end of this month. last year the u.s. house of representatives overwhelmingly passed a five-year extension of the program with some changes. the houts also passed a short-term extension through june. the senate has not yet acted on either a long or short-term extension. senators recently heard from industry representatives about the role of the national flood insurance program and what its expiration might mean. this is 50 minutes. >> and what we'll do before we start on this panel is i would like to give ranking member vitter the opportunity to see a few words. >> thank you again, mr. chairman. and i'll be very brief. i just wanted to underscore really my last point. today is may 19th. the entire program expired after may 31st. 22 days. slightly over three weeks. and we really, really need to

act for the good of the country and the economy. and we need to act in a longer-term way. not just another band-aid, another short-term extension which creates and continues an unhealthy level of uncertainty. and i appreciate the chairman feeling the same way and working very closely with me and others in this regard. i'm going to be doing two things this week, but i hope to get widespread support. i'll be passing around a new letter addressed to senators read and mcconnell, urging this to be put on the floor absolutely as soon as possible. senator tester and i had that same sort of plea in a letter dated february 14th. that was three months ago. so it's even more urgent now. and secondly i'm going to be proposing as a floor amendment to the next bill after the

present one, whatever that is. the senate reauthorization bill with some controversial perfecting amendments that have been worked out since committee. so it looks like that next bill on the floor will either be an fda user fee reauthorization or a small business tax bill. neither of those is highly partisan or highly controversial. so whichever of those comes up i'll be proposing as a floor amendme amendment. the senate bill with the perfecting amendments incorporated into it. and i hope we can get a bipartisan cooperation and effort to get that attached to that bill as a means of pushing this forward. thank you, mr. chair, for the couple minutes, and i look forward to our second panel. >> absolutely. and i don't think flood insurance should be controversial or partisan, either. it impacts everybody. i want to get started with our next panel. it's representing a broad

cross-industry support for reauthorization reform of nfip. i want to thank you for being here ahaechd time. dr. david a. sampson is the president and ceo of bci, which represents more than 1,000 homeowners, autos, and business insurance companies that rate over 30% of this nation's property and casualty insurance. dr. sampson also served in the george w. bush administration. as deputy secretary of the u.s. department of congress and assistant secretary of commerce for economic development. welcome, dr. samson. >> thank you, mr. chairman. it's a pleasure to be with you today. i appreciate your leadership on this issue. and for the invitation to be here. pci and its members who write about 52% of all the flood insurance through the nfip write your own coalition program.

it doesn't just affect one part of the nation. flooding occurs all across the country. and we fully support your efforts to pass bipartisan legislation that includes a long-term authorization and meaningful reforms. i'd like to just emphasize three key points in my testimony today. first, it is vitally important to avoid another lapse in the nfip as lapses have real-world negative consequences for consumers and the economy. second, as confirmed by the government accountability office, the program needs meaningful structural reforms. and third, privatization of the flood program is not feasible under current conditions. let me just expand on those a little bit. the first priority of course is to avoid a lapse in coverage. you've already documented your concern about that. more than 5.6 million american homeowners, businesses, and renters are nfip policy holders and rely on this program to protect their policy.

you've already discussed the 12 short-term extensions of the program since september 2008 leading to lapses in coverage. when congress has failed to act. in 2010 alone th$2010 alone the for a total of 53 days. each time the program lapses a cumbersome and expensive series of special bridging transactions is required from insurers and consumers and the nfip to set aside policy purchases, collect funds and advance claim payments. and all of this creates significant friction cost for the marketplace and certainly for americans who rely on this important protection. secondly, while it is chrisical for congre for congress to nfip the program as it stands now needs structural reforms adrsed in the senate bill. the nfip is deeply in debt and must transition to a more sustainable path.

i would point out that if a private insurance company held no surplus and carried $18 billion in debt on a $4 billion annual revenue stream regulators would -- for six years running regulators would immediately shut it down and the ceo would be fired and yet that's the situation that we face with the nfip program. two pci studies on flood risk producing revealed that the nfip is providing government-subsidized flood policies at roughly 1/3 of what the full risk cost would be in the private sector. the subsidies for repetitive loss and high-risk policies are even greater. 1% of the properties insured by the nfip have accounted for over a third of the claims on an ongoing basis and the previous panel spoke of that so eloquently. the third point i wanted to make is while the program needs to be reauthorized and must be

reformed it's important to note that discussions on privatizing the program are unfeasible under current conditions. the current nfip rates would need to be closer to true market rates before any meaningful discussion related to the private industry taking on flood risk can take place. a 2011 pci study estimated that if the private market were to underwrite the flood peril policy holders in flood plains could see rate increases of 200 to 400%. proposals to end the nfip are unrealistic given the current steep subsidies and the unwillingness of many homeowners to purchase coverage in high-risk areas even when mandated at these subsiditancid risks. so we applaud your efforts and pci certainly stands willing to work with this committee to do anything we can to help this overwhelmingly bipartisan piece of legislation make it through the senate in time to avoid the lapse and pursue the structural reforms that you have proposed.

thank you, mr. chairman. >> well, thank you, dr. sampson. we appreciate your testimony and we will have questions after we get done with the testimony of the other panelists. but thank you for your perspective and for your testimony. next we have mr. john a. jensen. serves as government affairs committee chairman of the independent insurance agents and brokers of america. and as president of corel insurance group. he is currently the south carolina national director for independent insurance agents and brokers in america. he is a past chairman of the independent insurance brokers of america. want to welcome you today, mr. jensen. you may proceed with your testimony. >> thank you very much. good morning, chairman tester and ranking member vitter. i am pleased to be here today on behalf of the independent insurance brokers of america or

the big i to present our perspective on the extension and reform of the nfip. we commend the subcommittee for looking at is this very important issue. i am president of corel insurance group which is an agency with 132 associates in 12 locations including offices at myrtle beach and hilton head island. since 2001 i have served as chairman of the government affairs committee for the big a. the big i is the nation's oldest and largest trade association of independent insurance agents and brokers and we represent a nationwide network of more than a quarter of a million agents, brokers, and employees. many of these agents serve as the sales force of nfip working with write your own companies. it is from this vantage point that we understand the capabilities and the challenge of the insurance market when it comes to insuring flood risks. the private insurance industry has been and continues to be

largely unable to underwrite flood insurance because of the catastrophic nature of these losses. therefore, the nfip is virtually the only way for people to protect against the loss of their home or business due to flood damage. prior to the introduction of the program in 1968 vifrltly the only financial remedy available to consumers after a flood was federal disaster assistance. since then the nfip has filled the private market void and created a reliable safety net for people whose properties have suffered damage. with this said we do recognize that the program is far from perfect, which is made all the more clear by the devastating 2005 hurricane season. the current $17.2 billion debt reveals some of the deficiencies of the program, and it is clear congress should show up to nfip's financial situation. for this reason the big i is very encouraged by chairman johnson's reg slaigs, the modernization act of 2011.

i want to be very clear. the big i strongly supports a long-term extension and reform legislation. there are important reforms that must happen to be program in order for it to be put on stable footing. in particular the big i for many years has asked congress to begin phasing out subsidies found in the program. we are pleased that chairman johnson's legislation contains proposals to do just that for many properties. additionally, the big i welcomes the legislation's proposal to increase the amount fema can raise premiums in any given year. currently, fema can only raise premiums by 10% on any property. the legislation would propose to increase this to 15%, which would allow the program to become more financially sound. i'd also like to comment on some recent discussions aimed at finding ways to privatize the program. the big i would always prefer to utilize the private market. however, we have yet to see evidence that the private

marketplace is any more prepared or capable of underwriting flood risk today than they were in 1968. that said, we welcome the study in privatization options found in the legislation and we'd be happy to discuss any ideas of increasing the private market's role going forward. finally, i'd like to touch on one of the most important things found in the reform legislation, and that is a long-term extension. as you know, for the past six years congress has not passed a long-term extension of the program and instead has opted to pass numerous short-term extensions. this has been done mainly so that congress could continue efforts at reform legislation. while the big i fully appreciates the passage of each of these short-term extensions, it should be noted that there is increasing frustration both in the marketplace and among our consumers with the program and its complete lack of stability. a five-year extension in the nfip as found in s-1940 is of more importance than i can stress. we strongly urge the senate

leadership to secure floor time for a full debate of s-1940. in fact, as you know this week, a number of organizations from various industries are taking part in a flood the hill week to urge the senate to timely pass s-1940. i'm happy that three panelists here today, the realtors, pci, and nature conservancy are part of that effort. hopefully we can make some progress this week. i thank the committee for giving me the opportunity to express the views of the big i on this important issue and i look forward to any questions you may have. and on a separate note i'd like to thank you, mr. chairman on behalf of our entire membership for introducing narad-237 we look forward to working with you on this common sense agent licensing legislation. >> thank you, john. i appreciate the kudos and it's good to see a guy who spells john right. thank you. appreciate your testimony.

mr. morris movisi is president of the national association of realtors. he was elected president of the florida association of realtors in 2002 and was named realtor of the year in 2003. i want to welcome you here today, and continue with your testimony, please. >> chairman tester and senator vitter and members of the subcommittee, thank you for the opportunity to test on this urgent need for a five-year reauthorization of the national flood insurance program. and i'd be remiss if i didn't bring you these salutations from marbury little, past president of the louisiana association of realtors and all the 5,000-plus realtors in louisiana who appreciate senator vitter, your involvement and commitment to this issue. and from betty kissic and rhonda tompers who said specifically, chairman, to tell you that they are very much pleased and very much committed to what you're trying to accomplish here on the hill. >> thank you.

>> my name is mo veissi. i'm the n.a.r. president 2012 for the national association of realtors and a broker owner of veissi & associates in miami, florida, a realtor firm that has been in existence for over 42 years. the national association of realtors represents more than a million members, as you've mentioned, involved in all aspects of the real estate industry. long-term reauthorization and reform of the national flood insurance program is a key priority to our members. as a matter of fact, on may 17th here in washington, d.c. we will have over 15,000 realtors at the washington, d.c. monument, and one of the five key issues that we will be speaking to the folks on the hill about is just this issue. insuring access to affordable flood insurance is critical. it creates certainty in the real estate market, and certainty is requirement for this real estate market to recover. home prices are still enormously fragile across the united

states. and more than a quarter of a million of existing home sales are distressed properties. tight lending standards remain a problem, and we don't want to give a lender another excuse not to approve a loan. stoppages or shutdowns exacerbate this market, and there have been 17 stoppages since 2008. twice failure to act led to program shutdown, and the latest is set to expire, of course as you know on may 31st of this year. the national flood insurance stoppages and shutdowns have broader implications for the u.s. economy. nfip is essential to 500,000 home sales annually. 13,000 sales nationally can be delayed per day if we don't have this bill in progress, intact. more than 47,000 real estate transactions were stalled in june 2010 for the 33 days that

this act was not in service. over 16,000 homes and houses are in the flood plains in montana. over 660,000 homes are in the flood plains in louisiana. but more than the homes are impacted by this. the commercial, multifamily, and refinancing, all are impacted by the lack of or the uncertainty in the national flood insurance program. the five year national flood insurance reauthorization offers broad advantages. one and the first one is the important bipartisan win for congress, which in my humble estimation is so much needed right now. two, this has passed unanimously out of committee. house has passed this bill by over 400 votes. crucial reforms are lost if the

five-year bill is not adopted. enhancing fema communications with communities, greater flood plain mapping, reimbursement of flood map and appeal expenses for nfip errors. streamlining of the appeals process. additional time for resolution avenue peals and review of flood mapping standards and procedures. the number of states that are affected are enormous. this is no longer a coastal issue. places like west virginia, tennessee, kentucky, alabama, new mexico, vermont, kansas, iowa, nebraska, missouri, utah, minnesota, wyoming, north and south dakota, all have related presidential disaster declarations, and there's more. every time we slow this down. every time we create an uncertainty in this particular bill and this particular offering, we slow down the process of a healthy real estate

recovery in this country. if there's one thing that's enormously important to this country's both economic and social and cultural background, it's the resurgence of a strong and healthy housing market and peripheral industry. so i would encourage you to continue to do the good work. you have the national association realtors who believes and understands your commitment. thank you very much. >> mo, thank you for your testimony. and i couldn't agree more. the real estate recovery is incredibly important to get our entire economy back on track. thank you for your testimony. next we have susan murdoch -- sarah murdoch. i'm sorry, sarah. senior policy adviser for climate change policy with the nature conservancy, a leading conservation organization working to protect ecologically important lands and waters. miss murdoch handles climate change adaptation strategies and federal hazard risk reduction policy for the nature conservancy. has also worked here in the senate. working for senator john kerry.

welcome, miss murdoch. and you may proceed with your testimony. >> thank you, mr. chairman, and members of the subcommittee. thank you for the opportunity to prevent the nature conservancy's views on the timing and reforms to the national flood insurance program. my name is sarah murdoch senior. the nature conner have van si is a conservation organization working around the world to protect ecologically important lands and waters for nature and people. we continue to support a five-year reauthorization of the national flood insurance program through the passing of the flood insurance reform legislation. we ask that this legislation be brought before the full senate for debate and consideration at the earliest opportunity. the nature conservancy is also a member of a diverse coalition of environmental organizations, taxpayer advocates, insurance

industry representatives and housing groups. also strongly supports the senate banking committee's flood insurance reform and this week we are participating in the hill activities. with this much diverse political support, it seems like passage of flood reform represents a win for all. contrary to congressional intent, the program, as it currently functions, is increasing risk from storms and floods to people, property, and ecosystems, and the important services that those ecosystems provide to people. enactment of the national flood insurance reform legislation will phase out subsidies that have undermined the financial stability of the program, would require fema to ensure maps are updated and accurate so people can understand and better prepare for their risks, and will streamline and strengthen the mitigation programs to help decrease flood risk and better protect communities, homes, and

businesses. i would like to focus the remainder of my testimony on our interest in this final provision, our support for strengthening the mitigation programs. in 2011 alone, there were 58 federal flood disaster declarations covering 33 different states and costing $8 billion and causing 113 deaths. both the costs and the number of deaths exceeded the 30-year averages. and results from scientific studies indicate that change in climate has exacerbated and will continue to intensify extreme weather events, including flooding and coastal storms. the proposed reform legislation is the most important single step we can take towards mitigating these risks. currently, under the flood insurance program, a dangerous feedback loop is in play, subsidized insurance rates facilita facilitates, which not only puts people and property at risk, it

simultaneously facilitates the destruction and degree gre dags of the ecosystems that provide a natural defense to people and properties. the traditional approach to flood protection and river floodplain systems has been to rely on dams and levies to contain flood waters, in coastal areas, to build gray infrastructure. while built infrastructure plays an important role in helping secure our communities, it requires substantial investments for both initial construction and ongoing maintenance. instead of relying solely on gray infrastructure, an alternative approach involves natural infrastructure or so-called green infrastructure with built infrastructure. this specifically involves maintaining and restoring the connectivity of rivers along with sufficient area floodplain and conserving and restoring coastal and natural infrastructures, such as wetlands, reeves, dunes, barrier beaches and islands, and in

addition to flood control benefits provided, these ecosystems provide many services that support and protect humans and nature, such as filtering pollutants, erosion protection, production of fish and shellfish, and continued agriculture production. the nature conservancy is working with partners across the country to implement floodplain restoration projects and along the east and gulf coast, louisiana in particular, we're building oyster reeves as a way of protecting against floods. due to our understanding of the benefits of investments in mitigating efforts, we stand ready to work with fema and members of congress to strengthen this aspect of flood insurance program. thank you for the opportunity to present the nature conservancy's recommendations on the need to pass the senate's five-year reauthorization of the flood insurance program. >> thank you, ms. murdoch, i appreciate your testimony, as i do with the whole panel. we will start with the questions

now. i want to before i start thank each one of you to your commitment to a long-term reauthorization, i very much appreciate it. i think the clerk put on seven minutes, we'll probably have more than one round, would be my guess. i'm going to start with the most pressing issue that's facing us right now, that's the danger of lapse in the program. i understand, and this may be different today, i don't know, senator vitter, but the short-term extensions cleared my side of the aisle, i don't know if it's cleared yours yet or not, but we're working together to try to get this done. in some cases, i would rather just see us get this thing done rather than deal with the extension. i think that's what senator vitter talked about in his remarks. i want to drill down on a point of the lapse, because the clock is ticking. in your testimony, you all spoke of consequences which can be pretty severe if this program does lapse again. so what i'd like to do from each

one of your different perspectives, describe the most damaging consequences of failing to extend this program, and at what point prior to exploration do carriers and agents and realtors and home owners need to start preparing for a potential lapse. go ahead, dr. sampson. >> well, while the cost of the lapse are hard to quantify, they are very real, and the answer to your question, mr. chairman, insurers are already in the process now that we're this close to the exploration of beginning to mail out the notices of the imminent lapse of the program. the only one who wins by that is the u.s. postal service, but those are -- those are embedded friction costs to insurers, and i think it's these repetitive lapses in the program that have caused a number of major

participants in the write your own program to leave in recent years. we're down to 85 active participants in the program from 150 just a few years ago, so that's giving you the indication that the frustration and the friction cost of these very complicated bridging transactions are making it not worth the participation from the insurer's perspective. >> would you like to respond to that that? >> yes, sir, as dr. sampson mentioned, the carriers are forced to carry out these notices, as i mentioned in my testimony, we have 3,000 flood insurance policies, that means we'll get 6,000 calls from folks saying what's happening, what's going on. i would also emphasize it is truly important to the consumers. as a matter of fact this morning on a cab ride over, i was forced to share a cab to five other people due to some transportation issues, but one of the ladies had a home in charleston, south carolina, and asked what i was doing here, and

i explained to her. she said, my god, don't they understand the hurricane season is june the 1st and this lapse may 31st. we get these notices all the time, and as we were leaving the cab, she said, would you do me a favor, my name is angie davis, tell the senate to do good work here, we need flood insurance, we can't be without it. >> thanks, john. maurice? >> six of the last eight recessions have come out because of a healthy construction market. we know even in the worst of times we're generating about 2-plus million jobs a year when the housing market is on track. without the national flood insurance, we affect so many homes, not just coastal states, but interior states today, and even those with existing home r , those that exist have clauses in

their existing mortgage that simply say, if there's a lapse in insurance policy, the mortgage has an opportunity to be called. so even those folks don't know how at risk they might be. this is a fledgling recovering real estate market. as important to this market as any other aspect, as important to the recession their period that we've had is a healthy real estate market both from the economic standpoint for america and from the social and cultural standpoint, and when you do anything, anything, to effect that fledgling real estate recovery, you are literally affecting the economic recovery and the social and cultural aspects of america. i can't tell you how important this piece of legislation, and senator vitter and senator tester, how important it is, that's enormously important. >> a quick follow up, you may not know this on a national