Pub. 14 2019-2020 Issue 2

WWW.NEBANKERS.ORG 26 Much to Do About Private Flood Daniela Clark, Associate General Counsel, Compliance Alliance T HE LONG AWAITED FINAL PRIVATE flood rule was, at last, jointly re- leased 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 accept- ing private flood insurance that meets the definition under the Biggert-Waters Act. Three years later, in November 2016, the Agencies revised and reproposed 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 insur- ance under the rule, without exception. However, it also allows the bank a safe harbor if the policy contains the Com- pliance Aid sentence. The Compliance Aid sentence (some- times 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 in- surance under the lawand 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 unfor- tunately, 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 an in- surer 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 re- garding insurance available under NFIP, (5) have a clause similar to SFIP regard- ing 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