National Flood Insurance Program; Group Flood Insurance Policy for Individual and Family Grant Program

FEDERAL EMERGENCY MANAGEMENT AGENCY

44 CFR Parts 61 and 206

RIN 3067-AC35

National Flood Insurance Program; Group Flood Insurance Policy

for Individual and Family Grant Program

AGENCY: Federal Emergency Management Agency (FEMA).

ACTION: Proposed rule.

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SUMMARY: This proposed rule would establish a Group Flood Insurance

Policy (GFIP) and the criteria for its implementation by the National

Flood Insurance Program (NFIP) when Federal disaster assistance is

provided under the Individual and Family Grant Program after the

President makes a disaster declaration.

EFFECTIVE DATE: We invite your comments which will be accepted until

May 1, 1995.

ADDRESSES: Please send comments to the Rules Docket Clerk, Office of

the General Counsel, Federal Emergency Management Agency, 500 C Street

SW., room 840, Washington, DC 20472, (facsimile) (202) 646-4536.

FOR FURTHER INFORMATION CONTACT: Charles M. Plaxico, Jr., Federal

Emergency Management Agency, Federal Insurance Administration, (202)

646-3422, (facsimile) (202) 646-3445; or Laurence W. Zensinger in

FEMA's Response and Recovery Directorate, (202) 646-3642, (facsimile)

(202) 646-2730.

.SUPPLEMENTARY INFORMATION: Section 411, Individual and Family Grant

(IFG) Programs the Stafford Act (42 U.S.C. Sec. 5178) authorizes the

President to make grants to States for the purpose of making grants to

individuals or families adversely affected by a major disaster. This

disaster assistance is provided to eligible individuals or families who

are unable to meet disaster-related necessary expenses or serious needs

through insurance or other means of assistance. The maximum grant

amount provided under the State-administered IFG program is $12,600 in

Fiscal Year 1995, and is adjusted annually as the Consumer Price Index

for All Urban Consumers changes.

In past presidentially declared major disasters, IFG recipients

were required to purchase and maintain ``adequate flood insurance'' if

they had flood damage and were in a special flood hazard area of a

community in which the sale of flood insurance was available under the

NFIP. According to the regulations published to carry out the purposes

of Sec. 411(a), ``adequate flood insurance'' is defined as a flood

insurance policy that provides coverage at least for the grant award,

for which the maximum in Fiscal Year 1995 is $12,600. A homeowner is

able to apply that amount to building or contents damage, or to both

kinds of damage, whereas a renter can apply up to $12,600 solely for

damage to contents.

Our experience has shown that many IFG recipients historically have

not used the part of the grant award that was provided to them to

purchase the required flood insurance for that intended purpose. These

individuals [[Page 13946]] frequently have been unable to obtain

adequate assistance from other means and have endured hardship as a

result of the disaster. Often they have such low incomes that they

cannot afford to repay a loan, even if the interest rate is as low as

four percent and the repayment schedule is spread over a number of

years. Therefore, FEMA developed an NFIP Group Flood Insurance Policy

(GFIP) for IFG homeowners or renters who experience flood damage, in an

effort to assist these individuals to protect themselves from future

flood losses and to comply with the purchase and maintenance

requirements of the IFG program. By using the GFIP concept, FEMA can

achieve significant administrative savings and can offer a premium rate

for the 3-year GFIP that is approximately $50 more than the 1-year

premium for a conventional Standard Flood Insurance Policy for a

property with the insurance-rating characteristics that most of the

properties that are anticipated to be covered under the GFIP have.

On September 23, 1994, while FEMA was in the process of preparing

regulations to implement the GFIP, the President signed Public Law 103-

325, the Riegle Community Development and Regulatory Improvement Act of

1994. Title V of Pub. L. 103-325 reformed major portions of the

National Flood Insurance Act of 1968, and is cited as the National

Flood Insurance Reform Act of 1994 (NFIRA). Section 582 of Pub. L. 103-

325 states:

``No Federal disaster relief assistance made available in a flood

disaster area may be used to make a payment * * * to a person for

repair, replacement, or restoration for damage to any personal,

residential, or commercial property if that person at any time has

received flood disaster assistance that was conditional on the person

first having obtained flood insurance under applicable Federal law and

subsequently having failed to obtain and maintain flood insurance as

required under applicable Federal law on such property.''

We interpret this section as a requirement in flood disasters for

each grantee who receives Federal disaster assistance for flood damage

to property located in a special flood hazard area and who is required

to purchase flood insurance (or had insurance purchased for them) to

maintain at least a minimum amount of flood insurance on the property

forever, or until they move to another address. If flood insurance is

not maintained, then no Stafford Act assistance may be provided for IFG

under sec. 411(a) for real or personal property in any subsequent flood

disasters. This maintenance provision also applies to individuals who

bought, or otherwise had transferred to them, any real estate for which

the flood insurance maintenance requirement was previously levied.

To enable States to provide affordable policies to IFG recipients,

FEMA proposes to limit IFG assistance to individuals and families with

$200 or more of real or personal property damage or loss. Assisting

individuals with damage of less than $200 is not cost-effective.

For individuals who qualify for IFG assistance, FEMA proposes that

a fixed premium amount, initially in the amount of $200, will be added

to the IFG awards (subject to the current grant maximum) to cover the

cost of the grantee's flood insurance coverage for the first 3 years.

If the grantee has disaster needs that meet or exceed the maximum grant

amount, this fixed premium amount shall be withheld from the grant and

provided to the NFIP to pay the premium, thus ensuring the grantee is

provided with a policy. The policy coverage will be equivalent to the

maximum IFG grant amount each fiscal year. This amount is $12,600 in

Fiscal Year 1995 as mentioned earlier.

The State IFG program staff would provide the NFIP with records of

the individuals to be insured. The records, which the State would

provide NFIP on a weekly basis, would be accompanied by payments to

cover the premium amounts for each grantee/policyholder for the 3-year

policy term. The NFIP would then issue a Certificate of Flood Insurance

to each insured. During the 3-year term of the coverage, the amount(s)

of coverage listed in the Certificate of Flood Insurance would be

adjusted annually on October 1 to reflect changes in the Consumer Price

Index for All Urban Consumers.

Approximately 60 days before the end of the 3-year term of the

GFIP, the NFIP would notify the IFG grantee/policy- holder of the

procedures to follow for applying for a new flood insurance policy and

of the amount of coverage that the IFG grantee/policyholder must obtain

in order to comply with the flood insurance maintenance requirements

established under the NFIRA. For purposes of complying with the

maintenance requirement, a ``minimal amount of flood insurance'' means

an amount equal to the IFG program's maximum grant amount in effect at

the time the new policy is obtained. Further, at the time of each

subsequent renewal, the notification concerning the amount of coverage

that must be maintained would be revised to reflect the IFG program's

maximum grant amount then in effect.

NFIP's Standard Flood Insurance Policy (which would be made

available to grantees upon request) specifies a number of restrictions

and limitations. While most exclusions pertain only to certain items in

the building, some of the exclusions mean that there is no coverage at

all for the building or the contents in the building. The coverage

exclusions would be specified in the Addendum that would accompany the

Certificate of Flood Insurance, which the NFIP would send to each IFG

grantee/policyholder. If a Certificate of Flood Insurance is issued for

a grantee whose property is ineligible for GFIP coverage, the NFIP,

upon discovery of such ineligibility, would notify the grantee that the

Certificate is rescinded and then refund the full premium costs to the

President's Fund. The State's 25% share would then be forwarded to the

State. The State would then return the $200 only to those grantees who

received maximum grant awards and had their premium costs deducted from

those awards.

NFIRA requires a 30-day waiting period, with two specific

exceptions, before flood insurance coverage becomes effective under the

Standard Flood Insurance Policy. Neither exception applies to the GFIP.

Therefore, to comply with the NFIRA, GFIP coverage would become

effective on the 30th day following the date that the records and

premium payment are received by the NFIP from the State.

National Environmental Policy Act

This rule is categorically excluded from the requirements of 44 CFR

Part 10, Environmental Consideration. No environmental impact

assessment has been prepared.

Executive Order 12866, Regulatory Planning and Review

This proposed rule is not a significant regulatory action within

the meaning of Sec. 2(f) of E.O. 12866 of September 30, 1993, 58 FR

51735, but attempts to adhere to the regulatory principles set forth in

E.O. 12866. The rule has not been reviewed by the Office of Management

and Budget under E.O. 12866.

Paperwork Reduction Act

FEMA requests that commenters address their concerns about any

additional paperwork or recordkeeping reporting burden this proposed

rule may place upon them. Comments on paperwork or recordkeeping issues

including burden estimates (i.e., the time it would take a State to

research [[Page 13947]] and compile the information and send premium

payments to the NFIP) may be addressed to the points of contact

identified in the ``For Further Information Contact'' section of this

proposed rule, and to Donald Arbuckle, Office of Management and Budget,

Office of Information and Regulatory Affairs, 3255 New Executive Office

Building, Washington, DC 20503.

Executive Order 12612, Federalism

This rule involves no policies that have federalism implications

under E.O. 12612, Federalism, dated October 26, 1987.

Executive Order 12778, Civil Justice Reform

This rule meets the applicable standards of Sec. 2(b)(2) of E.O.

12778.

List of Subjects in 44 CFR Parts 61 and 206

Flood insurance; Disaster assistance.

Accordingly, 44 CFR Parts 61 and 206 are proposed to be amended as

follows:

PART 61--INSURANCE COVERAGE AND RATES

1. The authority citation for Part 61 continues to read as follows:

Authority: 42 U.S.C. 4001 et seq.; Reorganization Plan No. 3 of

1978, 43 FR 41943, 3 CFR, 1978 Comp., p. 329; E.O. 12127 of Mar. 31,

1979, 44 FR 19367, 3 CFR, 1979 Comp., p. 376.

2. Section 61.17 is added to read as follows:

Sec. 61.17 Group Flood Insurance Policy

(a) A Group Flood Insurance Policy (GFIP) is a policy covering all

individuals named by a State as recipients under Sec. 411 of the

Stafford Act (42 U.S.C. 5178) of an Individual and Family Grant program

award for flood damage as a result of a Presidential disaster

declaration. The premium for the GFIP, initially, is a flat fee of $200

per policyholder. The amount of coverage would be equivalent to the

maximum grant amount established under Sec. 411. Coverage under the

GFIP would become effective on the 30th day following the date the NFIP

receives the records and premium payments from the State.

(b) The GFIP is the Standard Flood Insurance Policy Dwelling Form

(a copy of which is included in Appendix A(1) of this part), except

that:

(1) The GFIP provides coverage for losses caused by land

subsidence, sewer backup, or seepage of water without regard to the

requirement in paragraph B.3. of Article 3 that the structure be

insured to 80 percent of its replacement cost or the maximum amount of

insurance available under the National Flood Insurance Program.

(2) Article 7--Deductibles does not apply to the GFIP. The

deductible is $200 (applicable separately to any building loss and any

contents loss) for insured flood damage losses sustained by the insured

property in the course of any subsequent flooding event during the

policy term. No deductible shall apply to Article 3 B.3.

(3) Article 9 E., Cancellation of Policy By You, does not apply to

the GFIP.

(4) Article 9 G., Policy Renewal, does not apply to the GFIP.

PART 206--FEDERAL DISASTER ASSISTANCE FOR DISASTERS DECLARED ON OR

AFTER NOVEMBER 23, 1988

3. The authority citation for Part 206 is amended to read as

follows:

Authority: The Robert T. Stafford Disaster Relief and Emergency

Assistance Act, 42 U.S.C. 5121 et seq.; 42 U.S.C. 4001 et seq.;

Reorganization Plan No. 3 of 1978, 43 FR 41943, 3 CFR, 1978 Comp.,

p. 329; E.O. 12127 of Mar. 31, 1979, 44 FR 19367, 3 CFR, 1979 Comp.,

p. 376.

Subpart E--Individual and Family Grant Programs

4. Section 206.131(d)(1)(iii)(C)(2) is revised to read as follows:

Sec. 206.131 Individual and Family Grant Programs.

* * * * *

(d) * * *

(1) * * *

(iii) * * *

(C) * * *

(2) The National Flood Insurance Program (NFIP) regulations, at 44

CFR 61.17, establish the Group Flood Insurance Policy (GFIP), which is

a policy that covers eligible individuals named by a State as

recipients under section 411 of the Stafford Act of an IFG program

award for flood damage as a result of a Presidential disaster

declaration.

(i) IFG assistance will be provided to individuals or families with

residential or personal property damage or losses of $200 or more.

Individuals with damage of $199 or less will not be eligible for IFG

assistance.

(ii) The premium for the GFIP is a necessary expense within the

meaning of this section. The State shall withhold this portion of the

IFG award and provide it to the NFIP on behalf of individuals and

families who are eligible for coverage. The coverage shall be

equivalent to the maximum grant amount established under Sec. 411(f) of

the Stafford Act.

(iii) The State IFG program staff would provide the NFIP with

records of individuals who received an IFG award and are, therefore, to

be insured. Grantees would not be covered if they are determined to be

ineligible for coverage based on a number of exclusions established by

the NFIP. Records of IFG grantees to be insured shall be accompanied by

payments to cover the premium amounts for each grantee for the 3-year

policy term. The NFIP will then issue a Certificate of Flood Insurance

to each grantee.

(iv) Once the grantee/policyholder receives the Certificate of

Flood Insurance, the grantee should review the list of the types of

buildings that are ineligible for coverage. If the damaged building and

its contents are ineligible, the grantee must notify the NFIP in

writing. The NFIP will then reimburse the State IFG program for the

premium, so the IFG program can issue a check for the premium amount to

the grantee when a premium amount was withheld from a maximum grant

award. (If the grantee wishes to refer to or review a Standard Flood

Insurance Policy, it will be made available by the NFIP upon request.)

(Catalog of Federal Domestic Assistance No. 83.100, ``Flood

Insurance''; No. 83.516, ``Disaster Assistance'').

Dated: February 24, 1995.

Elaine A. McReynolds,

Administrator, Federal Insurance Administration.

Richard W. Krimm,

Associate Director, Response and Recovery.

[FR Doc. 95-6361 Filed 3-14-95; 8:45 am]

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