ALEXANDRIA, Va.–Private flood insurance policies for applicable loans must be accepted by credit unions beginning on July 1, according to a Regulatory Alert sent by NCUA to all federally insured CUs.
In the Alert, Chairman Rodney E. Hood said the private insurance policies must meet the definition of private flood insurance included under the Biggert-Waters Flood Insurance Reform Act of 2012.
“Credit unions should be aware of this significant policy change in flood insurance regulations and update policies and procedures to address these alternative options to (National Flood Insurance Program) NFIP policies,” Hood stated.
What Rule States
The NCUA board adopted a new rule in mid-February. The rule:
- Implements the Biggert-Waters Act requirement that regulated lending institutions accept private flood insurance policies that satisfy criteria specified in the Act
- Allows institutions to rely on an insurer’s written assurances in a private flood insurance policy stating the criteria are met
- Clarifies institutions may, under certain conditions, accept private flood insurance policies that do not meet the Biggert-Waters Act criteria
- Allows institutions to accept certain flood coverage plans provided by mutual aid societies, subject to agency approval.
Other Provisions
The Alert states policy coverage amounts under such plans must be at least equal to the lesser of the outstanding principal balance of the designated loan or the maximum limit of coverage available for the particular type of property under the 1968 National Flood Insurance Act.
The Alert includes information on scenarios under which a CU has more discretion in accepting the insurance policies that do not meet all of the definitions under the new rules.
Additional information on alternatives can be found here.