Yes, the flood insurance requirement applies to grain bins, unless the security agreement for the loan was structured to exclude the grain bins from the property securing the loan.

Any loan secured by a “building” is considered a designated loan that is subject to the flood insurance requirements. The Interagency Questions and Answers Regarding Flood Insurance explicitly include grain bins within the definition of a non-residential “building.” However, a lender may “carve out” buildings from its security interest to avoid the flood insurance requirements. Consequently, flood insurance may not be necessary on the grain bins if you structure your security agreement to exclude the bins from the property securing the loan. (If you already have executed the security agreement, this could be accomplished by an addendum.) The Interagency Guidance warns of the risks of this approach, however, and we recommend consulting with bank counsel if you choose this route.

For resources related to our guidance, please see:

• 12 CFR 339.3 (“An FDIC-supervised institution shall not make, increase, extend, or renew any designated loan unless the building or mobile home and any personal property securing the loan is covered by flood insurance for the term of the loan.”)

• 12 CFR 339.2 (“Designated loan means a loan secured by a building or mobile home that is located or to be located in a special flood hazard area in which flood insurance is available under the Act.”)

• 12 CFR 339.3 (“Flood insurance coverage under the Act is limited to the building or mobile home and any personal property that secures a loan and not the land itself.”)

• Interagency Questions and Answers Regarding Flood Insurance,  Question 12 (“Nonresidential buildings include those used for small businesses, churches, schools, farm activities (including grain bins and silos), pool houses, clubhouses, recreation, mercantile structures, agricultural and industrial structures, warehouses, hotels and motels with normal room rentals for less than six months' duration, nursing homes, and mixed-use buildings with less than 75 percent residential square footage.”)

• The Interagency Questions and Answers Regarding Flood Insurance,  Question 24 (“The lender may consider “carving out” buildings from the security it takes on the loan. However, the lender should fully analyze the risks of this option. In particular, a lender should consider whether it would be able to market the property securing its loan in the event of foreclosure. Additionally, the lender should consider any local zoning issues or other issues that would affect its collateral.”)