NFIP Reinstated After Two Day Lapse Period

On January 22, 2018, the President signed legislation passed by both houses of Congress that extends the National Flood Insurance Program’s (NFIP) authorization to 11:59 pm on February 8, 2018. The legislation also authorized FEMA to honor all policy-related transactions inadvertently accepted between January 20th and January 22nd.

During a lapse, FEMA still has authority to ensure the payment of valid claims with available funds, but if those funds are depleted, claims must wait until sufficient premium dollars are received or Congress appropriates supplemental funds to pay claims or increases the borrowing limit.

The NFIP lapsed four times between 2008 and 2012 – lapses that ranged from one day to a month. Congress has generally reauthorized the NFIP retroactively when it has lapsed, as it did in this instance, but the market disruption can be significant.

The program currently sits more than $25 billion in debt. On January 5th, FEMA finalized a 2018 agreement to to transfer $1.46 of risk to reinsurers.