Private Flood Compliance Aid

Federal Banking Agencies Issued Final Rule Effective July 1, 2019 on the Acceptance of Private Flood

July 1, 2019 was a big day in the flood insurance world that will benefit private flood carriers, lenders and property owners who want to buy private flood insurance. On that day, a new rule issued by Federal banking regulators took effect, which makes it much easier for federally-regulated lenders and their insurance consultants to accept private flood insurance policies. Assuming the policy has the limits and deductibles required by Law and the lender, the new rule says that a lender must accept any private flood insurance policy that includes the statement: “This policy meets the definition of private flood insurance contained in 42 U.S.C. 4012a(b)(7) and the corresponding regulation.” Because of this compliance aid, lenders and their insurance consultants no longer need to review the terms and conditions of a private flood insurance policy and make their own judgment call on whether it meets the statutory definition of “private flood insurance.” This should dramatically increase the purchase of private flood insurance in the future. We assume all private flood insurance carriers have made this sentence part of their policy form to ensure acceptance by all lenders.

The new rule also includes a “Discretionary Acceptance” provision that allows lenders to accept blanket or difference in conditions policies for non-residential buildings, even if the policy does not meet the statutory definition of private flood insurance. This may prove very helpful for owners of commercial buildings, by allowing them to maintain one policy to cover multiple buildings. However, there is always a possibility that an owner buys one of these policies to cover a schedule of buildings and then one or more lenders choose, at their discretion, not to accept the policy. In such cases, the owner would then have to buy separate flood coverage, which would create an additional cost and administrative headache for the owner.

For more information about how the new rule impacts your flood insurance option, please contact CRIO at 561-616-8593 or