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A Message From PIA's President

January 2018


The National Flood Insurance Program (NFIP) faces many challenges, but one is particularly vexing. The program must periodically be reauthorized by Congress. On the rare occasions that government shutdowns occur contemporaneously with the expiration of the program, the authorization for the NFIP lapses. That’s what happened in mid-January of this year when there was a shutdown that, fortunately, only lasted three days. However, deep differences on the issue of immigration, which prompted this shutdown, remain unresolved. In the past, NFIP lapses have also occurred independently of government shutdowns.

Since 2000, the NFIP has received two five-year reauthorizations. The rest of the time, over seven years nonconsecutively, it has operated on reauthorizations of varying lengths and endured multiple lapses.

A government shutdown does not affect the payment of flood insurance claims, and the insurance that people already have largely remains in effect. When an NFIP lapse occurs, the biggest obstacle policyholders and would-be policyholders face is the inability to purchase or renew policies. Real estate transactions for which flood insurance is required to close a mortgage can be delayed.

The National Association of Realtors estimates that the inability to write new flood policies during program lapses means that 1,332 homes sale closings per day, or roughly 40,000 per month, could be delayed or cancelled. The association derived its estimate from analyzing a 33-day period during which the NFIP had not been reauthorized during the height of summer home sales in 2010.

PIA supports a long-term reauthorization of the NFIP that also promotes the growth of the private flood insurance market—and ensures the stability that consumers need. It should include some important reforms to the program, including a gradual movement to risk-based rates; the continuation of grandfathering of rates; the forgiveness of the program’s debt; and the cultivation of growth in the private flood insurance market.

Tim Russell