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INTRODUCTION

• I want to thank your President, James Hanna, and Jan Weisel for inviting FEMA to participate in this session.
• It is an honor to join the NCSBCS - an organization that has been at the forefront of the development, adoption and enforcement of building codes. These codes have made a real difference in promoting disaster-resistant and sustainable communities.
• I am privileged to serve as Federal Insurance Administrator as the National Flood Insurance Program - or "NFIP" -- marks it 30^th Anniversary. It has been a time to take stock of how far we have come, and look ahead to where we want to go as we enter the 21^st Century.
• This morning I would like to discuss:
  
  1. background on the Program
  2. our experience over the last 30 years with NFIP requirements
  3. our vision as we move ahead towards the year 2000
  4. the common ground that we share.

BACKGROUND ON THE NFIP

• Even though I am a former Texas State Insurance Commissioner and have worked in insurance law for more than a decade, I am seeing the NFIP through new eyes.
• In fact, some of us who thought we were well versed in this industry tend to take it for granted. But it has made a major difference in the lives of virtually all Americans since its inception.
• Congress created that National Flood Insurance Program in 1968 in response to mounting losses and escalating costs of natural disasters to American taxpayers.
• It was constructed on three pillars:
  1. hazard identification and risk assessment - mapping of flood-prone areas to make flood hazard determinations and set insurance rates
  2. mitigation - adoption and enforcement of reasonable land-use requirements and building codes to reduce future flood damage
  3. insurance - a mechanism for financial protection of residents and business owners in flood-prone areas, not generally available in the private market.

• Together, these three pillars provide a solid foundation for the program. But, without the support of any one of them, the program cannot work effectively.
• Let's start with the insurance pillar.
• This Federal program is now one of the largest property and casualty insurers in the Nation. In fact, it is the largest single-line insurer, with over 4 million policies in force Nationwide, and $485 billion in coverage. It protects:
  1. property owners from financial disasters since homeowners' policies don't cover flood damage
  2. lenders from uninsured losses while a mortgage is paid off
  3. taxpayers who would otherwise provide disaster assistance to the uninsured flood victim
  4. participating communities whose floodplain management ordinances promote better, safer construction.

• The bulk (94%) of our business is carried out under a partnership arrangement between the Federal Insurance Administration - FIA - and (now) 85 private companies to offer flood insurance to the public. FIA sets the premium rates, but relies on these private companies to use their marketing talents to sell and service policies and adjust the claims.
• One unique aspect of the program is that it is self-supporting from premium income, not taxpayer dollars.
• This pie chart shows how we spend our premium revenue:
  1. In an average year, our losses amount to about $700 million (about 60% of our premium revenue in FY 1998).
  2. The expense allowance to private, "Write Your Own" companies accounted for 31% (or $370 million) of our expenses.
  3. Another 1% was used for Agent commissions for our Direct sales program) ($15 million)
  4. Interest to the Treasury was $43 million or 4% in FY 1998.
  5. For periods of heavy loss, Congress provided us the means to borrow money from the U.S. Treasury to honor claims without interruption. As the claims subside, borrowed funds are repaid, to you, the taxpayer, with interest! (over $108 million since '95)! 

• Another unique aspect of the Program is that the insurance operations put money back into the communities to support the other two pillars -mapping and flood mitigation. From the $30 Federal Policy Fee collected on each policy, we support floodplain mapping, flood mitigation grants to the States, and Federal staff and expenses.
• From the $30 Federal Policy Fee collected on each policy in FY 1998, we supported:
  1. Floodplain mapping ($43 million, 53%)
  2. Flood mitigation grants to the States ($9 million, or 11% - plus another $5million in prior year monies)
  3. Other flood mitigation activities, which include contracts, printing and CAP-SSSE grants to States ($9.4 million, or 12%)
  4. Federal staff and expenses of FEMA to manage flood mitigation activities and operation of the Federal Insurance Administration ($20 million, or 24%). 

• Hazard identification and Risk assessment -- accurate mapping of flood risks -- is the cornerstone of the Program.

Through the NFIP, over 20,000 communities have been mapped at a cost of $1.2 billion. The approximately 100,000 map panels produced by FEMA are one of the Nation's most valuable mitigation tools.

• The maps are used to:

1. set insurance rates
2. determine whether or not buildings are required to be covered by flood insurance as a condition of obtaining mortgage loans or other Federal or Federally-related financial assistance. This is the so-called "mandatory purchase requirement".
3. carry out local floodplain management, land use and water resource planning
4. manage emergencies

• Although the initial mapping of the Nation's floodplains is essentially complete, there is a continual need to revise and update the maps to reflect changed conditions and new areas that will be undergoing development.
• The maps are aging - 45% are at least 10 years old, and 70% are 5 years or older. Many are not up to date with current land development and Geographic Information Systems (GIS) technology. The manual cartographic methods used to produce the maps limit their utility, electronic distribution, and cost-effective revision.
• FEMA has recently launched a Map Modernization Initiative that will use state-of-the-art digital engineering, mapping, information technology to improve the accuracy and utility of the maps.
• We don't have enough money to do the job that needs to be done. Current rates of spending support update of only 2 - 3% of the map panels per year.
• Although the costs of flood mapping have been born by flood policyholders to date, we hope to obtain additional resources from Congress.
• While there is broad consensus that something needs to be done about the maps, there is not yet consensus on how to pay for it.
• The final pillar is mitigation.
• Without mitigation based on accurate mapping, there could be no insurance. As one of my predecessors recently said, "....it would just be a 'give-away' program." 
• In essence, the NFIP is a bargain struck between communities and the Federal government.
• Communities voluntarily join the NFIP to make their citizens eligible to purchase the insurance. Almost 19,000 communities Nationwide participate.
• Communities agree to adopt and enforce a floodplain management ordinance to regulate development in flood hazard areas. In exchange, the Federal government agrees to subsidize insurance on buildings built before flood hazards were known (so-called "Pre-FIRM" buildings). Owners of new buildings, built after FEMA has identified the flood hazards ("post-FIRM"), pay actuarial rates for insurance that fully reflect the risk.
• The NFIP requirements, which are minimum criteria for participation in the program, broadly applicable across the Nation, are a starting point.
  • We encourage communities to gain a full understanding of their flooding characteristics, changes in the watershed, vulnerable properties and populations and damage history;
  • And, take additional steps that protect their citizens commensurate with the risk.
• Many communities are already taking these steps through participation in the Community Rating System (CRS). It provides a built-in incentive for community efforts beyond these minimum floodplain management requirements in the form of premium discounts.
• Enforcement is key. Adoption of ordinances without enforcement leaves an empty "shell".

• Dealing with the economic costs and personal suffering caused by repetitively flooded buildings is one of our biggest challenges.
• When we assumed the risk for the older, pre-FIRM properties built in harm's way, we knew they would experience a higher loss rate. We are now implementing a strategy to reduce repetitive losses, which account for about $200 million in losses per year.
• We are targeting those buildings that have suffered the most loss. We will be providing grant funds to voluntarily relocate, buy-out or elevate them to prevent further loss. For those who choose not to accept our offer of assistance, we are considering insurance changes which, if adopted, would increase premiums to reflect more of the full risk.
• Our goal is to protect residents and business owners by providing real alternatives to break the cycle of repetitive loss.

OUR EXPERIENCE WITH NFIP REQUIREMENTS

• If you had to grade us on the program, we would get an A for improving land use and safety of buildings in high-risk areas.
• We have found that flood insurance has been an effective incentive for adoption and enforcement of floodplain management ordinances and other code requirements.
• In the early days of the program, the NFIP was a catalyst for many communities to adopt a floodplain management ordinances. To meet NFIP requirements, among other things, they had to review every building permit and determine if the proposed construction was in a high-risk area, and if so, regulate it accordingly. The permitting system was new to many communities.
• Thus, the program helped foster development of the administrative systems necessary to administer building codes and standards that exists today in the almost 19,000 participating communities.

• There is abundant evidence from our 30 years of insurance loss experience that the NFIP construction standards really work. The investment pays off:
  1. Structures built to higher standards are 77% less likely to be damaged. There are fewer and less severe losses.
  2. The higher standards are estimated to save taxpayers $800 million per year in damages avoided (almost $1B in 1999).
  3. Every $3 paid in claims is estimated to save the taxpayers $1 in disaster assistance.

• Most communities hold up their end of the bargain - by adopting and, most importantly, enforcing - these floodplain management requirements.
• When they don't, we all lose.

  -- Premiums are raised on insured property.
  -- In those communities suspended from the program, insurance is unavailable.
  -- Losses are larger due to poor construction, compromising our goal of an actuarily sound program with reasonable premiums
  -- An increased burden falls on taxpayers for disaster relief.

• While there is a need for more rigorous study of levels of compliance nationwide and the total impact on the program, one recent study showed that about 85% of the structures surveyed (a statistical sample of post-FIRM construction of various ages in communities that later became CRS communities) were built in compliance.
• But one thing is certain: There are significant problems in some areas and we need to devise new ways to move towards 100% compliance.

Substantial Damage/ICC

• We have new coverage to help pay the costs for compliance with State or community floodplain management laws or ordinances after a flood event in which a building has been declared substantially or repetitively damaged.
• While the claims payment (of up to $15,000) is provided to the policyholder whose property has been damaged by flood, communities play a key role. It is their responsibility to determine that the building is "substantially damaged" - i.e., that the cost of repairs equals or exceeds 50% of its pre-damaged value. If so, the building must be elevated or otherwise protected from the 100-year or base flood.
• The "substantial damage" requirement is designed to ensure that any significant increase in investment in flood hazard areas will receive needed protection from flood risk.
• However, we have found some evidence that indicates that fewer than 1/3 of "substantially damaged" structures are so designated. Communities must be more vigilant in enforcing this requirement, because properly rebuilt structures suffer less flood damage and reduce the burden on the all - the owner, the policy holder, and the taxpayer.

OUR VISION FOR THE FUTURE

• The three pillars of the National Flood Insurance Program involve many different stakeholders and touches so many lives.
• I would like to briefly outline the vision towards which we are all working as we enter the 21^st Century....
• Through Project Impact, we are working to help make the Nation disaster resistant, focusing on individual communities.
• This National effort shifts the focus of emergency management from responding to disasters to implementing disaster reduction measures. It encourages communities to form partnerships to identify natural hazards, assess what risks they pose, and prepare for them before they strike.
• At the core of Project Impact are two concepts:

  (1) The first is preventing damage by building stronger, safer communities before disaster strikes.
  (2) The second is partnership. No community can successfully become disaster resistant without everyone getting involved. Citizens, community organizations, business and industry, all levels of government and the media all are working together to make these communities safer places to live.

• We now have 118 Project Impact communities - at least 2 in every State -- and more than 700 corporate and business partners supporting the approach.
• Whether it's moving people out of a flood plain ... or preserving the coastline ... or retrofitting homes and buildings to withstand a hurricane, prevention pays. It not only makes good sense economically, but it pays dividends that you can't calculate in dollars and cents. It saves lives. It saves suffering. It saves loss of property. Prevention saves jobs. Bottom line, prevention works.
• Project Impact isn't a government program. It's not about Federal funds. It's a partnership - not just with FEMA, but with partners throughout business, local government, law enforcement, medical personnel, fire services and on down the line.
• We urge NCSBCS to join with us in this effort. Contribute your considerable expertise and networks to help make sure that building codes and standards in Project Impact communities are state-of-the-art models, with proper training in place and vigorous enforcement.

Sustainable Development and Livable Communities

• As Vice President Gore has said, "In the 21^st century, increasingly, a livable community will be an economically powerful one."
• He has launched a comprehensive Livability Agenda to help communities across America grow in ways that ensure a high quality of life and strong, sustainable economic growth in the 21^st Century.
• Key elements of this billion dollar initiative will provide communities with new tools and resources to preserve green space, ease traffic congestion, and pursue regional "smart growth" strategies.
• A National Town Meeting for a Sustainable America will be held May 2 - 5 in Detroit, designed to catalyze a National movement showcasing best practices that promote sustainability around the country. Affiliated events are being held around the country.
• Our Project Impact initiative will be one of the innovative Federal programs highlighted at the National Town Meeting.
• Voluntary buying out repetitive loss properties along waterways and returning floodplains to natural open space that sustains wildlife and provides families with places to walk, play and relax, contributes to more livable and economically viable communities.

Environmentally Sound Floodplain Management

• Since publication of the landmark Galloway report, - a report on the 1993 Midwest floods -- there has been a growing awareness that "non-structural" approaches to floodplain management are more sustainable and cost-effective for the long term.
• We need to protect our floodplains, our wetlands that act in nature as sponges that soak up excess rain and floodwaters and not fill them in for development or redevelopment .
• The truth is, we can prevent people from becoming disaster victims and protect our environment at the same time.
• Working with the Sierra Club and the National Wildlife Federation, homebuilders and realtors, we are finding common ground for future growth in areas that naturally provide excellent flood protection.

COMMON GROUND

• Building officials and floodplain administrators are our partners on the front lines in ensuring safe development.
• In large part, it is due to their diligence that flood losses are less than otherwise expected.
• We share common ground with the entire community involved with developing, adopting and enforcing building codes and standards.
• We applaud the work that has been done on the new International Building Code and International Residential Code, which together, are compliant not only with NFIP requirements, but also represent the state-of-the-art in seismic and wind compliance. We expect to be able to strongly support these codes when they are issued in the year 2000.
• Your initiative to streamline with Nation's building regulatory process should help reduce inefficiencies and facilitate the sound building process. We have much to learn from this effort.
• Your contributions to our recent Call for Issues process contained many constructive suggestions for improving the program. 

CLOSING REMARKS

• In closing, I'd like to remind you that the incidence of what we call "weather events" is on the rise. There have been more than 200 Presidentially declared disasters in the last five years. No state has been spared.
• Let's continue to work towards common goals to end the devastation now. We can do so by encouraging safe building practices and making sure that residents and businesses are protected from the financial losses through this valuable insurance mechanism.
• For those looking for more information on the program, I urge you to visit our portion of FEMA's Website. The address, as shown here, is www.fema.gov/nfip, or call our toll-free number, 1-800-427-4661.
• I will be pleased to answer any questions.