House Financial Services Subcommittee Issues Testimony From Reinsurance Association of America President Nutter

WASHINGTON, Nov. 13 -- The House Financial Services Subcommittee on Housing and Insurance issued the following testimony by the Reinsurance Association of America President Frank Nutter involving a hearing on Nov. 2, 2023, entitled "The Factors Influencing the High Cost of Insurance for Consumers":

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Chairman Davidson, Ranking Member Cleaver, and members of the Subcommittee on Housing and Insurance, thank you for the opportunity to testify during today's hearing on "The Factors Influencing the High Cost of Insurance for Consumers," and thank you for your interest in the U.S. property casualty (re)insurance industry.

I am Frank Nutter, President of the Reinsurance Association of America (RAA). The RAA is the leading trade association of property and casualty reinsurers doing business in the United States. RAA membership is diverse, including reinsurance underwriters and intermediaries licensed in the U.S. and those that conduct business on a cross border basis. The RAA also has life reinsurance affiliates and insurance-linked securities (ILS) fund managers and market participants that are engaged in the assumption of property/casualty risks. The RAA represents its members before state, federal and international bodies.

The RAA appreciates the Committee facilitating a discussion on what is driving up costs in the U.S. property insurance market. My testimony will provide a brief overview of reinsurance, discuss factors that contribute to the cost of property insurance and reinsurance, and offer a few recommendations.

Reinsurance

Reinsurance is essentially insurance for insurance companies. It is a successful, critical, and efficient risk management tool used by private sector companies and government programs to provide a crucial safety net for low frequency, high severity natural and man-made events that result in extreme insured losses. Figure 1 includes two U.S. property and casualty industry graphs that demonstrate this by showing over 50 years of data, dating back to 1970. For example, the peaks in the U.S. Reinsurance Industry Market Cycle show that reinsurance absorbed the most significant insured event losses in the U.S. (See Appendix A for a larger version of Figure 1).

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Reinsurance helps the private sector companies and government programs improve capacity and financial performance, enhance financial security, and reduce financial volatility. Insurers rely on reinsurers to assume losses for a single event or, in many cases, for an accumulation of losses from hurricanes, earthquakes, winter storms, wildfires, or terrorist attacks. Some historic events illustrate this. Hurricanes Katrina, Rita and Wilma in 2005 caused over $92 billion in insured losses, and reinsurers bore around 28% of the losses from those events.1 Reinsurers assumed 55% of $41 billion in insured losses from the terrorist events of September 11.2 Superstorm Sandy caused $25 billion in insured losses with reinsurers taking 30% of those losses.3

Reinsurance also is the primary mechanism for spreading risk globally, thereby accessing a greater pool of capital to pay for inevitable catastrophic losses. Reinsurance is extensively used by the private markets to diversify risk and protect against future losses. Reinsurance is purchased for...

1 Holborn Corporation, "Holborn Perspectives, Looking Closer At...SuperStorm Sandy," December 12, 2012

2 Holborn Corporation, "Holborn Perspectives, Looking Closer At...SuperStorm Sandy," December 12, 2012

3 Holborn Corporation, "Holborn Perspectives, Looking Closer At...SuperStorm Sandy," December 12, 2012

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...essentially four reasons: (1) to limit liability on specific risks; (2) to stabilize loss experience; (3) to protect against catastrophes; and (4) to increase capacity. Depending on the purchaser's goals, different types of reinsurance contracts are available to bring about the desired result.

For federal programs, purchasing reinsurance can mitigate the financial impact of any large-scale future losses and help to prevent any future funding lags as it is pre-arranged financing for losses. Reinsurance also allows federal programs to gain financial flexibility and not be forced to rely on emergency federal funding in the event of defaults that could put programs in jeopardy. Reinsurance has been used by federal programs, including FEMA's National Flood Insurance Program (NFIP), the Export-Import Bank of the U.S. (EXIM), and the Government Sponsored Enterprises (GSEs), Fannie Mae and Freddie Mac. It also has been used by state programs, including the California Earthquake Authority, California Wildfire Fund, Florida Hurricane Catastrophe Fund, and Florida Citizens Property Insurance Corporation.

Consistent with the intent of Congress, reinsurers believe the private sector can and should voluntarily assume more Federal government risk and help manage exposure to losses. The use of private capital will protect consumers, taxpayers, and communities, while spreading risk throughout the globe to insurers and other capital providers who are willing to assume such risk. Risk transfer via reinsurance and the capital markets strengthens government programs and private sector insurers by giving them the financial flexibility to ensure they continue to remain viable in the long term. Reinsurers are poised to work with the Congress and the Administration to expand and maximize the Federal government's utilization of the private market to the extent the industry can write the risk.

Reinsurance is not mandated for private sector insurers, the NFIP, EXIM, and the GSEs. It is voluntarily purchased by insurers and government programs. Insurers and government programs have options, including purchasing reinsurance, which is a form of rental capital, or they raise other forms of capital, such as equity or debt. Aon reported that, "Reinsurance remains an accretive source of capital for insurers when compared with debt and equity."4 In general, when insurers or government programs choose to buy reinsurance, it is because it works for them as a more cost-effective way than the alternatives for them to manage their catastrophic risk.5 On average, reinsurance capital is less than half the cost of equity capital.

U.S. property and casualty reinsurers are regulated by the states, and non-U.S. property and casualty reinsurers doing business in the U.S. are regulated by other jurisdictions that are recognized as reciprocal jurisdictions by meeting criteria set forth in the 2017 U.S.-EU Covered Agreement and 2018 U.S.-UK Covered Agreement, both of which states have implemented, and the National Association of Insurance Commissioners (NAIC) Uniform Checklist for Reciprocal Jurisdiction Reinsurers.7

4 https://www.aon.com/insights/reports/2023/reinsurance-market-dynamics

5 https://www.reinsurance.org/Fundamentals/Fundamentals_of_Property_and_Casualty_Reinsurance/

6 https://www.reinsurance.org/RAA/News/2023/RAA_Publishes_White_Paper_on_CA_Homeowners_Insurance_Market/

7 https://home.treasury.gov/policy-issues/financial-markets-financial-institutions-and-fiscal-service/federal-insurance-office/coveredagreements/us-eu-covered-agreement; https://home.treasury.gov/policy-issues/financial-markets-financial-institutions-and-fiscal-service/federalinsurance-office/covered-agreements/us-uk-covered-agreement; and https://content.naic.org/cmte_e_reinsurance_certified_reciprocal_reinsurers.htm

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Extreme Natural Disasters and Insured Losses

Extreme natural disasters have become more frequent and more severe. According to Aon, "2022 is anticipated to rank as the fifth costliest year on record for insurers." Direct economic losses resulting from natural disasters in 2022 are estimated at $313 billion"; and 75% of $132 billion of global insured losses were recorded in the U.S.8 Two of the top ten events in 2022 were Hurricane Ian, resulting in approximately $52.5 billion in insured losses and the worst drought the U.S. has seen since 2012, which resulted in approximately $8 billion in insured losses.9 The Swiss Re Institute reported (Figure 2), "Since 1992, insured losses have grown 5-7% on an average annual basis."10

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8 https://www.aon.com/weather-climate-catastrophe/index.aspx?utm_source=media&utm_medium=orgdigital&utm_campaign=0_ri_esg_ins_rin_global_r0&utm_content=engagement_climate-change_read-article

9 https://www.aon.com/weather-climate-catastrophe/index.aspx?utm_source=media&utm_medium=orgdigital&utm_campaign=0_ri_esg_ins_rin_global_r0&utm_content=engagement_climate-change_read-article

10 https://www.swissre.com/institute/research/sigma-research/sigma-202301.html#:~:text=A%20prevailing%20economic%20storm%20in,at%20USD%2050%2D65%20billion.

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According to the National Oceanic and Atmospheric Administration (NOAA) National Centers for Environmental Information (NCEI): "In 2023 (as of October 10), there have been 24 confirmed weather/climate disaster events with losses exceeding $1 billion each to affect the United States. These events included 1 drought event, 2 flooding events, 18 severe storm events, 1 tropical cyclone event, 1 wildfire event, and 1 winder storm event. Overall, these events resulted in the deaths of 373 people and had significant economic effects on the areas impacted. The 1980-2022 annual average is 8.1 events (CPI-adjusted); the annual average for the most recent 5 years (20182022) is 18.0 events (CPI adjusted)."11 Figure 3, by NCEI, shows the approximate location of these 24 events that occurred in the U.S. through September 2023.12 Figure 3.

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11 https://www.ncei.noaa.gov/access/billions/

12 https://www.ncei.noaa.gov/access/billions/

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In July, Gallagher Re reported that for the first six months of 2023, "...insured loss was 18% higher than the decadal average (USD44B) and 39% above the 21st Century average (USD38B)." Gallagher also reported that 13 of the 17 events with insured losses over $1 billion were in the U.S. Figure 4 shows insured losses by peril for the first half of 2023 that that 69% of the losses were due to severe convective storms (SCS), which may produce thunder, hail, strong winds, brief tornadoes, and/or flooding.13

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13 https://www.ajg.com/gallagherre/news-and-insights/2023/july/2023-natural-catastrophe-report/; https://www.nssl.noaa.gov/education/svrwx101/thunderstorms/types/

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According to Aon, "When viewing insured losses on a cumulative basis since the start of the 21st century, Tropical Cyclone is the costliest global peril. Like Earthquake, it is largely driven by extreme loss years and single catastrophic events, as opposed to severe convective storms (SCS) - losses, which are driven by an increasing frequency of events. Approximately 40 percent of cumulated losses from Tropical Cyclone were caused by only five Atlantic Hurricanes -- Katrina, Ian, Irma, Ida and Sandy. On the other hand, the number of costly SCS events outpaced other perils by a large margin."14 See Exhibit 11.

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14 https://www.aon.com/weather-climate-catastrophe/index.aspx

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Reinsurance Capital With record-breaking losses, reinsurance exposures have outpaced capital (Figure 5), and insurers have spent more in claims payments and expenses than they collected in premiums.15

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15 https://www.swissre.com/institute/research/sigma-research/sigma-202301.html#:~:text=Global%20economic%20losses%20from%20natural,from%20natural%20catastrophes%20are%20standard.; and https://www.spglobal.com/marketintelligence/en/news-insights/research/us-pc-insurance-market-report-profitability-to-remain-elusive-in2023#:~:text=%E2%9E%A4%20The%20S%26P%20Global%20Market,even%20point%20for%20underwriting%20profitability.

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However, according to Fitch Ratings "...reinsurers [are] still offer[ing] ample cover against the most severe events...". Gallagher Re's half year 2023 report estimated that reinsurance dedicated capital (Figure 6) rebounded to $709 billion, a "...robust increase in [reinsurers'] capital base..." primarily due to "...unrealized investment appreciation...".16 In September, Fitch Ratings projected that the reinsurance sector would "...maintain very strong capital in 2024...".17

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The reinsurance industry also has continued to support the National Flood Insurance Program. There are 18 reinsurance companies participating in the NFIP Reinsurance program in 2023.18 In the first year of the program, the benefit of the reinsurance program was evident when FEMA recovered $1.042 billion from 25 reinsurers to help pay the cost of NFIP losses and claims resulting from Hurricane Harvey (2017). This 2017 coverage, which also improved NFIP's financial viability and protected taxpayers, cost $150 million, and the program successfully renewed the subsequent year.

Loss Costs

Several factors contribute to the cost of insurance and reinsurance.

According to the Insurance Information Institute, "Much of the increase can be attributed to supply-chain issues and labor shortages driving up the cost of home repairs and replacement.19

16 https://www.ajg.com/gallagherre/news-and-insights/2023/september/1h-2023-reinsurance-market-report/

17 https://www.fitchratings.com/research/insurance/global-reinsurers-pull-back-from-natural-catastrophe-cover-24-08-2023; and https://www.fitchratings.com/research/insurance/global-reinsurance-sector-outlook-revised-to-improving-07-09-2023

18 https://www.fema.gov/flood-insurance/work-with-nfip/reinsurance

19 https://www.iii.org/sites/default/files/docs/pdf/state_of_the_risk_homeowners_02032022.pdf

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Social inflation is also a factor that contributes to the cost of insurance and reinsurance.20 For example, a proclamation issued by the Governor of Florida in 2022 stated that "...according to the Office of Insurance Regulation, Florida accounted for 79% of the nation's homeowners insurance lawsuits over claims filed while making up only 9% of the nation's homeowners insurance claims."21

Increasingly, more and more people in the U.S. are living near the water and the woods, aesthetically pleasing places to live but also much more dangerous, high-cost areas. According to the Insurance Information Institute, "In the United States much of rising loss trend is due to people moving into risk-prone areas. More people, homes, businesses and infrastructure means more costly damage when extreme weather events occur."22 In September, this was verified by Verisk: "The growth in exposure values, driven primarily by continued construction in high-hazard areas, and rising replacement costs - largely due to inflation - are the most significant factors responsible for increasing catastrophe losses. The other significant factor is the impact of climate change, which is often cited as the primary reason for the increase in losses. But, while this plays a role, year-over-year growth of exposure and rising replacement values have a far greater short-term impact."23

The Insurance Information Institute also published a map (Figure 7) by Aon demonstrating that: "...the number of housing units in the United States has increased most dramatically since 1940 in many areas that are most vulnerable to weather and climate-related damage. Red and purple represent the greatest increases, and these colors disproportionately cluster around hurricane- and flood-prone areas in Florida and Texas, as well as parts of California, Nevada and Washington that are at an elevated risk of wildfire or drought -- and, consequently, mudslides and flash floods."24

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20 https://content.naic.org/cipr-topics/socialinflation#:~:text=Issue%3A%20Social%20inflation%20is%20a,monetary%20relief%20for%20their%20injuries.

21 https://www.flgov.com/2022/04/26/calling-on-the-legislature-to-hold-a-special-session-regarding-property-insurance/

22 https://www.iii.org/white-paper/flood-beyond-risk-transfer-042921

23 https://www.verisk.com/newsroom/insurance-industry-faces-average-annual-natural-catastrophe-losses-of-$133b-a-new-high-according-toverisk-report/

24 https://www.iii.org/white-paper/flood-beyond-risk-transfer-042921

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Uninsured Losses and Subsidized Insurance

In addition to property owners and the insurance industry, the Federal government pays for uninsured losses that result from extreme natural disaster events. In June 2023 Taxpayers for Common Sense reported:25

* "Presidential major disaster declarations, which trigger funding of emergency and recovery efforts led primarily by the Federal Emergency Management Agency (FEMA), tripled from 200 in the 1960s to 600 in the first decade of this century. Taxpayers spent more than $120 billion responding to 2017 disasters."

* "To put the high costs of federal disaster spending into perspective, 2017 spending exceeded the annual discretionary budget of every federal agency except the Pentagon that year. A federal agency funded at an amount equal to the 2017 disaster spending would have received more funding than the combined fiscal year appropriations for the Departments of Commerce, Energy, Interior, Labor, Transportation, Treasury, as well as the Environmental Protection Agency and the U.S. Army Corps Engineers."

Ultimately, it is U.S. taxpayers and property owners paying for uninsured losses through emergency government assistance, amounts which are less than compared to claims payments. Federal disaster assistance is provided only when there is a federally declared disaster and typically results in a fraction of what insurance assistance can provide. For example, according to FEMA, the average, annual flood insurance premium was $700 (about $58 per month) in 2019, and the average claim payout was $53,000.26 Meanwhile, in 2019, federal disaster assistance was capped at $34,900 with an average annual payment of $6,246.27

Fully relying on the Federal government for insurance or disaster assistance supported by taxpayers is not a long-term solution. When the Federal government doesn't have sufficient funds to pay for the cost of extreme events, it borrows them. NFIP provides a good example. FEMA's most recent NFIP financial statement, the Program is $20.5 billion in debt.28 According to the U.S. Government Accountability Office's most recent study on the NFIP: "NFIP was created with competing policy goals--keeping flood insurance affordable and the program fiscally solvent. A historical focus on affordability has led to premiums that do not fully reflect flood risk, insufficient revenue to pay claims, and, ultimately, $36.5 billion in borrowing from Treasury since 2005."29

Congress cancelled $16 billion of the program's debt in 2017, and NFIP has paid $5.71 billion in interest to the U.S. Department of the Treasury, which also is paying interest on U.S. borrowing to the tune of $659 billion for the federal fiscal year that ended in September, according to a Treasury report issued on Friday. 30 Congress and FEMA should be commended for taking steps in recent years to address the fundamental flaws in the NFIP and toward removing inequitable and unjustifiable rate subsidies.

25 https://www.taxpayer.net/climate/paying-the-price/

26 https://www.fema.gov/data-visualization/historical-flood-risk-and-costs

27 https://www.federalregister.gov/documents/2018/10/22/2018-22884/notice-of-maximum-amount-of-assistance-under-the-individuals-andhouseholds-program; FEMA communication with RAA, 4/16/2021

28 https://www.fema.gov/flood-insurance/work-with-nfip/watermark-financial-statements

29 https://www.gao.gov/products/gao-23-105977

30 https://www.fema.gov/flood-insurance/work-with-nfip/watermark-financial-statements; and https://www.washingtonpost.com/business/2023/10/20/interest-debt-payment-treasury/

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As a result, the NFIP is today on a path toward a stronger financial framework and resiliency to pay claims without additional borrowing from taxpayers. The RAA urges Congress to avoid retreating from this progress and strongly encourages Congress to fully examine reforms that will improve the program to the benefit of those with homes, businesses, and communities facing flood risk and taxpayers alike. (Please refer to the RAA's testimony before the House Financial Services Subcommittee on Housing, Community Development, and Insurance for its May 25, 2022, hearing on "Reauthorization and Reform of the National Flood Insurance Program" for the RAA's views on flood reform.31)

Unlike the NFIP, insurers and reinsurers are required by states to have adequate capital to pay for losses, including catastrophic losses. The industry raises capital through premiums paid by consumers -- policyholders and cedents (insurers that purchase reinsurance) -- and investment returns insurers and reinsurers made with those premiums. The investors in turn expect some return on their investment. Consumers expect to be paid if a claim is filed and covered in a (re)insurance agreement. If insurance investors and consumers are not paid for their investment in and purchase of (re)insurance respectively, they will invest their money elsewhere or purchase (re)insurance from another company. Ultimately, insurers and reinsurers investing consumer premiums, allows premiums to stay lower than they would be otherwise, helps the (re)insurer remain solvent after claims are paid, and provides investors with a return on their investment.

Recommendations

What should Congress do about increasing costs of insurance, reinsurance, and federal emergency disaster expenditures?

I. The Federal government should allow each state to manage its own insurance regulatory and legal environment, as each state has unique insurance market challenges. For example, functioning, competitive insurance markets benefit consumers and allow insurers to charge risk-adequate rates to cover losses, so California is moving toward reforms to achieve that.32 In 2022 and 2023, to reduce social inflation-related loss costs, Florida took significant action to curb litigation abuses and restore balance in the legal system while retaining consumer access to courts. As a result of Florida's reforms, new insurance companies have entered the Florida market in 2023.33

Also, each state faces different perils, and in recent years, record-breaking events. Florida and other Gulf and East Coast states have experienced extreme hurricanes. California and other western states have experienced extreme wildfires. Midwest states have experienced severe convective storms (SCS), which may produce thunder, hail, strong winds, brief tornadoes, and/or flooding.34

We have distributed to each member of the Subcommittee, for their congressional district, data from the Federal Emergency Management Agency's National Risk Index,...

31 https://financialservices.house.gov/calendar/eventsingle.aspx?EventID=408331

32 https://www.reinsurance.org/RAA/News/2023/RAA_Publishes_White_Paper_on_CA_Homeowners_Insurance_Market/

33 https://www.insurancejournal.com/news/southeast/2023/08/15/735429.htm

34 https://www.insurancejournal.com/news/national/2023/04/27/718083.htm; https://www.ajg.com/gallagherre/news-and-insights/2023/july/2023-natural-catastrophe-report/; and https://www.nssl.noaa.gov/education/svrwx101/thunderstorms/types/

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...which depicts the perils in their congressional district. In short, no congressional district's peril data looks the same.

II. Congress should reform federal programs to provide incentives for people to live in more resilient homes and communities. Investing in pre-disaster mitigation can reduce the impact of future disasters on lives, property, and the economy. The National Institute of Building Sciences 2019 "Natural Hazard Mitigation Saves" report, funded by the U.S. Department of Housing and Urban Development, describes that federal disaster mitigation has saved $6 for every $1 invested since 1995.35 Other mitigationrelated activities, such as updating building codes to ensure resilient structures, and investments can save between $4 and $11 for every $1 spent. Federal agencies in charge of housing programs, transportation and other infrastructure, and forests and waterways, for example, should incentivize property owners and communities to improve resilience against the perils they face. A few examples include encouraging and providing funds for: stronger building codes and enforcement; better land use that promotes nature-based solutions to protect communities; and building fortified homes using standards like those developed by the Insurance Institute for Business & Home Safety.

III. In December 2022, President Biden signed into law the RAA-initiated Community Disaster Resilience Zones Act. It requires the Federal Emergency Management Agency to use a data driven approach to identify and prioritize the most in need and most at-risk communities in the U.S. facing natural hazard risks, directing public sector funds and private-sector resources to these communities to improve resilience. The CDRZ Act was supported by over 30 national organizations (See Appendix B). Last month, FEMA designated the first CDRZ communities to receive hazards assistance for resilience.36 Congress should use this structure to improve resilience in communities across the U.S. Related to the data used for CDRZ Act implementation and for other purposes, Congress should fund the National Oceanic and Atmospheric Administration (NOAA) and National Aeronautics and Space Administration (NASA) for improved weather and climate risk assessment.

IV. In addition to increasing funding for pre-disaster mitigation grants for FEMA programs, such as the Building Resilient Infrastructure and Communities (BRIC), and other agency programs, Congress should establish more cost-effective ways to improve U.S. resilience instead of only appropriating limited federal funding. For example, based on the CDRZ act passed in December 2022, Congress should enact tax legislation that would incentivize the private sector to invest in resilience obligations issued by Federal, state and local governments. These financing vehicles would leverage federal spending with private capital to fund pre-disaster mitigation projects that reduce risk, improve resilience, and create insurable communities. And Congress should enact other common-sense legislation, including the "Disaster Mitigation and Tax Parity Act" to exempt state and local mitigation grants from federal taxation; and the...

35 https://www.nibs.org/projects/natural-hazard-mitigation-saves-2019-report

36 https://www.fema.gov/press-release/20230906/fema-designates-first-communities-receive-targeted-assistancehazards#:~:text=FEMA%20Designates%20First%20Communities%20to%20Receive%20Targeted%20Assistance%20for%20Hazards%20Resilience,-English&text=WASHINGTON%20%E2%80%93%20Today%2C%20FEMA%20is%20announcing,worsened%20by%20the%20climate%20crisi

s.

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"Strengthening Homes and Eliminating Liabilities Through Encouraging Readiness(SHELTER) Act" to provide a disaster mitigation tax credit of 25% of qualifying mitigation expenses of up to $2,500 for individuals and $5,000 for businesses.37

V. Given the likelihood of future, significant, and costly natural disasters throughout the U.S. and uninsured residential costs, it is important to have a coordinated effort focusing on closing the insurance protection gap. That effort should include traditional insurance and risk transfer as well as innovative risk transfer mechanisms for communities. The National Association of Insurance Commissioners cited a statistic that "Only 1% of properties outside of flood zones have flood insurance, yet half of U.S. floods occur in these areas." A 2018 report by AIR Worldwide (now Verisk), warned that the next big earthquake to impact California, likely by 2044, could result in $170 billion in total damage and almost half would be residential-related loss, $37 billion of which would be uninsured.38 The Federal Advisory Committee on Insurance (FACI) "Subcommittee on Addressing the Protection Gap through Public-Private Partnerships and Other Mechanisms" issued recommendations to achieve the goal of closing the flood insurance program gap.39

What should Congress not do?

Congress should not create a new federal property (re)insurance program to displace the insurance industry or states' regulatory role. Like the NFIP historically, such a federal program would likely subsidize premiums so they do not reflect property risk and expected loss, which can mask the true risk of a property, encourage ownership of property in hazard-prone locations, discourage property builders and owners from building properties that are resilient against natural hazards, and discourage pre-disaster mitigation of properties. A federal (re)insurance program would increase the cross subsidy from low or no risk persons and taxpayers to those living in high-risk areas. The classic "robbing Peter to pay Paul" analogy applies. Insurance subsidies or artificially low rates also have facilitated the development of environmentally sensitive coastal areas, including those at high risk to losses caused by natural disasters. Finally, like private sector insurers and reinsurers, unless government-chartered insurance programs have sufficient capital, they can become insolvent, just like the NFIP. Appendix C includes a letter by the SmarterSafer Coalition that opposes a federal reinsurance program and outlines concerns expressed by environmental groups, taxpayer advocates, insurance interests, housing organizations, and mitigation advocates.40

Conclusion

The RAA looks forward to continuing to work with you to address the very real, dangerous, and costly challenges caused by extreme natural disaster events that are increasingly impacting consumers, taxpayers, communities, and our industry and others. We must work together to increase the resiliency of our country. Thank you for your consideration of our views.

37 https://www.congress.gov/bill/118th-congress/house-bill/4070; https://www.congress.gov/bill/118th-congress/house-bill/4305

38 https://www.air-worldwide.com/Publications/Infographics/Who-Will-Pay-for-the-Next-Great-California-Earthquake-/

39 https://home.treasury.gov/system/files/311/December2019FACI_ProtectionGapPresentation.pdf; https://home.treasury.gov/system/files/311/December2019FACI_ProtectionGapProposedRecs.pdf; and https://www.airworldwide.com/Publications/Infographics/Who-Will-Pay-for-the-Next-Great-California-Earthquake-/

40 https://www.smartersafer.org/2023/09/13/smartersafer-coalition-raises-concerns-about-federal-reinsurance-program-to-senate-bankingcommittee-leaders/ 15 APPENDIX A 16 APPENDIX B 17 18 APPENDIX C 19 20 21

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View original text, plus charts here: https://docs.house.gov/meetings/BA/BA04/20231102/116528/HHRG-118-BA04-Wstate-NutterF-20231102.pdf