Transcripts For CSPAN3 Policy 20240702

A look now at challenges in the property Insurance Market witnesses discuss the impact of rising Interest Rates, oversight of Insurance Marketplaces and insurance providers leading california, texas and other state this hearing held by the senate, taking housing and urban housing committee. Committee banking, housing and urban affairs, to order. Witnesses who have been before and welcome, colleagues and staff first hearing, obviously, post labor day. A few Financial Decisions are more important than buying a home but homebuyers are making the best for themselves, their families and communities. Homebuying is an act of optimism and also stressful families buying a new home have so much to think about a sure they cover that down payment, navigating mortgage and closing process, moving in, getting kids set up in new schools if they have children. Buying Homeowners Insurance has been a part of the process that gets families certainty and peace of mind for homeowners are confident their monthly Insurance Premiums will provide a backstop against the physical and financial devastation that could ensue if their largest investment is threatened by increasing number of Natural Disasters, tornado, hurricane or wildfire and other dangers, incidents or accidents. Knowing they are covered can help homeowners sleep better at night. Or that is how it is supposed to work but increasingly, homeowners, have faced an unpleasant surprise when it is time to renew policies. Homeowners who spent years making their payments regularly without fail are shocked to find their insurers has raised the cost, limiting coverage or too many cases wont renew the policy at all. Insurers have abandoned and in some places entire market leaving consumers with fewer options that cost more and provide less coverage. Consumers are counting on their insurers now more than ever. According to noaa, the countrys experience 15 weather disasters, each resulting in losses of more than 1 million. 50 disasters causing more than 1 billion. Severe storms resulted in 34 billion of insured losses for the first half of this year alone, the highest ever in a six month period. No reason to think those numbers will keep going up with Climate Change. Hawaii, florida, borough lot, extreme weather events up and and millions of americans lives. Last month the Deadly Wildfires in our 50th state tragically killed at least 115 people with hundreds more missing, projected losses of 6 million per losses from hurricane a dahlia, which plowed through florida, georgia and the carolinas last week can reach 20 billion. Senators welch and sanderson, the raking manner and center scott amis ahead of the hearing. They have details from status measurement devastating floods. Homeowners, landlords and renters can hit them the hardest but is the lowest income residents. We know that in disaster after disaster. It is most residence in committees of color have been pushed into the areas that are most Affordable International disasters as weather patterns change because of Climate Change, risk and exposure and places that have not been prone to natural catastrophes. This is let Insurance Company to reify a risk concentration levels and not just on the coast. As the head of the association for insurers said, there is no place to hide from the severe Natural Disasters. The result has been a disturbing and abrupt trend. Companies are researching coverage or raising rates in some cases they leave states or geographic areas out entirely. As secretary yellen recently noted, the result is a protection gap, increasing costs with limiting options for families and increasing Financial Stability concerns are cross the Financial System for u. S. Insurance rates, the cost of insurance that Companies Buy in to protect themselves by spreading out risk have reportedly increased up to 50 . These jumps in reInsurance Premiums have been driven, in part, by frequent and more severe Natural Disaster for themselves and investors higher reinsurance rates mean higher costs for Insurance Companies, which mean price hikes passed on to consumers every month it has left millions of americans pay more for insurance often with less protection than before while others to scramble to find any insurance at all because their insurance has refused to renew the policy. California, two major insurers, state farm and also date stop writing new policies in the whole state. They cited the growing risk of disaster feet and insurance rates as factors but not to be outdone. In florida, since 2020, 16 severe storms and hurricanes have caused more than 100 billion worth of damage and led to an exodus of insurers. Farmers insurance became the fourth in florida alone to exit the market. Joining bankers insurance, lexington insurance. They would stop writing property policies in that state. Many are looking for new coverage. Days a days later aaa announced it would not have higher exposure policies in the state per despite that average premium cost 6000. The highest in the country. 14 insurance comings have left the state or have the receivership process. Insurers exiting state markets and left homeowners and businesses with no choice but to seek coverage from state mandated insurers of last resort, which provide bare bones policies and typically higher rates. Insurers of last resort are exactly that, they are the last resort. That used to mean these had a small share policies. As exposure is increasing as especially coastal states but everywhere have been battered. In florida, for the citizens, the state insurer of last resort is now the states single large property insurer, 1. 4 million policies. California is the california fair plan has been 100 increase in policies over the last five years. Reportedly offering coverage to 300,000 policies at the end of last year. It is not only homeowners hit by rising cost. The National Multifamily Housing Council reports similar issues for multifamily sector, higher rates and deductibles, coverage limitations and in some cases mobile private market Insurance Coverage option at all. Because each policy is a contract between the Property Owner and the insurance, it is hard to know when they have stopped writing coverage. In apartment owners tell us they are seeing a clear trend. They will only bear the burden as higher cost is passed on to them in the form of even higher rents. Owners have already too small supply of Affordable Apartment serving the lowest income renters may be increasingly left with impossible choices. Todays witnesses understand the unique challenges facing homeowners and Property Managers from columbus, the capital of my home state of ohio is seeing a problem of rising insurance costs firsthand across the many state or Church Residents provided. I am pleased to have all three of you here today. As we explore these important topics. Ricky member, got. Thank you for joining us today. It is such an important conversation about the state of insurance and the Important Role that insurance plays in the ability for homeowners, specifically as we discussed today. Transfer the rest to an Insurance Company. Coming from south carolina, thinking about my friends in florida and georgia and North Carolina, thinking about the devastation of the fires in maui , my prayers and my thoughts are certainly with those folks who lost family members and have seen their lives devastated, their properties destroyed. So much attention is given to the challenges of the environment, climate. All too often what we see with maui or in other states is that man made disasters that jeopardizes states. I think about the fact that in my lifetime, as an adult i spent 20 plus years in the insurance business. I do have an affinity for terms that we use when i was in business. Mike, have you ever been in insurance . Two boy, have i. One of the things that we have both talked about is the probable maximum loss. Can an Insurance Company calculate accurately or even in the range of reality what is a probable loss within the markets. Whether that market is in the charleston area where we are prone to hurricanes or the state of california or ohio with storms and or other national Natural Disasters. Can the company predict the loss that will be incurred. It can be absorbed based on the premiums they charge per policy. When you cannot, you do not stay in the market. It is kind of that simple. Insurance companies have to follow the basic rules of economics like any other business. That is why the challenges that we see, particularly in states like california and florida california is overregulated and it makes it very difficult for Insurance Company to make a profit in the state we cannot make a profit, you dont day in the state. One of the reasons why you see state farm aig, and other Insurance Companies that were named leaving market. Race efficiency is impossible to get there. And then the inability to find the path forward. Whether it provides some reduction of the risk or, as i have discussed before, absolute necessity of us to get our arms around the catastrophic currents from coast to coast. Weather is a hurricane, earthquake, flood or tornadoes. We have not wrestled with the actual damages done by catastrophic occurrences across the country. If youre on the coast or frankly in the south, louisiana, florida, or south carolina, we account for half of all the premiums going into the nfip. When a flood happens in new york , new jersey or ohio, the policyholders there have never heard of or thought of a Flood Insurance policy. They are drawing money out of an account without having put any resources in. We have some challenges that we should identify and understand and i appreciate that every Insurance Company is wrestling with today. We think that states like california and florida, two things come to mind. In one state you have a burdensome marketplace that is impressive. It drives business apps. There Insurance Companies that are fleeing the state of california. Every other business i can find another place to go deems to be looking for a different market. Florida, part of the challenge that we see is the Regulatory Environment is challenging. Certainly, the master disasters 9 of the homeowner policies in the country, represent about 79 of Homeowner Insurance lawsuit. Over the last decade, companies in florida have paid out 51 billion, however, 71 of that goes to attorney fees. Something is broken in the market. It is not the homeowner that is receiving the lion share of the resources. It is the lawyers because of the challenges in a broken state as it relates to the environment that is apparent, obvious and clear in florida. Whether it is california or florida, we need to understand, holistically, the challenges that these Insurance Companies face. I would love to hear from the experts today solutions, opportunities to recalibrate markets. For us to have a panoramic view of how to keep Insurance Companies viable in these markets. Without any question, homeowners, today are desperately looking for opportunities to afford the coverage they think the average premium for a house, 1700 for homeowners for the same policy in florida it is 6000. If that is the case, it is not simply a case of race officially based on the probable maximum loss of the Natural Disaster. It has to do with the 51 billion paid to attorneys that have to be factored into the new definition of race efficiency that will be really hard to meet if that environment does not change. We met tana, senator scott. I will introduce todays witnesses. Doug heller is a member of the treasury department. The executive committee of California Coalition of against insurance fraud, heller, welcome. Executive Vice President external affairs and Strategic Partnerships at national Church Residents, the largest provided of senior housing. She serves as chair of the board of directors for the stewards of formal housing for the future, a member of the board of directors for the corporation. Supportive housing and a pass for more of the sustainable, affordable and Housing Management association. Noris, welcome. Jerry three at no he served as director of Search Research in multiple roles in the ig welcome. Mr. Heller, please begin. Good morning, mr. Chairman and centers. I am doug heller. There is several forces creating the property insurance and crisis in many parts of the country. I will highlight what consumers are dealing with, the underlying driving of crisis and thoughtout government, insurers and Property Owners can Work Together to reduce the cost, improve coverage and build safer homes and more resilient communities. In 2022 americans spent about 125 billion for Home Insurance. It is about 40 faster than inflation since 2017. We hear from many around the country paying upwards of 500 per month just for the basic Home Insurance. Add more if they need to and if they need to buy a separate file, earthquake or windstorm policy. Regions exposed to the worst climate risk are being hit hard in this market. This is a national problem. In fact, some of the highest price are paid by resnick of the midwest who are facing tornado and hail risk. The neighborhoods most vulnerable to climate disasters are often home to communities of color and low income americans amplifying the crisis for them. It is not just geography targeting these communities. In all but a few states, insurers penalize homeowners if they dont have a great credit score. Even if they had never filed a claim for this disproportionate harms lower income folks, people of color and rural american adding more pressure on the premiums that are boiling over due to Climate Change. The second part of the crisis is the Insurance Companies deciding to walk away from lungs or communities and some states entirely. Since every one of the mortgage is required to maintain coverage and because people want protection for their most vital asset, this is a scary situation. What makes people so angry is that the insurers for years, who are the presumed experts, they have told them that their neighborhood is fine and insurable. They always collected the premium. For companies to take the chips off the table without warning and walk away is unacceptable. Especially after the injury resisted calls for climate risk analysis for years. As a result, we are seeing many more people forced into the state insurance providers as a last resort, would sell a high price policy with barebones coverage. Or when people cannot make payments they being forced placed into expensive coverage by their Mortgage Company and this we are hearing more and more, people simply cannot afford to own a home because they cannot get insurance. The third problem is the hollowing of the coverage that people cant afford. Rather than working in partnership with their policyholders and committees to reduce the risk of loss due to climate disasters, Insurance Companies are selling policies with less rebuilding benefit, more exclusions and higher deductibles companies are reducing their own risk, sure. That does not change the actual cost of disaster risk. It transit back to homeowners, renters, farmers and other consumers. Why is this happening . There are two drivers of the crisis. First, the reality of worsening disasters is undeniable. Tackling this requires a collaborative effort to reduce the risk that stems from Climate Change by investing in safer homes, buildings and more well defended and resilient communities. This involves better data collection, expanded public support of Infrastructure Investment and more grants for individual homeowners and building owners to harden their homes. When Properties Owners invest in loss mitigation, they should be promise access to coverage and relief on premiums. Also, this discussion must include issues a property developer, Affordable Housing and equity as we try to adapt to climate risk if we dont take on the larger question, then Insurance Companies will be the one left in charge of venues and housing policy through their underwriting decisions. The second key driver of this Current Crisis is the exploding prices in the unregulated global reInsurance Market. It is what the property Insurance Companies to hedge their funds. Prices are up 35 since january alone. If insurers can get that reinsurance that they seek. We need a meaningful Public Private partnership to address this failure. The way forward is for the federal government to provide a catastrophe reinsurance backstop just as we did with terrorism. In exchange for insurers offering a meaningful insurance product. One without holes and one that covers all major perils. In capping the client rest this weight the reinsurance provide needed certainty to insurers on their probable maximum loss. To conclude, by prioritizing their own exposure to Climate Change rather than reducing actual risk of loss, insurers have left American Consumers in a bind that calls to this hearing today. Effectively addressing this problems them as a holistic approach to climate risk and property insurability. It requires a focus on strategies that reduce the damage done by Climate Change, strengthen communities and use innovative Public Private partnerships to great Insurance Markets that will yield affordable and quality coverage to americans as we confront Climate Change together. We have opportunities in question, i would love to talk about senator scotts concerns about california and florida and make sure we address details but for now i will thank the committee for having me here and conclude there. Miss norris, welcome. I would like to thank you for this opportunity to speak about the challenges and the property Insurance Market and how this is impacting the multifamily sector, especially Affordable Housing. For over 60 years, National Church residences has provided housing and healthcare to older adults. We currently provide affordable rental homes for more than 20,000 low income seniors in 23 states. My remarks largely, today, reflect those of a growing coalition of multifamily housing stakeholders concerned by the trends in the Insurance Industry and the impact they have on affordable rental housing and the people who live in those homes. I am proud to be associated with several organizations as currently mentioned, including stewards of Affordable Housing for the future, where im currently serving as board chair. National Affordable Housing Management Association where i chair at the Affairs Committee and the National Multifamily Housing Council, where we are a member. These groups along with many other house associations recently created a task force focused on finding solutions to the current Insurance Market challenges so that Housing Providers can meet longterm Housing Needs for our residents. It is with this lens that i would like to share what we know about the property insurance trends and the negative impact it is having on the housing supply and affordability. Property insurance rates in the u. S. Have increased for 22 consecutive quarters. In just the past three years Housing Providers have reported annual premium increases ranging from 30 to 100 . That is for affordable rental housing. At National Church residences, we have seen our property and Casualty Insurance costco 400 increased in six years. We are also seeing reduce coverage. Minimum deductibles on property level policies have increased from 10,000 to 25,000 and up to 100,000, which is the option we had to take this year. In addition to the risk increases, these high deductibles can conflict with financial requirements. To avoid defaulting on financing, Housing Providers have to take additional policies, create layered coverages, all which at cost. Even developers and owners with very large portfolios like ours have little Bargaining Power in todays industry. The pressures created by these increases unpack our residence too. Increased insurance costs result in increased rents. In market rate housing and Affordable Housing communities. Continued rising cost may also lead to the reduction in services to our residents, deferred repairs and threats to long stained ability sustainability. High insurance costs are also hindering solutions to the Affordable Housing crisis, rising insurance costs means lower Net Operating Income to support debt or equity returns. If you cannot borrow as much or attract less investment, it becomes even more difficult to finance the construction and preservation of the current Affordable Housing communities. We are seeing the volatility of the Insurance Market being driven by three key issues, the unprecedented frequency of Natural Disasters. The impact of inflation on replacement value methodology. Finally, on the Insurance Market capacity and policy limitations. Many insurers have simply ceased to underwrite multifamily casually policies nationwide or in certain markets prone to Natural Disasters like the gulf coast states of florida and louisiana. I have detailed more information in my written testimony though my messages this we must act now. Our country has a shortage now of 7. 3 million Homes Affordable to low income people. We cannot afford to jeopardize existing housing or slow the creation of new ones. Both shortterm and longterm policy solutions are needed. In the short term, hud and other federal agencies can provide funding for affordable rental homes. They must rethink existing insurance requirements. And provide increased flexibility and funding to Property Owners to account for the realworld challenges we are facing. In the longterm, investments in Climate Resilience and the greater level of intervention by the federal government and the Insurance Markets are necessary given the current market failures. Thank you for the opportunity to speak today and for your efforts to explore and address these significant insurance challenges. We stand ready to work with you to further these efforts. Thank you. Two, mr. Norris. Mr. Theodorou, thank you. Chairman brown, members of the committee, thank you for holding todays hearing and invitation to testify. Todays hearing is timely. Consumers and states with ailing Insurance Market struggle to secure Homeowners Insurance within budget availability and affordability concerns are particularly acute in california and florida. Symptoms of the element include ensure insolvencies, insurers ceasing to do business or positing new business, rising premiums, large Natural Disasters, hit hilary or idalia. It is a miracle no lives were lost let us be grateful for that. California and florida markets are not all gloom and doom. Before the good news let us look at the temperature of the broader market. To maintain that it has been depleted. In 2022 the primary Insurance Industry had a slight underwriting loss for every one dollar in premium that it took in and it paid out a dollar, two cents in losses and expenses. Investment income offset the underwriting loss contributing to a positive 4 return. According to economist thomas so , competition does a much more effective job in government at protecting consumers. The Insurance Industry with over 2600 insurers is highly competitive. Chairman brown, Ranking Member stott scott. Your states are among the most competitive states, especially south carolina. It is number four. Someone is doing something right there. States residual markets are another window into insurance competitiveness. Residual markets are state mandated insurers of last resort with insurance is unavailable in the standard market. California and florida large residual markets are unhealthy symptoms. Insurance market and loss exposures vary across states. Maine is the least catastrophe prone whereas california is about to earthquake, wildfire, mudslide, atmospheric rivers, even typhoons. One would expect property Insurance Premiums in california to be higher than in less catastrophe prone states but they are not. Homeowners insurance and preemies in tennessee and south dakota are about equivalent to californias. Even though californias risk and can costs are higher. They go back to proposition 103 in 1988. Proposition 103 made california the only state to introduce public interveners, who can challenge rate increase request above 7 . This requires the regulator to address insurance rate change request within 60 days. The reality is that the 60 day rule must be waived before action is taken by the regulator print resulting in delays of a year or more this straitjacket prevents insurers from charging riskadjusted rates. The result is close to 20 insurers positing their business or not renewing policies. Proposition 103 as a form of price control. The academic literature finds that price controls do not work in california demonstrate best friend more way the regulator handicaps insurers is pipe riveting in sugars insurers by factoring cost into risk modeling this is like forbidding a donut maker to change the price of its donuts irrespective of flour and sugar cost. In contrast, the price controls , floridas florida troubles were driven by excessive litigation. As we just heard, for years florida had the dubious distinction of being home to 79 of the Homeowner Insurance litigation. Despite having only 9 of the countrys homeowner policies. What is the good news . In the spring the California Assembly and senate held productive bipartisan information hearings on climate models. And in florida, comprehensive reform was signed into law. What is more, several new companies with fresh capital have announced entering florida one just yesterday. Going forward, californias auspicious tail winds of change should continue and florida should maintain its resolve and put its history of Lawsuit Abuse in the rearview mirror. On that happy note, thank you for holding todays hearing. Thank you for your consideration of my views i look forward to your questions. Thank you, mr. Theodorou. Thank you for that. Mr. Heller, you cannot open a new space for up without seeing the stories of homeowners facing skyrocketing insurance rates with less coverage and higher deductibles and not being able to find Assurant Assurant insurance. Why are so many people across the country suddenly being priced out of the homeowners Insurance Market . Thank you, senator brown. There are a few reasons. The first reason we have to acknowledge is that Climate Change is exactly exacerbating the cost of Risk Transfer. It is increasing the severity and frequency of disasters. You mentioned example, 15 1 million events this year alone. The most severe incidents were in texas but we talked about california and florida. Climate change is a national concern. It is affecting Insurance Markets everywhere. The unregulated Global Market is number two and it is a driver here. The increase premiums over the past two years put the rate online index at the highest in history of the index, which is been calculated since 1990. That Risk Transfer is also too expensive. There has been adequate oversight of state Insurance Markets around the country. And terrible rules that require some of the public sure is a last resort, this is love florida and louisiana to charge customers more than the actually indicated rate. That makes no sense. Why are making last resort insurers charge more than they need to charge to provide coverage finally, there is a specific pain point for lower income americans because they dont have great credit find themselves seeing 40 , 60 , 80 spikes even without claims. It is a confluence of these difficult issues. Thank you. I hope we can get agreement or acknowledgment from everyone on this committee of both parties of the existence of Climate Change and the severity and the huge cost. Thank you. Ms. Norris, weve heard arguments that Consumer Protections at the state level lead insurers to stop writing Homeowner Insurance policies in certain states. But the insurance multifamily Property Owners by that usually does not have the kind of protections you know and the oversight that a homeowners policy insurance what how does the multifamily policies include different from the coverage a homeowner would buy, number one. Two, are you seeing insurers offer multifamily coverage across the country . Thank you, mentors senator brown. We want to highlight what was already mentioned about the impact of Climate Change to your point. Are three highest claims we have had in our history have happened over the last two years one was from Hurricane Ida in august of 2021. 6 1 2 Million Dollars for our organization. Hurricane ian, which hit a single property in florida and required us to vacate the property for six months and rebuild it at 13 million. And a winter storm elliott. It hit 44 of our communities. It is a really challenging time to be providing Affordable Housing. We see in the Insurance Market, our insurance is covered at a national level. We work with carriers that go across state lines. We are seeing fewer and fewer options available for us. Our previous renewal, we had four carriers that worked with us on property and casualty. Three of those walked away. They left us with a single carrier and a take it or leave it on the premiums. We went thank you. I want to thank you for raising concerns around nonprofits having difficulty finding affordable property Insurance Coverage. I appreciate that. I have long raised similar concerns including the last years insurance hearing. I am hoping we can find a resolution. Mr. Heller, you noted that raising insurance rates, reducing coverage dont reduce respite it reduces risk for the insurer and shifted onto the homeowner. What can we do to reduce risk so we can bring down costs and make homeowners and renters property safer . Thank you. There are several things. We are doing, in some ways, a lot of this work with building resilient infrastructure with the brics program and fema. There is new data release about where we need to invest most aggressively to provide the most return on the impish structure investments around 500 different census tracts in the country. We need to take the front end of the solution as seriously as we have taken the back and by having fema emergency funds after a disaster. That is what we need to do. Put our money up front. One thing that can be done simply, senator feinstein has bills that would take grants to homeowners taxfree for home hardening. That is something we could do. I know in California Earthquake Authority wants to give money out to people to strengthen their homes but people are going to bear the tax burden of that so the money is not free. It will not help them rebuild. We need to make those investments on the front and but if we protect homes of the dollar, we dont have to rebuild with emergency funds with five, six or seven dollars. Thank you, my time has expired. Ms. Norris, i want to offer knowing that i can be difficult for nonprofit operators to access resources for mitigation in ways we can Work Together. Senator scott. Thank you, mr. Chairman. Mr. Theodorou, he said something earlier will make sure that was understood. If the Company Brings in a dollar in premium but pays out 1. 02 in losses, that is probably a bad thing. That is right. The only way you make that up is by the roi on your investment between the time you bring in and the time you pay it out given opportunity to invest the resources. If you invest them in a good market, then you can stay afloat. You have that good market, like todays market, we have a 70 inflationary act on it on all the supplies, it makes it more difficult to get that kind of roi. That is right, especially following the long period of Interest Rates were Investment Income was lower. The contribution from Investment Income was depressed and did not contribute enough to bring the combined ratio below 100 . Correct. Two, repetitive losses but we just heard about rebuilding, rebuilding, rebuilding. National Flood Insurance program, 1 of losses that occur are repetitive losses. They count for about 30 of the payout from the national Flood Insurance program. If you keep building in the same area where there is a disaster after disaster, after disaster but the chances are pretty good you will pay more out. That is right. There needs to be incentives for better behavior for the national Flood Insurance program. Now, they are trying to disincentive eyes these repetitive and severely imperative loss problems by having 25 increase if you have these repeated events. Send the right signals and people will respond by harding and taking preventive measures. Increasing resiliency. Perhaps the federal government is not the answer to what local communities need to do in making decisions around whether or not to rebuild the property and the place. Youve had multiple losses to the same property based on the same basic set of circumstances that come through a community. That is right. The federal government has not had a good history of involvement in insurance. You mentioned the national Flood Insurance program, which has led tens of billions of red ink. We have the subsidies but dont encourage affirming of the right crops and in the right area. The Insurance Industry, as you know, is tremendously complex. Simple in principle but in the execution there is administration and policy distribution, actuarial and a dozen other functions. The federal government has no business trying to create Insurance Companies. It is simply not feasible. Perhaps one of the reasons why we should thank the lord for the mccarrick and ferguson act of 1955 that made our insurance estate based system, the structure has produce highly competitive, fair market all across this country. Frankly, it sets a global standard for is an accurate statement . That is right. Efforts in the past that have followed the Insurance Market to create a federal backstop or to provide government subsidized reinsurance have not been successful. They have not taken off because it is not feasible. In 2007, a couple years after katrina, katrina, rita wilma. The economic a cea talked about the ways in which that would not be feasible. Conger miss charlie crist, the governor in florida. There was a Kevin Mahoney bill for a number bills have been introduced with a kneejerk reaction. They are having strings. Let us send the federal government into fix it. Does not have a history of working then and it wont happen now. Sounds like to me youve already answered my first question which is about the fact that fellow taxpayers subsidizing state insurance challenges is not a recipe for longterm success. That is right. Subsidies and cross subsidies were the poor subsidize the rich are both bad. Simple, sounds like to me. Could you speak to why the Insurance Markets operate and lag behind the rest of the economy and why we are seeing increased prices now . One of the questions im trying to narrow in on is the important back over the last couple he years received in inflationary impact that led to increases with the new market with you have 5. 25 higher to be embedded into the Insurance Company model. That does cost something. It does take a couple of years before it earned and. As we have seen with inflation Building Material cost rose by 19 in 2021, a percent in 2022. Copper prices and other prices of lumber and metal that is needed and rebuilding homes have gone up it takes time. The loss may happen towards the end of the policy period. And then for the repairs are more expensive than before. It takes one or two years for those impacts to fit in. There is three main drivers of some of the strength. Economic inflation, reinsurance cost and natural catastrophes. Thank god the right of the inflationary factor. , sir. Two senator reed of rhode island is recognized. Mr. Heller, if Congress Acts by september 30th the national Flood Insurance program does not exist. Can you tell us what the consequences of that will be . Please. Americans right now are facing these unprecedented catastrophes. We just saw pennsylvania and new york hit by flooding. The private market has not been there to provide insurance for homeowners. It has been stripped out of the homeowner policies. We need a backstop so there is Flood Insurance. I will say only 12 of americans actually buy Flood Insurance. We are desperately under insured for this coverage. It is important to note that senator scott is right, the Flood Insurance program has created has not been a success. We need it there because we dont have it then we have nothing. One of the reasons that a federal reinsurance would be so valuable, like we did with tria , we we have this exposure by bring a federal reinsurance, we could push the Flood Insurance product back into Homeowner Insurance and back into the state and the private markets. I think is exactly what senator scott was calling for. The private insurers could be protected when they sell Flood Insurance knowing that the worstcase scenario was taken off the hook. Until we do that, until we push it out of the federal government and back into homeowner policies that we buy, we need to have a Flood Insurance program in the federal government. Thank you. There is also another approach, which would be mitigation. In my state were working with the National Resource conservation service, which is under the United States department of agriculture. We are actually buying homes in areas that are flood prone. That is a National Participation of floodwaters from working with the corps of engineers. My conclusion is we probably should do a lot more preemptive work with respect to resilience. Senator reed, you are exactly right. Our first, second and third weeks that we should be doing is reduce the rest for me have a knowledge of data. Whether it is with or with windstorms and fire, we know how important better roofing is pretty this stuff can be done. We have to make the commitment rather than just shifting the decks on the titanic by saying, Insurance Companys will not take that risk higher deductible, less coverage for homeowners, renters and prep we are seeing the risk instead. There is a discussion of the wear for all with many Insurance Companies. In rhode island, our assembly passed a law that requires a notification by Insurance Companies prior to their departure. That gives the state the opportunity to work with the company to see if there is a ways they can diversify or do other things. Is that an approach that is worth emulating elsewhere . That is exactly right. What you are doing in rhode island makes a lot of sense. We hear from homeowners all the time. Why am i settling until i cannot be in shortterm they have always insured me. We need to have a transition process for insurance cannot take a maze for decades and that we realize it is Climate Change and we are out. It is important you have a transition process. Thank you very much for tonic, mr. Chairman. , senator reed. Is centered around the south dakota is recognized. Thank you, mr. Chairman. Mr. Theodorou. Im curious how long have you have studied or participated in the Insurance Market reviews . Ive been analyst of the industry for 15 years, 12 years in Insurance Research and Asset Management firms in hartford every last three years leading the Insurance Research at our street. Prior to that i was in the industry. I worked in the industry as an underwriter and in other capacities. I am curious. I was first licensed in the insurance i was first licensed to sell insurance as an agent in south dakota in 1978 for Homeowners Insurance. And carry that license all the way up until 2015 when i was elected to the United States senate. Just curious, during that time period, you learn what is in a policy and not in a policy. Under homeowners policy there was antwo form, and transferred into an age of reform. You have coverage with exceptions builtin. I was trying to think back, i dont believe i have seen a homeowners policy which was of a liberal with a Flood Insurance as part of the original perils. Are you aware of of Flood Insurance or a homeowners policy that start out under the basic forms with Flood Insurance . No. Flood has been excluded for several decades prior to the 1970s when you began. The 3, which is most common form excludes flood national Flood Insurance program. It has been the principal provider of Flood Insurance. The good news is that the private market is growing. That brings good news in here. Now, there is 77 private companies that are writing 31 of Flood Insurance business compared to 12. 6 , just a few years ago. The private market is starting to come in, especially since the new rating with ideology is been introduced. We have the national Flood Insurance program which is a backstop for Flood Insurance across the country. I think it is very important that we get it renewed. I think it is important aspect for a lot of areas, particularly the risk is high. The vast majority of americans simply look at their policy and say, i dont need Flood Insurance because i am not in a an area which is prone to flood. The mortgagee does not require them to buy it. What you end up with is, in many cases, the folks who would buy it are the people that think they may have a loss are being required because the federal government believes they may be in a Flood Program or in a flood zone. Correct . That is right. That leads to two problems for you have adverse selection, which means the policies that are written are the one with the highest risk. There next to a river or creek or on the coast. And you have low penetration. There are 70 million homes in the United States and only 5 million carry Flood Insurance. Is estimated over 80 of homes in the United States are exposed to flood. As we have seen the last couple years, we have these atmospheric rivers, these rainstorms that are horrific and violent. They are removed from bodies of water. What exposure is there. The market is underpenetrated. There is an adverse selection. We represented dozens of Insurance Companies and the agencies that i have had an ownership interest in and south dakota. I found they want to be in the market and be writing a lot of Insurance Coverages. They did not want to write one or two, they want a lot. They made a profit if they had a larger part of the market itself. The vast majority of insurance carriers would love to write for a particular mind of coverage if they thought that they could make a profit. Fair enough . That is absolutely right for the exodus from california, as Ranking Members scott said, is law economics. If you are losing money, theres no reason to go on doing that in this case, if we recognize that there are certain areas around the country where carries have said , we cannot make a profit there. We are on our way out. Mitigating circumstances, Climate Change is part of it. Being able to appropriately increase your rates for the risk of some of those Severe Weather events. If they are not able to increase rates based upon that, then they look at and say, we are for profit organization. We cannot make a profit. There seems to be a movement where people think that we should spread that out to taxpayers to pick up the losses and keep the rates low. Is that a Fair Assessment of what some folks thinks is a better alternative . That would socialize the risk and penalize people unnecessarily and allow people with high risk to go on having the risk. Thank you. Senator menendez from new jersey is recognize. What happened with the private market makes an amount for insurance that is almost unfeasible to be able for the homeowner to afford . They choose not to have property flooding insurance. And the consequences of that when we have the storms and the wildfires or the flooding that ends up the federal government comes in and helps the state. Is it not better to have a system that is somewhat insured . The affordability, on affordability issue can be dealt with with means testing, if there is rail on affordability. If the home cannot be moved then there can be some form of means testing. The good news is that with the new rating methodology, 20 of policies have seen a decrease in the premium that they have an enormous number of people have left the national Flood Insurance program as a result of 2. 0. Let me ask this, decades of inaction, particularly of Climate Change, is property the insurance to buckle to provide returns for shareholders and sell a product the policyholders can actually afford. As businesses, insurers have an obligation to their shareholders to make a profit. As policymakers, we have an obligation to correct for market layers when there is a compelling Public Policy reason to do so. Here, it is to ensure families can afford necessary coverage and prevent collapses in our local housing market. Between wildfire, droughts and flooding, the reality is that there is nowhere left in the country that is being challenged by a Natural Disaster. Ms. Noris, in my state you have seen trees in bric, south river and elizabeth that are historically challenged with letting. What would it mean by the way, those communities are not wealthy by any stretch of the imagination when it mean for costs for seniors at home owning , in terms of Flood Insurance and it becomes bravely expensive . Thank you for the question. I assume youre talking about in our multifamily communities, are Affordable Housing communities that we have in your state. Correct . Yes. In new jersey along with all of our other communities in other states, where we provide Affordable Housing, the idea of us as the owner being able to not be insured puts it tremendous risk not only on us but on a residence mac as well. At some point, if we were not able to get insurance then it would leave our building and a residence mac completely exposed. We had, as i mentioned earlier, we had our highest three claims that have happened in the last two years. If we did not have insurance, those apartments would have been completely unable to be reoccupied. So people would be out . Mac as a matter fact in one of our commutes they were out for six months my review about. Without insurance we would not have been rebuilding. Senior communities like the ones your are talking about, a part of the reason i introduce this bipartisan act was the legislation would ensure affordable while providing generational investments in mitigation and risk map to tackle longterm challenges of flooding. Nearly 11 years ago, we face the worst Natural Disaster in our states history, super storm stanley. It destroyed homes, flooded entire communities in the months and years following hurricane sandy, new jersey made a disaster in getting an honest claims check for their Flood Insurance policy. These are people who played a lifetime and never made a claim. All the settlement may make a claim through the manipulation of engineering reports and utilizing obscure loopholes, Insurance Companies acting as contractors for fema systematically lowballed policyholders. I subsequently led a charge for fema to establish the sandy claims review, which resulted in 260 million more paid out to families that were previous did not but it seems to me an old dog does not seem to learn new tricks. What are you seeing in florida for Homeowners Insurance policyholders in the aftermath . It has been terrible for so many home owners after ian we have seen the evidence of Insurance Companies that were literally changing their own adjusters changing their own adjusters claims values and this is straight fraud from Insurance Companies and we need to prosecute those fraudsters. How regulators arent coming in in real time and taking the data is leaving homeowners expose after they paid their escalating premiums and when they need them the most, the companies turn their backs on them. My legislation stops the bad actors from taking place. One final question, mr. Chairman, mr. Heller , is there a regulator to submit changes to . The nfip goes through the process but we have seen 2. 0 with these massive rate increases for a lot of people and it is quite frustrating. We need to make sure the rates that come out are fair and distributed fairly. I appreciate the means to make affordable rates but we have not seen an appropriate we have seen real problems at the nfip. We have lost 150,000 policyholders. By their own admission, fema says we will lose 1 million policyholders by the end of the decade because of the premium increases. That is not a way to solidify an Insurance Program. Mr. Chair . Thank you, senator menendez. Unanimous consent to submit one opinion piece and one article related to some of the root causes of california and floridas problems . Objection. Mr. Theodorou, i want to go back to a very important number. For every dollar premium taken in, it is 1. 02, is that correct . That is right. The premiums were necessary for risk and they were about two cents on the dollar that year . Thats right. They have investments and have returns to make up those losses. Would it be fair to say that the insurers who are paying out more than they are taking in and premiums hand over fist are greedy . Based on the data . The data says they are not. The 2022, there was a 4 profit margin because of the 600 basis points and longterm insurance history has got a return of 6. 5 . Companies that are publicly traded have 14 to 15 . The Insurance Industry is a much smaller margin than other industries. A part of what we could be doing here is considering National Policy that is trying to address some of the shortcomings in my opinion that exist as past policies. In california, you mentioned prop 103. They are addressing some of the problems in florida and im glad they got on board. We did that 10 years ago. But there seems to be a suggestion that we just dont have enough regulations in place at the state or federal level to fix this problem. Do you think there are glaring gaps in regulatory measures we should take to fix this problem . No, i dont. The push to introduce some sort of federal backstop or support however well intentioned would backfire because contrary to popular opinion, the Insurance Industry is not on its knees. It is not collapsing. It is in the bills and is business. Inflation and Interest Rates are beyond control but in the mutual Insurance Industry, companies have been doing business for 200 years. You cant be greedy for 200 years and not lose all of their business. They have to be doing something right and theyve been through storms before. Is there a strategy to shrink the market . Only in states they cant make a dollar. Why on earth would a major exit california and florida . They cant make the numbers work. They cant sustain it and we know why. Part of what we have to examine to the extent the federal government should shutdown is examine the policy decisions made at the state level that are creating structural problems. I mean, i dont know how we actually get and address miss norris , you listed three areas that need to be addressed. We need to address all of them. I dont think we will accomplish that through a centralized more burdensome construct coming out of washington. There is a way to fix this problem and i dont think it is with a big federal government solution to the problem. I mean, you can draw axes between policy decisions made and exiting the market. I do like what you said about affordability. I think we should find people seeking insurance. They prefer not to be on the property anymore. We fell with fema, with resiliency measures, with movement. Weve had 53 tropical cyclones impact North Carolina over the past 20 years. We average landfall in North Carolina every four years. I have been dealing with this for the 16 years ive been in elected office, but i dont believe the mindset that some of my colleagues have here is this can be fixed in washington. It needs to be addressed on a statebystate basis. We need Flood Insurance and we need to address these problems but it will not come from compelling the private sector business to serve a market that cannot be sustained with all the constraints they have. I did have one final question. Mr. Heller, i want to confirm what you said, and mr. Theodorou , i would like your opinion. You said credit rate alone can increase the premium by 80 . Yes, sir. We have seen premiums jump for people with low credit but no claims history. Low personal credit history. Up to 100 , a doubling of their premium. Mr. Theodorou, could you believe explain to me why you believe it should include a credit rate . The credit score is found to be correlated with losses. The industry though, i think, or from what i know in my experience as an underwriter, it doesnt overprice policies because of credit scores. If it did, Competitive Forces would come in. Right. If it wasnt relatively correlated to the risk, it wouldnt be part of the process . Yes. Thank you. The senator from pennsylvania is recognized. Thank you very much, mr. Chairman. Mr. Heller , can you remind me what happens when in pennsylvania a family cannot get Insurance Coverage . Thank you, senator fetterman. People cant have their home or if they are a renter, they dont have the protection they need if disaster strikes. They dont have coverage for the loss of use of the building if it comes down but we are seeing some people who cant make their premiums, they are being forced into a policy by their Mortgage Company where their Mortgage Rate will go up to buy coverage for the lender but that provides no coverage for them, so we see people who cant afford their coverage paying the Mortgage Company anyway but they have no protection afterwards. One way or the other, you are uninsured and losing your home or force placed into coverage that doesnt protect you, or you dont have the coverage as a renter for what you need when disaster strikes. This has a downstream effect that is catastrophic for the individual families whether it is a home fire or a flood or windstorm. Is there ever a good reason to penalize buildings solely based on their zip code . You know, this is one of the problems. We have a history of redlining and we see it in the home Insurance Market as we saw in the homeowners market dating back to the 1930s. When we have people who build safe homes and safe buildings wherever they are, we should give them the credit for that. Gave the insurance to them. We want to talk about getting away from dangerous risk zones but when you say climate disasters when people try to build in communities that because of zip code and redlining history cant get insurance, we are giving people no options, especially for Affordable Housing and it makes no sense to have this high influenza of zip codes on the Insurance Market. It is just devastating. What is the financial benefit of proactive landuse and planning . Well, it means lowering the cost of risk and insurance. Safer homes and safer communities. Pennsylvania has done a lot of work investing in that front and either we protect homes and communities before disaster strikes or rebuild with taxpayer costs afterwards so the protection not only is good for the communities and families, for the Insurance Companies, there is less risk to bear and they can charge lower premiums. Back to the chair. Thanks, senator fetterman. Senator kennedy . Oh, im sorry. Senator vance from ohio. We appreciate your time. I want to welcome miss norris , who graduated in my neck of the woods in the state of ohio. I appreciate you all being here. I want to focus on the california model and whether things are fundamentally broken about the way california regulates its Insurance Marketing. If you step back, and we all agree we want people to be able to afford Home Insurance with however much money they make, there are two ways to do that. One is to help low income people afford insurance in a market that is regularly regulated and operates effectively. Another option is to regulate the market such that it cant actually function properly and doesnt provide the benefits insurance is supposed to provide and i worry california has gone down that pathway. We risk learning the wrong questions. I want to direct my questions first to mr. Theodorou. Could you maybe just explain prop 103 and what it changed about Insurance Regulations in the state of california . In 1988, proposition 103 the ballot proposal was passed by a slim margin and it gave a 20 rebate to automobile insurers and introduced the intervenor process where parties could argue for rate decreases and established a provision that indicated that the Insurance Department would respond within 60 days, something that hasnt happened. Those are the three main things. In the prior approval of rates. Am i right that the Regulatory Regime has come out of prop 103 is very backwards. In other words, insurers are focused on casualty loss and so forth that has happened in the past as opposed to forward modeling for future risk . Those were two statutes introduced, one that prevents them from using the recent experience of catastrophes in the last six years, and another statute that prevents the use of incorporating reinsurance cost. Reinsurance as part of the cost of Insurance Companies, so those are two other provisions in addition to the prop 103 great. Thank you. Mr. Heller, i will direct this question to you and if you want to say something, feel free to do so if we have the time. One of the arguments ive heard the reason insurance rates are so high in california is because of the threat of Climate Change. Places closer to the ocean theoretically would be more at risk to climate disasters. My question here is how could we credibly argue that climate risk is driving californias Insurance Market when there are more looking backwards, not forwards . And second, you see all types of Casualty Insurance rates going up. It is one thing to say property insurance goes up. It is harder to swallow the idea Auto Insurance would go up in response to climate risk, yet that is exactly what we are seeing in california. Thank you, senator vance. I appreciate the opportunity to focus in. I would like to start by noting there has been real misinformation because from 2019 to the present, california and i really want you to hear this because it is really important california has been one of the most profitable Homeowners Insurance in the nation. When we say they are leaving, they are not leaving, they are cutting back on business but not because they havent been able to make the return they asked for. They have actually done better in california and since 2021, they have received 95 of the rate increases they requested. In the regulatory system, that does work but allows public input and that has been so critical. Is that profitability, mr. Heller because they left the markets and focused on the most profitable markets . No, profitability because california has given them the rate they need and invested 2 billion in wildfire prevention and we have done the work in california and used the regulatory protections for consumers to ensure prices were escalating as they needed to be, but also maintaining the protections. I wanted to answer the other question, which was this pass through of reinsurance costs. ReInsurance Markets are the highest theyve been in 30 years. California does allow Insurance Companies. There is no statute that prevents them from buying reinsurance. They cannot pass that to their consumers. For the states that allow the pastor like florida, louisiana, california colorado, they are seeing withdrawals from the market and seeing companies underwriting out served communities. The path to reinsurance allows the Insurance Companies to be freed from that market but does not protect consumers from withdrawals happening everywhere irrespective of this pass through. Mr. Chair, could you address the climate question in relation to auto versus property insurance rates . Climate does impact auto to a degree on the comprehensive policies. So, first of all, i disagree with the fundamental point you said about climate being a coastal issue. The issues in the midwest are linked to Climate Change and Climate Change is hitting everywhere so i dont want to mistake this as a coastal issue around the country. It is a national issue. Sure, but california is more at risk for climate disasters than the state of ohio. Ohio is a great place to be. Absolutely. The auto Insurance Market in california is not different than the auto Insurance Market we are seeing across the country. Auto insurance in california because of the protections from prop 103 prevented Insurance Companies from getting as much of a windfall during the pandemic when we were at home not driving. Some companies charged as if it was 2019 even though we were stuck at home and there have been inflationary pressures because of car repair costs that are more driven by covid, post covid, then Climate Change. We are seeing rate increases in california it as the Washington Post noted, those increases are as severe around the country. It is by no means related to the Consumer Protections of the state. Senator warren from massachusetts is recognized. Thank you, mr. Chairman. Insurance is there for Natural Disasters but Climate Change means Natural Disasters are hitting harder and more frequently than ever before and that is upending the Insurance Market and pushing insurers out of entire cities or even states. Without insurance, millions of families will be at greater risk for climate crises and as whole communities lose access to insurance the impact will be felt all the way through our economy, so lets talk about what the tools are to make some changes here. More than two years ago, President Biden issued an executive order telling the federal insurance office, whose job it is to monitor the Insurance Industry, to examine the impact of Climate Change on private insurance in the United States. So, fio would help the federal government better understand climate related Financial Risks and to assess the potential for major disruptions of private Insurance Coverage across the country. So, mr. Heller, what the data fio is proposing to collect help identify the threats to consumers and the economy from Climate Change . Would this data be useful . Thank you, senator warren. We need to understand with granular data where the industry is more exposed, where coverage offerings are shrinking and consumers become more exposed and how Risk Transfer has changed over time. Think deductibles, lower rebuilding costs. The pressure to keep information from getting to the public and Public Policymakers not just through fio but we have seen needing data but not getting the data. That is one of the reasons the market crisis feel so sudden because we havent been collecting data that would have given us the tools to prepare. Okay, i can tell i am talking to another data nerd. We want the numbers because its helpful in helping assess risk. We need the information. The president has asked for the information. Why dont we have it . Its been more than two years now. It turns out the state regulators are pushing back on this. They say collecting this information is unnecessary. I will quote them here. Ill advised and burdensome. They have claimed this data call would threaten socalled existing efforts insurers have made to mitigate the risk of Climate Change on policyholders. They are even saying the fio and the Biden Administration is strongarming insurers and regulators to adopt climate risk mitigating strategies and this could lead to higher Compliance Costs on insurers and higher premiums on americans. It seems to me here the insurers and regulators are going out of their way to hide information about premiums, claims, profits, and coverage. Without that information, consumers have no way of knowing if a hiked premium is justified or if it is just padding an Insurance Companys profits. So, mr. Heller, you explained why we need the data. Why are Insurance Companies resisting so hard on providing this data . What are they trying to hide . Insurance companies dont want us, the public and Public Policymakers, to understand where things stand because it allows them to do what we have seen in california, bully the regulators and policymakers. Oh, we will leave if you dont do exactly what we want. The reason fio made this request was because there was a black hole where the data needs to be where we could figure this out for ourselves and understand if it is as some are suggesting, regulatory burden, or to the Insurance Companies not to the preparation . Is it the Insurance Companies that have been shifting around their books to expose more consumers . That data call would reveal it and that is why the Insurance Companies have lobbied so hard to keep it out of our hands . I appreciate the notion. I take it, ms. Norris, you would agree that we need the data and the data are essential for making good policy and evaluating what the Insurance Companies are up to . Absolutely. Insurance companies themselves have big data oh. Big data is out there. They can decide what the premiums are. We should all be able to see the transparency. I appreciate the work you are doing here. This is just a reminder Insurance Companies have been playing every part of this game. They have underwritten fossil fuels in the prophet from the impacts of those fossil fuels on climate and when Climate Risks are rising, they are trying to hang American Families out to dry and demanding higher premiums or to get out of the market altogether. There is a lot going on here that poses real risk to our economy. We need this data and we need it now. Thank you. Thank you, mr. Chairman. Senator kennedy of louisiana is recognized. Chairman, we agreed fema administered national Flood Insurance program risk rating 2. 0 is woefully inadequate, mr. Heller . Yes. Miss norris . Maam . Yes. Jerry, since i cant say your last name . I would not say it is woefully inadequate. Okay. Imperfect as it is, does it make sense to you, mr. Heller , to allow the national Flood Insurance program to expire . No, it doesnt. Short of getting a better solution in there, we need to have that backstop and we should absolutely keep that around. We are not likely to get a better solution in a few weeks, are we . No. Miss norris, do you think it makes sense for it to allow to expire . It should be funded and perform as needed. Mr. Jerry . It should be allowed to continue and not with a short one month, two month kicking the can down the road. There needs to be a longterm reauthorization. 5 years, 10 years is in order. Right. Miss norris , if the world became Carbon Neutral by 2050, do you believe that would solve a lot of the problems of the costs of Flood Insurance and Casualty Insurance . Senator, that is a pretty loaded question. I am not a scientist, but that is a wonderful thing to think about. I would love to know we could get there. Well, i have thought about it and hopefully you have too. Since you dont want to answer my question, mr. Heller , what do you think . Itll not solve the crisis we have now but as discussed earlier we are trying to make risk plans for years in the future, so we have to begin to solve the problem in the meantime. All right, you dont think it will solve the problem . Not todays problem. We need to take how about you, mr. Jerry . It is a different issue, one to pollution and emissions. What will we do to transition from fossil fuels to renewables . If you were king for the day , mr. Jerry, tell me what you would do to fix the problem of cost of casualty Care Insurance today. I would shine a spotlight on the areas of disruption. Give me three specific things you would do. Just top line to fix the problem today, in english. Repeal proposition 103, have florida continue its reforms where it is eliminated that is two. The third is to educate the public on how insurance works. They know how it works. It is called write a check. Then you have to sell blood plasma to go to the grocery store, which you probably have to do anyway because of President Bidens inflation. Give me three things you would do, mr. Heller. One, we need to be putting money into protecting homes, making sure our levees are strong, making sure our communities okay. That is number one. Number two, build a reInsurance Program. When businesses in the commercial sector were afraid they wouldnt get terrorism insurance because of 9 11, we have created a solution. The government gets into the reinsurance business. What is number three . Lets get the regulators on the ball in the states to actually go through the data because when we look at the data coming in that is number three. The regulators on the ball. What is number four . Oh, wow. I get a fourth. I think we need to address the needs of lower to moderate income people to make sure we are not creating an Insurance Market that slices and dices people based on socioeconomic status. Let me give miss norris a chance. Mr. Chairman . Then your time expires. I can give you a chance to answer. First of all, i will affirm everything just mentioned. Number one, we need to invest in ways of being able to get our communities and our buildings resilient. Government subsidies, that is number one. Number two, create this reInsurance Program and re stabilize the market. Okay, thank you. Your time has expired. I thank you all for your testimony here i will get to it, but i want to raise some of the questions senator kennedy raised. Miss norris , thank you for pointing out seniors and low income individuals are especially vulnerable and suggesting some proposals to address that, including, as we have discussed, mitigation and resilience. I thank you as well, mr. Heller, for talking about that. I think there is agreement here that the headline from the Washington Post just a few days ago sums up the problem. The headline was home insurers cut Natural Disasters from policies as climate risk grows. Some of the largest u. S. Insurance Companies Say extreme weather has led them to end certain coverages, exclude Natural Disaster protections, and raise premiums. All three of you agree that is a problem . Absolutely. I understand, mr. Theodorou, you indicated that price caps in place in california have exacerbated the problem and clearly there is some price point at which Insurance Companies have to raise premiums to cover the costs of damage. If someone caps the price lower than that, they will exit the market. That is your point, right . That is right. It is capped at 7 . If you remove the cap, and i understand the argument, you need to choose between exiting the market and raising premiums , right . That is right. The option is to raise premiums on homeowners, including low income homeowners, right . Thats right. It hasnt been mentioned but there was a 39 increase people building in the forest of california where they are exposed to wildfires and in fort myers, florida, that is the sixth largest place for people to move to. We should have landuse policy built smart. Dont build in areas you will get hit. I was listening to your responses and a lot of the proposals, mr. Heller and miss norris, include some form of subsidy whether for resilience or i think mr. Heller, you proposed an nfip approach, is that correct . I wouldnt say an nfip approach but it could be converted to a reinsurance backstop. If i could quickly correct mr. Theodorou, there are no price caps in california. That is a falsehood to create a fake bogeyman. The average premium increase for Homeowners Insurance has been 12. 5 , not 7 . There is no rate cap. They have to justify their rates to be accountable. Anyway, i wanted to correct that. I am all for collecting the data and joining senator warren on her letter, but we all know we have a problem because we have Climate Change and it is increasingly extremity of the intensity and frequency of Natural Disasters. That obviously has a cost and so the question in my view, who is actually going to pay the cost . Right . In my view, we should look to those who have actually generated the reasons for the damage. I dont think taxpayers should have to pay for this. The market failure is actually the cost of Carbon Emissions into the atmosphere that is heating up the atmosphere and causing these Natural Disasters. I would just submit rather than ask mr. And misses taxpayer to be the ones to come forward, we adopt a proposal that i have put forward and will continue to pursue and create a polluter pays fund and ask the biggest emitters of Greenhouse Gases to cover the cost of some of this, whether it is through a system. That is a marketbased solution and deals with the market reality that is not currently captured. Of course, Consumer Federation of america would be in support of that. The Insurance Companies, of course, underwrite a lot of the fossil fuel producers in the country and they use the investments into our premium dollars to invest into those fossil fuels and make a good return on it and as they profit on the factors that drive Climate Change, they downstream the external cost to the homeowners, Property Owners that have homes through their Insurance Premiums and they make a profit on Climate Change and downstream the cost of it to consumers in our reduced coverage. It is even more on that but i would absolutely support there being a private sector or source to cover these costs so it does not flow down to individual families. Well, yes, based on responsibility, thats right. Senator, that is a great idea. Climate change, which has been coming and is now here and we are all seeing it exacerbate, if we started a simple solution 10 years ago, maybe we could have mitigated the issues here today. I would support that solution along with many other ones brought to the table today. We have to act in many, many ways to fix whats currently here right now. Thank you. The intention is noble but may miss the target because the largest emitters of fossil fuel , the companies drilling, refining, or outside of the marketplace. They have captives for the largest oil and gas companies. It could be beyond the pale of regulators because they are not regulated the same way. Just to be clear, we would be essentially capturing the fees based on pollutants. It is a marketbased solution. Thank you, mr. Chair. I would like to start by reiterating the importance of our statebased system of insurance regulation, a system that is protecting consumers for over a century. We risk undermining the very premise of this system. Rather than leveraging the expertise of state insurance regulators, treasury and fio are acting unilaterally to push the administrations climate agenda including by requesting a plethora of highly detailed information from insurers. Not only has treasury been unclear with how they intend to use this data that they collect, but the effort would be duplicative in many ways. Many states already collect similar data to help them understand the Economic Impact of Natural Disasters and weather events. Any efforts from treasury to sidestep state insurance regulators blatantly undermine congressional intent. Fio should work with and not around state insurance officials that have decades of experience assessing the market impacts of these catastrophic weather events. In this regard, we have had an active Hurricane Season and have already seen a number of named hurricanes in 2023. The frequency of such weather events has impacted the property Insurance Market. Insurance premiums, like all prices, or market signals to consumers and the property insurance space, the higher the premium indicates the existence of higher risk. As someone who lost my house and my cars and my things in a storm, i get it and i get the importance of it. I come from a state ravaged by storms, whether they be tornadoes or hurricanes alike so i understand the importance of getting this right. In response to higher Insurance Premiums, states like california have implemented overly restrictive regulations including price controls on insurers. In essence , this deprives homeowners of market signals that could steer them towards building a better, less dangerous place or encourage them to build disaster Resilient Homes. I want to get your thoughts on that statement. Mr. Is it theodorou . Theodorou. I will do my best to get that right. Do you agree with that . I agree 100 . The efforts to get more data from Insurance Companies on catastrophes is superfluous. Data is there. Data from noaa looking at the disagreement between whether there is increasing severity and frequency. We have been studying this in a publication that should come out in a few months. The fio, if we look at it, what is it statutorily supposed to do . To monitor the Insurance Industry, not to direct or manage or insert itself. In many ways, it was created when people thought the Insurance Industry was responsible for the Global Financial crisis, which it was not. The federal efforts that have been introduced however well intentioned have not been successful. If we look at the financials of the crop Insurance Program and efforts to launch the reinsurance backstops have failed going back to 1992. Lets not repeat the mistakes of the past. Absolutely. I only have a little bit of time left so i will brag on my state. We have heard a number of questions asked in a number of different solutions. I want to tell you somewhere i believe alabama has gotten it right. We have seen firsthand what active resiliency efforts look like. For instance, in alabama, weve had a program that incentivizes homeowners to fortify their roof to withstand Severe Weather. The program was in response to damage ensued by hurricane ivan and hurricane katrina. It was created to incentivize investments and more Resilient Homes and to issue policies in these storm prone communities with the goal of reducing future hurricane damage. When Hurricane Sally hit in alabama in 2020, i am proud to say the nearly 16,000 homes and buildings with fortified roofs remained intact. This resulted in lower insurance claims with less debris cleanup and allow the community to reopen and recover more swiftly. This is what effective action looks like. State officials assess an event, identify a solution, and put into practice without overreach something that works. Additionally, just last week due to the great work of governor ivey, commissioner fowler, the new Alabama Resilience Council met for the first time. The council will focus on public and private collaborations to build stronger , safer, more resilient communities. This is another great example of effective state driven solutions. I am out of time, but certainly appreciate any comments you have on the great work alabama is doing. It is my understanding louisiana has copied the program, which is a good thing but it doesnt have to be the government that provides this funding. I replaced the roof of my house, called my insurance agent, and i got a credit on my insurance. The right behavior leads to lower losses, which leads to lower premiums. In my written testimony, i pointed out the Fortify Program in alabama. I agree with jerry. Unfortunately not enough Insurance Companies are incentivizing by giving discounts or making policies available when they do invest in their homes. This is a very important piece of the effort and that is why we focus on the front end work, like in alabama, rather than cleaning up with fema money instead of insurance money and making more Resilient Homes. Let me follow up on the conversation. I absolutely believe the states have incredible data that should be utilized as well. Mr. Heller, let me touch on this as well. Nevada regulators offer expedited review for insurers who submit filings for discount to take mitigation members. What are some of the ways you can ensure courage encourage insurers to set the premiums . This is an incredibly important thing and we have worked on exactly this. By laying out really clear discounts to Homeowners Insurance company should be providing based on the science out there and we have the Insurance Institute doing a lot of great work on this front and groups like the oneida policyholders, we know when you build stronger roofs, when you clear brush, when you take these actions, you can reduce the risk and that reduces premiums. Unfortunately too companies have fallen through on giving discounts. In california, they are required to. In nevada, there are these incentives. States should be looking at whats being done in alabama because when we make ourselves safer, we reduce the risk and we reduce the cost and that is the work we should be focusing on right now instead of conversations about throwing away Consumer Protections. In nevada we have seen extreme weather happening. We got rain and flooding, flooding that has been devastating structures there particularly in southern nevada. Nevada has worked hard to build space for its communities and the u. S. Army corps of engineers have helped us in certain areas. I do agree there needs to be more opportunities and incentives to lower those premium costs in the work homeowners do. Mr. Heller, while i have you , talk about manufactured housing. In your written testimony, you noted people who live in manufactured homes pay more for lower quality Homeowners Insurance. Can you explain how insurance policies seem to fail the 28 million who live in manufactured homes . That is one of the more disastrous segments on the market. It affects older homeowners quite a bit. The policies written for manufactured homes are generally active cash value, so they depreciate the value of the home when you file a claim so you dont get everything you need to fully rebuild. They have weird exclusions. For example, the hvac systems are considered contacts. They are part of the home for rebuilding, so its harder to do that. For some people, you cant even collect a full claim if you dont rebuild in the same place. Well, if your home park doesnt reopen, you cant rebuild in the same place so you cant even use the policy you are paying for and yet manufactured homes, which the market is less competitive than the regular homeowners market, are more expensive on a per dollar basis and sometimes more expensive altogether than homeowners so it is a tough market to be someone living in a manufactured home and trying to get coverage. Particularly at a time manufactured homes are different than the manufactured homes of the past, correct . There are more people that need a roof over their heads and can provide you a level of comfort and security. In a way the Insurance Industry is trying to ensure homes from decades ago and we have done a great job making Affordable Housing through manufactured homes and yet the Insurance Products are substandard either because they want to or it is because it is all they can afford. We need to do a better job making the insurance better and regulators need to Pay Attention to these forms because they are not good enough. Miss norris , let me talk to you and stay on the Affordable Housing piece. Nevada is no different and it is something i have been working on in the state. I appreciate your testimony telling us rising insurance costs undermine not only the future of Affordable Properties but those that currently provide homes to people. Can you expand on your statement that Affordable Housing providers may be forced out of the market because of insurance and operating costs out pace allowable or feasible rents . Yes. Thank you for that question, senator. The Affordable Housing community is a regulated world, right . There are a lot of different programs of affordability but they all run on basic principles. Number one, the people who move into our communities are people who need to move into our communities. They cant make too much money. Rule two, we cant charge them too money to live there. Those are the two rules of Affordable Housing. And so, essentially whenever you have a serious situation with catastrophic increases of expenses that rise quickly, there is no way to do an adjustment of the rent, nor do we necessarily want to hear we dont want to do a dramatic increase in rent for the folks that cant afford it, but it leaves us with this situation where our expenses are crushing our operational margin, or even our ability to meet our costs. That is a real problem. The regulators often, for example, with hide, we can go and ask them for a rent increase but if an Insurance Premium which hits in the middle of the year and weve already got our rent increase, we cant ask for another rent increase. If we ask the next year, it may take them a while actually a significant amount of time to approve that rent increase. The rents cannot meet the expenses. That forces us as the owner to make really bad decisions. We have to stop doing Certain Services or differ any expense we can. Eventually it could end up saying we just cant afford to do this. It could put those properties at risk which can put at risk peoples homes. Thats like 100 people at a time or 200 people at a time so the impact on Affordable Housing is significant. Especially compared to the market. Does that make sense . It does. I think my time is up. Thank you, miss cortez masto. Nonprofit organizations are having a lot of trouble in the market, as michelle has described. You have been working on making the Risk Retention Group Available to nonprofits, alternative mechanisms. That is something we should add into the mix because it really is an opportunity to have a Market Solution to help avoid the chaos we are seeing for nonprofits. Housing developers and other nonprofits. I want to thank you for sharing on my behalf. Senators who wish to submit questions, those questions are due one week from today, thursday, september 14th. You have 45 days to respond. One other thanks to jordan harris, who will be leaving at the end of the week to take a job working on equity issues. Congratulations. This hearing is adjourned. A healthy democracy doesnt just look like this. It looks like this, where americans can see democracy at work, where the citizens are truly informed and the public thrives. Get it straight from the source. Uncensored, unbiased word from word fr the Nations Capital to wherever you are because the opinion that matters the most is your own. This is what democracy looks like. Cspan, powered by cable. Live on sunday, november 5th on indepth, Nadine Strossen is taking calls about free speech , censorship, and more. She is the author of a guide to free speech law and the debate surrounding it. Join with your phone calls, facebook comments. Indepth with Nadine Strossen live on sunday, november 5th at noon eastern time on cspan 2. Since 1979 in partnership with the cable industry, cspan has provided complete coverage of the halls of congress from the house and Senate Floors to congressional hearings, party briefings, and committee meetings. Cspan gives you a front row seat to how issues are debated and decided with no commentary, no interruptions, and completely unfiltered. Cspan , york unfiltered view of government. Up next, former u. S. Customs and Border Protection on the Biden Administrations implementation of a mobile app that provides customs and border prti