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: Interim final rule with request for comments.

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SUMMARY: This interim final rule changes FEMA's Individual and Family

Grant (IFG) regulations by establishing a minimum damage threshold of

$201 or more in real or personal property losses, or both, resulting

from any type of incident in order to receive an IFG award in these

damage categories. The rule also changes our flood insurance

regulations for IFG award recipients in Presidentially declared major

disasters by establishing a Group Flood Insurance Policy (GFIP) and the

criteria for its implementation. This interim final rule also

authorizes the GFIP, as a one-time, pilot project, for recipients of

the State of Alaska's own, fully funded disaster assistance grants to

help individuals and families recover from flooding in September and

October 1995. Comments are being solicited on making the GFIP available

in the future to any

[[Page 19198]]

State with a fully funded, disaster assistance grant program for

individuals and families.

DATES: This interim final rule is effective on May 1, 1996. Please

submit any comments in writing by July 1, 1996.

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

Emergency Management Agency, Federal Insurance Administration, (202)

646-3422, (facsimile) (202) 646-4327; or Laurence W. Zensinger in

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

(202) 646-2730.

SUPPLEMENTARY INFORMATION: On February 7, 1995, FEMA published in the

Federal Register (Vol. 60, page 7130) an interim final rule changing

the flood insurance regulations for Individual and Family Grant program

recipients in Presidentially declared major disasters, in order to meet

the mandates of Sec. 582 of the National Flood Insurance Reform Act of

1994 (NFIRA), which the President signed into law on September 23,

1994.

On March 15, 1995, FEMA then published in the Federal Register (60

FR 13945) a proposed rule to establish an IFG eligibility requirement

of $201 or more in real or personal property damage, or both, resulting

from any type of disaster incident in order to receive an IFG award for

items in these categories. In the same rule, we proposed to establish a

GFIP and proposed criteria for the GFIP 's implementation by the

National Flood Insurance Program (NFIP) when FEMA provides IFG awards.

The term of the GFIP will be for 36 months, and, for implementation

under the IFG program, will begin 60 days from the date of the disaster

declaration. For the pilot project to be conducted in the State of

Alaska, the term of the GFIP will begin on the date this interim final

rule is published in the Federal Register. On and after the inception

date of the GFIP, coverage for individual IFG recipients or the named

insureds under FEMA's pilot project with the State of Alaska, will

begin on the 30th day after the NFIP receives from the State the

records of GFIP insureds and their premium payments. Hereafter and with

this understanding, the GFIP will be referred to as a 3-year policy.

To meet the NFIRA requirements that were effective when the

President signed the law on September 23, 1994, FEMA had to write the

February 7, 1995 interim final rule to be effective retroactively.

However, FEMA welcomed comments for a 60-day period. The proposed rule,

which made additions to the same paragraphs changed by the interim

final rule, provided for a 45-day comment period. To ensure State and

Regional personnel were informed of these two rules, FEMA staff

included a rules presentation at eight Human Services Automated Systems

Orientation (HSASO) sessions, at which time issues were discussed and

written comments were encouraged. FEMA also requested comments on the

estimates for the additional paperwork or record-keeping reporting

burden in connection with the time it would take a State to research

and compile the information and send premium payments to the NFIP. FEMA

invited the public to submit comments to the agency or to the Office of

Management and Budget (OMB) on the paperwork issues including the

burden estimates and any aspects of the information collection

requirements. Neither FEMA nor OMB received comments in connection with

the collection of information.

FEMA received four sets of written comments on each of the two

rules--two of the six respondents commented on both rules. The tally of

comments included representatives of four state agencies dealing with

emergency management, a private consultant service dealing with banking

and legislative issues, and an insurance committee of an association

concerned with floodplain management issues. While generally supportive

of the proposal to establish a GFIP the respondents did express concern

for one or more of the proposed provisions.

One State agency had a series of concerns. The first concern

questioned how the February 7, 1995 interim final rule escaped OMB

review. OMB does not require a review of rules where the aggregate

annual impact of the rule is less than $100 million.

The second concern, which was shared by another State, was that the

NFIRA would place an administrative and monitoring burden on the States

as an unfunded mandate. One State felt this would occur even if NFIP

would track and maintain all information. FEMA has worked hard to take

up the administrative burden for the States and will further ease

burdens by tracking flood insurance maintenance beyond the 3-year

requirement that has been in effect since the Flood Disaster Protection

Act of 1973.

The State's third concern was that the NFIRA requirements should be

effectuated after the date FEMA had notified them by letter of the

requirement. By mandating that the flood insurance purchase and

maintenance requirement be made effective upon the signature of the

President, Congress clearly intended to allow no exemptions. As a

result FEMA had no time to inform States of the requirements and allow

them to prepare for the consequences.

The next concern was that the cost of implementing the rule would

be greater to Federal and State governments than the benefits of

tracking data for the life of each property. Congress clearly intended

NFIRA mandates to be carried out regardless of the costs. However,

since FEMA already tracks the data necessary to administer this

program, there should be no additional burden to States.

This State then proposed alternatives to NFIRA legislation.

However, those alternatives are already part of NFIRA or are part of

the implementing regulations.

A second State felt it was punitive to require new owners to

purchase and maintain flood insurance; this feeling was shared by many

State participants in the HSASO sessions held during the comment

periods. The NFIRA--not the rule--requires new owners to maintain flood

insurance. Congress intended for property owners who buy or build in a

floodplain to protect themselves or bear the cost. Accordingly,

disaster assistance will not be provided to the occupant for a second

flood when flood insurance has not been purchased and maintained by the

new owner.

Two States questioned who would be responsible for informing the

buyer of property upon which the flood insurance purchase and

maintenance requirements were imposed. The NFIRA stipulates the

``transferor'' or seller of the property must disclose this requirement

to the buyer, and such written notification must be contained in

documents evidencing the transfer of ownership of the property.

Three States and the association expressed concern about a database

tracking system for real estate transactions. Rather than attempt to

undertake the impossible task of tracking such sales forever, FEMA has

chosen to prohibit Federal flood disaster assistance from being

provided for a property a second time. To do otherwise would place a

heavy burden on State and local governments.

The association felt the Federal government, and not the States,

should maintain any database required to implement the mandates imposed

by Sec. 582 of the NFIRA. FEMA agrees and will maintain the database.

A State and the association expressed concern that was also voiced

by the majority of attenders at the HSASO sessions, namely, that the

coverage

[[Page 19199]]

maintenance requirement, equating to the IFG maximum grant amount, is a

financial hardship to IFG recipients, who are predominantly the elderly

and individuals and families receiving public support. FEMA must

implement laws enacted by the Congress. In recognizing that maintaining

flood insurance is a hardship on those with limited income, FEMA is

establishing a GFIP to assist grantees for up to 3 years of coverage.

However, in keeping with the spirit of NFIRA to increase NFIP

participation and replace disaster assistance with flood insurance

coverage, we have decided to establish for all IFG recipients the

maximum IFG award amount as the amount of flood insurance to be bought

and maintained as a condition for future IFG eligibility for any

uninsured flood-damaged real or personal property, or both.

The association recommended a long-term, low-cost policy providing

a fixed amount of flood insurance coverage, and offering the grantee

the option of purchasing either a GFIP or a Standard Flood Insurance

Policy (SFIP). Under a GFIP, the State will provide the grantee with up

to 3 years of coverage. The grantee can always switch to an SFIP at an

increased cost.

The association and a State were concerned that grantees will not

maintain flood insurance beyond the end of the 3-year term of the GFIP.

FEMA shares this concern. NFIP will send a notice to GFIP certificate

holders at the end of the 3-year policy period to alert them to the

maintenance requirement and to the consequences of not maintaining

flood insurance. The notice will (1) encourage them to apply for NFIP's

conventional SFIP by contacting a local insurance agent, producer, or a

private insurance company selling NFIP policies, and (2) advise them as

to the amount of coverage they must maintain in order not to jeopardize

their eligibility for future disaster assistance.

One of the States suggested that the responsibility of the NFIP to

notify the IFG grantee/policyholder toward the end of the 3-year

coverage period (as described in the Supplementary Information section

of the proposed rule and as discussed above) be incorporated into the

implementing regulations. FEMA agrees and a new paragraph (c)

incorporating such language has been added to Sec. 61.17.

The consultant recommended that the cost of the flood insurance be

deducted from the grant award and that flood insurance coverage be

placed directly by FEMA through its regional offices. To ensure that

the IFG recipient will have coverage as soon after the grant award as

possible, a fixed premium amount will be added to the IFG awards

(subject to the current grant maximum), but withheld from the grant and

provided directly to the NFIP Servicing Agent. Since the Servicing

Agent is already equipped to issue policies, it would not be cost-

effective to duplicate this capability using the limited FEMA resources

in the regions. The Servicing Agent will send the IFG recipient a

Certificate of Flood Insurance and advise the grantee of the option of

securing increased limits of coverage by purchasing an SFIP at an

increased cost.

One of the States suggested we continue to allow grants of $200 or

less, but exempt those recipients from the insurance requirement. The

law does not appear to allow us the option of exempting grantees from

maintaining flood insurance. Therefore, we have determined it was more

cost-effective for the victim and the government to disallow grants of

$200 or less for damages or losses to real or personal property, or

both. This minimum-loss eligibility requirement shall be applicable not

only to floods, but also to all types of disaster incidents.

The consultant questioned whether the maximum grant amount (then

$12,600) was for the entire family or each member of the household,

since there appeared to be an inconsistency in reference to

``homeowner.'' The proposed rule refers to a ``homeowner'' in context

of an insurance ``policy'', whereas grants are made to each eligible

property owner to apply to damaged/lost property. The maintenance

requirement is, therefore, placed on each property owner who receives a

grant.

The consultant then questioned how new maps or revised map changes

would affect a homeowner who has received a grant when the property was

not initially in a special flood hazard area (SFHA) and, as a result of

a new or revised map, is placed in an SFHA. If a property was not in an

SFHA at the time the grant was given, there would have been no flood

insurance purchase requirement. If the homeowner were to apply for an

IFG grant at a later date after the property had been placed in an

SFHA, the flood insurance purchase requirement would apply and the

State would follow the procedure for securing a GFIP for that IFG

recipient.

The fourth State objected to the burdensome requirement of

providing NFIP with weekly reports and payments. Since FEMA does not

want to burden States, we are asking for weekly vs. daily reports. FEMA

will also provide States with an automated system that will support

this requirement.

The same State felt that the NFIRA flood insurance requirements

should apply to the Disaster Housing Assistance program, as well as to

the IFG program. FEMA is in the process of reviewing this proposition.

This State's last comment was that all disaster programs should

comply with the same regulations. FEMA is coordinating with all Federal

and State agencies involved in implementing this law. We have actively

solicited and welcomed comments from all sources, and have tried our

best to ensure equity in program assistance provided to all.

In addition to the changes made in response to the comments, we

amended Sec. 61.17(b)(2) in this final rule to clarify that benefits

under Article 3 B.3. of the SFIP Dwelling Form will not be subject to a

separate deductible, but are subject to the GFIP deductible of $200

(applicable separately to any building loss and any contents loss).

Additionally, FEMA received a request from the State of Alaska to

make the GFIP available not only to recipients of IFG grants but also

to recipients of its own fully funded disaster assistance program

comparable to the IFG program in benefits and eligibility requirements.

The State's request, which was prompted by a recent disaster recovery

effort, has merit. FEMA has determined that 42 U.S.C. Secs. 4014(a)(2)

and 4015(b)(2), which authorize FEMA to make the GFIP available to

recipients of IFG awards, may also apply to recipients of certain

State-funded disaster assistance programs. We have modified the interim

final rule to apply the GFIP, as a one-time, pilot project, to

recipients of the State of Alaska's own fully funded disaster

assistance program for individuals and families suffering damage from

flooding that occurred in the State during September and October 1995.

The decision to make the GFIP available to these flood disaster victims

is based on the fact that the State of Alaska's award program is

comparable to the IFG program, including eligibility requirements such

as income levels. The State also has the capability to provide

information to the NFIP in a format compatible with NFIP requirements.

The evaluation of this one-time, pilot project of the GFIP in the State

of Alaska will help FEMA evaluate whether the GFIP should be made

available to other States requesting the availability of the GFIP for

100-percent, State-funded disaster assistance programs comparable to

the IFG program. Comments are also being solicited specifically on this

issue.

Finally, Sec. 582 of the NFIRA prohibits future Federal disaster

assistance to

[[Page 19200]]

anyone who fails to obtain and maintain flood insurance coverage in

connection with previous flood-related disaster assistance. Section 582

provides: ``Notwithstanding any other provision of law, no Federal

disaster relief assistance made available in a flood disaster may be

used to make a payment (including any loan assistance 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.''

In light of the requirements of Sec. 582, and in anticipation of

the spring flood season, there is an urgent need to make the GFIP

available upon publication of this final rule. FEMA finds that there is

a compelling need and good cause to waive the 30-day effective date

requirements of the Administrative Procedure Act, 5 U.S.C. 553(d). This

interim final rule is effective on the date of publication in the

Federal Register.

National Environmental Policy Act

This interim final 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 interim final 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 interim final rule has not been reviewed by the

Office of Management and Budget under E.O. 12866.

Paperwork Reduction Act

This interim final rule does not contain a collection of

information and therefore is not subject to the provisions of the

Paperwork Reduction Act of 1995.

Executive Order 12612, Federalism

This interim final rule involves no policies that have federalism

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

Executive Order 12778, Civil Justice Reform

This interim final 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 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 (IFG)

program award for flood damage as a result of a Presidential major

disaster declaration, and, as a one-time, pilot project, to recipients

of the State of Alaska's own fully funded disaster assistance program

for individuals and families suffering damage from flooding in

September and October 1995. Alaska's disaster assistance program is

comparable to the IFG program in benefits and eligibility requirements,

including income levels. The State of Alaska has also agreed to provide

information to the National Flood Insurance Program (NFIP) in a data

format compatible with NFIP requirements. The premium for the GFIP,

initially, is a flat fee of $200 per policyholder. Thereafter, the

premium may be adjusted to reflect NFIP loss experience and any

adjustment of benefits under the IFG program. The amount of coverage

shall be equivalent to the maximum grant amount established under

Sec. 411. The term of the GFIP shall be for 36 months and will begin,

for implementation with the IFG program, 60 days from the date of the

disaster declaration. For FEMA's pilot project with the State of

Alaska, the term of the three-year policy will begin on May 1, 1996. On

and after the inception date of the GFIP, coverage for IFG recipients

or for recipients of the one time pilot project of the GFIP for the

State of Alaska's own comparable fully funded, disaster assistance

program, will begin on the 30th day after the NFIP receives the records

of GFIP insureds and their premium payments from the State. A

Certificate of Flood Insurance shall be sent to each IFG recipient,

and, for the one-time pilot project in Alaska, to each individual or

family receiving a grant from Alaska's own fully funded disaster

assistance program.

(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 NFIP.

(2) Article 7, Deductibles, does not apply to the GFIP. Instead, a

special deductible of $200 (applicable separately to any building loss

and any contents loss) applies to insured flood-damage losses sustained

by the insured property in the course of any subsequent flooding event

during the term of the GFIP. The separate deductible applicable to

Article 3 B.3 does not apply.

(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.

(c) A notice will be sent to the GFIP certificate holders

approximately 60 days before the end of the 3-year term of the GFIP.

The notice will (1) encourage them to contact a local insurance agent

or producer or a private insurance company selling NFIP policies under

the Write Your Own program of the NFIP to apply for a conventional NFIP

Standard Flood Insurance Policy and (2) advise them as to the amount of

coverage they must maintain in order not to jeopardize their

eligibility for future disaster assistance.

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

AFTER NOVEMBER 23, 1988

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

follows:

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

Subpart E--Individual and Family Grant Programs

4. Section 206.131(a) is amended by adding a sentence between the

sentence ending, ``* * * to reflect changes in the Consumer Price Index

for all Urban Consumers,'' and the sentence beginning, ``The Governor

or his/her designee is responsible . . .'' to read as set forth below,

and

[[Page 19201]]

Sec. 206.131(d)(1)(iii) (C) and (D) are revised to read as follows:

Sec. 206.131 Individual and family grant programs.

(a) * * * IFG assistance for damages or losses to real or personal

property, or both, will be provided to individuals or families with

those IFG-eligible losses totaling $201 or more; those individuals with

damages or losses of $200 or less to real or personal property, or

both, are ineligible. * * *

* * * * *

(d) * * *

(1) * * *

(iii) * * *

(C)(1) The State may not make a grant for acquisition or

construction purposes in a designated special flood hazard area in

which the sale of flood insurance is available under the NFIP unless

the individual or family obtains adequate flood insurance and maintains

such insurance for as long as they live at that property address. The

coverage shall equal the maximum grant amount established under

Sec. 411(f) of the Stafford Act. If the grantee is a homeowner, flood

insurance coverage must be maintained on the residence at the flood-

damaged property address for as long as the structure exists if the

grantee, or any subsequent owner of that real estate, ever wishes to be

assisted by the Federal government with any subsequent flood damages or

losses to real or personal property, or both. If the grantee is a

renter, flood insurance coverage must be maintained on the contents for

as long as the renter resides at the flood-damaged property address.

The restriction is lifted once the renter moves from the rental unit.

(2) Individuals named by a State as eligible recipients under

Sec. 411 of the Stafford Act for an IFG program award for flood damage

as a result of a Presidential major disaster declaration will be

included in a Group Flood Insurance Policy (GFIP) established under the

National Flood Insurance Program (NFIP) regulations, at 44 CFR 61.17.

(i) 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.

(ii) The State IFG program staff shall provide the NFIP with

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

be insured. 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. Flood insurance coverage becomes effective

on the 30th day following the receipt of records of GFIP insureds and

their premium payments from the State, and terminates 36 months from

the inception date of the GFIP, i.e., 60 days from the date of the

disaster declaration.

(iii) 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. Therefore, once grantees/policyholders receive

the Certificate of Flood Insurance that contains a list of the policy

exclusions, they should review that list to see if they are ineligible

for coverage. Those grantees who fail to do this may find that their

property is, in fact, not covered by the insurance policy when the next

flooding incident occurs and they file for losses. Once the grantees

find that their damaged buildings, contents, or both, are ineligible

for coverage, they should notify the NFIP in writing in order to have

their names removed from the GFIP, and to have the flood insurance

maintenance requirement expunged from the NFIP data-tracking system.

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

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

(D) A State may not make a grant to any individual or family who

received Federal disaster assistance for flood damage occurring after

September 23, 1994, if that property has already received federal

flood-disaster assistance in a disaster declared after September 23,

1994, a flood insurance purchase and maintenance requirement was levied

as a condition or result of receiving that Federal disaster assistance,

and flood insurance was, in fact, not maintained in an amount at least

equal to the maximum IFG grant amount. However, if that property was

determined to be ineligible for NFIP flood insurance coverage and is in

a special flood hazard area located in a community participating in the

NFIP, then the State may continue to make grants to those individuals

or families that receive additional damage in all subsequent

Presidentially declared major disasters involving floods.

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

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

Dated: April 25, 1996.

James L. Witt,

Director.

[FR Doc. 96-10779 Filed 4-30-96; 8:45 am]

BILLING CODE 6718-02-P