For the first time in more than 20 years, FEMA has announced plans to make changes to its Standard Flood Insurance Policy (SFIP). Under the proposal, FEMA would introduce a new Homeowner Flood Form, to be published at 44 C.F.R. 61 appendix A(4), that would provide flood coverage for one-to-four residential properties. FEMA has also proposed adding five endorsements to the new form: Increased Cost of Compliance Coverage, Actual Cash Value Loss Settlement, Temporary Housing Expense, Basement Coverage, and Builder’s Risk. These endorsements would be codified at 44 CFR 61 appendices A(101)-(105). FEMA anticipates the new form will be more “user-friendly” and with the “accompanying endorsements would increase options and coverage for owners of one-to-for family residences.”
The National Flood Insurance Program managed by FEMA currently provides flood insurance through three different flood insurance policy forms: the Dwelling Form, the General Property Form, and the Residential Condominium Building Association Policy (RCBAP) Form. The Dwelling Form provides coverage for a one-to-four family residential building or a single-family dwelling unit in a condominium building. The new Homeowner Flood Form, upon adoption, will replace the Dwelling Form for the owner of a one-to-four family residence, but the Dwelling Form will continue to be used for landlords, renters, and owners of mobile homes, travel trailers, and condominium units. The General Property Form is issued for a five-or-more family residential building or a non-residential building, and the RCBAP Form insures residential condominium association buildings.
The addition of a new Homeowner Flood Form will likely impact the private flood policy review process currently required of regulated institutions. The Biggert-Waters Flood Insurance Reform Act of 2012 obligated the interagency regulators to issue a final rule requiring financial institutions to accept private flood insurance, and on February 13, 2019, the interagency regulators announced the issuance of this joint final rule. The final rule requires regulated institutions to accept flood insurance policies that meet the Biggert-Waters statutory definition of “private flood insurance” through four primary components: (1) mandatory acceptance of private flood insurance; (2) mandatory acceptance compliance aid; (3) discretionary acceptance of private flood insurance; and (4) flood coverage provided by mutual aid societies. Upon the issuance of the new SFIP Form, regulated institutions will need to review, and possibly revise, their private flood acceptance policies and procedures to ensure compliance with the private flood insurance rule in light of the new Homeowner Flood Form.