Congress allows NFIP to lapse; no new flood insurance policies for now
Congress failed to reauthorize the National Flood Insurance Program (NFIP) by its expiration date, which was March 28 at midnight. Congress is not expected to revisit consideration for NFIP reauthorization until it returns to session April 12, 2010. This means that until Congress approves reauthorization of the NFIP no new NFIP policies will be issued, existing NFIP polices due for renewal during this time will not be renewed, and increased coverage requests will not be processed. Existing NFIP flood insurance policies in effect prior to the program lapse (with coverage period effective during the lapse) will be eligible for claim payments for covered damages incurred during the effective dates of the policy.
The program lapse has significant implications on the lending industry and home mortgage/building industry. Real estate transactions for properties in the Special Flood Hazard Area (SFHA) or other areas where the lender requires flood insurance to close the loan will not go through unless coverage similar to the NFIP’s flood insurance policy can be found in the private insurance marketplace that is acceptable to the lender.
A brief FEMA memo on the failure to reauthorize can be found here.
A FEMA FAQ memo concerning the lapse of NFIP and its implications can be found here.
An article from the Insurance Journal can be found here.