You are correct. If the borrower refuses to get adequate flood insurance you cannot force place insurance in order to close the refinancing.
You can work with the insurance company's RCV. See "Loss Payments" on page 28 of the Mandatory Purchase Guidelines.
However, be prepared to justify the difference between their value and the most recent value obtained from the new appraisal. If their (the insurance company) value is from 3 years ago I would be more inclined to go with the current appraisal and I would expect an examiner would be too.
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The opinions expressed are mine and they are not to be taken as legal advice.