[Congressional Record Volume 154, Number 75 (Wednesday, May 7, 2008)]
[Senate]
[Pages S3854-S3861]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
FLOOD INSURANCE REFORM AND MODERNIZATION ACT OF 2007--Continued
The ACTING PRESIDENT pro tempore. The Senator from Florida.
Mr. MARTINEZ. Mr. President, I rise to speak in support of the Wicker
amendment, the multiple peril insurance provision. I want to share some
thoughts with the Senate on this provision.
As a Senator from the State of Florida, little is of more importance
to the average homeowner than their home insurance and the cost of that
insurance.
The multiple peril insurance provision will create a new option in
the National Flood Insurance Program to offer coverage of both wind and
flood risk in one policy.
The program requires premiums for the new coverage to be risk-based
and actuarially sound.
CBO estimates the multiple peril program ``would increase premium
receipts and additional claims payments by about the same amount--
resulting in no significant net budgetary impact.''
By covering wind and flood risk in one policy, the multiple peril
option will allow coastal homeowners to buy insurance and know that
hurricane damage would be covered.
The reason we have to consider this is because in Florida, the gulf
coast and throughout the region we have experienced constricting
effects in the market.
Insurance companies are pulling out. They are dropping coverage.
State Farm, for instance, stopped writing residential, rental, and
commercial policies just 2 months ago.
People in my State are finding it increasingly difficult to secure
insurance, especially policies that cover both wind and flood damage.
People who have paid every premium and never filed a claim are simply
locked out of the market.
But insurance is only part of the solution. We also have to encourage
mitigation.
The multiple peril program would strengthen coastal mitigation
efforts by making the new coverage available only where local
governments have adopted building codes consistent with International
Code Council standards.
Most of the State-sponsored plans are not able to spread risk
efficiently and not able to build up sufficient reserves to cover a
major hurricane.
They are forced to charge higher and higher premiums to buy more
overpriced reinsurance to keep up with their increasing liability.
The Federal multiple peril program will spread coastal risk
geographically, in a much more efficient manner than the state pools.
I strongly support the Wicker amendment, and I encourage my
colleagues to do the same.
I remind my colleagues that CBO expects that the new coverage offered
under H.R. 3121, the Wicker amendment, would increase premium receipts
and additional claim payments by about the same amount, and the CBO
claims that the result would be no significant net budgetary impact.
For those reasons, I strongly support the Wicker amendment and urge
my colleagues to vote in favor of it.
I yield the floor and suggest the absence of a quorum.
The ACTING PRESIDENT pro tempore. The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. VITTER. I ask unanimous consent that the order for the quorum
call be rescinded.
The ACTING PRESIDENT pro tempore. Without objection, it is so
ordered.
Mr. VITTER. Mr. President, I rise in very strong support, with so
many of my colleagues, of the Wicker amendment. As Senator Martinez has
talked about Florida, Senator Wicker has talked so eloquently about
Mississippi, so, too, in Louisiana it is an absolute imperative that we
address the wind liability coverage issue in this larger debate.
The single greatest obstacle to recovery in both of our States hit by
Katrina and Rita is insurance. For so many of my constituents,
insurance on the wind liability side is unavailable or, if it is
available, completely, absolutely unaffordable. This Wicker amendment
will give folks a new option. It won't mandate it, it won't push them
into that program, but it will give them an option. Most importantly,
it will give them an option without increasing any burden or risk to
the taxpayer.
I want to repeat something that has been said, but it is vitally
important for everyone to understand before we vote; that is, the CBO
has made perfectly clear this amendment does not make the bill more
expensive. It does not make the program more expensive. It does not
cost the taxpayer for a very simple reason: There is a mandate in the
language that premiums be set in an actuarially sound way to cover the
risk.
I strongly support the Wicker amendment.
Amendment No. 4722 to Amendment No. 4707
Having said that, I ask unanimous consent to set aside the pending
amendment and call up Vitter amendment No. 4722.
The ACTING PRESIDENT pro tempore. Without objection, it is so
ordered.
The clerk will report.
The assistant legislative clerk read as follows:
The Senator from Louisiana [Mr. Vitter] proposes an
amendment numbered 4722 to amendment No. 4707.
The amendment is as follows:
(Purpose: To increase maximum coverage limits)
At the appropriate place, insert the following:
SEC. 33. MAXIMUM COVERAGE LIMITS.
Subsection (b) of section 1306 of the National Flood
Insurance Act of 1968 (42 U.S.C. 4013(b)) is amended--
(1) in paragraph (2), by striking ``$250,000'' and
inserting ``$335,000'';
(2) in paragraph (3), by striking ``$100,000'' and
inserting ``$135,000''; and
(3) in paragraph (4)--
(A) by striking ``$500,000'' each place such term appears
and inserting ``$670,000''; and
(B) by inserting before ``; and'' the following: ``; except
that, in the case of any nonresidential property that is a
structure containing more than one dwelling unit that is made
available for occupancy by rental (notwithstanding the
provisions applicable to the determination of the risk
premium rate for such property), additional flood insurance
in excess of such limits shall be made available to every
insured upon renewal and every applicant for insurance so as
to enable any such insured or applicant to receive coverage
up to a total amount that is equal to the product of the
total number of such rental dwelling units in such property
and the maximum coverage limit per dwelling unit specified in
paragraph (2); except that in the case of any such multi-
unit, nonresidential rental property that is a pre-FIRM
structure (as such term is defined in section 578(b) of the
National Flood Insurance Reform Act of 1994 (42 U.S.C. 4014
note)), the risk premium rate for the first $500,000 of
coverage shall be determined in accordance with section
1307(a)(2) and the risk premium rate for any coverage in
excess of such amount shall be determined in accordance with
section 1307(a)(1)''.
Mr. VITTER. Mr. President, this amendment is basic and
straightforward. This amendment would increase the coverage limits for
flood policies under the National Flood Insurance Program. Why do we
need to do that? For a very basic reason. Those dollar limits have not
been changed in 14 years. They haven't been changed at all, adjusted
for inflation or anything else, since 1994. So it is way past overdue
to update these coverage limits in a reasonable way. This Vitter
amendment 4722 would do just that. But, in fact, it wouldn't even fully
take into account inflation since 1994. It would fall a little short of
that. We chose the increases because my increases in amendment 4722 are
exactly what the House of Representatives has already passed, merely
updating those limits to take into account most but not even all of
inflation since they were last set in 1994.
I share with the chairman and ranking member the goal of making this
program more fiscally sound, more actuarially sound. But we will
completely frustrate that goal if we have a program with extremely low
coverage limits and people can't buy the coverage they need. What will
happen if we allow that? More and more storms
[[Page S3855]]
will hit, and people who have flood insurance coverage will not have
nearly enough coverage, so there will be pressure--every event, every
storm--to come to Congress for emergency measures above and beyond the
flood insurance program. That isn't a path to fiscal soundness. A path
to fiscal soundness must include some reasonable updating of coverage
limits. This amendment would do that.
Finally, this was included in the House version of the bill. It did
pass the House overwhelmingly. In the context of the House bill, the
Congressional Budget Office said it did not add to the cost of the bill
in any way because increased premiums go along, of course, with
increased coverage limits. The CBO said, in light of those increased
premium payments, which go along with increasing coverage limits, there
isn't an addition to the cost of the bill. It is a net wash in terms of
the cost to the taxpayer and to the bill.
I encourage all of my colleagues on both sides of the aisle to look
hard at this amendment. It is a sound, modest amendment to update the
program. It is perfectly consistent with fiscal soundness. I would hope
we can get a strong resounding vote in favor of the amendment.
I yield the floor.
The ACTING PRESIDENT pro tempore. The Senator from Alabama.
Mr. SHELBY. Mr. President, I rise to oppose the Vitter amendment and
oppose it very strongly. The goal of flood insurance legislation is to
move the program to more actuarially sound prices. This amendment would
undermine that goal. The Vitter amendment would add significant new
liabilities to the program without ensuring the necessary premium
increases to cover such liabilities.
I want to remind my colleagues that we are forgiving in this bill
nearly $20 billion of debt incurred as a result of failures of the
flood insurance program to date. The changes we are making are an
attempt to ensure that taxpayers never have to pay off such a debt ever
again. This amendment runs contrary to that goal, making it much more
likely that we will be back bailing out the program in the near future.
Furthermore, there are currently numerous private insurance carriers
providing flood coverage for losses that exceed the maximum amounts
provided by the Federal program. In other words, unlike basic coverage,
where no private insurance exists, there is a private insurance market
available for additional coverage. While I recognize this insurance is
expensive, that is because it is actuarially priced. The premium is
commensurate with the risk.
This program was designed to address the fact that the market stopped
providing primary flood insurance coverage. It was not intended to
socialize risks that were otherwise being handled by private markets.
The only reason to increase the coverage limits of the program is to
crowd out risk-priced private insurance to provide socialized
subsidized insurance. I believe it is largely due to the existing
subsidies that this program has such problems. We do not need to add
more subsidies at this time.
For all these reasons, I oppose the Vitter amendment and urge my
colleagues to do the same.
The ACTING PRESIDENT pro tempore. The Senator from Louisiana.
Mr. VITTER. Mr. President, in response, I respect very much the views
of the ranking member. But, No. 1, at least with regard to the House
bill on which I have seen the CBO analysis, the CBO said it did not add
to the cost of the bill because higher premiums obviously come with a
higher coverage limit, if folks choose to buy that.
Secondly, if we have coverage limits which are way too low and a big
event hits, that is going to shove us in a direction away from fiscal
soundness because it will make extraordinary emergency measures
necessary in response to that event by this Congress, rather than
having an insurance system capable of covering the loss.
Amendment No. 4723 to Amendment No. 4707
I ask unanimous consent to set aside the pending amendment so I may
call up amendment No. 4723.
The ACTING PRESIDENT pro tempore. Without objection, it is so
ordered.
The clerk will report.
The assistant legislative clerk read as follows:
The Senator from Louisiana [Mr. Vitter] proposes an
amendment No. 4723 to amendment No. 4707.
The amendment is as follows:
(Purpose: To allow for a reasonable 5-year phase-in period for adjusted
premiums)
On page 11, line 6, strike ``Any increase'' and all that
follows through the second period on page 11, line 11, and
insert the following: ``Any increase in the risk premium rate
charged for flood insurance on any property that is covered
by a flood insurance policy on the date of completion of the
updating or remapping described in paragraph (1) that is a
result of such updating or remapping shall be phased in over
a 5-year period at the rate of 20 percent per year.''.
Mr. VITTER. Mr. President, in the interest of moving this bill along
and moving through as many issues as possible efficiently, I will
explain the amendment briefly.
This amendment deals with those properties which have an increased
risk because of the issuance of new flood maps. Every time there is an
event, of course, whether it is a small event or a huge one, such as
Katrina and Rita, there are new flood maps developed over time by FEMA.
If a property is a greater risk under those new flood maps, under this
underlying bill premiums would go up. I have no objection to that. They
should go up. But I do think we need to temper that with a reasonable
time period over which to spread out that increase. This underlying
bill says that increase would happen all in 2 years. My amendment would
change that to mirror the provision in the House bill and would spread
that increase over 5 years instead of 2.
This is a reasonable, modest measure to make this movement toward
fiscal responsibility and actuarial soundness reasonable and manageable
by the premium payer. Some of these changes, particularly after an
event such as Katrina or Rita, can be quite dramatic. To say that all
of that change, all of that premium increase happens over 2 years is
going to be a huge, whopping bill that is going to stop a lot of folks
from being able to be insured over time.
I think this change to have that phased in over 5 years is
reasonable. It does not lose sight of the goal of fiscal soundness and
actuarial soundness, but it is a reasonable accommodation to folks who
are in a very different circumstance because of a brandnew flood map.
With that, Mr. President, I encourage my colleagues on both sides of
the aisle to support the measure, and I yield back the floor.
The ACTING PRESIDENT pro tempore. The Senator from Connecticut.
Mr. DODD. Mr. President, first of all, let me thank my colleague from
Louisiana for offering these amendments and handling them as
efficiently as he said he would. I appreciate that very much. We are
trying to move legislation here, so I am grateful to him.
As to this idea, this last point that was made--like the first
amendment he offered--there is value and merit in what he is
suggesting. But, as Senator Shelby has pointed out, we are trying to
strike balances. We have an obligation, one, to get this program up and
running again. There is $17 billion on which we owe a debt, which is
going to raise the cost of premiums if we do not forgive that debt,
which is the major thrust of this legislation, as well as trying to
deal with some other related issues--but to try to keep this within
prudent fiscal conditions.
What we do in this bill--and the point the Senator from Louisiana
raises is a valid one. Certainly, we do not want this to occur in 1
year. So what Senator Shelby and I did with our committee members is to
do a 2-year phase-in of this program. It is not 5 but it is 2 years, to
try to exactly accommodate the legitimate concerns raised by the
Senator from Louisiana. Obviously, it all occurring at once would
probably be more than some people could tolerate. If the property is
newly mapped in a flood plain, the rates are phased in over a 2-year
period to ensure that a home or business can plan for flood insurance
costs, obviously. It is not as long as 5 but we think 2 helps.
The bill and this provision are part of our overall effort to balance
the need to reform and strengthen the flood program with the need to
ensure people can afford to purchase needed flood insurance. Striking
that balance is what we are trying to achieve. It is hard not
[[Page S3856]]
to make a case--we could make it 6 years, 7 years. That would be
easier. But the problem is, at the same time we would not be getting
the revenue coming in to accommodate covering the additional properties
we want to cover with the new mapping. So how do we do that? We thought
2 years would be an adequate amount of time to give people a chance to
phase that in and simultaneously meet our obligation of seeing to it
that this program would be there to cover the 5.5 million homes we are
talking about. I think we struck that right balance.
As to the other members of the Banking Committee, again, we
unanimously adopted these provisions, and not without debate and
consideration of the very point being raised by the Senator from
Louisiana.
I wish to remind my colleagues, again, this bill results in
significant savings in the flood program. The bill forgives $17 billion
in debt. We are paying interest payments on that $17 billion. That is
part of that premium cost. That is a huge cost. Without this debt
forgiveness, which is a part of this legislation, policyholders would
see rates increase many times over. In fact, rates would have to almost
double just to pay the interest on the debt FEMA owes. So that is a
major thrust of what we are trying to achieve. So we are saving all
policyholders and all homeowners at risk from being priced out of this
program with the debt-relief provision.
In exchange, however, the bill contains provisions to move the
program to actuarially sound rates to ensure the long-term viability of
the flood program, which is also our responsibility with this
legislation--to make sure that actuarially this program will have the
revenues coming in to support and sustain the risks it tries to cover
against.
These reforms stabilize the flood program to make sure that when the
next flood hits, homeowners will have flood insurance to be able to
rebuild their homes and their lives.
I am concerned that further subsidies in the program undermine our
efforts to put this program on sound financial footing. Those are the
reasons I would oppose the second Vitter amendment as well. I say that
with respect. Again, these are a lot of ideas that neither Senator
Shelby nor I would say lack merit. It is a question of what we can
afford to do, where the balance is, where the actuarial soundness is.
That is more the thrust of our argument than whether we agree or
disagree with the goals stated by the proponents of these amendments.
I make the same point I made earlier as to the amendment offered by
Senator Wicker from Mississippi. I would be hard pressed to make a case
that we should not try to do something about wind damage. It is a
legitimate issue. I will point out in this morning's papers, if you
read about that incredible devastation created in Myanmar: 25,000
people lost, 120-mile-an-hour winds ripping through that country,
clearly flood damage, clearly water damage, clearly wind damage.
The problem Senator Shelby and I have is, I could not answer the
question. My friend from New Mexico asked me: How much is that going to
cost, Senator? I cannot answer you. You have a right to know the answer
to that question, so we are trying to find that out. We have asked for
a study to look at the wind issue. The Acting President pro tempore
comes from a coastal State as well. He knows what can happen with these
issues. I think wind is a legitimate issue for us to sort out. But I
cannot honestly answer the question actuarially. We are told it is five
times the cost. If you take in the four hurricanes in 2005, the $17
billion in flood damage, wind damage would have been five times that
cost. Of course, we have a flood insurance program here that puts $2.5
billion into that account on an annual basis.
So we are talking about something we are really not capable of
managing under the present circumstances--a legitimate issue. The
Senator from Mississippi is absolutely correct in raising it. I pointed
out earlier that Senator Schumer of New York talked about this
passionately. Senator Martinez from Florida talked about this as well.
Anybody from a coastal State will tell you what this can mean. But I
have to be able to answer--as Senator Shelby and I do--the question of
whether you can actuarially account for this, whether we can have a
program that is sustainable, and we cannot answer those questions. In
the absence of doing that, we reluctantly oppose these amendments, and
because of the importance of getting this program accomplished, in
place.
In 3 weeks, or less than 3 weeks, the hurricane season starts. Any of
us who live in these eastern coastal areas, the Gulf State areas,
Florida, coming up that coast all the way up to New England, know that
at any given point over that period of time, we could be hit. We need
to have this program in place to begin to take care of these costs.
That is why we are here today to try to get this done.
I am going to respectfully say and urge colleagues to come over with
their amendments so we can get this work done--to listen to what they
have to offer and say, to consider where we can, but we need to
complete this bill, and we are going to be most reluctant to be
supportive of ideas that violate the actuarial soundness of what
Senator Shelby and I and the other 18 members of our committee endorsed
last year when we adopted this bill.
Mr. President, I see my colleague from Alabama on the floor.
The ACTING PRESIDENT pro tempore. The Senator from Alabama.
Amendment No. 4719
Mr. SHELBY. Mr. President, I would like to take a few moments. I rise
in opposition to the Wicker amendment that the Senator from Mississippi
offered earlier and has spoken to. I recognize that property casualty
insurance availability and affordability is a serious concern in some
parts of this country, perhaps all parts. The addition of wind
coverage, however, to the financially insolvent flood insurance program
is not the solution to this problem.
I think we should put this amendment into context. According to the
Insurance Information Institute, this amendment would add an additional
$10 trillion to $12 trillion in exposure to the bankrupt Federal flood
program, as well as annual Federal program deficits that could reach
$100 billion or more. Just think about it.
On this, in the Banking Committee, we have had no hearings. We have
established no record. We have no understanding in any way, shape, or
form as to what the true consequences of the Wicker amendment could
be--nothing at all.
Perhaps we should consider this amendment in the context of flood
insurance. The National Flood Insurance Program does not charge
actuarial rates for anyone within the program. There are direct
subsidies to many homeowners and indirect subsidies to all others
because the underwriting criteria do not accurately depict the risk.
The program is currently bankrupt and has no ability to pay back its
$17 billion debt obligation at this point. With a model such as this, I
am not convinced that another Government-managed insurance program will
well serve the American taxpayer.
There are other considerable flaws to the approach contemplated by
the Wicker amendment. Private insurers minimize exposure to
catastrophic risk through diversification. The Wicker amendment would
concentrate the risk. It provides no ability for reinsurance,
retrocessional insurance, or any other means to diversify and lay off
risk.
In addition, the Federal wind coverage would face operational
challenges that have not been addressed through the Wicker amendment.
The flood program currently takes advantage of efficiencies created by
the use of public and private resources. No private insurance company
would ever sell or solicit a policy that would directly compete with
itself. Therefore, the wind portion of this insurance will be marketed,
underwritten, and serviced directly by the Federal Government, if you
will. This will add significant administrative costs and bureaucracy to
the process of claims handling.
The capital markets have begun to show strong willingness to
underwrite the risks associated with natural disasters. New
innovations, such as catastrophe bonds and sidecar agreements, have
been created recently. By allowing more Federal Government involvement,
many of the innovative techniques for transferring risk will be crowded
out in the marketplace.
[[Page S3857]]
While there are some parts of the country where insurance coverage
problems have occurred, most of the property casualty insurance market
is functioning well in this country. In order to fully understand the
problems associated with coverage lapses, I believe we must work to
understand the root causes of the problem so we can debate solutions
and address the problem without hindering the rest of the market
itself.
Our legislation creates a commission intended to provide us much of
the necessary information we need to understand the problem of
catastrophic risk. For instance, the commission would study ``the
current condition of, as well as the outlook for, the availability and
affordability of insurance in all regions of the country.'' It would
also consider ``catastrophic insurance and reinsurance markets and the
relevant practices in providing insurance protection to different
sectors of the American population,'' as well as many other issues
directly relating to the cost and availability of insurance for wind
damage.
Given the potential exposure to the taxpayer, I believe we owe them a
better process. At a minimum, Mr. President, I think we need to further
study this problem prior to committing the resources of the American
taxpayer.
The ACTING PRESIDENT pro tempore. The Senator from New Mexico.
Mr. DOMENICI. Parliamentary inquiry, Mr. President: What is the
business before the Senate?
The ACTING PRESIDENT pro tempore. The Vitter amendment is the pending
business.
Mr. DOMENICI. Mr. President, that is because we had unanimous consent
to set aside the Domenici amendment, or the Allard amendment?
The ACTING PRESIDENT pro tempore. There was a unanimous consent to
set aside the pending amendment.
Mr. DOMENICI. Mr. President, I am going to speak on the underlying
Domenici amendment for about 15 minutes, and then time will be arranged
for that between the leaders for later in the day, so we will not have
to have any further interruptions, as I understand it. I do not seek to
interrupt your bill. I say to Senator Dodd, there will not be any
further interruptions until some agreement is reached, perhaps between
the leadership.
Mr. DODD. Mr. President, I say to my colleague, I am trying to
arrange--we now have three amendments. There may be some people who
want to be heard on them, the Wicker amendment and the two Vitter
amendments. My hope was to have a vote at around 3:15 on those three
amendments.
I am trying to move a bill--Senator Shelby and I. We are running out
of time here. There are about maybe as many as 17 amendments we are
going to have to consider. We could be in here late tonight. If that is
the case, I would like to do that in order to get this done. I am going
to let staff know here--and I am not going to make the motion at this
time--just to let them know I would like to make a unanimous consent
request that, say, at 3:15 we vote on the Wicker and the two Vitter
amendments and to notify the leadership of that so they can consider
whether they want to agree to that. But that way, we could move along,
if Members want to be heard on these amendments.
The concern, I say to my good friend from New Mexico--and he is one
of my best friends here--I am trying to get this done.
Mr. DOMENICI. Sure.
Mr. DODD. If you have 15 or 20 minutes, it will blow me back from
3:15.
Mr. DOMENICI. Mr. President, 3:30 would be early enough. You would be
making good time at 3:30 and let me have a little time. This is a big
amendment and we have to have some understanding of it before you get
your bill finished. You are going to have a vote on it--I won't use
more than 15 minutes at this point--on a very big proposition on behalf
of almost all of the Republicans. I don't know about your bill in
detail, but I think you are doing a terrific job.
Mr. DODD. Here is my problem. If I don't have a vote at 3:15, it will
be a lot later than that, and I will be notified by staff and the
leader. That is my problem. I know my colleague wants to be heard on
the bill and he has every right to be heard. I would like to vote at
3:15, stacking three votes at 3:15.
Mr. DOMENICI. If you get that agreed to, can I have consent to be
recognized after those votes for 15 minutes?
Mr. DODD. I am happy to do that.
Mr. DOMENICI. Mr. President, I ask unanimous consent that if votes
are called for on the three amendments alluded to by Senator Dodd, the
Senator from New Mexico would be recognized after those votes for 15
minutes to speak on the energy amendment which is attached to this
bill.
The ACTING PRESIDENT pro tempore. Without objection, it is so
ordered.
Mr. DODD. We have a request to see whether we can have the three
stacked votes at 3:15.
Ms. LANDRIEU. Mr. President, reserving the right to object, what are
the three votes?
Mr. DODD. Senator Wicker and two amendments offered by Senator
Vitter. I don't have the numbers in front of me.
The ACTING PRESIDENT pro tempore. The unanimous consent does not deal
with stacking those three votes at this point. The unanimous consent
only dealt with the Senator from New Mexico having floor time if there
were three votes.
Ms. LANDRIEU. OK. That is the only unanimous consent agreement. That
is fine.
Mr. DODD. Pending the agreement on that, at the conclusion of those
three votes, the Senator from New Mexico be recognized for 15 minutes
to talk about his amendment--assuming we can get an agreement to have a
vote at 3:15.
Mr. DOMENICI. If we don't get agreement on that, then I ask that I be
recognized at 3:30 for my 15 minutes.
Mr. DODD. Let me try to get an agreement here. One step at a time.
The Senator from Louisiana wants to be heard.
The ACTING PRESIDENT pro tempore. The Senator from Louisiana is
recognized.
Ms. LANDRIEU. Mr. President, I wish to speak for a moment, if I
could, about the wind amendment that is pending that Senator Wicker,
myself, Senator Vitter, and Senator Cochran have cosponsored. Several
of us have been working on this for months now, and our colleagues in
the House, particularly from Mississippi and Louisiana, have been very
engaged, but there are other delegations that are engaged in this issue
as well. The reason is because flood insurance, while it has been
helpful--very helpful to some degree--throughout the southern part and
coastal areas of the country, is not sufficient. We have to provide
some opportunity for our homeowners and businesses to have access to
affordable wind insurance, and the operative word here is
``affordable.''
That is why we have offered this amendment to modify and expand the
insurance bill regarding flooding. That is why we have held this bill
up--one of the reasons this bill has been held up by several of us for
several months now--until we could try to get an opportunity to fix
this bill which is still, in my view, greatly flawed in a number of
areas, and this is one. This bill is not providing what people need--
not just in Louisiana and in Mississippi but in Texas, in Alabama, in
South Carolina, in North Carolina, in Florida--in many places around
this country that may be subject to storms, particularly along the
lines of Katrina and Rita and other storms that have hit recently and
are projected, obviously, to continue.
We are making some significant changes. People are building stronger.
There are new building codes being adopted county by county, parish by
parish, and State by State. There are new ideas about designs and
building more safely. Even some communities are moving to higher
ground. Neighborhoods are making tough decisions about where we should
build and where we shouldn't. All of that is going on throughout many
parts of the country.
I wish to read a couple of letters--because I think my colleagues
have explained this issue very well--that we are receiving from
constituents who have been struggling to get themselves back in their
homes and to pay not just their mortgage but their insurance costs as
well as the rising cost of fuel and the rising cost of groceries. This
is exacerbating a very tough economic situation that we are
experiencing in the gulf.
[[Page S3858]]
This is an e-mail I received from Chet in Metairie:
Hello. I live in Old Metairre. My home did receive wind
damage from Katrina, with a total insurance claim of just
under $30,000. I share my mortgage costs with my mother who
is a 79-year-old retired Jefferson Parish school teacher.
This year, our homeowners insurance tripled. Thanks to this,
the total amount we pay to our mortgage company has almost
doubled in 2008. Our monthly payment of loan, property tax,
and insurance has gone from about $1,200 before Katrina to
$2,093 post-Katrina. My income has not increased. My mother's
pension has not increased at all. My brother in Mandeville
has experienced similar increases. We know that insurance
companies reported record profits in the year following
Katrina.
It is very interesting to me that so many people on this floor are
screaming and yelling about record oil profits. I didn't hear anyone
come to the floor to talk about the strange and unusual situation of
after one of the greatest catastrophes in the history of this country,
or at least recent catastrophes, the insurance profits hit a record
high, but no one from the committee came down to talk about taxing or
curbing insurance profits. Yet we can't even get any kind of expansion
or affordable rates for wind coverage.
I am not blaming all insurance companies, but there is something to
be said for in the same year that there is the largest catastrophe in
the country, the companies that are covering the catastrophe had record
profits. I don't understand it and most of my constituents don't
understand that. So there is a plea from constituents everywhere to try
to do something about affordable insurance coverage.
Here is another e-mail from Kim in New Orleans:
Dear Mary, I'm not really sure what category this falls
under. I have owned a home in New Orleans for the past three
years. My insurance has gone from $995 a year to $5,133. I am
a single mother with one child. I cannot afford an insurance
premium of $995 to $5,135. What are we going to do?
Another from Mandeville:
My homeowners insurance has just increased $1,000. Since my
insurance company decided not to cover hail and wind anymore,
I will have to buy insurance from the ``Fair'' plan--
Which is our State's pool--
at a higher premium.
In addition to keeping the premium low enough to afford my
mortgage, I cannot cover everything inside of my home.
Now, again--I know the Presiding Officer has been down to Louisiana--
I am not talking about second homes on beaches. I am not talking about
homeowners who live on the water. I am talking about people who live in
the city, a port city, similar to Baltimore. We have New Orleans, a
great port city, that services not just the millions of people who live
in and around the metropolitan area and all up and down the lower
Mississippi River, but a port city that benefits the whole entire
Nation. So basically, with the bill that the committee has brought to
the floor, which I have objected to, their basic philosophy is
everybody who lives in and around a port that generates profit can pay
high rates, so everybody else can pay extra low rates, and the people
in the port cities can basically absorb the difference.
I understand about risk. If you are living in Florida on a beach in a
condo as a second home or maybe even your first home or you are living
on a beach in Alabama or in Mississippi, maybe you should pay a little
bit extra. But the people whom I am representing--we only have two
beaches. There are only two, 3 miles long, and you can't even get to
them basically without a boat. I have people in Mandeville, in St.
Tammany Parish, in Tangipahoa Parish and in the city of New Orleans 5
minutes from the Superdome who are seeing their rates quadruple. These
people are not living in a vacation area.
This committee is having a hard time understanding this issue. That
is why the Members, both Republicans and Democrats, have brought this
bill, to try to say what are we going to do to give affordable wind
coverage to people who live in and around these port communities.
This is from Robert in Slidell:
This will be an increase from $500 to $3,887 or an increase
of 775 percent. My dwelling coverage increased by more than
21 percent in June of 2007 and another 21 percent in June of
2008. This is in addition to my deductible increasing 775
percent.
He says:
I am confused.
Well, let me tell Robert that I am confused too, because this is
supposed to be a reform bill coming through to give people better
insurance and better coverage and it leaves wind out of it completely.
That is why we put on a wind amendment. I ask my colleagues to please
support the amendment that will allow us to include wind.
This is a final e-mail from Theresa in LaPlace, LA, again, 75 miles
from a beach:
I just received notice from my mortgage company that due to
the skyrocketing insurance premiums for my landlord policy,
the house note is increasing from $312 per month to $725 per
month. The monthly insurance premium is more than the monthly
house note. If something is not done, I am going to be forced
to sell my house.
Now, I have been to this floor many times before. I am very sensitive
to the foreclosure problems going on around this country. I know the
counties that are experiencing very high foreclosure rates. Some of
them are because lenders speculated. Some of it is because a few home
builders got greedy--not all, because most home builders are doing the
right thing, but they maybe speculated in a market.
Mr. President, I ask unanimous consent for 3 more minutes.
Mr. DODD. Can I interrupt you for a minute?
Ms. LANDRIEU. Yes.
The ACTING PRESIDENT pro tempore. Does the Senator from Louisiana
yield at this time?
Ms. LANDRIEU: Yes, for 1 minute.
The ACTING PRESIDENT pro tempore. The Senator from Connecticut is
recognized.
Mr. DODD. Mr. President, I ask unanimous consent that at 3:15 p.m.,
the Senate proceed to a vote in relation to the following amendments:
Wicker amendment No. 4719, the Vitter amendment No. 4722, and the
Vitter amendment No. 4723.
Further, I ask that there be 2 minutes of debate equally divided
between the two votes and that there be no second-degree amendments in
order prior to the vote. Finally, I ask unanimous consent that the
first vote be a 15-minute rollcall vote and the remaining votes be 10-
minute votes.
Ms. LANDRIEU. I object.
The ACTING PRESIDENT pro tempore. Objection is heard.
The Senator from Louisiana is recognized.
Ms. LANDRIEU. Thank you, Mr. President.
As I was saying, the letter goes on to say:
I have paid enough in insurance premiums to rebuild my
house out-of-pocket had it been completely destroyed.
But again, when we try to get decent, affordable coverage for people,
both for flood and wind, we are having a difficult time on this floor
and in this Congress.
So I hope as we continue to discuss through the afternoon the
importance of this that people will understand and recognize that this
amendment--there are several but this amendment regarding wind is very
important so we can continue our recovery in the gulf coast.
As I was saying before I was asked to pause for a minute, I recognize
the foreclosure difficulties throughout the country, and I have said I
am sensitive to the concerns of those communities. But I want to please
remind everyone again: The people of the gulf coast do not have a
foreclosure problem brought on by themselves. In fact, our foreclosure
rate is lower, much lower than any--much lower than the national
averages. But our people are getting their homes foreclosed and taken
away from them because Federal levees that should have held failed and
an insurance system we should have regulated has gone in large measure
unregulated, and programs such as this that are supposed to be helping
people afford insurance are not doing so. It is not right.
Our people have nowhere else to go other than to Congress to help
them get a better system in place. That is why I and many of my
colleagues have held this bill up for 2 years in committee. We may or
may not get to vote on it this afternoon, depending upon how many e-
mails I decide to read into the Record.
I wish to talk about an amendment I am going to offer and send up,
amendment No. 4706, as modified.
The ACTING PRESIDENT pro tempore. Is the Senator requesting to set
aside the pending amendment?
[[Page S3859]]
Ms. LANDRIEU. Yes, and I will offer another one.
The ACTING PRESIDENT pro tempore. Is there objection?
Mr. DODD. Objection.
The ACTING PRESIDENT pro tempore. Objection is heard.
Ms. LANDRIEU. Mr. President, I suggest the absence of a quorum.
The ACTING PRESIDENT pro tempore. The clerk will call the roll.
The bill clerk proceeded to call the roll.
Mr. NELSON of Florida. Mr. President, I ask unanimous consent that
the order for the quorum call be rescinded.
Ms. LANDRIEU. I object.
The ACTING PRESIDENT pro tempore. Objection is heard. The clerk will
continue with the call of the roll.
The bill clerk continued the call of the roll.
Mr. NELSON of Florida. Madam President, I ask unanimous consent the
order for the quorum call be rescinded.
The PRESIDING OFFICER (Mrs. McCaskill). Is there objection? Without
objection, it is so ordered.
Amendment No. 4719
Mr. NELSON of Florida. Madam President, I want to speak to the Wicker
amendment. This amendment, which will add wind coverage to the flood
insurance policies, is a major policy change with regard to the Federal
Government. Wind coverage has always been handled by the private
insurance sector and/or the quasi-government sector, covering wind
through a catastrophic insurance fund as we have in Florida, or a
quasi-insurance company such as we have in Florida.
This is a major policy shift. The bottom line is, I support this
amendment because it is an important symbolic amendment. Our people are
hurting and they need some help with regard to the potential
catastrophic wiping out of not only their lives but their property as
well.
What has happened in this day and age of the huge natural catastrophe
first came to the fore in the example in 1992 by the monster hurricane,
Hurricane Andrew. Andrew--now they think it was a category 5, which is
winds upwards of 150, 155 miles an hour--had insurance losses in 1992
of $16 billion. That was by far the largest insurance loss through a
natural catastrophe in the history of the United States. In today's
dollars that would be somewhere around a $22 or $23 billion insurance
loss.
What really shook up the insurance marketplace at that time was, had
Andrew turned 1 degree to the north and drawn a bead on the city of
Miami or Fort Lauderdale instead of the city of Homestead--which is way
to the south in a relatively undeveloped part of Miami, Dade County--
had it turned 1 degree to the north and hit that other area, it would
have been a $50-billion-loss storm, and that would have taken down
every major insurance company in the country that was doing business in
the path of that storm. That is what shook up the markets.
Then we had a few others--not anything upwards of category 4 or 5--in
the latter part of the decade in the 1990s. Then along comes 2004 and
we get four hurricanes in Florida within a 6-week period. There was
virtually no county in the State of Florida that did not have hurricane
damage. The only good news coming out of that year was none of them
were above category 3--in the range of 120 to 125 miles per hour. Of
course, the damage goes up exponentially as winds increase in miles per
hour above 110, 115. When you get on up into the range 130, 140, 150,
the damage goes up exponentially.
The insurance marketplace was just roiled, and insurance companies
could not find what is known as catastrophic coverage, or in this case
insuring against catastrophe to insure the insurance company against
that catastrophic loss.
Of course, right on the heels of 2004, then we had the awful mess
with Hurricane Katrina. That is an interesting storm because it was a
typical category 3 storm that can cause the amount of damage that you
would expect a storm to do hitting the Mississippi coast with category
3 winds. What people did not expect was, on the back side of that
hurricane--remember the hurricane is counterclockwise in the northern
hemisphere--the back side of those winds coming across Lake
Pontchartrain, as the eye of the hurricane moved over the coast to the
east in Mississippi, those winds brought the rain, and that started
filling up the canals in New Orleans. The pumps did not work or were
inadequate to pump out the canals. The water rose, the water pressure
rose, it breached the dikes, and it filled up the bowl of New Orleans
so you get so much more water damage, flood damage, with a lot of the
people in New Orleans not having flood insurance when, in fact, they
were below sea level in the location of their homes.
What the amendment of Senator Wicker, and a companion side-by-side of
Senator Schumer, is doing is adding wind to the flood insurance
policies. Symbolically it is important because our people are hurting.
They cannot find available hurricane wind insurance, and they can't
find it affordable. That is why I am going to support it.
Now, let me tell you what is wrong with it. Should this legislation
pass, it would have to be fixed down the line. It has two major flaws.
The first is that it sets up a standard that says the rates for this
wind insurance have to be actuarially sound.
That sounds real good. Rates ought to be actuarially sound. But the
problem is, there is no check and balance on the person or persons who
are going to be doing that as there is in the regulation of insurance
by the insurance commissioners of the 50 States. Therefore, what I fear
with legislation like this is that some secretive group or Star Chamber
outside the normal government in the sunshine, making mathematical
calculations that are actuarially sound, would suddenly enact rates
that would go through the roof, and the very purpose of what we are
trying to do--to have available and affordable insurance for people in
the face of hurricanes--would be for naught. It would have exactly the
opposite result with no accountability and no insurance regulator that
would crack the whip on them.
The other flaw in the requirement of actuarially sound rates is, if a
loss occurs and you are covering both wind and flood, the wind losses
may well absorb all of the available reserves in the Federal flood
insurance program and there is no money left in order to pay the flood
insurance claims.
What it does is it translates into higher premiums and a potential
loss of flood subsidies. The requirement in the bill that the
multiperil rate be actuarial could cause the current flood
policyholders, who are eligible to receive subsidized rates through the
standard National Flood Insurance Program, through their flood policy,
to lose the subsidy that is already there in the National Flood
Insurance Program. If this policy in this amendment were to be enacted,
it could certainly lead some States with existing wind coverage
options--such as my State of Florida--to discontinue that coverage,
which would further provoke policyholders to have to purchase the
expensive but actuarially sound National Flood Insurance Program
multiperil coverage.
This would essentially shift the liability from the State to the
Federal Government while at the same time actually limiting consumers'
access to affordable wind coverage--exactly the opposite of what is
intended by the offeror of the amendment. Nevertheless, it is a logical
conclusion unless you clean up this language.
Now, the next concern I have with it is both the Wicker and the
Schumer amendments could destroy the financial integrity of the
National Flood Insurance Fund. In both these amendments being offered,
the multiperil policy would be offered as an optional coverage under
the National Flood Insurance Program.
Because the proposals do not expressly separate the premium from the
standard flood program, there is a potential for the entire flood fund
to be drained without paying the claims for the wind damage. This would
put the flood insurance program right back in the situation it finds
itself now: relying on borrowing from the U.S. Treasury to pay the
claims to flood policyholders.
So this is a complex problem. But as we try to solve it, we must
ensure that we do not inadvertently undermine the viability of the
National Flood Insurance Program and fail to fulfill the promise we
made to 5.5 million current policyholders, and, oh, by the way, 40
percent of all those flood insurance policyholders are in my State of
Florida--40 percent of them.
[[Page S3860]]
All of us along the gulf have struggled with availability and
affordability of homeowners insurance. But, Members of the Senate, this
is not only a Florida problem and it is not only a gulf coast problem;
insurers are cancelling coverages from Texas to Massachusetts, and
those who say the Federal Government does not belong in the catastrophe
insurance market are mistaken.
Because when the big one comes, and mark my word, the big one is
coming, the big one is a category 5 storm that hits at a high-density
urban concentration population on the coast, be that anyplace on the
gulf or Atlantic seaboard, when that big one comes, the availability of
private markets to handle that natural disaster is not going to be able
to be there. And the Federal Government keeps denying the fact that we
ought to face this problem.
The Senators in the Midwest say: Well, Hurricanes are Florida's
problem or earthquakes are California's problem. What they do not
recognize is, no, it is everyone's problem. Because what typically
happens when a natural disaster of this magnitude hits, it is the very
same Federal Government that picks up the tab.
I remember my first year as a young Congressman back in 1979. I had
to vote for what were Federal disaster funds and the cleanup of a
natural catastrophe that was the blowing of Mount St. Helens, which
spewed ash all over several cities.
I thought to myself at the time, when others were trying to kill that
disaster assistance saying: Well, that is not our problem; that is the
problem of the State of Washington. No, it is all of our problem. The
Federal Government does have the disaster funds to come to that aid.
If you take a State such as Louisiana in the aftermath of Hurricane
Katrina, that full hurricane now is something like a $200 billion
economic loss. The Federal Government has picked up at least half of
that, $100 billion. And we say we do not think there is a Federal
responsibility to try to plan ahead for that catastrophe by providing
some kind of catastrophe insurance if the States cannot provide it?
This whole instability has repeatedly forced the Federal Government
to absorb billions of dollars of uninsured losses, including the most
recent ones of Hurricanes Katrina, Rita, and Wilma, just those
hurricanes alone.
So as we go on down the line, we have a must-pass bill. We have to
reauthorize this Federal Flood Insurance Program. I wish to thank the
chairman and the ranking member in that what they have done, if we do
not pass anything else--and I have a couple amendments on trying to
arrange for a loan program from the Federal Government. It has already
passed the House--a loan program at fair market rates; in case the
State catastrophe fund, which is a reinsurance fund against
catastrophes, in case that goes belly up, that there will be a loan
program from the Federal Government at market interest rates.
But if we fail on all these, at least in the bill, thanks to the
chairman and to the ranking member, is the setting up of a commission
that would have to report back, a commission composed--and the ranking
member is coming on the floor. I have been singing his praises, along
with the chairman's, of putting in the bill a commission made up of
experts, broadly representative of the communities that are affected,
to recognize we have a problem on covering catastrophes in the
insurance business.
That commission would have a certain day on which to report. What
that will signal, if that is the only thing we can get in here, I hope
we can get this loan program that I talked about for a State insurance
catastrophe fund. If it goes drain dry, that Federal Government would
lend money to it at market rates so that at the State level, they can
try to take care of that catastrophe.
But if we cannot get that, there is a question of germaneness;
therefore, I would have to get a 60-vote threshold to have the
amendment considered. But if we cannot do that, at least we have in the
bill, in a must-pass bill, the Federal flood insurance bill, for the
first time, the Federal Government will have on the table the
recognition that we have to understand and do something about the
response from the Federal Government when the big one comes. And it is
coming.
Madam President, I made a commitment to the Senator from Louisiana
that when I yield the floor I will ask for the quorum call. So I would
merely take my instructions from the Senator from Louisiana if she
wanted me to entertain a question from any Senators standing, without
losing my rights to the floor.
The Senator from Louisiana has so indicated. So I would certainly
yield for the purpose of a question without losing my right to the
floor to the distinguished chairman.
The PRESIDING OFFICER. The Senator from Connecticut.
Mr. DODD. Madam President, I do not have a question for my colleague.
I wish to thank him. For those who want to understand this, I think he
is rather eloquent and knowledgeable. As a former insurance
commissioner of the State of Florida, he has more than a passing
familiarity with these issues. He has described it, made the case more
eloquently than I did about the difficulty we have with the wind
amendment; not on the substance of whether we ought to do something
about it but whether we can and what the effects of this amendment
could be.
I commend him as someone who understands that, for laying it out and
the problems inherent with it. As he and my colleagues know, the
ability to then alter that kind of amendment then becomes almost
impossible in this process.
As I said earlier in the presence of my friend from Mississippi, we,
Senator Shelby and I, are deeply involved in the foreclosure issues, as
we have been over the last number of months. As our colleagues are
aware, this subject matter of catastrophic insurance would have been
the major subject matter of the Banking Committee. I regret we were
caught up in the foreclosure situation, for obvious reasons.
But that does not minimize at all the situation my colleague from
Florida faces--or that other States do. It is not only a Florida issue,
this is an issue that affects all of us in this country, and we need to
have a far better plan in place on how we deal with it.
I mentioned earlier: Pick up this morning's newspaper. You read the
headline in the local newspaper and every newspaper, I presume, across
not only this country but around the world on what happened in Myanmar;
120 mile-an-hour winds, devastation, loss of life. These problems are
occurring around the globe. We would be naive at best to think it
cannot happen here. In fact, it has happened and could happen even
worse in this country. So we need to get to those points. I thank him
very much for his eloquence and his understanding of these issues.
Mr. NELSON of Florida. Madam President, I would yield for the
purposes of a question, without losing my rights to the floor, to the
Senator from Mississippi.
The PRESIDING OFFICER. The Senator from Mississippi.
Mr. WICKER. I thank my friend, the Senator from Florida, for
yielding.
I, too, wish to commend him for his statement about the complexity of
this issue. I appreciate the reservations he has expressed, while at
the same time expressing support for the Wicker amendment today. I
would hope the Senator would agree that support for this amendment
today, though it might not be a perfect amendment, would send the
signal he suggested--that there needs to be a Federal response to this
issue.
We know this bill will go to conference. There will be additional
work on it. But I would like to send a signal to the executive branch,
to the insurance industry, to the homebuilders, to the realtors, we
need to get busy on this issue.
Because, as the Senator said, the insurance for wind coverage is not
there anymore in the private market at an affordable rate. And the wind
pools are not affordable, because the pool is so small that we cannot
spread the risk, whether it is Massachusetts, Connecticut, New York,
Maryland, North Carolina, Virginia, South Carolina, Florida, Texas,
Louisiana, Alabama, or my home State of Mississippi.
This is a problem for people when the next big one comes, as my
friend has said. We do not know where or when it will come, but what we
do know for a certainty is it will indeed come.
So I appreciate the thoughtfulness of the Senator's remarks. I
appreciate his
[[Page S3861]]
bottom indication that he supports the amendment as a vehicle to move
this issue forward.
I yield the floor.
Mr. NELSON of Florida. Madam President, I indicated in my opening
remarks that not only do I support the Wicker amendment but the similar
Schumer amendment. It is important, symbolically, to get something
done.
Now, the Senator from Mississippi has suggested another idea, that at
the end of the day, when it is very difficult to enact a national
catastrophic fund, what the Federal Government can do is encourage, by
giving incentives to the States, enactment of a regional catastrophic
fund.
Florida, of course, had to take the lead because we were the ones who
got devastated in 1992 by Hurricane Andrew. Florida set up this fund
called the Florida Hurricane Catastrophe Fund. It is a reinsurance fund
to insure against catastrophes.
But that cost is spread over 18 million Floridians. Does it not make
a lot more sense to spread that hurricane catastrophic risk over 50
million Americans, by getting all the Gulf States and the Atlantic
coast States to combine in a regional catastrophic fund, since at the
end of the day, it is going to be very hard to get a national
catastrophic fund?
So as we get on down the line, with the commission, if that is the
only thing that survives this legislative process, then certainly that
should be an item on the table that the commission would consider when
they would report back to the Congress.
I am hopeful for the first time now, we have something on the floor
that is going to address this, and I am grateful I can speak out on
behalf of 18 million Floridians who are hurting because what they want
is available and affordable homeowners insurance.
Right now many times it is not available, and they have to go to a
government insurance company such as Citizens or it is unaffordable.
Remember, if you can't have homeowners insurance, you can't build
homes, make loans on homes, or sell homes. The necessary component for
all three of those industries--real estate, construction, and banking--
is an available and affordable homeowners insurance policy. We have
reached the point that it is either not available or it is not
affordable. Finally, we are beginning to address it, right here. I am
grateful for that.
I yield the floor and suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
Mr. GREGG. I ask unanimous consent that the order for the quorum call
be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. GREGG. I ask unanimous consent to speak as in morning business
for 7 minutes.
The PRESIDING OFFICER. Without objection, it is so ordered.
____________________