National Flood Insurance Program (NFIP); Standard Flood Insurance Policy

FEDERAL EMERGENCY MANAGEMENT AGENCY

44 CFR Part 61

RIN 3067-AD05

National Flood Insurance Program (NFIP); Standard Flood Insurance

Policy

AGENCY: Federal Emergency Management Agency (FEMA).

ACTION: Final rule.

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SUMMARY: We (FEMA) are increasing the limit of liability under Coverage

D--Increased Cost of Compliance of the Standard Flood Insurance Policy

from $15,000 to $20,000. New information indicates an expected decrease

in annual claims, and based on this decrease, we believe the limit of

liability can be increased with no change in premium.

EFFECTIVE DATE: May 1, 2000.

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

Emergency Management Agency, Federal Insurance Administration, (202)

646-3422, (facsimile) (202)646-4327, or (email)

[email protected].

SUPPLEMENTARY INFORMATION: On February 25, 1997, we published in the

Federal Register, 62 FR 8391, a final rule that adds Coverage D--

Increased Cost of Compliance (ICC) to the Standard Flood Insurance

Policy. We set the limit of liability for this coverage at $15,000. We

considered several issues in arriving at that figure.

First, the pricing for this coverage has to be actuarially sound

with premiums varying, to the extent possible, by risk. Second,

Sec. 555 of the National Flood Insurance Reform Act of 1994, which

[[Page 70192]]

mandates ICC coverage, sets a cap of $75 that we may charge for this

coverage. Third, our initial estimates were that the number of

policyholders receiving benefits under ICC coverage would be between

3400-3700 each year. Fourth, we considered the uncertainties associated

with the introduction of the product, especially since we had had no

direct experience with ICC coverage.

In making initial estimates of ICC claims, we had access to our

loss experience from 1978 through 1994. The latest experience period

for estimating ICC claims runs through 1998. Based on our additional

experience with flood losses--losses large enough to trigger community

declarations of substantial damage--we have decreased the number of

expected annual ICC claims to a range of 2700--2900. On this basis, we

are confident that the limit of liability for ICC coverage can be

increased from $15,000 to $20,000 (a 33% increase) with no change in

premium. The number of ICC claims actually filed since the introduction

of this coverage is small compared to the number that we expected based

on our flood claims filed under building coverage. We intend to

continue analyzing this discrepancy, make further adjustments in

premium charges, coverage amounts, or both as warranted, and to

continue our education efforts with policyholders and local officials

to make sure that they adequately understand the coverage.

Administrative Procedure Act Determination

We are publishing this final rule without opportunity for prior

public comment under the Administrative Procedure Act, 5 U.S.C. 553.

This final rule is a rule of agency procedure or practice that is

excepted from the prior public comment requirements of Sec. 553(b). The

rule makes nonsubstantive, nonsignificant changes to 44 CFR part 61 by

conferring a benefit to flood insurance policyholders, increasing

coverage for the increased cost of compliance without an increase in

premium.

National Environmental Policy Act

The requirements of 44 CFR Part 10, Environmental Consideration,

categorically exclude this final rule. We have not prepared an

environmental impact assessment.

Executive Order 12866, Regulatory Planning and Review

This 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 Office of Management and Budget has not reviewed this final

rule under E.O. 12866.

Paperwork Reduction Act

The final rule is not subject to the provisions of the Paperwork

Reduction Act of 1995.

Executive Order 13132, Federalism

This rule involves no policies that have federalism implications

under Executive Order 13132, Federalism, dated August 4, 1999. The rule

simply increases coverage for the increased cost of compliance from

$15,000 to $20,000 without an increase in premium. It involves no

preemption of State law nor does it limit State policymaking

discretion. In light of the purpose of the rule and the absence of

federalism implications, we have not consulted with State and local

officials during preparation of this rule.

I certify that the requirements of Executive Order 13132 have been

met in a meaningful and timely manner.

Executive Order 12778, Civil Justice Reform

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

E.O. 12778.

Congressional Review of Agency Rulemaking

We have sent this final rule to the Congress and to the General

Accounting Office under the Congressional Review of Agency Rulemaking

Act, Pub. L. 104-121. The rule is not a ``major rule'' within the

meaning of that Act. It is an administrative action in support of

normal day-to-day activities that increases a benefit to policyholders

without increasing premiums. It does not result in nor is it likely to

result in an annual effect on the economy of $100,000,000 or more. It

will not result in a major increase in costs or prices for consumers,

individual industries, Federal, State, or local government agencies, or

geographic regions. It will not have ``significant adverse effects'' on

competition, employment, investment, productivity, innovation, or on

the ability of United States-based enterprises to compete with foreign-

based enterprises. This final rule is exempt (1) from the requirements

of the Regulatory Flexibility Act, and (2) from the Paperwork Reduction

Act. The rule is not an unfunded Federal mandate within the meaning of

the Unfunded Mandates Reform Act of 1995, Pub. L. 104-4. It does not

meet the $100,000,000 threshold of that Act, and any enforceable duties

are imposed as a condition of Federal assistance or a duty arising from

participation in a voluntary Federal program.

List of Subjects in 44 CFR Part 61

Flood insurance.

Accordingly, we amend 44 CFR part 61 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. The first sentence of the second paragraph of Coverage D--

Increased Cost of Compliance in Article 4 of Appendix A(1) to Part 61

that begins ``The limit of liability * * *'' is revised to read as

follows:

Appendix A(1) to Part 61

* * * * *

Article 4

* * * * *

Coverage D--Increased Cost of Compliance

* * * * *

The limit of liability under this Coverage D (Increased Cost of

Compliance) is $20,000. * * *

* * * * *

2. The first sentence of the second paragraph of Coverage D--

Increased Cost of Compliance in Article 4 of Appendix A(2) to Part 61

that begins ``The limit of liability * * *'' is revised to read as

follows:

Appendix A(2) to Part 61

* * * * *

Article 4

* * * * *

Coverage D--Increased Cost of Compliance

* * * * *

The limit of liability under this Coverage D (Increased Cost of

Compliance) is $20,000. * * *

* * * * *

3. The first sentence of the second paragraph of Coverage D--

Increased Cost of Compliance in Article 4 of Appendix A(3) to Part 61

that begins ``The limit of liability * * *'' is revised to read as

follows:

Appendix A(3)--to Part 61

* * * * *

Article 4

* * * * *

[[Page 70193]]

Coverage D--Increased Cost of Compliance

* * * * *

The limit of liability under this Coverage D (Increased Cost of

Compliance) is $20,000. * * *

* * * * *

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

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

Dated: December 13, 1999.

Jo Ann Howard,

Administrator,

Federal Insurance Administration.

[FR Doc. 99-32657 Filed 12-15-99; 8:45 am]

BILLING CODE 6718-03-P