No New Flood Insurance Policies During Government Shutdown

Americans will not be able to buy new flood insurance policies as long as the ongoing federal shutdown continues, officials confirmed Wednesday.

Source: Daily | Published on December 27, 2018

The action was confirmed in a memo David I. Maurstad, chief executive of the National Flood Insurance Program, shared with employees, members of Congress and others.

Disagreement over paying for President Donald Trump’s proposed wall at the U.S.-Mexico border kicked off a federal shutdown that started Saturday.

Failure to pass a bill to fund many of the government’s basic operations means FEMA, the agency that administers the flood insurance program, can’t issue new policies or renew those that lapse during the shutdown, Maurstad says in the memo.

“As a general principle, during a suspension, the government and its fiscal agents cannot expend funds or incur new obligations,” he wrote. “During a lapse in appropriations, FEMA is unable to use the National Flood Insurance Fund for any purpose other than to pay the costs incurred in the adjustment and payment of any claims for losses on existing policies in force prior to the lapse of appropriations.

“Therefore, even though Congress reauthorized the NFIP prior to the suspension, FEMA is not authorized to sell or renew policies without an appropriation.”

The Courier and Daily Comet reported Saturday that such an action was possible, citing insurance industry sources who noted that past shutdowns had resulted in the same response.

The program, the only source of flood insurance for most Americans, covers more than 28,000 homes in Terrebonne and Lafourche parishes with a combined value of roughly $7.2 billion. The program insures more than 5 million homes and businesses nationwide.

The House and Senate scurried last week to pass a bill that prevented the program from lapsing before it expired at midnight Friday. Trump signed the bill Friday night, extending the program through May 31.

Louisiana congressional staffers said Sunday that they believed the extension would avoid disruptions to the flood insurance program through the shutdown. But staff members said they were awaiting clarification from FEMA to make sure.

Sen. John Kennedy, R-La., and Rep. Steve Scalise, R-Metairie, both of whom sponsored the extension bill, said through staff members Wednesday night that they are working with FEMA and the Trump administration on a solution. Both contend FEMA’s action ignores Congress’ intent in passing the extension.

“FEMA’s decision to not continue issuing NFIP policies as part of the government funding debate is unacceptable and a break of their own precedent,” said Lauren Fine, Scalise’s press secretary. “Millions of families and businesses in Louisiana and around the country pay into and rely on this program, and it’s a disgrace for FEMA to pull the rug out from under them.”

Current policies will remain in effect.

But locally and nationwide, the latest action means many people preparing to buy a house can expect delays. That’s because federal law requires anyone in a high-risk area to have flood insurance before a lender can issue a mortgage. It also means anyone whose policy expires during the shutdown will not be able to renew it until Congress passes a budget funding the program’s operations.

The National Association of Realtors says Congress has passed 42 short-term renewals to avoid lapses in the past two decades. A lapse for about a month in 2010 left thousands of buyers unable to close deals on homes.

The current federal shutdown, as outlined in Maurstad’s memo, has the same effect.

FEMA’s guidance drew immediate concern from major insurance industry groups, including the American Insurance Association, the Council of Insurance Agents & Brokers, the Independent Insurance Agents & Brokers of America, the National Association of Mutual Insurance Companies and the Property Casualty Insurers Association of America.

“This decision comes despite Congress passing and the president signing legislation last week specifically intended to keep the program operating during the shutdown,” the groups say in a joint statement. “The decision to stop issuing and renewing NFIP policies for the time being is a rebuke of the clear intent of Congress and the president.”

The groups say they stand ready to work with Congress and the administration to find solutions to close the flood insurance gap.

“In the meantime,” the statement says, “we urge FEMA to rethink its decision.”