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#2210996 - 04/12/19 05:03 PM
Re: New Private Flood Insurance Rules
Tesla
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10K Club
Joined: Jul 2001
Posts: 83,365
Galveston, TX
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Compliance aid for mandatory acceptance. A member bank may determine that a policy meets the definition of private flood insurance in paragraph (b)(9) of this section, without further review of the policy, if the following statement is included within the policy or as an endorsement to the policy: “This policy meets the definition of private flood insurance contained in 42 U.S.C. 4012a(b)(7) and the corresponding regulation.â€
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#2210997 - 04/12/19 05:04 PM
Re: New Private Flood Insurance Rules
Tesla
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Diamond Poster
Joined: Nov 2006
Posts: 1,409
California
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#2210998 - 04/12/19 05:08 PM
Re: New Private Flood Insurance Rules
Tesla
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Power Poster
Joined: Nov 2003
Posts: 3,726
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You know I think everyone is struggling with this as we (bankers) have never been given such an easy task when it comes to flood insurance (Just look for these words and you're good to go!) Ha! Ha! 
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It's not that I take life for granted. It's only that the good won't make it. Innocence dies, while Villany Thrives.
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#2211621 - 04/19/19 02:14 PM
Re: New Private Flood Insurance Rules
Tarhe
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Junior Member
Joined: Oct 2018
Posts: 30
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Yes, even if there is a compliance aid language, please still verify that the insurance company is licensed and able to insure the property in the designated area.
Last edited by Jesenia - Compliance; 04/19/19 02:16 PM.
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#2211622 - 04/19/19 02:17 PM
Re: New Private Flood Insurance Rules
Tesla
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Junior Member
Joined: Oct 2018
Posts: 30
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Yes, even if the policy contains the Compliance Aid Provision, we still need to verify that the insurance company is licensed, admitted or otherwise approve.
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#2211624 - 04/19/19 02:26 PM
Re: New Private Flood Insurance Rules
rlcarey
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Joined: Oct 2018
Posts: 30
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#2211760 - 04/22/19 05:40 PM
Re: New Private Flood Insurance Rules
Tesla
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10K Club
Joined: Nov 2000
Posts: 18,762
Central City, NE
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[Compliance aid for mandatory acceptance. A member bank may determine that a policy meets the definition of private flood insurance in paragraph (b)(9) of this section, without further review of the policy, if the following statement is included within the policy or as an endorsement to the policy: “This policy meets the definition of private flood insurance contained in 42 U.S.C. 4012a(b)(7) and the corresponding regulation.â€[/quote]
So far, I've seen private Flood Insurance policies from 3 different states that have the Compliance Aid Statement, but then state "This policy is issued by a nonadmitted insurer, and in the event of the insolvency of such insurer, this policy will not e covered by the _____ (insert State and their regulatory agency)".
Another policy has "This insurance contract is issued by a non-admitted insurer which is not licensed by nor under the jurisdiction of the _____(State name) Insurance Director."
In effect the extra statement cancels out the Compliance Aid Statement (in my mind) as the insurance company must be "licensed, admitted or otherwise approved to engage in the business of insurance in the State or jurisdiction in which the insured building is located, by the insurance regulator of that State or jurisdiction."
These are all Lloyds of London policies. I'm not too worried about Lloyd's going down, but the wording conradicts the Compliance Aid Statement.
Thoughts?
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#2211778 - 04/22/19 06:40 PM
Re: New Private Flood Insurance Rules
Tesla
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10K Club
Joined: Jul 2001
Posts: 83,365
Galveston, TX
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David - I assume that these were non-residential properties and insurance? Typically, Llyod's is a surplus line insurer and are not specifically licensed in the State, however they would be acceptable as long as they are not disapproved. I am not sure this voids the Compliance Aid statement as long as they are incompliance with 42 U.S.C. 4012a(b)(7).
42 U.S.C. 4012a(b)(7)(A) is issued by an insurance company that is—
(i) licensed, admitted, or otherwise approved to engage in the business of insurance in the State or jurisdiction in which the insured building is located, by the insurance regulator of that State or jurisdiction; or
(ii) in the case of a policy of difference in conditions, multiple peril, all risk, or other blanket coverage insuring nonresidential commercial property, is recognized, or not disapproved, as a surplus lines insurer by the insurance regulator of the State or jurisdiction where the property to be insured is located;
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#2211820 - 04/22/19 10:55 PM
Re: New Private Flood Insurance Rules
Tesla
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10K Club
Joined: Jul 2001
Posts: 83,365
Galveston, TX
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Well the compliance aid statement is the following:
“This policy meets the definition of private flood insurance contained in 42 U.S.C. 4012a(b)(7) and the corresponding regulation.â€
However, 42 U.S.C. 4012a(b)(7)(A) that I quoted above, has two parts to it and it is separated by an "or". The insurance company can be licensed under (i) or a surplus line insurer for nonresidential commercial properties just has to be recognized or not disapproved under (ii).
That was the basis for my question as to the type of property. They may well be required by the State to also tell them that they are not admitted or licensed by the State within the policy.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com
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#2211838 - 04/23/19 03:09 PM
Re: New Private Flood Insurance Rules
Tesla
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10K Club
Joined: Jul 2001
Posts: 83,365
Galveston, TX
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Well, if it was for 1-4 property, then I think it is a problem. The question is then, who polices the insurance companies for proper use of the compliance aid statement??
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com
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#2214028 - 05/20/19 07:16 PM
Re: New Private Flood Insurance Rules
Tesla
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10K Club
Joined: Nov 2002
Posts: 20,656
The Swamp
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I think we have several [including our own FP insurance] which is through Lloyds. All three of these 'designations' apparently stand alone [see 'or'] and I'm not exactly sure where Lloyds fits in to the statement.
licensed, admitted, or otherwise approved to engage in the business of insurance in the State or jurisdiction in which the insured building is located, by the insurance regulator of that State or jurisdiction
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My opinion only. Not legal advice.
Say you'll haunt me - Stone Sour
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#2214292 - 05/23/19 05:14 PM
Re: New Private Flood Insurance Rules
Tesla
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Platinum Poster
Joined: Jun 2014
Posts: 566
Petersburg, VA
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Do we need to have any non-NFIP policy that we have accepted and are currently in place reviewed for the private insurance requirements as of 7/1, or would we just need to tackle them as they come up for renewal?
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#2214321 - 05/24/19 11:46 AM
Re: New Private Flood Insurance Rules
Tesla
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Power Poster
Joined: Sep 2010
Posts: 2,658
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I don't see anything in the rule that leads me to believe you must re-evaluate existing private policies (until a MIRE trigger occurs). That said, you are permitted to comply with the rule before the 7/1/19 implementation date.
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Adam Witmer, CRCM All statements are my opinion, not those of my employer, and should not be taken as legal advice. www.compliancecohort.com
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#2214657 - 05/31/19 11:32 AM
Re: New Private Flood Insurance Rules
Tesla
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Platinum Poster
Joined: Jun 2014
Posts: 566
Petersburg, VA
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(C) A mortgage interest clause similar to the clause contained in an SFIP; and
...
(iv) Contains cancellation provisions that are as restrictive as the provisions contained in an SFIP.https://www.fema.gov/national-flood-insurance-program/standard-flood-insurance-policy-formsLooking over the SFIP's posted on FEMA's website, is this the section that we would need to compare against a private policy for the mortgage interest clause? Q. MORTGAGE CLAUSE
The word “mortgagee†includes trustee.
Any loss payable under Coverage A—Building Property will be paid to any mortgagee of whom we have actual notice, as well as any other mortgagee or loss payee determined to exist at the time of loss, and you, as interests appear. If more than one mortgagee is named, the order of payment will be the same as the order of precedence of the mortgages.
If we deny your claim, that denial will not apply to a valid claim of the mortgagee, if the mortgagee:
1.Notifies us of any change in the ownership or occupancy, or substantial change in risk of which the mortgagee is aware;
2.Pays any premium due under this policy on demand if you have neglected to pay the premium; and
3.Submits a signed, sworn proof of loss within 60 days after receiving notice from us of your failure to do so.
All of the terms of this policy apply to the mortgagee.
The mortgagee has the right to receive loss payment even if the mortgagee has started foreclosure or similar action on the building.
If we decide to cancel or not renew this policy, it will continue in effect for the benefit of the mortgagee only for 30 days after we notify the mortgagee of the cancellation or non-renewal.
If we pay the mortgagee for any loss and deny payment to you, we are subrogated to all the rights of the mortgagee granted under the mortgage on the property. Subrogation will not impair the right of the mortgagee to recover the full amount of the mortgagee’s claim. And where would I find cancellation provisions? I didn't really see anything in the SFIP itself, unless either I missed it or it's only talking about the mortgagee notification quoted above.
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#2214658 - 05/31/19 11:38 AM
Re: New Private Flood Insurance Rules
Tesla
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10K Club
Joined: Jul 2001
Posts: 83,365
Galveston, TX
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A flood insurance policy once purchased, cannot be cancelled by the NFIP. It may only be not renewed with proper notice.
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#2214829 - 06/04/19 11:39 AM
Re: New Private Flood Insurance Rules
Tesla
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Platinum Poster
Joined: Jun 2014
Posts: 566
Petersburg, VA
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Where can I find the language for the cancellation provisions in the SFIP? I would like to have something to point to when training my folks on what to look for.
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#2214831 - 06/04/19 12:25 PM
Re: New Private Flood Insurance Rules
Tesla
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10K Club
Joined: Jul 2001
Posts: 83,365
Galveston, TX
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Since a SFIP dwelling policy or other policy once issued cannot be cancelled by FEMA before the expiation date of the policy, except in the case that duplicate policies have been issued, I am a little at a loss as to what to point you too. Why would something be address in a policy that is not allowed?
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#2214848 - 06/04/19 01:37 PM
Re: New Private Flood Insurance Rules
Tesla
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Platinum Poster
Joined: Jun 2014
Posts: 566
Petersburg, VA
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Why would something be address in a policy that is not allowed? Maybe I'm getting tripped up on the language in the regulation, but it specifically states "provisions contained in an SFIP." (iv) Contains cancellation provisions that are as restrictive as the provisions contained in an SFIP. Hence why I thought it would be a provision within the policy.
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#2214852 - 06/04/19 01:45 PM
Re: New Private Flood Insurance Rules
Tesla
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10K Club
Joined: Jul 2001
Posts: 83,365
Galveston, TX
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So - you have a private policy sitting in front of you that says: the private insurance company can cancel the policy with 60 days notice to the insured. Is that more restrictive than a policy that has no provisions for cancellation?
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#2214853 - 06/04/19 01:49 PM
Re: New Private Flood Insurance Rules
rlcarey
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Platinum Poster
Joined: Jun 2014
Posts: 566
Petersburg, VA
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Ah, ok. I'm seeing the light now!! Thanks
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#2215187 - 06/06/19 08:18 PM
Re: New Private Flood Insurance Rules
Tesla
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Junior Member
Joined: Sep 2017
Posts: 32
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If a private builders risk policy is missing the compliance aid statement, and provides the following:
1) adequate coverage as required under the NFIP;
2) is issued by an authorized insurer that is licensed, admitted, or not disapproved by a state insurance regulator;
3) mortgagor and mortgagee show as loss payees (unless condo or similar property); and
4) sufficient protection, which includes reasonable deductibles based on borrower's financial condition; payment terms and conditions with respect to payment per occurrence or per loss and aggregate limits are adequate to protect to protect the Bank's interest; the flood policy complies with state insurance laws; and the private company has financial solvency to satisfy claims.
Is the following adequate notice of cancellation or non-renewal to the mortgagor and mortgagee for sufficient protection?
"This policy may be canceled by the Company by mailing to the Named Insured, at the address shown in this policy or last known address, written notice stating when, not less than sixty (60) days thereafter such cancellation shall be effective, except in the event of the Named lnsured's non-payment of any premium due, said notice shall be ten (10) days."
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#2215203 - 06/07/19 10:40 AM
Re: New Private Flood Insurance Rules
Tesla
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10K Club
Joined: Jul 2001
Posts: 83,365
Galveston, TX
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That says the Company can cancel the policy with 60 days notice. It is not compatible with a NFIP policy that cannot be cancelled. I have not otherwise seen a builder's risk policy that would come close to complying as private insurance.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com
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