Transcripts For CSPAN2 Policy 20240703

Democracy. A look that what challenges the property Insurance Market. Witnesses discussed the impact of rising Interest Rates, oversight of state Insurance Marketplaces and insurance providers departing california, texas and other states his hearing is on the Senate Banking housing and urban affairs committee. [background noises] [background noises] [background noises] [laughter] [background noises] the command banking housing and affairs come to order. Welcome back witnesses who have been here before and welcome colleagues and staff. The first hearing post labor day. A few Financial Decisions are more important than buying a home. Homebuyers make an investment in themselves, their families, their communities. Homebuying is an act essentially active optimism. It is also stressful. Families buying a new hole have so much to think about making sure they cover their down payment, navigating the mortgage included thing a process. Ovmoving in, getting kids set ua new school theft shall divide buying Homeowners Insurance has always been a part of that process appeared to guesstimate certainty and peace of mind but homeowners are confident their monthly Insurance Premiums will provide a backstop against the physical and financial devastation that could ensue if their largest investment is threatened by increasing number of Natural Disasters i turned out, hurricane, wildfire or other dangers or incidents or accidents. Knowing they are covered can help homeowners sleep better at night. Where that is how it is supposed to work increase in the home owner except face surprise when its time to renew their policies. Homeowners who spent years making their payments regularly without fail are shocked to find their insurers have raised costs, has limited coverage or too many cases will not renew the policy at all but insurers have abandoned in some cases entire markets leaving consumers with fewer options that cost more and provide less coverage. Consumers are counting on their insurers now more than ever. According to noaa since the beginning of the year the country has experienced 15 weather disasters each resulting at losses of more than 1 billion. Fifteen weather disasters costing more than a billion dollars. Reinsurance estimated severe storms resulted in 34 billion with a b of insured losses the first half of this year alone the highest ever in a six month. No reason to think those numbers wont keep going up with Climate Change. Why, florida, vermont extreme weather events appended millions of americans lives at last months terrific deadlyr wildfires in our state tragically killed at least 115 people with hundreds more missing protect projected losses of 6 billion loss in Hurricane Idalia plowed through florida, georgia, parts of the carolina last week could reach 20 billion et cetera so welch and sanders sent a letter to the Ranking Member to center scott and me ahead of this hearing detailing the loss vermonters have suffered from devastating floods this summer. Higher insurance rates could at the very homeowners land or who could least afford them and has hit them hard so often its the residents, we know that in disaster after disaster it is the lowest income residents communities of color through and pushed into the areas mostin vulnerable to Natural Disasters. As weather patterns continue to change because of Climate Change, risk and exposure will extend to places if not previously been prone to natural catastrophes. This has led Insurance Companies to reevaluate not just on the coast. Ahead of the association said there is no place now there is no place to hide from the severe Natural Disasters. An abrupt tread companies restricting coverage or raising rates or deductibles in some cases they leave states or geographic areas out entirely. Secretary yellen recently noted the threat resulted in a protection gap increasing cost limiting options for families increasing Financial Stability concerns across the financial system. U. S. Reinsurance rates the cost of insurance by elvis is spreading out risks reportedly increase up to 50 these jumps in reinsurance have been driven in part by frequent more severe Natural Disasters for themselves for their investors appeared higher reinsurance rates means higher cost for Insurance Companies which then meet price hikes passed on to consumers left millions of americans paying more for Homeowner Insurance often less protection than before others scramble to find any insurance at all because their insurance has refused to renew the policy. Allstate stopped writing me a Home Insurance policies for the whole state. Both sides of the growing risk of catastrophe and spiking reinsurance rates as factors in their decision. Not to be outdone in florida since 202616 severe storms and hurricanes have caused more than 100 billion worth of damage and led to an exodus of insurers. Farmers insurance became the fourth in florida alone and sure to exit the market during Bankers Insurance and tour insurance, lexington insurance, announced in july which stopped writing property insurance policies in that state. 100,000 floridians are looking for new coverage. Days later aaa announced it would notot renew some high exposure policies of the state despite the fact the average yearly Homeowners Insurance premium in florida cost 6000, the highest in the country. Fourteen Insurance Companies have either left the state or entered the receivership process. Insurers exiting state market select homeowners and businesses with no choice to seek a coverage frombu statemandated insurers of last resort which provided barebones policies provide barebones policies at typically higher rates. Insurers of last resort are obviously exactly that they are the last resort. That used to meet the insurers that a small share of policies. But his climate exposure has increased especially coastal states but everywhere have been battered. Insurers of last resort are growing in florida for example florida citizens the states and insurer of last resort is a state single largest property insurer. 1. 4 billion policies california insured resort to plan has been to see more than 100 increase in policies the last five years. Through the thousand policies they end of last year. Its not only homeowners hit by rising cost is shrinking coverage and that Multi Council report several issues for multifamily sector. Higher rates and deductibles. Coverage limitations and some cases no viable private market Insurance Coverage option at all. Each insurance policy is a contractor for the Property Owners and the insured sgt of the interest operating coverage for part consider community or state. Portland owners told to stay clear tread renters on by the burden when its passed on to them with higher rents. Homeowners to small supply of affordable apartments serving the lowest income renters may be increasingly left with impossible choices. Todays witnesses understand the unique challenges facing homeowners and Property Managers ms. Noris from columbus the capitol my home state of ohio sing a problem of rising insurance costs firsthand across the manyin states or National Church residents provided Affordable Homes for america seniors. I am pleased to have all three of you here today. To explore these importantex topics Ranking Member scott welcome too. Thank you, mr. Chairman i thank you all for joining us today for such an important conversation about state of insurance and states around the country. The Important Role that insurance plans and the ability for homeowners specific as we discussed today to transfer the risk to an Insurance Company. As you would imagine coming from South Carolina thinking about my friends in florida and georgia and North Carolina, thinking about the devastation of the fires in maui. My prayers and thoughts are certainly with those folks whors have lost family members who have seen their lives devastated, their properties destroyed. So much attention is given to the challenges of the environment, climates, but too often what we see is the demand made disasters that jeopardize insurance in those states. Think about the fact that in my lifetime as an adult i spent 20 plus years of the Property Casualty Insurance Business i do have an affinity for terms that s. We use when i was in business, mike have you ever been insurance . Rex boy have i provides mike was also in church and Insurance Agency owner as well. What things we would both talk about is the probable maximum loss coded your Insurance Company calculate accurately or even in the range of reality what is the probable maximum loss within a market . Whether that is the charleston area we are prone to hurricanes or state of california or ohio with storms and or other Natural Disasters. Can a company predict the loss that will be incurred. It could absorb that cost based on the premium base charge per policyge. When you cannot, you do not stay in the market. It is kind of that simple. Insurance companies have the file the basic rules of economics like any other business thats one of the challenges that we see. Particularly in states like california and florida. Californias overregulated market makes it very difficult for Insurance Companies to make a profit. When you cant make a profit you dont say in those states. Thats one of the reasons the state farm aig the Insurance Company sustained living markets because their rates is impossible to get there. Then the inability to find a path forward. Whether it provides reduction of that risk or as i have discussed before the necessity of us get her arms from the catastrophic c occurrences from coasttocoast. Whether its a hurricane, earthquake, flood, or tornadoes. We have not really wrestled with the actual damages done by catastrophic occurrences across the country. Youre on the coaster frankly itself with this louisiana or South Carolina we account for half of all the premiums going and it f and ip. My flight happens in new york, new jersey, ohio, the policyholders there never heard of thought of a Flood Insurance policy parts of their drug money out of an account without putting any resources in the account. We have real challenges we should identify and understand and appreciate. That every Insurance Company is wrestling with today but think about this in california and florida. The two things come to mind one states you have a burdensome marketplace that is oppressive that drives business outlets not just Insurance Companies fling the state of california. Every other business that can find a place to go seems to be looking for different market. So i understand that part of florida part of the challenge we see is the environment is challenging. Certainly Natural Disasters are challenging but with only 9 of the policies homeowner policies and the countries they represent about 79 of home owner insurance losses. Over the last decade companies in florida paid out 51 billion. However, 71 of that goes to attorneys fees. Something is broken in the market. Its not the homeowner that is receiving the resources it is the lawyers because of the challenges in a broken state as it relates to the litigious environment that is apparent, obvious and clear in florida. So whether its california or florida we need to understand holistically the challenges these Insurance Companies face s phobic pull out the market. I would love to hear experts today t solutions, opportunities to recalibrate markets and for us to have a panoramic view of how to keep Insurance Companies viable as a market. Because without any question homeowners today are desperately looking for opportunities to afford the coverage i think the chairman suggested earlier the average premium for a house, 1700 for homeowners for the same policy in florida it is 6000. That is the case its not simply a case of great sufficiency based on a probable maximum loss of a Natural Disaster. It has to do with the 51 billion paid to attorneys that have to be factored in to the new definition of sufficiency thats going to be really hard to meet if that environment does not change. Think you said its got all introduced todays witnesses. Doug keller as a director Insurance Consumer federation of america. Serves as a member of the Treasury Department federal Advisory Committee insurance members the california automobile assigned Risk Advisory Board Member Executive Committee and californias coalition against insurance fraud. Welcome. Schulte north executive Vice President of Strategic Partnerships national troop church is the largest provider of senior housing. She serves as chair of the board of directors for the stewards of affordable cap housing for the future of the board of directors of the corporation support housing and a past president board member of the sustained well Affordable Housing Management Association, welcome. Jury is the director of finance insurance and trade policy program at the street institute. Prior to joining our street director of Insurance Research and multiple roles and ensuring welcome. Please begin thank you brick works good morning mr. Chairman senators im deco director of insurance for consumer can federation of america there are several forces. The property insurance crisis that has arrived and many parts of the country and is in brewing and others i will highlight what consumers are dealing with. The underlying drivers of the crisis and thought max about insurers and Property Owners can Work Together to reduce costs, improve coverage and build safer homes and more resilient communities. I in 2022 americans spent about 125 billion for Home Insurance. Its raising 40 faster than inflation since 2017. For many around the country bank upwards of 500 per month just for the basic Home Insurance. Me add more if they need to do things by separate flood, earthquake or windstorm policy. Thats a bracelet regions exposing the worst climate risk of being hit hard in this market. But this is a national problem. In fact some the highest prices are the midwest with tornado and hail risk. Neighborhoods most vulnerable to climate disasters are home to communities of color and low income americans amplify the crisis for them. Its not just geography tardiness communitys. All but a few states insurers penalize homeowners that they just have a greatin credit scor. Even if they have not filed a claim. People of color and rural americans adding more pressure on the premiums that are arty boiling over due to Climate Change. Now the second part of the crisis is Insurance Company deciding to walk away from long served communities some states entirely. Since everyone of the mortgage s required to maintain coverage people want protection for the most valuable asset this is an incredibly scary situation. What makes people so angry though the insurers for years i have told them the neighborhood is fine and insurable and they always collected the premium for companies who take their chips off the table without warning and walkways unacceptable of the resisted calls for climate risk analysis for years. As a result rethink many more people forced into the state insurance providers of last resort which silly high price policy with often bare bones coverage our people cant make the payments they end up being forced to place into expensive coverage by their Mortgage Company. For this we are hearing more and more people simply cannot afford to own a home because they cannot get insurance. The third problem is a hollowing thehollowing out of coverage pee can afford. Rather than working in partnership with the policyholders and communities to reduce the risk of loss due to climate disasters, Insurance Companies are selling policies with less rebuilding benefit. More exclusions and higher deductibles. Companies are reducing their own risk, sure. That does not change the actual cost of disaster risk it transfers it back to homeowners, renters, farmers and other consumers. So why is this happening question what their two key drivers of the crisis. First the relative worsening disasters is undeniable. Tackling this requires a collaborativere effort to reduce the risk that stems from Climate Change by investing in safer homes and buildings more well defendant resilient committees better data collection,n, expand public supported Infrastructure Investment more grants for individual homeowners in building owners heard their homes. And when Property Owners invest in the loss mitigation they should be promised access to coverage under relief on their premiums. Also this discussion must include issues of property development, portable housing and equity as we try to adapt to climate risk. If we do not take on the larger questions Insurance Company so be the ones left in charge of house and policy Global Reinsurance market. They used to hedge their bets. Prices are up 35 since january p alone if insurers can even get the reinsurance they seek. We need a meaningful Publicprivate Partnership to address this amount of market failure the way forward is a federal government to provide a catastrophe reinsurance backstop. Just as bioterrorism. In exchange for insurers offering meaningful product. But with that gaping holes in all major perils. Capping insurers climate risk this way the federal Reinsurance Program would provide it is cery to ensure center scott mentioned their maximum loss. So to conclude by prioritize their own exposure Climate Change rather than reducing the actual risk of loss insurers select American Consumers in the binder that caused called us to this year i end can effectively addressing problems to mans a holistic approach to climate risk and property insurability. It requires a focus on strategies that will reduce the damage done by Climate Change, strengthen communities and use innovative Publicprivate Partnerships to create competitive sustainable Insurance Market that will yield affordable coverage to americans and we confront Climate Change together. For opportunities during the question i loved it talk about center scott concerns about whats happeningwo in california and florida id like to thank the committee for having me here and i will conclude there. Welcome. Mr. Chairman, Ranking Member scott and committee members. I would like to thank you for this opportunity to speak about the property Insurance Market and how this is impacting the multifamily sector especially Affordable Housing. For over 60 years National Church references has provided housing healthcare to older adults who provide Affordable Homes for more than 20000 low income seniors in 23 states. My remarks largely today reflect those of a growing coalition of multifamily housing stakeholders. Concerned by the trends in the Insurance Industry and the impact they have on Affordable Housing. And the people who live in those homes. I am proud to be socio several of those currently mentioned including Affordable Housing mime currently serving as board chair. The Management Association i chair the Regulatory Affairs committee at the National Family Housing Council were we are a member. These groups along with many other trading associations create a task force focus on finding solutions they cant meet longterm Housing Needs for our residents. Its with this lens i would like to share what we know about the property insurance trend the negative impact will have on the housing supply in affordability. Property insurance rates in the u. S. Have increased for 22 consecutive quarters. The past three years having providers have reported annual premium increases ranging from 30 to one 100 . For affordable rental housing. In fact National Church weve seen property and Casualty Insurance costco four 100 increase in six years. We are also saint reduced to seo coverage. Minimum deductibles on the operatele level have increased from 10,000 to 25000 and up to 100,000 which is the option we had to take this year. In addition to the risk increased this presents the high deductibles can conflict with financial requirements. To avoid on defaulting financing Housing Providers have a take additional policies, create layered coverages all which added cost. Even developers and owners with very large portfolios like ours have little Bargaining Power in todays industry. The pressure is created by these increases impact our residents too. Increased insurance costs result in increased rents and market raise housing and Affordable Housing communities. Continued rise in costs can also lead to the reduction in services to our residents. Deferred repairs and threats to longterm sustainability of our communities. High insurance costs are hindering solution to the Affordable Housing crisis. Rising insurance costs mean lower not operating income if you cannot borrow as much or attract lessss investment it becomes even more difficult to finance the construction and preservation of the current Affordable Housing communities. We are seeing the volatility of the insurance margin debt being driven by three keyes issues. The unprecedented frequency of Natural Disasters. The impact of inflation on replacement value methodology and finally on the Insurance Market capacity and policy limitations. Many insurers have simply ceased to underwrite multifamily casualty policies nationwide or in certain markets prone to i National Disasters like florida and louisiana. I have detailed more information in my written testimony but my message is this. We must act now. Our country has a shortage now of 7. 3 million Homes Affordable to low income people. We cannot afford to jeopardize existing rental housing or slow the creation of new woods both shortterm and longterm policy solutions are needed. And the short term hud and other federal agencies can provide funding for affordable rental homes. They must rethink existing insurance requirements. And provide increased flexibility and funding to Property Owners to account for the real world challenges we are facing. In the long Term Investments in climate, resilience and the greater level ofl interventiony the federal government and the Insurance Market are necessary given the current market failures. Thank you for the opportunity to speak today and for your efforts to explore and address the significant insurance challenges. We stand ready to work with you to further these efforts. Thank you. Welcome. Chairman brown, Ranking Member scott members of the committee thank you for holding todays hearing and to testify at todays hearing as atomic consumers in states with ailing Insurance Markets struggled to secure Homeowners Insurance within budget. And affordability concerns are particularly acute in california and florida symptoms of the ailment include insured insolvencies ceasing to do business or pausing new business, rising premiums large Natural Disasters, first and foremost it is a miracle the lives were lost from hilary or idalia. Let us be grateful for that. Floridas Insurance Markets are not all doom and gloom. He forgets the good news lets get to the temperature of the broader market. Some maintain Insurance Industry capitol has been depleted. That is not so. In 2022 the Insurance Industry had a slight underwriting loss for every 1 dollar in premium that it took and it paid out a dollar 2 cents in 7 mils and losses and expenses. Investment income offset the under writing ross 4 return. According to economists competition is a much more effective job than government protecting consumers. The Insurance Industry with over 2600 insurers is highly competitive. Chairman b brown, Ranking Member scott, ohio and South Carolina are among the most competitive states for insurance. Especially South Carolina is number four so someone is doing something right there. I agree. States residual markets another window into insurers and competitiveness but residual markets are statemandated insurers of last resort when insurance iss unavailable in the standard market. California andce floridas large residual markets are unhealthy symptoms. Insurancee markets loss exposurs varies across states. Maine is the least catastrophe prone whereas california is exposed to earthquakes, wildfire, mudslide, Atmospheric River roads even typhoons. But would expect property Insurance Premiums in california to be higher than it less catastrophe prone estates but states butthey are not. Homeowners insurance t and premiums in tennessee and south dakota are about equivalent to californias. Even though california at risk in building and repair costs are higher. California Insurance Market troubles go back to proposition 1031988 proposition 103 made california the only state to introduce public interveners who can challenge a rate increase re requests above 7 . This requires the regulator to address insurance rate change requests within 60 days. But the reality is the 60 day rule must be waived before action is taken by the regulator. Resulting in delays of a year or much more. Thisuc straitjacket and prevents insurers from charging riskadjusted rates the result is closer 20 insurers pausing new business or nonrenewing policies. Proposition 103 is a form of price control of the academic literature finds price control do not work. California demonstrates this. California insurance regulator handicaps insurers is by prohibiting insurers from factoring reinsurance costs and recent climate patterns to risk modeling. This is for bidding a donut maker to change the price of its donuts irrespective of flour and sugar costs. In contrast california price controls florida market troubles were driven primarily by excessives litigation. For years florida and the dubious distinction of being home to 79 of the Homeowner Insurance litigation in the country. Despite having only 9 of the countries Homeowner Insurance policies. So what is the good news . In the spring California Assembly and senate held productive bipartisan informationve hearings on climae models. Tort reform has been signed into law. Several new companies with fresh capitol have announced entering florida one just yesterday. Going forward californias auspicious tailwinds of change should continue. Florida should retain its resolve and put its history of abuse in the rearview mirror. On that happy notes thank you for holding todays hearing. Thank you for your consideration of my views. I look forward to your questions. Thank you. It is always good to end on a happy note. Thank you for that. Mr. Heller, you cant open a newspaper that seeing stories of eihomeowners facing skyrocketing insurance rates. Not being able to find insured despite what some say its not happening. Only in california. Why are so many as short as you can wear some people across the country said the being priced out of the Homeowners Insurance market . Thank you, senator brown. The first reason we have to acknowledge up front is Climate Change is severely exacerbating the cost of Risk Transfer it increases the frequency of disasters. You mention for example 15 at 1 billiondollar events this year alone. Actually reported the most severe incidents were in texas through this is happening around the country Climate Change is a national concern. It is affecting Insurance Markets everywhere. The un regulated reinsurance is number two and the driver here. This drastically increased increasepremiums over the past s actually put the rate online in that produced by the subsidiary at the highest in the history of the index rate which has been calculated since 1990. That is also too expensive. An adequate oversightht of state Insurance Markets around the country. There are some terrible rules that require some of the big states public insurers of last resort of the citizens of florida and louisiana to actually charge customers more than the indicated rate. That makes no sense of our wherg last resort insurers charge more than they need to charge to provide coverage . Then finally i mentioned the specific point for lower income americans who because they do not have great credit find themselves singing 40, 6080 premium spikes just because of that without claims. With difficult issues. Hope we get an agreement or acknowledgment from everyone on this committee of both parties the existence of Climate Change and the severity the huge cost in so many ways to all of us. Thank you. We have heard arguments at the state level leads insurers to stop writing Home Insurance policy in certain states. But the insurance multifamily Property Owners does not have the kinds of protections as you know for the oversight that Homeowners Insurance policy would. How is the multifamily policy include different from the coverage of the homeowner and seconds are you seeing insurers offering multifamily coverage across theti country . Mentioned the impact of Climate Change to your points. They are three highest claims weve had in our history have happened in the last two years. One was from Hurricane Ida in august of 2021. Six and half a Million Dollars for our organization. Hurricane ian hit a single property in florida and required to vacate the property for six months and rebuilds about 13 million. And a winter storm elliott which hit 44 of our communities. Its a really challenging time to be providing Affordable Housing. We see in the Insurance Market our insurance is covered at a National Level we work at carriers that go across state lines. But we are in fact seeing fewer and fewer options for us. Our previous renewal we had four carriers that worked with the property and casualty. Three of those walked away and left us with a single carrier. Its basically take it or leave it on the premiums. Thank you. I wanted to thank you for raising concerns around nonprofits having difficulty finding affordable property coverage. I appreciate that in your testimony have long raised similar concerns including blasters insurance hearing and im hoping we can find a resolution to that. Thank you for that. You noted raising insurance rates, reducing coverage do not reduce risk it reduces the risk for the insurer and push it onto the homeowner. What can we do to reduce risk so we can bring down costs of make homeowners and renter property safer . Correct thank you, mr. Chairman. There are really several things but we are doing a lot of this work with the building resilient infrastructure of the Brick Program at fema theres new data that was just released about where we need to invest most aggressively towe provide the return on Infrastructure Investments around 500 different census tracts in the country. We need to take the front end of the solution as serious as historically taken in the back end by having fema Emergency Fund after a disaster. That is what wein need to be dog is putting our money up front. The one thing that needs to be done very simply that would make grants to homeowners taxfree for home hardening. The California Earthquake Authority wants to be giving money out. Not quite help them rebuild. If we protect homes with a dollar we dont have to rebuild with Emergency Funds with five, six, 7 afterthefact for. Thank you my time has expired. This nurse wont offer this committees help. Knowing can be difficult for nonprofit operators to access resources for mitigation in ways we can create a Work Together. Senator scott . Thank you, mr. Chairman. You said earlier that i want to understood. The Company Brings in a dollar in premium but pays out 1. 2 in losses, thats probably a bad thing. Thats rightht progress only way you can make that up the roi on your investment the time you bring it in the time you pay it out you have the opportunity to invest the resources. In a good market you have enough to stay afloat. Good 17 of inflationary impact on companies and business on gas on all of the supplies it makes it more difficult to get that roi. That is right. Especially the low and along. If Interest Rates Investment Income was lower. So it was depressed did not contribute enough for the combined ratio below one 100 . Cracks correct. Never to the threat of losses. National Flood Insurance 1 of losses that occur. They account for 30 of the payouts of the national Flood Insurance program. So if you keep it building in the same area at this disaster after disaster after disaster the chances are pretty good. Thats right thats right. There need to be incentives for better behavior for the Flood Insurance. Got to dis incentivize these severely repetitive loss of properties by having 25 increase if you have these repeated events. By increasing resiliency. Perhaps sometimes a federal government is not really the answer to what local communities need to do in making decisions around whether or not the same basic set of circumstances. Federal government has not had a good history ofor involvement in insurance but you not mention the national Flood Insurance program which is blood tens of billions of dollars of red ink for the Crop Insurance also has these subsidies the delta encouraged farming of the right crops in the right areas for the Insurance Industries as you know and senator rounds, is tremendously complex. Simple in principle but the executioners administration and distribution. A dozen other function. The federal government has no business trying to create Insurance Companies is simply not feasible. Rex perhaps one of the reasons we should thank the good lord for the act of 1945 that made our form of insurance state based system of insurance. This has produced highly competitive fair markets all across this country. And frankly it sets a global standard is an accurate statement . That is right efforts in the past that have followed the Insurance Market to create a federal backstop or provide subsidized reinsurance have not been successful. They have not taken off because it simply not feasible for 2007 a couple years after Hurricane Katrina wilma, held eight similar hearing. Talked about the ways in which that would not be feasible. Congressman mosca which governor chris the governor in florida. And theres a Kevin Mahoney built a number of bills have been introduced as a kneejerk reaction buried in Insurance Industries have an strain lets sum the federal government into fixit freight does not have a history of working then and it wont have one now. Sounds like to me youve already answered my first question. Which is the fact federal taxpayers subsidizing states insurance challenges is not a recipe for longterm success. That is right. Subsidies and cross subsidies for the port subsidize the rich are both bad. Simple it sounds like to me. Did you speak to why insurance operate in lag behind the rest of the economy ande why we are seeing increased prices now . One of the questions im really trying to narrow in on is the important fact of the last couple of years is seen inflationaryas impact that led o 12 rate increases for that market yet fivepoint to 5 or higher Interest Rate to be embedded into the Insurance Companies model. That cost something. It takes a couple of years before it earns in reaching with inflation building material, gross bite 19 in 20218 in 2022. Copper prices, other prices of a lumber and metal that is needed in rebuildingg homes have gone up. But it takes time. The loss may happen to the end of the policy. And then for the repairs they are more expensive thanth before so it takes one or two years before the inflationary impacts are fed in. There are three main drivers. Economic inflation, reinsurance cost and natural catastrophes. Im glad you brought up the inflationary factor. Appreciated sir. Thank you, senator scott. Senator reid of rhode island is recognized for. Thank you very much mr. Chairman. If congress is going to act by september 30 the national Flood Insurance program does not exist can you tells with the consequences of that will be . Ask thank you, senator. Americans right now are facing these unprecedented catastrophes. We just saw pennsylvania and new york, vermont hitrk by severe flooding. We need to have Flood Insurance the private market has not been there to provide insurance for homeowners and is been stripped up of the homeowner policies. And so we need a backstop so there is Flood Insurance. I was sailing 12 of americans bite Flood Insurance we areur desperately uninsured or underinsured for this coverage. It is important to note senator scott is rates the Flood Insurance program has created is not been a success. We need it there because if we dont have at the move got nothing. One of the reasons of federal program would be so valuable will be have this desperate exposure by bringing an federal reinsurance we could actually push the Flood Insurance product back into Homeowners Insurance for it back into the state. Back into the private market which is exactly what senator scott was calling for. So then the private insurers could be protected with a cell Flood Insurance knowing the worst Case Scenario were taken off the hook. But until we do that until we push Flood Insurance out of the federal Government Back into the homeowner policies that we all bite we need to have Flood Insurance program for the federal government. Thank you. Theres also a nether approach which would be mitigation. In my state will work with the Conservation Service which is under the United States department of agriculture. We are actually buying homes in areas that are flood prone. We are assuring floodplains solicit natural dissipation of floodwaters work with the corps of engineers. So my conclusion is we probably should do a lot more preemptive work with regard to resilience . What senator read your exactly right. Our first, second and third thing we should be doing is reducing the risk weve got the knowledge and data. Whether its floods as you are talking about or windstorms we know how important better roofing is. This stuff and can be done but we have to make a commitment to it rather than just shifting the decks on the titanic missing Insurance Companies arent going to take that riskra higher deductibles less coverage homeowner renter and Property Owners they take the risk instead. There is discussion obviously a withdrawal of many Insurance Companies in rhode island our assembly passed a law that requires notification by an Insurance Company prior to thei departure. That gives the state the opportunity to work with the company to see if there are ways to diversify or two other things to compensate is that an approachel worth emulating elsewhere . Its exactly right. We are doing and rhode island makes a lot of sense. The thing we hear from homeowners all the time why am i suddenly being told they cant be ensured . They have always ensured me. The point is we havent transition process they cant think of a for decades and decades and save nelly realtors Climate Change we are out of here its really important have a transition process like youre talking about. Thank you very much and thank you, mr. Chairman prevents thank you, senator reid. Senator rounds of south dakota is recognized. Thank you, mr. Chairman thank you to all off you for coming before us today. I am curious. How long have you studied or participated in the Insurance Market reviews . Next i have been an analyst of the Property Casualty insurancee industry for 15 years. Twelve years at conning and in in hartford for the last three years leading the Insurance Research. Prior to that is in the industry i worked in the industry as an underwriter and in other capacities for. Just curious. I was first licensed in the insurance i was first licensed to sell insurance as an agent and south dakota 1978 for Homeowners Insurance. And i carried that license all lifted 2015 when i was elected to the United States senate. Just curious during that time. In a policyats whats not in a policy. And under home owner pellet is nature toe. Form transferring to an 803 form you have named perils then you had special all risk coverage with exceptions built in. But i was trying to think back i think ive ever seen a homeowners policy which was available with a Flood Insurance as part of the original perils are you aware of a homeowners policy that started out under the basic forms with Flood Insurance . No, no flood has been excluded for several decades prior tobe the 1970s when you began. The h03 is the most common form. Special form excludes Flood Insurance Program National Flood Insurance program. The principal provider Flood Insurance for the good news is the private market is growing. For going to ring some good news in here. Another 77 private companies that are writing 31 of flood Insurance Business compared to 12. 6 just a few years ago. The private market is starting to come in. Especially since the new rating has been introduced. Right now the national Flood Insurance program which is a backstop for Flood Insurance across the country. Personally think its very important that we get it renewed. I think it is an important aspect for a lot of aries particular where the list is high. But the vast majority of americans simply look at the all the seats i dont need Flood Insurance because im not in an area which is prone to floods so they dont buy or their mortgagee does not require them to buy it. So what you end up with in many cases the folks y who would buyt are the people who think they may have a loss or of our beingg required because the federal government may be n a flood zone. Correct . That is rightor that leads io problems. When you have adverse selection which means the policies that are written are the ones with the perceived highest risk. The next two river, a creek, or all the coast brutally of low penetration 70 million homes only 5 million carry Flood Insurance is estimated over 80 of homes the United States are exposed to flood it proves to producinglast couple of years we these rivers these rain storms rainstormsare horrific and viol. They remove from bodies of water to the flood exposure is they are afraid that market is underpenetrated theres adverse selection. Lee represented dozens of Insurance Companies the right homeowners and then agencies tt ive been ownership interest in and south dakota. I found that either wanted to be in the market and be writing a lot of Insurance Coverages for they did not want to write one or two they wanted to write lights. They had a profit if they had a larger part of the market itself. The vast majority of insurance carriers would love to write for a particular line of coverage if they thought they could make a profit, fair enough . Thats absolutely right. The exodus from california as Ranking Member scott said is the law of economics. If you are losing money theres no reason to go on doing that for. s particular case if we recognize that certain areas from the country were carriers of said look, we cannot make a profit there. We are on our way out. Mitigating circumstances Climate Change is a part of it. Being able tot, appropriately rk your rates at some of that risk of some Severe Weather events. Theyre not able to increase rates based on that that look at it and say that we are a pro forprofit organization but we cannot make a profit. But there is a food but were people think we should spread that out to taxpayers to pick up the losses and keep the race low is that a Fair Assessment of what some folks think are better alternative . I was socialize the risk and penalize people unnecessarily or to allow people with higher risk to go on having higher risk. Thank you, thank you, mr. Chairman. Had hartman invest is recognized by. What happens though when the private market makes amount for insurance that is almost unfeasible for the homeowner to afford and choose not to have property flooding insurance bring the consequences of that when we have the storms or the wildfires or the flooding that ends of the federal government comes and helps us stay. Isnt it better to have a system that somewhat insured here . The affordability of the un affordability issue can be dealt with with a means of testing if there is a real un affordability i in the home cant be moved or harden the home. Come see some means of testing. 20 of policies have seen a decrease in the premium that they h have. An honest number of people have left the national Flood Insurance program as a result. Let me ask that decades of inaction particularly in Climate Change is causing the property and Casualty Insurance to buckle under competing pressures to sprovide returns for shareholdes and sell a product that the they can actually afford. Us businesses and insurers have an obligation to the shareholder to make a profit i get that. But as a policy makers have an obligation to correct for market thfailures when there is a compelling Public Policy reason to do so. Here is to ensure families can afford and prevent collapses in our local Housing Markets. Because between wildfires, droughts, flooding the reality is theres no were left in the country that is not being challenged by a Natural Disaster. In my state use communities that are historically challenged with flooding. What would it mean and by the way those communities are not wealthy by any stretch of the imagination. Would it mean for costs for seniors or homeowners terms of Flood Insurance becomes unavailable it becomes prohibitively expensive . Thank you center for the question. I seem your chocolate in our multifamily communities our Affordable Housing communities we have in your state. In new jersey along with our other communities in other states where we provide Affordable Housing idea of us as the owner being able to not be utinsured puts a tremendous risk not only on us but our residents as well. At some point if we were not insurance it would leave our building and our residents completely exposed. Is it mentioned earlier we had our highest three claims it happened in the last two years. If we did not have insurance those would have been completely unable to be reoccupied. Is a matter of fact that one of our communities they were out for six months and without interest would not have rebuilt they would a bit left to find their own home. Senior communities like that when youre talking about are part of the reason why i interlace this bipartisan ip reactive. Legislation would not insure flood rates stay affordable while providinglo generational investments and mitigation to check a longterm challenges of flooding. Nearly 11 years ago we face the worst National Disaster of our States History supersoft sandy destroyed homes, destroyed businesses, flood entire communities sprayed the months and years following hurricane new york face of manmade disaster getting it on its claims check for the Flood Insurance policy. These are people paid a lifetime never made a claim at all the said now when theyre making a claim to the manipulation of engineering reports and utilizing obscure loopholes, Insurance Companies acting as contractors for fema systematically lowballed policyholders. I subsequently led a charge for fema to establish the sandy claims review which resulted 260 million more paid out to families that were previously denied. But it seems to me an old dog does not seem to learn new tricks. What are you seeing in florida for Homeowner Insurance of policyholders in the aftermath of ian . It has been terrible for so many homeowners after ian. We have seen the evidence of Insurance Companies that are literally changing their own adjusters claims of values. This is a straight fraud for Insurance Companies. Wepr need to prosecute the justs the Insurance Companies cheating peopleha part however not learng that lesson how brake leaders are not coming in in real time and taken the date it to figure this out is leaving homeowners exposed after they paid their premiums for years the sliding premiums. When they need the companies in most the companys most the company so their backs on them or cheat them. Might legislation stops the bad actors from taking place roots out what took place. One final question mr. Chairman, though they have eight regulator they have to submit rate changes to . And fip goes through its process. What we have seen is these in massive rate increases for a lot of people its quitepl frustrating. We need to be making sure the rates are fair and distributed fairly. Do appreciate it if it means testing for affordable rates. But we have not seen an appropriate weve seen real problems. We have lost one of 50000 policyholders. By their own admission fema says we will lose 1 million policyholders by the end of the decade due to premium increases. Thats not a way to solidify an insurance program. Thank you, mr. Chairman. Thank you, sarah tillis of north colitis recognized. Think it mr. Chairman. Seek unanimous consent to submit one opinion piece and one article related to some of the root causes of california and floridas problems. One of those was coauthored by mr. Theodore. I want to go back to a very important number that senator scott touched on. For every dollar of premium taken in you or a dollar into sense is that correct . Thats correct to pray. For the premiums they judge were necessary to cover their risk they were off by 2 cents on the july that year, right . Thats right. And they have a hedging strategy they have investments o and hopefully have a return to d make up those losses. So, would it be fair for anybody to say that the insurers who are paying out more than they are taking in and premiums are making money hand over fist and greedy . Based on the data . The data says they are not. They kicked in about 600 basis points. And long term the Insurance Industry has got to return of 6. 5 . Companies are publicly traded hep 14 15 the Insurance Industry has much smaller margin than other industries. A part of what we could be doing here is considered National Policy that is trying to address the shortcomings that are past policies states that california you mentioned 103. Their dressings of the problems in florida through tort reform. Im glad they got on board but we did that 10 years ago in North Carolina. There seems to be a suggestion here would just do not have enough regulations in place at the state or federal level to fix thisce problem. Do you think there are glaring gaps in regulatory measures to fix this problem . No i dont. The federal backstop or supports. However wellintentioned it backfired. Contrary to popular opinion the reInsurance Market in the primary Insurance Industry is not on its knees. Its not collapsing. Its in the business of thingng with catastrophes for their cycles in the business inflation and Interest Rates are factors beyond its control. In the eight mutual Insurance Industry there companies have been doing business for 200 years. You cannot be greedy for 200 years and not lose all of your business for their doing something right theyve been through storms before. See you think there are many corporate boardrooms that have a strategy and shrinking their markets as a part of their Growth Strategy . Only in states with the cant make a dollar. The point is why on earth but at major insurer exit california and florida . They cant make the numbers work they cannot sustain it. And we know why. A part of what we have to examine here to the extent the federal government should get is examine the policy decisions made at the state level thatscy creating the structural problems that cause insurers to exit the markets. I dont how we actually get an address key areas that need to be addressed we need to address all of them. I dont think we accomplished that through some sort of centralized burdensome regulatory coming out of washington. There is a way to fix this problem i dont think its of the federal government solutiona to the problem but its working through the root causes. You could draw a nexus between policy decisions made and exit the market. Mention affordability we should find we do have people seeking insurance they preferred not to be on the property anymore. We fail with vehemently felt with resiliency measures we fail with movement where 53 tropical cyclones impact North Carolina over the last 20 years the averageer landfall every four years. Ive been dealing with this for the 16 years i have been elected office. But i dont believe the mindset that some of my colleagues have here can be fixed in washington. Its to be addressed on a statebystate basis. We need to provide for Flood Insurance we have to address these problems. But its not going to have firm compel you private sector business to survey markets that cannot be sustained with all the constraints they have. I did have one final question but it would to confirm what you said and i want to get your opinion. You said credit risk writing alone could increase a premium by as much as 80 . Guess what we see premiums jump for people with low credit butwe no claims history. Low personal Credit History as much is one 100 doubling of their premium. Could you explain to me why you think part of the should included risk rating . The credit score insurance has been found to be correlated with losses. The industry though i think from what i know and from my experience as an underwriter is not overpriced policies because of credit scores. Edited Competitive Forces would come in and issue a policy. It was not correlated to the risk it would not be a factor in the process. Okay, thank you pray think of your testing bigwigs senator fetterman of pennsylvania is recognized. Thank you very muchpe mr. Chairman. Mr. Heller can you walk by what happen happens in pennsylvania at working family cannot get Insurance Coverage . Thank you, senator fetterman. What happens is people cannot have their home for they cannot own their home or if they are a renter they do not have the protection they need atan their disaster strikes they often times you have a place to go for forthe job coverage for loss ofe if a building comes down. But what we are seeing for some people cannot make their premium and the homeowners cannot make their premiums they can be forced into a policy by the Mortgage Company where the Mortgage Rate will go up. The monthly Mortgage Rate go up to buy coverage for that letter that provides no coverage for them. We have seen people who cannot afford the coverage in a paying for the insurance for the Mortgage Company but they have no protection after words. One way or of the other you are either uninsured and losing your home or force placed but does not protect you. You dont have the coverage as a erricher for what you need when disaster strikes. This has a financial downstream effect that is catastrophic for the individualal families after disaster strikes. Whether its a warm fire, a flood, a wind storm. Is there ever a good reason to penalize building based solely on the zip code . This is one of the problem of history of redlining and americas many troubling one. We see in the Home Insurance market has been the homeowners market dated back to the 1930s. We havee people who build safe homes in safe buildings wherever they are we should get in the credit for that. Give insurance of them so we can encourage that kind of production. Whom to talke about getting awy from dangerous risk zones. With the climate disasters people try to build in communities that because of zip code and redlining history cannot getmm insurance. Then we are giving people no options for Affordable Housing it makes no sense to have this high influence of zip codes of the Home Insurance price. It is just devastating. Was the financial benefit of proactive landuse in planning . It means lowering the cost of risk and that means lowering the cost of insurance. Mean safer homes in safer communities. Pennsylvania said a lot of work and investing in the front end. Is it we protect homes and communities before disaster strikes or rebuilding with taxpayer cost after words. The protection not only is good for the communities and families it also means the Insurance Companies have less risk or to bear which means they can charge lower l premiums. I see my balance back to the chair. Thank you, senator fetterman. Senator vance is recognized from ohio. Piglets thank you mr. Chair welcome. To the folks testifying before the committee appreciate your time especially once have a welcome for ms. Noris graduated Miami University might neck of the woods in ohio. Appreciate wellbeing here. I want to focus on the california model and whether theres something fundamentally brokenen about the way californa regulates the Insurance Market. If you step back we all agree we want people to be able to afford a Home Insurance for of their station in life and how much money they make. Mthere are two ways to do that one is to help lower income people afford insurance and a market that is reasonably regulated and operates effectively. Another option is to try to regulate the market such that it can actually function properly and it provides benefits and insurance is supposed to provide. I worry california is gone down that pathway weight risk learning the wrong lessons. I will direct my questions first to mr. Theodore. Thank you for being m here. Sorry about that. Could you maybe explain proper 103 what change about Insurance Regulations i state of californ . Sure , 80 proposition 103 the bell proposal was passed by slim margin in california. They gave a 20 rebates to automobile insurers. Introduce the intervenor process where parties could argue for rate decreases. It provided a division the Insurance Department would respond within 60 days. Those are the three main things. Prior approval of rates. And i rates that the Regulatory Regime has come out of prop 103 is very backwards . Insurers are focused special tea loss and so forth thats happened in the past. As opposed to forward modeling for future risk . Institute statutes introduced. One prevents them from using the recent experience of omcatastrophes. There is another statute that prevents the use of incorporating reinsurance costs. Reinsurance is part of the cost of Insurance Companies brother to other provisions in california statute which arent in addition to proper 103. So vicki what to say something, feel free to do so, so long as we have the time. One of the arguments i have heard is the recent insurance re rates are so wide california is because of the threat of Climate Change. Which of course places closer to the ocean theoretically closer to risk of climate related disasters. I guess my question here is how can we credibly argue that climate risk is with driving california Insurance Market when they are bored backwards looking than forwardlooking. The change in the future, not in the past. Secondly see all types of cashless assurance and rates going up or its one thing to think property insurance goes up with climate risk. Its foolhardy to swallow the idea that Auto Insurance would go up and responsive climate risk yet thats exactly was seen california piglets thank you i am a california. I work in the california Insurance Market for over 25 years. Appreciate the opportunity to focus in. I like to start by noting this realness of information approved from 2019 until the present california. I really want to tear this its very important california is one of the most profitable Homeowner Insurance markets in the nation. Vastly more profitable than the country as a whole is verse eight theyre leaving theyre cutting back on their business is not because theyve not been able to make the return it asked for. Theyve actually done better in californiaia went to when they receive 95 rate increase they have 2 requested for it in the regulatory system that does work. But also allows public input that is been so critical. Is that profitability because they have effectively left of the riskiest in focus of the most profitable question of excess profitability them the ratete they need comfort its invested in wildfire prevention. We have done the work in california use the regulatory protections for consumers to ensure prices were escalating as they need to be but also maintaining the protection you mention i want ask the other question you mention is the pastor reinsurance costs. We talked about the fact reInsurance Markets are us going to the a highest point to been over 30 years. California does allow Insurance Companies is note statute that prevents them from buying reinsurance. They cannotyi pass to the excess above what is actually very indd on to their consumers. And state that do allow the passthroughgh states like florida, louisiana, colorado, the Insurance Premiums are much higher than california. There also see withdrawals out communities the path with reinsurance flood Insurance Company to be free from that exorbitant international unregulated market but it is not protect consumers from withdrawal per thats happening everywhere irrespective of the passthrough. Nope we are running but can you stress the climate question in relation to auto versus property insurance . Works climate does impact auto to a degree on the comprehensive. So first of all i disagreed the fundamental point about climate being a coastal risk. They are linked to Climate Change are striving to my highest rates. Its hitting everywhere touchtone to mistake this is a coastal issue around the country. [inaudible] california its probably more at risk from climate disasters in the state of ohio. Ohio is a great place to i get it i absolutely. [laughter] auto Insurance Market in california is not different of the auto Insurance Market we see around the country. One thing is Auto Insurance in california because of the protections from proposition 103 prevent Insurance Companies and get a windfall during the pandemic were stuck at home not driving the around the rest of the Country Companies kept on charging us owes 2019. Even though we are all stuck ats home. So now inflationary pressures because of car repair costs that are independent for their more driven by covid posts covid than Climate Change. rate increases in california. As they reported the other day the rate increases are as severe around the countrys not a california specific thing it is by noth means related to the Consumer Protections for. Thankthre you. Center at warren is recognized for. Thank you. Insurance is there right Natural Disasters like floods, fires, storms. Climate change means that this ascertaining harder and more frequently than ever before. Thats upending the Insurance Market and pushing insurers entire cities or entire state. Without insurance millions of families will be at greater risk for climate crises. As whole communities. The impact this wont be felt all that through our economy. So lets talk about some of the tools are to make some changes here. Ak more than two years ago President Biden issued an executive order telling the federal insuranceex office whose job it is to monitor the Insurance Industry, to examine the impacts of Climate Change onquiet private insurance in the United States. So they propose to collect new data from insurers that would help the federal government to better understand climate react reallyrelated Financial Risks to assess the potential for major disruptions of private across the country. So it would the data fifo is proposing to collect help identify the threats to consumers in the economy from Climate Change . But the data beco useful . Yes thank you, senator warren of course they would. We really need to understand that with granular data where the industry is more exposed. Work, coverage offered are shrinking consumers become more exposed Risk Transfer is changed over time think growing deductibles the lower rebuilding cost. The pressure to keep information from getting into the public into Public Policy makers but for years we have seen that meeting date but not getting the data. One of the reasons of market prices we are talking about s today feel so cited. We have not got the day that would have given us the time to prepare. I can sometime ensure the data at nerd we want to get the numbers. Because they are helpful in helping us understand and assess risk. So if the information is important that we need the information for the present assess for the information. Why dont we have it . This has been more than two years now. It turns out the insurers and the regulators the state regulators are pushing back on this. Collecting this information is unnecessary. Went to quote them here, ill advised and burdensome. They claimed this would threaten socalled existing efforts insurers have made to mitigate the risk of Climate Change on policyholders. They are even saying the fio and the Biden Administration is strongarming insurers and regulators to adopt climate risk mitigating strategies this could read to hire compliance causing higher premiums on americans. Now it seems to me here the insurers and regulators are going out of their way to hide information about premiums, claims, profits and coverage. And without that information consumers have no idea of knowing if they hiked a premium is justified or if it is padding and Insurance Companies profit. So you explained by we need the data. Why are the Insurance Companies resisting so hard on providing the data . What are they trying to hide . The Insurance Companies do not want us the public but also Public Policy makers to really understand where things stand because it allows them to do what we have seen in california is bully policymakers by saying were going to leave if you dont do exactly what you want if you do notg, deregulate this market we are going to walk away from you. The recent buyout made this request theres a black hole were all the data needed to be we can figure this out for ourselves and understand. Some are suggesting its a problem of Regulatory Burden or is it Insurance Companies did not do the preparation we been calling for for 20 years. It said the Insurance Company been shifting on the books to protected their profits and expose more consumers . That data cult would reveal thats why the Insurance Companies have lobbied so hard to keep it out of her hands. I very much appreciate the notion. I see it nods here. I take it ms. Norske would agree with this . That we need the data and the data is essential . Both for making good policy evaluated with the insurance policies rep to question requests absolutely. We know the Insurance Companies themselves big data is out that they are using big data to evaluate risk underside of the premiums are we should be able to see the transparency. Im all for transparency in this. I appreciate the work youre doing itg. This is just a reminr the Insurance Companies are playing every part of this game. They have underwritten financing fossil fuels and then they profit from selling protection from the impacts of those fossil fuels on climate. Climate riskst are rising there trying to hang American Families out to dry here. And demanding either higher premiums or get out of the market altogether. Theres a lot going on here that poses real risk to our economy. We need the data that we need it now thank you, thank you, mr. Chairman for. Thank you, senator warren. Senator kennedy of louisiana is recognized. Can we agree the fema administered national Flood Insurance program risk rating 2. 0 is woefully inadequate . Yes. Books maam . Yes. And gerry, since i cant say your last name. I would y not since woefully inadequate. Okay. Imperfect as it is, does it make sense to you to allow the national Flood Insurance program to expire . No it doesnt. Short of getting a better solution and their we need to have that backstop we actually should keep that around for. Were not likely to get that better solution in a few weeks, are we . No we are not. You think it makes sense to allow it to expire question. I do not think it makes sense that he should continue to be funded and performed as needed. Alright mr. Gerry . Thank you for the question. I think it should be allowed to continue or not with the shortterm one month or two month kicking the can down the road there needs to be more certainty about the availability of insurance. The longterm reauthorization five years, it may be 10 years is more in order. Mrs. Noris, if the world became Carbon Neutral by 2050 do you believe that would solve a lot of the problems of the cost of Flood Insurance and Property Casualty insurance . Click center thats a pretty loaded question. And i am not a scientist. I do think number one that is a wonderful thing to think about. I would love to know we could get there. I have thought about it. And hopefully you have two big bucks i have thought about a pig pig. You wanty dont want to ansr my question. What do you think . Is not going to sell the property insurance crisis we have now. That is part of the risk projection as was discussed earlier. We are trying to make a risk to plans for years going into the future so we have to begin to solve that problem. But you dont think it will solve the problem question because its not going to solve todays probably need better how about you mr. Gerry . A solution to a different issue to one of the pollution and admissions and what were going to do during the transition going from fossil fuels to renewables . If you are king for a day mrd do to fix the problem of the cost of property and Casualty Insurance today . Oh shine a spotlight on the areas where there is disruption and miss location for. What does that mean . Lets give meet three specific things she would do just top line to fix the cost to educate the public about how insurance works. Its called write a check and then you have to sell blood plasma to go to the Grocery Store which you probably have to do any way because of the inflation. Give me three things you would do. No shiny objects. We need to be putting money into protecting homes making sure the levees are strong and to build a federal Reinsurance Program when businesses in america with the commercial sector were afraid they werent going to be able to get terrorism insurance anymore because 9 11, we came in and created a the government gets into the reInsurance Business. Whats number three . Lets get the regulators on the ball, movemb it down to get them to go through the data because when we look at the data coming in you get the regulators on the ball. Number four is to address for the needs of lower and moderate income people by making sure that we are not only creating an insuranceby market that slices d dices people based on their socioeconomic status but penalizing good safe he said i can give a chance to answer. Everything that was just mentioned, we need to invest in ways of being able to get the communities into buildings. Thank you for your testimony. I will get to bed but i also want to raise the questions of senatorrr kennedy. Thank you for pointing out seniors and low income individuals arere especially vulnerable year and suggesting some proposals to address that including as we discussed mitigation and resilience. And i think you as well as youve talked about that. The headline for the Washington Post a few days ago sums up the problem and the headline was in sugars cut Natural Disasters from policies as Climate Risks grow and at the first sentence some of the Largest Companies say extreme weather has loaded them to an end to certain coverages, exclude Natural Disaster protections and raise premiums. All three of you as i listen to the testimony agree thats a problem . Absolutely. I understand that you indicated the price caps placed in california have exacerbated the problem and theres some price point at which if they have the price lower than that they will exit the market. The alternative is to increase premiums on homeowners including many low income homeowners. And living in the urban interface it hasnt been mentioned but theres a 39 increase. In fort myersy in florida the sixthlargest place for people to move to with land use policy build smart not areas where youre going to get hit. I was listening to the responses to the questions and a lot of the proposals involve some form and i think mr. Heller you also proposed and nf ip type of approach is that correct . Yes except i would say it could be converted to a backstop but if i could quickly correct, there were no price caps in california that is a falsehood that has been stated to create a fake bogeyman over the last two years the average for Homeowners Insurance has been 12. 5 . There is no cap it is just the companies have to justify to be accountable. So i wanted to correct that. Im all for collecting the data. But we all know we have a problem because we have Climate Change its increasing the extremity, the intensity and frequency of Natural Disasters. That obviously has a cost. So the question in my view who is going to pay the cost and in my view we should look to those who actually generated the reasons for the damage. I dont think taxpayers should have to pay for this. The market failure here is to price the cost of Carbon Emissions into the atmosphere that is heating up and causing these Natural Disasters so i would just submit rather than ask mr. Ands. Mrs. Taxpayer to have to be the ones to come forward we adopt a proposal that ive put forward and will continue to pursue to create the polluter pays fund and ask the biggest emailers of Greenhouse Gases to help cover the costs of some of this whether it is through a system that deals with the externality that isnt currently captured. If i could get a response from each of you on that idea. The federation of america would be supportive of that. But let me make a slightly nuanced point the Insurance Companies continue to underwrite and use the investments to invest and make a good return on it and then as they profit off of the factors they downstream the external costs to the homeowners into Property Owners not profits that build for the Insurance Premiums so they make a profit on Climate Change and front of their investments and downstream the cost to consumers in the premiums into reduced coverage so its more than that but i would support their being a private sector source to cover the cost so it doesnt just get floated down into individual families. A private sector source based on those. I think its a great idea. Climate change which has been coming and we are seeing it exacerbated if we had a single solution ten years ago maybe we could have mitigated we need this and more we need to fix what is currently here right now. It may miss the target because the largest emitters of the largest fossil fuel Companies Growing exploring and refining our outside of the ordinary propertyCasualty Insurance marketplace. It could be beyond the pale of regulators because they are not regulated the same way. We would be essentially capturing those and that they they wouldhave to defray the co. Its a marketbased solution. Thank you mr. Chairman. Id like to start by reiterating the praise urban preservation of the insurance regulation a system that is effectively protected consumers for over a century. Rather than leveraging the expertise of state insurance regulators, treasury or acting unilaterally to push this administrations claimant agenda including by requesting a plethora of highly detailed information from in sugars as many states and the nia see collected data to help them understand the Economic Impact of Natural Disasters and weather events. Any efforts from treasury were to sidestep the insurance regulators blatantly undermines congressional intent. We should work with and not around state insurance officials that have decades of experience assessing the market impacts of these catastrophic weather events. In this regard weve had an active weather Hurricane Season and have seen a number of named hurricanes in 2023. The frequency of such has inevitably impacted the property Insurance Market. Insurance premiums like all prices are signals to consumers and of the property insurance base, the higher the Insurance Premium indicates the existence of higher risk. As someone who lost my house and my cars and my things in that a storm, i get it and i get the importance of it. I also come from a state that is ravaged by storms whether they be tornadoes or hurricanes, so i understand the importance of getting this right. In response to higher Insurance Premiums, states like california have implemented overly restrictive regulations including price controls on in sugars. In essence this deprives homeowners of market signals that could steer them towards building and better less dangerous places or encourage them to build more disaster resistant homes. So i want to get your thoughts on that statement. Can you tell me, do you agree with that . I do 100 . The efforts to get more data and Insurance Companies on catastrophes into their exposure is simpler superfluous. The Insurance Companies look at the catastrophes and frequency and severity because there was a disagreement about whether there is increasing severity and frequency. Also the federal insurance office, what is it a surgical really supposed to do to monitor the year Insurance Industry, not to direct or manage, but to insert itself in many ways its an agency without a mission created as part of dodd frank a when people thought that the Insurance Industry was responsible for the Global Financial crisis which was not. So the federal efforts for the insurance backstops going back to hurricane andrew lets not repeat mistakes of the past. I only have a little bit of time left so i will transition to bragging on my state. Weve heard a number of questions asked. Alabama has gotten it right and weve seen what effective regulations and active resiliencyse efforts look like r instance in alabama, weve had a state Grant Program that incentivizes homeowners to fortify the roots to withstand Severe Weather. Theat program was in response to damages and sued by hurricanes ivan in 2004 and katrina in 2005 created to incentivize investments in more Resilient Homes and to encourage in sugars to continue issuing policies in these storm prone the communities with a goal of reducing future hurricane damage. When Hurricane Sally hit in alabama in 2020, im proud to say the nearly 16,000 homes and buildings that fortified remained intact. This resulted in lower insurance claims and allowed the community to reopen and recover more swiftly. This is what effective action looks like where officials identify and put into practice without Regulatory Overreach something that works. Just last week due to the great work of governor iv, commissioner seller andsi director, the new Alabama Resilience Council met for the first time. The council will focus on publicprivate collaborations to help build stronger, safer, more resilient communities. This is just another example of effective state driven solutions. I am out of time, but certainly appreciate any comments you have on the great work that alabama is doing. I would to say that it doesnt have to be the government that provides this funding. I replaced the roof on my house and call in Insurance Agent and got a credit on my insurance through the right behavior it leads to lower premiums. In my written testimony i pointed out the program and this is a model the government can partner with communities and i agree not enough companies are incentivizing by giving people oudiscounts or making policies available so i think that this is a very important piece of the effort and why we focus on thes. Front end work like that is being done rather than try to clean up after the disaster with insurance money and better Resilient Homes. Senator cortez musto. Let me follow up on the conversation with the division of insurance i believe the states have incredible data that should be utilized as well. Andcr let me touch on this as wl you noted that the regulators offer expedited review for insurers to submit filing to and discount for those who take mitigation measures so let me start there. What are the ways we can encourage them to incorporate the incentives when they set the premiums . Thank you. Um this is an incredibly important thing. Weve worked with the division on exactly this like laying out really clear discounts that Insurance Companies should be providing based on the science thats out there and we are doing a lot of great work on thisng front end groups like my colleagues at the united policyholders. When you build stronger and take these actions, you can reduce the risk and that reduces premiums. Unfortunately too Many Companies havent followed through but many are and in california they are required so thats beingma built into it. In nevada and others incentives and states should be looking at the departments and looking at whats being done in alabama because when we make ourselves saver we reduce the risk and the cost. So this is the kind of work we should be focusing on rather than some of the conversations about throwing away Consumer Protections. I appreciate that. And we have seen recently extreme weather happening across the state of nevada because the rain and flooding that has been devastating there are great partnerships that can happen but i agree there needs to be more opportunities and incentives to lower the premium costs. While i have you let me talk about manufactured housing and your testimony that people that live in the manufactured homes pay more l for the quality Homeowners Insurance. Can you explain how they seem to fail some of the 20 million who live in manufactured homes . Thank you, senator that is one of the more disastrous segments of the market and of course it hits the holder homeowners quite a bit so the policies that are written for thee manufactured homes generaly now have what is called the general cash value so they depreciate the value of the home when you need to file a claim so you dontwh get everything you need to rebuild. They have weird exclusions. The systems in the homes are considered content that have less coverage then we see in the normal Homeowners Policies that are part of the home for rebuilding and for some people if you cant even collect your full claim if you dont rebuild in the same place. If the home park doesnt reopen you cant rebuild in the same place so you cant use the policy been paying forget these manufactured home policies which the market is less competitive than the regular market are more a per dollar basis and sometimes more expensive altogether so its a tough market for somebodyer living ina manufactured mobile home to try to get coverage. Particularly at a time when they areth different than the manufactured homes of the past. There are more people that should be taking advantage of the lord cost that put a roof over your head and provide a level of comfort and security. The way the Insurance Industry is trying to ensure homes from decades ago, and weve done a good job of making Affordable Housing through manufactured homes andor yet the Insurance Products are substandard for people who either because they want to or its all they can afford are in these communities and types of homes and we need to do a better job to make the Insurance Coverage better and regulators need to Pay Attention because they are not good enough. Let me talk to you and stay on the Affordable Housing piece because the nation needs Affordable Housing. Nevada is no different and its something ive been working on. I appreciate the testimony telling us rising insurance costs undermine not just the future of Affordable Properties to those that currently provide homes to people. Can you expand that providers may be forced out of the Housing Market because of insurance and operating costs else pays even feasible rent . Thank you for that question. Affordable housing theres a lot of different programs but they all run on basic principles. Number one people that move into the communities are people that need to move into the communities. They cant make too much money. And rule number two we cant charge too much money to live there so thats basically the two rules of Affordable Housing so essentially when you have a serious situation like this with catastrophic increases of expenses that rise quickly, there is no way to do an adjustment, nor do we necessarily want to. We dont want to do a dramatic increase for folks that cant atafford it but what that leaves us with is a situation where our expenses are crushing our operational margins or ability to meet our costs. That is a problem because the regulators often for example with hud we can ask for a rent increase but if an Insurance Premium which hits in the middle of a year and weve already got the rent increase we cant ask for another rent increase and then if we ask the next year it may take a while, actually a significant amount of time to approve that increase so we are in the position where the rent cant possibly meet the expenses and that forces us as the owner to make the really bad decisions we have to either stop doing certain services, we have today for expenses, any accidents we can and eventually it could end up we just cant afford to do this. It could put the properties at risk that could put at risk peoples homes and thats like one or 200 people at a time so the impact on affordable 2 housg is significant especially compared to evenrd the market. Does that make sense . Yes, thank you i know my time is up. I just want to add onto a point because its something you brought up at the beginning. Nonprofit organizations are having a lot of trouble on the market as michelle has described and youve been working on making the Risk Retention groups available to nonprofits. These are alternative mechanisms and that is something we should make sure we add into the mix because it is an opportunity to have a private Market Solution thatca will help avoid the chaos that we are seeing for the nonprofit Housing Developers as well as other nonprofits. And i want to thank him for sharing on my behalf. Thank you to the witnesses for being here and providing testimony. Senators who submit questions they are due one week from today. You have 45 days to respond to any questions. Thank you for that and one other thanks to Jordan Harris who will be leaving at the end of the week. Congratulations and with that, the hearing is adjourned [inaudible conversations] [inaudible conversations] student can move documentary competition is back and this time we are celebrating 20 years, looking forward while considering the past. The youth of today are the leaders of tomorrow. Its imperative that we take care. We can Work Together. Inflation really matters. Its important to understand the ramifications. We are asking middle and High School Students to create a five to six minute video addressing one of two questions. In the next 20 years what is t most important change you would like to see in america or over the past 20 years what has been the most important change. Show supporting and opposing perspectives. We are giving away 100,000 in total prizes with a grand prize of 5,000 and because we are celebrating 20 years, every teacher that has students participate has an opportunity to share a portion of an addition 50,000. The deadline for students to submit this friday, ary th, 2024. For more information, visit our website on student cam. Org. Buckeye broadband supports cspan as a public serce along with these other providers givingou