Flood Insurance Reform Priorities Act of 2010
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Mrs. CAPITO. Mr. Chairman, I yield myself such time as I may consume.
I would like to thank the chairwoman, Chairwoman WATERS, for her hard work on this very important piece of legislation.
H.R. 5114, the Flood Insurance Reform Priorities Act, provides for the long-term reauthorization reform of the National Flood Insurance Program, extending it for 5 years, through September 30, 2015. The bill would phase out subsidized premium rates for certain properties, increase the annual limit on premium rate increases, and impose minimum deductibles for all policies.
The bill before us today, I believe, makes constructive reforms to eliminate certain subsidies and strengthens the financial soundness of the NFIP. Unfortunately, it also includes wasteful government spending. While I wish the bill went further to place the program on a path toward self-sufficiency and limit taxpayer exposure, I will support the final passage of this bill.
The NFIP is currently operating under a short-term extension through September 30, 2010, after experiencing its third lapse this year. H.R. 5114 makes constructive reforms to eliminate certain subsidies and strengthen financial soundness. In addition, several Republican proposals have been incorporated in H.R. 5114 to strengthen the reforms in this bill, including provisions to eliminate subsidized rates over time for homes that were sold to a new owner, impose minimum deductibles for all insured properties, require a report on the feasibility of incorporating national recognized building codes into the NFIP flood plain management criteria, and to direct the NFIP to report to Congress with a plan to repay its debt to the Treasury within 10 years.
The NFIP is facing serious financial challenges and cannot afford to continue on its current path. The GAO has included the NFIP on its annual list of high-risk government programs since 2006 because of its ongoing potential to incur billions of dollars in losses. With an $18 billion debt to the Treasury now and the persistence of subsidized premium rates for properties in high-risk areas, the NFIP continues to be underfunded and Federal taxpayers remain at risk.
Unfortunately, recent temporary lapses of the NFIP created uncertainty in the housing market and resulted in negative consequences for home buyers trying to purchase flood insurance protection in high-risk areas where it is required. While many property owners depend on flood insurance for some measure of financial security, and many more should consider purchasing it to protect themselves from potential losses, fundamental reforms are needed to make the flood insurance program more self-sufficient, reduce the potential for losses, and minimize the financial risk to taxpayers.
In the long run, it is my hope, along with most of my Republican colleagues, that all flood insurance premium rate subsidies should be eliminated and underwriting risks should be transferred to the private insurance market to the maximum extent possible.
In this respect, the provisions of H.R. 5114 that phase out and eventually eliminate certain premium rate subsidies represent very positive steps. The bill includes constructive measures to eliminate subsidized rates over time for nonresidential properties and nonprimary residences, including second homes and vacation homes.
H.R. 5114 also raises the cap on rate increases from 10 to 20 percent, which will allow the NFIP to charge premiums more appropriate to the risk within a shorter period of time. These useful reforms are overshadowed, unfortunately, by provisions authorizing almost $500 million in new Federal spending for new mitigation and outreach grant programs and to establish an Office of Flood Insurance Advocate within FEMA, which administers the Flood Insurance Program.
While there is a definite need to improve FEMA's communication with communities and to increase advocacy about the impact of the new flood risk maps, Republicans believe that this effort should be undertaken using the existing NFIP funds, rather than new Federal spending in this time of historic deficits.
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Mrs. CAPITO. Mr. Chairman, I yield myself such time as I may consume.
I would like to thank the chairwoman, Chairwoman WATERS, for her hard work on this very important piece of legislation.
H.R. 5114, the Flood Insurance Reform Priorities Act, provides for the long-term reauthorization reform of the National Flood Insurance Program, extending it for 5 years, through September 30, 2015. The bill would phase out subsidized premium rates for certain properties, increase the annual limit on premium rate increases, and impose minimum deductibles for all policies.
The bill before us today, I believe, makes constructive reforms to eliminate certain subsidies and strengthens the financial soundness of the NFIP. Unfortunately, it also includes wasteful government spending. While I wish the bill went further to place the program on a path toward self-sufficiency and limit taxpayer exposure, I will support the final passage of this bill.
The NFIP is currently operating under a short-term extension through September 30, 2010, after experiencing its third lapse this year. H.R. 5114 makes constructive reforms to eliminate certain subsidies and strengthen financial soundness. In addition, several Republican proposals have been incorporated in H.R. 5114 to strengthen the reforms in this bill, including provisions to eliminate subsidized rates over time for homes that were sold to a new owner, impose minimum deductibles for all insured properties, require a report on the feasibility of incorporating national recognized building codes into the NFIP flood plain management criteria, and to direct the NFIP to report to Congress with a plan to repay its debt to the Treasury within 10 years.
The NFIP is facing serious financial challenges and cannot afford to continue on its current path. The GAO has included the NFIP on its annual list of high-risk government programs since 2006 because of its ongoing potential to incur billions of dollars in losses. With an $18 billion debt to the Treasury now and the persistence of subsidized premium rates for properties in high-risk areas, the NFIP continues to be underfunded and Federal taxpayers remain at risk.
Unfortunately, recent temporary lapses of the NFIP created uncertainty in the housing market and resulted in negative consequences for home buyers trying to purchase flood insurance protection in high-risk areas where it is required. While many property owners depend on flood insurance for some measure of financial security, and many more should consider purchasing it to protect themselves from potential losses, fundamental reforms are needed to make the flood insurance program more self-sufficient, reduce the potential for losses, and minimize the financial risk to taxpayers.
In the long run, it is my hope, along with most of my Republican colleagues, that all flood insurance premium rate subsidies should be eliminated and underwriting risks should be transferred to the private insurance market to the maximum extent possible.
In this respect, the provisions of H.R. 5114 that phase out and eventually eliminate certain premium rate subsidies represent very positive steps. The bill includes constructive measures to eliminate subsidized rates over time for nonresidential properties and nonprimary residences, including second homes and vacation homes.
H.R. 5114 also raises the cap on rate increases from 10 to 20 percent, which will allow the NFIP to charge premiums more appropriate to the risk within a shorter period of time. These useful reforms are overshadowed, unfortunately, by provisions authorizing almost $500 million in new Federal spending for new mitigation and outreach grant programs and to establish an Office of Flood Insurance Advocate within FEMA, which administers the Flood Insurance Program.
While there is a definite need to improve FEMA's communication with communities and to increase advocacy about the impact of the new flood risk maps, Republicans believe that this effort should be undertaken using the existing NFIP funds, rather than new Federal spending in this time of historic deficits.
I know some of my Republican colleagues offered amendments to do just this, to address these concerns. And I wish that they had been made in order today, as their inclusion would have enhanced our debate.
The NFIP was originally intended to reduce the need for emergency disaster assistance from Federal taxpayers to local communities, and the program has a long ways to go to reach the point of being self-funded and self-sustaining. Furthermore, I believe that Congress has an obligation to U.S. taxpayers to challenge the premise that most flooding hazards will never be insurable by the private insurance market.
I remain committed to enacting comprehensive reforms that not only modernize the National Flood Insurance Program so that homeowners will continue to have access to flood insurance, but at the same time protect the American taxpayer.
I reserve the balance of my time.
I know some of my Republican colleagues offered amendments to do just this, to address these concerns. And I wish that they had been made in order today, as their inclusion would have enhanced our debate.
The NFIP was originally intended to reduce the need for emergency disaster assistance from Federal taxpayers to local communities, and the program has a long ways to go to reach the point of being self-funded and self-sustaining. Furthermore, I believe that Congress has an obligation to U.S. taxpayers to challenge the premise that most flooding hazards will never be insurable by the private insurance market.
I remain committed to enacting comprehensive reforms that not only modernize the National Flood Insurance Program so that homeowners will continue to have access to flood insurance, but at the same time protect the American taxpayer.
I reserve the balance of my time.
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Mrs. CAPITO. Then I would just like to say that this has been an effort that has been moving forth. As we've said, we've had a lot of lapses in this program across the country. It's caused a lot of disturbances for folks who are trying to purchase new homes or refinance, and I think that we need a permanent extension of this for 5 years.
So, again, I do have reservations about the additional spending; $500 million at this time of high debt and deficit and high unemployment is, I think, improperly placed, but this bill does have another purpose, and that is to make sure that homeowners and home purchasers can have the access that they need to the flood insurance program.
With that, I yield back the balance of my time.
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Mrs. CAPITO. Mr. Chairman, I would like to say that the chairwoman's manager's amendment does make good improvements to the underlying bill by phasing out taxpayer subsidies for severe repetitive losses.
As we know, and as I said in my opening statement, the NFIP is facing serious financial challenges and the program cannot afford to go on its current path. So in this respect, I think that Chairwoman Waters' manager's amendment is a positive step in the right direction. In addition, the manager's amendment includes additional reforms that seeks to reduce the subsidies over time that continue to burden this program.
The measure includes several provisions to address local community concerns that we have all heard in our districts resulting from new flood risk maps and the ongoing flood control projects, resulting in delays of purchase requirements and higher rates in certain cases.
I would like to point out why I believe that phasing out the subsidies for severe repetitive loss properties is important. If you look at the accounting for these losses over the last several years, the repetitive loss properties only account for 1 percent of the total policies in the program nationwide, yet the repetitive loss properties account for almost 30 percent of the claims paid annually.
Well, I think there is a sense of fairness about this, and most of us recognize that this is unfair. The subsidies for folks who continue to live in repetitive loss property areas continue to run up the losses in this very important flood insurance program. The high incidence of claims on repetitive loss properties has cost the National Flood Insurance Program more than $2.7 billion since 1978.
So with the reforms that the chairwoman has made in the manager's amendment, I support the manager's amendment.
I yield back the balance of my time.
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Mrs. CAPITO. Mr. Chairman, I certainly understand. And I've had constituents myself who have been remapped and fallen into the flood plain and questionable areas a lot, to their frustration. And I understand the gentleman from Ohio's intent on his amendment. But I think it sort of opens the door a little too broadly and a little too widely. While the amendment that he is proposing helps property owners who seek to recoup their expenses of appealing the flood map, it provides for full reimbursement for any costs. There's no specification to what reasonable costs could be--but any cost. And I think this is too broad.
I would prefer to see the amendment go back to the drawing board, reshape it, so that we can address the needs and the cost issues to our constituents but also make sure that we don't leave it so the door is so wide open that it would encourage in some possibilities maybe re-looking at it, overly expensive investigations into the flood mapping, without any kind of reasonable assurances that the costs that are incurred in challenging the maps would fall within a reasonable amount.
With that, I yield back the balance of my time.
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Mrs. CAPITO. I would like to begin by saying to my friend from Mississippi, we have kind of had an ongoing discussion on this. I think he knows this is not a personal issue for me, but it is a very personal one for him, and I certainly understand that. I can't really even imagine being in your shoes, quite frankly, and a lot of your fellow Mississippians in what has happened.
But I am going to oppose this amendment, really, by seeking to address the water and wind issue, which is something I think we do need to address. I have several issues that I would like to bring forward.
First of all, I have concern that this could interfere with the State regulation of insurance. As we all know, insurance is regulated through the States. It could dictate some of the processes that I think would undermine the State regulation of insurance.
It's interesting that the gentleman brought up State Farm because--and I'm sure he's aware that State Farm has just recently announced that they are going to be withdrawing from the WYO program, which is the Write Your Own insurance program, for several reasons, I believe. I'm not certain what they all are. But this means that 800,000 customers nationwide who bought their flood insurance coverage through State Farm will now need to be picked up by other Write Your Own insurance companies.
Third, I think this amendment could impose or would impose a new fiduciary responsibility on insurance companies that participate in this program. According to industry experts, this could expose insurers to new lawsuits and force them to place the interests of the Federal program over the interests of their own policy holders.
I think there could be a better way to address this issue and the objectives of this amendment by working with FEMA officials and State insurance regulators to devise a formula with ratios that would apportion losses fairly to address the situation in the future. Some States and companies are already using this approach to help clarify potential wind-versus-water issues.
So, with that, I would like to thank the gentleman for his passion and his ``stick-to-it-iveness'' to try to solve a very deep problem, particularly in his region of the country. But with the way this amendment is written and printed, I would have to be in opposition to it.
I yield back the balance of my time.
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Mrs. CAPITO. I would just like to speak very briefly in support of the gentleman's amendment. We have all had in our States issues with knowing the correct way to leave and evacuate certain areas. I sort of was hoping that this area of information was already covered. So I want to thank the gentleman for bringing this amendment forward, and I would ask that we support the gentleman's amendment.
I yield back the balance of my time.
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Mrs. CAPITO. I would like to address the gentleman's amendment really in the broader context of the Office of the Flood Insurance Advocate. This is creating it within this bill, and I think in my opening statements I addressed this issue. It's creating a new office. And at a time when we have rising debts and deficits, we are creating another bureaucracy, another obligation on the Federal taxpayer where I think that we could work within existing regulatory and administrative offices to try to accomplish the same thing.
We had a discussion yesterday in the Rules Committee where the chairwoman of our subcommittee talked about the need for advocacy. And I don't oppose the need for helping people wind through the intricacies of FEMA, trying to make appeals, trying to find out when and how they're going to be paid or what their alternate living arrangements might be and all the things that an advocate can do in terms of winding through a large bureaucracy like FEMA. But FEMA has assured us that they have already a functioning appeals process, and on top of an Inspector General and continual GAO oversight of the NFIP program.
So I think that the advocacy office itself is representing some duplicative and unnecessary bureaucracy and spending. So while I don't oppose the gentleman's amendment, if the advocacy office goes through, it's not really the substance of your amendment, it's really more the basis of the flood advocate itself, Office of the Flood Advocate itself.
I yield back balance of my time.
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Mrs. CAPITO. I would like to thank the gentleman for his amendment.
I raise questions about this amendment for the same reason that I raised questions about the previous amendment, and that is, you know, we are at a point here in our economy in this time where we have high unemployment. We have our deficit that has just passed over the trillion dollar mark for the second year in a row. We have increasingly excruciating debt that we're going to be passing on to our children and grandchildren, and yet we're still going to be creating a grant program in this bill that's going to cost the taxpayers $250 million--significant dollars at a time when people are losing their jobs or cutting back or making decisions in their own lives about the ways to afford the things that they not just want but they absolutely must have and need. And while, you know, further education and outreach is always a good thing, I think now would be a good time for us to make a statement in this bill by saying, not now, not this time, not this $250 million.
I have a question, too, in terms of the gentleman's amendment, not being a real estate agent myself. I'm not sure that in the real estate agent--in the training to become a real estate agent and the things--I know you have to be licensed and you have to take continuing ed and you have to keep up on all different kinds of financing and property evaluations and all the things. It's kind of a surprise to me that real estate agents don't already know the extent or how to deal with the Flood Insurance Program, particularly if there are regions of the country that are prone to this type of damage and these type of floods. But I don't know if the gentleman has an answer for that.
Are you aware of whether real estate agents now, across the country, are exposed to this kind of information? I mean, why wouldn't they already have this?
I yield to the gentleman if you have an answer to the question. I don't know the answer to that.
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Mrs. CAPITO. Thank you for that clarification.
Reclaiming my time, I would just additionally say that I would think, through the continuing education of the real estate schools and the licensing boards throughout the different States who have these issues, that this would already be something that's covered.
Again, I will go back to my original premise, $250 million in 5 years at a time of record debt and deficit and high unemployment, to me, is an improper expenditure at this time.
With that, I yield back the balance of my time.
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