▶ 0:18:50Chair Scott: Good morning. This committee will come to order. I want to begin by thanking our witnesses for being here today and taking your valuable time to provide insight. Your participation is critical to helping us understand the challenges and opportunities facing our insurance markets, and the role policies must play in protecting american communities.
▶ 0:19:15Chair Scott: Over the past year, americans from the carolinas to california endured catastrophic natural disasters, from hurricanes on our east coast as well as fires in south and north carolina recently, to the devastating wildfires across los angeles county.
▶ 0:19:35Chair Scott: These once again made clear the enormous human and economic toll natural disasters because, in the urgent need for better predisaster planning and a more resilient insurance market. For families across the country, insurance markets and insurance is not just a financial product. It is peace of mind. It is knowing that if the unthinkable happens, they will have the support they need to rebuild their lives and to recuperate.
▶ 0:20:05Chair Scott: But today, more americans are finding that that coverage is either unaffordable, unavailable, or both. This is a problem that affects every american. As someone who spent most of my career outside of politics in the insurance industry, I know firsthand how critical a well-functioning insurance market is to our economy.
▶ 0:20:29Chair Scott: I also understand the delicate balance between offering affordable products and properly pricing the risk. Insurance markets must be allowed to function properly. They should be based on sound actuarial and underwriting principles, not mandates that ultimately hurt consumers. Unfortunately, into many states, government regulations have made it nearly impossible for insurers to price policies based on actual risk.
▶ 0:21:00Chair Scott: In california, for years, insurance regulations prohibited the use of catastrophe models, and restricted insurers from including the cost of reinsurance in their rates. From 2012 to 2022, every dollar collected in premiums, some insurers in california spent $1.13. That is a problem. The math just does not work.
▶ 0:21:32Chair Scott: That is not sustainable. It is no wonder that insurers have chosen to nonrenewal policies or exit the market in california altogether, and this was before the california wildfires. At the same time, poor land management practices, failure to implement basic mitigation strategies, and misguided environmental policies have made natural disasters even more destructive.
▶ 0:22:04Chair Scott: We must be honest about the multiple factors driving the rise in catastrophic losses, from local mitigation policy failures to market distortions created by regulations. That is why I reintroduced the repeatedly flooded communities preparations act, along with senator shots. This bill encourages local, state, and federal cooperation to establish and implement mitigation strategies and plans. Mitigation saves lives. It preserves property.
▶ 0:22:36Chair Scott: And ultimately, it leads to more stable markets and healthier communities. I believe that a serious and thoughtful approach to mitigation, combined with insurance market reforms that allow carriers to tie real risks to rates, and help ensure that coverage remains affordable for americans across this remarkable country.
▶ 0:23:03Chair Scott: So today, I look forward to hearing from our distinguished panel of witnesses about what is working, what is not working, and how we can move forward with effective solutions, and working together, I am confident that we can help strengthen our communities, our markets, and the resilience of our nation. Thank you. Ranking member warren?
▶ 0:23:28Sen. Warren: Thank you, Mr. chairman, and thank you to our witnesses for being with us today. I appreciate your holding this hearing today. It is needed. The rising cost of home insurance is serious, and it is a growing problem, and one that we have got to work together on in a bipartisan way. Housing is already too expensive for many americans. Even if families can afford to buy a home, they then get stuck with whopping insurance bills.
▶ 0:23:59Sen. Warren: Mr. chairman, I know you have seen this in south carolina. I have seen it in my home state of massachusetts. Senator kennedy I know has seen this in louisiana. Our home insurance rates in massachusetts went up 16% just last year alone. Insurance costs are rising all over the country. In california, after the devastating wildfires in los angeles. In florida and in the southeast after devastating hurricanes, floods, and other natural disasters.
▶ 0:24:29Sen. Warren: But even in areas not hit by natural disasters, rates are climbing fast. In each of the last two years, average home insurance rates across the nation have increased by double digits -- 23% overall. This is a devastating burden that can cost thousands of dollars on top of all the other costs of homeownership. High prices are not the only problem.
▶ 0:24:58Sen. Warren: In many communities, property insurance is simply impossible to get at any price. Just two months ago, federal board reserve chair powell told this committee that soon there will be entire regions of the country where homeowners will not be able to get a mortgage because insurance companies won't provide coverage and lenders won't lend without the security of insurance. Even families with insurance are struggling.
▶ 0:25:27Sen. Warren: We have all heard the horror stories of families that have coverage, and even after they have faithfully paid their plans for years, when disaster strikes, they must battle with insurance companies that delay and deny claims, ripped them off, and leave them on the hook for expensive repairs. The insurance system is breaking all across the country.
▶ 0:25:51Sen. Warren: The implications are huge for family budgets, for real estate markets, and for insurers, banks, and the entire financial system, and our economy. Know that members of this committee on both sides of the aisle share ideas and talk about solutions, and I am happy to be part of those discussions. Unfortunately, Mr. chairman, president trump is making the property insurance crisis worse and driving up costs for families across the country.
▶ 0:26:22Sen. Warren: Let's start with his chaotic and damaging tariffs. These tariffs will make just about everything needed to rebuild and repair houses more expensive. Aluminum, hvac systems, appliances, gypsum, and on and on. The national association of homebuilders estimates that trump's tariffs will raise the cost of building a new midsized home by $10,900.
▶ 0:26:55Sen. Warren: And according to the insurance industry, trump's tariffs will cost the average home owner over $100 a year in extra insurance costs. The second problem is that president trump to completely eliminate the federal emergency management agency, or fema, as we all know it.
▶ 0:27:15Sen. Warren: He is getting a head start by denying disaster aid all over this country, leaving families with it or no federal help following dies -- following disasters in arkansas, west virginia, washington, and north carolina. Recently, hud secretary turner changed the eligibility requirements for community block development grant disaster relief funds, essentially delaying aid for disaster-stricken communities all across our country.
▶ 0:27:47Sen. Warren: Yesterday, senator murray and I called up on the hud inspector general to investigate this. Additionally, the administration also recently announced it is ending fema's building resilient infrastructure and communities or bric program.
▶ 0:28:06Sen. Warren: This provides hazard mitigation funding to communities and families across the country to help cover the costs of making their roads and bridges and homes more resilient against natural disasters. My state of massachusetts was relying on $90 million from the bric program to make our community safer. President trump has his way, more of this assistance will disappear.
▶ 0:28:33Sen. Warren: Fema also administers the national flood insurance program. Indeed, the whole job of fema is to help americans prepare for and respond to disasters. If president trump succeeds in killing this agency, americans will be left with an even bigger flood and property insurance burden, with no relief in sight.
▶ 0:28:56Sen. Warren: If we are going to make good on our promise to make housing more affordable, banking members on the other side of the aisle need to push back forcefully against the costly and dangerous policies. I'm ready to work with you to do that and to address the bigger changes that we need to make to keep property insurance costs down and to make housing more readily affordable. Thank you, Mr. chairman.
▶ 0:29:25Chair Scott: We will now move to our witnesses. The first witness we will hear from is Mr. robert gordon, senior vice president at the american property casually -- casualty insurance association.
▶ 0:29:36Mr. Gordon: Members of the committee, thank you for the opportunity to testify today. I am with the american property insurance association, the premier property and casually -- casualty industry, represent and to thirds of the industry. I want to start by commending this committee for your bipartisan leadership on insurance issues. We also thank, Mr.
▶ 0:30:01Mr. Gordon: Chairman, for your leadership on the repeatedly flooded communities act, as well as senator britt for her work on the insurance staff protection act. Those are important bills that we support. Property-casualty insurance markets in the united states have faced significant stresses over the last several years. They are starting now to re-stabilize.
▶ 0:30:25Mr. Gordon: In 2022, insurance capital contracted by over $73 billion, and ams downgraded from stable to negative the profitability outlook for the entire personal, auto, and property insurance sector, the first time ever. In 2023, insurers 10 year commutative losses peaked with 59 billion dollars.
▶ 0:30:48Mr. Gordon: In 2024, personal auto insurance was upgraded back to stable, business liability insurance and homeowners insurance have a negative profitability outlook. Homeowners and insurance -- and insurers in 2023 paid out $1.11 in claims and expenses for every dollar collected. Homeowner insurance rates increased because those losses increased even more.
▶ 0:31:14Mr. Gordon: The primary cost factors were record inflation, even higher inflation for building materials, and more expensive buildings being built in disaster-prone areas. Natural catastrophe losses doubled in the last decade, but the cost to replace properties in the united states more than doubled. Add to that climate change, legal system abuse, regulatory costs. Together, those have escalated more than either the cpi or homeowners insurance rates.
▶ 0:31:41Mr. Gordon: All homeowners insurance underwriting overall has been profitable, there have been enormous differences among the states. California is facing the worst property insurance crisis. The majority of the new homes are being built in areas with significant wildfire risks, and they are having challenges obtaining insurance. That is largely because california requires prior rate approval. It is the only state that takes roughly a year to approve insurance rate increases. It has some of the highest, worst costs in the nation.
▶ 0:32:12Mr. Gordon: And over the last decade, homeowner insurers in california had a 15% net underwriting loss and a negative return on net worth. As the chairman said, that math does not work. Telephone's insurance commissioner warned in 2023 that insurance companies will not write insurance, especially in high-risk areas, unless they are able to ensure they have the capital in reserve to fully meet all the claims submitted by insurers, cover their expenses, and earn a fair return. Unfortunately, that has not yet manifested.
▶ 0:32:44Mr. Gordon: Both the insurance commissioner and the governor have been working hard on regulatory reforms, and it should not be a surprise that the majority of the top homeowners insurers have pulled back from the market until those materialize. To fill coverage gaps, california has expanded their residual market. That has nearly tripled in size since the end of the 2019 wildfire season. Insurers and agents have warned that that residual market fair plan is a ticking time bomb.
▶ 0:33:14Mr. Gordon: That time bomb exploded this january. The 2025 california wildfires resulted in enormous devastation. They could exceed a record $40 million of insured losses. The fair plan residual markets loss exceeded its available capital and has assessed private insurers a billion dollars for support, with more potentially to come. Despite its quasi-insolvency, the fair plan is actually now being expanded for high-end commercial property.
▶ 0:33:44Mr. Gordon: Unfortunately, that is going to further mask environmental risk signals. Apcia is working with california leaders on regulatory solutions, including suggestions to depopulate the fair plan, allow insurers to charge timely and actuarial rates. We are also emphasizing the need in california and nationwide for more mitigation, resiliency, and infrastructure. Those are hopefully bipartisan goals.
▶ 0:34:11Mr. Gordon: We are supporting state and federal adoption of funding for safety standards including wildfire prepared standards and fortified building standards. Those help save lives and reduce disaster costs. We do also rely on the federal government's noaa and nasa weather satellites. Those provide data unities used to predict and prepare for storms. Fema plays an essential role in disaster mitigation, eventing losses before they occur.
▶ 0:34:40Mr. Gordon: Usda supports community resilience and forest management. Those programs are essential for effective mitigation and could not be easily replicated by the states or private industry. Thank you, Mr. chairman, ranking member.
▶ 0:34:55Chair Scott: Thank you for your testimony. Mr. epstein will be next, the president and founder for the center for industrial progress.
▶ 0:35:04Mr. Epstein: Thank you for having me. I want to talk today about why we need a free market in disaster insurance, and I am going to focus on the case of the california wildfires. January's devastating wildfires were the biggest that we got. I am a californian. Californians were significantly more in danger from out-of-control wildfires.
▶ 0:35:28Mr. Epstein: What I saw differently in this case is californians are starting to understand the root cause here, which is a failure to practice climate resilience. As a longtime resident of southern california, I have long been frustrated that our leading politicians blame problems on rising co2 levels, which is a factor and a minor factor. They have relatively no ability to affect near term. Oleg knowing the major factor that can directly effect, which is resiliency.
▶ 0:35:56Mr. Epstein: If you look at the last 100 years of data, we see that increasing resilience can more than offset any new dangers from rising co2 levels. The death rate from climate related disasters has fallen 98% over the last century, and damages adjusted for gdp growth have not increased. Go free to ask about the noaa billion dollar disastrous thing, which violates scientific integrity and is inaccurate. Climate change, we have very little near-term control over.
▶ 0:36:26Mr. Epstein: We can radically reduce fire danger through resilience, but california has done none of these. One is we can crackdown on human ignition. Almost all wildfires in southern california begin with ignition from arson, accidents, especially from the homeless, and powerline fires. The first two are easy to crackdown on, and yet we have failed spectacularly to do so. Number two is we can reduce fuel load. Whether you are talking about dense forest or the chappell roan agitation in the l.a.
▶ 0:36:52Mr. Epstein: Area, reducing the flammable material with brush clearing, fire breaks, and logging -- that can dramatically limit fires. Number three is we have failed to reduce the proximity of homes to fuel. Once a fire starts to spread, a huge factor in how destructive it is is how much human infrastructure is near flammable areas or inflammable areas.
▶ 0:37:22Mr. Epstein: Number four is fire resistance, increasing fire resistance. Once a fire reaches urban areas, a major factor is how fire resistant the info structure is. We have in many areas not significantly increased fire resistance to handle the danger caused by other bad policies. Finally, the fifth thing we can do that we are not doing properly is build robust response capabilities. The last line of defense against a fire is effective firefighting that can respond quickly and at a large-scale.
▶ 0:37:52Mr. Epstein: Before the recent fires, the l.a. Fire department had a stagnant budget and insufficient water infrastructure. Why is california so bad at wildfire resilience? One reason is related to what senator warren brought up. Green policies are against human impact. They are against building in general. In the case of forests, they impede us from managing our naturally fire prone forests. We are refusing for green dogma reasons.
▶ 0:38:22Mr. Epstein: The thing most relevant to today's hearing is a lack of free-market fire insurance. In a free market, fire insurance premiums would have risen dramatically in response to, in california, our failure to practice wildfire resilience. That is really important. It sends a crucial message, but we shut the messenger in california.
▶ 0:38:43Mr. Epstein: Any californians have experienced a situation -- I wife and I did early last year -- when in preparation for the birth of our first child, we bought our first home in southern california, and no private company would sell his fire insurance at any price. Climate catastrophes would say it is because there is so much climate risk that no one can ensure it, that this is absurd. Insurers routinely insure for far riskier things relative to the principle at stake.
▶ 0:39:11Mr. Epstein: For example, at the extreme, it might be 1%. But other forms of insurance often exceed 5%. Athlete disability insurance, occupational insurance -- even applecare often exceeds 5%. People insure things with much higher risk than wildfires.
▶ 0:39:30Mr. Epstein: The problem is california is not letting it function, because as we have failed to practice resilience, we needed insurers to raise prices, to send signals that we needed to take these resilience measures, that again we shot the messenger. We have proposition 103 from 1998 that requires insurance companies to raise prior approval. We have heard of other failures of the california insurance market. Basically, it is very simple.
▶ 0:39:57Mr. Epstein: You need to allow total freedom of insurance markets to act in response to risk, and that sends a message to people who are doing irresponsible things at the state level, local level, individual level. If you do that, you can have a robust response. I have been trying to convince my government in california that they need to radically reduce wildfire risk through resilience and through proper free-market insurance. Whether they listen or not, I hope the senate can learn from california' is failures.
▶ 0:40:26Chair Scott: Thank you, Mr. michael newman, general counsel for the insurance institute for business and home safety.
▶ 0:40:35Mr. Newman: Members of the committee, thank you for the opportunity to speak today. I am the general counselor of the insurance institute for business and home safety, enabled by the property insurance industry. We are a building science research institute that studies how to make homes, businesses, and our communities safer from severe weather. In today's hearing, you have already heard the words mitigation, resilience, catastrophes, used quite a bit.
▶ 0:41:07Mr. Newman: I am probably going to use them myself. What I think we would all do better to use more relatable words that the average american homeowner can understand -- words like survivable and insurable. Survivable means homes and communities that can withstand severe weather we know they will face, so that families can get on with their lives. Insurable means simply properties that carriers want to ensure.
▶ 0:41:35Mr. Newman: We are not talking about a guarantee here, but what makes a home a more attractive risk. Whatever words we decide to use, our primary goal should be to make american homes and communities more survivable and insurable. Today, that goal is more urgent than ever. Recent years have seen a market increase in the frequency, severity, and impact of severe weather.
▶ 0:42:00Mr. Newman: The los angeles county fires were a grim reminder of what can occur when wind, fire, and our neighborhoods come together without the right mitigation actions in place. Decades of research in the lab and the field have taught us how to build and retrofit our homes and communities to better withstand these catastrophes.
▶ 0:42:19Mr. Newman: Ibhs programs like fortified and wildfire prepared enhance the survivability and insurability of homes to storms and wildfires, and yet far more action and investment by individuals, why the public sector, are necessary to make progress at the scale this moment demands. Change is possible. Today, I want to share two stories with you that demonstrate the possibilities for progress.
▶ 0:42:47Mr. Newman: In california, a key sign of progress comes from the private sector. Last month, ihs and kb homes celebrated the opening of dixon trail, a new community outside of san diego. Each of the 64 homes in this neighborhood will be built to our wildfire preparedness standard, with separation of structures and the elimination of connected fuels throughout the neighborhood. The community will act as a passive firebreak rather than as a dense fuel source.
▶ 0:43:18Mr. Newman: This protects everyone. These actions require almost cost neutral choices in building materials. For kb homes, the homes are easier to ensure and therefore easier to sell. Congress can follow the lead by applying the following maxim -- where we build should dictate how we build. All federal investments in new construction should require that those buildings be able to withstand the severe weather we know they will face.
▶ 0:43:46Mr. Newman: When this happens, housing policy is disaster mitigation policy. Housing investments are disaster mitigation investments. Now, across the country from california, the strength in alabama homes program provides homeowners with $10,000 grants to put fortified roofs on homes. This funding comes solely from state government.
▶ 0:44:08Mr. Newman: Combined with strong building codes, insurance incentives, and engagement with roofers and builders, the program enhances survivability and insurability through retrofits. Louisiana is following a similar playbook. In alabama, 83% of the more than 50,000 designated homes in the state use no government funding. State funds are catalyzing change.
▶ 0:44:33Mr. Newman: Roofers -- [no audio] I did, thank you. Congress can reduce the tax burden state mitigation grants through the bipartisan disaster mitigation and tax priority act introduced by senator tillis and cosponsored by many on this committee. We know how to make homes and communities more survivable -- survivable and insurable.
▶ 0:45:03Mr. Newman: Transiting this knowledge into action requires policies that drive consumer behavior, incentivize resilient retrofits, and catalyze the innovation and might of the private sector. It may not always be easy, but as my wife likes to remind me, we can do hard things. We appreciate the opportunity to share ideas with you today and I look forward to your questions.
▶ 0:45:27Chair Scott: Thank you. Lastly, we will hear from the honorable jessica pyska, supervisor for the county of lake in california.
▶ 0:45:36Ms. Pyska: Thank you, members of the committee, for the opportunity to testify today. [humming sound]
▶ 0:45:52Chair Scott: Try that. Why don't you switch microphones. Just the mic. Or chairs. [laughter] yes. If you would only teach us to do that in a bipartisan fashion as well. Thank you.
▶ 0:46:14Ms. Pyska: It is an honor to be here today, speaking on behalf of my constituents, sharing the stories of rural california and our experience with wildfires, the growing insurance crisis, and how we are working to resiliently face a changing climate.
▶ 0:46:31Ms. Pyska: I also chair the agriculture, environment, and natural resources policy committee for california, served on the working group, and him on the national association of the counties reform task force, working with leaders toward federal policy solutions that strengthen local resilience. In summer 2015, lake county experienced three catastrophic wildfires.
▶ 0:47:00Ms. Pyska: Valley fire burned 76,000 acres, nearly 2000 structures, and claimed four lives. I lost my home and most of my community that day. At the time, valley was the third most destructive fire in california history. It marked the beginning of the mega fire era that now defines the west. 70% of lake county has since burned, and we have lost 5.5% of our housing stock.
▶ 0:47:28Ms. Pyska: Through the 20 climate-related declared disasters, we have forged partnerships across local governments, federal agencies, tribal nations, and nonprofits, to proactively protect our communities.
▶ 0:47:42Ms. Pyska: Federal mitigation programs including fema grants, the wildfire defense grant program, and the nrcs environmental quality incentive program have brought millions of dollars to invest in firebreak's, vegetation management, defensible space, safe evacuation routes, watershed restoration, and forest health. We built the capacity to apply for and manage grants, and work towards increasing community resilience.
▶ 0:48:11Ms. Pyska: Lake county is a small, isolated, economically challenged area with a population of 68,000 people, with almost a quarter of the population and seniors, and 17% living in poverty. Despite these demographics, we have proudly become a model for disaster mitigation and community preparedness. This fight these investments, we continue to be crushed by the insurance crisis plaguing our nation.
▶ 0:48:39Ms. Pyska: Despite these demographics, we have proudly become a model for disaster mitigation and community preparedness. Lake county has among the highest rates of insurance nonrenewal in california. Many residents on the state fair plan, the insurer of last report. Homes built to 2008 standards have a much higher survival rate. However, even homeowners of those new, resilient homes are struggling to obtain affordable insurance. Homes can mitigate future catastrophic losses.
▶ 0:49:10Ms. Pyska: In lake county, we are piloting a program with the state and fema to cluster harden our riviera community, investing $55,000 in each of 350 total homes. Science-based mitigation and defensible space can lower risks and increase the insurability not just for the renovated homes, but for the full community.
▶ 0:49:35Ms. Pyska: Other counties can follow this framework, leveraging federal and state grants to harden older housing stock. We also prepare for the hotter, drier, longer fire seasons, and wetter, more extreme winters. The national weather service modeling is relied upon to pre-position emergency resources. Forest management is a priority, and we have engaged with tribal partners to reintroduce cultural burning to the landscape. Our communities are better prepared than ever.
▶ 0:50:04Ms. Pyska: Americorps teams have helped seniors and vulnerable residents with defensible space projects and disaster preparation. Federal dollars across many programs lower risk and make our communities safer. That insurance premiums continue to climb beyond what my constituents can afford. Landlords are leaving the rental market because they cannot absorb skyrocketing insurance costs. Homes are vacant because buyers cannot obtain insurance.
▶ 0:50:32Ms. Pyska: If this trend continues, our property tax based local economy will suffer. We cannot fix this alone. Robust federal investment in disaster mitigation and community resilience is critical to protect lives and property and ensure communities like mine have a future. Thank you again for the opportunity to testify today, and I look forward to your questions.
▶ 0:50:55Chair Scott: Thank you for sharing your testimony and sorry to hear about the devastation that relates to the subject at hand today. Really appreciate you being here and spending some time and unfortunately sharing your pain as he face the challenges so many around the country face as well. Let me stick with the same topic, affordability. Over the last five years, the insurance industry has experienced a series of shocks that affected profitability.
▶ 0:51:26Chair Scott: And if you are not profitable, that dog won't hunt. Real question is, if you look at the effects of covid-19, rising input costs, and legal abuse, they have all manifested in higher costs for insurers, caregivers, and fewer options for the american consumer.
▶ 0:51:47Chair Scott: Can you provide more context for how those factors have contributed to rising costs and how those costs translate into premiums and ultimately translates into not having insurance at all?
▶ 0:52:04Mr. Gordon: Insurers need capital to provide coverage to people. We saw the capital base shrink, and it still has not recovered in real terms. The economy keeps growing, but the insurance capital has not caught up, and the expenses keep rising faster than the insurance premiums. When we break it down, for example, and look at the severe convective storms, things like tornadoes and hail, it has been about an 8% annual increase.
▶ 0:52:34Mr. Gordon: Of that, you see a couple percent from general inflation. You see additional building inflation that has been much more costly for the cement and lumber and so forth. Then, you have climate change, which has been, for severe and convective storms, adding about a percent a year. Then, you and the regulatory cost. So the losses are going up.
▶ 0:52:59Mr. Gordon: In california in particular, we are seeing more building and more expensive areas, and the capital is not there. Insurers are losing money in the california market. Talking about the profitability in california, it has been a negative return on net worth, with a significant negative underwriting loss. Do not have the capital to continue meeting growing demand. That is why a majority of the top homeowner insurers in california had to pull back from that marketplace.
▶ 0:53:29Mr. Gordon: They don't have the capital to provide for that increasing demand.
▶ 0:53:32Chair Scott: The state of california and other states do not allow rates efficiency. You have one or two choices -- losing money or losing the state.
▶ 0:53:42Mr. Gordon: An insurers have a duty to maintain solvency, and they are not going to keep putting new money into states where they are not able to increase their capital and they have not been profitable enough to attract new capital. The nei seed released a profitability report in the last couple of weeks that said the 10 year return on net worth for insurers is only about 40% with the general business index.
▶ 0:54:10Mr. Gordon: An investor choosing between insurance or a broader commercial sector is not apt to choose insurance. If insurance is not able to grow -- again, our surplus is only run about 5% since 2021, whereas the gdp has grown closer to 20% during that time, including inflation. It is just not enough to keep up. If we want to keep insurance affordable, that goes back to mitigation.
▶ 0:54:37Chair Scott: Mr. epstein, it seems to me that you agree. Climate change is happening. It is actually happening. But you have a different prescription in how you deal with this as it relates to disaster mitigation. Can you elaborate on your idea of climate adaptation in terms of disaster mitigation and management?
▶ 0:54:57Mr. Epstein: First, just thinking of the climate change or climate impact itself, you need to be open to both negative and positive impacts, and you need to be precise about the quantity. The other thing you need to be clear on, since most of the climate impacts are coming from burning fossil fuels, is the energy we get from fossil fuels that we would not otherwise have, because there is nothing as cost-effective or scalable for most people. That makes us more resilient.
▶ 0:55:26Mr. Epstein: I mentioned that disaster deaths from climate related disasters are way down, even though we have these incentive to build in dangerous places. It shows us the resilience is far outpacing any kind of new challenges. So as long as we leave markets free, development free, including insurance markets free, we are going to become more and more resilient. Would you rather experience the climate of today or 100 years ago?
▶ 0:55:55Mr. Epstein: Obviously today, because the resilience is much greater. We want to keep that trend going.
▶ 0:56:00Chair Scott: I like to stay under five minutes, but I will submit a question for the record. Where you see good models beyond what you saw earlier, and how we can replicate that or bring it to scale. Thank you. Turning to the ranking member, thank you.
▶ 0:56:23Sen. Warren: Thank you, Mr. chairman. Homeowners cannot catch a break. Someone finally saves up for a down payment to buy a home. On top of their mortgage payment, there is homeowners insurance that on average costs $200 a month. In some areas, costs or even higher. In texas, the cost is now gone up to about $400 a month. Areas of flooding like louisiana will need separate flood insurance policies, and that on average a cost about $700 a month.
▶ 0:56:53Sen. Warren: So homeowners are getting squeezed. We cannot fix our housing crisis without fixing skyrocketing insurance costs. But the trump administration's attacks on federal disaster mitigation and relief programs and threats to dismantle fema will raise insurance costs, not lower them. Trump's plans will make our housing affordability crisis worse.
▶ 0:57:17Sen. Warren: Supervisor pyska, you lead a town of almost 68,000 people in an area that has been hard hit by floods and wildfires, and I am very sorry for your personal losses here, as well as the losses of your community.
▶ 0:57:33Sen. Warren: Can you explain to this committee how trump's moves two/ federal disaster relief funding and eliminate mitigation assistance programs has affected your community and other small towns across this country?
▶ 0:57:53Ms. Pyska: Thank you for the question, senator. To consider resiliency for a community, we have to be holistic and look at the systems that incorporate everything. I mentioned all of these grant programs that we have been applying for and implementing. And we have $14 million that was awarded under cwd g, that was awarded last fall. That is currently frozen.
▶ 0:58:22Ms. Pyska: Those are mitigation programs that are identified in our community wildfire preparedness plan that we cannot move forward with right now, so we have lost valuable time appearing for this fire season.
▶ 0:58:36Sen. Warren: So the money has been granted, approved, and now it is frozen. This is the time you need to engage in this mitigation. Trump's threats are real. Just last week, fema's acting administrator wrote a memo outlining steps the president can take to significantly reduce the number of emergency declarations that a president approves, and thus the amount of federal assistance sent to cities and states hit hard by natural disasters.
▶ 0:59:06Sen. Warren: For example, deciding that extreme snowstorms can never be a disaster, or raising the amount of damage that states must suffer to even qualify for federal disaster aid, will ultimately reduce federal help available, just when communities need it most. The trump administration is breaking the federal government's commitment to help families rebuild after a disaster, and the commitment to help make their homes more resilient in preparing for the next one.
▶ 0:59:37Sen. Warren: And this will ultimately raise homeowners insurance costs. So supervisor pyska, what actions can federal policymakers take to make housing and property insurance both more affordable and more accessible for families?
▶ 0:59:53Ms. Pyska: In california, there are about 5 million homes that are built in high fire threat areas. The new fire mapping in certain areas does not even include altadena, which just burned, so it is likely more than that. Those are 5 million homes that were built before 2008 that will not be survivable during these weather events and fires.
▶ 1:00:22Ms. Pyska: So we need this continued investment from the federal government so that we can spend that one dollar ahead of time that we know saves seven down the road.
▶ 1:00:34Sen. Warren: Thank you. Let me ask one more question. What will happen to communities like yours if the federal government does not step up and use tools to support communities that have been struck by disaster, and to help lower insurance costs and ultimately housing costs for families?
▶ 1:00:54Ms. Pyska: The federal thresholds are already too difficult for counties like mind to me. We had 20 declared disasters in the last 12 years, and only a fraction were federally declared, because we are not able to meet those thresholds. As thresholds continue to change, we will be left out.
▶ 1:01:16Sen. Warren: I appreciate your demonstrating why congress needs to act, and I look forward to working with the chairman and all the members of this committee to help fix insurance and housing prices in this country.
▶ 1:01:26Chair Scott: Thank you, ranking member. I go to senator kennedy.
▶ 1:01:33Sen. Kennedy: Thank, Mr. chairman. I apologize to each of you for missing your opening statements, but I was in another committee. I have five minutes, and I would like each of you to give me 30 seconds on why you think premiums have risen, and another 30 seconds each on what you think we should do about it. Mr. gordon?
▶ 1:02:01Mr. Gordon: The primary cost factors for rising homeowners insurance cost -- it is primarily the demographic shifts of people moving into more climate risky areas and building more expensive homes. 40 year record inflation is the next biggest component. And then the building material inflation has outpaced the underlying inflation.
▶ 1:02:25Mr. Gordon: You add to that climate change, legal system abuse, and regulatory costs, and that is why the natural disaster costs of homeowners insurance are going up. The best way to offset that is through more mitigation. More mitigation and resiliency. Improved building codes. Wildfire prepared standards, fortified building standards.
▶ 1:02:47Mr. Gordon: When you look at -- if you analyze hurricane ian, which was the second worst insured lost -- insured loss in history, if that had hit florida before all of florida' is building code reforms, it would have been closer to a hurricane katrina loss. He would see entire neighborhoods --
▶ 1:03:08Sen. Kennedy: Excuse me to interrupt. I want to make sure every buddy has a chance.
▶ 1:03:11Mr. Epstein: The basic failures that are causing premiums to rise -- the government has failed at climate resilience, which is the most important thing. Government controlled things like government -- like for us in california -- they have failed to manage those properly. I'm times they inhibit people from managing their own properties. That is part one. Part two is actively encouraging people to take on risk it would not take in a free market.
▶ 1:03:35Mr. Epstein: Like all these disaster relief things end up subsidizing people taking more risk and that creates these cascading problems. Solutions are simple. We want to get rid of the green policies that inhibit resilience and we want a totally free market in resilience thomas of people are not encouraged to take on undue risk.
▶ 1:03:52Sen. Kennedy: Madame supervisor?
▶ 1:03:55Ms. Pyska: The changing climate has led to catastrophic disasters in my county and across california, as you know. What can be done is a continued investment in infrastructure, hardening homes and community, forest health, and fuel management programs.
▶ 1:04:14Sen. Kennedy: Mr. newman?
▶ 1:04:16Mr. Newman: I agree with Mr. gordon on all his reasons why property insurance pricing is increasing. Of those, risk is the only one a homeowner has any control over. Disaster mitigation has to be part of the solution to drive down insurance costs. Not just any disaster mitigation. The risk reduction needs to be grounded in science and verified. It is those two features that provide the bridge from the actions of a homeowner to the insurance industry.
▶ 1:04:48Mr. Newman: What I can tell you is that when you do that, insurers will pay attention.
▶ 1:04:56Sen. Kennedy: Let's go in -- >> that is awesome.
▶ 1:05:03Sen. Kennedy: Let's go in reverse order. I think each of you mentioned mitigation. When I hear mitigation, I also hear money. Who do you think should pay for the mitigation, and how should we pay for it?
▶ 1:05:21Mr. Newman: Senator, we all have an obligation to pay for mitigation. That falls on homeowners and families. That falls on every level of government. In the private sector needs to pitch in as well.
▶ 1:05:34Ms. Pyska: I agree. This is all of our responsibility at the local level all the way up to the federal level, because we know who has to come in and clean up after a catastrophic --
▶ 1:05:48Sen. Kennedy: You think local should contribute?
▶ 1:05:49Ms. Pyska: I think everyone has a part to play. Yes, there is a part to play local.
▶ 1:05:55Mr. Epstein: In general as much as possible the people taking on the risks -- as individual as possible. In less the government does something specifically disastrous. What you want risk to be as individual as possible.
▶ 1:06:10Mr. Gordon: The single most cost-effective wildfire safety standard is just simply moving the dry brush and plants 15 feet away from your home to create a defensible perimeter. California actually required that in law, but never implemented that in regulation. There are very cost-effective things homeowners can do, immunities can do, if we guide them in the right direction.
▶ 1:06:34Chair Scott: On behalf of the chairman, senator tillis.
▶ 1:06:40Sen. Tillis: Thank you so much. I was actually looking --
▶ 1:06:46Mr. Epstein: The terrace, the crazy language -- I agree with senator warren that tariffs are making this problem much worse.
▶ 1:06:55Sen. Tillis: I was in a serious meeting when I was abroad last week, and for some reason something came up on my phone that was very embarrassing because I did not know what it was until some but he told me what it was. Anyway, back to the matter at hand. From north carolina -- we get hurricanes now in the east and west. Hurricane helene impact was near a category one hurricane. It killed 106 people. Hundred 51,000 homes damaged.
▶ 1:07:24Sen. Tillis: I've hundred thousand small businesses and disaster counties, 5000 miles of roads, including a 20 mile segment of I-40 which is still not up and running. We know storms. I heard you all talk about mitigation. We talked about that for the last 10 years I have been here and the eight years I was in the legislature. We always talk about it and then we forget about it and do nothing. The president was roundly criticized for saying that there should be conditions attached to fema aid.
▶ 1:07:55Sen. Tillis: I disagree, incidentally, with the president, if you meant individual assistance. You have got to give people food, shelter. There cannot be conditions for that. Move it out the door. They should not suffer the consequences of bad policy decisions. However, Mr. gordon made a great point.
▶ 1:08:14Sen. Tillis: I am perfectly satisfied with the notion of having conditions of cash to any resiliency and recovery to states and local jurisdictions that fail to make their communities and their land more resilient and more able to respond. So I think that it would be great. I did not know specifically, Mr. gordon, what you said.
▶ 1:08:37Sen. Tillis: I think it is perfectly fine to say that we come up with some sort of way to index state and local government, based on the extent to which they have really implemented best practices for forestry management, for tributary clearing within environmental norms. Whatever a best practice looks like. Depoliticize it.
▶ 1:08:58Sen. Tillis: And if you are in a jurisdiction that hasn't implemented the rules, and if we are in a world of scarce resources, then the state and local governments that actually are listening and executing and implementing all of these words that we talk about every time a storm comes through -- I think they should get first right. We are in a world of scarce resources.
▶ 1:09:19Sen. Tillis: I believe there should be a point where if a state or local government no longer has demonstrated law, procedures, and money, to prepare for mitigation, they should not get a dime. If it to the jurisdictions that do. What is wrong with that concept, Mr. gordon?
▶ 1:09:35Mr. Gordon: Senator, I think you are making an incredibly important point, and there is extremely cost-effective mitigation that can be done that just is not happening out there. Certainly, it is a burden on federal taxpayers to keep providing post-disaster funds for things that could have been mitigated. But it really is a bipartisan issue. We could work together to improve that mitigation. And it is so important.
▶ 1:10:03Mr. Gordon: The most cost-effective time to do that is new buildings or rebuilding. It is so important to build back better when you have disasters.
▶ 1:10:12Sen. Tillis: Except for the build back better part, I got everything else.
▶ 1:10:15Mr. Epstein: Two words for you -- Mr. newman: two words for you, building codes. Building codes work. The florida building code prevented $3 billion of additional losses associated with hurricane ian in florida. To the point commissioner pyska made -- alton nina will not be rebuilt using california' us wildfire codes unless there is action taken by los angeles county. That cannot be the case.
▶ 1:10:45Mr. Epstein: We need to apply the tools we know work to build new construction.
▶ 1:10:49Sen. Tillis: I know we are talking more about insurance strategies. I will put some questions for the record. But folks, we have got to stop talking about resiliency and then you go home, you get political pushback, you don't do it. People are dying. Businesses are being lost.
▶ 1:11:10Sen. Tillis: I can take a look at a lot of the communities in north carolina that were impacted by nearly $50 billion in damage from helene, and probably attribute some of them to past mistakes and not moving forward on the mitigation. I will leave you with this. In one of the small towns where I had a former mayor who had been in the town for a long time. Said, you know, these buildings here, I own them all.
▶ 1:11:37Sen. Tillis: And I got really mad when town council made me elevate those buildings back there that are about 12 foot higher than they were before. Now, they are the only ones standing. We need local and state officials to have the courage to tell their communities what they need to do to be more resilient, and the federal government needs to reward those who will, and to deny funding for those who don't. Thank you.
▶ 1:12:02Chair Scott: Thank you. Senator smith.
▶ 1:12:06Sen. Smith: Thank you, Mr. chair, and welcome to our panelists. I appreciate this hearing this morning. I would like to start by asking for unanimous consent that a report from the bipartisan policy center which is about opportunities for federal action to address the rising costs of home insurance we entered into the record. I think this is a really good contribution to our discussion and I would ask unanimous consent that it be included in the record.
▶ 1:12:30Chair Scott: Without objection.
▶ 1:12:36Sen. Smith: I'm going to focus on the rising cost of homeowners insurance and how extreme weather events are affecting that. Homeowners insurance is costing more and more around the country, and it is getting harder to find around the country. And the reason for this is pretty clear. Increasingly common and more and more extreme weather events, whether it is rain or hail or fire, or tornadoes, hurricanes -- otherwise known as climate change.
▶ 1:13:03Sen. Smith: Colleagues, I have some maps to show what is happening, and I want to do a big thank you to senator whitehouse and the budget committee staff, who helped with these maps together. This is an issue in minnesota. You might think that it would not have the same challenges as north carolina, take a look at this. This map shows that in minnesota working families are struggling to manage a 39% average increase in home insurance rates, which would have seen over the last seven years.
▶ 1:13:30Sen. Smith: Some regions of my state, costs have gone up even more. Yellow madison county, a rural county in western minnesota, saw premium increases of over 400% over seven years. Can see that here. Folks in some minnesota counties are struggling to find any insurance at all. We are seeing big increases in non-renewals in 18 counties across my state.
▶ 1:13:57Sen. Smith: All but one of these 18 counties have had a federal disaster declaration for flooding or severe storms during the same period. This is a huge deal, of course. It is not, of course, just a minnesota problem. The rates of -- especially in states represented by members of this committee.
▶ 1:14:24Sen. Smith: In 2023, all of these states were the top 20 worst estates for home insurance nonrenewal's. Louisiana, number two. North carolina, number three. Massachusetts, number five. Rhode island, south carolina, south cota, I could go -- south dakota, I could go on. This is a significant problem. I want us to understand these insurance disruptions pose a systemic risk to the financial sector and the housing market and to our state budgets.
▶ 1:14:56Sen. Smith: Commissioner pyska, I will come to you in a minute about this. This is a quote from jay powell read I asked a question about this and he answered in part that because banks and insurance companies are pulling out of high-risk risk areas, he said "if you fast-forward 10 or 15 years, there are going to be regions where you can't get a mortgage."
▶ 1:15:28Sen. Smith: If this happens, it won't be just a regional issue, it will be a national issue. Given your experience in california, do you think that local or state governments have the capacity, are they positioned to deal with this kind of massive, systemic impact if we see a loss of home insurance for families?
▶ 1:15:51Ms. Pyska: No, not at all. That will impact our local budgets. We get most of our revenue from property tax. We are starting to see homes sit on the market for an extended period of time that cannot be sold. You can't get insurance in escrow for. -- escrow. The landlord could no longer pass through the cost of the insurance to her. So, it's going to affect all of our communities.
▶ 1:16:20Ms. Pyska: We all already seeing a high number of hoa's in fire threat areas. Even though we are doing this mitigation work at the local level with fire breaks, with hardening homes, we are doing as much as we can right now. Everything is on the line.
▶ 1:16:42Sen. Smith: We can't just say the states will cover this. It is a systemic financial risk. In the couple of seconds that I have left, you have to consider what this means, in terms of your municipal bond ratings as well, is that not true?
▶ 1:16:58Ms. Pyska: Absolutely.
▶ 1:16:59Sen. Smith: I wanted to take the opportunity to raise this issue. It is something I know all of us on this committee are thinking about what we could do around mitigation. I have a question for the record which I will submit. The systemic risks we see is something that is a big, big problem. Thank you, Mr. chair. >> thank you, senator smith.
▶ 1:17:27Sen. Smith: I feel the need, whenever we have a discussion like this, to touch on the fact that we have an insurance and when we have an insurance related discussion, I believe the U.S. system of state-based insurance regulation actually is the gold standard when it comes to protecting our insurance markets and insurance consumers in south dakota, across the country. I want to explore it.
▶ 1:17:57Sen. Smith: Mr. gordon, do you believe our state-based reglet tory system has been successful?
▶ 1:18:02Mr. Gordon: It has been very successful. There are some exceptions but we are doing an exceptional job in -- they are doing an exceptional job and we work closely with them. >> we are talking about when you have the ability to separate determined risks and make sure those risks are responded to, fair?
▶ 1:18:25Mr. Gordon: That is fair. What's interesting is there has been a lot of talk about how state residual markets have been brewing because of nonrenewal's. For every state residual market that has expanded there's a residual in a neighboring state that is better regulate it where, with similar climate risks, it's contracting. It's about state regulation. Insurers have been insuring the weather for hundreds of years and will continue to do so.
▶ 1:18:53Mr. Gordon: It's the government risk I can make a challenging, particularly if you can't get a good rate.
▶ 1:18:57Chair. Rounds: One area we have -- it's been 12 years. This is how good congress is at this. It's over 12 years since the last time the reauthorization of the punditry's program was completed. This has caused uncertainty.
▶ 1:19:21Chair. Rounds: Senator kennedy and I are working together to introduce legislation that re-authorizes the program and makes commonsense reforms that promotes solvency, transparency, affordability, mitigation and consumer projection. Private insurers do play a role, a critical role in the nfip.
▶ 1:19:40Chair. Rounds: Beyond administer ration of the program, private insurers handle claim, processing -- claims, processing, risk assessment and data analysis to improve flood risk pricing. I question to Mr. gordon, nfip has been experiencing a decline in direct premiums written. Mr.
▶ 1:19:59Chair. Rounds: Gordon, what ideas do you have for increasing nfip bite b while maintaining private market participation, perhaps bringing back policies that we considered years ago might be something we should consider?
▶ 1:20:18Mr. Gordon: You are right. Flood is the most common risk. 4.7 william homeowners rely on the nfip. That is 4% of homeowners. We need to help homeowners understand even if you are not in a flood zone, flood insurance is so important to citizens of asheville -- important. The citizens of asheville found that out recently.
▶ 1:20:45Mr. Gordon: As you say, the nfip has had 33 consecutive short-term reauthorization's. We need some certainty, reform and a long-term reauthorization and we want to work with you to achieve that.
▶ 1:20:57Chair. Rounds: Mr. newman, what medication tactics have you found to be the most successful and how can we as policymakers guarantee that mitigation investments lead to tangible reductions in premiums? >> thank you, senator. I will take two perils, quickly. One is wildfire.
▶ 1:21:25Chair. Rounds: Our wildfire repair program brings together a set of mitigation actions that reduces risks of insurance. The wind and hail side, we have our fortified program. It's a better way to install roofs and have new construction to homes better withstand hurricanes, high winds and hail. Both of those instances, we are combining science-based mitigation actions with verification. That is what provides a bridge to the property insurance industry. That is what insurers are looking for.
▶ 1:21:56Chair. Rounds: In terms of policymakers, we need to find ways to make it easier for people to afford these mitigation actions. They are not expensive. Our mitigation actions are affordable, achievable and effective. Many homeowners don't have the requisite money. How do we make it easier through commercial lending, through government programs, through grants, through tax incentives, through a catastrophe savings account?
▶ 1:22:20Chair. Rounds: All of these things can help cover the cost of making our homes and communities more survivable and insurable.
▶ 1:22:27Chair. Rounds: Thank you. My time is expiring. Senator van hollen is recognized.
▶ 1:22:36Sen. Van Hollen: Thank you for your testimony. It is bad enough the trump administration essentially denies the fact of climate change and doesn't want to do anything about it. Doesn't want to take any actions to reduce the admissions, greenhouse gas emissions that help fuel climate change.
▶ 1:23:00Sen. Van Hollen: But, on top of that, they want to eliminate many of the important federal investments that we use to try to protect communities from the impact of climate change. So, they don't want to put out the fire or help reduce the fire. They also want to get rid of the fire breaks.
▶ 1:23:23Sen. Van Hollen: And I am referring specifically to their proposals to cut back fema programs and, specifically, their termination of the brink program. And so, I would like to begin with you, Ms. pyska. I heard your testimony on c-span . Thank you for sharing with us the terrible experience that you had.
▶ 1:23:52Sen. Van Hollen: But, I know now that you are committed to trying to protect others in communities. Can you describe briefly what the impact of getting rid of the brick program would be on our efforts to mitigate the impact of climate change and national disasters, generally?
▶ 1:24:10Ms. Pyska: Thank you, senator, for that question. Lake county, we have not been able to apply for brick because it is too difficult for a county our size. We have been working toward getting brick ready for the last several years. This is a devastating loss to the plans we have put in motion.
▶ 1:24:35Ms. Pyska: My two neighboring counties, sonoma county and napa county, are much more affluent but also have suffered from multiple fires that have continued to cross our borders between our counties. They each have applied for and been awarded brick grants. And they only got through planning. Now that we are about to start -- they are about to start implementing these programs that would bring resiliency into their community, hardening homes and educating the community.
▶ 1:25:06Ms. Pyska: Fuel management programs, all of that is now gone. While the planning was helpful, they are dead in the water now. They cannot move forward with those really critical programs.
▶ 1:25:17Sen. Van Hollen: Thank you for sharing that story. We have a similar situation in the state of maryland. Maryland had about $91 million in federal funding for 51 targeted projects in the state of maryland. In the case of crisfield, maryland, on the bay, which has been prone to rising sea levels and additional storm surges.
▶ 1:25:49Sen. Van Hollen: They had done the preliminary work and then received a substantial federal britt grant to help them. And of course, that was terminated altogether. So, they are kind of left because it is a small community. They are certainly not to blame for the rising waters around them. And yet, here we have the trump administration abandoning their program, designed to help communities like theirs.
▶ 1:26:20Sen. Van Hollen: Mr. newman, I know that you testified a few years ago in support of the brick program in front of the house transportation and infrastructure committee. You pointed to the brick program, specifically as an important way to help these committees.
▶ 1:26:49Sen. Van Hollen: Can you talk about the impact of cutting that program to communities?
▶ 1:26:52Mr. Newmen: I didn't have the good fortune to testify at that time but I'm sure my organization did. Brick was a good idea during the trumpet ministration the first time through and it remains a good idea now. It's not a perfect program. The fact that lake county has not been able to access funds from the brick program suggests that it can be improved. But, when the U.S.
▶ 1:27:16Mr. Newmen: Chamber of commerce and also the insurance company put out a report that says every dollar invested in disaster preparedness and mitigation has a $13 in economic savings, we know -- is the best time to reduce risk reduction.
▶ 1:27:41Sen. Van Hollen: It was another senator, I stand corrected. Thank you. >> thank you Mr. chairman and thank you to our witnesses for being here today. The four years of the biden administration, we saw a reckless spending. Trillions of dollars on partisan programs.
▶ 1:28:03Sen. Van Hollen: The average family in america had to pay $13,000 more to have the same standard of living after biden as they did before biden. Mr. gordon, I think you reflected that in your testimony, that inflation was the primary driver of that. We have seen in nebraska when we are talking about these homeowner insurance rates, the average insurance premium has gone as high as up to $5,120 for a home valued at $300,000.
▶ 1:28:35Sen. Van Hollen: The average home insurance and premium rate in the U.S. last year was 21 year was $2151. That's a difference of $2957 that nebraska pays higher in insurance premiums than the rest of the country. That is a 1-2 punch for homeowners who have just experienced high inflation.
▶ 1:29:06Sen. Van Hollen: One of the things we have in nebraska is whether. The weather. In 1935, we had a tornado come through. We had a mother come through last year. -- 1975, we had a tornado come through. We had another tornado come through last year. Fremont recently had four inch hail.
▶ 1:29:30Sen. Van Hollen: Unless we are talking about microclimate change, the hail did not impact any of the communities. It's bad luck that fremont got hit with that. It's hard to say climate change will be a primary driver of that. Wister gordon, I am wondering if you could comment on -- do you have some thoughts on specifically nebraska, why we sing these homeowner insurance rates go up?
▶ 1:29:57Mr. Gordon: We do have specific data on nebraska. We will provide that to your office. Nebraska is a great place to live.
▶ 1:30:08Sen. Ricketts: The best place in the world.
▶ 1:30:13Mr. Gordon: One of the things we have seen excel running after the pandemic is people moving to states -- accelerating after the pandemic is people moving to states and building nicer homes. You add inflation and higher inflation in the building materials and supplies and then you add a little bit from climate change and legal system abuse and so forth and we have an 8% manual increase in the cost from hail and tornadoes that are hitting nebraska.
▶ 1:30:42Sen. Ricketts: The weather accounts for a percent of that?
▶ 1:30:47Mr. Gordon: The climate change is 1% of the 8%. The rest is the 40 year record inflation and even higher inflation in the building materials and supplies.
▶ 1:30:59Sen. Ricketts: Mr. epstein, do you have any thing -- anything?
▶ 1:31:09Mr. Epstein: Climate change and extreme weather is driving local insurance premium increases. We have data. Things like the human related cyclone and energy, hurricane frequency and intensity. We don't see any significant changes. We do see some warming but we are not seeing any significant changes. Hypothetical changes are in the future. We see adjusted for gdp, globally, damages are not going up.
▶ 1:31:35Mr. Epstein: If we have an insurance premium, it's not driven by climate, it's driven by other things including lack of resilience and or subsidizing people that take on too much risk. We need to -- through all these disaster relief things -- we need to stop subsidizing people. That is leading to casket and problems and there is no way around that.
▶ 1:31:54Sen. Ricketts: One of the things you are saying is if we look over the data over the last hundred years, and we look at things like tornadoes in nebraska and hurricanes on the gulf, they are not occurring anymore or less?
▶ 1:32:11Mr. Epstein: There are not statistically significant trends. Storms will become 10% more frequent and dramatic. It's not that big a factor. It's real, it's just small. And we don't know if it is net negative in terms of extreme weather issues.
▶ 1:32:30Sen. Ricketts: I'm running out of time. One of the things you talked about was the insurance environment. In nebraska, we have a great insurance department. They really do a wonderful job. Nebraska is one of the leaders in the insurance marketplace.
▶ 1:32:56Sen. Ricketts: I just wanted to give a shout out to my homestay industry here. Thank you very much. >> thank you, Mr. chair. I wanted to thank you for having this important hearing. It's something that needs to be addressed. I am from nevada. Wildfires are happening now. It's a problem with our insurance costs as well. I appreciate the conversation today.
▶ 1:33:27Sen. Ricketts: I appreciate the conversation about fuel reduction. But needs to happen -- that needs to happen as part of this mitigation effort. I wanted to point out senator tim sheehy and I have a wildfire support act we introduced. I welcomed them to join me.
▶ 1:33:44Sen. Ricketts: It provides resources to help prevent wildfires before they start and combat those that do spark and help those that are touched by wildfires recover and rebuild. I have to point out that the collective work we have done in a bipartisan way in the bipartisan infrastructure package was to deliver about $8 billion for wildfire prevention and suppression.
▶ 1:34:11Sen. Ricketts: It was important for us, for the very reasons you are talking about. And I have to say, I'm disappointed. I have just learned and heard reports of terminated employees at agencies like the bureau of land management and U.S., who are working to protect the west from these wildfires. I have also learned how elon musk and doge has cut adderall funds for wildfire mitigation.
▶ 1:34:38Sen. Ricketts: They have stopped work orders, removing fuels from public lands along with firing thousands of service and doi employees. We have to get back on track for the reasons you are talking about. I came from nevada. I am in my state -- hearing in my state as well about the high cost of insurance. Supervisor pyska and Mr. gordon, let me ask you about this.
▶ 1:35:05Sen. Ricketts: I've heard from insurance professionals about insurance discrimination against first-time homebuyers. Insurers can deny a first-time homebuyer a policy, simply because they lack prior insurance history, which negatively impacts their insurance score. Is this true? And should insurance policies be based on the risk profile of the house? Isn't that where it should be, rather than if the buyer is a first-time homeowner?
▶ 1:35:33Sen. Ricketts: Let me start, supervisor pyska, with you and then I will ask you, Mr. gordon.
▶ 1:35:40Ms. Pyska: Thank you. I am not aware of that in my county but I am happy to look into it and get back to you. >> I appreciate that. Mr. gordon, are you hearing anything like that?
▶ 1:35:51Mr. Gordon: I have not heard about that issue. Certainly both the homeowner and the home are relevant to the risk. Some homeowners do a better job of taking care of their property than others. I have not heard about that specific problem but we would be happy to work with your office to see if there are any issues we can help with. >> thank you. Let me jump back to supervisor pyska.
▶ 1:36:13Mr. Gordon: Can you discuss the strategy of ensuring homes on a house by house basis, rather than a zip code to account for owners who have made investments in resiliency? With this more accurate estimation help expand access to affordable insurance options?
▶ 1:36:29Ms. Pyska: Thank you, senator. Certainly, hardening house by house is a good approach. But what we are trying to do in my county is cluster entire quantities so the entire community is resilient and evacuation core doors are safe. So that the community does not become more feeble. >> Mr. gordon, what that make a difference?
▶ 1:36:54Ms. Pyska: Would that help lower insurance costs if the companies saw mitigation and what work was being done in the neighborhood?
▶ 1:37:01Mr. Gordon: Yes. One of the most effective fire safety measures is clearing a five foot defensible parameter. If you do that and your neighbor stone, then you are still vulnerable. A lot of these fire measures, it's important that the community does it in addition to the individual homeowner. >> I have to agree with senator rounds. There is a rule for us at the federal level and the state level. In nevada, I've been talking with my state insurance commissioner.
▶ 1:37:30Mr. Gordon: It's important for us to make sure we are addressing those concerns. I just have to say, thank you for being here. This is the number one topic I hear on home for so many reasons. In the west, it is the wildfires. In other geographic locations, there is other extreme weather that has an impact but we need to address it and do it in a collaborative effort. Thank you for being here. >> thank you for having another great hearing.
▶ 1:38:00Mr. Gordon: I agree with senator cortez masto. A question I have for all of you. This should be bipartisan. We should all want to lower the cost for consumers. This is not a republican or democratic issue, it's an american issue. What's the role of excess litigation in driving the cost of on insurance?
▶ 1:38:29Mr. Gordon: >> while I am an attorney, that's not my area of expertise.
▶ 1:38:35Ms. Pyska: Senator, it's not my area of expertise, either but we would be happy to get to you.
▶ 1:38:43Mr. Epstein: This makes everything worse but if you want to focus on how much litigation we have that delays per views and makes them take forever, this applies to so much building in the united states but particularly wildfire prevention type measures where you wait forever to get authorization to clear things to law. This is a cancer on the country and it is destructive with wildfire prevention. >> it's a very important, significant and pwn it of the increase in costs.
▶ 1:39:14Mr. Epstein: Consumers want a legal system that is -- you see a small number of people getting rich with these mega-vertex. All consumers have to pay for that in the form of higher prices. The tax on americans is 4200 dollars annually on american families. The united states is an extreme outlier compared to other nations on how much money is drained away from litigation. It is really a big business for some of the plaintiff lawyers.
▶ 1:39:44Mr. Epstein: That is why we are seeing the enormous increase in advertising -- in the legal advertising. Insurance is saying if parties have a problem with their claim, working out with the agent or broker and then you can go to the insurance department and they will work it out for free without taking 33% to 40% of your compensation which would mean you would not have enough to pay for your needed medicare. Florida has had success in reforming their system.
▶ 1:40:12Mr. Epstein: At one point, they had about 9% of the homeowners claims with about 79% of the homeowners litigation in the country. Now, with some reforms, they have dramatically reduced the litigation. We have seen the we have seen t both the reinsurance and primary insurance rates came down in florida, despite the cost increases you are hearing about. They were able to reduce their insurance rates and make it more affordable.
▶ 1:40:41Sen. Marino: Ohio has one of the lowest insurance rates in the country. >> can you say that again? >> ohio has great insurance rates, low cost of living. If you are watching this, leave your home stay and move to ohio.
▶ 1:41:07Sen. Marino: One of the things that we have done in ohio is had a lot of competition. A lot of robust competition in the marketplace. Easter gordon, starting with you, what role does that plate -- Mr. gordon, starting with you, what role does that play? I see homeowners insurance rates and that mix a difference to working-class americans. If you can't afford a home and you can't afford a car, those are the two basic elements of being able to have a thriving life. What are your thoughts there?
▶ 1:41:38Mr. Gordon: Insurance is one of the most competitive financial sectors. There are thousands of insurers competing for your business. You can't turn on the television without seeing insurance ads competing. In states like ohio that have done a great job of regulating, they just aren't seeing the same availability. They have inflation like other states do. That is a national and global issue. Those markets have performed very well and that's a credit to the state regulation in ohio. >> Mr.
▶ 1:42:05Mr. Gordon: Epstein, obviously you and I have talked about the need for more energy resources around the country. We have currently a lot of manic move among some states, 18 states, to eliminate combustion engine cars and have everybody drive electric vehicles.
▶ 1:42:26Mr. Gordon: Have you seen a cost infants between having to repair an electric vehicle that has been in an accident and how that is driving up insurance rates versus a traditional internal combustion engine automobile?
▶ 1:42:38Mr. Epstein: In general, ev's are being forced on people because they are not the most cost-effective option, that includes the full process, including insurance. The mandate of ev's is an existential threat to the grid. Powerline stuff is related. The grid issues can create wildfires themselves. We should really stop overloading our grid and adding capacity to the grid. >> Mr. chairman?
▶ 1:43:08Mr. Epstein: >> senator kim.
▶ 1:43:11Sen. Kim: Mr. gordon, I wanted to start with you, going through the national flood insurance program. I know there was some discussion about it earlier. We still don't know where this administration will be going when it comes to nfip. I'm trying to think through the range of actions that might be considered by this administration. Mr. gordon, I wanted to ask you, I know there was some talk about some role privatization.
▶ 1:43:38Sen. Kim: I was concerned when I saw that project when he 25 called for the privatization and elimination of the national flood insurance program. I wanted to ask you if the nfip privatized and liquidated, are they -- while keeping insurance premiums low for consumers?
▶ 1:44:00Mr. Gordon: The short answer is no pre-flood is the most common is asterisk. 4.7 -- is no. Flood is the most common disaster risk. It is currently $22 billion in debt after $16 billion of debt forgiveness.
▶ 1:44:22Mr. Gordon: The prices that it charges, there is such a great chasm between what that and the private market would have to charge. The private market would not be able to do it, it would be a political outrage. The private market would take a long time to absorb that. The nfip plays an important role in encouraging commodity floodplain management. That is something the private sector could never replace. It is essential to keep that program working.
▶ 1:44:51Mr. Gordon: We have certainly raised our hand anytime there were pickups in the write your own program to make sure that american homeowners could continue to benefit from the footer all flood insurance program.
▶ 1:45:02Sen. Kim: Do you have a sense of how much premiums, how much we would estimate premiums would go up if nfip was unilaterally privatized?
▶ 1:45:13Mr. Gordon: It depends on the homeowner and certainly the nfip has been trying to start to close the gap between their underpricing and actual rates. But there is a significant delta and prices would have to go up significantly if the private market were to take that on overtime. It would take quite a bit of time for the private market to absorb that risk.
▶ 1:45:35Sen. Kim: When I go around by stay, so many commodities are trying to -- from superstorm sandy it while back. In ocean county down to cape may, places where there were generations that have grown up there. They are worried about this. The way they talk to me about it, they say they worry that their way of life is just going to go away.
▶ 1:46:05Sen. Kim: And they won't be able to keep up with this. I appreciate that you can really help us understand some of the left and right limits of what should be possible here. I will be honest with you. I am worried because we have seen this administration take drastic steps quickly and I am trying to urge this committee to play a role in trying to make sure the administration is thoughtful about how we move forward, how we work together to come up with that. Because what I'm worried about, I would like your thoughts on this.
▶ 1:46:33Sen. Kim: I see this is a situation where, especially some of the poorest, most vulnerable that leaving some of these communities, that they will fall through the cracks. That we are seeing some type of major gutting and they won't be able to afford those types of prices. And we will see a real devastation in terms of who is able to live in some of these types of areas. Does that make sense to you?
▶ 1:46:53Mr. Gordon: It does. Ap cia has supported testing. If you're going to have a subsidized test for people living in the flood zones, target the people who need it the most, such as the people you are talking about.
▶ 1:47:12Sen. Kim: Ms. pyska, fema removed the -- and take the needs of vulnerable communities into account during the hazard mitigation planning progress -- process. What do you think that's going to do -- what is the role that that is going to do in terms of their ability to better prepare themselves for the dangers that are out there?
▶ 1:47:42Ms. Pyska: Thank you, senator. We know that the wildfires are going to continue as the other unprecedented winter storms and atmospheric rivers, if we can't harden our commodities and do that mitigation upfront, then potentially, we lose more of our communities. That's what's at risk.
▶ 1:48:00Sen. Kim: I was talking about ocean county in new jersey, very concerned about flooding. But also, continuing to fight wildfires as we speak. We have brave firefighters trying to keep people safe. Just a number of different threats that are not just exclusive to orange county or new jersey but all over. Thank you for raising that important point. I will yield back. >> senator banks.
▶ 1:48:26Sen. Banks: Mr. gordon, we have seen reports of criminal gangs like ms 13 paying illegal immigrants to stage fake accidents on worksites before they sue contractors for medical injuries that they didn't actually incur. I'm worried that this is driving up the cost of liability insurance and workers comp insurance and pulling resources away from working class americans who actually do become injured on the job.
▶ 1:48:56Sen. Banks: It's yet another example of criminal, illegal gangs stealing resources from american workers. Can you talk about how is this spike in fraud impacting insurance costs on the ground and do you think it is?
▶ 1:49:08Mr. Gordon: Absolutely, senator. Fraud is an enormous challenge in the insurance industry. Fraud against insurers has increased in cost by more than $300 billion annually. That includes staged auto accidents, fraudulent contractors soliciting. Fraudulent or phantom charges.
▶ 1:49:33Mr. Gordon: They are using artificial intelligence to better detect fraud patterns. Up to 23% of people say they would commit insurance fraud and one third say they don't consider it a real crime. >> we are talking about a mess 13 and some of those -- ms 13 and some of those fraud incidents.
▶ 1:49:58Mr. Gordon: We have seen some passengers tensing up for the accident occurs which clearly shows it is a staged accident. >> proving ms 13 has been involved?
▶ 1:50:09Mr. Gordon: I haven't seen all of the reports. -- evidence prayed I have seen the reports that indicate they are involved. -- evidence. I have seen the reports that indicates they are involved.
▶ 1:50:27Sen. Banks: What are the short and long-term effects of price caps and what's a better way to keep insurance costs at bait? Mr. g-- at bay.
▶ 1:50:39Mr. Gordon: Insurance is an important sector. States like california, that have prior approval, where the inflation costs have gone up, what you have seen is now the majority of homeowners insurance and top insurers have had to pull back from that marketplace. That transforms affordability pressures into availability crisis. We saw that in florida after the hurricane, and two in 1992.
▶ 1:51:08Mr. Gordon: Most of the national chairs pulled out of the marketplace. It went into a downward spiral until they enacted a number of reforms including allowing much more actuarial rates.
▶ 1:51:24Mr. Gordon: Price points are not the way to go, having a relatively free, competitive market where you have thousands of insurers buying for consumer business and insurance rates on the market conduct, making sure they are fulfilling promises. That's what makes effective market.
▶ 1:51:40Sen. Banks: Mr. epstein, some on the left talk about climate change being the biggest cause of rising insurance costs. That was one of the justifications they used for pushing the green new deal. Spending $1 trillion on green energy subsidies and the inflation reduction act for example. Have these policies made energy more abundant and affordable in america?
▶ 1:52:07Mr. Epstein: Energy effects everything, I talked about how energy makes you more climate resilient. It's one of the reasons we are seeing floods and storms. We have energy to build the infrastructure. All of these green energy programs make energy more's -- more scarce. They artificially force us to use amounts of solar and wind we would not use on the free market.
▶ 1:52:38Mr. Epstein: The inflation reduction act, since we are talking about reconciliation in the general environment, that whole thing should be repealed. That saves $1 trillion to $2 trillion from the budget. It stops us from distorting the electricity markets in a way that is defunding unrel that is defunding unre reliable electricity and over funding unreliable electricity.
▶ 1:53:03Mr. Epstein: We need to get the government to stop restricting good energy and stop subsidizing ineffective energy and that will be crucial.
▶ 1:53:10Sen. Banks: Is there any meaningful evidence that ira has reduced the risk of natural disasters?
▶ 1:53:18Mr. Epstein: No, they have increased it because they make us poor and less resilient. >> I yield back. >> thank you. Ms.
▶ 1:53:30Mr. Epstein: Pyska, I'm sorry if I got that wrong, -- in an effort to reduce wildfire risk including clearing trees and creating defensible space between shrubs, despite these proactive measures, her insurance premium jumped from $1450 to $4500 a year.
▶ 1:53:57Mr. Epstein: Across the state, people are seeing their premiums triple or quadruple. I have heard from people that they have had their insurance struck altogether. Shouldn't insurance costs reflect their reduced risk? At the very least, they should be able to access and maintain affordable coverage to protect their homes? Would you agree with that statement? -- protect their homes. Would you agree with that statement?
▶ 1:54:26Ms. Pyska: Yes. I lost my home in 2015. It is in a burn scar. The only thing that is the same is the topography. My home went -- the insurance price annually was about $2600 four years ago. Now it's almost $9,000. I have cement siding, no wood decks. Everything I could possibly do, I have done.
▶ 1:54:58Ms. Pyska: I actually lost coverage last summer and had to work with my insurer to bring it back. It's -- and I've done everything possible, as with everyone in my newly rebuilt community. >> Ms. pyska, insurers are primitive from using losses in natural disasters in other states like a wildfire in california as a justification for rising premiums in arizona.
▶ 1:55:25Ms. Pyska: How do we make sure insurers are following that rule and what oversight is in place to protect homeowners from excessive rate hikes, especially as we have consolidation in the insurance market?
▶ 1:55:35Ms. Pyska: I appreciate that question but it's not my area of expertise. >> take a guess. I'm just kidding. Mr. gordon, after major disasters, we often see an influx of scam artists pushing an assignment of benefits. A third party convinces a homeowner to sign over their insurance rights, leaving the homeowner without repairs.
▶ 1:56:06Ms. Pyska: What are insurance companies doing to verify the legitimacy of aob agreements and protect consumers from fraudulent actors, which ends up driving premiums?
▶ 1:56:14Mr. Gordon: You are right, senator. Insurers have been victims of that kind of assignment of benefit fraud. This is where the insurance regular this are doing the right thing and helping to educate consumers. Don't go to these contractors and sign away your rights. It's important to notify your agent and company of potential harm and make sure you have a valid license contractor working on it. A number of states have passed a simon of and if it reform.
▶ 1:56:45Mr. Gordon: Florida was effective -- assignment of benefit reform. Florida was effective in reforming that. It's a tragedy. A lot of states are doing the right thing and cracking down on that for consumers. >> essentially, this is like the windshield policy, right? In arizona, we have a lot of windshield cracks all the time.
▶ 1:57:15Mr. Gordon: People come up to us and say I will pay you cash. It's kind of the same concept.
▶ 1:57:20Mr. Gordon: Exactly the same concept. That's another big area of fraud. Thank you for raising that up. >> how do insurers detect fraud stemming from aob eight? What about on the business side?
▶ 1:57:35Mr. Gordon: This is one area where artificial insurer -- artificial intelligence is very important. They work with the regulators and the law enforcement community to go after that. It's going to be an ongoing challenge. It helps when the states get involved and have the right laws in place to protect and prosecute. >> I yield back.
▶ 1:58:05Mr. Gordon: >> senator blunt rochester. >> thank you ranking member warren and the witnesses for being here today. Rising insurance costs are a hidden driver in the affordability costs we are facing today. This is a chance to examine how climate risk, market instability and federal policy are making it harder for families to afford and maintain a home. The skyrocketing cost of housing is a top priority of mine.
▶ 1:58:34Mr. Gordon: As we all know, you can't own or buy a house without insurance and the costs are rising. Not just in delaware but across the country. In fact, my first bill as a united states senator is focused on housing. The housing supply frameworks act. And I introduced this bill with senators federman and tillis and it has broad, broad bipartisan support.
▶ 1:58:59Mr. Gordon: This bill is about increasing housing supply and production while cutting red tape and looking at zoning and providing options to municipalities and states. We know there are many factors that are driving insurance costs to increase. As you noted in your testimony, Mr. gordon, frequent disasters, growing population in high-risk areas and the higher rebuilding costs are some of the significant contributors.
▶ 1:59:28Mr. Gordon: One of the other factors I wanted to focus on is tariffs. I joined ranking member warren in creating a letter to the president today, highlighting the zastrow's trade policy that homeowners say could increase the cost of a new home by over $10,000. The tariff impact does not start there. Insurance is also about future risks and the whole cost of repairs.
▶ 1:59:56Mr. Gordon: I know there are many factors, Mr. gordon, but can you speak to the impact of tariffs on your ability to set prices today? >> exit difficult -- >> it makes it extremely difficult. It can be significant on the auto insurance side as well.
▶ 2:00:21Mr. Gordon: My actuary is pulling out what little hair he has left because it keeps changing every couple of weeks and I keep saying what is today's estimate? He's back at the drawing board. It makes it difficult to price. There is always a lag time where insurers have to identify and file an wait for the policies to -- and wait for the policies to rollover. We have to make our best estimates at any moment on what the cost is going to be and it is very challenging.
▶ 2:00:49Mr. Gordon: >> I think the key word you used there was uncertainty. Just to be clear, you are saying that even the announcement of tariffs can cause uncertainty and also can cause premiums to rise today. That tariffs and the uncertainty costs, my constituency -- constituents see our real money today.
▶ 2:01:16Mr. Gordon: That is correct. Insurers will make adjustments. They have to make ongoing adjustments -- decisions. That rolls into the cost for insurers. >> could I shift gears to Ms. pyska? I want to shift to insurance pricing to mitigation. I want to emphasize the critical role the federal government has in reducing risk before disasters strike.
▶ 2:01:44Mr. Gordon: Investments in mitigation save lives, protect property and lower long-term costs. That is a win for families and for taxpayers. Unfortunately, we are seeing the opposite happened. Ms. pyska, are there changes that are affecting your work on the ground? What does this mean for the ability to plan, budget and protect your community?
▶ 2:02:08Ms. Pyska: Thank you for the question. We have a very old housing stock. So, most of the houses were built before 2008, when they had the higher codes to withstand an event. Our problem now is going back to those communities and hardening them, hardening each home and having defensible space and having safe evacuation routes. Fire breaks surrounding those communities.
▶ 2:02:37Ms. Pyska: That's what we have spent the last 10 years wilting up a workforce to do that work -- building up a workforce to do that work. That workforce is in jeopardy and all of that work is compromised. >> I have a lot more questions but -- see, I don't know, did the time change on this? I'm down to 10 seconds. I have more questions that I will submit for the record. Thank you so much to all of the witnesses and I yield back. >> senator warner.
▶ 2:03:09Sen. Warner: Thank you. Mr. gordon, I will start with you. I'm sorry, I'm going to follow-up on my colleagues comments. I appreciate what you said about the complete uncertainty and the fact that these tariffs could end up costing about $10,000 for a new home.
▶ 2:03:37Sen. Warner: One of the things that is stunning on this issue is there is not a day that goes by that we don't get additional reports that nations around the world are starting to view china as a more reliable trading partner than the united states of america. Just let that sink in for a minute.
▶ 2:04:04Sen. Warner: We spent 15 years trying to warn against the challenge of china's authoritarian regime stealing intellectual property. But in 100 days, china is now viewed as a more reliable trading partner.
▶ 2:04:19Sen. Warner: We have literally seen work that was done by the biden administration and the first trump administration, the obama administration, going back to the bush administration where we tried to say to the nationstates around the world, buyer beware about doing business with china. I know this has been asked. You talked about the uncertainty and the chaos. I just want you to drill down a little more, when we think about things like lumber prices going up.
▶ 2:04:49Sen. Warner: Doesn't this also affect the rebuilding costs if a home were to be destroyed, that that's another reason that we are driving up these costs of home insurance, because of not only the building of new construction but the rebuilding? Can you address that? >> yes, senator.
▶ 2:05:10Mr. Gordon: Particularly, canada, mexico and china were a disproportionate percentage of the lumber and cement and auto parts. Our trade relationship with those countries certainly impact the prices. To the extent the tariffs are there, the longer they are there and the higher the rates are, the more expensive the insurance is going to be for building and rebuilding.
▶ 2:05:35Sen. Warner: I'm sure he's been mentioned but one of our colleagues, sheldon whitehouse has spent a lot of time on this and he's helped educate me. He's also scared the hell out of me about what we are going to be seeing coming forward. I just want to acknowledge, in virginia, we have the norfolk naval base. One of the largest naval bases in the world.
▶ 2:06:03Sen. Warner: Literally, our navy spends tens of millions of dollars a year, sometimes hundreds of millions of dollars raising the peers, -- piers because of climate change. If our own military is acknowledging that this is a reality, they wouldn't be spending this money if it wasn't. I will give this to you, Mr. gordon.
▶ 2:06:31Sen. Warner: With the changes and if we want to call it sea level rise, climate change, whatever you want, isn't this as well affecting dramatically the cost of home insurance?
▶ 2:06:46Mr. Gordon: Senator, there are two different issues. One is the concern about aging infrastructure and how increasing lyman risks are increasing danger to the infrastructure of how that can affect risk. On the other hand, in terms of the property insurance overall, virginia is a well regulated state. What we have seen is the residual markets in virginia have actually shrunk.
▶ 2:07:13Mr. Gordon: Winning the availability has been very strong in -- meaning the availability has been strong in the private markets because of how well they are regulated and fewer people have had to go to the state backup funds.
▶ 2:07:23Sen. Warner: Because of the level of flooding that has taken place, we have a church in downtown norfolk but has to change its schedule about once a month because it has flooded almost on a monthly basis. That didn't happen 20 years ago. The refusal to accept science around it baffles me. One last question and then I will be happy to have -- and I will be happy to have anybody weigh in.
▶ 2:07:53Sen. Warner: One of the things I think we ought to do is be prepared for what's coming. That means resilience. The united states chamber of commerce, not exactly a flaming liberal organization, has said that for every dollar invested in resilience and disaster preparation, they say seven dollars.
▶ 2:08:16Sen. Warner: Yet, this administration recently has canceled a lot of resiliency projects in southwest virginia, that got hit by hurricane helene. I know some of you are viewed as republican witnesses and some are democratic witnesses.
▶ 2:08:36Sen. Warner: Do any of you want to try to defend cutting resiliency grants as a smart way to address, we can call it, if you don't like the word climate change, whatever, but the level of storms and cutting resilience dollars, does that make sense to any of you?
▶ 2:08:55Mr. Epstein: It makes sense in a certain way, we should stop subsidizing all of this stuff and let insurance prices adjust to the actual risk. Sea level rises are one foot right now.
▶ 2:09:13Sen. Warner: Have you looked at the navy and the amount they are spending?
▶ 2:09:19Mr. Epstein: I've looked at global sea level rises.
▶ 2:09:22Sen. Warner: I would ask you to look at the navy budget and look at how much money we spend every year. You may say one foot a century, that's not the case in hampton roads and virginia. And if you don't have that kind of knowledge, I don't know how you can claimed to be any kind of expert in this field.
▶ 2:09:45Sen. Warner: If you are also saying let's get rid of any resiliency protection and let the market price that, under that kind of free market approach, let's also get rid of the military and let us all just price in those costs because a free market would not spend money on preparation. I think it's an absurd answer. >> senator. Your time has expired.
▶ 2:10:16Sen. Warner: I would love to follow up with additional questions. >> don't worry, senator warner, my question is similar to years. I want to thank ranking member warren for holding today's hearing and I want to thank each of the witnesses for being here. My first question is directed at Mr. pyska -- Ms. pyska. I know you have served as county executive.
▶ 2:10:46Sen. Warner: You also served as county executive, leaving a local jurisdiction in maryland that I saw firsthand as you have, the devastation that flooding from severe storms can cause. There were times where we had to send our first responders into communities in boats to rescue residents who became stranded when the waters rushed down their streets and into their homes.
▶ 2:11:11Sen. Warner: In maryland alone, there is $150 million worth of flood and mitigation projects that have now gone -- that will now be canceled as a result of the cancellation of the building resilient infrastructure communities program. Two of these programs, heartbreaking for us, are in a place called crisfield, maryland. Which is helped an entire town protect their residence from storm surges as high as five feet.
▶ 2:11:42Sen. Warner: I would like to ask you, Ms. pyska, from your perspective, as someone who has been a victim of natural disasters as well, how harmful is the cancellation of the brick program?
▶ 2:11:51Ms. Pyska: Thank you, senator. As I mentioned earlier, our county is rural, economically challenged and we have not had the resources to yet apply for brick but we have been working toward it as our goal. The counties to the side of us, the south and the west, sonoma and napa are much more affluent and have the resources. They have applied for and been awarded two grants in 2021.
▶ 2:12:23Ms. Pyska: -- those grants in 2021 trade they have done a substantial amount of planning to highlight what will harden their communities from a wildfire. Now that they are at the point of implementation, those funds are now terminated. They are, as I said earlier, dead in the water with all of the plans they have been working toward.
▶ 2:12:41Sen. Alsobrooks: What's been devastating is our towns and cities applied for these funds. They spent years planning and these not only make them safer from flood mitigation but they contribute significantly to their economies. Canceling is catastrophic in many of these areas and irresponsible. Mr.
▶ 2:13:06Sen. Alsobrooks: Gordon, in light of these cancellations and the potential overhaul of fema which could drastically change the national flood insurance program, would you share your thoughts on the role of the federal government and what you believe that role should be in helping to stabilize the market and keep all of these costs in check?
▶ 2:13:23Mr. Gordon: Yes, senator. Fema plays an enormous role in that regard. Flooding is the most common natural disaster. While there is some limited private flood insurance, the private market couldn't hope to take on the 4.7 million homeowners and families that rely on the nfip that is run by fema.
▶ 2:13:45Mr. Gordon: Fema also does a lot of great work in natural disaster mitigation, making sure communities are adopting flood mitigation measures and creating flood maps. Those are all really essential to help protect communities against floods and we support the continuation of all of those programs.
▶ 2:14:05Sen. Alsobrooks: One more question for Ms. pyska. The trump administration has proposed dramatically overhauling fema, including by possibly quadrupling the amount of damage a community must suffer in order to receive federal aid. Them overseas the national flood insurance program and maryland has about 63,000 active flood insurance policyholders. Let me be clear.
▶ 2:14:34Sen. Alsobrooks: Any lapse in the federal flood insurance program would be harmful to marylanders. Would you just comment on how harmful it would be for your county if a fema overhaul threatened the administrations flood insurance program?
▶ 2:14:50Ms. Pyska: It would be extremely damaging for the future of our county and for all of the communities. Most of the communities surround the clear lake which is in the center of our county which is the largest natural lake in california and the oldest freshwater lake in north america. So, all of our communities around the lake rely on nfip. We need that reauthorized.
▶ 2:15:17Sen. Alsobrooks: Thank you. I yield.
▶ 2:15:23Sen. Warren: In closing, I want to thank all of our witnesses for being with us today. Some of you have traveled out of town -- from out of town and we are grateful that you are taking time away from work and your families to testify. Insurance affordability issues continue to be important to this committee and to all of the states that we represent.
▶ 2:15:49Sen. Warren: For senators who wish to submit questions for the hearing record, those questions are due one week from today, thursday, may 8. To our witnesses, you will have 45 days from that date to submit your responses to the questions for the record. Thank you. And with that, this committee is adjourned.