Q: If we have a private flood insurance policy currently in place and it comes up for renewal after July 1, 2019, the questioner asks, do we need to review the policy under the mandatory acceptance criteria in order to allow continued use of that policy post renewal? And the questioner continues what if the private policy does not meet the criteria?
A: So once the policy comes up for renewal, it would be necessary for the lender to review it. Although there is no regulatory requirement to review policies that are currently in place, once a policy comes up for renewal, it should be handled as though it is a new policy. In other words, a lender will have to review all policies that are new or renewed after July 1, 2019, to make sure the policies comply with the regulation. To comply with the regulation, the policies must meet the mandatory acceptance criteria or have the compliance aid assurance clause. If the policy does not meet the mandatory criteria, it may still be acceptable if it meets the discretionary criteria. If the policy does not meet the mandatory or the discretionary criteria, the lender will have to notify the borrower. If the borrower does not purchase acceptable flood insurance, the lender must purchase acceptable insurance on that borrower's behalf.
This Q&A was part of the discussion in the Outlook Live – 2019 Interagency Flood Insurance Update on Private Flood Insurance Rule webinar held on 6/18/19 and focused on the new private flood insurance rules that become effective 7/1/19. Information may be found here: https://www.webcaster4.com/Webcast/Page/577/30085