Flood Insurance Program Lapses As Sen. Bunning Holds Up Bill

NU Online News Service, March 1, 2:21 p.m. EST

WASHINGTON–The National Flood Insurance Program has expired and been shut down after a lone senator blocked omnibus legislation that included renewal of NFIP.

The action by Sen. Jim Bunning, R-Ky., caused consternation in the property and casualty industry, but the National Association of Professional Insurance Agents (PIA) said in a statement that the Senate could act to restore the program at least until March 28.

Senate Majority Leader Harry Reid, D-Nevada will reportedly seek a $100 billion permanent version of the bill later this week, which for procedural reasons Sen. Bunning would be unable to block.

Under a directive issue by the Federal Emergency Management Agency Oct. 27 and reiterated on Feb. 25, the effect of the lapse is that the NFIP will not be able to issue new policies, increase coverage on existing policies or renew expiring policies.

Insurance industry representatives said without NFIP in place, real estate closings could be held up.

The flood program slipped into a technical lapse at midnight Sunday after Sen. Bunning placed a hold on a bill that also would extend unemployment and COBRA benefits as well as prevent a 21 percent cut in fees for physicians treating Medicare patients.

The bill (H.R. 4691) was passed by the House on Thursday by voice vote.

Sen. Bunning declined to waive his unanimous consent authority. He said that he doesn't oppose extending benefits, but rather he opposes the method proposed to pay for it, which would add to the deficit. He wants to pay for the extension using stimulus funds.

This next extension of the reauthorization would be the fourth since the NFIP originally expired Sept. 30 of last year.

The NFIP has become a political football because House Democrats want to add wind damage coverage to the program as well as reduce the ability of insurance companies to limit their obligation to cover hurricane claims by citing a flood damage exemption.

Those House proposals have failed to secure support in the Senate, but the Senate's version of the legislation would have paid off the NFIP's $20 billion deficit, most of it from claims that arose from Hurricanes Rita and Katrina in 2005.

The Senate bill would also seek to reduce the cost of serial claims from those who live in flood-prone areas, although members of Congress from Louisiana are opposed to such provisions.

NFIP has been allowed to lapse as concern among legislators over the ballooning deficit has increased, while worries over storm damage have decreased somewhat since 2005.

"It's extremely unfortunate that the program expired," said Blain Reithmeier, a spokesman for the American Insurance Association.

"This is incredibly burdensome for insurance companies and homeowners alike," he said. "That being said, let's hope Mother Nature relents and a retroactive extension is put in place quickly."

Mike Becker, PIA director of federal affairs, added, "While this lapse in the flood insurance program will likely be corrected retroactively this week in the Senate, it is disappointing."

He said "insurance agents and their clients who need flood insurance are now at a disadvantage. Many real estate transactions require flood insurance, and the NFIP is the sole source for more than 95 percent of the flood coverage nationwide. We could see real estate closings delayed until this is fixed."

FEMA said in its directive that "if there is a lapse in NFIP authorization, any hiatus period should be brief, and most of the nearly 5.6 million flood insurance policyholders nationwide will not be affected."