Right in the middle of hurricane season, the National Flood Insurance Program (“NFIP”) was set to expire. With nothing more than a few hours to spare, on July 31, 2018, the U.S. House of Representatives reauthorized the NFIP for four additional months, through November 30, 2018. Expiration of the NFIP would have left all existing policies in place, but federal flood insurance (the dominant source of flood insurance across the United States), would be unavailable for any new purchases. Expiration of the NFIP has the ability to stall real estate deals, cause lender and financing issues, and cause buyers to have second thoughts on their purchase. If property is located in a FEMA flood zone, lenders typically require a flood insurance policy before agreeing to provide financing.
NFIP flood policies are designed to insure property owners with respect to flooding from the ground up, i.e. heavy rains, storm surges, overflowing rivers, or the like due to hurricanes and/or other acts of nature. Standard hazard insurance policies typically do not cover these types of event.
At current time, the NFIP is severely underfunded and reforms are being evaluated. Unfortunately, the extension did not include any reforms. Since 2017, Congress has passed six additional short-term extensions of the NFIP and has been unable to reach a consensus on how to move forward with the NFIP. Reforms to the NFIP are needed to ensure the long-term viability of the program given the recent devastating floods across the United States.
Earlier this year, the House of Representatives passed H.R. 2874, the 21st Century Flood Reform Act. This Bill authorizes premium increases and seeks to improve the accuracy of the FEMA flood maps. The Bill also increases funding for flood mitigation programs to help reduce flood risks. In order to become law, the Bill must still pass through the Senate and requires execution by the President. Whether or not this occurs is an unknown. However, given the financial issues of the NFIP and past lack of reform, something clearly needs to give.
If you have any questions on the above please contact any of our attorneys at (303) 432-9999