On Friday, December 21, 2018, Congress reauthorized the National Flood Insurance Program (NFIP) until May 31, 2019; however, as of 12:01 a.m. (Eastern Time), due to the lapse in annual appropriations for the Department of Homeland Security, the annual appropriation for the NFIP also lapsed. The NFIP is continuing to pay flood insurance claims; however, FEMA advised Write Your Own (WYO) companies that the sale of new insurance policies and renewal of lapsing policies may be affected because of the lapse in appropriation. This is because the WYO are entitled to a fee from the sale or renewal of flood insurance policies and such a fee may be considered an impermissible funding obligation during a lapse of annual appropriations. In light of this requirement, yesterday, NFIP sent a message to its industry partners providing guidance to suspend sales operations as a result of the current lapse.
FEMA is aware of the concerns regarding this situation – especially given that Congress reauthorized the NFIP last week – and is actively working with external stakeholders to assess the impact and determine what options exist to enable the NFIP to allow the sale and renewal of flood insurance policies to continue. Please note, policies in effect on or before December 21, 2018, will remain in force, and NFIP insurers will continue to pay claims under those policies during a lapse. Additionally, while an expiring flood insurance policy may not be renewed during the lapse, there is a 30-day grace period – which begins at the end of the specific policy’s term – during which the policy is still effective.
Recognizing that many Americans rely on the NFIP to protect their homes and businesses from damage caused by flooding, FEMA is currently reviewing all legal authorities with the Administration that would allow the NFIP to continue operations without interruption, so as to hopefully minimize impacts to policyholders and insurance industry partners during this funding lapse.
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