Homeowners insured under the National Flood Insurance Program [NFIP] could soon find themselves up the proverbial creek—literally—because Senate Republicans have allowed the federal flood program to expire. Enacted in 1968, NFIP currently covers 5.5 million homes in flood plains, where insurance is required. When the Senate recessed for its spring break, it left without renewing the program, rendering policyholders unable to renew their coverage.
The expiration of NFIP was collateral damage in a political fight between Republicans and Democrats over extending unemployment benefits. Extenders for NFIP were part of the unemployment bill (H.R. 4851, the Continuing Extension Act) blocked by Sen. Jim Bunning (R-KY) and a few other Republican Senators. Since September 2008, there have been 6 short-term flood extensions. This is the first instance since 2002 where the program was not extended within a few days of the expiration date.
According to the Property Casualty Insurers Association of America, there are 5.5 million flood insurance policy holders in 20,000 designated flood areas. Without an active NFIP, no new policies can be issued, and no existing policies can be renewed.
A further consequence of the extension delay is that, without NFIP in place, home buyers in designated flood areas will not be able to close on their loans on schedule. In fact, as an increasing number of lenders recognize that flooding can occur almost anywhere, many are requiring flood insurance even if a home is not in a high-risk flood zone.
The tragedy of the politicization of NFIP extension is underscored by this month’s unprecedented flooding in Rhode Island and other areas of the Northeast. The risk, in the Northeast as well as in other flood-prone areas around the country, is that flooding will occur before Congress returns to Washington on April 12 to act on the legislation. In the good news department, Senate aides report that, when Congress does renew NFIP, its provisions will likely be retroactive to the interim period during which it was allowed to lapse.
“It’s unfortunate that the NFIP has fallen victim to the political process,” says Blain Rethmeier, spokesman for the American Insurance Association. “One can only hope that Mother Nature is kind until April 12.”