Pub. 9 2019-2020 Issue 2

O V E R A C E N T U R Y : B U I L D I N G B E T T E R B A N K S - H E L P I N G C O L O R A D A N S R E A L I Z E D R E A M S September • October 2019 13 T he long awaited final private flood rule was, at last, jointly released on February 20, 2019 by the OCC, FRB, FDIC, FCA, and NCUA (“the Agencies”) 6 long years after the first proposed rule. The first proposed rule that was released in October 2013 introduced the requirements for accepting private flood insurance that meets the definition under the Biggert-Waters Act. Three years later, in November 2016, the Agencies revised and proposed the private flood rule. There are some key differences in the final private flood rule from the 2016 proposal. The final rule requires the bank to accept private flood that meets the definition of private flood insurance under the rule, without exception. However, it also allows the bank a safe harbor if the policy contains the Compliance Aid sentence. The Compliance Aid sentence (sometimes referred to as the magic sentence) is a sentence in the policy that provides safe harbor to the bank where the bank is permitted to rely on the Compliance Aid sentence that states that the policy meets the definition of private flood insurance under the law and regulation. The specific sentence is: “This policy meets the definition of private flood insurance contained in 42 U.S.C. 4012a(b)(7) and the corresponding regulation. If the Compliance Aid sentence is not included in the policy, then unfortunately, the bank is required to look through the policy to determine if the policy meets the definition of private flood insurance. In order for the policy to meet the definition of private flood insurance it must be (1) issued by a insurer or surplus insurer that is licenses by the state regulatory agency in which the property is located, (2) be at least as broad as NFIP, including deductibles, exclusions, and conditions, (3) require a 45 written notice for non-renewal or cancellation, (4) include information regarding insurance available under NFIP, (5) have a clause similar to SFIP regarding mortgage interest, (6) include a one year statute of limitations provision, and (7) include cancellation provisions that are as restrictive as those in SFIP. If this seems vague or confusing, Compliance Alliance has a checklist available in our Flood toolkit that may be helpful to the bank: https://www.compliancealliance.com/ find-a-tool/by-toolkit/flood. Much to Do About Private Flood BY SILVIA GARCIA MAGGIO, CRCM, ASSOCIATE GENERAL COUNSEl