Consumer Compliance Outlook: Third-Fourth Quarter 2015

A Note from the Editors

“Floods are the most common and costly natural disaster in the United States,” according to the Federal Emergency Management Agency (FEMA).1 “Between 1980 and 2013, the United States suffered more than $260 billion in flood-related damages.”2 These significant losses translate to a large volume of flood insurance claims. In 2005, for example, Hurricane Katrina resulted in claim payments of $16.3 billion from the National Flood Insurance Program (NFIP), ranking as the most expensive flood in the U.S. since the NFIP’s inception in 1968. In 2012, Superstorm Sandy resulted in more than $8 billion in claim payments, ranking as the second most costly flood in the U.S.3

These statistics provide a stark reminder to lenders about the importance of understanding and complying with federal flood insurance laws and regulations. To facilitate compliance, Consumer Compliance Outlook has published several articles over the years discussing federal flood insurance requirements. However, flood insurance compliance continues to be a challenge for financial institutions. Federal Reserve data for consumer compliance examinations reveal that several flood insurance requirements regularly appear among the top-cited violations by examiners.

As a result, this issue of Outlook is devoted to flood insurance compliance. We review the July 2015 interagency final rule to implement new flood insurance requirements of the Biggert-Waters Flood Insurance Reform Act of 2012 (BWA) and the Homeowner Flood Insurance Affordability Act of 2014 (HFIAA). We also republish a comprehensive article on flood insurance requirements from 2011 titled “Flood Insurance Compliance Requirements” that has been updated to reflect several significant changes in the flood insurance laws, including changes as a result of the passage of the BWA and the HFIAA. Finally, we provide a resource page with helpful flood insurance links.

We hope you find this special flood insurance issue informative.