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

we also write nearly 3,000 nfip policies. since 2001i served as chairman of the government affairs committee for the big point the big lie is the nation's largest oldest trade association of independent brokers and we represent a nationwide network of marvin a quarter of a million agents, brokers and employees. many of these agents served as a sales force of the nfip working with port huron cos. it's from this vantage point that we understand the capabilities and the challenges of the insurance market when it comes to ensuring flood risk. the private insurance industry has been and continues to be largely unable to underwrite flood insurance because the catastrophic nature of the losses therefore urge the nfip as virtually the only way for people to protect against a loss of their home or business deutsch flood damage. prior to the introduction of the program in 1968, virtually the only financial remedy available to consumers after the floods is federal disaster assistance. since then, the nfip has built the market avoid crea

we also write nearly 3,000 nfip policies. since 2001 i have served as government affairs committee chairman for the big i, the largest trade association of independent insurance agents and brokers and we represent a nationwide network of more than a quarter million agents, brokers and employees. many of these agents serve as a sales force with nfip working with write your own compapolicy. the insurance company continues to be largely unable to underwrite flood insurance because of size of these losses. prior to the program in 1968, virtually the only financial remedy available to consumers after floods was federal disaster assistance. since then the nfip has filled the private market void and created a reliability 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. congress should shore up the fin

the nfip was designed so that in years where there was excessive claims payments, the nfip could borrow from the federal treasury and repay that with interest, which worked fine when there was losses and in the good years they could repay that. in 2005 they had to borrow billions of dollars, the debt peaked around $19 billion. it's currentry at $17.75 billion. with the current structure, the nfip is going to be unable to repay this debt essentially, so bringing us all back now to the reform, one of the key things in the house and senate bill is phasing out those discounts on a sub-class of property owners, commercial properties, for second homes and vacation homes, for what are referred to as severe repetitive loss properties, essentially the riskiest of the riskiest of properties, also some of the bills, i think they differ slightly. one of the bills would phase out the discounts every time the property turns over, so if a new person purchases a home or if an owner lets their policy lapse, when they go out to renew it, they'd phase out the discount too. >> there's been pushback, genera

nfip is essential for 500,000 home sales annually, 13,000 sales nationally can be delayed per day if we don't have this bill in progress, in tact. 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 are in the flood plains in laws laws but more than the homes are impacted by this, the commercial, multi-family, refinancing, all are impacted by the lack of or insurgency in the national flood insurance programs. it offers broad advantages. one is the important bipartisan win for congress, which is my humble explanation is so much needed right now. two, this has passed unanimously out of commit and the 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 notification of flood plain mapping, reimbursinreimbursing, streamlining of the mapping appeals process, additional time for the resolution of appeals and review of flood mapping standa

the amount of claims the nfip paid out in 2005 was more than the m

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 tod

right now, prices in the nfip, there are two differences in rates. is a determinant on the fema map. you have higher rates of your in the 100-year flood plain. there's also a zone for areas subject to wave action that have a different rate structure. on top of those difference in rates ,fema has two classism policies, those that refer to actuarial where the premium is said on the modeling of expected it damages and historical damages in the area. there is a small group of policies, about 20%-25%, that receive discounted premiums or are referred to as subsidized policies. they only pay about 40%-45% of the full premium. to have been concerns over the nature of these discounts. they were initially have been put in by congress to encourage communities to participate and encouraged homeowners to purchase insurance. it was thought it was not fair that people who may have located in the 100-year flood plain before they knew of the rest should be penalized. it was thought that the discounts would phase out relatively quickly over time because, as structures

right now, prices in the nfip, there are two differences in rates. one is a determinant on the fema map. you have higher rates of your in the 100-year flood plain. there's also a zone for areas subject to wave action that have a different rate structure. on top of those difference in rates ,fema has two classism policies, those that refer to actuarial where the premium is said on the modeling of expected it damages and historical damages in the area. there is a small group of policies, about 20%-25%, that receive discounted premiums or are referred to as subsidized policies. they only pay about 40%-45% of the full premium. to have been concerns over the nature of these discounts. they were initially have been put in by congress to encourage communities to participate and encouraged homeowners to purchase insurance. it was thought it was not fair that people who may have located in the 100-year flood plain before they knew of the rest should be penalized. it was thought that the discounts would phase out relatively quickly over time because, as struct

as my colleagues know, the nfip is set to expire on may 31. this program provides vital flood insurance coverage to homeowners in flood-prone communities. just two weeks ago we passed a 30-day extension, h.r. 5740, to spare property owners and the housing market from another lapse in the nfip. that bill was approved by this chamber on may 17 by a vote of 402-18. the senate has sense amended our -- since amended our legislation, extending the authorization for an additional 30 days, for a total of 60 days or until july 31. the senate amendment also eliminates subsidized rates for second and vacation homes. according to an unofficial congressional budget office staff estimate, this provision will generate approximately $2.5 billion over 10 years. although not identical, the senate's reform provisions mirror section 5 of h.r. 1309, the five-year reform bill that we in the house passed with overwhelming bipartisan support last july. and if any technical changes are needed, they can be addressed in the -- in any long-term reform measure that we con

many of these agents serve as a sales force of the nfip. it is from this vantage point that we understand the capabilities and challenges of the insurance market when it comes to ensuring flood risk. 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 to the flood damage. prior to the introduction of the program in 1968, virtually the only financial remedy available to consumers after floods 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 recognize the program is far from perfect, which is made all the more clear by the devastating 2005 hurricane season. the current debt reveals some of the deficiencies of the program, and it is clear that congress should shore up its financial situation

the nfip was designed so that in years where there was excessive claims payments the nfip could borrow from the federal treasury and pay that with interest. which worked fine when there were a few losses and in good years they could repay that. in 2005 they had to borrow billions of dollars. the debt peaked in 2008 after hurricane ike at around 19 billion. currently at 17.75 billion. this has been the focus of a lot of the reform effort with the current premium structure the n fismt p will be unable to repay this debt essentially. so bringing us all back now to the reform, one of the key things in both the house bill and senate bill phase out discounts on subclass of property owners. would phase out discounts for commercial properties, for second homes and vacation homes, for what are refered to as severe repetitive loss properties, these are essentially the riskiest of the riskiest properties. some of the bills, they deliver slightly, one of the bills would phase out the every time the property turps over. in a new person purchasing home or homeowner lets the policy lapse when they re

nfip is in debt and needs to transition.. -- if it had bet on an annual revenue stream, for six years running, regulators would immediately shut it down, and the ceo would be fired, if that is the situation we face with the program. pci studies revealed nfip is providing a government- subsidized plans of 1/3 of what the cost to be in the private sector. the subsidies for high-risk policies are even greater. 1% of the properties insured by the nfip have accounted for one- third of the claims and an ongoing basis. the previous panel spoke of the eloquently. while the program needs to be authorized and reform, it is important to note that discussions on authorizing the program -- privatizing the program are not feasible. current rates would be to be closer to true market rates before meaningful discussion related to the private industry taking them flood risk could take place. a 2011 study estimated if a private market were to underwrite flood peril, we could see rises of up to 300%. the unwillingness to purchase in high-risk a

loss properties where you have 1% of the properties that account for 30% of all the claims in the nfip. the reform bill does address that, and i would say that that is a critical component. the increase in the amount that fema can increase premiums to incrementally move toward a sound rate, while important, i would say what's more important than that, though, fema has been unwilling to raise the premium prices even by the amount that they are currently authorized in legislation, which is 10% a year, so even more important than raising the cap in legislation of what they could raise prices i think is a signal to the marketplace that they will actually do that in incremental steps. the longer you artificially suppress these rates, the longer the impact on the consumer down the road, so in addition to what's in the legislation, this committee and other committees of jurisdiction encourage fema to use the authority they currently have, i think, is critically important. >> thank you, ms. murdoch, in your testimony you cite an interesting statistic that for every dollar spent on flood mitiga