levees and other flood control structures, 

dam inundation zones, and moderate risk areas (Zone B/shaded X) 

• Require flood insurance equal to the replacement cost on any structure outside 

the SFHA for which two or more damage claims or Federal disaster assistance 

have been paid due to flooding unless it is mitigated 

• Evaluate expanding the mandatory purchase requirement for all buildings in 

coastal storm surge zones 

ASFPM continues to be concerned about the enforcement of the mandatory purchase requirement. In 2014 our members became quite concerned when FEMA decided that because mandatory purchase was not the agency’s responsibility, it rescinded the Mandatory Purchase of Flood Insurance Guidelines (ironically our members report the document is alive and well in circulation as a bootlegged resource 

and while dated, it is still very helpful). 

What is the compliance rate? Attempts to quantify this in 2005 as part of the 

evaluation of the NFIP concluded that while overall the market penetration rate of 

the NFIP nationwide was estimated to be around 50 percent, the mandatory purchase requirement compliance rate could not be precisely determined. That same 

study did come to the conclusion that mandatory purchase compliance at the time 

of loan origination did not seem to be an issue. 7 While the number hasn’t been precisely determined, another study as part of the evaluation of the NFIP contained 

a very good policy discussion of the mandatory purchase issue and contained 72 recommendations, including one that ASFPM strongly concurs with: ‘‘FEMA should explore opportunities to exercise a leadership role in promoting compliance and in assisting Federal entities for lending regulation to meet their obligations related to 

flood insurance.’’ 8

Aside from the compliance rate, it may be useful to divide mandatory purchase 

compliance into three areas: mandatory purchase associated with loans from federally regulated lenders, mandatory purchase associated with loans by Federal agencies that do direct lending (i.e., Dept. of Agriculture, Veterans Administration, SBA) 

and mandatory purchase associated with the receipt of some forms of disaster assistance. It is important to note that while FEMA has the authority to administer 

the NFIP, other Federal agencies typically have the authority to administer the 

NFIP’s mandatory purchase requirement. Although ASFPM would note that compliance with mandatory purchase associated with disaster assistance falls on FEMA. 

This means there are likely very different processes and procedures in place. 

While Congress continually raises questions about mandatory purchase, FEMA 

continually points out that it does not have explicit authority to enforce the requirement. ASFPM agrees with earlier Office of Inspector General recommendations that 

FEMA could have a useful role in the implementation of the mandatory purchase 

requirement including assisting other Federal entities in addressing the compliance 

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issue. FEMA’s Office of Inspector General in 2000 provided several examples of how 

FEMA could promote compliance without assuming a regulatory or enforcement 

role. One example is re-instituting a process FEMA used in the 1980s and early 

1990s that collected information about mortgages and location in the SFHA from 

applicants seeking flood-related disaster assistance. FEMA then matched the information with data on which property owners carried flood insurance to determine the 

level of compliance with the mandatory purchase requirement. 

• ASFPM recommends Congress clarify FEMA’s role in mandatory purchase to 

provide leadership and give FEMA explicit authority to provide technical assistance to Federal entities to meet their obligations to related to mandatory purchase compliance 

• ASFPM recommends the committee hold a hearing dedicated to compliance 

with the mandatory purchase requirement (including when flood insurance purchase is required as a condition of disaster assistance) to further explore this 

issue 

Improving the NFIP Policy Offerings 

Community floodplain managers often hear complaints about the NFIP centered 

around what is covered and what is not; and the inability to get additional coverages like living expenses as part of a NFIP policy. ASFPM has been impressed 

with FEMA’s customer experience initiative after Sandy with FEMA committing to 

improving the insurance product it sells. Yet FEMA is constrained by a cumbersome 

rulemaking process that can take years to complete. 

• ASFPM recommends Congress give FEMA the flexibility to offer additional 

flood insurance policy options and make changes to existing options without the 

need for extensive rulemaking 

In Conclusion 

Floods are this Nation’s most frequent and costly natural disasters and the trends 

are worsening. The NFIP is the Nation’s most widely used tool to reduce flood risk 

through an innovative and unique mix of incentives, requirements, codes, hazard 

mitigation, mapping, and insurance. At the same time, we understand the four main 

pillars of the NFIP are interconnected; and making significant changes to one pillar 

without thoughtful consideration of the other three can erode the program overall. 

While we are under no illusion that the NFIP is the only tool in the toolbox, it is 

one that serves policyholders, taxpayers, and the public well. 

The Association of State Floodplain Managers appreciates this opportunity to 

share our observations and recommendations with the Committee. 

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RESPONSES TO WRITTEN QUESTIONS OF SENATOR SCOTT 

FROM LARRY LARSON 

Q.1. In South Carolina, we have zoning laws that have allowed for 

the development of properties that drain directly into other properties. 

As a result, some South Carolinians have their homes or businesses flooded over and over and over again, with the NFIP picking 

up the tab every time. 

Without heavy-handed mandates, how can we incentivize local 

governments (municipal and county) to be proactive and rectify 

these repeat problem areas to the benefit of homeowners and taxpayers? 

A.1. This is an issue that exists when local communities do not provide adequate development standards that protect the property 

rights of those adversely impacted by development as well as those 

of the developers. Property rights of both are important. No property owner has the right to do something on their property that 

will adversely impact someone else’s property. Many communities 

require those developing to demonstrate how any increased runoff 

from the development will be retained on-site, or will otherwise be 

mitigated to not adversely impact others. ASFPM has how-to 

guides and tool kits on our website showing how communities can 

do accomplish this: www.floods.org/index.asp?menuID=460& 

firstlevelmenuID=187&siteID=1. 

The NFIP currently provides community credits in ‘‘Activity 450’’ 

of the Community Rating System for community adoption of Low 

Impact Development (LID) stormwater management practices. 

These are generally modest levels of credit (of up to 25 points). 

Considerably higher levels of community credits are available when 

communities adopt requirements for new developments to control 

and provide for infiltration of water runoff for increasingly higher 

volume storms. Such approaches can make a substantial difference 

in reducing conflicts and controlling worsening future flooding conditions through thoughtfully managing the community’s 

stormwater. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR HEITKAMP 

FROM LARRY LARSON 

Q.1. Affordability: As we examine reauthorizing the NFIP, we cannot repeat the mistakes of Biggert–Waters and increase costs that 

drive homeownership out of reach for working people. 

Many of the fixes we passed in HFIAA—such as capping the rate 

of insurance increases for most primary residences and preserving 

grandfathering—were crucial to making sure homeowners in my 

State, especially in areas like Minot, Fargo, and Drayton, could afford to stay in their homes. In Minot in particular, the city is facing 

a looming remapping deadline in the fall of 2018 that will significantly alter the affordability for nearly three thousand properties 

in the area. Many properties are slated to be moved from an X (low 

risk) zone to an AE (high risk) zone, which will mean a huge premium increase for many of these homeowners. I’ve heard from 

some in my State that the jump could be from roughly $400 per 

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month to $2K–$6K per month, if they don’t secure flood insurance 

prior to the remapping. 

Minot is a great example of why grandfathering is so critical for 

keeping families in their home. Do any of the witnesses believe 

that the grandfathering and affordability caps placed in HFIAA 

should be altered? 

A.1. ASFPM warned in its testimony as Biggert–Waters was being 

debated that movement towards actuarial rates too fast would 

cause the problems that eventually occurred resulting in the 

changes under HFIAA. ASFPM supported the adjustments in 

HFIAA, which really resulted in the lengthening of time for policies 

to move to full risk rates. The important element that was preserved is a point of certainty that actuarial rates will truly happen. 

These rates had been grandfathered for 44 years until BW–12 

started the move to actuarial. Three important things must happen 

to make this process successful: 

1. Continual movement to actuarial, 

2. FEMA should show policyholders what full risk rates will ultimately be on NFIP policies, and then show discounts being 

provided, and 

3. Assistance should be provided to mitigate the building so the 

property owner can afford the premium—this mitigation assistance can be through ICC or mitigation programs like PDM 

or FMA, and, when available, HMGP or CDBG–DR or other 

assistance grants. 

An additional idea to consider is establishment of a State-related 

‘‘mitigation’’ revolving loan program working to assist communities 

and homeowners with voluntary property buyouts and relocations, 

or other building mitigation measures (such as loans for elevation 

of building utilities) to help lower homeowners’ insurance costs 

through lowering flood risk to structures. 

Q.2. In order for residents to obtain the benefit of affordable rates, 

they need to secure flood insurance prior to the remapping. How 

can we better educate homeowners about the critical importance of 

these mapping changes and the impact it will have on affordability? 

A.2. It is clear from research and analysis that citizens most trust 

information from people they know; usually the local officials. It is 

important to enlist local officials to help educate the property owners on their risk and urge them to get insurance now. Any resources to assist local officials in doing this would be useful. 

Q.3. As we see more and more extreme flooding across the country, 

FEMA will always be there for homeowners on the back end with 

at least some Federal money through hazard mitigation assistance. 

Given that severe flooding occurs more often, and the Federal 

Government many times foots a lot of the bill irrespective of flood 

insurance, does it make sense to expand some level of mandatory 

flood coverage to all federally insured mortgages? 

A.3. Yes, it makes sense to expand mandatory purchase and 

ASFPM has testified previously that many options exist, such as 

requiring insurance on all loans in 500-year floodplain and in residVerDate Nov 24 2008 10:49 Dec 14, 2017 Jkt 046629 PO 00000 Frm 00166 Fmt 6602 Sfmt 6602 L:\HEARINGS 2017\03-14 ZZFLOOD DISTILLER\31417.TXT JASON
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ual risk areas behind or below structures that may fail or overtop,; 

or all the way up to consider requiring that all homeowner policies 

must cover all natural hazards, including floods just like they cover 

wind and fire now. 

Q.4. What would the costs be for homeowners in low risk areas? 

A.4. Similar to Preferred Risk Policy (PRP) now. However, under 

the current pricing scheme and surcharge mandated by Congress, 

the surcharge essentially equals the premium, so the surcharge, 

which is not risk based but artificial, needs to be appropriately reduced or eliminated. 

Q.5. How would this help sure (shore?) up the NFIP program and 

what risks would it present? 

A.5. By coming into closer harmony with a basic tenet of insurance—spreading the risk by increasing the risk pool (both by class 

of structure and geographically). Even now, the NFIP has an adversely selected portfolio—very high-risk areas have concentrations 

of policies whereas low risk areas are chronically underinsured. 

The more policies in the program, the lower the rates, in general. 

More people would have to buy, but if rates in low risk areas are 

really low, and paid monthly that would help homeowners manage 

costs. 

Q.6. Private Flood Insurance and Sustainability of the NFIP: If private flood insurance is structured the right way it could play a 

helpful role within our Federal flood insurance system; however I 

have real concerns about cherry-picking and the impact that could 

have on the long-term risks for the NFIP. 

Mr. Larson, in your testimony you express similar concerns 

about cherry-picking. How can we design a minimum coverage 

standard, or other sensible protections, that would allow for more 

private flood insurance without draining the best risk from the 

NFIP? 

A.6. Level the field so private competes fairly—and this cuts both 

ways. The NFIP cannot be at a competitive disadvantage to private 

flood and vice versa. This means a couple of things: 

First, private pays an equivalent policy fee to pay for mapping, 

mitigation and floodplain management, and the private policy must 

truly meet the minimums of the NFIP policy mentioned in next 

question. 

Second, in order for the communities to have access to private insurance, as with NFIP, communities must continue in good standing to participate in the NFIP, meeting at least the program’s minimum floodplain management standards. 

Third, private policies must have at least some of the required 

elements of 42 U.S.C. 4012a(b) that are in existing law now—specifically the provision of flood insurance coverage which is at least 

as broad as the coverage provided under a standard flood insurance 

policy under the national flood insurance program, including when 

considering deductibles, exclusions, and conditions offered by the 

insurer and the additional loss payee provision to ensure that 

claims go back into repairing the damaged building. 

The private flood proposals being considered by Congress eliminate this consistency requirement, which puts the NFIP on the 

164 

hook for very high-risk properties that private insurers will not insure through a continuous coverage provision. If the NFIP is to accept a private policy from a continuous coverage standpoint, 

shouldn’t it be an ‘‘apples to apples’’ situation? ASFPM is strongly 

opposed to eliminating the requirements of 4012a(b) as we are witnessing a private flood market that is now already growing, WITH 

these requirements in place. 

Q.7. If we decide to make the standard for private policies that 

they must be ‘‘at least as broad as coverage under a standard flood 

insurance policy’’ who should be making the determination of 

whether an individual private policy meets that standard? Are 

there challenges with allowing state Insurance Commissioners the 

option to make this determination, and if so, what are they? 

A.7. First, the agencies overseeing lenders should complete their 

job of defining ‘‘at least as broad’’. This levels the field. Second, 

FEMA can be helpful in this regard and should be directed to assist (we have elaborated on this point in our written testimony). 

ASFPM is concerned there will be challenges with 50 State insurance commissioners having 50 different definitions for a program 

that applies nationally. Those 50 States can address other aspects 

of the insurance company, but the equivalent policy issue must be 

nationally consistent. 

Q.8. One interesting way to better align incentives and risks between the private sector and Federal Government would be by having the Federal Government and private sector split losses and 

benefits on every policy. For example, you could have a design 

where for each dollar of loss or dollar of premium, there’s a predetermined percentage of risk sharing between the Government 

and private sector. Could an approach like this be effective within 

the NFIP? 

A.8. This sounds simple, but would likely be complex to administer. 

Private insurance is already expanding in the Nation, and if the 

NFIP rates continue toward actuarial, should increase. As long as 

the playing field is level, they should be able to coexist. ASFPM is 

aware of a proposal in the Cassidy–Gillibrand discussion draft, 

which establishes a pilot program for risk sharing with the private 

sector. We are supportive of trying this concept out on a purely 

pilot basis. 

Q.9. Mitigation: In North Dakota we spend a lot of our resources 

on finding ways to mitigate flood damage. Many of our local homebuilders have built homes above and beyond local building codes in 

order to make sure homes are less susceptible to flooding. However, 

under the current system, many of these costs go unrecognized for 

purposes of lower flood insurance premiums. 

Where can we make improvement to recognize mitigation efforts, 

not just at the community level, but at the homebuilder level? 

A.9. There seems to be a misperception here. In fact, the current 

system recognizes many building standards that truly reduce the 

flood risk. The simplest way is to adopt a freeboard—or a building 

first floor elevation level above the base (100-year) flood. For example, if the first floor of a building is above the BFE (regulatory flood 

165 

level—usually the 100-year flood level) reductions in premium 

rates look like this: 

Feet above BFE for first floor Premium reduction 

1 foot ........................................................................................................................... A zone 50% V zone 18% 

2 foot ........................................................................................................................... A zone 68% V zone 38% 

3 foot ........................................................................................................................... A zone 74% V zone 55% 

These are data that Chad Berginnis (ASFPM) updated using 

April 2017 premium rates. Communities should also be encouraged 

to work with lenders, homebuilders, and realtors to inform homeowners of the long-term benefits of investment in prudent higher 

building elevations to reduce flood risks and insurance costs, currently and into the future. During new construction, one foot of elevation adds only about 1 percent to costs. 

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ADDITIONAL MATERIAL SUPPLIED FOR THE RECORD

SMARTSAFER NATIONAL FLOOD INSURANCE PROGRAM REFORM 

PROPOSAL, FEBRUARY 2017 


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AN ILLUSTRATION OF THE BENEFITS OF PRIVATE MARKET 

DEPOPULATION AND REINSURANCE RISK TRANSFER 


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STATEMENT OF THE REINSURANCE ASSOCIATION OF AMERICA 


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LETTER SUBMITTED BY THE CONSUMER FEDERATION OF AMERICA 


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