Lawmakers and industry groups are slamming the Federal Emergency Management Agency for a decision announced Wednesday to stop processing flood insurance claims due to the federal shutdown.
The critics argue an extension of the National Flood Insurance Program passed prior to the shutdown should allow the agency to continue to do essential functions and fulfill the claims. Instead, victims of flooding who did not have claims already approved by the agency or those whose existing policies lapse during the shutdown will find themselves without federal assistance.
“I strongly disagree with this guidance as it incorrectly interprets congressional intent demonstrated last week with Congress passing legislation to keep the program operating until June 2019,” said Sen. Marco Rubio, R-Fla., Thursday.
Rep. Maxine Waters, D-Calif., ranking Democrat on the Financial Services Committee, urged FEMA to “immediately reconsider this harmful and incorrect interpretation of its authority and resume its important work of providing flood insurance to families across the country.”
On Wednesday, FEMA said that it would continue to back NFIP policies in effect by Dec. 21, 2018, but that going forward it would have “limited ability” to process new claims.
“During a lapse in appropriations, FEMA is unable to use the National Flood Insurance Fund for any purpose other than to pay the costs incurred in the adjustment and payment of any claims for losses on existing policies in force prior to the lapse of appropriations,” said NFIP Chief Executive David I. Maurstad in a memo to staff and members of Congress.
FEMA said in a statement late Thursday that the NFIP was continuing to pay flood insurance claims but added that companies participating in its Write Your Own program, which allows property and casualty insurance companies to write and service the Standard Flood Insurance Policy in their own names, may be affected by the shutdown.
“This is because the WYO are entitled to a fee from the sale or renewal of flood insurance policies and such a fee may be considered an impermissible funding obligation during a lapse of annual appropriations. In light of this requirement, yesterday, NFIP sent a message to its industry partners providing guidance to suspend sales operations as a result of the current lapse,” FEMA said.
The agency added that it was “aware of the concerns regarding this situation” and was “actively working with external stakeholders to assess the impact and determine what options exist to enable the NFIP to allow the sale and renewal of flood insurance policies to continue.”
Industry groups panned the initial announcement. “FEMA’s unexpected decision will complicate and delay loan closings for borrowers who are required to carry flood insurance and seek [National Flood Insurance Program] coverage for as long as the government shutdown continues,” said Rob Nichols, president of the American Bankers Association. “This result is in direct conflict with what Congress and the President intended when legislation was passed and signed into law last week to extend the NFIP’s authorization for six months.”
