partners serving consumers in the flood program has dropped from 150 to 70 that are actively writing flood insurance over the last six years. while harleysville worked very hard to provide our policyholders with affordable protection, for many insurers, program revenues have been outweighed by growing administrative costs. they are leaving the nfip. the draft does not add too many additional requirements to the nfip. please keep the bill streamlined to insure the program will remain standing. thank you for the bipartisan committee draft which addresses the critical vulnerabilities in the nfip and will greatly strengthen flood protection for millions of consumers. the write your own flood partners support you and hope that you will be able to keep a straightforward bill with long-term extension and no further lapses. harleysville and pci stand ready to be of any assistance desired. >> thank you. we recognize mr. rutenberg for five minutes. >> chairman biggert, ranking member gutierrez, members of the subcommittee, thank you for the opportunity to testify today. my name is barry rutenberg, and i'm a home builders from gainsville, florida and first vice chairman of the board of directors of the national association of home builders. nahb commends the subcommittee for addressing reform the nfip program. builders strongly support a five-year program reauthorization as a best way to provide a steady foundation on which to build program revisions and ensure that nfip is efficient and effective. for several years nfip short-term extensions created a high level of uncertainty in the program causing severe problems in already troubled housing markets. during the periods, there were delays or canceled closings due to the inability to obtain flood insurance for mortgages. often new home construction was shut down or postponed due to the lack of flood insurance approval. adding unneeded delays and job losses. we believe this reauthorization will ensure the nation's real estate markets operate smoothly and without delay. the availability and affordability of flood insurance gives local governments the ability to plan and zone their communities including flood flans. this allows homeowners the opportunity to live in a home location of their choice, even when the home lies in or near a floodplain. home builders depend on the nfip to be annually predictable, universally available and fiscally viable. the nfip creates a strong partnership with states and localities by requiring them to enact and enforce floodplain management measures including building requirements designed to ensure occupant safety and reduce future flood damage. the partnership depends upon the availability of up to date flood maps and financially stable federal component and allows local communities direct developments. unfortunately the losses and devastations suffered with the 2004 and 2005 hurricanes and the 2008 midwest floods has severely taxed and threatened the involven sy of the nfip. while these have exposed shortcomi shortcomings, we believe reforms must not be an overreaction to the historic circumstances. the nfip is not just about flood insurance premium and payouts. it is a broad program that guides future development and mitigates future losses. the financially stable nfip is in all of our interests and congress' efforts have the potential to greatly impact housing affordability and the ability of local communities to control their growth and development options. a key tool in the nfip's implementation, rate maps or firms, have been recognized by congress to be inaccurate and out of date. fema has been successful in digitizing mauve of the firms, but many are not using the updated data. because of this large discrepancies remain. we believe continued congressional oversight is necessary. we commend the proposal to establish the technical mapping advisory council and hope it will foster more collaboration. beyond fixing the maps, nfip supports increasing coverage limits and offering various insurance options for consumers and even a possible minimum deductible increase. the nfip must continue to allow state and local governments, not the federal government, to dictate local land use policies and make decisions on how private property may be used. fema must also better coordinate its activities with other federal agencies who have oversight of other federal programs. in my written statement, i discuss fema's recent requirements of compliance for certain property owners. additionally, before any reforms are enacted to change the numbers, location or types of structures required to be covered by flood insurance, fema should first demonstrate that the resulting impacts on property owners, communities, and local land use are more than offset by the increased premiums generated and hazard mitigation steps taken. nfip urges congress to ensure construction requirements remain tight to the 100 year standard. should congress change the hazard area from 100 years to 250 years, it would require more homeowners to purchase flood insurance and would impose mandatory construction requirements that increase costs and impact resale values. significantly. this would also affect fema by requiring modifications to ordinances and policies all at a time when fema has admitted its lack of resources to provide current services. i thank you for today. nahb looks forward to working with this committee on this valuable program. >> thank you so much. unfortunately, if you look at the clock, and you see those two white dots up there, that means we have votes and we have got about seven minutes left for voting. so and these floor votes may take 45 minutes to an hour depending on how long it will be, but we do want to have the opportunity to ask questions and i hope all the members will come back briefly. so the subcommittee stands in recess and we'll convene immediately following the floor votes. n insurance and housing has gavelled back in for the hearing on the national flood insurance program. >> desire to look at risk. it's a common use of reinsurance. i will supply a more detailed set of metrics that will be appropriate for this. and what i say is that you would expect -- you'd expect that the program working with the private sector would want information related to the types of properties that are insured, the insured values, any mitigation in the area. the kind of things that would -- that a layman would understand would be necessary to fully evaluate the risk. and then to break -- make a recommendation to fema and the nifp about how to structure a program that will be successful when placed in the market. >> yes. please submit for the record the data that's necessary. >> thank you. >> without objection. thank you. mr. ellis. in reviewing the subcommittee's discussion draft, can you elaborate for us how it would reduce the burden on taxpayers and can you provide us with specific recommendations to improve it in this regard? >> sure. thank you very much, madam chairman. no, we definitely have, i think, the bill is very constructive start in this process. and certainly the areas where we're going to allow the rates to actually increase both one is that it will go from 10% maximum annual increase to 20% maximum increase. also, the fact that they increase the deductible for preflood insurance to $2,000 and something that would help protect taxpayers and reduce some of the subsidy for prefront properties. lastly, as you move to the flat hazard properties and essentially just the provisions to try to reduce the subsidies by allowing the rate to increase 50% the first year and 20% each year after that, all of those factors really start moving the program in a much more sound or much more fiscally sound and often on the backs of taxpayers. >> thank you. and then for anyone who cares to answer, why is there been a retreat in the number of companies participating in nifp? and do you think that any primary insurance companies would ever be willing to include flood insurance in the basic homeowner's policy with regard to properties outside the 100-year flood plain? >> i will be willing to take that. the main reason carriers have been leaving the national flood insurance program is, number one, the profit margin is very slim. we received approximately 30% for administering this program. out of that 30%, we pay our agents 20%. we then pay state premium taxes of 2%. which leaves us eight points to manage this program and to pay for all of our costs. not only that, the program is very, very technical in nature. and a lot of carriers have felt that because of the complexity of the program, they do not really have the expertise to remain in the program because of the litigation that has been ensuing over the last few years. they feel like the exposure that are due to the litigation is not worth remaining in the program. >> thank you. at this time i would yield back my -- the balance of my time. mr. sherman, you're recognized for five minutes. >> i thank the chair lady. i also thank my colleague from los angeles for letting me ask questions first. i think it's in the national interest that we have people insured. you can do this by mandates or subsidies or federal involvement. or you can sit back and watch them be uninsured. the reason that we want to see them insured is apparent to those who are soft hearted. when the disaster happens, you hate to see people uninsured. no one has ever accused me of being soft hearted. but if you're hard hearted, every time we have a major disaster, we have an extraordinary or supplemental appropriation that comes right out of the federal budget, increases the deficit. and so it is in the government's interest to make sure people are insured. that being said, we're here to talk about flood insurance. i represent a desert. i look forward to seeing how this program can be expanded or used as a model for earthquake insurance. i represent, for example, north ridge. so i'm anxious to see this program work effectively and even if it costs the federal government something to make sure that people have insurance both in terms of fiscal cost or in terms of the federal government being involved, providing capital at lower rates, et cetera. you may say well that's federal government. we shouldn't have that involvement. i've been here a while and any time there's a disaster, all of a sudden, nobody is talking about the deficit. nobody is talking about the growth of the federal government. everybody is talking about how to help people that are uninsured. as you know, the federal emergency management agency has been going through the process of updating the flood plain maps and there have been questions about the process of developing the maps and the impact they'll have on local communities. some homeowners have never had to buy flood insurance will have to do so and homeowners who are currently mandated to buy coverage may not have to in the future causing confusion in a lot of areas. do you think that remapping is a problem? >> that's a very good question. i feel your pain. i feel the pain of all of the property owners who have been moved to a special flood hazard area. i think that this is something that is being addressed in the bill. it does need to be explored because there are definitely areas that have been removed from the flood plain that should still be in it. miss mccarthy spoke earlier this morning from long island about structures sitting right on water that were removed from the flood plain. hers being one of them. and there's definitely areas for improvement for risk mapping. and i feel that the council that has been put together that is mentioned in this bill is an excellent start. and there are many experts who will be able to properly address this issue and lend us all some insight as to how we can come up with better risk mapping than what we currently have. >> thank you. i have a question for the record that i'd like anyone to respond to after some thought when you go home tonight or tomorrow or in -- you know, until the record closes. and that is what should we be doing to make sure that people have the earthquake insurance that they need both to help them as individuals, to make sure that lenders are willing to loan? you can tell people not to build in a flood plain. you can't tell california not to build near an earthquake fault unless you want to be a 49-state country. so what do we do on earthquake coverage? i'd like to hear your consideration for the record on that if any of you think you can provide some enlightenment. thank you. i yield back. >> thank you. the gentleman from georgia is recognized for five minutes. >> thank you, ma'am. thank you. you know, most of y'all are in the business world and how long do you think it would have taken y'all to set down and try to come up with a remedy for losing $18 billion in about four years? would y'all have thought about that anywhere down the road? we're just a little late, i guess, in trying to do this. i think since 2005 this program has gone in a hole about $18 billionment i think they paid off a couple of billion since then. but the government does not seem to sense that losing money is a problem. but it is to all the taxpayers of this country. and so we've got to do something to remedy this. but we don't want to do anything that doesn't make sense. we have two speeds up here, do nothing and knee jerk. and too many of our solutions come from the knee jerk type thing. but mr. ellis, i wanted to ask you, is there any type of program that -- any of the environmental groups or conservation groups have about going in and buying some of this property that may have had a total loss that is adjacent to a wetlands or is there any type of program that y'all are aware of or that y'all are thinking about trying to create that would do that? >> well, speaking for smarter safe of the coalition, we're a budget group. there are environmental groups in that coalition. and certainly there have been interests both after major disasters to buy and purchase properties and buy out the owners and then at the value of the home was prior to the disaster and then using that for conservation or other things along those lines. there was challenge 21 that was looking at that. so certainly so, certainly think that that tool and mitigation are certainly appropriate areas for fema and for this program to get involved in and actually could pay dividends in the long run. >> mr. westmoreland -- >> yes? >> mind if i add to that? the current program, current federal -- the national flood insurance program does have funds allocated for mitigating property losses, including purchasing properties that are repetitive loss properties, and then the predisaster mitigation programs that fema has does allocate money as a percentage of the overall payments for disaster mitigation for just this purpose. i think our view would be that maybe fema has not been as aggressive as it could be in utilizie inine ining those fund certainly, we'd encourage congress mitigating those funds to achieve what's mentioned. you asked about the planning. i represent the reinsurance industry, and nearly all insurance companies and most state insurance plans like the california earthquake authority and others, do, in fact, plan for the outlier year, the severe loss infrequent year to buy reinsurance to protect them against that, and that's what we're recommending that the flood insurance program do as well. >> okay. talking about the repetitive losses, i know that about, i think it's 2% of the policies are for the repetitive, but 25% of the losses is on the repetitive. what would some of the insurance companies' idea be for remedying that when 2% of your premiums is covering 25% of your losses. >> congressman, may i answer that? i represent a primary insurer, and i'd like to remind us of the phrase and the old adage that once bitten, twice shy. and this is what's happened with repetitive loss properties. looking at it as a primary insurer, if we insured a property that insured flood losses on a property, and some natural disaster came in and the property was destroyed, if the property was rebuilt in the same location with no mitigation, i would be not inclined to insure that property a second time. and i would suggest that we need corrections in the national flood insurance program to do that. we don't want to allow or have people rebuild in areas that under the same circumstances will have these repetitive losses. it's simply not fair to the american taxpayer. there are folks that wish to do so. if they wish to rebuild in these areas, they need, number one, to charge or to be charged actuarily sound rates. if they want to absorb that risk, they need to pay for that risk. they need to pay for it, not the american taxpayer. >> yeah, i couldn't agree with you more. mr. rudenberg, i know that i come from a home-building background, too, and a lot of times, you're faced with having a lot that has got a lot of contour to it, let's say, and part of it is in a flood plain, a 100-year flood plain or whatever, but the floor level may be 15 feet above the flood level. my experience has been that the homeowner still had to buy flood insurance, even if the floor level was at a level that it would be impossible to flood. is that what -- has that hindered you, or have you found that in any of the subdivisions or whatever that you've done business in? >> yes, congressman, we do find that it is an issue for some people, but other people are willing to say if i want to be on this lot, for, normally, there's a nice view or something else, and they will pay the premium, and we have to work with our county to build in a way that will ensure that it's not a burden to the future. i think it might -- if i could quickly add, that in many of the new developments we're doing in my area, we now build for an 18-inch rain storm event. we have other developments that have no retention areas whatsoever or somewhere in the middle, and we're all paying the same. and perhaps in the future, we should be looking at whether or not we should be charged based upon the risk. and if you have that much capacity for storm water, then maybe that's a little lower risk. i would also suggest that if you're looking for things to do, that we seem to have a few people available to work on mitigation, and for that 1% to 2%, there may be a program where you want to do a lower interest rate program or something on that order for people to go ahead and modify their homes out of their own money, spend their money, and that would reduce the risk to the program. >> yes, sir. >> thank you. >> the gentleman's time has expired. >> and i yield back. >> thank you. i would note for the record that one town in illinois, due to repetitive loss, moved the town to higher ground. so, i think there's all various ways that we can take care of that, and i would now recognize ms. waters of california for five minutes. >> thank you very much, madam chair. i'm sorry that our fema representative had to leave, but certainly had to leave for a good reason. i had a number of questions that i would have liked to have asked -- >> maybe we will try and get him back at a later date. >> okay. well, let me talk about my bill, hr-1026. it would restore stability to the flood insurance program by reauthorizing the program for five years. it would also address the impact of new flood maps by delaying the mandatory purchase requirement for five years, then phasing in the actuarial rates for another five years and make some improvements to the program. that's a little bit different from your bill, madam chair, but i think we're both committed to working to see how we can find the best solutions. i'd just like to ask the panel -- i don't want you to take sides, but i want to find out, what about the time? two years as opposed to five years? what do you think makes good sense and is reasonable and would help us to get everybody into the program at the correct rat rates, and basically, help us to stabilize this program? can i get a response from anyone? give me your thoughts. >> congresswoman waters, we would be concerned to have a longer delay, such as envisioned, five years, and then slowing in the rate increase, just because the people are in the flood plain, you know? and we're essentially denying some of the information that they're actually in the flood plain, and we want to give them the tools, and some of that is the rates and understanding of that. so, basically freezing the maps or denying them going a place doesn't help the communities. i would rather pursue an approach, such as in the draft legislation, that would phase in the rate increase so it's not a shock to the system, and then if there are people who are unable to pay, that are truly needy, then we should have outside the rates certain subsidies to enable them to purchase flood insurance. i think that's a better way to go, congresswoman, and something that would responsible to the taxpayer and to the public -- >> phase it in over what period of time? >> i'm agreeable with the timeline that is in the legislation. it's basically -- it could be a year that they would say you don't have to do the purchase, then extend it for a year and a year after that, up to three years. i would rather see briefer and no delays and just try to deal with it at the rates, but i'm amenable to that sort of balanced approach. >> anyone else? what about the question of the cost to the taxpayers with subsidies? >> well, the subsidies are there right now. we've got a program that's $18 billion in the hole. i certainly think that we're going to have to deal with this issue to try to have affordability for insurance for people who are truly needy. and you know, something that's outside the program. i'm not sure what the costs would necessarily be, but i think it's important that we get people the accurate maps and we have them have these tools, which of it is knowing that they are in the flood plain or what type of flood plain they're in, and the second thing is knowing what it costs and what the true cost of living in harm's way is, and that gives them some decision-making to deal with about where their home is or mitigation measures they can take to reduce their costs, reduce their vulnerability. >> let me, madam chair, just say, in addition to my concern about the time for phasing in people with the correct actuarial rates, i'm concerned about too many communities in this country that are improp improperly, incorrectly mapped, and the ability of individuals and communities to oppose the mapping and how we are going to resolve that, and what impact does that have on the delays that i am thinking about? i want the mapping to be as accurate as it possibly can to avoid people being in a situation where the mapping is incorre incorrect. the flood zones that are created or identified through the mapping are not proper. i just went through one of these in my district where, luckily, the community got together and just worked very, very hard and got it changed, but i don't know how much of that is out there and whether or not if we need to also think about that as we do a delay of getting the program on track. >> if the gentlelady was yield. >> yes, i yield to the chair. >> i think that, actually, congresswoman mccarthy was here and had very much so the same concerns and some maps that she believed were really mistaken, and it sounded like that, so that this is an issue, and i think the first panel relied that there is an appeal process that people should take advantage of. but you're right, we need to make sure that that's correct, and i think that we have in this draft attempted to address that issue, and that mandatory purchase requirement would be suspended for one year with the possibility of two additional one-year suspensions provided that fema makes a finding with respect to the flood risk mapping on a community-backed community basis. >> i'm sorry, you're talking about when they're in the appeals process? >> no, i'm talking about -- now i'm talking about what is in the draft legislation that we've been talk being. >> that deals with the incorrect mapping -- >> that's correct. >> -- issue? >> yes. so, i think there's something in there that you would like, in other words. >> yeah. i'd like to talk with you further about it, if i may, because i'm told that, you know, if you get a study, that that costs money, that individual homeowners can do studies and communities can do studies, but it costs money to do that, and i'm not so sure -- >> well, if i might again. >> yes. >> we also have a mapping council in the bill so that this can be done other than having the communities having to do their own study, but i don't want to take any more time on this. >> okay, thank you. >> the gentleman from virginia, our vice chair, is recognized for five minutes. >> thank you, madam chair. welcome. thank you all again for being here and helping us sort through this important matter. as i said during the first panel, it seems to me our primary responsibility or a primary responsibility as we look at this is, obviously, trying to figure out how we minimize the impact to the taxpayer and be good stewards of our responsibility that way. then i think, also, it's incumbent upon us in washington to not promote policies that create moral hazard. and obviously, i know that's a great interest to you. i have a question maybe for mr. ellis and then maybe mr. holden and ms. parrillo, and i'd like to hear the perspective from your quarter. but my question is, what is our goal here and what is achievable? are we able to minimize the impact, if this bill goes forward? do you think that this will be effective in minimizing the impact of subsidies to the taxpayer? i mean, we've heard different figures -- $1.3 billion of taxpayer built-in subsidy, $1.8 billion, and that's obviously on top of the $18 billion of the debt that's accrued. then secondly, will we be, i think, addressing the issue of moral hazard? will we be encouraging or discouraging to the maximum extent possible homeowners from making decisions that not only threaten their property -- and that's obviously your concern, as members of the insurance industry that are here, the property issue. but obviously, as we see in japan, it's not just property. it's also lives. and so, i was wondering if you could address kind of that big picture, where we're going with this. >> sure. >> and how do we measure our success? >> that's always critical, i think, with any government program, is trying to figure out how to measure success, congressman. and i think what we're trying to do, or what we would like to see at taxpayers for common sense and then smartersafer.org, is to move this program into a sounder fiscal footing, so to move it to where, one, the people actually know the risk, and part of it is having accurate, up-to-date flood maps, so they know where they're actually living or buying a home. second is that they understand the cost of that risk, that they are actually purchasing insurance that's commensurate to the risk that's actuarilly sound, also so they have an understanding of where they live, and also to mitigate or reduce that risk. lastly, and very important for our group, is trying to remove that risk off the back of the taxpayer and putting it back on to the rateholders, or the policyholders, where it logically belongs. and so, i think that, you know, we created this program in 1968, and we're stuck with it, and it isn't a private market, a large private market, anyway, in flood insurance, and so, we're going to have to deal with this program and try to move it towards a more actuarily sound basis and also try to use it as a tool to help people out. not just help them out in buying flood insurance, but to help them out of harm's way, to give them information and reduce their risk and reduce the impact on the american taxpayer. >> congressman, i agree with the actuarial sound concept. i won't go into that further. but as someone who sells the policy to the consumer on a daily basis, i think we have to make the program more attractive, because the more people we get to buy the product, the larger the number is and the bigger the risk pool. and so, one of the components of the draft legislation that i feel, somebody who sells to the consumer every day, is very important is the loss of use coverage for the residential property, where we could actually have some coverage for flood loss and the business interruption on the commercial side. because right now, when you're trying to sell this product to the consumer, there's a lot in the bill -- or a lot in the policy, a lot of coverage that is not there that i think would make it more attractive. those components, overexpanding the policy, to some degree, we could make sound off the bat, and i think the consumer will find it a much more attractive program. >> i'm sorry, go ahead. >> thank you, congressman. there are two things i'd like to address. first, as a representative of the national association of mutual insurance companies, we believe that the program is necessary. there is not a private market that is available at this time to be able to insure those properties, but it does need to be reformed. it does have significant weaknesses. the first thing i'd like to talk about is the take-up rates. in my testimony, i testified that less than 30% of people that are in those flood plains actually purchase the insurance. first of all, they may not purchase it. if they do, purchasing a new home, if they have a federally backed mortgage, they're required to have flood insurance, they do, and it lapses. there needs to be penalties there to ensure that that doesn't happen. as my colleague here talked about, the lower numbers, that's what the insurance mechanism, how it's predicate ed on that basis. we need to have enough people in there that will pay a little so we can spread the risk across a larger base. it will keep the prices reasonable and affordable. the second thing i'd like to talk about is the idea of the actuarially sound rates, and i will take that up. i think that is an absolute necessity to this program. and there's two points i'd like to make about the actuarially sound rates. first of all, the nifp was formed on the basis in 1968 of gradually moving toward actuarially sound rates for all properties in the program. here we are 40 years later and we're not close to that. we need to be able to be disciplined in the program to be able to get to that point, be it two years or five years. secondly, these subsidized rates, as they are in effect right now, they apply to all properties, to all property owners, regardless of their ability to pay. if you own a beautiful property and waterfront and you're well established and you can well afford to pay for the cost to insure that property for flood insurance, you are paying the same rate as that individual who's been a property, perhaps, of lesser means, maybe they've been there 40 years and they're on a pension. they're paying the same rate. we feel that's fundamentally unfair. so, that's why we are proposing the move toward actuarially sound rates should be supported by some type of means-based testing for those folks -- again, not through the flood insurance program. if you bury that "subsidy" in the flood insurance program, the insurance mechanism, it's hidden to all. it needs to be transparent, so it needs to come outside of the flood insurance program and deal with those individuals who truly need the assistance of government. and the others who don't, who can pay for it themselves and choose to live in those properties, they should absorb the costs themselves. >> i would like to comment first on the fact that i don't feel that we are stuck with the national flood insurance program. i think we should all be extremely fortunate that we do have the national flood insurance program. the national flood insurance program has worked in a manner that it was designed to work for. it was designed to protect people for a general condition of flooding. the rates were designed based on an average loss share. therefore, when you look at a catastrophe like a katrina, the bill was never designed to fully make the program actuarially sound with an event like katrina. the nfip did not fail with katrina. the levees broke. this program, the most important goal here is for this program to continue to protect the 5.6 million people who currently have a flood policy in place. this bill goes a long way towards reducing the federal subsidies and the moral hazards and addressing lingering concerns, such as mapping, which is a true concern. >> do you mind if i add one more comment to that about the actuarial rates? >> another minute, obviously. >> one minute. >> the program doesn't include a factor for catastrophe loss years like 2005, but it should. the reason you have all this federal debt is because it doesn't plan for and it doesn't price for all that. so, if you want to send the right signal to the policyholders who live there, but if you also want to protect taxpayers, you really do need to factor in that rate, or as i've suggested on several occasions, the program needs to be purchasing reinsurance as a way to protect against the outlier year. thank you for the opportunity. >> thank you. the gentleman from missouri is recognized for five minutes. >> i just have one question, madam chair. i disagree with ms. jallick. i think there were some things broken other than the levees in the gulf. shortly after katrina, the chair, ms. waters and i, along with i think three other members, went to the gulf. we held hearings in new orleans and in biloxi. katrina was not partisan. we lost a senator, a republican senator's home, a democratic member of the house. and the thing that i think has to eventually be addressed is this whole issue of wind. jean taylor, congressman gene taylor only had his steps remaining on the lot where he lived. and i guess the question is, how do you determine whether the house was washed away by the floods or whether the house was blown away by the wind? and it seems to me that what was broken was that it provided a lot of insurance companies with a way out. they just declared, you know, you don't have wind insurance and your house is not here because of the flood. it seems to me that that's something that has to be repaired, you know, as secondarily to the repair of the levees. >> in 99% of the times, the two adjusters that are assigned to assess the damage will be able to determine the difference between wind and water. it is very rare when the professional adjustors in the field cannot make that determination. adding wind to a policy would just add more debt to the taxpayers, whereas this particular bill i feel very strongly that it's, you know, while not a perfect bill, it is a bill that can get enacted into law -- >> okay, i support the bill. i support the bill. that's not -- i want to deal with what i was trying to deal with, which is, we have a problem. if you're saying that there can be concrete evidence and proof on whether it was floodwaters or wind, why were we having so many controversies? if it was so easily determined. >> well, again, i do believe 99% of the time, you do have the ability to distinguish between the wind and the water. and on a very rare occasion -- and again, you know, katrina is something that was not foreseen, not expected, and hopefully, we can take some of the missteps that we feel happened during katrina and learn from them and put things into law going forward that will help to shore up any type of misconceptions between the wind and the water. >> thank you. >> and the expert council that is designed in this bill should be able to assist with that as well. >> the gentleman yields back. mr. stivers from ohio is recognized for five minutes. >> thank you, madam chairwoman. i'd like to thank the witnesses for being here and sharing your expertise. it seems to me that, you know, we all know that the flood insurance program has to do a better job of pricing risk, number one. the flood insurance program also has to -- well, we have to decide how much risk we want to give the taxpayers, number two, and whether we want to have the taxpayers have a lot of risk. the third issue, i think, is how we deal with broader participation. we need to all recognize that there are people that live in areas that probably should be participating in the flood insurance program that aren't participating. then the fourth issue to me personally is i think we need to figure out how we can encourage growth of the private market over time, not necessarily immediately, and i don't think it will happen immediately. i'd like to kind of hit those one by one. and i know that some of your written testimony talks about pricing risk. i have a real concern about the government's ability to price risk. it just has shown not just in the flood insurance program, but in many programs in many ways, that the government doesn't do a very good job of pricing risk. do you have any specific recommendations, any of you, that would help the government do a better job of pricing risk? >> mr. stivers, frank nutter. we represent the reinsurance market. and the point that i made about two suggestions we have made is that if you introduce the private reinsurance market into the program, you've introduced into it the risk assessment mechanism that the private reinsurance market does, which it does routinely for catastrophe risks, for earthquakes and tsunamis and floods and wind storm. and i've made two proposals. one is that the program actually go into the market and seek to lay off risk into the reinsurance market on the basis of a data analysis between the nfip and appropriate brokers. and secondly, there is a pooling mechanism in the existing legislation that's been dormant for 40 years -- 35 years. and while i'm not suggesting it be reinstituted, i am suggesting that it does provide an opportunity for the private sector on a reinsurance basis to participate through a pool with a program, and again, it would have that interaction to the private sector risk pricing, risk assessment mechanism. >> thank you. briefly, that was a pretty good answer. anybody else have any ideas, suggestions? >> yes, congressman. i'd like to add, you're right, and government is never going to be that good at pricing risk, just simply because it's not good politics, necessarily. charging people -- >> terrible politics, yeah. >> so, part of the way to guard against that is to make sure we don't expand the program, so we don't add in wind insurance or we don't actually add in, as been suggested, is in the draft coverage for business interruption or other areas that could be insured separately, just because we know that government is inherently flawed in that. and so, the more that we expand the program or even increase annually the levels that are available in insurance, we're crowding out the private market and we're putting the government potentially more on the hook at not pricing risk adequately. so, some of it is just don't make it worse. >> thank you for that. let's talk a little bit about encouraging participation. and i can't read your name. i apologize. i know you talked about the lack of participation. you know, are there proposals that would -- you know, you could pass along that says everybody has to get it. we passed a law in the '20s that says nobody can drink, and people drank. so, passing a law won't necessarily mean compliance, but what i'm curious of is how do we get more compliance of people that should be buying flood insurance to buy flood insurance as opposed to just saying it's mandatory, which, you know, obviously, it is maybe a start or part of it, but i don't think that alone is the solution. >> i think the bill does a very fine job in going down the road of ensuring compliance with it. there are mandatory purchase requirements for federally backed mortgages and there needs to be continued enforcement on it. within the national flood insurance program, they need to track better those properties that have flood insurance, and in the event they allow those policies to lapse, to be able to institute any type of remedial action or penalties to ensure that it's done. second -- >> thank you. let me ask you -- let's say my house is paid off. i don't have a mortgage. how do we enforce that? >> i don't think you can enforce that, but i would suggest that a prudent person would want to protect their largest financial asset, and that may not be a position for the national flood insurance program but one of understanding the risks that we all have. and i know my colleagues, as independent agents, will counsel our clients that the exposures that they have and to properly protect those exposures. there's -- >> let me let somebody else weigh in because i only have a limited number of time. thank you. >> i just wanted to mention that, you know, anything that a consumer wants to purchase, they're going to purchase if it's an attractive product to purchase. and right now, the program has a lot of unattractiveness to it. i hear it every day. when i explain the program to a client, nah, i don't think it's something i need. i think this bill does a lot towards making the policy -- >> better? >> -- and the coverages much more effective. >> thank you. madam chairwoman, i'm sorry, i'm out of time. >> thank you. without objection, mr. cleaver is recognized. >> thank you for your generosity, madam chair. this will be very short. i gave up caffeine for lent, and so i have a headache, and i've got to get on the airplane, and i'm going to have a double headache because i'm on this wind versus the flood. can somebody explain to me what you did to determine whether a house was blown away or washed away? i mean, because as you may -- i'm sure you know, there were throngs coming to us about that issue, and as i said, we saw steps remaining, the only thing remaining. i mean, can you, you know, measure something on the cement? i mean, help me, somebody. >> if the structure is no longer there, then they are going to be -- the adjusters are going to -- the wind and water adjusters are going to work very closely together and look at the proximity to water lines, perhaps, perhaps was there a surge that had occurred, which then definitely would be the cause of loss was water. if there was a tornado, or through wind-driven rain that it was determined that the house was destroyed by wind. but they would pull weather reports, they would do a lot of investigation to make that determination, call in engineers, if need be. and there are, quite frankly, there's going to be times when maybe they cannot make that determination. and at that point then, then we would expect that the wind and the water carrier would then split the cost of the damage. and it's very unfortunate when that happens, but it's also extremely rare when it happens. >> not in katrina. >> very rare. >> not in katrina. >> but again, katrina was not a normal event as well. >> madam chair. >> may i answer that? >> who is speaking? go ahead. >> there's been a -- you can quite often tell by the construction and by the date of the construction. because as we have been evolving the construction techniques and the building codes, the newer homes are much more protected against wind than the latter ones, and depending upon the area and the code it was built on, there's often very good clues. then again, that goes to the insurance professionals. you should know from the viability of the nfip program that the newer houses are being built to much higher standards, and therefore, the risks are diminished. >> thank you. we're up to concluding right now, and i would like to ask you, any of you who could offer suggestio suggestions, how would congress structure assistance for certain homeowners? whether we want to say means testing or modest income. homeowners outside of nfip. so, if you have a suggestion, if you could submit that for the record, i would appreciate it. and as i mentioned earlier, during the coming months, our subcommittee intends to mark up legislation and implement several reforms that will improve the financial integrity and stability of the program. and i think legislation will require an examination of ways to decrease the role of taxpayers and increase the role of private markets and flood insurance. more specifically, among several provisions, our reform measure will aim to improve flood maps through a fair and transparent process, phase in adequate rates for risk, increase program flexibility to better serve homeowners and enhance local communities' ability to enforce building codes. so, nfip reforms must enhance the program and protect both taxpayers and policyholders. and with that, i would really like to thank all of the witnesses. i think you really have highlighted a lot of issues and explained it to a lot of our members who have not been through flood insurance before. so, this has been very helpful. i really appreciate it. and the chair notes that some members may have additional questions for this panel, which they may wish to submit in writing. without objection, the hearing record will remain open for 30 days for members to submit written questions to the witnesses and to place their responses in the record. and with that, this hearing is adjourned. >> good morning, >> good morning. i am the managing director of the event. thank you for attending today. a very hot topic, very interesting topic. i would like to give you a brief instructions. we are the 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