Flood Insurance Reform and Modernization Act of 2007
He will be speaking today. And I don't think there is anybody who can describe what happened as a result of Hurricanes Katrina and Rita and Wilma and what happened in the gulf coast, in particular, his district, any better than Mr. Taylor will do. And by the time he finishes his presentation here today, I think all of the Members will very well understand why it is so necessary that we move with a real reform bill to deal with these kinds of catastrophes.
As you know, I introduced a bill on July 19, 2007, following substantial consideration by the Financial Services Committee on flood insurance and related issues. Specifically, the committee held two hearings on June 12, one examining the issues of the national flood insurance program raised by the gulf coast hurricanes, and a second hearing on the predecessor to this bill, H.R. 1682, introduced by Chairman Frank. Thereafter, on July 17, the committee held a hearing on related legislation, H.R. 920, the Multiple Peril Insurance Act of 2007, that was introduced by Mr. Taylor.
H.R. 3121 reflects this extensive committee analysis on the NFIP, wind insurance and related issues. Accordingly, on July 26, 2007, the Financial Services Committee reported out H.R. 3121 with a favorable recommendation. I hope that we're able to pass H.R. 3121 today because it makes critical improvements to the NFIP in light of the devastating lessons of the 2005 hurricane season.
In the aftermath of Hurricanes Katrina, Rita and Wilma, NFIP faced unprecedented financial and regulatory strains as it confronted approximately $21.9 billion in NFIP-insured losses. The program had to borrow in excess of $17.5 billion from the United States Treasury in order to pay claims and interest resulting from Hurricane Katrina alone.
Those of us concerned about NFIP in the wake of the 2005 storms saw the urgent need to put the program on sounder financial footing by addressing the issues stakeholders had raised around the substantial premium discounts and cross-subsidies among classes of its policyholders, outdated flood insurance rate maps, allegations of uneven compliance with mandatory purchase requirements, and questions as to the performance and efficiency of private insurers operating under the NFIP's Write Your Own program.
Additionally, the committee hearing on H.R. 920, the Multiple Peril Insurance Act of 2007, made it clear the need to address perverse incentives created by dual government and private insurance regimes when damage can be a result of wind and flood. I'm proud to say that H.R. 3121 prudently addresses these concerns.
Specifically, the bill would increase NFIP's borrowing authority to $21.5 billion from $20.8 billion, but require that it satisfy traditional criteria for actuarial soundness by phasing out discounted premiums; allow the Federal Emergency Management Agency, that is, FEMA, to increase flood policy rates by 15 percent a year, up from 10 percent; raise civil penalties on federally regulated lenders who fail to enforce mandatory purchase of flood insurance for mortgage holders; increase program participation incentives; encourage the revisions to flood maps; and starting in mid-2008, allow for the purchase of optional insurance for wind as well as water damage.
These reforms are desperately needed because, as we have seen, storms will become stronger and more intense. We need a program that can contend with the worst that Mother Nature can throw at us. Simply put, we cannot wait and let another hurricane season pass without putting the National Flood Insurance Program on solid footing.
I would urge my colleagues to support H.R. 3121, the Flood Insurance Reform and Modernization Act of 2007.
And I thank you so very much, Mr. Chairman, for all of the time that you have put in trying to make us very credible as we relate to these reforms by not only giving us the leadership, but allowing us to hold the hearings that are so necessary to get the information that is so desperately needed to do this.
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