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Crucial Week for Flood Insurance Approaches as Government Shutdown Looms

With Risk Rating 2.0 currently scheduled to be implemented Oct. 1, disagreements in Congress could lead to a government shutdown and a lapse in the National Flood Insurance Program (NFIP).
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crucial week for flood insurance approaches as government shutdown looms

Next week is expected to be a busy one for the National Flood Insurance Program (NFIP). First, Risk Rating 2.0, FEMA's new pricing methodology for the NFIP, is currently scheduled to be implemented next Friday, Oct. 1. 

Barring any last-minute changes to the schedule, all new policies effective on or after Oct. 1 must be issued under Risk Rating 2.0. Existing policies renewing with effective dates between Oct. 1, 2021, and March 31, 2022, can renew under the legacy rating plan or renew their policy under Risk Rating 2.0. All existing policies with renewal dates on or after April 1, 2022, will be renewed under Risk Rating 2.0.

FEMA has updated the NFIP Services page to provide access to the latest documents for Risk Rating 2.0.

Risk Rating 2.0 is a massive change to the NFIP and the Big “I" is optimistic that it will have a positive impact on the NFIP in the long term. Naturally, any change of this magnitude will have some implementation issues. The Big “I" and our carrier partners will work closely with FEMA to resolve any issues as quickly as possible and make any necessary refinements to ensure the intended objectives of Risk Rating 2.0 are achieved.

In related flood insurance news, the NFIP is currently scheduled to expire next week on Sept. 30, the same date as government funding runs out. Although there is widespread agreement that a long-term reauthorization of a reformed NFIP is needed, allowing the program to lapse would be devastating to policyholders across the nation who are still being impacted by COVID-19 and are facing an increasing number of severe flooding events.

Earlier in September, the Big “I" joined others in the insurance industry and several other interested stakeholders in sending a letter to congressional leadership urging them to extend the NFIP. The Big “I" was the only Main Street agent group to sign the letter.

Extending the NFIP is currently complicated by the fact that Congress must also fund the government and act to raise the debt ceiling. This week, the U.S. House of Representatives passed legislation that would fund the government and extend the NFIP until Dec 3. However, because the legislation also included a debt ceiling increase, it received no Republican votes in the House. Currently, it remains unclear—and maybe even unlikely—that it will receive the 10 Republican votes needed for the legislation to pass the U.S. Senate.

Importantly for insurance agents, disagreement between the two parties could lead to a government shutdown, which in turn could lead to a lapse in the NFIP.

With the possibility of a lapse on the horizon, agents need to be prepared. The Big “I" expects FEMA to release updated guidance for a potential lapse in the coming days and will share it as soon as it becomes available. As we get closer to Sept. 30, the Big “I" also encourages agents and brokers to reach out proactively to any insurance companies they use to write NFIP policies for company-specific procedures.

Please read next week's News & Views for an update on both Risk Rating 2.0 implementation and possible reauthorization of the NFIP.

Wyatt Stewart is Big “I" assistant vice president of federal government affairs.

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Monday, October 25, 2021
On the Hill