Private flood insurance policies for applicable loans must be accepted by credit unions beginning July 1, the board chairman for the federal regulator of credit unions said Tuesday.
In a Regulatory Alert sent to all federally insured credit unions (FICUS), National Credit Union Administration (NCUA) 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. In February, NCUA adopted a rule along with other federal financial institution regulators that – after nearly seven years – finally put the definition in effect.
“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 wrote.
The new rule, adopted by NCUA Feb. 12:
- 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 that institutions may, under certain conditions, accept private flood insurance policies that do not meet the Biggert-Waters Act criteria; and
- Allows institutions to accept certain flood coverage plans provided by mutual aid societies, subject to agency approval.
In the Alert published Tuesday, NCUA’s Hood noted when credit unions must accept private flood insurance that meets the definition outlined in the February rules. The policy coverage amount under those 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 (NFIA), the Alert states.
The Alert also outlines when credit unions have more discretion in accepting the insurance policies that do not meet all of the definitions under the new rule.
For the mutual aid society plans, the Alert states, NCUA must give approval. “If a credit union desires NCUA approval for a mutual aid society flood plan, it should submit a request to the NCUA through its Regional Office,” the Alert states. “The NCUA will evaluate requests and, if approved, such plans will be listed on the NCUA’s website for future reference. The evaluation will assess the plan based on the criteria for mutual aid societies detailed above.”
Last week, the federal financial institution regulators announced a June 18 no-charge webinar focusing on the interagency final private flood insurance rule. Staff from the NCUA, the Federal Deposit Insurance Corp. (FDIC), Office of the Comptroller of the Currency (OCC), Federal Reserve System, and Farm Credit Administration are expected to be on hand for the discussion.