BOARD CONSIDERATION OF MUTUAL AID SOCIETY PLANS

The February 2019 revision to the flood insurance regulations provides a definition of a “mutual aid society” and describes the conditions under which a regulated lending institution may accept a flood protection plan issued by a mutual aid society. Within the Board’s Regulation H, 12 CFR 208.25(c)(3)(iv) enumerates those conditions. The first of the conditions for acceptability of a mutual aid plan requires that “the Board has determined that such plans qualify as flood insurance for purposes of the [National Flood Insurance] Act.” Under the Board’s interpretation of the National Flood Insurance Act, if the mutual aid society issuing the mutual aid plan is recognized as an “insurer” or the mutual aid plan is recognized as “insurance” by the State in which the property is located, then the plan would qualify as flood insurance for purposes of the Act.

The Board recognizes that state member banks may not typically analyze mutual aid society plans in the course of their lending activities. Therefore, Federal Reserve staff will assist state member banks in determining whether a mutual aid plan meets the Federal Reserve’s conditions for acceptance. In order to request review of a mutual aid society plan, a state member bank should provide the plan, along with any supporting State-specific regulatory information pertaining to the State in which the property is located, to its responsible Reserve Bank prior to accepting the plan. The Reserve Bank may coordinate with Board staff to obtain a determination regarding the acceptability of that plan in satisfaction of the flood insurance purchase requirement.

Importantly, because the Board’s determination is based upon the laws and regulations of the State in which the property is located, acceptance of a mutual aid society plan in one State will not apply to the acceptability of that plan in other States. Any mutual aid society plan submitted for consideration will be reviewed within the context of the applicable State’s laws and regulations.

This is a solid first step by the Board. No mention is made of the turnaround time for the Board’s review of a Mutual Aid Society Plan.

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