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It’s our understanding that under FEMA’s new Risk Rating 2.0 methodology, flood zones will no longer be used to calculate insurance premiums. Instead, flood insurance rates will be based on the actual flood risk and value of individual properties.
Phase I of FEMA’s changes were implemented on October 1, 2021, with new policies subject to the Risk Rating 2.0 methodology and existing policyholders eligible for renewal will be able to take advantage of premium decreases. We’ve received little guidance surrounding how or if Special Flood Hazard Determination forms will be revised and how Bank’s should address coverage based on the risk ratings.
Can you provide any insight or point us in the right direction? Additionally, does Jack’s Compliance Resource expect to provide training on this topic?
Thank you!The changes in the premium structure impacts your customers, but does not change much for your bank, at least for now. You must still make sure that properties are covered by an adequate amount of flood insurance.
The prudential regulators are not up to speed on this development. They are in the process of finalizing Frequently Asked Questions that impacted by these changes. They will need to explain how a bank ensures that a flood policy adequately insures against the flood risk. FEMA has already stopped putting the risk rating on the declaration page, so it is no longer possible to compare the risk rating from the bank’s determination to the risk rating on the policy.
When the agencies get caught up, I assume they will let you and I know what we are expected to do.
We are very anxious to conduct training on this topic, but waiting on the prudential regulators to reset the rules.
I have a 2.0 question regarding an Evidence of Flood Insurance Coverage Placed (renewed policy under 2.0) we received recently. Under 2.0 my understanding is like above, coverage will be based on risk and we may not see a “zone” on our policies or evidence of flood insurance. What has thrown us for a loop is our understanding that if a home is located in an SFHA it will still require coverage, our flood determination states its located in Zone AE an SFHA, but our Certificate of Insurance notes “FLOOD ZONE: Non-SFHA Zones”. Wouldn’t we want to see the Flood Zone section state “FLOOD ZONE: SFHA ZONE”?
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