The property/casualty insurance industry should not be seriously affected by the federal government shutdown.

Since the industry is largely regulated by the states, not Washington, the impact on the industry of federal workers not going to work should be minimal. Insurance licensing, product and rate approvals, and other state regulatory activities will continue.

If hundreds of thousands of federal employees have their paychecks delayed for an extended period, insurance carriers and agents with lots of federal employees or contractors as customers would eventually begin to worry about their customers’ ability to keep up payments.

“We expect the shutdown of the federal government to have minimal effects, if any, on the insurance industry. Insurers will continue to operate under normal circumstances and FEMA will continue to administer the NFIP [National Flood Insurance Program],” Nat Wienecke, senior vice president for federal government relations for the Property Casualty Insurers of America (PCI), told Insurance Journal.

“While we don’t expect a short-term, federal government shutdown to have a major impact on the insurance market, a long-term government shutdown and its resulting economic consequences are cause for some concern,” said Charles Symington, senior vice president of external and government affairs for the Independent Insurance Agents and Brokers of America (Big “I”).

Symington said his group is “particularly concerned with the impact on our economy if the federal debt limit is not raised by the middle of next month.”

The Big “I” is not alone in its concern over the future of the debt ceiling, which the Treasury says must be raised by mid-October.

The industry’s American Insurance Association (AIA) is among the 236 organizations that signed a U.S. Chamber of Commerce letter urging the House of Representatives and the Senate to ensure the “uninterrupted funding” of the federal government into the next fiscal year.

The Chamber’s letter also urged Congress to “act expeditiously” to raise the nation’s debt limit.

“It is not in the best interest of the employers, employees or the American people to risk a government shutdown that will be economically disruptive and create even more uncertainties for the U.S. economy,” the Chamber letter stated. “Likewise, we respectfully urge the Congress to raise the debt ceiling in a timely manner and remove any threat to the full faith and credit of the United States government.”

Essential Services

The federal government’s emergency and essential personnel including those serving in the military will still go to work today, although the White House has leeway in determining what personnel and services that are deemed essential in nature.

Not all federal services depend on annual fiscal year appropriations. But the longer the shutdown, the more workers will likely be furloughed and the more services will likely be affected.

The Federal Emergency Management Agency (FEMA), part of the Department of Homeland Security, will continue any disaster efforts it has underway, since those are funded out of a special disaster relief fund and not annual appropriations. If there were a major disaster where states needed assistance, FEMA could be called on for help.

The shutdown will not immediately affect the federal flood insurance program, which will continue to sell and service policies, or the federal crop insurance program, according to officials.

The health exchanges and other features of Obamacare scheduled to start today will be implemented as planned, just as Social Security and Medicare operations will continue. “The marketplaces will be open on Tuesday, no matter what, even if there is a government shutdown,” President Obama said Friday.

The self-funding U.S. Post Office will still operate, thus premium checks and policies can still be mailed.

The Federal Reserve is not funded by Congress either so it would remain open, as would the Consumer Financial Protection Bureau, which the Fed funds. The Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency are also self-funded and would remain open.

The Securities and Exchange Commission (SEC) will continue operating.

Federal law enforcement, courts and juries are expected to continue operating, at least for the immediate future.

Airlines and Amtrak (except where repairs are underway) should be running as scheduled although those needing passports will likely experience a delay.

According to the Congressional Research Service, recent federal government shutdowns have ranged from three to 17 days. In November 1995, there was a five-day shutdown, followed by 21-day shutdown from December 1995 to January 2006.

The government nearly shut down in 2011. On April 9, 2011, right before deadline, the House, Senate and Obama administration avoided a shutdown by agreeing on a budget for the rest of the fiscal year.