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 basis, but you may know it from a southern florida basis, if this thing were to expire, what kind of impact as far as percentage of homes would it have, say, in southern florida? >> well, i can't be specific about that, although i'll get you those -- >> i just want to get an idea. >> we were, as i quoted to you, nationally we were about 1300 a day, 37,000 across the board, but in florida where we would be specifically impacted because the entire state is a floodplain, it would impact every one of those sales, and even the existing mortgages. perce

percentage-wise, 1 out of every 2. >> thank you very much. ms. murdoch, from your perspective, if we keep doing extensions or if it is to expire, how does that impact the mitigation efforts? >> clearly, you know, we're seeing more and more increased storms and storm damage, which is causing more and more damage, and the mitigation efforts are long-term efforts. they are not something that can happen overnight, so you need that long-term certainty of the program, the backing of the program, and the grants that they provide in order to really plan for and implement some of these mitigation efforts. >> thank you, senator vitter? >> thank you, mr. chairman, and i certainly, strongly support a short-term extension if we feed it, you know, if we can't do anything else before may 31st. in fact, i think technically it's my bill, so i'll certainly be trying to clear that if it's

necessary. i'm just concerned about two things. number one, patience is running really thin among some members about doing all these short-term extensions, so we may not be able to clear it, clear it means get unanimous consent, every senator on our side has to agree, and, you know, the more these ban dad extensions we do, the less patience members have, because they want reform, which is needed. secondly, a short-term extension avoids a lot of negatives, but it doesn't accomplish the positives that the full reauthorization does, and i think that was one of the points, so i'm for it if we can only do that between now and may 31st, but i'm also trying, as john and others are, for the full reauthorization. may 31st is three weeks and a

day away. when do concrete negative actions, notices, letters, other things, start going out compared to that date. is it now, dr. sampson? >> they've already started. >> why don't you describe some of that and when that starts. >> 60 days out from the expiration of the program, insurers are required to notify holders of policies that the coverage is going to be ending, and then, as i say, it has a casca cascading, during the lapse there is this whole cascading series of very complicated bridging transactions that add no value to the process, but only cost to the carriers and uncertainty to the policy holders. you know, we're in a bizarre situation where you have the

national flood insurance program actively advertising the nfip on television to try to increase the take uprate, which is the socially responsible thing to do, and yet everyone who has a policy knows the number of disruptions that we've experienced over the last several years, and so we're really sending cross signals here, and these lapses are causing companies to exit the program, and i'm convinced that these continual lapses create such uncertainty in the policy holder that it reduces and suppresses the take uprate and the renewal rate. >> and i assume part of what you're saying is a near lapse, a near miss is also negative. i mean, if you act the day before, three days before, that's also -- >> well, we are within -- we are

within the period where negative activities are already occurring from the company's perspective, but i would say, if you can get the short-term extension without letting it lapse, we're talking about here the least of the bad alternatives, so certainly, we're in the cone of negative activity, but it's not as negative as it will be if we get to may 31st and the program lapses for the 13th time. >> right, right. okay, that's all i have. thank you, mr. chairman. >> senator moran. >> mr. chairman, thank you. i'm not a member of this subcommittee, i appreciate you allowing me the opportunity to join you today, really only for the purposes to lend my support to see that we get this accomplished and to hear from the witnesses today to -- so i can have my arguments reenforced. i still remain baffled by at least i'm unaware of a response to the letter that the two of you