Flood Insurance Reform and Modernization Act of 2006

FLOOD INSURANCE REFORM AND MODERNIZATION ACT OF 2006 -- (House of Representatives - June 27, 2006)

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Mr. GARY G. MILLER of California. Mr. Chairman, I rise to support H.R. 4973, the Flood Insurance Reform and Modernization Act, before us today.

The National Flood Insurance Program is a valuable tool in addressing the losses incurred throughout this country due to floods. It assures that businesses and families have access to affordable flood insurance that would not be available on the open market.

Prior to the passage of the National Flood Insurance Act in 1968, insurance companies generally did not offer coverage for flood disaster because of the high risk involved. Today more than 20,000 communities participate in the National Flood Insurance Program. More than 90 insurance companies sell and service flood service insurance. There are more than four million policies covering the total of $800 billion.

The National Flood Insurance Program provides Federal flood insurance for properties located in flood-prone areas where the community has voluntarily agreed to institute floodplain management and land use control measures that minimize the risk of flooding and mitigate potential flood damage. The program is intended to provide a more cost-efficient alternative to costly Federal disaster assistance by encouraging communities to take preventive measures to reduce flood losses and providing affordable flood insurance that would not otherwise be commercially available.

Last year's hurricane season resulted in significant strains on the NFIP. The claims resulting from the losses from these catastrophic hurricanes is unprecedented in the history of the program.

Since the NFIP's inception in 1968, the program paid out $15 billion in claims. In contrast, claims for Hurricanes Katrina and Rita alone are expected to exceed $25 billion. This far surpasses claims paid by the entire history of the NFIP.

In the past, when losses exceeded premiums, the NFIP had been allowed to borrow from the U.S. Treasury to repay claims. Such loans have traditionally been paid back rather quickly with interest.

The bill before us today increases the amount that FEMA may borrow from the U.S. Treasury to $25 billion to cover the expenses incurred by the National Flood Insurance Program, NFIP, during the last year's hurricane season.

As CBO has stated, the funds borrowed from Treasury so far exceed the program's income from premiums and fees they will likely never be repaid. As such, this bill proposes a number of reforms to the program to ensure that it is actuarially sound in the future.

When we debated this in committee, some individuals made proposals; and for the best of reasons, they said we should look at a 100-year traditional floodplain, and anybody within a 100-year traditional floodplain should be required to pay for insurance.

The problem that many of us have who represent districts who have mitigated 100-year floodplains is that all of our people who are not at risk would be required to basically boost the program by increased premiums by them participating in it also.

And when Federal dollars, State, and local have been spent to mitigate 100-year floodplains, many of us thought that that was unreasonable. In fact, the 100-year floodplain would have impacted a large portion of L.A. County that I represent. Anything near the L.A. River would have been included, and most of Orange County would also because the Prado Dam mitigates that.

There was another proposal made with the best of heart and the best of concern for the people of this country. That said, let's look at a historical 500-year floodplain. The problem we had with that is there is no evidence available and then there is no information available either that we can dictate and determine how much a 500-year floodplain might be.

If we had taken a 500-year historical floodplain, it would have included all of L.A., most of L.A. County, and most of Orange County and any other city in this country that is next to a river or near the coast.

I offered an amendment and it was supported by the committee that said let's do a GAO study to determine if we need to expand the program, how it should be done, how it should be implemented. I think it is a reasonable approach, rather than us just making a knee-jerk reaction to a severe problem. And it is a problem we have to address. I am not saying we don't. But to tax people who are not impacted or not at risk of flood to boost the program, I think, is unreasonable. It would have impacted many of our districts that don't live in areas of high risk. And I do understand the need that we need to protect those who are within the program. We need to make the program actuarially sound. And I am pleased with the language in this bill that is included here, and it expands the coverage of the program. And I urge my colleagues to reject any amendment that would further expand it without GAO studies.

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