NFIP Lapses in Government Shutdown
Without reauthorization, NFIP cannot provide new flood insurance contracts or renew existing contracts. NFIP’s authority to borrow funds from Treasury in order to pay claims been reduced from $30.425B to $1B. The economic impact of NFIP’s lapse is broad. The National Association of Realtors (NAR) states that “the NFIP supports roughly half a million home sales annually, generating 1 million jobs and contributing $70 billion to the U.S. economy.” According to the Congressional Research Service, lapses can prevent borrowers from obtaining flood insurance, which is mandatory to close, renew, or increase loans secured by properties in Special Flood Hazard Areas (SFHAs). During a lapse in 2010, 1,400 home sale closings per day were canceled or delayed, representing over 40,000 transactions per month, not including commercial properties. After past lapses, the largest WYO insurer (with 840,000 policies) left the NFIP, reportedly because of the associated administrative burden. Insurers are forced to reallocate resources to communicate with agents and customers about program lapses and its effects.
Organizations like NAR, APCIA, and NAMIC have advocated to avoid NFIP’s lapse. Media outlets like Insurance Journal, Newsweek, Bloomberg, The Hill, and Politico, have reported on the impacts of this lapse. Politico writes, “Congress is on the brink of creating a new housing market disruption.”
Since its last long-term reauthorization expired on September 30, 2017, NFIP has been reauthorized on a short-term basis 33 times. There have been 3 lapses during this period, including a lapse of three days in January 2018. NFIP also lapsed for 8 hours in January 2018 and for 13 hours in March 2024. The current lapse affirms CSFI’s longstanding priority and the urgency of a long-term, multi-year NFIP extension for program stability and policyholder assurance.