Financial Institutions Now Must Accept Private Flood Insurance

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In mid-February, a joint final rule was issued to implement provisions of the BiggertWaters Flood Insurance Reform Act of 2012.

The joint final rule requires regulated financial institutions to accept private
flood insurance policies. As Richard J. Andreano, Jr. of The National Law Review writes, “to qualify as private flood insurance under the final rule, a policy must be issued by an insurance company that meets certain conditions, and the policy must provide flood insurance coverage that is at least as broad as the coverage provided under a standard flood insurance policy (SFIP) issued under the National Flood Insurance Program (NFIP) for the same type of property, including when considering deductibles, exclusions, and conditions offered by the insurer.”

The joint final rule sets forth specific requirements that a policy must meet to be considered to provide qualified coverage. Regulated lending institutions may, under certain conditions, accept private flood insurance policies that do not meet the Biggert-Waters Act criteria. It also allows institutions to accept certain flood coverage plans provided by mutual aid societies, subject to agency approval.

The five regulating agencies are: the Farm Credit Administration, Federal Deposit Insurance Corporation, Federal Reserve Board, National Credit Union Administration, and Comptroller of the Currency.

All 90 pages of the final rule can be viewed here. The final rule becomes effective on July 1, 2019, although early adoption is permitted.