• Americas

Insurance Market & ‘Superstorms’ Rapidly Changing Bank Flood Compliance

By Brian B. Murray, Senior Managing Director, co-head Special Opportunities Group

Damage caused by the historic flooding in the Midwest and recent flooding in the Northeast tore up highways, railroad lines, levees and bridges, not to mention the widespread destruction of homes and businesses. Flooding is a yearlong challenge for federal officials and these recurring events are the start of heightened awareness prior to Hurricane Season.

Few things can grind a community to a halt like severe flooding. Unfortunately, it’s the most-common natural disaster in the U.S., causing billions in economic losses each year. In 2018 alone, Hurricanes Michael and Florence caused an estimated $50 billion in damages.

As these weather events continue to grow in severity and frequency, it is clear that the 1960s-era National Flood Insurance Program (NFIP) is outmatched by the super storms of the 21st century and the financial toll they’ve taken on the industry.

As a result, there have been enormous changes to the NFIP and the bank flood compliance landscape, from a patchwork of new rules to changing compliance requirements and even the broadening of the private flood-insurance market.

The country’s financial institutions are increasingly being required to show proof of compliance, and the penalties for not doing so are severe. Regulators continue to take issue with the way banks manage flood insurance across all lines of business and have taken a firm hand in enforcement of their policies.

Cushman & Wakefield has distinguished itself as the clear market leader in flood policy remediation for our country’s financial institutions, helping them navigate the complex waters of flood compliance with a team of more than 100 experts in the field on recent projects throughout the country.

We’ve been instrumental in assisting the biggest banks achieve regulatory flood compliance on their loan portfolios.  Through these efforts we have gained valuable insights into best practices and continue to share them with the banking community.

For example, we’ve developed a “Flood Insurance Coverage Calculator” methodology that ensures compliance for all property types and allows for NFIP and Private Policy coverages, yet it’s customizable enough to adapt to an institution’s policies and procedures.

Because of our interest and expertise in this sector, we are proud to sponsor the 2019 National Flood Conference June 2-5 in Washington, D.C. to discuss the NFIP and other issues related to the business. We will also be at the annual MBA’s Commercial / Multifamily Servicing & Technology Conference May 14-17 in Los Angeles, CA to discuss loan servicing updates for Flood Insurance.

They say the only thing constant is change. Even as you read this, changes are being proposed for the NFIP as there is a looming deadline of May 31 to reauthorize the program. Many believe substantive changes should come with the reauthorization.

For more information, download our latest report on Bank Flood Insurance Compliance – Challenges & Observation.

biran-murray-diligence-advisoryBrian Murray is co-head of the Special Opportunities Group at Cushman & Wakefield.  The Group is a strategic advisor to banking clients providing banking and credit-trained team members for regulatory reporting projects, compliance support, technology transition/migration support, and loan diligence services throughout the country.

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