Federal flood insurance at risk of lapsing yet again

Federally backed flood insurance for homeowners could expire this month.

Sen. John Kennedy, R-La., introduced a bill Tuesday to extend the National Flood Insurance Program to Sept. 30, 2025. The program, which makes up a majority of U.S. homeowners' flood insurance coverage, is set to expire on March 14 along with the in-limbo federal budget. 

Lawmakers have authorized 32 short-term extensions for the program since 2017. Sens. Kennedy and Bill Cassidy, R-La., also a co-sponsor of the bill, belong to a new working group in the Senate Banking Committee formed to address a long-term solution for the NFIP. 

Spokespersons for the senators didn't respond to immediate requests for comment Thursday morning. 

Mortgage lenders are responsible for requiring borrowers with government-backed home loans to obtain the coverage if their property is in a Special Hazard Flood Area, defined as areas with a 1% annual chance of flooding. The Federal Emergency Management Agency oversees the program and reports 4.7 million policyholders holding NFIP coverage, according to its most recent estimate in 2022.

While FEMA has faced scrutiny from the Trump Administration over its payments toward housing migrants, little to nothing has been said of the NFIP. The Department of Government Efficiency, which has scoured federal housing agencies for what it deems as fraud, waste and abuse, has not publicized any action related to FEMA or the NFIP. 

The non-partisan Congressional Research Service in January said the NFIP has $3.4 billion available to pay flood claims, while owing $20.5 billion in debt to the U.S. Treasury, amassed since Hurricane Katrina in 2005. It can borrow another $9.9 billion from the government. The program also transfers risk via reinsurance and catastrophe bonds. 

States have also taken aim at FEMA and its Risk Rating 2.0, which it claims sent flood coverage premiums soaring in recent years. The agency's most recent estimate for average NFIP premiums was $935 in 2022.