Senator John Kennedy (R-LA) recently introduced S. 4533, the National Flood Insurance Program (NFIP) Extension Act of 2022, with Sens. Cindy Hyde-Smith (R-MS), Marco Rubio (R-FL), and Bill Cassidy (R-LA) as cosponsors. The legislation would prevent the NFIP from expiring on September 30, 2022 by extending it for one year until September 30, 2023.
Throughout the spring and summer, PIA members from around the country have been advocating for Congress to extend the program for as long as possible and, at a minimum, to prevent the NFIP from lapsing, all as part of PIA’s rolling, year-round 2022 Advocacy Days.
The program’s most recent five-year reauthorization expired on September 30, 2017, nearly five years ago. Leading up to that deadline, the 115th Congress was unable to agree on reforms to the program. As a result, the NFIP briefly lapsed three times within a three-week period in early 2018. The NFIP has been subject to approximately 20 extensions of varying lengths since the 2017 deadline, and, unless Congress acts, its current extension will expire at the end of September, during the peak of the Atlantic hurricane season.
Every short-term extension brings with it the chance for the program to lapse. When the NFIP lapses, consumers are unable to renew existing policies or finalize the purchase of covered properties. Claims continue to be paid on existing, in-force policies, but consumers engaged in ongoing real estate transactions may experience disruptions in those processes, especially if they are purchasing a property in a mandatory purchase area, where federal law requires flood insurance. Plus, if a flood loss occurs during a lapse, some claims may not be processed until the program is reauthorized. Prior NFIP lapses are estimated to have disrupted over 1,000 home sales per day, and, of course, the longer the lapse, the greater the disruption.
The series of short-term extensions over the last five years has been extremely disruptive for everyone associated with the NFIP, including policyholders. Even if the program does not lapse, the federal government and every facet of the insurance industry incurs costs associated with preparing for a lapse as the NFIP’s next expiration date approaches. Agents, carriers, vendors, lenders, and FEMA itself all develop contingency plans for a lapse, and they are forced to manage those expenditures whether the lapse occurs or not. Indeed, only a long-term reauthorization can avoid them. The program’s effectiveness depends on certainty.
PIA strongly supports a long-term reauthorization (five years or longer) of the NFIP that includes necessary reforms. However, as the number of legislative days in the current Congress dwindle, , a one-year extension will allow breathing room for the deliberation necessary to develop a thoughtful reform package and avoid lurching from one short-term extension to the next. PIA supports this legislation and will advocate for its prompt passage.