NFIP Reauthorized Again?

Stop me if you’ve heard this one before: the National Flood Insurance Program (NFIP) was recently reauthorized again. “Again?” you ask. Wasn’t it just reauthorized? And wasn’t it just reauthorized right before that?  And right before that? And right before that? If the NFIP was originally passed over 50 years ago, why does it seem to keep getting reauthorized so often? The technical reason is that the NFIP does not contain a single expiration provision, so the program must continually be reauthorized, and Congress puts an expiration date on each reauthorization.

If it seems like you’ve heard about NFIP reauthorizations a lot recently, it’s because you have.  In the past five years the NFIP has been reauthorized twenty-two times. On average that’s about once every 2.75 months, or once about every 82 days. The last “long-term” NFIP reauthorization was in 2012 as part of the Biggert-Waters Flood Insurance Reform Act, but that authorization expired on September 30, 2017. Since 2017 the longest reauthorization was one year, authorized during Fall 2020 during the COVID-19 debacle, and the shortest reauthorization was four days, earlier this year in March 2022.

Much like the Federal Deposit Insurance Corporation (FDIC) advertises that no depositor has ever lost a penny of insured deposits since the FDIC was created in 1933, the Federal Emergency Management Agency (FEMA) also promotes that FEMA and Congress have never failed to honor the flood insurance contracts in place with NFIP policyholders. Even if the NFIP wasn’t reauthorized in time and the program lapsed (which has happened more than once in the last five years), FEMA still has the authority to ensure the payment of valid claims. The effect of a lapse is that policies cannot be purchased or renewed during a lapse, but once reauthorization occurs, NFIP policies may once again be purchased or renewed. Industry sources estimate that upwards of 40,000 home mortgage loans per month could be affected by an NFIP lapse.

The NFIP was most recently scheduled to expire on September 30, 2022, but as earlier indicated, it was indeed reauthorized. Apologies for burying the lede, but the recently reauthorized NFIP now expires on December 16, 2022. Before the digital ink will dry on this article, the NFIP is already “about to expire again” in about 60 days which, as discussed, is nothing new for the National Flood Insurance Program.

Despite the continual reauthorization process, the NFIP remains the primary source of flood insurance coverage for residential properties. According to Congressional estimates, there are nearly 5 million NFIP flood insurance policies providing over $1.3 trillion in coverage in the United States.

This looks to be a continual source of headache going forward, but here at Compliance Alliance we’ll continue working to send out daily e-mails, weekly newsletters, and monthly magazines keeping you informed about what’s going on in the industry (such as the NFIP expiration/reauthorization rollercoaster), as well as answering your questions on the hotline as the need arises.