[House Hearing, 118 Congress]
[From the U.S. Government Publishing Office]



                   HOW DO WE ENCOURAGE GREATER FLOOD
                     INSURANCE COVERAGE IN AMERICA?

=======================================================================

                                HEARING

                               BEFORE THE

                        SUBCOMMITTEE ON HOUSING
                             AND INSURANCE

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED EIGHTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 10, 2023
                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 118-10






                 [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]






                               ______
                                 

                 U.S. GOVERNMENT PUBLISHING OFFICE

52-366 PDF                WASHINGTON : 2023











                 HOUSE COMMITTEE ON FINANCIAL SERVICES

               PATRICK McHENRY, North Carolina, Chairman

FRANK D. LUCAS, Oklahoma             MAXINE WATERS, California, Ranking 
PETE SESSIONS, Texas                     Member
BILL POSEY, Florida                  NYDIA M. VELAZQUEZ, New York
BLAINE LUETKEMEYER, Missouri         BRAD SHERMAN, California
BILL HUIZENGA, Michigan              GREGORY W. MEEKS, New York
ANN WAGNER, Missouri                 DAVID SCOTT, Georgia
ANDY BARR, Kentucky                  STEPHEN F. LYNCH, Massachusetts
ROGER WILLIAMS, Texas                AL GREEN, Texas
FRENCH HILL, Arkansas                EMANUEL CLEAVER, Missouri
TOM EMMER, Minnesota                 JIM A. HIMES, Connecticut
BARRY LOUDERMILK, Georgia            BILL FOSTER, Illinois
ALEXANDER X. MOONEY, West Virginia   JOYCE BEATTY, Ohio
WARREN DAVIDSON, Ohio                JUAN VARGAS, California
JOHN ROSE, Tennessee                 JOSH GOTTHEIMER, New Jersey
BRYAN STEIL, Wisconsin               VICENTE GONZALEZ, Texas
WILLIAM TIMMONS, South Carolina      SEAN CASTEN, Illinois
RALPH NORMAN, South Carolina         AYANNA PRESSLEY, Massachusetts
DAN MEUSER, Pennsylvania             STEVEN HORSFORD, Nevada
SCOTT FITZGERALD, Wisconsin          RASHIDA TLAIB, Michigan
ANDREW GARBARINO, New York           RITCHIE TORRES, New York
YOUNG KIM, California                SYLVIA GARCIA, Texas
BYRON DONALDS, Florida               NIKEMA WILLIAMS, Georgia
MIKE FLOOD, Nebraska                 WILEY NICKEL, North Carolina
MIKE LAWLER, New York                BRITTANY PETTERSEN, Colorado
ZACH NUNN, Iowa
MONICA DE LA CRUZ, Texas
ERIN HOUCHIN, Indiana
ANDY OGLES, Tennessee

                     Matt Hoffmann, Staff Director













                 Subcommittee on Housing and Insurance

                    WARREN DAVIDSON, Ohio, Chairman

BILL POSEY, Florida                  EMANUEL CLEAVER, Missouri, Ranking 
BLAINE LUETKEMEYER, Missouri             Member
RALPH NORMAN, South Carolina         NYDIA M. VELAZQUEZ, New York
SCOTT FITZGERALD, Wisconsin          RASHIDA TLAIB, Michigan
ANDREW GARBARINO, New York           RITCHIE TORRES, New York
MIKE FLOOD, Nebraska                 AYANNA PRESSLEY, Massachusetts
MIKE LAWLER, New York                SYLVIA GARCIA, Texas
MONICA DE LA CRUZ, Texas             NIKEMA WILLIAMS, Georgia
ERIN HOUCHIN, Indiana                STEVEN HORSFORD, Nevada
                                     BRITTANY PETTERSEN, Colorado











                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    March 10, 2023...............................................     1
Appendix:
    March 10, 2023...............................................    41

                               WITNESSES
                         Friday, March 10, 2023

Enoizi, Julian, Head of Public Sector, Guy Carpenter, on behalf 
  of Marsh McLennan..............................................     5
Heidrick, Christopher W., Owner and Principal, Heidrick & Company 
  Insurance and Risk Management Services LLC, on behalf of the 
  Independent Insurance Agents & Brokers of America (The Big 
  ``I'').........................................................     6
Martin, Carlos E., David M. Rubenstein Fellow, Brookings 
  Institution; and Project Director, Remodeling Futures Program, 
  Harvard University's Joint Center for Housing Studies..........    10
Small, Patrick, President, DUAL Specialty Flood, on behalf of the 
  Wholesale & Specialty Insurance Association (WSIA).............     8

                                APPENDIX

Prepared statements:
    Enoizi, Julian...............................................    42
    Heidrick, Christopher W......................................    56
    Martin, Carlos E.............................................    60
    Small, Patrick...............................................    74

              Additional Material Submitted for the Record

Davidson, Hon. Warren:
    Written statement of the American Bankers Association........   167
    Written statement of the American Property Casualty Insurance 
      Association................................................   173
    Written statement of the National Association of REALTORS....   178
    Written statement of the National Flood Association..........   180
    Written statement of the National Multifamily Housing Council 
      and the National Apartment Association.....................   181
    Written statement of the Natural Resources Defense Council...   186
    Written statement of Professional Insurance Agents...........   192
    Written statement of the SmarterSafer Coalition..............   200
Garcia, Hon. Sylvia:
    Houston Chronicle article entitled, ``Houston-area property 
      owners drop FEMA flood insurance after pricing change''....   204
Waters, Hon. Maxine:
    Written statement of the National Association of REALTORS....   178
    Written statement of the Natural Resources Defense Council...   186
    Letter from Hannah Perls, Staff Attorney, Environmental & 
      Energy Law Program (EELP), Harvard Law School..............   212
    Written statement of Texas Appleseed.........................   217
    Written responses to questions for the record submitted to 
      Julian Enoizi..............................................   224










 
                   HOW DO WE ENCOURAGE GREATER FLOOD
                     INSURANCE COVERAGE IN AMERICA?

                              ----------                              


                         Friday, March 10, 2023

             U.S. House of Representatives,
                            Subcommittee on Housing
                                     and Insurance,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 9 a.m., in 
room 2128, Rayburn House Office Building, Hon. Warren Davidson 
[chairman of the subcommittee] presiding.
    Members present: Representatives Davidson, Posey, 
Luetkemeyer, Norman, Fitzgerald, Garbarino, Flood, Lawler, De 
La Cruz, Houchin; Velazquez, Tlaib, Pressley, Garcia, Williams 
of Georgia, Horsford, and Pettersen.
    Ex officio present: Representative Waters.
    Chairman Davidson. The Subcommittee on Housing and 
Insurance will come to order.
    Without objection, the Chair is authorized to declare a 
recess of the subcommittee at any time.
    Today's hearing is entitled, ``How Do We Encourage Greater 
Flood Insurance Coverage in America?''
    I now recognize myself for 5 minutes to give an opening 
statement.
    Welcome to the first hearing of the Housing and Insurance 
Subcommittee for the 118th Congress. I am confident that this 
will be a productive subcommittee, and I look forward to 
working with the ranking member and my colleagues to tackle 
issues that are affecting Americans across the country.
    Before we begin, I would like to note that the ranking 
member of the subcommittee, Representative Cleaver, could not 
be with us today, as he is currently recovering from a recent 
surgery. I wish him a safe and speedy recovery, and I look 
forward to his return. And thank you to Congresswoman Garcia 
for filling in for him today.
    Again, today's hearing is entitled, ``How Do We Encourage 
Greater Flood Insurance Coverage in America?'', and will 
highlight one of the most widespread and devastating issues 
affecting our country: flooding. Flooding has been and will 
continue to be one of the most-dangerous vulnerabilities facing 
millions of Americans in their homes.
    The National Flood Insurance Program (NFIP) currently 
covers 4.7 million policyholders, and is worth over $1.3 
trillion. Despite this, the program does not capture the 
entirety of flood risks facing Americans who live outside 
Special Flood Hazard Areas (SFHAs), as designated by the 
Federal Emergency Management Agency (FEMA), which is what 
brings us here today.
    Statistics show that 20 percent of all flood claims take 
place in areas deemed low- to moderate-risk, so it is important 
that we explore ways to entice greater coverage in flood-prone 
areas outside of the government-created flood maps, 
particularly by expanding the private market, where the 
industry has the ability to underwrite and insure against flood 
risk.
    Despite recent growth in the private flood insurance 
market, which now covers 7 percent of the entire flood 
insurance market, regulatory hurdles are one factor impairing 
the private sector's ability to reach its full capacity. 
Today's hearing will look to examine where those regulatory 
hurdles may exist, at least at the Federal level.
    Additionally, we will also explore barriers that currently 
exist where consumers fail to appreciate their susceptibility 
to flood risk with information that they are given. A critical 
step in strengthening our overall preparedness against 
devastating floods is raising the public's awareness.
    If we explore ways to address both of these issues--first, 
barriers to growing the private market and; second, consumer 
accessibility to accurate information and improving their 
awareness, along with the ability to correct the record--we 
will make great strides to alleviate pressure on the Federal 
Government and taxpayer dollars in the event flooding does 
occur.
    Our witnesses today will provide valuable, holistic insight 
for us, as policymakers, to improve on the current system and 
allow for enhanced protection against floods.
    Their testimony, collectively taken with the future 
testimony regarding the National Flood Insurance Program--
likely our next hearing--will hopefully provide us with a basis 
to pursue legislation that leaves us better off than the status 
quo when it comes to protecting against flood disasters.
    I thank our witnesses for their testimony today, and I look 
forward to the conversation.
    With that, I yield back.
    The Chair now recognizes the acting ranking member of the 
subcommittee, the gentlelady from Texas, Representative Garcia, 
for 4 minutes for an opening statement.
    Ms. Garcia. Thank you, Mr. Chairman.
    And many thanks to Ranking Member Cleaver for asking me to 
sit in for him today during this very important hearing.
    This issue is literally close to home for me, as I 
represent the Houston area, which is particularly prone to 
flood disasters. I am glad we are here today to discuss flood 
insurance. I see it as an urgent issue and an opportunity for 
bipartisanship.
    The solution here is clear: Congress must pass a 
bipartisan, long-term reauthorization of the National Flood 
Insurance Program (NFIP).
    Since 2017, the NFIP has been reauthorized on a short-term 
basis 25 times. It is our responsibility to extend this 
important program on a long-term basis to guarantee 
comprehensive and affordable flood insurance for all Americans 
who need it.
    Since 2000, there has been at least one flood event in the 
United States on at least 300 days of the year. And in 2021, 
all 50 States and the District of Columbia were affected by 
flooding.
    And while States along the coastline, like my home State of 
Texas, are most at risk, data shows that flooding happens 
almost as often in inland States as in coastal States. In fact, 
99 percent of the U.S. counties are impacted by flooding 
yearly. This means that no one is safe from a flood event 
impacting their homes, their businesses, and their lives. 
Flooding cost more than $85 billion in damage and economic 
losses in 2021 alone and is responsible for two-thirds of the 
cost of all natural disasters combined.
    I would like to point out that natural disasters, 
particularly flood events, disproportionately impact low-income 
Americans and Americans of color. Chairman McHenry has directed 
each subcommittee to consider diversity and inclusion issues 
during all of our hearings and to weave them in, as our 
Subcommittee on Diversity and Inclusion was eliminated. As 
former Vice Chair of that subcommittee, I would like to very 
much make it clear that flood insurance is not just a financial 
or industry-related issue; it is an issue of equity, diversity, 
and inclusion.
    This context lays out why it is so essential that we work 
together across the aisle to reauthorize the NFIP on a long-
term and comprehensive way. Currently, the NFIP is authorized 
until September of this year. Unless we authorize the program, 
its authority to provide new flood insurance contracts will end 
and its ability to borrow funds from Treasury will be all but 
erased.
    Clearly, we cannot let this happen. The impacts would be 
devastating. And it is far past time that we prioritize the 
long-term reauthorization rather than kicking the can down the 
road once again.
    In addition, we must also work on greater private industry 
participation in flood insurance to ensure a variety of options 
and plans for Americans seeking coverage. The name of the game 
here is affordability, widespread access, and inclusion for all 
groups in the flood insurance space, particularly as we are 
only seeing flood events worsen as a result of climate change.
    I would like to thank our witnesses for being here today, 
and I look forward to a very productive discussion this 
morning.
    Thank you, Mr. Chairman, and I yield back.
    Chairman Davidson. Thank you.
    The gentlelady yields back, and I now recognize the 
gentleman from Missouri, Mr. Luetkemeyer, for 1 minute.
    Mr. Luetkemeyer. Thank you, Mr. Chairman. Just a point of 
personal privilege for a moment.
    Today is the last day for my financial services expert, 
Lucas West, to be with us. Lucas is leaving to go to the 
private sector. He has been with us for over 9\1/2\ years, and 
over 5 years as my financial services advisor, expert, 
confidant, all those sorts of things.
    So, I wanted to introduce Lucas as the brains of the 
operation. I am just the face. He is the guy who probably knows 
more about it than I do. And so, as a result, I have always 
leaned on him for his expertise and advice.
    As we all know, our long-time staff members become almost a 
part of the family. We spend as much time or more with them 
than we do with our own family sometimes. So, it is a 
bittersweet day for us from the standpoint of losing a family 
member. But, by the same token, we are excited for this moment 
because Lucas gets to begin the next step of his career.
    And with that, we are very happy for him, we look forward 
to continuing to work with him down the road, and we would 
appreciate you extending our support for him in his next move.
    Thank you, Mr. Chairman. I will yield back.
    Chairman Davidson. Thank you.
    The gentleman yields back.
    Today, we welcome the testimony of a great panel of 
witnesses who hopefully will help us do what the gentlelady 
from Texas said, extend this flood insurance program so that we 
have some clarity in the market, but also do it in a way that 
addresses the concerns that you will share today.
    First, Mr. Julian Enoizi. Mr. Enoizi is the global head of 
the Public Sector Practice for Marsh McLennan's Guy Carpenter 
reinsurance brokerage. Prior to his tenure at Marsh, he was the 
CEO of Pool Re, the United Kingdom's government-backed 
terrorism reinsurance mutual, for almost a decade, and he has 
worked at several leading insurance companies throughout 
Europe.
    Second, Mr. Christopher Heidrick. Mr. Heidrick is the owner 
and principal of Heidrick & Company Insurance and Risk 
Management Services LLC, and is testifying on behalf of The Big 
``I.'' He has a long and successful career in the insurance 
industry at companies like Prudential and Marsh. His current 
role at his Florida-based company has him advising clients, 
colleagues, and local and State organizations about all aspects 
of the National Flood Insurance Program and private flood 
insurance.
    Third, Mr. Patrick Small. Mr. Small is the president of 
DUAL Specialty Flood and executive vice president at DUAL North 
America, and is testifying on behalf of the Wholesale & 
Specialty Insurance Association. He has 30 years of experience 
in the insurance industry and is both resident and nonresident 
licensed in all States for property and casualty, life and 
health, and surplus lines. He is a member of the Association of 
Lloyd's Brokers and is the current chairperson of the board.
    Fourth, Dr. Carlos Martin. Dr. Martin is both the David M. 
Rubenstein Fellow at the Brookings Institution, and the 
director of the Remodeling Futures Program at Harvard 
University's Joint Center for Housing Studies. He earned his 
Ph.D. in civil and environmental engineering from Stanford 
University.
    We thank each of you for taking the time to be here.
    Each of you will be recognized for 5 minutes to give an 
oral presentation of your testimony. And without objection, 
each of your written statements will be made a part of the 
record.
    Mr. Enoizi, you are now recognized for 5 minutes to give 
your oral remarks.

    STATEMENT OF JULIAN ENOIZI, HEAD OF PUBLIC SECTOR, GUY 
             CARPENTER, ON BEHALF OF MARSH MCLENNAN

    Mr. Enoizi. Subcommittee Chairman Davidson and Ranking 
Member Cleaver, my name is Julian Enoizi, and I am part of 
Marsh McLennan, the world's leading professional services firm 
in the areas of risk, strategy, and people.
    We are a U.S. company with more than 85,000 colleagues 
worldwide, advising public- and private-sector clients in 130 
countries. With more than 150 years of experience, we advise 
individuals, businesses, governments, and communities in 
analyzing their exposures, implementing solutions, and 
addressing and mitigating the financial impact of natural 
disasters through insurance and other disaster risk management 
tools.
    Despite being a prevalent natural hazard, flood risk is 
underestimated, contributing to an underinvestment in 
resilience, policy decisions that exacerbate the situation, and 
insurance solutions that are consequently inadequate.
    Global economic losses from floods have increased a 
staggering amount, nearly 70 percent in the 15-year period 
ending in 2021. We must, therefore, act collectively, 
government and industry, to counter this increasing incidence 
of flooding through enhanced access to flood risk data, which 
will foster greater investment in flood protection and smarter 
land-use planning decisions. Moreover, it is a matter of fact 
that individuals and communities with flood insurance recover 
better and faster than those without.
    We believe that there are five ways to mitigate the impacts 
of flood. First, strengthening the NFIP. Risk Rating 2.0 will 
help align premiums with risk but must not negate or hinder 
efforts to maintain the pooling principle upon which insurance 
is founded. Moreover, with more than $20 billion of debt and 
hundreds of millions of dollars in annual interest payments, 
the NFIP needs both reform and long-term reauthorization to 
become the sustainable, world-leading flood insurance program 
it has the potential to be.
    Second, protecting U.S. taxpayers with reinsurance. 
Reinsurance provides both assurance that the NFIP claims will 
be paid, as well as private capital to protect the program, and 
ultimately, U.S. taxpayers. Thus, when Hurricane Harvey struck 
in 2017, it triggered a full reinsurance payout, saving 
taxpayers over $850 million.
    Third, growing the private flood insurance market. The 
Administration has proposed reforms that supplement and support 
the NFIP while also recognizing that private flood insurance 
has a role to play. The private market should, therefore, be 
encouraged and enabled to innovate alongside the NFIP to find 
ways to further close the flood insurance protection gap.
    Fourth, embracing innovations and new solutions. Parametric 
solutions are a form of risk transfer that can contribute to 
improving climate resilience. Unlike traditional indemnity-
based property insurance, pricing is simply calculated on the 
probability that water rises above a certain level. This 
ensures a welcome and expedited payout to those who have 
suffered loss.
    For example, community-based catastrophe insurance (CBCI) 
is one such parametric product, pioneered by Marsh McLennan, 
providing disaster insurance to a local government entity 
wishing to cover a group of properties. It enhances financial 
resilience by simultaneously providing affordable coverage and 
creating incentives for risk reduction. And recently, New York 
City, with our help, has harnessed CBCI's twin approach to 
increase the resilience of low- and medium-income households.
    And fifth, risk reduction. The insurance sector has a proud 
history of incentivizing individual risk reduction actions, but 
systemic risks require systemic solutions, and today's growing 
flood exposures must be addressed at the community, regional, 
and national levels. Congress has taken strong steps to 
facilitate community-level risk reduction through increased 
funding and prioritization frameworks such as the Community 
Disaster Resilience Zones Act, and should continue to equip 
communities with the capabilities needed to take meaningful 
action.
    An example of a program that already reflects these five 
approaches is the U.K.'s flood reinsurance program, Flood Re, a 
mutual reinsurance company that operates as a not-for-profit 
public-private partnership. The program makes affordable flood 
insurance available to more than half-a-million U.K. homeowners 
in high-risk areas. And it creates a vehicle able to 
efficiently share U.K. flood risk with the private reinsurance 
market and promotes better post-flood reconstruction behaviors 
as a result.
    Given the scale and complexity of flood risk, it is my 
humble submission that the only solution to this problem 
involves an all-of-society approach to fostering resilience. In 
this regard, insurance risk transfer has an important role to 
play in incentivizing hazard mitigation through behavioral 
change, better building codes, and community resilience 
planning.
    I urge the government, therefore, to consider initiatives 
such as pairing FEMA's Building Resilient Infrastructure and 
Communities (BRIC), with risk transfer solutions such as CBCI, 
to demonstrate the combined value of risk reduction measures 
when partnered with risk transfer. Indeed, I close by 
encouraging FEMA to do more in this field and offering our help 
as it seeks to do so.
    Thank you for your time today and for the opportunity to 
present my remarks. I look forward to your questions.
    Thank you.
    [The prepared statement of Mr. Enoizi can be found on page 
42 of the appendix.]
    Chairman Davidson. Thank you.
    Mr. Heidrick, you are now recognized for 5 minutes to give 
your oral remarks.

  STATEMENT OF CHRISTOPHER W. HEIDRICK, OWNER AND PRINCIPAL, 
HEIDRICK & COMPANY INSURANCE AND RISK MANAGEMENT SERVICES, LLC, 
  ON BEHALF OF THE INDEPENDENT INSURANCE AGENTS & BROKERS OF 
                    AMERICA (THE BIG ``I'')

    Mr. Heidrick. Good morning, Chairman Davidson, Ranking 
Member Cleaver, and members of the committee. My name is Chris 
Heidrick, and I am pleased to be here today on behalf of the 
Independent Insurance Agents and Brokers of America, or The Big 
``I.''
    The Big ``I'' is the nation's oldest and largest trade 
association of independent insurance agents, representing more 
than 25,000 agencies across the country. Many of these agents 
work with write-your-own companies and private flood carriers. 
It is from this vantage point that Big ``I'' members understand 
the capabilities and challenges of the market when it comes to 
insuring against flood risks.
    I am the owner of an independent insurance agency located 
in Sanibel, Florida. I regularly counsel homeowners and small 
businesses regarding flood insurance. I also hold the 
designation of associate in national flood insurance. I 
previously served as chairman of The Big ``I'' Flood Insurance 
Task Force, and chairman of the Flood Insurance Producers 
National Committee, an organization that provides technical 
assistance and advice on FEMA operations.
    Sanibel Island was ground zero for Hurricane Ian 5 months 
ago. The island was completely inundated by 4 to 12 feet of 
water and was inaccessible by car for 3 weeks after the 
hurricane. I would like to thank the NFIP leadership that 
visited Sanibel in the aftermath of the storm. In general, 
flood insurers, both NFIP and private, provided our clients 
with a quick response and provided my agency with great support 
following Ian.
    When considering flood insurance, people often want to know 
when the last local flood occurred. I often tell them that, 
more and more often, those events are things that have never 
occurred before, and may even be difficult to imagine. Even on 
a barrier island in the Gulf of Mexico, some homeowners 
underestimated their risk of flooding. The last time Sanibel 
was inundated by a storm surge was 1926, almost 100 years ago.
    I also grew up along the Jersey Shore. A week before 
Hurricane Sandy, no one would have thought that a storm surge 
would wash away homes that had been there for 100 years. And a 
week before Hurricane Harvey, no one in Houston would have 
thought it possible to get 5 feet of rain from one storm.
    On Sanibel, some people felt safe from flooding because 
they were in the center of a barrier island that was only 
between 1 and 2 miles wide. If those people are underestimating 
their risk of flooding, what should we expect in less-risky 
areas?
    As you would guess, agents like myself who serve coastal, 
high-risk flooding areas sell the most flood insurance and are 
the most familiar with the NFIP. However, to make progress with 
respect to the number of U.S. households insured for the peril 
of flood, we need to focus on less-risky areas.
    In all areas, it is important to recognize that property 
owners have limited time and attention to dedicate to the 
purchase of flood insurance. When someone is buying a home, 
they are also often changing jobs, selling another home, 
coordinating a move, applying for a mortgage, enrolling 
children in a new school, and much more.
    In perceived low-risk areas, homeowners have often been 
told by family, friends, and others that flood insurance is not 
needed before they even come to meet with their insurance 
agent. There simply isn't enough time for an agent to convince 
them otherwise. So, we need to change the narrative so that all 
of those trusted advisors are advising home buyers that flood 
risk is real and that consumers should protect themselves.
    Purchasing flood insurance can be a daunting and complex 
process, and in this digital age, there is often a rush to cut 
corners under the erroneous notion that an automated process 
can replace human interaction and expertise. In the case of 
flood insurance, this could not be further from the truth. Any 
kind of proposal that undercuts the value and trusted role that 
insurance agents and brokers play in this process could have a 
negative impact on the goal of increasing flood insurance 
participation rates.
    Additionally, agents play a critical role in retaining 
flood policies and preventing a decrease in participation 
rates. When a policyholder pays off a mortgage, or is no longer 
required to carry flood insurance due to a map change, agents 
are the people who speak with those homeowners and recommend 
that they retain their coverage. To achieve the goal of 
increasing the number of households insured for the peril of 
flood, policy retention is just as important as writing new 
policies.
    And what can Congress do in the short term to move the 
needle? You can make modest policy changes that could help grow 
the market and protect consumers.
    For example, The Big ``I'' supports H.R. 900, which was 
recently introduced by Representatives Luetkemeyer and Castor. 
The bill would amend the National Flood Insurance Act of 1968 
to clarify that private flood insurance can satisfy NFIP's 
continuous coverage requirements.
    The Big ``I'' also supports allowing refunds for unearned 
premiums for the midterm cancellation of NFIP policies if a 
consumer elects to purchase a policy from the private flood 
insurance market.
    Thank you again for your time, and I look forward to any 
questions that you may have.
    [The prepared statement of Mr. Heidrick can be found on 
page 56 of the appendix.]
    Chairman Davidson. Thank you.
    Mr. Small, you are now recognized for 5 minutes for your 
oral remarks.

STATEMENT OF PATRICK SMALL, PRESIDENT, DUAL SPECIALTY FLOOD, ON 
   BEHALF OF THE WHOLESALE & SPECIALTY INSURANCE ASSOCIATION 
                             (WSIA)

    Mr. Small. Good morning, Chairman Davidson, Ranking Member 
Cleaver, and members of the subcommittee. My name is Patrick 
Small, and I am the president of DUAL Specialty Flood.
    My firm is a member of the Wholesale & Specialty Insurance 
Association, and we thank you for inviting me here today to 
testify about my perspective and experience as a professional 
in the private flood insurance market.
    DUAL operates as a managing general underwriter and is a 
leading program administrator in the U.S., offering specialized 
financial lines, property, and casualty insurance products. We 
place coverage in all 50 States on a surplus lines basis, 
working directly with retail agents and brokers, wholesale 
brokers, and insurance carriers.
    In 2022, DUAL placed $1.5 billion in gross written premium 
amongst all of our product lines, with over 30 carrier partners 
and 30-plus underwriting programs across 7 operating 
subsidiaries.
    DUAL's Specialty Flood Division focuses both on private 
primary and nexus flood for both commercial and residential 
consumers, and places $65 million in annual premium or about 5 
percent of DUAL's annual premium production.
    I joined DUAL in 2014. That was around the same time that 
the private flood market began to develop as a result of the 
2012 reforms supporting the direct engagement of the private 
market.
    Since then, we have steadily grown our product lines as 
well as market partnerships. And, generally speaking, consumers 
whose risks exceed or do not fit within the terms and limits of 
the NFIP or whose risks are declined by the standard market 
will have agents and brokers look to our markets for solutions.
    The partnerships between the consumer's agent and the 
wholesale partner is critical. And I am pleased to be 
testifying with two firms that I regularly work with in this 
capacity.
    My written testimony includes additional facts and figures 
about the size of the surplus lines flood insurance market and 
its growth since 2011. To touch on this briefly, I will 
reference numbers available from California, Florida, Texas, 
and New York, as they have been collecting and reporting this 
data since at least 2011. While not a full picture, these four 
States collectively account for nearly 50 percent of the U.S. 
surplus lines insurance market. In these four States, surplus 
lines flood insurance premium has grown from $119 million in 
2011 to $437 million in 2022, or an average of 14 percent per 
year.
    And the number of policies written in these States during 
this time has actually increased even faster. In 2011, there 
were only 11,650 surplus lines flood policies written in these 
4 States, but in 2022, we had over 204,000 policies written, 
with an average increase of 33 percent per year.
    There is no definitive source of information about the size 
of the private flood insurance market, but our limited sources 
clearly show that the private market is still very much in its 
infancy, dwarfed by the 4.7 million flood insurance policies 
written by the NFIP.
    The private market will continue to expand with the general 
push towards rate adequacy and sustainability, in which the 
NFIP is clearly helping to lead the way. We have seen this 
steadily increase as a result of the clarifications made by 
Federal banking agencies, as well as State actions to modernize 
the regulatory environment, especially in our surplus lines 
market.
    I see steps in the right direction with the impact of Risk 
Rating 2.0. The emphasis that the NFIP is now putting on inland 
modeling as well as the proper valuation of a property are key 
components to underwriting accuracy and rate development for 
any type of property program.
    As to what the Federal Government can do to help continue 
this trend, we did note a few legislative proposals that we 
support in our testimony. Two of those measures are: one, the 
continuous coverage provision, to allow a consumer to move 
freely between the NFIP and the private market; and two, 
allowing the NFIP to return unearned premium for mid-term 
cancellations.
    Throughout this whole process, we must also provide a 
continuum of education to our consumer base. which includes 
both agents and their clients. And really, it is the emphasis 
to highlight or alert the insured to real versus perceived 
exposures to flooding. The insurance buyer must understand 
their risk and have a general idea for the potential for 
protective coverage to lead to better take-up.
    Again, thank you for having me. We look forward to working 
with you and your staff to increase flood coverage across the 
nation.
    Thank you very much.
    [The prepared statement of Mr. Small can be found on page 
74 of the appendix.]
    Chairman Davidson. Thank you, Mr. Small.
    Dr. Martin, you are now recognized for 5 minutes to give 
your oral remarks.

  STATEMENT OF CARLOS E. MARTIN, DAVID M. RUBENSTEIN FELLOW, 
BROOKINGS INSTITUTION, AND PROJECT DIRECTOR, REMODELING FUTURES 
 PROGRAM, HARVARD UNIVERSITY'S JOINT CENTER FOR HOUSING STUDIES

    Mr. Martin. Thank you.
    Good morning, Chairman Davidson, Representative Garcia, and 
members of the subcommittee. Thank you for the opportunity to 
present research on the challenges that households face with 
increasing and increasingly-costly floods.
    NFIP has faced numerous hurdles since its creation in 1968, 
not the least of which was the increasingly-poor mismatch 
between its policy rates and actuarial risk. The passage of 
congressional reform a decade ago, along with FEMA's consequent 
Risk Rating 2.0 efforts, have improved the program's ability to 
reflect flood risk more accurately, but they have also 
foregrounded the affordability and access concerns that we are 
discussing today.
    I identify six themes from the literature relevant to the 
widespread adoption of flood insurance.
    The unaffordability of flood insurance is the first and 
most-salient barrier to broader take-up. The creation of a 
well-designed, means-tested assistance program for low-income 
property owners with high-risk properties could more 
efficiently help households burdened by NFIP rate increases and 
effectively expand the marketplace for any provider at the same 
time.
    Second, most consumers have limited awareness of their 
actual flood risk and may not see the need to purchase flood 
insurance if it is not required. Highly-vulnerable groups, such 
as renters, have little to no information or support for their 
housing decisions. Better property disclosures and user-
friendly information channels would help households make those 
informed decisions.
    Third, Federal institutions that require flood insurance 
may not have clear, consistent, and enforced requirements, 
especially for the future flood risks that are material to 
homeowners' exposures but not integrated into the terms of a 
30-year mortgage today. Updates to reporting and fiduciary 
regulations of consumer financial products for which flood risk 
is relevant could lead to immediate flood insurance take-up and 
a better integration of consumers' financial tools.
    Fourth, consumers are often in the dark about their own 
individual coverage. Understandable and uniform coverage, 
premium, and treatment information, including clear language 
about all policies for a property, as part of a national 
insured's bill of rights could increase homeowners' awareness 
of coverage gaps and lead them to purchase more and better 
flood policies.
    Fifth, we could simply reduce the risk that makes flood 
insurance so expensive. We have massively underfunded 
mitigation at both the property and infrastructure levels, 
including thoughtful buyouts for repetitive lost property. More 
resources to Federal mitigation programs, particularly for 
vulnerable communities, would make offering flood insurance a 
sounder proposition for all carriers.
    And finally, the lack of transparent data on properties, 
property owners, and their respective insurance policies 
prohibits a sound assessment that can inform critical policy 
questions such as the one posed in this hearing's title. Open 
data are necessary to measure disparities between policyholders 
by price, coverage, and treatment, which is evidence needed to 
ensure that Federal decisions lead to fair, efficient, and 
effective outcomes. Centralized national reporting requirements 
akin to mortgage disclosure data would support monitoring, 
evaluation, and corollary research.
    Along with these broad categories of opportunities to grow 
flood insurance markets lies the expansion of the marketplace 
of providers. Fortunately, the six categories I have mentioned 
benefit any type of flood insurance carrier. However, we know 
too little about how the principles of fairness, efficiency, 
and effectiveness would play out under that scenario.
    Historically, poor reporting of private insurance data, 
highly variable across the overseen State Governments, prevents 
evidence-gathering with respect to one provider's ability to 
expand the consumer pool for flood insurance over another, such 
as the currently-dominant NFIP option.
    We know that one benefit of NFIP has been a closer 
alignment to mitigation efforts and the broader Federal 
disaster risk management framework.
    Efforts to increase private flood insurance should not only 
consider its effectiveness in reducing the cost of Federal 
operations, but also the cost that the Federal Government 
incurs of post-flood relief and recovery when insurance claims 
payouts are insufficient, and of pre-flood mitigation 
infrastructure that incentivizes private insurers to provide 
policies in the first place.
    Of course, Congress should view the fair distribution of 
costs and benefits across all policyholders as being the 
primary criterion for moving forward.
    We are living in a moment when the unwritten contract 
between insurers and government is being extensively rewritten. 
Over 100 years ago, private insurers stopped issuing fire 
policies because of the great urban fires. In the 1920s, 
private insurers stopped issuing flood policies after the great 
Mississippi floods. This led to the eventual creation of the 
NFIP.
    Expanding flood insurance to more households whose 
properties and communities are vulnerable is a laudable and 
necessary goal, but we should tread carefully, lest we find 
ourselves in a position similar to 1968.
    Thank you very much.
    [The prepared statement of Dr. Martin can be found on page 
60 of the appendix.]
    Chairman Davidson. Thank you, Dr. Martin.
    And we will now turn to Member questions. The Chair now 
recognizes himself for 5 minutes for questions.
    Because it is a government entity, the National Flood 
Insurance Program needs legal authorization from Congress in 
order to sell its insurance. Unfortunately, that authority has 
been caught up in our broken appropriations process since the 
last long-term NFIP bill expired in 2017.
    Given the very real possibility that we might face a 
government shutdown come October and, with it, a lapse of the 
National Flood Insurance Program, I have introduced H.R. 1392, 
the National Flood Insurance Program Extension Act of 2023, 
which would reauthorize the program through December of 2024, 
giving this committee the time and deadline freedom it needs to 
do a deep dive on flood insurance reforms.
    Does anyone on the panel think that giving the NFIP nearly 
2 years of stability would be a bad thing? Do each of you 
support H.R. 1392 over this endless cycle of short-term 
reauthorizations, punting the ball down the road, and 
brinkmanship on looming deadlines? Is this a bad thing, to 
extend it and provide 2 years of certainty?
    Mr. Enoizi. Mr. Chairman, I would say, absolutely not. I 
would say we would support anything relating to stability and 
long-term extension.
    In my previous role, I ran an entity similar to the NFIP, 
albeit in terrorism, and we had 5-year reviews, which gave a 
period of stability and an ability to look at modernization of 
the program in order that it could keep pace with changes in 
all sorts of environments. And I found that very valuable.
    Chairman Davidson. Yes. Thank you for the clarity on that. 
And I hope we can find consensus.
    Anyone else?
    Mr. Heidrick. Mr. Chairman, The Big ``I'' agrees that job 
one is to not allow the National Flood Insurance Program to 
lapse.
    Beyond that, The Big ``I'' does support a long-term 
reauthorization of the National Flood Insurance Program, and we 
would be happy to work with you and your staff on working out 
the details.
    Chairman Davidson. Yes.
    I think we will just go down the line, if you--
    Mr. Small. Yes, I think we would concur. The Wholesale & 
Specialty Insurance Association would also support that. Even 
being in the private market, one sustains the other. The NFIP 
sustains the private markets and vice versa. I think there is a 
great opportunity. So, extension would be in our favor.
    Chairman Davidson. Thank you.
    Mr. Martin?
    Mr. Martin. Yes, program stability is absolutely critical. 
I would encourage the subcommittee to consider reauthorization 
for even longer, as much as is possible.
    Chairman Davidson. Thank you.
    As everyone knows, the National Flood Insurance Program is 
by far the largest provider of flood insurance, roughly 93 
percent of all residential flood insurance coverage, while 
private insurance makes up the rest.
    There is also nothing like the public-private partnerships 
for risk-sharing that we have seen in markets like mortgage 
insurance, where in 2021 the government FHA/VA share is around 
55 percent of the private mortgage insurance market and PMI is 
about 45 percent. That market tends to work well in delivering 
both ample consumer choices and a government baseline option.
    Mr. Small, is there any reason why we could not aim to 
replicate that sort of model for flood insurance going forward, 
where NFIP plays a big but not dominant role while the private 
capital takes on more risk and supplies new options?
    What steps would we need take in order to move us closer in 
that direction so that we could have a more stable mortgage 
insurance market model than the all-or-nothing model we 
basically have?
    Mr. Small. Yes. No, I like that--thank you for the 
question, and I like that observation. I think the PMI model, 
where you entertain the initiation of purchasing a flip policy 
at point of loan origination, is excellent. We have done a lot 
of work with lenders looking at loan origination and through 
the lifecycle of servicing a loan, in terms of placing flood 
and maintaining flood insurance, both with the NFIP and the 
private market.
    And I think the unique opportunity with the NFIP is, if you 
have a nationally-promulgated product, and you have write-your-
own carriers, and plenty of them, and/or going direct to the 
NFIP, there is a real opportunity to tighten our relationship 
with lenders throughout the nation. Whether the vehicle is PMI 
and/or just introducing flood insurance at point of loan 
origination, it is highly critical and very important.
    Chairman Davidson. Yes. Thank you.
    And, Mr. Heidrick, briefly--I apologize for cutting you a 
little short on my time--maybe a quick suggestion that would 
help agents?
    Mr. Heidrick. Thank you, Mr. Chairman.
    Education is the most-important priority, not just for 
consumers but for their trusted advisors as well. We as a 
society need to recognize the risk of flooding in lower-risk 
areas just as well as in higher-risk areas.
    In addition to consumer education, affordability is a 
critical factor, because people cannot buy a product that they 
can't afford to have, even if they do recognize the risk.
    Chairman Davidson. Thank you.
    The gentlewoman from Texas, Ms. Garcia, is now recognized 
for 5 minutes.
    Ms. Garcia. Thank you, Mr. Chairman.
    And thank you to the witnesses for being here this morning.
    As I mentioned in my opening statement, I represent the 
Houston area, which is particularly prone to flooding. We all 
witnessed the disaster of Hurricane Harvey in 2017 that left 
much of my district under water. And while, luckily, we have 
not had a flood event since then, the flooding has not stopped, 
and the potential for disaster is always, always looming. In 
fact, any rain event makes us go for cover and get ready.
    And to make matters worse, fewer households in Houston have 
flood insurance now than when Harvey hit, largely due to the 
lack of affordability.
    Mr. Martin, you wrote in your testimony about take-up, 
highlighting that Congress must ensure that more Americans are 
opting to have flood insurance coverage. How can we do that? 
What provisions should be in the reauthorization that would 
make sure more individuals and families take advantage of the 
program? And what role might private insurance play in this?
    Mr. Martin. Certainly, private insurance is playing a much 
larger role, and will likely continue to play a larger role as 
the legislative reforms from a decade ago as well as Risk 
Rating 2.0 implementation continues.
    I would certainly recommend the subcommittee look at a wide 
range of options, many of which we, all of the panelists, agree 
to, with regard to information provision, data sharing, et 
cetera, so we can monitor these effects. But, ultimately, a 
means-tested assistance program for low-income households in 
high-risk areas that will need to be able to have additional 
resources to be able to afford their insurance policies is 
critical.
    Ms. Garcia. Thank you.
    I would like to turn now to the the NFIP's Risk Rating 2.0 
system--I think one of the witnesses allude to it--designed to 
distribute coverage rates more equitably and accurately. This 
effort, while important, does mean that some individuals would 
face increased rates.
    Mr. Martin, as we consider policy related to the NFIP, how 
can we balance affordability with accurate risk assessment, 
especially as risk for flood events continues to rise?
    Mr. Martin. This is the challenge that not only this 
committee has faced but that has been the subject of 
conversation since the legislative reforms from a decade ago. 
The ability for NFIP to match its rates with actual actuarial 
risk is allowing many more private insurers and carriers to be 
able to provide services in this area.
    That doesn't mean that low-income households who can't 
afford it will suddenly be able to afford it. There is a 
likelihood that more competition will be helpful and could 
provide reduced premium rates based on the levels of analytical 
data tools that private insurers could bring to the table, but 
this will continuously be a challenge and one that we need to 
monitor.
    I would just recommend that we still consider the use of 
data and the availability of data, to be able to understand who 
is excluded and who is included.
    Ms. Garcia. Okay. Thank you.
    As you likely know, about 25 percent of damage to homes 
from flooding happens outside of high-risk flood zones. And 
households are only required to have flood insurance if they 
are located within the high-risk zones.
    Mr. Martin, how can we address this problem? Do high-risk 
zones need to be updated? And if so, how often?
    I know that is a big issue in our area, the establishment 
of the floodplain maps, the flood zones.
    Mr. Martin. That is exactly right. The dynamic nature of 
hydrological and climatological conditions, particularly due to 
better information about climate change's effects on sea-level 
rise and more extreme flooding events--a lot of these 
conditions requires a constant monitoring and constant 
updating.
    One could argue that the more frequently that information 
is updated for NFIP, the better. So, certainly, more resources 
to making sure that we have the best scientific information to 
be able to make those changes is helpful.
    Ms. Garcia. Okay.
    I know one of the other witnesses mentioned it, but how 
does it--where is the play between fully addressing this and 
establishing the zones, but then the educational process 
involved and making sure homeowners know what the potential 
risks are and what the liability is?
    I know in my area, language also becomes a barrier. A lot 
of these plans, a lot of the outreach is only in English. It is 
not in Spanish; it is not in the Vietnamese pockets that I 
have. And, of course, the Houston area also has a lot of 
Chinese Americans.
    What can we do more in terms of educational outreach for 
people to know the potential risks?
    Well, he had 2 seconds.
    Sir?
    Chairman Davidson. Yes, please.
    Ms. Garcia. Mr. Martin?
    Mr. Martin. I didn't know if you wanted another witness to 
respond.
    We can certainly do things that warn people making 
decisions about properties and about housing, like property 
disclosures. And that should be included for renters as well. 
Unfortunately, we have very variable property disclosure 
information across the States, which is a State-dictated 
policy. But we do have national policy regarding certain things 
like lead-based paint, which includes renters.
    So, there are opportunities to think about disclosure 
opportunities, when people are making those housing decisions, 
to think about their flood risk as well.
    Ms. Garcia. Okay. Thank you.
    And thank you, Mr. Chairman.
    Chairman Davidson. Thank you.
    The gentleman from Florida, Mr. Posey, is now recognized 
for 5 minutes.
    Mr. Posey. Thank you, Mr. Chairman.
    Mr. Heidrick, some people have suggested flood insurance 
premiums should be further adjusted to account for projected 
climate change. Why should flood insurance premiums be based on 
anything other than the flood risk for the current insurable 
year?
    Mr. Heidrick. I'm sorry, Congressman. I didn't hear the 
beginning part of that question. What I heard is, why should 
premiums be based on something other than risk? Is there 
something more to that?
    Mr. Posey. Yes. Some are proposing that flood insurance 
premiums should be further adjusted to take climate change into 
consideration. And the question is, why should anything more 
than the risk for the current year be the subject of it?
    Mr. Heidrick. Got it. Thank you for that question.
    That question is probably better answered by an insurance 
company that actually prices risk, as opposed to an insurance 
agent. I am not certain exactly how those rates are calculated.
    Mr. Posey. Okay.
    Mr. Small, we are going to commit to actuarial flood 
insurance premiums and premium subsidies for low- to moderate-
income homeowners, and we know which homes are subject to 
mandatory insurance.
    What are the reasons to have the Federal Government selling 
flood insurance instead of merely turning its business over to 
the private sector and State insurance regulators? Could the 
private sector handle this need?
    Mr. Small. I think when we look at risk selection, 
regardless of moderate or Special Flood Hazard Areas, we kind 
of look at it the same. We look at the risk. We develop rates 
for sustainability and accuracy, in terms of being actuarially 
sound. So, there is a component there to getting the insurance 
component correct in order to have a sustainable business and 
to be able to fund claims when they come in.
    We don't really differentiate between a B, C, or X, or a 
moderate-risk zone, over an A or V zone. We look at the risk, 
we look at the geography and the components that go into that, 
develop a rate, and then determine if that is a business that 
we can sustain and be in.
    I am not sure that addresses your question, but that is 
kind of how rate development works when we look at the flood 
business.
    Mr. Posey. Yes. That is good insight into it.
    We know that there are many properties that have had 
numerous claims in the past. We have heard reports of multiple 
total-loss payments for property. Do you think it is wise or in 
the public interest to continue covering risks that are almost 
certain to occur?
    Congressman Luetkemeyer said one time, if a guy has a crash 
every single year, sooner or later the insurance companies 
won't cover him. Do you think it is wise that we continue to 
cover these total-loss properties year after year? Anybody?
    Mr. Small. That is kind of a difficult question.
    I think in the private market, yes, that would be a real 
challenge for us to make sure that we have sustainability in 
that particular insured.
    In many insurances, when you have claims or repetitive 
claims, there becomes an issue, and you have to look for other 
markets and/or mitigate in your reconstruction of your loss in 
order to become insurable.
    Obviously, NFIP has a social element of responsibility to 
help Americans maintain their homes in situations of 
catastrophe.
    It is a delicate balance, for sure. But, you have hit on 
something that, yes, will be a challenge for the private 
market, and probably a challenge for NFIP as well, as we think 
about the long-term sustainability.
    Mr. Posey. Thank you.
    Mr. Enoizi, in September, after hurricanes in Florida, 
Fortune Business News reported that the FEMA Director said that 
the Agency's flood maps are useless. ``The maps don't 
accurately tell the people they were in the floodplain in 
Kentucky or Florida.'' The Washington Post had a similar story 
in early December last year. The alleged culprit is, of course, 
climate change.
    Can we expect to get more people signed up for flood 
insurance or can we even have a reliable insurance program or 
accurate premiums if the maps are inadequate, as FEMA is 
claiming? Will insurance ever be able to meet the needs of 
people in harm's way if FEMA can't produce accurate maps?
    Mr. Enoizi. Thank you, Congressman.
    I think in terms of flood mapping, technology is evolving 
all the time. And, certainly, satellite technology enables us 
to do much more in terms of flood mapping. In my remarks, I 
talked about encouraging and enabling FEMA to do more in terms 
of its flood mapping. I think that is something that should 
absolutely be encouraged.
    Mr. Posey. Okay.
    I see my time has expired, Mr. Chairman, so I yield back.
    Chairman Davidson. The gentleman yields back.
    The gentlewoman from California, Ms. Waters, who is also 
the ranking member of the Full Committee, is now recognized for 
5 minutes.
    Ms. Waters. Thank you very much.
    I am going to direct my question to Dr. Martin.
    Dr. Martin, historically, private insurers have receded 
from communities after they were hit hard by catastrophic 
flooding. For example, we have heard from homeowners in Houston 
whose coverage following Hurricane Harvey was dropped by their 
private insurers. We even heard about people who reapplied for 
the private coverage but were shocked to receive notification 
that they were denied coverage.
    Can you discuss how this affects equitable access to flood 
insurance? What does this say about the role of the NFIP?
    Mr. Martin. Thank you for that question, Representative 
Waters.
    And we certainly hear stories in the general press as well 
as researcher anecdotes about, for example, a Houston family 
whose policies are lost either immediately after an event, or 
even, many times, before. And I can't speculate about the 
specific reasons for that single family, their policy being 
dropped or denied, but we certainly look to see what the--we 
would like to see more of what these patterns are in different 
cases.
    There are studies which suggest that many of the 
discriminatory practices that relate to price and coverage have 
been eliminated significantly and diminished. But insurers 
still base rates on credit score, credit-based insurance 
scores. And as I understand it, about 85 percent of home 
insurers use credit-based insurance scores in States where it 
is allowed. So, there is a concern whether there are 
differences and disparities in who gets dropped and under what 
conditions.
    Certainly, if it has to do with the actuarial risk, then 
one would argue that NFIP plays a valuable role, because: one, 
it is a guaranteed policy; two, it conforms to national 
consumer protection rules; and three, there will always be a 
need for a program like NFIP that can distribute risks more 
evenly to include more policyholders.
    Ms. Waters. Dr. Martin, a 2022 study found that worsening 
climate change has more than tripled the risk of a trillion-
dollar megaflood in my own State of California compared to a 
century ago.
    Indeed, earlier this year, we experienced some of the worst 
flooding in the State's history, totaling between $5 billion 
and $7 billion in damages in parts of Los Angeles County. We 
have not only seen life-threatening flooding that took down 
trees and inundated cars, but we also have seen significant 
snowfall that has led to destructive floods.
    These damages can be especially devastating in a State 
where 98 percent of the Californians lack flood risk coverage. 
And for those who do have flood insurance, NFIP accounts for 84 
percent of all policies currently enforced in the State, 
offering a critical lifeline to thousands of families.
    With the threat of more-frequent and severe flooding, this 
could mean that NFIP may take on additional debt in the future, 
but the program is already saddled with legacy debt from 
Hurricanes Katrina and Sandy.
    Interestingly, Republicans were very supportive of 
forgiving part of the NFIP debt when they were in charge. And I 
see no reason that new policyholders should have to pay for the 
legacy debt from floods from nearly 20 years ago.
    Do you agree that Congress should finally and fully forgive 
this legacy debt? How would forgiving the debt support the 
affordability of the NFIP?
    Mr. Martin. Yes, I would agree with that. There is no 
reason for that debt to be held over the head of the program. 
It doesn't benefit future policyholders, it doesn't benefit 
current policyholders, and it certainly doesn't benefit the 
long-term fiduciary stability of the program.
    With the reforms that have occurred in the last 10 years, 
both by the program and legislated through Congress, I believe 
that many of the concerns of longer-term fiduciary standing 
have been resolved, so there is a lot more stability in the 
program.
    Ms. Waters. I agree. And I have legislation that would 
forgive the legacy debt.
    Thank you very much.
    And I yield back the balance of my time.
    Chairman Davidson. The gentlelady yields back.
    The gentleman from Missouri, Mr. Luetkemeyer, who is also 
the Chair of our Subcommittee on National Security, Illicit 
Finance, and International Financial Institutions, is now 
recognized for 5 minutes.
    Mr. Luetkemeyer. Thank you, Mr. Chairman. And 
congratulations on your new role. I look forward to your 
leadership here in the 118th Congress.
    And thank you for holding this hearing today. I think it is 
vitally important that we get some information to our 
colleagues on flood insurance. There are a lot of us on the 
committee--actually, there are only two or three of us who have 
some background on this. Everybody else is new to the committee 
since we last discussed this thoroughly several years ago. So, 
it is a great topic to be start off the Congress.
    Mr. Heidrick, you indicated you supported my bill that 
would allow people to sort of dip their toe in the private 
insurance market and then be able to go back to NFIP. Why do 
you think that bill is important?
    Mr. Heidrick. Thank you for your question, Congressman. And 
thank you for your work on that bill, as it is very important. 
Obviously, The Big ``I'' supports it.
    The bill clarifies for the consumer--or, the consumer can 
leave the NFIP and come back to the NFIP.
    And to be specific in an answer, I have a real example. I 
have a client who is paying $800 a year for their flood 
insurance premium. The house was sold to the next buyer, who 
was able to keep up that premium, right? They take advantage of 
something called a, ``glide path,'' which exists currently in 
Risk Rating 2.0 that moves people from the less-expensive 
premium that they had under the old rating system to their full 
risk rate.
    But the full risk rate on this particular property is 
$8,000. The statute limits the amount that premium can increase 
each year. It protects the value of the home. It is an asset 
for the next buyer in case that person has to sell their 
property and, of course, keeps the cost of flood insurance 
affordable.
    But as that premium increases over time, there may be 
private flood insurance options that are actually more 
attractive to that consumer, whether because it is less 
expensive or it may be better coverage.
    But under the threat that that person may have to return to 
the NFIP at some future time and immediately be subject to that 
full risk rate, that consumer--as an agent, I can't recommend 
to that consumer that they leave for this less-expensive 
solution, because they are giving up the ability to take 
advantage of that glide path over time. Unforeseen 
circumstances could lead that person back to the NFIP at a much 
higher premium.
    Mr. Luetkemeyer. Thank you very much for that.
    Flood insurance is a big issue for me, both on a personal 
basis and from the standpoint of my district. Over two-thirds 
of the Missouri River goes across our State, I have a number of 
miles of the Mississippi, and then I have 1,150 miles of 
shoreline around the Lake of the Ozarks, which is the number-
one recreational lake in the country, and actually has more 
miles of shoreline than the State of California, to give you an 
idea of how big my flood insurance problem is. Even though I am 
an inland State, it is a really big deal.
    So from that standpoint, Mr. Enoizi, does the private 
insurance market have the ability to take on more flood risk?
    Mr. Enoizi. Yes, I believe it does. But it requires--if you 
look at premium as calculated on two factors, frequency and 
severity, both of those have been increasing in previous years, 
and so many of the questions that have already been asked in 
terms of better flood mapping--but also combining this, that if 
you actually look at the numbers that we are talking about, 
there is never going to be enough premium dollars in the 
insurance system to pay for all of the losses that you are 
talking about. So, we have to find ways to marry risk financing 
with risk mitigation.
    And buying on a community basis can achieve that, because 
otherwise you are going to always be trying to sell onesies and 
twosies as opposed to selling to vulnerable communities.
    Mr. Luetkemeyer. One of the things that we talked about in 
some of the early statements that were made is the fact that 
the--that some of all of you made--is the fact that the program 
is not sustainable from the standpoint of the revenue it 
generates. We continue to have losses. We wrote off $16 billion 
in 2017, and we are currently $20 billion in debt. So, 
technically, it is a subsidy program for people who want to 
live along water to be able to take advantage of the view or 
whatever.
    My view is that this program needs to be revenue-neutral. I 
don't see why we have to continue to subsidize it. I am a big 
believer in the secondary market.
    I know, Mr. Enoizi, your company does a lot of secondary 
market work. I would assume that you would support that.
    Years ago, when I was chairman of this subcommittee, we had 
a lot of discussions with the secondary market individuals, who 
said there was plenty of capacity in the secondary market to 
take up this additional risk, which would hopefully drive the 
premiums down.
    Do you think this would help drive premiums down, if we 
could pass off some of this other risk to the secondary market?
    Mr. Enoizi. Yes, absolutely. Pricing needs to be more risk-
reflective, and that is why I applauded 2.0 in my remarks. That 
is how you will bring the private market back, is via risk-
reflective pricing but also innovative solutions.
    I mentioned parametric, which, rather than indemnity-based, 
is more about just simply a trigger where a water level rises. 
It is these kinds of innovations that are going to allow the 
private market to take the burden off the taxpayer.
    Mr. Luetkemeyer. I know we did a quick sort of back-of-the-
envelope analysis of the losses over the 20 years previous back 
in 2016, 2017. And if we would have had a secondary market 
available to us and participated in it, with about a billion-
dollar deductible on it, we would never have had a single loss. 
It will work if we just participate in it.
    Thank you very much for your testimony.
    Mr. Chairman, I yield back.
    Chairman Davidson. The gentleman yields back.
    Members are advised that one vote has been called on the 
House Floor, and the Chair will continue the hearing. While I 
may step out, someone will always stay in the chair. And 
Members will filter out, make their vote, and come back in. We 
will work the queue as we would otherwise.
    The gentlewoman from New York, Ms. Velazquez, is now 
recognized for 5 minutes.
    Ms. Velazquez. Thank you, Mr. Chairman.
    Mr. Heidrick, following Superstorm Sandy, policyholders 
across New York and New Jersey voiced complaints about the 
coverage they thought they had versus the coverage they 
actually had.
    In response, my bill, the NFIP Administrative Reform Act, 
which passed this committee in the 115th and the 116th 
Congresses with unanimous bipartisan support, creates a 
disclosure and an acknowledgement to accompany the purchase of 
a standard flood insurance policy.
    In your experience, how would these documents provide 
policyholders with a better understanding of what is and what 
is not covered under their flood policy?
    Mr. Heidrick. Thank you for your question, Congresswoman. 
It is our job as agents every day to provide clients with as 
much information as possible to help them to make an informed 
decision that is best for their personal circumstances.
    Any tool, whether it is a document or anything else, would 
be something that would probably help to achieve that 
objective.
    Ms. Velazquez. Thank you.
    And, Mr. Martin, New York City is comprised of a diverse 
housing stock, especially for renters. While many multifamily 
buildings are owned by corporate firms, many owners are small 
mom-and-pops that operate on a very thin margin, especially 
when they are providing affordable housing.
    These properties are often the most-vulnerable to flooding 
events that lead to displacement after a storm. What more can 
Congress and FEMA do to improve pre-disaster mitigation for 
rental and affordable housing properties and their renters?
    Mr. Martin. Certainly, in particular, looking at the kinds 
of information that some of those property owners, in 
particular the small property owners, have access to is 
absolutely critical, and that includes some of the 
conversations we are having here, with very clear disclosures 
about what is in and what is outside of your policy and how it 
covers across all of your policies.
    And one could think about other alternatives for NFIP with 
regard to the coverage limits for certain kinds of properties, 
particularly those that may be owned by small, low-income 
households and occupied by low-income households. So, I would 
encourage you all to explore many of these kinds of options, 
yes.
    Ms. Velazquez. Thank you.
    Mr. Heidrick, despite the frequency and severity of 
flooding in the U.S., households' purchases of flood insurance 
have not kept pace.
    Additionally, many households also incorrectly believe that 
flood insurance is covered under their homeowners policy or 
that their home is not at risk. These statistics are even 
higher for households of color or where English is not the 
primary language.
    What recommendations do you have, and how is The Big ``I'' 
working to increase flood insurance coverage among ESL and 
households of color?
    Mr. Heidrick. Thank you again for your question, 
Congresswoman. The National Flood Insurance Program partnership 
with independent insurance agencies is critical to increasing 
the coverage amongst ESL households and businesses of color.
    The Big ``I'' insurance agents are across the country in 
virtually every community, in every State. Our members make up 
a cross-section of the communities that they represent. The Big 
``I'' also has a diversity council that has worked to improve 
diversity throughout the ranks of the entire independent 
insurance agency system, and we promote minority-owned 
insurance agencies.
    In terms of a recommendation, I would go back to the 
statement that I made before on education, that it is not just 
education of the consumer; it is education of all of those 
trusted advisers around the consumer so that we, as a society, 
ubiquitously recognize the risk of flooding.
    Ms. Velazquez. Thank you.
    Mr. Enoizi, to attempt to make flood insurance coverage 
more widely available and affordable for homeowners, I have 
previously introduced the Flood Insurance Tax Credit Act, which 
will create a new tax credit for flood insurance expenses based 
on a taxpayers' use of NFIP's WYO or direct program.
    Do you think a tax credit program like this could help ease 
premium payments for consumers and help incentivize them to get 
coverage?
    Mr. Enoizi. Congresswoman, thank you for the question. In 
answer to your question, I would say anything that encourages 
the takeup of flood insurance would be welcomed by my company.
    Ms. Velazquez. Mr. Martin, what is your view?
    Mr. Martin. I would certainly agree. Any opportunity to 
help expand the group--the pool of policyholders' purchases.
    Ms. Velazquez. Thank you. I yield back.
    Chairman Davidson. The gentlelady yields back.
    The gentleman from Wisconsin, Mr. Fitzgerald, is now 
recognized for 5 minutes.
    Mr. Fitzpatrick. Thank you, Mr. Chairman. In late July 
2022, FEMA released a concerning draft proposal called Direct 
to Customer. In its release, FEMA noted that it is imperative 
that FEMA enable the digital sale and services of flood 
insurance to increase the number of people covered. FEMA noted 
that this is a long-term project and stressed that they are in 
the early stages of looking at the concept and just beginning 
to ask questions about it.
    Despite the need for more flood insurance awareness, 
insurance agents and brokers, whether selling to NFIP or via 
private insurer, play an important role in informing the 
consumers' purchase decisions.
    In this digital age, there is often a rush to cut corners 
under the erroneous notion that an automated process can 
replace human interaction and expertise. Any kind of proposal 
that undercuts the valuable and trusted role that independent 
insurance agents and brokers play in this process could have a 
negative impact on increasing flood insurance participation 
rates.
    We saw this actually play out in the Economic Injury 
Disaster Loans (EIDLs) offered directly by the Small Business 
Administration (SBA) during the pandemic.
    I was a member of the House Small Business Committee in the 
117th Congress, and we had a much-higher incidence of fraud 
related to the Paycheck Protection Program (PPP) loans issued 
through the SBA than we did through the financial institutions 
that did the underwriting on them,.
    So, to Mr. Heidrick, do you think the direct-to-customer 
approach to distributing flood insurance would reach consumers 
that the NFIP or agents are not currently reaching?
    Mr. Heidrick. Thank you for your question, Congressman, 
and, no, I do not. Since I entered the insurance industry over 
30 years ago, direct-to-consumer approaches have been tried 
over and over again, and most have failed. In fact, over that 
time, the market share of independent insurance agents has 
remained stable, or it has grown.
    We talked about education earlier, and if we agree that 
education is essential to increasing the number of U.S. 
households insured for the peril of flood, then it is even more 
important that independent agents who live in and have local 
knowledge in local communities remain in the process so they 
can refer to the local creek, the local lake, the pond, the 
levee nearby, the hill, et cetera, that are specific to flood 
risks in a particular area.
    And agents also play a critical role in servicing these 
policies after they are written. When mortgages are paid off, 
retaining those policies is just as important as writing new 
ones. We don't believe that a call center representative or a 
website would be effective in conveying this information.
    And one other point that I would add is that some of the 
communities that we talked about earlier that are disadvantaged 
may not have the same access to computers and the internet that 
other communities have, so, there again, the role of the 
independent agent--a face-to-face relationship would be more 
important in increasing the takeup rate on flood insurance.
    Mr. Fitzpatrick. It seems, from the conversations that have 
been happening, that the biggest obstacle to more private flood 
insurance and to subsidies in the NFIP is that the subsidies 
have contributed to over $20 billion in debt to the NFIP as 
well. And, unfortunately, I think that is what is putting a lot 
of these properties in harm's way.
    Mr. Small, many of these plans are currently being phased 
out by FEMA, but how can Congress address the subsidies and 
bring more private plans into the market to protect taxpayers?
    Mr. Small. I certainly think there is room for improvement, 
for a new private market to come into the market. Obviously, it 
is a delicate balance, trying to, again, get the insurance 
component right and then figuring out the subsidy to maybe pay 
the premium. But you have to get the premium correct if you 
want a sustainable program.
    We have been on a 50-year journey with the NFIP, and in the 
last couple of years, some really great tools have been 
introduced. And I think we are still in the infancy, in the 
private market, to figure out what that is going to look like 
over time, but it looks very promising to me to have that. So, 
I think we need to take this forward, certainly make sure we 
have our extensions in place, and continue the good work that 
Risk Rating 2.0 has provided and build upon that.
    So, I think we are still early. I wouldn't say it is a 
reset. It has just taken us a while to get here, and here we 
are. But definitely, 4.7 million policyholders is not even the 
tip of the iceberg.
    Mr. Fitzpatrick. Last month, reports indicated that NFIP's 
traditional reinsurance placement faced a 36-percent decline in 
participants from the previous year.
    Mr. Enoizi, what can Congress do to encourage more 
participation and to further protect the taxpayers? And I know 
you have had this question multiple times today.
    Mr. Enoizi. Congressman, thank you. I think the reduction 
that you refer to is simply a function of the market. All areas 
of insurance suffered that kind of entrenchment.
    In terms of encouraging greater takeup, I think we have 
touched on a lot of those things. One thing that perhaps hasn't 
been mentioned is the idea that--
    Ms. De La Cruz. [presiding]. The gentleman's time has 
expired. The gentlewoman from Michigan, Ms. Tlaib, is now 
recognized for 5 minutes.
    Ms. Tlaib. Thank you, Madam Chairwoman. And thank you all 
so much for being here. I am from the City of Detroit, and you 
may not think that this issue applies to us. You always think 
about the coastal community, but in the Great Lakes, we have 
seen, especially in Michigan, in the last, probably, 5 to 6 
years, really--well, since 2014, just drastic damage from 
flooding in our communities.
    I always like to bring my district up in committee 
hearings. I can tell you, there is a woman in her 70s in 
Inkster who had her whole basement flooded . She couldn't go 
down there, didn't go down there. It ended up freezing over, 
and then she ended up having mold and so much more because she 
couldn't afford insurance.
    Not only that, she couldn't access FEMA dollars because of 
the way the process is, that you have to go there and provide 
all of this documentation. She didn't have the resources or 
capacity to get all that in, to take those photos to even--I 
think she still had an old phone, all of these things.
    When I read Michigan's flood insurance, I think the average 
is about $1,047, which is about $300 more than the national 
average. And on top of that, we have some of the highest auto 
insurance rates in the nation in Michigan. It is layers after 
layers for many of my constituents.
    FEMA estimates, I think, that even if you have an inch--an 
inch--of rain or water, it can cost $25,000 in damages. And so, 
of course, this program is important, but it is not accessible 
or affordable to my residents.
    And I don't know how we change that, because I feel like we 
primarily focus, to be honest, on the accessibility of those 
who own the million-dollar homes on the coast, those who are in 
parts of Florida, and other areas, while the senior citizen who 
worked all her whole life is watching, again, everything she 
put in this home just disappear day by day.
    When you have an insurance product that is so risky and 
unstable that the government must step in, you don't have a 
free market product, do you? Mr. Martin?
    Mr. Martin. To the extent that NFIP has been reformed, it 
is competitive with private insurers.
    Ms. Tlaib. What we have, to me, is a product that forces 
teachers, nurses, retirees, and residents across my district to 
pay for multi-million-dollar insurance policies so that the 
wealthiest Americans can afford to rebuild their mansions after 
the latest major natural disaster. That is how my residents see 
it.
    Mr. Martin. What you are referring to is the clear reason 
why the NFIP is still needed. We have to have policy coverage 
for people who don't have the resources.
    The challenge is now, with the changes that have occurred, 
we do have an affordability problem, so an assistance program, 
particularly for low-income people, is absolutely critical.
    I would say that the condition for the household that you 
are describing speaks to the importance of mitigation and 
insurance availability beforehand so that people don't have to 
go through the suffering that these events incur.
    So, I certainly encourage you all to think about the range 
of mitigation tools and preparedness tools that should be 
provided and resourced, particularly for low-income, vulnerable 
communities.
    Ms. Tlaib. Mr. Small, did you have something to say?
    Mr. Small. Not necessarily. We look at all types of risk, 
from the larger, more highly-valued structure to the structure 
that you have described in your question. And, yes, it is a 
delicate balance. I agree that mitigation is key and, again, 
there--
    Ms. Tlaib. We are covering 93 percent--93 percent of flood 
insurance is covered by NFIP. Is that correct?
    Mr. Small. I'm sorry, say that--
    Ms. Tlaib. About 93 percent of flood insurance is covered 
under NFIP?
    Mr. Small. That is correct.
    Ms. Tlaib. Yes. Many colleagues supported this resolution 
that was all over the place about not supporting socialism, all 
forms of socialism. To me, that is Social Security, and a 
number of things. Is this program a form of socialism, Mr. 
Martin?
    Mr. Martin. I don't believe it is. I think what it is, is 
a--
    Ms. Tlaib. Government subsidizing 93 percent of flood 
insurance for--
    Mr. Martin. Oh, the long-term--
    Ms. Tlaib. --for multi-million-dollar homes. So, for 
millionaires, it is not socialism?
    Mr. Martin. I'm sorry for misunderstanding your question.
    Ms. Tlaib. Yes. Where the government is subsidizing and 
pretty much taking over--93 percent, that is a lot.
    Mr. Martin. The risk pool and diversifying the risk pool is 
certainly one way that we can make the program more--
    Ms. Tlaib. I am just trying to make a point, because it 
seems like when it benefits my residents, it is socialism, but 
when it benefits multi-million-dollar homeowners, it is not. I 
yield back.
    Ms. De La Cruz. Thank you.
    Now, I would like to recognize myself, Monica De La Cruz, 
from Texas.
    Prior to 2018, NFIP featured a noncompete in its contract 
with insurers that sell its products. Let me give you a little 
bit of background. I was an insurance agency owner, and so I 
really understand the role that insurance agents play in 
relationship with their insureds.
    I can tell you from my experience that the best way to sell 
NFIP insurance--and I sold that for many years--is to make sure 
that the insurance agents are actually equipped with the tools 
to be able to sell the product and to be able to easily sell 
the product.
    In my experience in south Texas, first, we became licensed 
with our insurance company, and then we had to go and file 
independently with NFIP. The more steps you put in the way for 
an insurance agent, the less likely it is that they are going 
to do it.
    So, even though I found myself in a low-income community, I 
felt like it was very important for me to not only offer the 
services of my insurance company but also with NFIP due to the 
lower-income city that I was in.
    That being said, NFIP does feature this noncompete 
contract. Can you tell me more about this noncompete contract 
and how it actually affects the independent agent? And this is 
for any of you who would like to take it.
    Mr. Heidrick. You mentioned independent agents, so I will 
go ahead and speak, although I am probably not qualified to 
answer your question completely. First, thank you for your 
valuable insight. I couldn't agree with your statement more.
    As you were talking earlier about making it easy for the 
agent to access multiple products and provide more choice to a 
consumer, that is exactly one of the most-critical points of 
this. So, rather than have an agent access multiple, different 
systems and prepare multiple different quotes to provide 
multiple different options to a consumer, it makes a lot more 
sense for them to be able to enter the client information in 
one place, one time, and then see multiple quotes as a result.
    And that, the removal of the noncompete for write-your-own 
companies is exactly what has enabled that type of solution. 
Thank you.
    Ms. De La Cruz. Thank you. Would anybody else like to 
discuss this portion?
    Mr. Small. I think Mr. Heidrick had it right, point of 
access and ease of access is critical. So, to be able to go in 
and provide multiple quotes and comparisons is important for 
the overall growth of policyholder accounts, whether NFIP or 
private, and, again, there's ample opportunity for growth for 
both.
    Ms. De La Cruz. Excellent. Thank you. I yield back.
    The gentlewoman from Georgia, Ms. Williams, is now 
recognized for 5 minutes.
    Ms. Williams of Georgia. Thank you to all of the witnesses 
who are here today to discuss this very critical conversation. 
It shouldn't be a surprise that the chronic underfunding of the 
National Flood Insurance Program's mapping and mitigation 
efforts has been particularly detrimental for communities of 
color, as it was for my district during Atlanta's catastrophic 
floods of 2009 when more than 20 inches of rain fell over 2 
days in parts of the City, like Vine City and English Avenue, 
that are already experiencing disparities in wealth, causing 
$500 million of damage.
    Historic and ongoing socio-economic and racial segregation 
has led to people of color being more likely to live in areas 
that are more susceptible to flooding, but aren't designated 
Special Flood Hazard Areas, and they are less likely to have 
the necessary insurance to protect themselves, their homes, and 
their belongings.
    And when people of color who do have flood insurance file 
claims--and they are less likely to do so--they have a higher 
rate of unpaid claims. Further, renters are highly unlikely to 
know about the possibility of their rental home flooding.
    As climate change worsens, we can expect communities of 
color to be hit the hardest by its impacts, and the disparities 
people of color face only exacerbate the financial harm that 
they experience. And this is simply unacceptable.
    Dr. Martin, what legislative reforms to the NFIP should 
this committee focus on in order to address these disparities?
    Mr. Martin. Thank you for noting the experience that has 
happened for your constituents. I think that experience speaks 
to the broader benefit of NFIP being integrated into the 
National Disaster Management Framework so there is more 
opportunity to think about where mitigation works best, 
including very thoughtful mitigation and including buyout 
programs for low-income and disadvantaged communities.
    I do want to elaborate a bit on the disparities that you 
are noting by race and ethnicity and income, and certainly, I 
noted earlier that much of the pricing and coverage 
disparities, the evidence suggests that we have eliminated much 
of that, for a lot of reasons of automation.
    But there are still disparities in claims treatment and 
general treatment, so this is a concern that we want to make 
sure gets alleviated. The recommendation that I had regarding 
data transparency, not just for NFIP but also for private 
insurers so that we can monitor that kind of treatment 
disparity, I think is absolutely critical.
    Ms. Williams of Georgia. Thank you, Mr. Martin.
    Buying a home is the greatest way to produce generational 
wealth, which Black people have been locked out of for 
centuries, and it couldn't be more evident than in my hometown 
of Atlanta where we lead the nation in the racial wealth gap. 
However, if that house is in an area that is at risk of 
flooding but isn't recognized as an SFHA, that wealth could 
vanish with one environmental disaster.
    Part of the problem here is that flood-related disclosure 
requirements are set at the State level. My home State of 
Georgia doesn't have any statutory or regulatory requirements 
for a seller to disclose a property's flood risk or past flood 
damages, greatly disadvantaging buyers who don't have this 
necessary information when purchasing a home. And for renters, 
there are no Federal or State laws requiring landlords to 
disclose any flood risk or damages.
    Dr. Martin, what can be done to remedy this issue that 
affects not only Georgia but 20 other States?
    Mr. Martin. That is exactly right. The disclosure rules are 
determined by State policy, and State policies vary widely. In 
fact, after Hurricane Katrina in Louisiana, Louisiana imposed 
what is called the gold standard of property disclosures, but, 
again, that only benefits home buyers and not renters. So, the 
rental disclosure is very modest, at best, in this country.
    One could consider national reporting disclosures or at 
least provision of information that is accessible for renters 
of all incomes and all backgrounds to be able to find out where 
the risks are that they may be going to rent.
    Ms. Williams of Georgia. Thank you. After the 2009 flood in 
Atlanta, the local paper, The Atlanta Journal-Constitution 
(AJC), published an article entitled, ``Damage exceeds flood 
map boundaries.'' If a flood were to impact Atlanta today, like 
it is raining outside and it continues to rain, we could expect 
the AJC to publish the same exact headlines simply because not 
enough has been done.
    Federal maps are still painfully out of date and can't 
accurately predict which homes and neighborhoods have a 1-
percent or greater chance of experiencing flooding in any given 
year. This means that homeowners don't know if flood insurance 
is something they need to even consider buying.
    Dr. Martin, you might have to send me this answer in 
writing, but beyond increasing funding the NFIP to continually 
update floodplain maps, what can Congress do to begin to 
alleviate this issue?
    Mr. Martin. Thinking about the mitigation strategy, climate 
change is affecting every community. We are in a dynamic time, 
and it is important to make sure that we provide those 
resources to account for those future risks.
    Ms. Williams of Georgia. Thank you. I have more questions 
that I would like to submit in writing to the witnesses to get 
a follow-up on, and I yield back, Mr. Chairman.
    Chairman Davidson. The gentlelady yields back. The 
gentleman from New York, Mr. Garbarino, is now recognized for 5 
minutes.
    Mr. Garbarino. Thank you, Mr. Chairman. And thank you to 
the witnesses for being here. I represent parts of Long Island 
that got ravaged during Superstorm Sandy, but I am not going 
to--I have my own suspicions about Risk Rating 2.0, but I am 
going to save that for another day.
    But I do want to ask, Mr. Heidrick, it has been about a 
year since Risk Rating 2.0 did go into full effect. How have 
monthly premiums changed since then, and how has your 
experience been as the new pricing methodology has been rolled 
out?
    Mr. Heidrick. Thank you for your question, Congressman. The 
difference in premium has impacted every property differently 
because the whole premise of Risk Rating 2.0 was to incorporate 
risk characteristics that are specific to each individual 
property in the rating factor.
    I have seen some people for whom the premium decreases, and 
some for whom the premium increases, and a lot of that change 
is dependent upon the starting point: Where was the premium 
before, and was the premium adequate before? For instance, in 
the prior rating system before Risk Rating 2.0, properties that 
were in low-risk areas, what was formerly referred to as the 
preferred risk policy, preferred risk areas, were actually the 
worst-performing segment of the NFIP, and the least-profitable 
segment of the NFIP. So, as you would expect from that starting 
point, those least-risky properties have actually probably 
seen, on whole, the largest increases in premium.
    Mr. Garbarino. After Sandy, the Federal Government came in, 
and a lot of money was spent raising homes either on the 
barrier island, Fire Island, or on the south shore, and also 
installing flood openings.
    Would you say that now with Risk Rating 2.0, there are 
clear benefits with those mitigation features that people have 
added? Are there benefits to their new policies?
    Mr. Heidrick. There are benefits to mitigation. The 
challenge that agents have had under Risk Rating 2.0 is the 
black box rating engine, if you will, that makes it impossible 
for insurance agents, floodplain officials, and others to 
really provide specific guidance to a consumer who wants to 
implement mitigation but also wants to know what their return 
on investment, via a lower premium, is going to be.
    Mr. Garbarino. Have you seen, just because of where their 
property is located, if a home has been raised, have your 
consumers seen increases still in flood insurance through the 
NFIP?
    Mr. Heidrick. Some of my consumers have seen increases as a 
result of Risk Rating 2.0, and those people who had existing 
policies are protected by the glide path, the Federal statute 
that caps increases at 18 percent for most policies.
    Mr. Garbarino. But my question is, have they seen a 
benefit? If they have done those mitigation features, like 
raising the home, have they seen a benefit from that?
    Mr. Heidrick. I don't have any clients who have actually 
raised a home, but what I have been told by the NFIP is that 
the extent of the mitigation impact interplays with a lot of 
other rating factors. So, there may be one property that sees a 
much smaller impact or a much greater impact as a result of 
their mitigation efforts than another.
    Mr. Garbarino. Thank you. I appreciate that answer, and now 
I have a question for Mr. Enoizi.
    I recently saw an article about a community-based 
catastrophe insurance transaction spearheaded in New York City, 
a pilot program to support low- and moderate-income communities 
in high-flood-risk neighborhoods. It appears that the City 
worked with Marsh to essentially finance emergency grants to 
households in need of assistance in the aftermath of a flood. 
Can you tell us a little bit more about this program and 
whether the program that was set up in New York City could be 
replicated in other parts of the State or even nationwide?
    Mr. Enoizi. Thank you for the question, Congressman. I 
think the community-based catastrophe program actually responds 
to many of the questions that have been raised today, 
particularly around low-income homes. What it effectively does 
is it allows a community to purchase insurance as opposed 
looking to buy them individually.
    And the advantage of that is, first of all, parametric 
trigger, which is essentially, there is no argument over 
whether or not a flood occurred or didn't occur and what level 
it occurred. And that allows for quick payments, $15,000 
payments. Some of that money can then be put towards the risk 
mitigation to which you alluded.
    The New York community that bought the policy got a premium 
reduction because they were buying en masse. That allowed them 
to invest some of the savings that they made into further risk 
mitigation. And in short, I think that is the way that you are 
going to achieve greater take-up of insurance in the United 
States, by buying on a community level, instead of, as the 
Congresswoman was alluding to earlier, people who cannot afford 
to buy insurance.
    Mr. Garbarino. I appreciate that. I did have other 
questions, but I am out of time, so I yield back.
    Chairman Davidson. The gentleman yields back.
    The gentleman from Nevada, Mr. Horsford, is now recognized 
for 5 minutes.
    Mr. Horsford. Thank you, Mr. Chairman, and thank you to the 
ranking member as well. This is a critically-important topic 
for us to discuss. And while, at the moment, Nevada is in the 
grip of an historic drought, the varied ecosystems across my 
State are such that many of the communities that I represent 
are extremely susceptible to flash floods.
    As Dr. Martin rightfully pointed out in his testimony, the 
most-pressing issue and biggest barrier that I hear from my 
constituents is affordability. We need to be expanding flood 
insurance to everyone who needs it. The loss associated with 
water damage can be absolutely catastrophic, especially for a 
family that was already struggling to make ends meet. Without 
insurance, these costs can lead to financial ruin, and with 
upwards of 57 percent of damages not covered, our nation has 
issues with both the uninsured and a massive underinsured 
population.
    Now, I understand that private flood insurance can be an 
excellent supplement to coverage for high-value residential 
properties, but today I want to focus on individuals who cannot 
afford even a basic policy. It is an incredible paradox that we 
find ourselves in. Individuals who are the most in need of 
comprehensive flood insurance coverage are far too often unable 
to afford their premiums.
    So, I am eager to work with all of my colleagues on this 
subcommittee to find responsible improvements to our National 
Flood Insurance Program. But I want to make sure that lowering 
costs and expanding coverage is at the center of anything that 
we do.
    Dr. Martin, could you please take just a few minutes to 
discuss the consequences for working families if the National 
Flood Insurance Program rates would quadruple, as you mentioned 
in your testimony?
    Mr. Martin. Certainly. And I would like to even expand your 
question, and talk about the consequences for NFIP and the 
Federal Government from not helping low-income households be 
able to afford insurance. For the households themselves, the 
evidence shows that a disaster event, including most floods, 
would create a financial spiral lasting up to at least 4 years. 
And I say 4 years only because the data that I have access to 
was for 4 years after, but it is very likely that that 
financial spiral will continue well after 4 years.
    So, for households, it is absolutely critical to have some 
preparatory assistance, to have some financial assistance to be 
ready for the flood, and that is the whole purpose of 
insurance.
    For NFIP, certainly, you are looking at the broader Federal 
coffers. The investment in insurance and mitigation saves 
money. Studies from the National Institute of Building Sciences 
have suggested that for every dollar invested in mitigation, 
you have $6 in savings from recovery. So, it is a better 
investment from a fiduciary standpoint as well.
    Mr. Horsford. Great. I agree that it would be simply 
unacceptable to allow that many of our constituents to have to 
fend for themselves because they can't afford comprehensive 
flood protection. And I want to work together to keep flood 
insurance affordable to those who need it the most.
    Let me conclude, Dr. Martin, by asking you to speak about 
how means-tested affordability programs may have spillover 
effects into the private market and result in increased 
affordability for all policyholders?
    Mr. Martin. It certainly would. If you are providing 
resources to a certain number people who could be accessing 
private insurance, NFIP, et cetera, they are actually making 
sure that a broader pool of people will be purchasing products. 
Assuming that they have some contribution in, because they are 
clearly paying for the product, as well as having to partially 
subsidize, they are going to be expanding the pool for a much 
broader group.
    Mr. Horsford. Thank you very much. I look forward to 
working with my colleagues on this, and I will yield back my 
time.
    Chairman Davidson. The gentleman yields back.
    The gentleman from South Carolina, Mr. Norman, is now 
recognized for 5 minutes.
    Mr. Norman. Thank you, Mr. Chairman.
    Mr. Enoizi, renters are a group that typically has low 
take-up rates for flood insurance. As noted in your testimony, 
a contents-only policy is an option for many renters. Can you 
speak to the benefits of contents-only and how that affects 
those who choose to get the policies?
    Mr. Enoizi. Thank you, Congressman. I guess it really goes 
to creating a culture of people who look after themselves, 
acknowledging the remarks about people affording to be to look 
after themselves, but often those people would not be aware 
that the property, the underlying property, was not covered for 
flood insurance. So, providing a way to provide policies to 
renters, perhaps through mandatory offer, not mandatory 
purchase but mandatory offer, might overcome that problem.
    Mr. Norman. It just specifies that it really is a tailor-
made policy that people could choose from, is that right?
    Mr. Enoizi. Yes, Congressman, it is about providing options 
and innovation in products so that people can actually choose 
what their own risk appetite is and then purchase insurance to 
cover the delta.
    Mr. Norman. I guess this is for everyone, but compared to 
other insurance products offered in a State-regulated 
marketplace, how much consumer choice does a homeowner have 
when purchasing NFIP coverage?
    Mr. Heidrick. I will be happy to start, Congressman. There 
certainly are fewer flood insurance options than many other 
personal lines insurance products. As stated earlier, over 90 
percent of the current flood insurance is with the National 
Flood Insurance Program.
    We have seen several new, private flood insurance companies 
come into the market. I think it is important to recognize that 
the private flood insurance market is still in a stage of 
infancy. It has come a long way since 2014, but it is really 
since 2014 that private flood insurance companies have offered 
personalized insurance products.
    So we are still kind of new to this, and I think the 
private companies working side by side with the National Flood 
Insurance Program will help that industry to continue to grow 
and become more stable.
    Mr. Norman. Yes, and the lending institutions are getting a 
lot more, I guess, insistent that flood insurance is obtained, 
even if the land that they are building on is not particularly 
prone to a flood.
    Mr. Heidrick. It is my experience, as an insurance agent, 
that the lending institutions are very, very diligent at 
enforcing the mandatory purchase requirements. They not only 
are diligent in following up, making sure they have proof of 
flood insurance, sometimes weeks before a closing occurs, but 
then, even as that policy is in force and renews year after 
year, reading the declarations page and asking for certain 
language to be altered or to make sure that it is going to be 
100-percent compliant with whatever regulatory agency is going 
to come in and audit them on an annual basis.
    In my experience, the lending institutions are actually 
quite fearful of the regulatory audits regarding flood 
insurance.
    Mr. Norman. Yes. I am in the commercial real estate field, 
and that is one of the first things we start with--you examine 
the flood maps, you look at declarations, you get the premiums 
if you can get it before you purchase a property to put the 
improvements on.
    I want to thank each of you for testifying today. This is 
very important for us, having a bill which is coming forward, 
with competition, letting people choose different policies that 
they may want to look consider.
    So thank you for what you are doing, and Mr. Chairman, I 
yield back.
    Chairman Davidson. The gentleman yields back.
    The gentlewoman from Colorado, Ms. Pettersen, is now 
recognized for 5 minutes.
    Ms. Pettersen. Thank you, Chairman Davidson, for holding 
today's important hearing, and I also want to thank the 
witnesses for offering your expertise today.
    The National Flood Insurance Program provides a critical 
backstop, as all of you have talked about, to ensure that 
property owners can be offered flood insurance. In Colorado, we 
are routinely seeing flooding from heavy storms and early snow 
melts.
    However, as you know, 25 percent of all flood insurance 
claims come from outside of known high-risk areas, meaning that 
many communities have never experienced flood risk before 
having a flood.
    And, even worse, the constant and growing risk of 
catastrophic wildfires leads communities that have previously 
not been prone to flooding to experience repeated flood events 
for a number of years until vegetation regrows and other 
mitigation efforts are put in place.
    These homeowners are often surprised that their homeowners 
policies do not cover flood events, and I, unfortunately, have 
been one of those where we unexpectedly faced a flood, and it 
was told to me that only water that occurs inside the home is 
covered, which is devastating for far too many people.
    There are also communities throughout Colorado that have 
been spared the worst of a wildfire and end up needing to 
surround their home with sandbags because even minor rain 
events can lead to heavy flooding.
    As this committee considers the long-term reauthorization 
of the National Flood Insurance Program, we must also work to 
ensure that consumers are aware of their options, and I 
appreciate the discussion about what options we have to do that 
moving forward today.
    One of the most pressing issues that this committee must 
also fix is that many homeowners wrongfully assume that flood 
insurance protections are covered, and disclosure requirements 
and education surrounding the availability of flood insurance 
will help them better understand what options that they have.
    A very important issue for Colorado that we need to focus 
on here, that I am especially interested in, is not just around 
flood insurance but what we are going to do to address wildfire 
insurance and coverage.
    I have heard from so many constituents in Jefferson County 
who were almost impacted by the Marshall Fire but were unable 
to actually insure their homes because of the risk that is 
posed due to wildfires.
    What are we going to do? What options do we have to work 
together to address that issue in bringing maybe some of the 
similar approaches that we have with flood insurance? And I 
don't know who would like to touch on that. Maybe Dr. Martin?
    Mr. Martin. I would be happy to start. Thank you for that 
question. Certainly, for me, this speaks to the broader issues 
of all hazards that affect people, because people don't silo 
their houses as being flood-related, fire-related, et cetera. 
People think of their house in all of its performance 
capacities, which means that they may not understand what their 
various insurance policies cover.
    So the idea of having documents and sort of checklists for 
consumers to easily understand across all of their policies is 
absolutely critical. That tends to be regulated by State, so--
and I would like to expand from Colorado to California that 
went through many of the same conditions in the last 5 years, 
leading to a lot of homeowners insurance policy providers 
leaving the State--or threatening to leave the State because it 
was a catastrophic risk that they couldn't cover anymore.
    We see this sort of repeating pattern of being able to 
provide private insurance, but then people not being able to 
afford it when it is available, and most consumers not 
understanding what their policies cover.
    I would say, when it comes to documentation and 
availability of information, thinking through, akin to what we 
have done in healthcare insurance provisions, making sure 
consumers understand what is in their policies is in their best 
interest, and certainly in the best interest of State and 
Federal Government.
    Mr. Enoizi. Specifically, if I may, Congresswoman, I think 
the other thing I would add to Dr. Martin's comments is the 
need for risk mitigation, as we have already heard, regarding 
flood but also regarding wildfire, and specifically when it is 
regarding wildfire, there are nature-based solutions that can 
be put in place that can help create fire breaks to prevent 
these losses.
    Ms. Pettersen. I am still getting used to being in Congress 
versus the State legislature, so I was raising my hand over 
here. But something that we did in Colorado is, we brought a 
fee for every policy plan that actually went towards fire 
mitigation.
    And I know, generally speaking, insurance companies are not 
in favor of fees, but that's just an example of something we 
might be able to come together on, to actually put money and 
investments up front to save in the long term. But I really 
appreciate the conversation and what we are going to do to make 
sure that constituents like mine are able to have access to the 
insurance that they need.
    With that, I yield back.
    Chairman Davidson. The gentlelady yields back.
    The gentleman from Nebraska, Mr. Flood, is now recognized 
for 5 minutes.
    Mr. Flood. Thank you, Mr. Chairman. In 2019, there was a 
bomb cyclone that hit the State of Nebraska. It was a major 
flood event in Nebraska that led to a disaster declaration and 
serious damage to 104 cities in our State.
    In fact, we are still feeling the effects of the flooding 
to this day. Offutt Air Force Base was severely damaged, and we 
are still working to restore a lot of the facilities that were 
destroyed.
    Nebraska is not a coastal State, but we have more miles of 
river than any other State in the nation, and our flooding is a 
cautionary tale. It highlights the need for protection against 
flood events across the country.
    So we have to ask ourselves, how can we ensure that 
homeowners are better protected the next time there is a major 
flooding event? And I do think that having private options is a 
good direction to go.
    I have a question for Mr. Enoizi. Some other nations have 
adapted flood insurance marketplaces that provide robust 
protection with a private model, and you have testified to this 
already.
    Can you speak to some of the very specific market-based 
reforms that were implemented in the United Kingdom?
    Mr. Enoizi. Thank you for the question, Congressman, and I 
should point out that as somebody who ran one of these public-
private partnerships for nearly a decade, I am very much in 
favor of public-private partnerships where the risk-sharing 
between the public and the private is maximized.
    In other words, you find incentives for the private market 
to take as much of the risk as it is possible to do, and I 
think that is much of what we have been talking about today.
    First, in the United Kingdom, we have something called 
Flood Re, which is a public-private partnership between the 
U.K. government and the insurance industry, and that has a 
number of features which we have, again, been touching on here 
today, principally around making insurance affordable to those 
people who cannot afford it but who are, by necessity, living 
in flood zones as opposed to choosing to live in flood zones.
    Second, when flooding occurs, they have to build back 
better; in other words, part of the contingency of them 
receiving a payment on the claim is that they then have to put 
flood mitigation in place, putting their flood points halfway 
up the wall or not putting carpet on the ground floor.
    And, third, after three strikes, if they don't put those 
mitigations in place, then they are no longer offered the 
insurance. Those are the kinds of things you see in the United 
Kingdom.
    Mr. Flood. And how effective has that been, the Flood Re 
program?
    Mr. Enoizi. I think largely, it has been extremely 
effective. It has a sunset clause. It was due to expire after 
25 years, and as with my own experience, one of the things we 
were able to do and what they are able to do is to push most of 
the risk back into the private market, so that only the 
uninsurable are left with the State, which is probably the way 
it should be.
    Mr. Flood. Mr. Luetkemeyer talked about it before, that we 
have a situation in the United States where homeowners can get 
their home rebuilt every couple of years. This is exactly what 
you are trying to prevent by requiring the insured to build 
back better after a flooding event. I don't know how familiar 
you are with our Federal program, and I am brand new to 
Congress as well.
    What has that conversation been like among the flood 
insurance community, about requiring people to build more 
flood-resistant structures following a massive claim? Can you 
speak to that, or would there be somebody else who could speak 
to it?
    Mr. Enoizi. I think it has generally been extremely well-
received because if they don't do it, then they will no longer 
be eligible for the insurance. So, it is really almost they are 
put into a position where they have to do it.
    Mr. Flood. Thank you very much. To close, I would like to 
emphasize the importance of nurturing a private flood market 
that is competitive, innovative, and will drive costs down.
    The National Flood Insurance Program provides a one-size-
fits-all solution on flood--and given my last name, everybody 
should have flood insurance. It works for some, but a robust 
marketplace would introduce more consumer choice, allow for 
more customization, and eventually lead to price competition 
that benefits the consumer. Thank you, sir, for your answers.
    And thank you, Mr. Chairman. I yield back.
    Chairman Davidson. The gentleman yields back.
    The gentlewoman from Massachusetts, Ms. Pressley, is now 
recognized for 5 minutes.
    Ms. Pressley. Thank you so much, Mr. Chairman, and thank 
you to our witnesses for joining us today on what is truly an 
urgent and consequential issue.
    I represent the Massachusetts Seventh Congressional 
District, a district which includes several coastal communities 
vulnerable to flooding. So, encouraging greater flood insurance 
is an issue of significant importance to me and my 
constituents.
    For cities in my district like Boston, Chelsea, and 
Everett, the climate crisis is not an abstract, far in the 
future, distant problem; it is a reality here and now. 
Communities, families, and small businesses are experiencing 
firsthand the extreme impact of weather events that are growing 
in severity and frequency, the combination of hurricanes, storm 
surges, and rising sea levels resulting in greater flooding, 
plain and simple.
    The National Flood Insurance Program is essential in 
safeguarding our most-vulnerable frontline communities and 
helping homeowners protect both themselves and their 
properties. However, this program is also facing several unique 
challenges.
    Mr. Enoizi, I was going over your written testimony, and 
you highlight in it the challenge of the flood protection gap. 
Just for the record, and for the general public, could you 
expound upon what this is and why this gap exists?
    Mr. Enoizi. Thank you very much for the question, 
Congresswoman. The flood protection gap is essentially the 
difference between economic loss and the insured payout. So if 
the loss is a hundred, and the insurance policies pay out 20, 
then you have a gap of 80, and that is obviously a massive drag 
on the economy.
    And, globally, there is something like $82 billion of flood 
losses every year, and the protection gap on those is somewhere 
around $25 billion. So it is an enormous problem globally, not 
just in the United States.
    Ms. Pressley. Thank you. So, it is critical that we ensure 
that flood insurance is available and affordable, as we have 
heard throughout this hearing, to those who need it, especially 
for those living in high-risk flood zones.
    Mr. Heidrick, what do you see as the primary barriers to 
increasing flood insurance coverage, and what can Congress do 
to address them? What role can we play?
    Mr. Heidrick. Thank you for the question, Congresswoman. As 
I stated earlier, I think the barrier really comes down to two 
primary issues, and before we think of innovative and outside-
the-box issues, I really think that we need to address these 
two fundamental issues which are, first, education--not just 
consumer education but all of those trusted people who would 
advise a consumer, family, friends, and other professionals--
and second, affordability, some sort of an affordability 
solution that is outside the National Flood Insurance Program, 
means-tested for those people who need that support.
    Sorry, I lost the second part of your question.
    Ms. Pressley. Oh, that was it. Just, what did you see as 
the primary barriers, and what can Congress do?
    Mr. Heidrick. What Congress can do, thank you very much, is 
first, don't let the National Flood Insurance Program lapse. 
Second, any long-term reauthorization that modernizes the NFIP 
would be welcome by, I think, everybody, who is impacted by 
flood insurance, and I can't imagine who is not.
    When we talk about those reforms, I know it is sometimes 
sticky and sometimes complicated. We don't have to have every 
single reform, every single idea. I would encourage the 
committee to not let perfect get in the way of good, if we can 
make sure that this product continues to be available and maybe 
even modest improvements for those many Americans who need it.
    Ms. Pressley. Thank you, Mr. Heidrick. Certainly, it's a 
universal issue: urban; rural; and suburban.
    Dr. Martin, as a housing expert, can you speak to the 
economic benefit of increasing flood insurance coverage for 
homeowners and small businesses in terms of reducing those 
financial losses?
    Mr. Martin. Absolutely. One of the critical areas which 
people often forget when they are purchasing a home, for 
example, is all of the additional expenses that are associated 
with maintaining and making sure that their home is going to be 
safe in the long term.
    So, certainly opportunities, particularly for low-income 
households, to make sure that they have those opportunities, 
will ensure a more stable housing product that can be insured, 
that can be mortgaged and lended to, and that can be rented out 
as needed.
    And it is absolutely critical to ensure that we get this 
right.
    To speak to an earlier point that you made, Congresswoman, 
is the fact that these risks are going to increase. We are 
going to see continuously-changing dynamics because of the 
changing climate, so it is absolutely important that we get 
this right, right now.
    Ms. Pressley. Thank you. Again, expanding flood insurance 
coverage is an important tool to prevent everyone, especially 
low-income folks, from facing financial ruin in the event of a 
flood. That is my time. Thank you. I yield back.
    Chairman Davidson. The gentlelady yields back.
    The gentleman from New York, Mr. Lawler, is now recognized 
for 5 minutes.
    Mr. Lawler. Thank you, Mr. Chairman.
    And thanks to our witnesses for sharing your insight and 
experiences on this important topic. This is a topic that is of 
great importance to my constituents in the immediate suburbs of 
New York City, who have seen, over the last decade-plus, 
increasing flooding and the aftereffects of storms like Sandy 
and Ida.
    As a nation, but especially in New York, in my district, we 
are also dealing with serious affordability issues, so finding 
ways to ensure that we are encouraging Americans to have flood 
insurance, and to help them avoid being in a situation where, 
when you have a flood, you aren't covered, is extremely 
important. Currently, only homeowners with active federally-
backed mortgages in higher-risk Special Flood Hazard Areas are 
subject to the law's mandatory flood insurance purchase 
requirement. That means that renters and homeowners without 
such mortgages may be at the same elevated risk but have no 
requirement to insure their residence. Or they might be 
overlooked by the NFIP's outreach and remain unaware of their 
elevated flood risk.
    Mr. Heidrick, would encouraging more private flood insurers 
to seek out such homeowners in special, flood hazard areas and 
offer them customized private flood coverage help reduce the 
flood insurance gap?
    Mr. Heidrick. Thank you, Congressman. I would say anything 
that improves choice and access for consumers will help to 
reduce the flood insurance gap.
    Private flood insurers have, over the last several years, 
done a good job of filling gaps and providing alternatives to 
clients, alternatives that may be a lower-priced product or 
even expanded coverage than the NFIP offers. And the more that 
the private flood insurance industry develops, the more choice 
there will be for consumers and the closer we will get to that 
goal of closing the gap.
    Mr. Lawler. Thank you. Beyond individual homeowners 
purchasing individual policies from the NFIP or another 
provider, what other insurance options exist to help insure 
homeowners and communities against flood risk? This is for any 
of you on the panel.
    Mr. Enoizi. Congressman, if I may, on your previous 
question, just by way of an anecdote, in Germany, in such areas 
that you were referring to, you would have a billboard the size 
of that TV screen, saying: If this river floods, you need to 
have insurance; otherwise, the government will not bail you 
out.
    I just make that point as an anecdote.
    To your specific question, in your State, we have actually 
been successful in working with some of your communities to 
sell a product that actually covers the community and thereby 
overcomes the need for the sort of education which can be very 
difficult, and also the affordability, because it is actually 
the community that is purchasing the insurance on behalf of the 
vulnerable community, which ensures a very speedy payout, quick 
recovery, less economic drag, and reduced impact on the 
taxpayer. So, that is one of the innovative solutions that we 
are working on with people in your State.
    Mr. Lawler. Just to follow up on your initial point about 
Germany, what have you seen in terms of other countries in 
Europe or Asia and their approach to closing flood insurance 
gaps? And can any of those tools be utilized here to help us 
meet our own domestic challenges?
    Mr. Enoizi. Again, thank you for the question. I guess it 
really--you see two different approaches. Mutualization of 
risk, and you referred to Asia, so Southeast Asian communities 
of nations that have essentially joined together to provide 
this kind of insurance on a territory-wide basis. And that 
includes sometimes actually even predicting, through satellite 
imagery, when the flood is going to occur, and paying out 
before the event actually happens, and then, the ability to 
move out of the way of harm, close up your businesses, and 
protect yourself that way.
    Other areas use socialization of risk where you are 
actually using a levy on taxpayers, homeowners who purchase the 
product, where everybody, as in the U.K., pays 10 pounds. I 
live on top of a hill, but I pay my 10 pounds, and that allows 
people who are in a vulnerable area to purchase more affordable 
insurance.
    Those are cultural and political issues which I won't 
comment on, but there are lots of different solutions to the 
same problem.
    Mr. Lawler. Thank you. I yield back.
    Chairman Davidson. The gentleman yields back.
    The Chair now recognizes Ms. Garcia for 1 minute.
    Ms. Garcia. Mr. Chairman, I would like to ask unanimous 
consent to enter for the record two documents that I failed to 
do during my questions. The first one is, ``Flooding is Nearly 
a Daily Occurrence Throughout the U.S.'' It is a Forbes 
Magazine article.
    And the second is a Houston Chronicle article entitled, 
``Houston-area property owners drop FEMA flood insurance after 
pricing change.'' Thank you, Mr. Chairman.
    Chairman Davidson. Without objection, it is so ordered.
    I would like to thank our witnesses for their testimony 
today. I think we can safely say that we have good ideas to 
make a better product, and hopefully we can work together to do 
just that without turning this into a think tank. We can 
hopefully, at least make it somewhat better.
    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 5 legislative days for Members to submit written questions 
to these witnesses and to place their responses in the record. 
Also, without objection, Members will have 5 legislative days 
to submit extraneous materials to the Chair for inclusion in 
the record.
    This hearing is now adjourned.
    [Whereupon, at 10:57 a.m., the hearing was adjourned.]

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                             March 10, 2023


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