The need for a long-term extension to the National Flood Insurance Program is something lurking “in the back of our minds,” says a Norfolk, Va.-based personal lines manager.

On Oct. 30, NFIP policyholders in Virginia and nationwide were thrown yet another lifeline from Congress with a short-term extension to maintain the program’s current spending resolutions through Dec. 18.

Megan Paradis

“We don’t panic, but in the back of our minds we worry and wonder: What if they don’t extend it?” said Megan Paradis, personal lines manager for S.L. Nusbaum Insurance Agency in Norfolk, Va. “We need to make sure our clients are covered,” she added.

This short-term solution could create concern for the estimated 108,000 NFIP policyholders in Virginia in 2008, according to the latest data from FEMA, since flood damage is excluded under standard homeowner and renter policies.

“I don’t think the public is even made aware of this issue,” said Doug Favre, president and owner of Hampton, Va.-based Lackey Saunders Insurance Co., noting that his clients have not raised the lack of a long-term e xtension with him.

More than 10,000 residential flood insurance policies were in effect in Hampton, Va., and about 9,000 in Norfolk at the end of 2005, according to a recent FEMA report.

“I just can’t imagine them not extending it again,” Favre said.

Virginia’s residents have relied on the program over the last three decades. In a FEMA list of the top ten significant flood events from 1978 through June 2008, ranked by top NFIP payout, Virginia was affected by four of these events – each with an average paid loss of more than $22,000. They include Hurricane Ivan (Sept. 2004): $56,865; Hurricane Isabel (Sept. 2003): $24,736; Hurricane Floyd (Sept. 1999): $22,617; and Hurricane Hugo (Sept. 1989): $29,315.

With many mortgage lenders requiring flood insurance before real estate closings, the short-term extension creates an “air of uncertainty,” said Mike Becker, national director of federal affairs for The National Association of Professional Insurance Agents, in a statement.

The decision by Congress marks the second short-term extension signed by President Barack Obama in 2009. The Senate has yet to act on a bill passed by the House to extend the NFIP through March 2010.

The efforts to reform the NFIP, and push for a long-term extension, have been slow-going because of the $20 billion debt the program already faces in the aftermath of the devastating storms of 2004 and 2005, including Hurricane Katrina. Additional obstacles delaying a long-term resolution of the NFIP include Rep. Gene Taylor’s (D-Miss.) proposed addition of wind damage coverage in the Multiple Peril Insurance Act and Congress’ continuing debate over health care reform.

This story originally appeared in the December 2009 print edition of Insurance & Financial Advisor.