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Five regulatory agencies, including the NCUA, have approved a final rule to require financial institutions to accept certain private flood insurance policies to meet flood insurance requirements for homeowners and businesses.
The new rule implements provisions of the Biggert-Waters Flood Insurance Reform Act of 2012; it takes effect on July 1.
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The new rule, as adopted by the NCUA, allows credit unions to rely on an insurer's written assurances that the requirements for flood insurance has been met. In addition, the rule clarifies that, under certain conditions, financial institutions may accept private flood insurance policies that do not meet federal criteria.
And the rule allows credit unions to accept certain flood coverage offered by mutual aid societies, subject to agency approval.
The federal flood insurance program is on shaky ground. Congress has been attempting to overhaul program, an effort that so far has proven unsuccessful. As a result, the program has come close to expiring, but has been extended through a series of short-term extensions.
Last year, the Congressional Research Service reported that expanding the availability of private flood insurance is considered by many people as an answer to the viability of the program.
CRS also pointed out that homeowners and businesses would be more likely to be paid for losses more quickly under a private insurance policy than they would be under the federal program.
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