Neugebauer Holds Hearing on Reforms to Flood Insurance
WASHINGTON, DC— Congressman Randy Neugebauer (R-TX), Chairman of the Financial Services Subcommittee on Housing and Insurance, held a hearing today on Implementation of the Biggert-Waters Flood Insurance Act of 2012: Protecting Taxpayers and Homeowners. The hearing examined the implementation process for reforms to the National Flood Insurance Program (NFIP), which is $24 billion in debt. His opening statement follows:
“Thank you for attending this important hearing examining the National Flood Insurance Program, the ongoing implementation of Biggert-Waters, and the rate-making process for those policies affected by section 205 and 207 of that Act.
“After more than a decade in Congress, if I have learned anything, it is that the federal government does a terrible job of underwriting and pricing risk. And that has very real consequences for taxpayers who end up footing the bill for the government’s failures.
“Whether it is Fannie Mae, Freddie Mac, the Federal Housing Administration, Medicare, or soon to be ‘Obamacare,’ the failure of the federal government to adequately price risk has piled hundreds of billions of dollars onto our $17 trillion national debt.
“The NFIP is the latest in a long list of government programs that have failed to price risk effectively. As a result, the NFIP was added to GAO’s “high-risk list” in 2006 and remains high-risk due to the financial exposure the Program represents for the American taxpayers. Today, the Program is deeply in debt to the tune of $24 billion – and this number has the potential to rise.
“To deal with the poor fiscal health of the NFIP, Congress passed the Biggert-Waters Act. The Act reauthorized the NFIP for five years and included important reforms to get the Program back on sound financial footing. One of those reforms was the gradual elimination of outdated rate subsidies. In a rare display of bipartisanship, Republicans and Democrats overwhelmingly supported the notion that risk-based premiums were needed for the NFIP to be self-sufficient and fiscally solvent.
“Since Biggert-Waters passed in July of 2012, there has been a lot of misunderstanding surrounding the implementation of the Act. I recognize that homeowners are confused and, in some cases, scared about potential rate increases. The hearing today will give our Members the opportunity to address a number of constituent concerns related to the implementation of Biggert-Waters. It will also help this Committee separate fact from fiction in the implementation process, which can help us determine whether any changes or adjustments are needed to the Act.
“What I can relay is that my Subcommittee has found there to be a lot of misinformation related to Biggert-Waters implementation. For instance, we have looked into complaints about exorbitant flood rates for policyholders who have been re-mapped, where premiums are believed to increase because of section 207 of the Act. As we have learned, FEMA has not made final determinations on these section 207 properties – and in many cases maps are still two years away from being approved by local communities and finalized by FEMA.
“With regard to Section 205, Congress was very clear in its intent to eliminate certain subsidies, including subsidies for vacation and second homes, severe repetitive loss properties, and deliberately lapsed policies. So, that leaves a subset of Section 205 policies that may merit further attention during this hearing.
“I look forward to a productive discussion today. I thank the Members and all of our witnesses for participating in this important hearing. In particular, I would like to thank Representative Bill Cassidy, who is here today, and his staff for assisting this Committee in navigating and responsibly addressing this issue.”