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#2205711 - 02/11/19 09:15 PM New Private Flood Insurance Rules
Tesla Offline
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Hi! I would like to see if I am understanding this rule correctly and would appreciate your thoughts! smile

If a private insurance policy has the compliance aid statement, whether it comes from a private insurer or mutual aid society, the bank can rely on the statement and must accept the policy.

If the private policy does not have the compliance aid statement, the financial institution may evaluate if the insurer is licensed/admitted or not disapproved (if surplus line); skip this step if a mutual aid society (OCC approved); ensure coverage is as required under the NFIP, mortgagor and mortgagee show as loss payees (unless condo or similar property) and if there is sufficient protection, which includes reasonable deductibles based on borrower's financial condition, adequate notice of cancelation or non-renewal is provided by insurer; payment terms and conditions are sufficient to protect the bank's interest, the flood policy complies with state insurance laws; and if the private company has financial solvency to satisfy claims. If all of these things are satisfactory we can choose to accept the policy or not. However, if the private policy meets the requirements of the definition of private insurance policy (I won't bore you with all of that)we MUST accept the private policy - even if it does not contain the compliance aid statement.

Assuming the above is correct (even though it is a summary) where do financial institutions find information about the private insurance company's licensing, complaints/issues, financial wherewithal??? I checked our state's Department of Insurance website and I could not find any information on there. frown
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Flood Compliance
#2205753 - 02/12/19 01:30 PM Re: New Private Flood Insurance Rules Tesla
rlcarey Offline
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What State are you in?
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#2205754 - 02/12/19 01:36 PM Re: New Private Flood Insurance Rules Tesla
burke116 Offline
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RVA
Regarding your summary, I would just also note that the bank must document its conclusion regarding sufficiency of the protection of the loan "in writing" when relying on discretionary acceptance of a private policy.

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#2205772 - 02/12/19 02:52 PM Re: New Private Flood Insurance Rules Tesla
Tesla Offline
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Randy - IL and Burke - thank you! smile
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#2205787 - 02/12/19 03:32 PM Re: New Private Flood Insurance Rules Tesla
Tesla Offline
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Update - I did find some resources for finding out information about insurance companies. https://eapps.naic.org/cis/help.do Also, use Moody's, S&P, Kroll, etc. for financial stability etc.

Thank you all for your help and if anyone else sees something I am missing in the above, please let me know. smile
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#2206084 - 02/14/19 02:03 PM Re: New Private Flood Insurance Rules Tesla
Kim M. Offline
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With the new Private Flood Insurance rule, will the customer be able to get a copy of the policy for the bank to read so we can decide if we can accept it? Will the customer have to pay for the policy first?

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#2206085 - 02/14/19 02:11 PM Re: New Private Flood Insurance Rules Kim M.
Questions Offline
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This new rule puts alot of burden on the lender to determine if the policy is adequate. Our staff are not insurance agents. What if we determine something is "at least as broad as" a SFIP, but miss something?

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#2206086 - 02/14/19 02:13 PM Re: New Private Flood Insurance Rules Tesla
rlcarey Offline
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With the new Private Flood Insurance rule, will the customer be able to get a copy of the policy for the bank to read so we can decide if we can accept it?

They will have too.

Will the customer have to pay for the policy first?

That is between them and their insurance agent.
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#2206092 - 02/14/19 02:27 PM Re: New Private Flood Insurance Rules Questions
rlcarey Offline
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Originally Posted By Questions
This new rule puts alot of burden on the lender to determine if the policy is adequate. Our staff are not insurance agents. What if we determine something is "at least as broad as" a SFIP, but miss something?


The private flood insurers are going to be all over this. I doubt that you are going to see many private policies without the compliance aid statement.
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#2206117 - 02/14/19 03:58 PM Re: New Private Flood Insurance Rules rlcarey
Adam Witmer Offline
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Originally Posted By rlcarey
The private flood insurers are going to be all over this. I doubt that you are going to see many private policies without the compliance aid statement.

My thoughts exactly.
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#2206532 - 02/19/19 10:59 PM Re: New Private Flood Insurance Rules Adam Witmer
Sheldon Hendrix Offline
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Sheldon Hendrix
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Originally Posted By Adam Witmer
Originally Posted By rlcarey
The private flood insurers are going to be all over this. I doubt that you are going to see many private policies without the compliance aid statement.

My thoughts exactly.


Ditto my thoughts. How will they be competitive otherwise.

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#2206883 - 02/22/19 07:04 PM Re: New Private Flood Insurance Rules Tesla
HGICO Offline
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Midwest
Insurance company ratings are available for free from AM Best at ambest.com They're a common ratings agency for insurance companies

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#2207205 - 02/26/19 10:09 PM Re: New Private Flood Insurance Rules Tesla
JobSecurity Offline
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Okay—maybe I am not really understanding the new Private Flood Insurance rules. I am trying to work on a spreadsheet to evaluate a private insurance policy that might not contain the compliance aid written statement. Since if a policy does not contain the written statement I can’t just reject it on the basis of it not containing it.

So I am going through the Standard Flood Insurance Policy from the FEMA website, and I am supposed to compare a private flood policy against the standard flood insurance policy to make sure they are not trying to add additional exclusions, there is not a limit of less than $2500 on artwork if they purchase the personal property insurance, or contain additional conditions that narrow the coverage??? The FDIC is going to respond timely to let me know if they determine the Mutual Aid Society that my borrower wants to use is qualified?

Please tell me if I am looking at this in the right way because I am feeling overwhelmed right now.

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#2207516 - 03/01/19 02:07 PM Re: New Private Flood Insurance Rules Tesla
Kim M. Offline
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Kansas
I am trying to also make a spreadsheet to evaluate private flood insurance. We are a small bank and I am confused also. Has anyone developed a spreadsheet that they would want to share with others? thanks kim

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#2207609 - 03/04/19 01:30 PM Re: New Private Flood Insurance Rules Tesla
Alison Offline
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Hi- The original poster wrote "If a private insurance policy has the compliance aid statement, whether it comes from a private insurer or mutual aid society, the bank can rely on the statement and must accept the policy".

I am not sure that we "must" accept the policy if it contains the compliance aid statement. Perhaps its different from agency to agency, but the FDIC version states "An FDIC-supervised institution MAY determine that a policy meets the definition of private flood insurance in 339.2 without further review of the policy, if the following statement is included within the policy....". While I think it easiest to accept it if it has that statement, it appears that we don't HAVE to accept it just because it has that statement.

Please clarify for me if I'm not interpreting this correctly.

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#2207611 - 03/04/19 01:52 PM Re: New Private Flood Insurance Rules Tesla
rlcarey Offline
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1. You have to accept private insurance if it meets the private insurance requirements.
2. If the policy has the compliance aid statement, then it provides you with a safe harbor for acceptance.
3. Why would you possibly require yourself to jump through further hoops?
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#2207615 - 03/04/19 02:14 PM Re: New Private Flood Insurance Rules Tesla
JobSecurity Offline
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Trying to figure out if it meets the private insurance requirements is the issue. If all insurance companies use the Compliance Aid then not a problem. If they don't there is a problem trying to evaluate it since we can't automatically decline it without the Compliance Aid. I am not an insurance agent.......don't want to be.

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#2207616 - 03/04/19 02:26 PM Re: New Private Flood Insurance Rules Tesla
rlcarey Offline
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Unfortunately, then you are going to be stuck figuring out if the policy meets the requirements of 208.25(b)(9) or equivalent definition in your primary regulator's version of the regulation.
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#2207618 - 03/04/19 02:48 PM Re: New Private Flood Insurance Rules Tesla
RR Joker Offline
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That truly seems a bit unfair. You would have thought they'd say you don't have to dig further if there is no compliance aid language. Put the onus on the dang insurance company, not the bankers!
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#2207622 - 03/04/19 03:10 PM Re: New Private Flood Insurance Rules Tesla
rlcarey Offline
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Ha - regulations seem unfair? - You have been around way too long for such a statement smile
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#2207631 - 03/04/19 03:38 PM Re: New Private Flood Insurance Rules Tesla
RR Joker Offline
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laugh!
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#2207775 - 03/05/19 03:30 PM Re: New Private Flood Insurance Rules Tesla
John Burnett Offline
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If private insurers want to have their policies accepted by lenders, they will eventually, subject to state insurance rules, bring their policies into alignment with the NFIP requirements and/or include the compliance aid statement on their policies.

As for mutual aid societies, I don't think you will ever get a compliance aid statement from them. They aren't technically or legally insurance. They are acceptable alternatives to required flood insurance if your regulator has approved them. As I understand it, the OCC has made some progress in this effort; the FDIC appears less willing to do so.
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#2209875 - 03/29/19 03:42 PM Re: New Private Flood Insurance Rules Tesla
Angelina Milano Offline
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Just thinking out of the box here, but would the Bank be able to rely on a certification from the insurance agent with the back-up pages of the private policy on file?

Was trying to create a decision tree, and I just couldn't make it easily understandable.

Also, what are people's thoughts on current private policies and their renewals? I'm thinking we will need to do the analysis at the time of renewal and if the agent/customer won't provide us adequate info to complete an analysis then we would need to follow the force place process.

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#2210827 - 04/10/19 10:32 PM Re: New Private Flood Insurance Rules Tesla
Moman Offline
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Posts: 505
WA
Just as a note - we have several private policies in existence. I discussed these with our EIC several years ago - at that time she stated "it's up to you" as to whether to accept or not. We had a process in place that closely replicates the new Private Policy rules. We found that they all had an equalizer statement imbedded that essentially guaranteed equality to an NFIP policy, if the language was not there.

The first wave to hit banks such as ours, will probably be the renewal of those policies. We will probably be proactive and request copies of the post 7/1 policies prior to them renewing post 7/1/19 to see what we are dealing with on those. Hopefully (with any luck) they will have the safe-harbor language already in those.

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#2210995 - 04/12/19 04:54 PM Re: New Private Flood Insurance Rules Tesla
Tarhe Offline
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Posts: 1,231
California
If the policy contains the Compliance Aid Provision, do we still need to verify if the insurance company is licensed, admitted or otherwise approved?

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