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#2245682 - 11/19/20 12:16 AM Private Flood Insurance - Excess Policy
BA13 Offline
100 Club
Joined: Jul 2016
Posts: 194
Hello,
We received 2 private policies for one commercial property in a SFHA and one is referred to as the policy and the other as an excess policy. I've not seen an excess policy before so I'm wondering if it "attaches" to the main policy?
The policy reflects $1M coverage, RCV of $1,443,000, flood zone X (incorrect) and has the compliance aide statement.
The excess policy by Lloyds states the maximum amount of coverage would be $443,000, it reflects zone AE (correct) but I don't see the compliance aide statement on it. When we do the lessor of 3 test, the maximum coverage of $500,000 would be what we require. Does this mean we have $1,443,000 of coverage?

Also, the flood zone on the determination must match the policy regardless if it's a NFIP or private policy, correct?

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Flood Compliance
#2245691 - 11/19/20 03:27 PM Re: Private Flood Insurance - Excess Policy BA13
rlcarey Offline
10K Club
rlcarey
Joined: Jul 2001
Posts: 83,219
Galveston, TX
An excess policy would have a deductible that matches the first policy. For example, I have a excess flood policy through Lloyds up to the value of my house that has a $250,000 deductible and a NFIP policy for $250,000, which is the maximum available under the NFIP program.

So, you don't have to worry about the excess policy, unless you are requiring it from a safety and soundness perspective or you have more than one building and need it to meet the minimum flood insurance requirements.

Regarding the main policy, if it has the compliance aid statement, then you are done. Few private policies care about flood zones as those are purely a premium rating standard that is only used by the NFIP.

The new proposed flood insurance FAQs indicate that lender will no longer be required to care about flood zone mismatches. So, that is the direction the regulators are going on that issue, even on NFIP policies.
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#2245740 - 11/20/20 05:15 PM Re: Private Flood Insurance - Excess Policy BA13
BA13 Offline
100 Club
Joined: Jul 2016
Posts: 194
Thank you for the guidance Randy!

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