The Federal Emergency Management Agency recently announced the postponement of the implementation of new guidance regarding the renewal of National Flood Insurance Program policies when the NFIP has lapsed due to a government shutdown or because Congress has not reauthorized it. The decision came after industry feedback, with the American Bankers Association and the National Flood Association jointly expressing concern that the proposal would have overturned longstanding practice.
The proposed guidance stated that if a policy renewal effective date is after the date the NFIP lapses, the policy renewal is considered void, even if the policyholder has paid the premium in advance and received a declaration page. It would have eliminated the practice of preemptively renewing policies should their renewal dates coincide with a potential lapse—an approach expressly supported by prudential regulators in guidance issued in 2010.
In its outreach, ABA and NFA said that the proposed guidance was wholly inconsistent with the NFIP’s stated goals, traditional insurance practices, and banks’ established processes and procedures for regulatory compliance with the Flood Disaster Protection Act.
