We’ve been patiently waiting and waiting and waiting. On the surface, we are actually thankful to FINALLY have a Proposal on private flood insurance. Well, it’s actually a re-proposal from October 2013, but we’ll take it. As we get into it further, we might not be as thankful, but it’s a starting place and gives us some insight into what the examiners are thinking. Also, it’s important to note the Proposal has not yet been published in the Federal Register and it could be any day now. When it is, comments will be due within 60 days.
Under the Proposal, banks will be required to accept private flood insurance policies that are:
• Issued by a legitimate insurer;
• Provide coverage at least as broad as an NFIP Policy; and,
• Meet additional requirements regarding advance notice of cancellation; restrictions on filing suit after a claim denial; and providing information about the availability of NFIP coverage.
There is also a “compliance aid” which will help you determine whether you have a private flood insurance policy that you’re required to accept. This is not a safe harbor; however, because you could still face liability if you refuse a policy you’re required, per the rule, to accept.
On the surface, this Proposal appears to be quite complex. It contains specific criteria to assist banks in determining whether coverage under a private policy is “at least as broad as” an NFIP Policy and it also has other criteria for private policies that you can choose to accept.
Be sure to check out our November Newsletter for more details.