If Congress fails to pass a budget for the rest of 2011 and the federal government temporarily shuts down, it should still be business-as-usual for the property/casualty insurance industry.    With the pending federal regulation of the health care industry the answer may be very different in a few years for healthcare.
Since the property/casualty insurance industry is largely regulated by the states, not Washington, the impact on the industry should be minimal – another argument for the state-run insurance system as opposed to another central, federal bureaucracy. Most insurance licensing, product and rate approvals, and other state regulatory activities
A shutdown will not affect the federal flood insurance program, which will continue to sell and service policies, or the federal crop insurance program, according to officials.
Also, the Federal Emergency Management Agency (FEMA), part of the Department of Homeland Security, will continue whatever disaster efforts it has underway, including those for spring floods, 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.
With the pending federal regulation of the health care industry the answer may be very different in a few years for healthcare.

“We’re not aware of any significant impact a short shutdown would have on the industry, and if it results in a more responsible federal budget it could make things better for business in general,” Matt Brady, National Association of Mutual Insurance Companies, told Insurance Journal.
Insurance lobbyists are a bit worried about delays in flood insurance reform and other bills.

http://www.insurancejournal.com/news/national/2011/04/08/193901.htm