NFIP Reauthorization
Information for WYO Companies and Agents
April 1, 2010
NFIP Reauthorization
• Congress did not reauthorize the NFIP by midnight of the last day of effective
authorization, which was March 28, 2010. Therefore, the Program is experiencing a
hiatus – a period without authority to:
o issue new policies for which application and premium payment dates are on or
after March 29, 2010, or
o issue increased coverage on existing policies for which endorsement and premium
payment dates are on or after March 29, 2010, or
o issue renewal policies for which the renewal premium is received by the company
on or after March 29, 2010, and after the end of the 30-day renewal grace period,
until Congress reauthorizes the Program.
• The hiatus period is expected to end soon after Congress reconvenes on April 12, 2010.
During the hiatus, most of the nearly 5.6 million flood insurance policyholders
nationwide will not be affected.
New Policies
Applications and premium payments made on or before March 28, 2010, the last day of effective
Program authorization
• New policies for which the application was completed on or before March 28, 2010, and
the application and premium payment were received within 10 days of the application
date, will be issued for coverage and will become effective on the requested effective
date, in accordance with the applicable waiting period rules.
• For loans closing prior to the first day of hiatus, when the application is dated on or
before closing and the premium payment is from the escrow account (lender’s check),
title company, or settlement attorney, and is received within 30 days from the closing
date, the policy can be issued effective the date of the closing.
• For loans closing prior to the first day of hiatus, when the application is dated on or
before closing and the premium payment is not part of the closing (i.e., the applicant or
applicant’s representative check or credit card) and the application and premium were
received within 10 days of the application date, the policy can be issued effective the date
of the closing only if the presentment of premium was on or before the closing date. If the
presentment of premium (check or credit card date) was on or after March 29, 2010, the
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policy cannot be issued, even though the application and closing occurred prior to the
hiatus.
• For loans closing on or after the first day of hiatus, when the application is dated prior to
the hiatus and the presentment of premium is prior to the hiatus, the policy may be issued
effective at closing so long as premium is received within 10 days of the closing date.
• As always, the starting dates of NFIP coverage depend on the applicable flood insurance
waiting period.
Claims
• Policies that are in force before midnight of the last day of effective Program
authorization will remain in force, and claims under those policies are to be processed
and paid as usual afterwards (once hiatus begins).
• Claims for covered losses occurring during a hiatus, on existing policies and on policies
issued effective after the last day of effective authorization, are to be processed and paid
as usual.
• WYO Companies may investigate claims under a reservation-of-rights letter or a nonwaiver
agreement, up to the point of payment. Under either, WYO Companies would
reserve the right not to pay the claim if Congress does not reauthorize the NFIP while
continuing the investigation of the claim.
• If reauthorization is granted retroactively, WYO Companies can issue policies effective
as of the date they receive payments (subject to applicable waiting periods), and claims
for covered losses can be processed.
Determining Payment Receipt Dates
New Policy Premiums, Renewal Policy Premiums, Added Coverage Endorsements
• The controlling factor in determining payment receipt dates for new policy premiums,
renewal policy premiums, or added coverage endorsements is when the insurance
company receives payment, not the standard mail postmark.
o However, proof of mailing receipts or third-party receipts that WYO Companies
receive through certified mail or from entities such Federal Express (FedEx),
United Parcel Service (UPS), and courier services do serve as payment receipt
dates.
o There will be no interruption in coverage if a customer mails the premium and the
WYO Company receives it on or prior to midnight of the last day of effective
Program authorization. See the exception listed below under Hiatus Scenarios,
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where the WYO Company is allowed to issue or renew policies even if the
premium is received after a hiatus begins.
Financials
• During the NFIP hiatus, the NFIP recommends that WYO Companies hold in abeyance
the following: (1) any premiums for new applications dated on or after the first day of the
hiatus, (2) renewal premiums received on or after the first day of the hiatus and after the
end of the 30-day renewal grace period, and (3) added coverage endorsements dated on
or after the first day of the hiatus.
• NFIP Letter of Credit is available during the hiatus.
Hiatus Scenarios
Policies without a 30-Day Waiting Period
• If the reauthorization is not retroactive to the first day of the hiatus, policies without a 30-
day waiting period would become effective on the date the reauthorization is effective.
This rule applies to loan closings occurring on or after the first day of the hiatus.
Policies with a 30-Day Waiting Period
• If the reauthorization is not retroactive to the first day of the hiatus, policies with a 30-
day waiting period would become effective 30 days after Congress has reauthorized the
NFIP.
Renewals
• If the renewal offer was issued prior to authorization expiration, and the renewal
premium is received before or within the 30-day grace period, the policy can be renewed
even if the renewal premium was received after authorization expiration. The same rule
applies on an underpayment notice issued before authorization expiration.
• WYO Companies are no longer authorized to renew policies if the premium is received
on or after the first day of the hiatus and after the end of the 30-day renewal grace period.
Cancellations
Existing policies can be canceled during the hiatus in accordance with valid NFIP cancellation
reason codes.
Group Flood Insurance Policies, Mortgage Portfolio Protection Program Policies
Follow the guidelines provided above.
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Assignment of Flood Policies
An existing policy can be assigned provided the insured signs and dates the endorsement request.
Action Required by WYO Companies during an NFIP Hiatus
• WYO Companies are to communicate the status of the program to their agents ASAP.
• WYO Companies are no longer authorized to issue renewal offers after the last day of
effective authorization.
• New business applications, renewals, and endorsements adding coverage that do not meet
the criteria listed above cannot be issued.