FEMA, N.Y. Officials Settle Dispute Over Flood Insurance Regulation

December 12, 2011

Federal Emergency Management Agency (FEMA) issued a new bulletin telling insurers that they should cooperate with state regulators on questions regarding federal flood insurance.

There has been an ongoing turf battle between FEMA and New York officials on regulating local flood insurers. Federal flood insurance is a federally funded program administered by FEMA and is sold and serviced by property insurance companies.

The new bulletin is the result of a recent meeting between FEMA and New York officials to work out their differences and discuss how best to assist flood victims.

The New York Department of Financial Services said New York regulators, at New York Governor Andrew Cuomo’s direction, have been “very active” in ensuring that insurers and their agents and adjusters were responding adequately to help flood victims.

According to the department, Governor Cuomo and New York State Financial Services Superintendent Benjamin Lawsky have been hearing many complaints from citizens and business owners that insurers were slow to respond in handling their claims. New York officials have been pushing flood insurers to pay out claims in a prompt manner.

But in October, FEMA sent a letter to Superintendent Lawsky, asserting that federal flood insurance is not subject to state regulation and that federal officials have regulatory authority.

The Cuomo Administration opposed this position and sent a letter to New York property insurance companies, informing them that they are required to follow New York rules for fairness and promptness when servicing customers with federal flood insurance.

FEMA and New York officials met recently to discuss the best way to protect policyholders. FEMA then issued a new administrative bulletin to flood insurers.

The FEMA memo refers to Write Your Own, the name for the program which has private insurers sell federal flood insurance. The following are statements from FEMA’s new bulletin:

“It appears that there is some confusion regarding the appropriate information sharing that can occur between WYO companies selling and administering NFIP insurance and State insurance commissioners and regulators seeking information about flood insurance claims and claims handling activities.

To clarify, FEMA encourages WYO companies to cooperate with interested State insurance commissioners and regulators with general flood insurance inquiries. Consistent with State and Federal requirements and practices, it is appropriate for WYO companies to respond to inquiries relating to the status of claims in the aggregate and the status of a specific claim, and to provide routine aggregate flood claims information.

It also is appropriate for a company to identify that it is the insurer for a particular building or its contents and to acknowledge a specific claim…By this Bulletin, FEMA is encouraging cooperation and comity with State insurance commissioners and regulators.”

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