Government Shutdown Effects National Flood Insurance Program


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The partial government shutdown which began at midnight on December 21 has impacted the National Flood Insurance Program (NFIP) despite the re-authorization of the program.

Although the NFIP are unable to issue any policies during the shutdown, the department will honor the effective dates of renewals that come up during the shutdown once it has been lifted. The shutdown ended on January 26th, 2019.

At this point it is unclear how long the shutdown will last, but it is expected into 2019. While both the House and Senate rushed to extend the NFIP before authorization expired, the Federal Emergency Management Agency (FEMA) will issue official guidance that the NFIP will operate in a limited capacity during the shutdown. 

The guidance will state that no new policies can be issued, no changes can be made to existing policies, and renewal policies cannot be issued. However, the claims process will proceed to function normally. The procedures outlined in bulletin W-17069 will be the basis for the forthcoming guidance.

Last week, it was the intent of Congress for the NFIP to continue to operate as normal should there be a government shutdown. However, FEMA’s appropriation, which funds the selling and servicing of flood insurance policies, expired with the rest of the unfunded government agencies and programs on December 22, 2018 at 12:01 a.m.

During this lapse in appropriation, FEMA will be advising all NFIP insurers (Write Your Own companies and NFIP Direct) that they may not collect premiums for the issuance, renewal, or monetary endorsements of NFIP policies because doing so would cause the government to incur obligations without an appropriation, which is prohibited by federal statue found in the Anti-Deficiencies Act. The guidance will state that the short-term interruption of flood insurance sales do not rise to the level of necessary market impact to warrant an exception to the Anti-Deficiencies Act. However, should the shutdown continue for a substantial period, the NFIP could start issuing policies again if the agency believes there is a significant market impact.