On November 30, 2018, the legislative authority that allows the National Flood Insurance Program (NFIP) to operate, will expire.
The NFIP was originally set to expire on September 30, 2017. Since then NFIP has continued under a series of short-term extensions ever since; the current extension was authorized in July 2018.
With the deadline fast approaching, it will be interesting to see what happens next. Unless reauthorized or amended by Congress, the following will occur on November 30:
- Flood insurance contracts issued before the deadline will continue until the end of their policy term of one year. FEMA still has authority to pay pending flood insurance claims with available funds.
- The authority to provide new flood insurance contracts or renew existing policies will expire. The National Association of Realtors estimates that a lapse in flood insurance might impact approximately 40,000 home sale closings per month.
- The authority for NFIP to borrow funds from the Treasury will be reduced from $30.425 billion to $1 billion. If there were to be a lapse in authorization on or after November 30, 2018, and the borrowing authority is reduced to $1 billion, FEMA would continue to adjust and pay claims as premium dollars come into the National Flood Insurance Fund (NFIF) and reserve fund. If the funds available to pay claims were to be depleted, claims would have to wait until sufficient premiums were received to pay them unless Congress were to appropriate supplemental funds to the NFIP to pay claims or increase the borrowing limit.
Sens. John Kennedy (R-La.) and Robert Menendez (D-N.J.) have introduced short-term legislation to re-authorize the NFIP for six months until the end of May 2019 before it expires on November 30.
Congress could also extend the NFIP via renewed funding for the government, which must be done by December 7, 2018. Under that scenario, there could be a week-long lapse of the program. During any lapse, NFIP policies would remain in force and the NFIP would cover claims if a storm were to hit. But new policies could not be sold, and existing policies could not be renewed.
The NFIP lapsed between January 20, 2018 and January 22, 2018, but received a short-term re-authorization through February 8, 2018. The NFIP lapsed for about eight hours during a brief government shut-down on February 9, 2018, but was extended by the omnibus spending bill through July 31, 2018.
As of May 2018, the NFIP had over 5 million flood insurance policies providing over $1.28 trillion in coverage. The program collects about $3.6 billion in annual premium revenue.
We will continue to follow this situation so check back for additional information.