We have a loan on a condo unit. The RCBAP indicates a replacement cost of $32,315,700 and 193 units. That works out to $167,439 per unit. Our loan amount is $252,000. The appraised value on the condo unit is $315,000. I know the appraised value doesn't really indicate the replacement cost. How can I determine whether the $32,315,700 RCV stated on the policy is accurate?

If the condo building is insured to 100% of the RCV you're done.

The coverage for a condo building is the lesser of the RCV for the building or $250,000 per unit.

I missed your last question. The RCBAP Dec Sheet is required to show the RCV for the building. You have no obligation that I am aware of to verify that figure.

Tagging on to this thread, from a risk management perspective (and not a flood insurance minimum requirement perspective), can we require the borrower to obtain a policy that would cover up to the loan amount based on the same above scenario?

If the condo is already fully insured, would that not be requiring them to over insure the property? Of what value would that additional insurance represent? How do you even attempt to determine the replacement cost of one specific condo unit within a condominium complex?

Randy, thanks. I'm not sure, that's why I was asking the question. I know NFIP will not pay above replacement cost value, but thought maybe a private policy would be an option to cover up to the loan amount. I'm not fully up to speed on how private policies work - so could be totally off base with the question. It just seems like we are taking a pretty big credit risk if the replacement cost value is not sufficient to cover our loan amount in those markets where condo prices are much higher than replacement cost. I was hoping there was an alternative option but maybe not.

There is always credit risk. If that is viewed as a problem, then your credit administration should review the maximum LTV allowed on a condo loan. If the condo is fully insurance to the replacement cost value, then there is adequate insurance to rebuild the condo buildings in the event of a flood. Additional private insurance on an individual condo unit just really would be of no value. Even private insurance does not pay based on market value.

Thank you for the clarification.