National Jun 28, 2019
Financial institutions must accept private flood insurance, starting July 1, 2019
The Biggert-Waters Flood Insurance Reform Act of 2012 obligated the interagency regulators to issue a final rule requiring financial institutions to accept private flood insurance. As of Monday, July 1, 2019, financial institutions must accept private flood insurance, as long as certain criteria is met.
The final rule mandates that regulated institutions must accept private flood insurance policies that satisfy the statutory definition of “private flood insurance.” To meet the specified criteria, a private flood insurance policy must:
- be issued by a duly licensed or approved insurance company;
- provide coverage “at least as broad as” coverage found in a National Flood Insurance Program’s standard flood insurance policy;
- include information that coverage is available under the NFIP;
- include a mortgagee clause similar to that found in an NFIP standard flood insurance policy;
- require an insurer to give 45-days’ notice to the borrower or lender prior to a cancellation or nonrenewal of a policy;
- contain a cancellation provisions that is as restrictive as the NFIP’s standard flood insurance policy; and
- include a provision that limits how much time an insured has to file a claim (i.e., no later than one year after the date of a written claim denial).
Prior to this change, financial institutions often would decline loans if insureds did not have insurance coverage from the NFIP.