# National Flood Insurance Program; Assistance to Private Sector Property Insurers

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URL: https://www.frixlaw.com/law-library/documents/fr%3A96-8127

## Record

- **Collection:** Federal Register
- **Document type:** Proposed Rule
- **Published:** April 3, 1996
- **Citation:** 61 FR 14709

## Text

FEDERAL EMERGENCY MANAGEMENT AGENCY

44 CFR Part 62

RIN 3067-AC26

National Flood Insurance Program; Assistance to Private Sector
Property Insurers

AGENCY: Federal Insurance Administration (FEMA).

ACTION: Proposed Rule.

-----------------------------------------------------------------------

SUMMARY: This proposed rule would amend the National Flood Insurance
Program (NFIP) regulations establishing the Financial Assistance/
Subsidy Arrangement that may be entered into by and between the
Administrator and private sector insurers under the Write Your Own
(WYO) program. The proposed amendments would: (1) Simplify the
Arrangement by streamlining the format; (2) reflect recent policy
changes regarding loss adjustment and financial operation of the
private insurers in the WYO program; and (3) delete references to
obsolete operating manuals and handbooks. The proposed amendments would
also improve the flexibility of the Arrangement and would provide
information to permit WYO participants to discharge their
responsibilities for underwriting, claims adjustment, and financial
control procedures established by the Federal Insurance Administration
(FIA).

DATES: All comments received on or before May 20, 1996 will be
considered before final action is taken on the proposed rule.

ADDRESSES: Please submit any written 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: Edward T. Pasterick, Federal Emergency
Management Agency, Federal Insurance Administration, 500 C Street SW.,
Washington, DC 20472, (202) 646-3443.

SUPPLEMENTARY INFORMATION: The WYO program has operated for thirteen
years. The program's operating documents reflect program experience as
well as the FIA's ongoing dialogue with private insurers that have
participated in the WYO program, insurance company executives, FEMA's
Office of Financial Management, and FEMA's Office of Inspector General.
Under the WYO Program, insurers signatory to the Financial Assistance/
Subsidy Arrangement may issue in their own names the Standard Flood
Insurance Policy, the form and substance of which is approved by the
Administrator. Insurers are responsible for all aspects of service,
including policy issuance to new policyholders and to their
policyholders insured under other lines of property insurance;
endorsement and renewals of policies; and the adjustment of claims
brought under the policies. The insurers pay losses and loss adjustment
expenses, as well as the commissions of agents, out of written
premiums. In return for discharging these responsibilities under the
Arrangement, insurers retain a set portion of the written premium. The
amount of retained written premium by an insurer is based in part on
the insurer's performance in achieving marketing goals during the
Arrangement year.
The proposed changes to the regulations are intended therefore to
simplify the terms and conditions of the WYO Arrangement itself in
order to make it easier for private insurers to participate in the WYO
program and thereby serve an underlying Congressional intent to carry
out the NFIP ``to the maximum extent practicable by the private
insurance industry,'' as called for in the Declaration of Purpose for
the National Flood Insurance Act of 1968, Pub. L. 90-448, 42 U.S.C.
4001.
The proposed changes would offer a more flexible framework than now
for private insurers participating in the WYO program to operate while
maintaining the operational and financial controls and standards
necessary to preserve program integrity and accountability--both for
the Government and for the participating private insurers. For example,
the adjuster's fee schedule needs to be revised to reflect program
changes prompted by the National Flood Insurance Reform Act (NFIRA) of
1994. Those revisions could be made, more appropriately, in a parallel
effort and published in operating manuals rather than encumbering the
Arrangement. Operating processes relating to the single adjuster
program may be better handled differently from the Arrangement. Also,
references to many documents should be deleted so that the Arrangement
is not encumbered with details about publications that may be scheduled
for revision during the course of the Arrangement year. Consistent with
the proposed changes to the WYO Financial Control Plan, Appendix B to
44 CFR Part 62 published in the Federal Register on February 1, 1996,
61 FR 3635-3644, this proposed rule would discontinue the self-audit
requirement for private insurers participating in the WYO program.
In sum, the proposed changes to the regulations would produce a WYO
Arrangement that would clearly specify the responsibilities and duties
of the Government and the private insurers participating in the WYO
program without burdening the Arrangement with unnecessary detail or
references that may become obsolete before the Arrangement year
expires.
National Environmental Policy Act. This proposed rule would be

[[Page 14710]]
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 would not be a significant regulatory action as defined
under Executive Order 12866 of September 30, 1993, Regulatory Planning
and Review, 58 FR 51735, October 4, 1993. To the extent possible, this
rule adheres to the principles of regulation set forth in Executive
Order 12866. This rule has not been reviewed by the Office of
Management and Budget under the provisions of Executive Order 12866.
Paperwork Reduction Act. This proposed rule would not contain a
collection of information and is therefore not subject to the
provisions of the Paperwork Reduction Act of 1995.
Executive Order 12612, Federalism. This proposed rule would involve
no policies that have federalism implications under Executive Order
12612, Federalism, dated October 26, 1987.
Executive Order 12778, Civil Justice Reform. This proposed rule
would meet the applicable standards of section 2(b)(2) of Executive
Order 12778.

List of Subjects in 44 CFR Part 62

Claims, Flood Insurance.

We use certain conventions in this proposed rule to highlight the
proposed revisions. New language is shown inside boldfaced arrows >>> October 1, 1996.> enable any interested qualified insurer> Other technical and policy material
published by FEMA and FIA will also provide guidance to the Company. > 15 days; > 1.4 > 1.5 > 1.6 Where flood losses reasonably believed to involve wind
damage are reported by property insurance agents of brokers, the
Company shall instruct its agents or brokers to mail or preferably send
by facsimile the ACORD Notice of Loss form, with complete details
regarding flood and, if available, wind insurance policies covering the
property, to the Single Adjuster Program Stationary CCO for assignment
to a single adjuster. The Stationary CCO will also accept loss
information directly from the agent by modem in CCO format where the
Company has arranged for its agents to provide the information in this
fashion.]
[ Where flood losses reasonably believed to involve wind
damage are reported directly to the Company by its policyholders or
agents, by telephone, the Company shall report the flood loss, with the
wind property insurer information, if available, to the Single Adjuster
Program Stationary CCO, by modem transfer in CCO format as such flood
losses are reported to the Company. Transfer by facsimile from the
Company can also be arranged where circumstances warrant it.]
[Upon receipt of the Notice of Loss, the Stationary CCO shall
effect immediate entry of all relevant data into the stand-alone CCO
System (i.e., not part of the NFIP mainframe computer system) for
instantaneous relay to the Catastrophe CCO established in the field. At
the Catastrophe CCO, which will be sited and fully operational within
24 hours of landfall, in coordination with the State Insurance
Regulator, a qualified loss adjustment organization shall be promptly
selected for each loss, and participating insurers shall be promptly
advised of the selection for their assignment of the loss to that
organization.]
[In respect to the foregoing, the Administrator will continue to
implement existing and future CCO Arrangements with State Insurance
Regulators and their State Property Insurance Plans, Windpool
Associations, Beach Plans, Joint Underwriting Associations, FAIR Plans,
or similar property insurance mechanisms, for example, as has been done
with the Insurance Department of the State of South Carolina.]
D. Policy Issuance
1.0 The flood insurance subject to this Arrangement shall be only
that insurance written by the Company in its own name pursuant to the
Act.
2.0 The Company shall issue policies under the regulations
prescribed by the Administrator in accordance with the Act;
3.0 All such policies of insurance shall conform to the
regulations prescribed by the Administrator pursuant to the Act, and be
issued on a form approved by the Administrator;
4.0 All policies shall be issued in consideration of such premiums
and upon such terms and conditions and in such States or areas or
subdivisions thereof as may be designated by the Administrator and only
where the Company is licensed by State law to engage in the property
insurance business;
5.0 The Administrator may require the Company to immediately
discontinue issuing policies subject to

[[Page 14712]]
this Arrangement in the event Congressional authorization or
appropriation for the National Flood Insurance Program is withdrawn.
E. The Company shall [establish a bank account,] separate >>
Federal flood insurance funds >> [and apart] from all other Company
accounts, at a bank >> or banks > Federal > State premium > adjustment > 1996-
1997 > 1996-1997 > 1996-1997
> a fee
schedule established by FIA. > in accordance with
guidelines issued by the Administrator. > Administrator > a period
not to exceed > In such event the Government will assume all
obligations and liabilities owed to policyholders under such policies
arising before and after the date of transfer. > FEMA > including claim file information > including interest, > the National Flood Insurance Reform Act of 1994,
<< and Regulations issued pursuant thereto and all Regulations
affecting the work that are issued pursuant thereto, during the term
hereof.

Article XVI--Relationship Between the Parties (Federal Government and
Company) and the Insured

Inasmuch as the Federal Government is a guarantor hereunder, the
primary relationship between the Company and the Federal Government is
one of a fiduciary nature, i.e., to assure that any taxpayer funds are
accounted for and appropriately expended.
The Company is not the agent of the Federal Government. The Company
is solely responsible for its obligations to its insured under any
flood policy issued pursuant hereto.
[In witness whereof, the parties hereto have accepted this
Arrangement on this ________ day of ________, 1993.]

________________________
[Company]

[by ________________________]

[(Title) ________________________]

[The United States of America]
[Federal Emergency Management Agency]
[by ________________________]

[(Title) ________________________]

[Exhibit A]
[FEE SCHEDULE]
------------------------------------------------------------------------
[Range (by covered loss) Fee]
------------------------------------------------------------------------
[Erroneous Assignment...................................... $40.00]
[Closed Without Payment.................................... 125.00]
[Minimum for Upton-Jones Claims............................ 800.00]
[$0.01 to $600.00.......................................... 150.00]
[$600.01 to $1,000.00...................................... 175.00]
[$1,000.01 to $2,000.00.................................... 225.00]
[$2,000.01 to $3,500.00.................................... 275.00]
[$3,500.01 to $5,000.00.................................... 350.00]
[$5,000.01 to $7,000.00.................................... 425.00]
[$7,000.01 to $10,000.00................................... 500.00]
[$10,000.01 to $15,000.00.................................. 550.00]
[$15,000.01 to $25,000.00.................................. 600.00]
[$25,000.01 to $35,000.00.................................. 675.00]
[$35,000.01 to $50,000.00.................................. 750.00]
[$50,000.01 to $100,000.00................................. 1,000.00]
[$100,000.01 to $150,000.00................................ 1,300.00]
[$150,000.01 to $200,000.00................................ 1,600.00]
[$200,000.01 to limits..................................... 2,000.00]
------------------------------------------------------------------------

[Allocated fee schedule entry value is the covered loss under the
policy based on the standard deductibles ($500 and $500) and limited to
the amount of insurance purchased.]

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

Dated: March 26, 1996.
Harvey G. Ryland,
Deputy Director.
[FR Doc. 96-8127 Filed 4-2-96; 8:45 am]
BILLING CODE 6718-03-P

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A96-8127. Public record. Not legal advice.