It has been nine years since the Interagency Questions and Answers Regarding Flood Insurance (Flood Insurance Q&As)have seen any revisions. But that’s all about to change. Under the National Flood Insurance Reform Act of 1994 (Reform Act), the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Farm Credit Administration, and the National Credit Union Administration (collectively, the Agencies) were required to revise their flood insurance regulations. In compliance with the Reform Act, the Agencies released a joint final rule in 1996. After promulgation of the joint final rule, commenters raised a number of diverse issues regarding the proposed rule. Thus, in 1997, the Agencies issued the Flood Insurance Q&As, which were last revised in 2011, to provide guidance for compliance with the new joint rule.
In late June 2020, the Agencies issued new proposed Q&As to “reorganize, revise, and expand” the guidance due to the substantial changes to flood insurance requirements under the Biggert-Waters Flood Insurance Reform Act of 2012, the 2014 Homeowner Flood Insurance Affordability Act, and the regulations issued to implement these laws. The revisions are meant “[t]o help lenders meet their responsibilities under Federal flood insurance law and to increase public understanding of their flood insurance regulations.” The “significant topics” addressed by the proposed revisions include “major amendments to flood insurance laws with regard to the escrow of flood insurance premiums, the detached structure exemption, and force-placement procedures.” Additionally, the Agencies are also proposing to reorganize the Q&As into “new categories by subject to enhance clarity and understanding for users, and improve efficiencies by making it easier to find information related to technical flood insurance topics.”
Once these new Q&As become final, they will supersede the 2009 and 2011 Q&As and supplement the Agencies’ other guidance or interpretations. The Agencies recently extended the comment period to the proposed Q&A revisions to November 3, 2020. In addition, the Agencies announced they will release another set of proposed Q&As regarding the private flood insurance rule, which provides that regulated lending institutions must accept a private flood insurance policy issued by an insurance company that meets certain conditions and provides flood insurance coverage at least as broad as the coverage provided under a standard flood insurance policy issued under the National Flood Insurance program for the same type of property. Over the next several weeks, we will address several of the proposed changes to the Q&As and the extent to which those changes impact flood insurance compliance of regulated institutions.