On Tuesday, Congresswoman Maxine Waters (D-CA), Chairwoman of the House Financial Services Committee, delivered the following remarks during a policy speech on the importance of the National Flood Insurance Program (NFIP).
As Prepared for Delivery
Good morning and thank you for inviting me to speak at this important and timely conference.
Before I begin, I’d like to thank the organizers of the National Flood Conference – the American Property Casualty Insurance Association and the Reinsurance Association of America – for hosting this event and for inviting me to speak today.
I’d also like to thank Tom Glassic for his warm introduction and for his work in bringing us together today. Thank you all for being here. All of us in this room have a long history with the National Flood Insurance Program. We’ve fought tirelessly over the years to ensure that it remains effective, solvent, and affordable for Americans across the nation. Unfortunately, that fight is continuing right now.
In the 1950s, floods devastated neighborhoods across the United States. In addition to the loss of property and life, private insurance companies suffered huge losses, leading them to stop writing flood insurance policies altogether.
Without insurance coverage to help families and businesses pick up the pieces after a storm, the government was left to pick up the tab in the form of federal disaster assistance. By 1968, Congress decided to step in and establish the National Flood Insurance Program – or NFIP – which assists property owners with the cost of flood recovery while also easing the burden on taxpayers for the recovery costs within flood zones.
The NFIP makes flood insurance available to millions of homeowners, renters, and business owners and also helps those policyholders to reduce their risk by providing flood mapping, floodplain management, and mitigation services. These activities help local communities and individuals prepare for the financial impact of flooding, whether it is caused by heavy rainfall that affects families living in the Midwest or life-threatening storms that pummel the millions of homes and businesses along the coasts. Despite the benefits the NFIP provides to policyholders and taxpayers, the program continues to be at risk.
We still have a lot of work ahead of us in Congress to enact a long-term reauthorization of the National Flood Insurance Program, but I am encouraged that so many of us in Congress – on both sides of the aisle – have identified reauthorization as a top priority.
I don’t usually have many opportunities to work with my Republican colleagues, but flood insurance has long been an issue that defies partisanship.
As you all know, in 2012 I joined former Congresswoman Judy Biggert in sponsoring the NFIP renewal legislation that came to be known as “Biggert-Waters” – a five-year reauthorization that focused on putting the NFIP on a path to fiscal sustainability.
Several years later, I reached across the aisle again to find ways to solve the unforeseen rate increases that resulted from FEMA’s implementation of the law. I found support from many Republicans that wanted to make sure families and businesses across the country retained affordable premiums.
Over the course of 2013, I convened meetings and conference calls with my colleagues to address the unintended consequences of Biggert-Waters, and we got to work drafting a bill that made it through the Senate. Eventually, after working with then-Republican leader Eric Cantor, we crafted a measure that could garner overwhelming support in Congress and address the affordability challenges that could have caused hardship for so many families.
I have long advocated for a long-term reauthorization of the NFIP in order to provide certainty in the housing market. Unfortunately, the NFIP has been carried along through twelve short-term extensions since Fiscal Year 2017, and has even experienced brief lapses during that time. This haphazard approach to legislating puts communities at risk and undermines the health of our housing market.
I am truly hopeful that as Chairwoman of the Financial Services Committee, with jurisdiction over the NFIP, that I will be able to work with Ranking Member Patrick McHenry on providing certainty to the market; enacting a long-term reauthorization that includes much needed reforms to address affordability, improve mapping, enhance mitigation; and ensuring that policyholders are protected.
First and foremost, I am focused on affordability. Although premium increases were slowed with the passage of the Homeowner Flood Insurance Affordability Act, there is still much room for improvement. Policyholders continue to be burdened with unfair fees and surcharges that have nothing to do with their actuarial risk. For example, small businesses are charged $250 every year just to participate in the NFIP. I hope that any legislation we pass out of the House repeals these harmful surcharges, which unfairly burden policyholders and are not tied to actuarial risk.
Secondly, with the NFIP’s work on an affordability framework finally completed, we know that there are low-income policyholders in the program that need financial assistance and we have analyzed several options for delivering that assistance. I am working on an affordability demonstration program that would target assistance to policyholders at or below 80% of area median income, which is well known in the housing world as representing low-income households. By targeting the demographic in such a way, we will be able to help those truly in need. And, by crafting this as a demonstration, we will be able to monitor the results and readjust the assistance as necessary.
But above all, I believe the single most important thing we can do to fix the NFIP and bring relief to policyholders is to forgive the NFIP’s debt.
I was so pleased that Congress recently forgave $16 billion in debt with strong bipartisan support. But we did not wipe the slate entirely clean and the debt continues to burden responsible policyholders for the catastrophic losses of Hurricane Katrina and Superstorm Sandy. The NFIP pays $400 million every single year just in interest alone to service a debt it can never repay. That $400 million could instead be spent on the affordability demonstration I just mentioned or repurposed to provide mitigation assistance or pay claims.
It is simply unacceptable that the very policyholders who are trying to do the right thing but are struggling to make the payments are paying for the servicing of a debt that was accrued at no fault of their own. I will not rest until something is done to address this $20 billion debt and the impact it has on policyholders.
Of course, the NFIP is much more than just an insurance program. The NFIP plays an important role in disaster preparedness and resiliency by providing flood maps. I’m committed to making further improvements in mapping by calling for additional funding and the use of the latest technology. According to the Federal Emergency Management Agency, everyone is at risk of flooding. It is important that flood maps are up to date and modernized so that flood risks are understood and accurately displayed.
I am also prioritizing reforms to and investments in mitigation, which is proven to save taxpayer dollars in the long term by helping to reduce the damage that occurs when floods hit. Policyholders and communities deserve credit for the mitigation efforts they undertake whether it is alternative methods of mitigation in dense, urban areas, or locally built levees that provide protection for entire neighborhoods.
Additionally, I am committed to providing the resources necessary for communities to conduct mitigation and floodplain management. I am looking at everything from state revolving loan funds, to grants for technical assistance, to insurance funds for buy-outs, to congressional appropriations for mitigation assistance. These steps will serve our nation well in the face of natural disasters that are increasing in severity and frequency every year.
As part of this effort, I understand that more must be done to address properties that repeatedly flood. So-called repetitive loss properties present challenges not only to the stability of the NFIP, but more importantly to families and communities. However, as we seek to move homes out of harm’s way we must take care to understand the plight of the people that live in those homes.
For many, there are simply no options. Often, the least desirable and risky areas are where low-income families are forced to reside. Or, they live in flood-prone areas because that is how they make their living. I’m often reminded of the hardworking shrimpers in Louisiana that I visited after Hurricane Katrina who would sooner lose their arms than lose their homes. In many cases, these families have lived in the same home for generations and fishing or shrimping is all that they know.
So, while I understand that repetitive loss properties need to be provided real options to either elevate or move out of harm’s way, I also want to be sure that we carefully consider the circumstances of the people inside the property.
I would also like to see some reforms to the claims process. As evidenced by the appalling reports of fraud in the aftermath of Hurricane Sandy, more must be done to protect policyholders.
I would like to thank Representative Nydia Velazquez for her hard work in crafting legislation that brings fairness, transparency, and accountability to the NFIP, and for working with all of the relevant stakeholders to ensure that the reforms are crafted in a balanced manner.
I would be remiss if I did not mention our efforts to grow the private sector in a responsible way. As you all surely know, the federal financial regulators took several years to come out with a rule that would allow lenders to accept private flood insurance as satisfaction of the mandatory purchase requirement. In the absence of action from the regulators, the House passed legislation that would have provided such clarification. I’m pleased that the regulators have finally acted, and we will be monitoring the development of the private sector as more companies begin to venture into the space.
Similarly, I’m pleased that the NFIP has taken steps to spread its risk through the purchase of reinsurance. To date, the NFIP has purchased over $2 billion in traditional reinsurance and capital markets placements. Again, we will be monitoring these developments as the NFIP continues to grow its reinsurance program.
Finally, I would like to offer some thoughts on FEMA’s latest administrative efforts to reform the NFIP. The initiative known as Risk Rating 2.0 includes a number of changes to premiums and underwriting that have the potential to lower costs for some but substantially raise them for others. Again, I must draw on my experiences from Biggert-Waters when premiums rose so quickly, so unexpectedly, and so dramatically, that they caused significant harm to policyholders and to the market.
Changes to risk rating must be undertaken with extreme caution and should always be done with the policyholder in mind. I will oppose any efforts to substantially raise premiums or to otherwise add to the affordability burdens that we in Congress are working so hard to tackle. Similarly, I will oppose any efforts to weaken grandfathering protections that simply allow homeowners who played by the rules and did everything right to avoid being penalized for changing factors outside of their control.
In closing, as we continue our work in the Financial Services Committee, I call on all of you to echo my commitment to a bipartisan, long-term, responsible reauthorization that addresses the debt, provides solutions to affordability challenges for families and businesses, and protects our housing market.
Flooding is truly a humbling and equalizing force. In the wake of the many catastrophic natural disasters we experienced just in the last three years, whether the wildfires in California; Hurricanes Harvey, Irma, and Maria; or devastating rainfall and flooding in the Midwest and the Southeast, we’ve seen neighbors rescuing neighbors and strangers helping strangers. We’ve seen the best of America during the worst of times, with everyone putting aside their differences, to come together to help one another in our time of need.
Now it’s time for Congress to do the same thing. We must put partisanship and ideology aside and ensure the continued affordability and availability of coverage for millions of Americans. We must renew the NFIP for the long term with a plan that ensures affordable flood insurance continues to be available to communities across our country as the first order of business.
Thank you for all your good work on this issue, and for inviting me to speak with you today.