HUD Publishes Housing Notice 2024-6: Wind or Named Storm Insurance Coverage - Maximum Insurance Deductibles

• By: admin
• On: 04/18/2024 08:06:32
• In: HUD Notices

SUBJECT: Wind or Named Storm Insurance Coverage - Maximum Insurance Deductibles 

Purpose

The MAP guide requires that the maximum deductible for casualty insurance may not exceed the greater of $50,000 or 1% of the insurable value for any insured building up to a maximum amount of $250,000. It has been increasingly apparent that insurers are less willing to underwrite a casualty insurance policy with this deductible, particularly in states and geographic areas subject to increasingly severe weather patterns. The purpose of this Housing Noticeis to address the challenges that borrowers are facing in the insurance market, caused primarily by weather conditions due to climate change. This Housing Noticeincreases the maximum casualty insurance deductible amount for wind or named storm coverage as set forth below. This Housing Notice applies to new mortgage insurance transactions that have not achieved final endorsement.

Background

Heavy rainfall, high winds and storm surges associated with intense storms have the potential to cause significant damage to property, more so than average seasonal storms that may be historically typical for any given geographical area. Because these stronger storms have the potential to cause significant damage to property, insurance providers generally define them as “named storms” and assess an increased named storm deductible as a condition of providing coverage in the event of a catastrophic loss. Wind or named storm deductibles first came about in 1992 after Hurricane Andrew, and became more common after Hurricane Katrina in 2005, when the insurance industry lost $64B.

Wind or named storm coverage, particularly using the lower deductible amount currently required by HUD, can be difficult to obtain in the insurance market due to a lack of availability in some areas, or when available, may be unreasonably expensive.

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