Transcripts For CSPAN2 Washington Journal Robert Hartwig Discusses The National Flood Insurance... 20170830

He is involved with risk and uncertainty management and president for the Insurance Institute of new york. Good morning. We are good glad to be here to start, wear you remind your viewers the purpose of the program and why we havent the Insurance Program which has been in place since 1 1968 has a purpose is to provide coverage to otherwise would be unable to obtain insurance against the disaster ofer flooding. Historically, a Flood Insurance is not been generally available through the private sector. A new situation. Again its been around for half a century. Today, this dayri and age is the debate about how it should be structured going forward. Should the private sector play a greater role, but currently theres 5 Million People across the country insured in larger shares of them in places like florida, texas gulf coast and other areas that are prone to flooding, especially flooding that occurs on a regular basis. As far as specifically, does the federal government take all of the risk for people who purchase these programs and what is their role . How they work inju conjunction historically the National Flood Insurance Program has assumed all of this risk. The policies are written a through, typically through your standard Homeowners Insurance company and you work with your ordinary agent. You can also work directly through the National Floodus Insurance Program. Manyny people use their local agent purchase the policy. That is simply to facilitate it easy toa purchase and available throughout the country in the same way that everyone is usedap to purchasing Homeowners Insurance. What typically happens, however, the premiums are then given to the federal government and the federalju government assumes the risk. The insurers, if theres a claim, private insurers typically are the ones thathe are adjusting those claims and then they report to the federal government and the federal government also reimburses the insurers fors the money they pay. The important thing here is that the federal government, the risk bear uses the private insurance sector to sell the e policies and to addressed claims on the backend afterk disaster happens. There has been a little change recently whereby for thehe first time ever, some of the risk was given to private reinsurers which are insurers for insurance companies. This is why the program is 25 billion in debt. Ly some share of the risk for very severe flood events has been seeded to private reinsurers and with respect to t hurricane harvey, it appears that the private reinsurance sector, involving those from around the world will, for the first time ever, be paying on t these claims. This was a good movee to help taxpayers. To be very specific about this, the National Program has coverage in place. The losses in excess of 4 billion, up to 8 billion, up to 20 billion will be paid for by private reinsurers. Our guest is here to talk about the program. You heard him talk about his current fiscal status, the demand on it and you can ask questions as well. Bob is from the university ofof south carolina. Lines are open. Bob, wasnt katrina that caused the lion share of the current debt that the program is seeing now . Guest of the 25 billion in debt that they currently hold, which ultimately is the debt of the u. S. Taxpayer, yes it was katrina that put the most deeply in the hole. He that was added by hurricanee sandy in 2012. It was never able to retire its debt from katrina whicher was incurred in 2005. There are many other storms that challenged thema resources. Katrina, wilma, rita, ike and sandy. Simply has not been the resources to pay back. What this means is the National Flood Insurance Program obviously is not collecting enough in the ways of premiums to cover its actual expenses in terms of claims. They like to claim that most years things go well and is able to pay its claims with the premiums that come in the door. Insurance,d ofus just being close enough or having nearlys enough money is not sufficient. Private insurers have to keep enough in the way of reserves, enough in the way of liquid resources to be able to pay claims to matter what the magnitude, no matter how many or where they occur or when they occur. The National Flood Insurance Program has fallen short of that for many reasons but if you really want to drill down i to it, theres not a lot of history that would support the idea that government run Insurance Programs and we leave this discussion to go live to louisiana governor John Bell Edwards talking about Tropical Storm harvey good afternoon and thank you for being back with us. Thus far, obviously things are not as bad as had been forecasted so we are very thankful for that based upon the amount of ral