The Federal Financial Institutions Examination Council updated its Flood Disaster Protection Act examination manual to reflect changes resulting from the new private flood rule, which went into effect on July 1, 2019. The rule is the long-awaited implementation of the 2012 Biggert-Waters Act provision that requires federally regulated lending institutions to accept private flood insurance policies that meet certain statutory criteria, in satisfaction of the mandatory purchase requirement.
The updated manual addresses: mandatory acceptance of a private insurance policy to satisfy the flood insurance purchase requirement if the policy meets the statutory and regulatory definition of “private flood insurance”; discretionary acceptance of a flood insurance policy issued by a private insurer, even if the policy does not meet the statutory and regulatory definition of “private flood insurance”; and discretionary acceptance of a plan issued by a mutual aid society in satisfaction of the flood insurance purchase requirement, if certain criteria are met.
In addition, the Federal Reserve released information on the acceptance of mutual aid society plans for Fed-supervised institutions. The agency noted that staff will “assist state member banks in determining whether a mutual aid plan meets the Federal Reserve’s conditions for acceptance.” To request a review, the bank must provide the plan, “along with any supporting state-specific regulatory information pertaining to the state in which the property is located, to its responsible Reserve Bank prior to accepting the plan.”
