The National Flood Insurance Program (NFIP) was extended through November 21 earlier this year, but if it is not funded again, what will be the impact on homeowners and investors?
According to WMBF News, the Federal Emergency Management Agency (FEMA) would still have authority to ensure the payment of valid claims with available funds in the event of a lapse. However, FEMA would stop selling and renewing policies for millions of properties in communities across the nation.
A short-term extension ensures policy holders will be able to renew their coverage and real estate agents won’t face an interruption while closing home sales.
“In the last two years alone, they’ve had 12 extensions and in the last two years they’ve had some of the biggest payout years," said Jeremy Jenks, VP of sales for the Trembley Group of Keller Williams. "So, the program is quite a few billion dollars in debt and I saw different estimates on it, but lots of billions of dollars in debt and I think what’s happening is Congress knows that they need to do something about this, but they’re not sure what to do and there is a bill in the Senate that would update the NFIP, but they just haven’t gotten there yet.”
September 30 was the deadline for Congress to reauthorize the NFIP. Lawmakers have been taking some steps to update the NFIP. For example, Senator Cindy Hyde-Smith of Mississippi is proposing an update to the Program, which aims to address the multiple extensions the NFIP has undergone with a long-term extension plan.
The NFIP faces other issues, including increased storm risk. At a recent hearing hosted by the Financial Services Subcommittee on National Security, International Development and Monetary Policy, environmental experts discussed the risks to the National Flood Insurance Program (NFIP) posed by climate change, saying the situation is likely to worsen in the coming years.
“Flood insurance is top of perils we have to face,” said Andy Karsner, who served as U.S. Secretary for Energy Efficiency and Renewable Energy during the George W. Bush administration, The Hill reports. “It is imperative for [insurance companies] to develop new tools of risk management because they are operating on very old model inputs and ancient legacy flood maps.”