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428A Russell Senate Office Building, Washington, DC 10:00 a.m. EDT

Chairman David Vitter

Good morning, and thank you for joining me for today’s Senate Committee on Small Business and Entrepreneurship hearing to discuss the need to avoid unaffordable flood insurance rate increases on small businesses.


I want to begin by offering my condolences to the people of West Virginia who are dealing with the aftermath of truly devastating floods, which early reports indicate, left thousands homeless and took at least two dozen lives.


I offer my thoughts, prayers, and support to the citizens there who are burdened with this disaster and encourage the Federal agencies involved to continue their work to get these people the resources and assistance they desperately need.  


This hearing is an important step to begin a conversation in the Senate about the National Flood Insurance Program in advance of the September 30, 2017 deadline for reauthorization.


We are going to hear from a two panels of experts and stakeholders to examine the details of the NFIP, and I want to thank all of our witnesses for being here today.


In my role as Chairman of the Senate Committee on Small Business and Entrepreneurship, I am making every effort to help small businesses.  This committee is working to shape policies that promote stability in the marketplace so that businesses can operate with the long-term certainty they need to make strategic decisions.


I believe it is important that Congress proactively works to avoid lapses in coverage by passing a long-term reauthorization of the NFIP before the deadline next year.


As many of us here remember, the lapses in coverage in 2010 had significant negative effects on the economy. It is extremely important for Congress to thoroughly examine the program and carefully consider all potential legislative changes with enough time for this body to take action that would prevent unintended consequences, like huge rate increases, from hurting the economy.


To fully understand the issues that the NFIP has historically created for homeowners and small businesses in the marketplace, it is important to have a basic understanding of the changes in our country’s flood policy.


Currently, there are nearly 5.5 million flood insurance policy holders across the nation. After the Biggert-Waters Flood Insurance Reform Act was signed into law to help make the program solvent after Hurricane Sandy, many of these people, especially many of my constituents in Louisiana, were outraged at dramatic increases in their premiums.


Rates were so dramatic that some folks faced 10 times the price of their previous premium, and even higher in some cases. It was not unheard of to hear horror stories of families paying $20,000-30,000 for a policy that had previously been $2,000 or less.


I met with many Louisianians about this, including with folks from Bayou Gauche who asked me to hand-deliver copies of their house keys to FEMA’s headquarters because of these drastic rate increases, they would not be able to afford their mortgages.


Furthermore, FEMA’s mishandling of the Biggert-Waters Act implementation resulted in inaccurate rate hikes that placed the viability of the entire National Flood Insurance Program at risk and caused great turmoil in the real estate market.


Not only did FEMA publish inaccurate flood maps that could have permanently devalued the Louisiana housing market, but these inaccurate maps could have completely wiped out the life savings of thousands of middle-class homeowners and small business owners.


Bill Bubrig, a resident of Plaquemines Parish lives in a home that was constructed at or above the NFIP required elevation at the time of construction.  In 2013, he wrote to me that his flood insurance annual premium was increasing from $633 to $28,544 for an insurance policy worth $250,000.  


This is one of the many nightmare scenarios that we heard about on a weekly basis, that was fueled largely by information that regional FEMA officials provided directly to policy holders in Louisiana.

Because of stories like these, it was clear that the NFIP needed an urgent fix to prevent homeowners and small businesses from losing their savings and homes.


In 2010, the NFIP expired four times for a total of 53 days, adding uncertainty to an already fragile housing market and delaying or canceling more than 1,400 home closings each day the program expired.


One of the major reasons for passing Biggert-Waters in the first place was to ensure that there was no lapse of coverage for policy holders. FEMA’s failed implementation of this law actually priced out policy holders with excessively high rate increases and would have created a lapse in coverage for these people if they could not meet these exorbitant payments.


Congress acted in a completely bipartisan fashion to pass a permanent legislative fix that provided relief to homeowners. Unfortunately, FEMA was not as quick to implement these reforms, but under congressional pressure devised a plan to refund excessive overpayments back to many of these policy holders.


Going forward, we need to find a way to deal with the solvency of the NFIP in a responsible way, but, at the same time, does not place this burden solely on the back of policyholders.  It is important that we examine how FEMA spends every dollar of premiums paid into the system.


I hope our conversation today will highlight the need for a long-term solution that prevents coverage lapses and provides stability for small businesses who are trying their best to operate amidst rate increases and a track record of policy changes and executive orders. 


Now, let’s get today’s conversation started. Again, I’d like to thank everyone for being here today and look forward to our discussion.