Five federal regulatory agencies have issued a joint final rule to implement provisions of the Biggert-Waters Flood Insurance Reform Act of 2012 requiring regulated institutions to accept certain private flood insurance policies in addition to National Flood Insurance Program policies.
The five federal agencies implementing the new rule include the Board of Governors of the Federal Reserve System, Farm Credit Administration, Federal Deposit Insurance Corporation (FDIC), National Credit Union Administration, and the Office of the Comptroller of the Currency (OCC).
The rule, which takes effect July 1, 2019:
• Implements the Biggert-Waters Act requirement that regulated lending institutions accept private flood insurance policies that satisfy criteria specified in the Act;
• Allows institutions to rely on an insurer’s written assurances in a private flood insurance policy stating the criteria are met;
• Clarifies that institutions may, under certain conditions, accept private flood insurance policies that do not meet the Biggert-Waters Act criteria; and
• Allows institutions to accept certain flood coverage plans provided by mutual aid societies, subject to agency approval.
Regulations implementing the federal flood insurance statutes prohibit regulated lending institutions from making loans secured by improved real property located in special flood hazard areas unless the property has adequate flood insurance coverage. The Biggert-Waters Act was signed by former President Barack Obama in 2012 and amends the federal flood insurance statutes that federal agencies have authority to implement and enforce.
Among other things, the Biggert-Waters Act requires the federal government to issue a rule regarding the escrow of premiums and fees for flood insurance; clarifies the requirement to force place insurance; and requires the agencies to issue a rule to direct regulated lending institutions to accept “private flood insurance” and notify borrowers of the availability of flood insurance coverage issued by private insurers.
To view the final rule on the nation’s flood insurance program, click here.