VIDEO and RUSH TRANSCRIPT: U.S. Rep. Ritchie Torres Participates in House Financial Services Subcommittee Hearing on the National Flood Insurance Program

Apr 28, 2023

WASHINGTON, D.C. – U.S. Representative Ritchie Torres (NY-15), as a member of the House Financial Services Committee, today participated in a hearing of the Subcommittee on Housing, Community Development, and Insurance entitled “The Reauthorization of the National Flood Insurance Program: FEMA’s Perspective”.

Testimony was provided by one witness: Mr. David Maurstad, Assistant Administrator/Federal Insurance Directorate, FEMA

Floods are the most common, most expensive, and most deadly natural disaster that communities across the United States experience. Reports reveal approximately 90 percent of all U.S. natural disasters also involve flooding from any number of sources, including inland flooding, flash floods, and flooding from seasonal storms. The damage from flooding can be extremely costly to both human safety and property.

The Federal Emergency Management Agency’s (FEMA) 50+ year old National Flood Insurance Program (NFIP), which is by far the nation’s leading provider of flood insurance coverage, has experienced two of its top five, four of its top ten, and ten of its top 20 costliest flood events all in the last decade alone. The NFIP currently provides coverage to roughly 4.7 million policyholders (4.5 million of which are residential policies) with over $1.3 trillion in total insurance coverage-in-force.

This hearing marked the second in an ongoing series of hearings on the topic of flood insurance planned by the Committee during the 118th Congress. The Committee has traditionally received testimony from FEMA to better understand the status of the NFIP and FEMA’s efforts to modernize the program as part of the Committee’s reauthorization process. This testimony plays an important role in the reauthorization process by keeping Congress informed of changes made to the NFIP’s operations as well as helping to focus attention on areas in need of legislative reform. However, FEMA has not appeared before the Committee since March of 2017. Additional relevant background can be found here.

VIDEO of Rep. Torres’s five minutes of questioning can be found here.

VIDEO of the full hearing can be found here.

A RUSH TRANSCRIPT of Rep. Torres’s remarks and questioning is below, as delivered:

REP. TORRES: Thank you Chair, I represent the lowest income congressional district in America. The lowest income Americans are hit the hardest by the crippling cost the National Flood Insurance Program. Under rating 2.0, FEMA is intent on raising premiums by as much as 18% a year for as long as ten years. And FEMA would be raising premiums even higher than 18% were it not for the statutory cap that Congress put into place several years ago. And so, an even stronger cap is needed to protect the lowest income families from rapidly rising flood insurance payments. You brought up earlier the notion of calculating premiums in light of income. When it comes to housing the threshold for affordability is 30%. No one should pay more than 30% of their income towards their rent. What would be the threshold when it comes to flood insurance policy?

MR. DAVID MAURSTAD, Asst. Administrator, Federal Insurance Directorate, Federal Emergency
Management Agency:
So, the program we designed, and the administration supports that you recommended, doesn’t look at the average median income of the property owner. The affordability framework that we developed actually outlined a number of ways that you could develop an affordability program. So, we’re certainly willing to look and have a conversation with you if there’s a different manner that we can provide this much needed…

REP. TORRES: Is that something you would study? What would constitute an affordable percentage of one’s income with respect to flood insurance?

MR. MAURSTAD: I would, my sense would be I’m not an expert in that…

REP. TORRES: Because that’s the approach we take with student debt, with affordable housing. So why approach it differently with respect to flood insurance?

MR. MAURSTAD: We looked at the most, the most effective way in our opinion, is what we’ve proposed. We certainly will look at different ideas if you have them.

REP. TORRES: I want to move on. If you live in a special flood hazard area and have a federally backed mortgage, you are required to have flood insurance, but not every person who lives in a special flood hazard area with a federally backed mortgage has flood insurance. Do you track non-compliance, and if so, what’s the number of people who fall into that category?

MR. MAURSTAD: So, we do not, that’s actually a lender, a lender requirement, not an NFIP requirement, and so we don’t track those numbers. I think there’s been some study done on it by the information that we have, but the lenders would have that information.

REP. TORRES: I’m assuming the more participants in the program, the more financially sustainable

MR. MAURSTAD: Actually, from an insurance perspective, it depends where those policyholders are. So, it’s not it’s not as simple of…

REP. TORRES: Do you have a sense of where the enforcement is breaking down? As far as the mandatory…

MR. MAURSTAD: I don’t know that the enforcement has broken down. So, I can’t comment.

REP. TORRES: Just judging by the non-compliance, it seems to suggest that there’s a breakdown in enforcement. FEMA has a new methodology rating 2.0. I’ve heard complaints that the new methodology for calculating premiums is largely known only to insiders. It is opaque to the rest of us, particularly state and local governments, does FEMA have any plans to make its methodology for calculating premiums more accessible and available to the public and pertinent stakeholders?

MR. MAURSTAD: So, the rating methodology that we’ve developed for that, for the first time, reduced a million policyholders premiums on average $60 a month. We’ve provided that methodology publicly already. We’ve also provided premium calculation worksheets and a number of other tools on our website, that agents and companies have.

REP. TORRES: So, you feel like there’s sufficient transparency?

MR. MAURSTAD: I believe we have been very, very transparent.

REP. TORRES: We’ve heard otherwise from New York State. Do you have, do you know why people are under the impression that your method is insufficiently transparent?

MR. MAURSTAD: Sir, I think that we’ve done a good job of providing all the information someone needs…

REP. TORRES: So, where’s the misunderstanding?

MR. MAURSTAD: To assess the program and GAO will be issuing…

REP. TORRES: Do you have a sense of where the misunderstanding is?

MR. MAURSTAD: Excuse me?

REP. TORRES: Where’s the misunderstanding? Because there seems to be, there’s a common complaint that I’ve heard that there’s a lack of transparency around your methodology. You seem to be claiming otherwise. So, I want to understand where’s the breakdown in communication? Where’s the misunderstanding?

MR. MAURSTAD: I don’t know the answer to that.

REP. TORRES: It’s something I would want to explore. Would the program be solvent if the federal
government paid the debt associated with theme with Katrina?

MR. MAURSTAD: Well, the program is backed by the full faith of the U.S. Treasury now, and so solvency is…

REP. TORRES: But apart from the full faith, you know, the program historically has been self-sustaining, self-financing. Would you be, go ahead…

REP. TORRES: I mean, actually, it has not been self-sustaining. The very nature of a catastrophic insurance program indicates that it would be very challenging for it to ever get impossible for ever be self-sufficient.

REP. ERIN HOUCHIN: The gentleman’s time has expired.


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