The clock has struck for the final hour of the compliance deadline for the Private Flood Insurance Rule. July 1, 2019 is the effective date for the mandatory acceptance of private flood insurance policies final rule, assuming the qualifications are met for each policy.
As you know, there are a lot of moving pieces to this final rule. There is the requirement for mandatory acceptance, the Compliance Aid statement, the discretionary acceptance option, and finally the mutual aid society provision. Oh, and don’t forget the customer notice about National Flood Insurance Policy, NFIP, availability.
The regulatory agencies recently offered a great webinar on the final rule. During the webinar they walked through the requirements, but what I found most helpful was a handful of questions asked during the Q&A portion. If you have our FI Hub package, then you saw where I pointed out the requirement for the insurance company to be licensed to do business in the state where the collateral is located. This was highlighted again in the webinar. The speakers referenced confirming state licenses with the state insurance regulators or the NFIP, website. Of course, if it is a private policy the agent may not appear on the NFIP site. But it was nice that they offered resources to confirm licensing.
The Agencies also clarified that institutions will not be required to review existing policies within the current portfolio until those policies come due. So, no back checking, which we knew but it is always nice when they confirm. In addition, one of the Agencies stated the Compliance Aid language must be the exact language provided in the final rule. Ensure a check for language deviations within the Compliance Aid statement is part of the policy review process.
I thought the conversation on the mutual aid society plans was especially interesting. The final rule mandates that a mutual aid society policy must be approved by your regulator. During the webinar each agency commented separately on this subject. One was still deciding on how they will handle the policy reviews. But all of them made it very clear they must approve the individual policy. In my opinion, this could cause a significant delay in the timing for loan closing and be very discouraging for the borrower. I recommend watching for follow up guidance specific to your regulator.
Be sure your employees are provided detailed education on this topic. It is important that all players are aware of the requirement. Below is a link to the Interagency webinar: https://www.consumercomplianceoutlook.org/outlook-live/2019/interagency-flood-insurance-regulation-update/