FCA Info Memo - Reauthorization of Flood Insurance Authority

Informational Memorandum
Subject:	Reauthorization of Flood Insurance Authority
Date of Memorandum:	01/16/2003
Expiration Date:
Office:	OPA
Signed By:	Dunn, Michael
FCA Contact Person:	Johansen, Mark
Contact Phone:	703-883-4064
List of Attachments:	ReauthJan14.pdf

INFORMATIONAL MEMORANDUM

January 16, 2003

To: Chairman, Board of Directors
Chief Executive Officer
All Farm Credit Banks and Associations

From: Michael V. Dunn, Director
Office of Policy and Analysis

Subject: Reauthorization of Flood Insurance Authority

In an Informational Memorandum (IM) dated December 19, 2002, we informed the Farm Credit System (System) institutions that the National Flood Insurance Program's (NFIP) authority to issue flood insurance contracts would lapse on December 31, 2002. On January 13, 2003, President Bush signed H.R. 11, the National Flood Insurance Program Reauthorization Act of 2003, which restored the NFIP. The Federal Emergency Management Agency (FEMA) may now enter into new insurance contracts, renew existing policies, and increase coverage on existing policies.

The law makes the reauthorization retroactive to December 31, 2002, which means that insurance companies may now resume processing all flood insurance applications, renewals, and requests for increased coverage received during the hiatus. They can also deposit the premiums they held during the hiatus and assign an effective date of the coverage according to the NFIP's rules as if there had been no hiatus.

SPECIFIC GUIDANCE

1. Under what circumstances is the reauthorization retroactive to December 31, 2002?

As discussed in FEMA's January 13, 2003, press release and our IM dated December 19, 2002, coverage is retroactive if the borrower completed the application and paid the premium that was held for processing by the insurance company pending congressional reauthorization.

2. Under what circumstances is the reauthorization not retroactive to December 31, 2002?

If you made a loan during the hiatus without requiring the borrower to apply for flood insurance and pay the premium and only now is the borrower applying for coverage, the coverage would not be retroactive to December 31, 2002. Instead, coverage would be effective on the date that the application for flood insurance is approved. Therefore, any flood loss sustained by the borrower during the hiatus would not be covered by the NFIP.

On January 14, 2003, FEMA sent guidance to all NFIP stakeholders about the National Flood Insurance Program Reauthorization Act of 2003. We have attached this guidance to the electronic version of this IM, which can be found on our Web site (www.fca.gov).

If you have any questions about flood insurance, please contact Mark Johansen, Policy Analyst, (703) 883-4064, TTY (703) 883-4434, JohansenM@fca.gov, Wendy Laguarda, Senior Counsel, (703) 883-4234, TTY (703) 883-2020, LaguardaW@fca.gov, or Charlotte Miller, FCA Examiner, (703) 883-4272, TTY (703) 883-4483, MillerC@fca.gov.

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