A flood insurance rule that, effective July 1, will require lenders to accept policies meeting the statutory definition of “private flood insurance” is explained in a bulletin issued to national banks and federal savings associations Thursday.
In Bulletin 2019-8, the Office of the Comptroller of the Currency (OCC) notes rule provisions that allow regulated lending institutions to accept flood insurance provided by private insurers that does not meet the statutory definition if the coverage meets certain conditions. It also permits institutions to accept certain flood coverage issued by mutual aid societies.
The rule was adopted by the OCC and the other federal bank and credit union regulators to implement provisions of the Biggert-Waters Flood Insurance Reform Act of 2012. All four regulators, including also the Federal Reserve Board, Federal Deposit Insurance Corp. (FDIC), and National Credit Union Administration (NCUA), had finalized the rule by Feb. 12.
The final rule requires lenders to accept “private flood insurance,” as defined in the Biggert-Waters Act, to satisfy the requirement that flood insurance be purchased in connection with loans secured by buildings or mobile homes located in special flood hazard areas for which flood insurance is available under the National Flood Insurance Program (NFIP). It includes a “compliance aid” provision to help lenders determine whether a flood insurance policy meets the Biggert-Waters Act definition of “private flood insurance.”
The OCC, in Thursday’s bulletin, noted that it already permits banks to accept private flood insurance and flood coverage provided by mutual aid societies, such as Amish Aid Plans, in satisfaction of NFIP requirements on a discretionary basis if the bank determines that the insurance adequately protects its security for a loan. They can continue to do so after the new rule kicks in, it noted.
Reg lookup: Loans in Areas Having Special Flood Hazards