FLOOD INSURANCE REFORM AND MODERNIZATION ACT OF 2007 -- (House of Representatives - September 27, 2007)
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Mr. BAKER. Mr. Chairman, I thank the gentlewoman for yielding and wish to quickly say as a Louisianan, obviously I am a defender of the flood insurance program.
I want to commend Chairman Frank for his willingness to work with us and all affected parties in crafting a flood insurance program reform which I thought was a very good product. It was only with the addition of the wind exposure element to the underlying bill that I began to have any concerns about the legislative direction of the chairman's recommendation.
Currently, the notional value of flood insurance in effect, just flood, not to confuse with wind, today is $1,092,932,778,000 as of a June 30 FEMA report. That's the potential exposure of the flood insurance program to claims pursuant to contract.
We know that the current flood program with the actuarial system in place cannot repay the debt it currently has. To put into scale what the additional risk brought onto the U.S. Government books will look like, the industry estimate from New England to the gulf coast only is an additional $19 trillion of risk exposure.
The limits in the bill that have been described is it's only available where you can buy flood insurance. We sell flood insurance in New Mexico. We sell it in Boulder, Colorado, and we sell flood insurance in Guam, and the entry to the wind program is to buy the flood policy, so that we will, in fact, nationalize wind insurance coverage via the flood program, opening the U.S. taxpayer to a risk and a payment for which there is not an adequate stream.
Some say, well, the bill requires actuarial rating. The flood insurance program has actuarial rating, but it's not industry actuarial. It only looks to historical claims data. There's no risk modeling to look forward.
Those who have laid claim to the fact that weather cycles are more severe, damages are likely to escalate, that is not data which is incorporated into the flood insurance premium structure. So there will be problems with the implementation of the program as currently drafted.
Am I suggesting we do nothing? Absolutely not. Do I think that the current system is adequately taking care of the risk of those who live along coastal areas? Of course it isn't.
I have legislation which I am planning to introduce and hoped to have had introduced before consideration of this bill on the floor which will enable the issuance of a privately issued policy, multi-peril; but it would be exempt from State price controls.
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