January 25, 2024
Washington, D.C. – Today, during a Senate Banking Committee hearing, United States Senator Elizabeth Warren (D-Mass.) called for the Biden Administration to swiftly finalize its data call about the effects of climate change on the insurance market—and to collect all the data necessary to understand our gaps in insurance coverage and the right regulatory response. During the hearing, the Senator highlighted the rise in flooding events due to climate change, and Michael Hecht, President & CEO of Greater New Orleans, Inc., stressed the importance of gathering more data from the insurance industry to understand climate change’s impact on access to and the affordability of flood insurance.
Transcript: Reauthorization of the National Flood Insurance Program: Local Perspectives on Challenges and Solutions
U.S. Senate Committee on Banking, Housing and Urban Affairs
Thursday, January 25, 2024
Senator Elizabeth Warren: Thank you, Mr. Chairman.
So, climate change is wreaking havoc on our communities, and with global temperatures on the rise, natural disasters are coming more often and they’re doing more damage. And with floods accounting for about two-thirds of the costs of all natural disasters, our nation’s flood insurance program is feeling the strain. In just the past decade, the National Flood Insurance Program has been hit by four of its top ten costliest events in history.
More floods—more intense floods—mean that more families and businesses need flood insurance more than ever before. Last year, parts of Massachusetts were devastated by historic flooding, causing millions of dollars in damage to homes, to businesses, to farms. Modeling shows that over 100,000 properties in the Commonwealth that aren’t in FEMA’s flood zones and don’t have flood insurance are at serious risk of experiencing a flooding event.
Mr. Hecht, you’re an expert on the flood insurance market. With climate change on the rise, more people need flood insurance. Does that mean that everyone who needs flood insurance today gets that insurance?
Michael Hecht, President & CEO, Greater New Orleans, Inc.: Absolutely not. Only about 4% of U.S. homeowners have flood insurance and that number should be much, much greater.
Senator Warren: In short, our flood insurance system is not working right now.
The best and most important thing we can do is tackle the root of the problem. We should be making big, bold investments to stop climate change in its tracks, and to reduce the risk that floods pose to our nation’s communities. But at the same time, we need to make sure that we understand exactly how the ongoing climate crisis is affecting our insurance market.
So, Mr. Hecht, let me come back to you. We know a few things about how climate change is changing access to insurance. We know that premiums are up by hundreds of dollars a year in many areas. We know that private insurers have pulled out of flood-prone states like Florida and your home state of Louisiana. But if we wanted to know exactly why an insurance company was pulling out of Leominster, Massachusetts, for example, and what insurance options were available to people in Leominster, at what premium levels, do we currently have data available to be able to do that?
Michael Hecht: Senator, no. So NAIC collects data that’s at a state level, policies enforced, and so forth, but we don’t, I don’t believe we have the level of granularity.
Senator Warren: Okay, so, down at the homeowner level, at the town level, at the area that’s flooding level, we just don’t have that information. You know, the Federal Insurance Office at the Treasury Department is now working to try to fill that gap. In November, FIO proposed a plan to collect data from insurers on how climate change is affecting Americans’ access to insurance and to the affordability of that insurance, including information on premiums, coverage, and claims.
Mr. Hecht, FIO has proposed gathering data about the effects of climate change on one type of home insurance. Would it be helpful if the Administration gathered data on more types of insurance—like flood insurance—and about more categories of information—like the reasons for policy cancellations?
Michael Hecht: Two quick answers to that. One is that, as a homeowner, you’re looking at the cost of staying in your home, which is all types of insurance, plus your mortgage note, and your car payments, and so forth, so the answer is yes. And then second, yeah, I think data, good data, is power.
Senator Warren: So, we’re in the same place. I always want more information, and particularly in an area like this, we have to understand the problem in order to fix the problem. The Biden Administration should finalize its data call about the effects of climate change on the insurance market as soon as possible. And the Administration should collect all of the data necessary to understand our gaps in insurance coverage and to work out the right regulatory response.
Michael Hecht: Absolutely.
Senator Warren: Good. Thank you all very much. Thank you for being with us today.