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#2212282 - 04/29/19 01:42 PM Private Flood Insurance - Insurance Co Rating
RVFlyboy Offline
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RVFlyboy
Joined: Oct 2000
Posts: 5,991
Soaring over Georgia
The new rule on PFIPs seems to say that we must accept a policy if it is issued by a licensed or recognized insurer if it meets certain standards. Nowhere in those standards does it address the rating (such as Standard & Poor's or AM Best rating) of the insurance company issuing the policy. Can we refuse to accept a policy from a poorly rated insurance company even if it meets the requirements of the rule? Or are we now going to be forced to accept a policy even though the company that issued it may not be in business a month from now?
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Jim Bedsole, CRCM, CBA, CFSA, CAFP
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Flood Compliance
#2212287 - 04/29/19 01:55 PM Re: Private Flood Insurance - Insurance Co Rating RVFlyboy
rlcarey Online
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rlcarey
Joined: Jul 2001
Posts: 83,227
Galveston, TX
There is nothing in the regulations that would allow you to reject a private policy if it meets all outlined requirements. Does your State actually license insurance companies that might fail next month? Do they not have to meet financial requirements to be licensed?
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#2212292 - 04/29/19 02:43 PM Re: Private Flood Insurance - Insurance Co Rating RVFlyboy
RVFlyboy Offline
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RVFlyboy
Joined: Oct 2000
Posts: 5,991
Soaring over Georgia
I used an extreme example with the "fail next month", but there are certainly insurance companies with ratings that indicate they have a substantially higher risk of being able to fulfill on policies they've written. Fannie Mae, for example, currently has ratings standards for property insurance carriers (which would include flood) here: https://www.fanniemae.com/content/guide/selling/b7/3/01.html

Will the new rules force Fannie to do away with these standards as relate to flood insurance companies?

To rephrase the question - while we know we must accept a PFIP that meets the standard, can we still have standards for acceptable private flood insurance providers? Or must we accept a PFIP from an insurance company that is rated as C from AM Best?
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Jim Bedsole, CRCM, CBA, CFSA, CAFP
My posts - my opinions

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#2212321 - 04/29/19 04:54 PM Re: Private Flood Insurance - Insurance Co Rating RVFlyboy
rlcarey Online
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rlcarey
Joined: Jul 2001
Posts: 83,227
Galveston, TX
Interesting dilemma - not sure if FNMA is going to amend that before July 1 or not, but there is no provision to reject private flood insurance that complies with the regulatory requirements based on an insurance company rating. Of course they are not the lenders, they are just purchasing the loans, so they can pick and choose what they want to purchase.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com

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