Adam, just as clarification, we can require flood insurance beyond the NFIP maximum of $250,000 when accepting a private flood insurance. We were under the impression we could not require a member to purchase flood insurance beyond the $250,000 limit. However, we thought we had heard a statement during a recent webinar that under the new rule the limit could be exceeded on private flood insurance policies. Just wanted to make sure we did hear that correctly. Thank you!

You have always been able to require a borrower to obtain more flood insurance than offered by the NFIP for safety and soundness reasons. That has not changed.

I'll second Randy's comment just so you know it's not his opinion vs. the webinar you listened to. You can require as much insurance as you'd like (up to the insurable value) regardless of whether it's NFIP or private flood insurance.

I agree with Randy & David that you can require more insurance (assuming a policy will actually pay it) as the $250,000 is just one of the amounts used in calculating the minimum amount of insurance needed. You have always been able to require more insurance than the minimum amount required as a matter of safety and soundness.

What has changed with the new private flood insurance rules relates the the "at least as broad as" requirement for deductibles. This gets a bit confusing, and I'm wondering if this was the context of what you heard in your webinar. In the preamble to the final rule, the Agencies clarified that for purposes of the mandatory acceptance requirement, deductibles must be “at least as broad as” an SFIP. For policies with coverage exceeding that available under the NFIP (i.e. over $250,000/$500,000), the policy must only meet the deductible for the amount of coverage available in an SFIP. In other words, deductibles for amounts under $250,000/$500,000 must be the same as an SFIP policy, but there are no restrictions for deductibles for amounts over what a SFIP would cover (i.e. $250,000/$500,000).

Recently we have received Private Flood policies from an insurer from across the pond. In two instances the Coverage A - Building coverage has been divided into two separate categories of coverage. The dec page shows an insurable value for the property at $110K while the building coverage consists of $20K in flood insurance coverage and $100K in catastrophic ground collapse coverage (and limits this to ground collapse due to flooding). For this example lets say our outstanding loan balance is $80K. Both flood insurance and catastrophic ground collapse coverage maintain separate deductibles at $1K each. Also for what it is worth the compliance aid statement is present.

I am aware that we can combined building and contents coverage (provided contents are used to secure the loan), but I have not encounter policies with minimal flood coverage and larger catastrophic ground collapse coverage built into the Building Coverage limit. My question is are we adequately covered? My instincts tell me that we are not and Interagency Q&A 8 and 9 seem to support my doubt.

Any additional guidance on this private flood issue would be appreciated.

Ground collapse insurance is not flood coverage in my mind.

I agree with Randy. Unless the ground coverage covers the same things covered by a SFIP policy (highly unlikely in my mind), it wouldn't generally comply with the private flood insurance rules. Now, the compliance aid statement throws a wrench into things, but my question is whether that statement applies to just the flood policy or also to the ground collapse coverage?

This is a good example of where you will want to conduct your own determination (instead of relying on the compliance aid) of whether the coverage meets the definition of private flood insurance.

Recently we have received Private Flood policies from an insurer from across the pond. In two instances the Coverage A - Building coverage has been divided into two separate categories of coverage. The dec page shows an insurable value for the property at $110K while the building coverage consists of $20K in flood insurance coverage and $100K in catastrophic ground collapse coverage (and limits this to ground collapse due to flooding). For this example lets say our outstanding loan balance is $80K. Also for what it is worth the compliance aid statement is present. My question is are we adequately covered?

I am aware that we can combined building and contents coverage (provided contents are used to secure the loan), but I have not encounter policies with minimal flood coverage and larger catastrophic ground collapse coverage built into the Building Coverage limit. My question is are we adequately covered? My instincts tell me that we are not and Interagency Q&A 8 and 9 seem to support my doubt.

Any additional guidance on this private flood issue would be appreciated.

Is there a reason you re-posted the exact same question??

Good grief no...... all I can blame this on is compliance brain with to many irons in the fire. Thank you both for confirming my suspicion and sorry for pumping my out of control post count

Wanted to get some thoughts on this. Policy does not contain the Compliance Aid Statement so you move to step 2 to determine if it meets the statutory definition of private flood insurance. My interpretation has been that this review was performed by the financial institution and it was on us to determine. I have seen examples of an agent certification document that essentially is an attestation from the agent certifying that the private flood policy meets the listed seven criteria (private flood definition). Do others think this is acceptable? Is there anything in the final rule pointing to who must vet the policy?

My reading is in line with your thoughts which is it is the institution's responsibility to make sure coverage is appropriate. Don't get me wrong, the cert would make me more confident in the review but I would still do the review. I would love to hear if anyone thinks you can rely on an agent.

Ultimately it is the bank's responsibility. Are you also getting an indemnification from the agent to cover you for any and all issues arising from their certification? I would be surprised if the insurance company would allow an agent to "certify" anything about the policy that they have issued, outside of what is actually written in the policy. They are not attorneys and while the lender is also usually not an attorney, if the lender documents their review and in good faith makes a determination that the policy meets the requirements - or at least meets the four requirements for discretionary acceptance, then I think the lender is going to be deemed in compliance. Relying blinding a third party certification who is no position to perform such a certification - not so much.