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As we approach a potentially active hurricane season, FEMA’s Administrator, W. Craig Fugate, is reaching out to Congressional Leadership and Members to strongly recommend Congress reauthorize the National Flood Insurance Program (NFIP) for two years. The NFIP will expire on May 31, 2012. Administrator Fugate’s letter to the Senate Banking Committee leadership and the House Financial Services Committee leadership is attached above.
The NFIP plays a key role in our Nation’s efforts to prevent and recover from flood disasters. Reauthorization of the NFIP before it expires on May 31, 2012, is essential to our Nation’s efforts to prevent and recover from flood disasters. Floods are the number one natural disaster in the United States in terms of lives lost and property damaged. The NFIP identifies areas of flood risk; it encourages communities to implement measures to mitigate against the risk of flood loss; it provides financial assistance to help individuals recover more rapidly from flooding disasters; and it lessens the financial impact of flood disasters on individuals, businesses, and all levels of government.
In recent years, a series of short-term reauthorizations and temporary suspensions of the NFIP have eroded confidence in the program among stakeholders, including state governments, tribal governments, local communities, individual policyholders, mortgage lenders, and the private insurance industry. In addition to disrupting the program's day-to-day operations, short-term reauthorizations and temporary suspensions create significant uncertainty regarding the federal government's long-term commitment to underwriting and indemnifying flood losses. In the absence of such a commitment, our stakeholders are less likely to make the investments needed to successfully sustain, strengthen, and grow the program — thereby undermining the NFIP’s effectiveness and efficiency over time.
A two year re-authorization will send a clear signal to citizens, communities, and private sector partners that the federal government will continue to support our nation's efforts to manage flood risk. If Congress does not re-authorize the NFIP before it expires on May 31, 2012:
• The NFIP can issue no new policies, renewed policies, or policy modifications. Although policies that were already effective when the NFIP lapses will remain in coverage until their expiration date, the NFIP cannot issue new and renewal NFIP polices, nor can it increase coverage on the existing policies.
• Property owners will be unable to complete new mortgage transactions. Property owners who would normally be required to purchase flood insurance to fulfill lending requirements will be unable to obtain affordable coverage. The National Association of REALTORS estimates that a lapse in authorization jeopardizes an estimated 1,300 sales each day or about 40,000 mortgage closings per month.
• The Disaster Relief Fund will bear additional costs when flood strike. Property owners who are unable to obtain flood insurance coverage may seek and be eligible for assistance from the Disaster Relief Fund. Consequently, failure to reauthorize the NFIP will result in transferring a portion of the costs of flood losses that otherwise would have been paid by the NFIP to the taxpayer through the Disaster Relief Fund.
• The NFIP may have to halt payment of claims for recent events, including Hurricanes Irene and Lee, if a lapse in authorization substantially reduces cash flow into the program from premiums or a significant flood event follows the lapse and drains the remaining, non-renewable funds.
If you have any further questions please feel free to contact FEMA’s Intergovernmental Affairs Division at (202) 646-3444 or at FEMA-IGA@fema.dhs.gov.
FEMA's mission is to support our citizens and first responders to ensure that as a nation we work together to build, sustain, and improve our capability to prepare for, protect against, respond to, recover from, and mitigate all hazards