Transcripts For CSPAN Washington Journal Robert Hartwig Disc

Our fellow citizens what is taking place. We simply have no choice. Thats sunday night on cspan2s book tv. Continues. Host joining us from South Carolina, Robert Hartwig, a codirector of the center for risk and management, and previously the president for the Insurance Information institute of new york. Good morning. Guest glad to be here. Host we are talking about the National Flood Insurance Program. Can you remind our viewers what the purposes and why we have it . Guest the National Flood Insurance Program, in place 1968, provides coverage for people otherwise unable to obtain insurance against the disaster of flooding. Historically, a Flood Insurance has not been historically available to the private sector. This is not a new situation. It has been around for half a century. At this day and age, there is a debate on should the private sector play a greater role . It ensures currently about 5 Million People across the country and larger shares in places like florida, the texas gulf coast and other areas prone to flooding, especially on a regular basis. Host does the federal government take all of their risk for people who purchase these programs and how do they work in conjunction with insurers . Guest historically, it has assumed all of the risk. The policies are written through typically through your standard Homeowners Insurance company and you will work with your ordinary agent and you can work directly through the program. Many people use their local agent to purchase a policy but that is to facilitate the sale and make it easy to purchase or at the country in a way everyone is used to purchasing it. What typically happens is premiums are then ceded to the federal government and the federal government assumes the risk. If there is a claim, private insurers are typically the ones adjusting the claims and the reports to the federal government and the federal government ultimately reimburses insurers from many they pay. The important thing is the federal government uses the private insurance sector to sell the policy and to adjust claims on the back after a disaster. There has been a change recently, where for the First Time Ever, some of the risk in the National Flood Insurance Program was seated to pride it reinsurers, insurers for Insurance Companies, so historically, the u. S. Treasury has borne all of the risk, and this is part of the reason why in program is 25 billion debt. Recently, some share of the risks for severe flood events has been ceded to private reinsurers. Respect toth hurricane harvey, no Tropical Storm harvey, it appears that the private reinsurance sector, and that involves insurers from around the world, for the First Time Ever pay on the claims, a good move to protect taxpayers. Be specific, the National Flood Insurance Program has coverage in place and will cover the first 4 billion of loss and inality and then for losses excess, up to 8 billion and up to 26 of that will be paid for by private reinsurers. I expect for the First Time Ever, reinsurers will participate in losses related to get events. Host you heard him talk about andcurrent this go status the demand on it. You can ask him questions. Robert hartwig from university of South Carolina, so eastern and central time since, 202 7488000. Mountain and pacific, 202 7488001. If you are a texas or louisiana resident, 202 7488002. Robert hartwig, was it katrina that really caused the share of the current debt the program is seeing right now . Guest of the 25 billion in debt that it currently holds, which is the debt of the u. S. Taxpayer, yes, it was katrina that put the most deeply in the whole, added to by Hurricane Sandy in 2012. The National Flood Insurance Program see was never able to retire its debt and there were many other storms that challenge their resources. And ike inta, wilma, texas, and sandy. What this means is that the National Flood Insurance Program is not collecting enough in the way of premiums to cover actual expenses in terms of claims. Y say is most dearest go well and they can pay with premiums that come in the door. In the world of insurance, just being close enough is not sufficient. Private insurers have to keep enough in the way of reserves and in the way of liquid resources to be able to pay claims, no matter their magnitude or how many there are or where they occur or when. The National Flood Insurance Program has fallen short of that for many reasons but if you want isthrow down to it, there that a lot of history that would support the idea that government run Insurance Programs typically run that well. Host would you say the government is offering this Insurance Program and it is then cheaply or are they too undervalued, is a typically cheap insurance . Guest there is no question that many individuals who receive their coverage throughout the United States through the National Flood Insurance Program are receiving premiums, are paying premiums in effect subsidized. In other words, they do not cover the expected costs associated with those properties, particularly repetitive loss properties. The only account for 1 or so of claims that the nfip sees, and the account for 35 to 40 of dollars that go up the door. Those homes and businesses are not paying anywhere close to the premium and other policyholders and taxpayers are being required to subsidize them. It becomes a politically contentious issue in terms of what should be charged for Flood Insurance amy adams and coastal areas Flood Insurance coverage and coastal areas, and because they are an economic engine that supports construction growth, employment, infrastructure growth, but whether this district happens to be represented by democrat or by republican, generally speaking, they were support the continuation of subsidies in these areas. Host again, Robert Hartwig our guest, and if you want to ask questions, lines are on the screen. Lets start in fort worth, texas. Betty, go ahead. Caller yes, i am reading from republicanlegram, i a Republican Legislature has just instituted a new deal called 1774, and this new law will make it harder for people to get money from the forces of nature, such as light, hail, rain storms, wind, snow storms, tornadoes, wildfires hurricanes, and the new law also shrinks the penalty for Interest Rate Insurance Companies must pay if they make late payments. Legislaturepublican that controls everything. Host Robert Hartwig, let me take that question to ask her about what a Homeowners Insurance policy covers when the comes to flood versus what someone receives under a flood plan or insurance from the government. Guest that is an important distinction. Private Homeowners Policies provide damage against wind damage, soaked to the extent harvey caused wind damage, that would be covered. If it tore your roof off and rain entered and a tree fell on your house and rain into that we, that would be covered. Flooder words, if it is a or storm surge, that is not and has never been covered by your standard Homeowners Insurance policy. Hence, that cap needs to be filled, and for most people, through a National Flood insurance for small businesses. There is a small, private Flood Insurance market. T is tightly underwritten by that, i mean the insurers that offer that coverage would want to make sure that your property is able to withstand flood to a significant extent. It is going to be priced appropriately. It will cover fully the risk they are assuming. With respect to a bill in the texas house, i cannot say specifically, but there has been a lot of efforts to try to intentionally reined in the increasing costs associated with National Disasters in terms of the federal aid that is being rolled out after the events. We have had events postkatrina, or senator postsandy, where cruz wasurz was a opposing a bill at that time. I do not think he will stand in the wake of the bill in association with texas. Host 202 7488000 percent to an eastern time zones. 202 7488001 for mountain and pacific. Texas and louisiana residents, 202 7488002. In delaware, go ahead. Caller i do not understand why taxpayers have to subsidize these areas, where there are known problems we constantly have year after year that we know is going to be flooded out on a regular basis. I live in delaware, we have constant problems year after year, yet taxpayers always have to pay for the beach erosion to get fixed and they had these multimillion dollar homes on beaches we have to subsidize on a regular basis. I do not think it is there for taxpayers to constantly do this, but we know there are no problems. When we know there are problems. It is ridiculous. Identifies theer subject of debate. Many economists, as well as many in washington in congress, think the same way, but on the other hand, there are many that do not. Whereou have an issue, you see sort of a separation in thinking between localities, which are dependent upon growth, for instance, in the coast of delaware or the coast of texas, which are dependent upon tourism , upon bringing individuals and businesses to spend money. That creates jobs. In order to do that, you do Everything Possible to try to make growth possible in these areas. That means blacks building codes or in building codes areas that avoid a storm surge. What we do over time is rather than make the problem better, you make it worse. One way you make it worse is subsidizing people and businesses to live in these areas. There have been proposals, upon the one reauthorization of the National Flood Insurance Program as it expires september 30 of this year and one would require that the fema and nfip no longer be insurance offer flood to any structure on any structure built in a flood zone, built after january 1, 2021. The idea behind that is that would give localities, businesses, homeowners an incentive to think once, twice and three times about what sorts of structures they are going to live in and where, how they could be constructed against the peril applied, including storm surge, and with this threeyear leave, a wicked insurers an opportunity to study the situation it would give insurers and opportunity to study the situation to appropriately locate homes and businesses in this area. The idea would be to get the federal government out, the taxpayer outcome and the private sector into this so that this is a winwinwin situation because homeowners and landowners would be less likely to experience flooding and structures built to withstand floods, even within a flood zone. Then they would be required to purchase coverage in the private insurance sector and private insurers would require or would have requirements that would be more stringent than currently exists through the National Flood Insurance Program today and hopefully, the taxpayer would be protected because when a private insurer suffers a boss, there is never a dime that would be requested by private insurers from the federal government to pay the claims. Host in florida is ben, go ahead. Caller i was wondering if i were good for Nothing Congress would consider repealing tax breaks for the wealthiest americans and consider garnering in trillions of dollars in offshore accounts . Thank you. Host i do not know park as is specifically related to that topic, but i want to read from becauseashington post the idea that private insurers to take the brunt of this, it says democrats oppose those provisions and they would cherry pick beast risky properties, what do you think about pick the least risky properties, what do you think about that . Best i think insurers would interested in underwriting a large share of the market under in currently by the nfip entry insurers would be interested in operating in this market, as well. Over time to the extent that premiums are allowed to migrate, generally migrating upward, to a level that reflects the risk, that will encourage private insurers and reinsurers to participate in the market and each would be when this policy that could happen impact on the taxpayer. It provides incentives that do not exist today to order fight, hardin, and zone structures in areas prone to flooding in a way that does not exist today and provides incentives for saying communities that want to maintain subsidies in order to essentially about almost unbridled growth in these areas. It allows an incentive to create structures, such as pumping infrastructure, building seawalls, love these, drainage love these, push levees levees, drainage systems and that will help reduce the exposure to taxpayers. Host in this story i read, the headline of the one over says that counties hardest hit, four out of five homeowners say they like Flood Insurance. Is this something required aspires purchasing and should that be the case question mark nobody case . Tost nobody is required purchase Flood Insurance unless you have a federally backed mortgage. Sometimes they take it out and do not maintain it over time. If you own your home or have a and unless thee bank and forces requirements, you do not have to have it very many people have come to believe that Flood Insurance is maybe something they can do without because they have come to believe if there is an event, there will be a federalaid package afterward and packages from the state and charity, but particularly from the federal government. They believe the government will bail them out. There is evidence in events like this that people come to view that, the large, federal aid packages, and there is tremendous pressure on whoever is president , tremendous pressure on president trump, just as with president obama and president bush, to provide large packages after the events. That is what we do as a country and we need to reach out to our fellow americans to make sure they are taken care of in their time of need, but is it the most efficient way to handle the recovery . Wave, aith a huge tidal synonymy of federal money in the aftermath of the event rather than investing it prior to the event in terms of zoning, location of homes, and the many things we can do to prevent flood loss before the flood occurs . By making those changes to the National Flood Insurance Program now, as it is about to be reauthorized at the end of september, but we can do is slowly over time harden the infrastructure of the United States, make us more resilient in terms of where we locate homes, businesses, that prepares us for the ordinary runofthemill hurricane, flood, melting snow, and against levels,at of rising sea which we see across the United States. This is a peril that will not go away. Hurricanes all have been no matter what but sea level rise, the severity of frequency in the events, we will have to see but no matter what, we are having rising sea levels and hurricanes. This is an issue worth investing in because of this going to be with us percent raise. Host from houston, texas, carolyn. Caller i just wanted to talk about Flood Insurance in terms of the governmentbacked insurance versus private insurance. That i have owned for 35 years that i have had Flood Insurance on that house for 35 years. The insurance was mandatory. I think i had a federally backed mortgage. I do not remember. I paid the house up years ago, but i now live in houston and i tried to get Flood Insurance itn i bought my house but was unavailable. Even through private insurance. Now, that house does not have Flood Insurance. I would like to get a refund back to the 35 years i spent on Flood Insurance new orleans, where when katrina hit, my house was not flooded, it has never been flooded, it is in a zone that does not generally polite, so a lot of us are paying in but not getting anything back. Do talk about people wanting to talk aboutage you people wanting to take advantage of the federal Flood Insurance program, but there are some of us who feel they have been taken advantage of for paying in when there is still need in areas we live. Host can i ask a couple of questions . Caller of course. Ift how much did you pay, you do not mind saying, in new orleans, what were your pain as far as the premium . The the preview the premium i paid her