On Compliance: What’s next for private flood insurance?

National Flood Insurance authorization, proposed rules raise concerns.

With the National Flood Insurance Program set to expire in September, it may be instructive to look back on the last time authorization ran out. Credit unions were caught in the middle regarding flood insurance requirements through the 17 short-term extensions, four lapses and nearly four years before the program was reauthorized in July 2012.

No one wants to experience that uncertainty again, but the future of NFIP depends on the willingness of Treasury Secretary Steven Mnuchin and Acting Federal Emergency Management Agency Administrator Robert J. Fenton Jr. to champion the increasingly expensive program before Congress. FEMA was forced to borrow $1.6 billion from the U.S. Treasury to cover NFIP losses in 2016, which logged the third largest annual loss at $4 billion.

Even as we anticipate drama regarding the reauthorization, the National Credit Union Administration and other federal financial agencies (Federal Deposit Insurance Corp., Farm Credit Administration, Office of the Comptroller of the Currency and Board of Governors of the Federal Reserve System) continue working on the final rules for private flood insurance. The Bigger-Waters Flood Insurance Reform Act of 2012 required lenders to accept private flood insurance; however, the implementation rules have still not been finalized by federal regulators. Comments were due in January regarding the second round of Proposed Rulemaking – Loans in Areas Having Special Flood Hazards – Private Flood Insurance (the first round was in October 2013).


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