[Federal Register Volume 64, Number 150 (Thursday, August 5, 1999)]
[Proposed Rules]
[Pages 42632-42633]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-20171]
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FEDERAL EMERGENCY MANAGEMENT AGENCY
44 CFR Part 61
RIN 3067-AD02
National Flood Insurance Program (NFIP); Insurance Coverage and
Rates
AGENCY: Federal Emergency Management Agency (FEMA).
ACTION: Proposed rule.
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SUMMARY: We, FEMA, are proposing to apply full-risk premium rates under
the National Flood Insurance Program to structures that have suffered
multiple flood losses and whose owners decline an offer of funding to
eliminate or reduce future flood damage.
DATES: Please send your comments on the proposal on or before September
7, 1999.
ADDRESSES: Please send your 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,
or (email) rules@fema.gov.
FOR FURTHER INFORMATION CONTACT: Howard Leikin, Federal Emergency
Management Agency, Federal Insurance Administration, 500 C Street, SW.,
Washington, DC 20472, 202-646-2784, (facsimile) 202-646-7970, (email)
Howard.Leikin@fema.gov.
SUPPLEMENTARY INFORMATION:
Definition
One of our (FEMA's) highest priorities is to correct the problem of
multiple flood losses to older structures insured under the National
Flood Insurance Program (NFIP). For the purpose of this proposal, we
call a sub-category of these structures ``target repetitive loss''
buildings and define a ``target repetitive loss building'' as a
``building with four or more losses, or with two or more flood losses
cumulatively greater than the building's value.'' This definition is
more specific than the broader category of buildings with multiple
flood losses which many stakeholders of the NFIP may be more familiar
with and which we have used frequently in the past to describe this
national problem.
Scope of the Problem
The broader definition of a building with multiple losses, which we
commonly use in the NFIP, is a building that has suffered within a ten-
year period two or more losses, each resulting in at least a $1,000
claim payment. We know that there are about 87,000 such buildings in
the country, and the total amount of claims paid by the NFIP since its
inception for multiple loss buildings is $3.5 billion. Multiple loss
buildings have accounted for 36 percent of all claims dollars paid
under the program.
About half of those buildings, however, are no longer in the NFIP's
book of business for a variety of reasons. Some property owners have
dropped their policies because we have imposed limitations on flood
insurance coverage, such as not insuring personal property in
basements. FEMA's mitigation projects have reduced the flood risk of a
number of properties with repetitive losses through elevation or flood-
proofing. In addition, some of these properties are now protected by
flood control projects and storm water management projects. Also, the
enforcement by State and local governments of the NFIP's flood plain
management standards for elevating or flood-proofing substantially
damaged properties has had a positive effect in reducing the exposure
to flood loss of a number of these properties.
In spite of this, the NFIP still insures about 43,000 multiple loss
buildings. We have already paid $2 billion in flood insurance claims on
these currently insured buildings, and we estimate that the continuing
cost to the NFIP for these properties insured under the NFIP will
average $200 million each year.
Target Buildings
Of the 43,000 multiple loss buildings insured under the NFIP, about
8,800 have had four or more losses. In addition to these, there are
another 1,300 insured buildings that have had two or three losses that
cumulatively exceed the building's value. We have concluded from our
actuarial studies that employing mitigation strategies for these
roughly 10,000 buildings, such as relocating or elevating them, will be
cost effective. These buildings will be the ``target repetitive loss
buildings'' of this proposal.
Repetitive Loss Strategy: Objectives
We are aware that there are some multiple loss properties that
demand immediate attention where the residents are at a high personal
risk because of their exposure to flooding. There are other
properties--often celebrated in the media--where we have made claims
payments under the NFIP that exceed the value of the building, and
where it makes good business sense to reduce their exposure to loss. We
cannot merely shift the costs of the NFIP to other programs. So we must
adopt a comprehensive approach under the NFIP that uses both
mitigation, such as
[[Page 42633]]
relocating buildings out of harm's way or elevating above estimated
flood elevations, and insurance such as an adjustment of premium rates.
Insurance for Pre-FIRM Properties
The National Flood Insurance Act of 1968, as amended, authorizes us
to offer flood insurance at less than full-risk premiums for older
structures in return for a community's enforcement of flood plain
management requirements. Congress recognized that in authorizing the
flood insurance program there would be a trade-off: federally-backed
flood insurance would be available for structures at a high flood risk
built without the benefit of detailed flood risk information. In
return, the local government would adopt and enforce flood mitigation
standards that make future construction resistant to future flood loss.
To make such efforts effective, we have worked with more than 19,000
communities and their state governments to develop the kind of detailed
flood risk information needed for flood mitigation efforts.
Properties built before the publication of the Flood Insurance Rate
Map (FIRM) have been eligible for less than full risk premiums. (For
this proposed rule, we call buildings constructed before the effective
date of the FIRM ``pre-FIRM'' buildings.) Our actuarial studies show
that the owners of repetitively flooded buildings insured under the
NFIP do not pay premiums that truly reflect the risk. What that means
is that property owners who have collected claims payments have been
paying and continue to pay less than full-risk premiums.
Insurance Component of the Repetitive Loss Strategy
This proposed rule would apply full-risk premiums for flood
insurance coverage to the ``target repetitive loss buildings'' whose
owners declined an offer of mitigation funding authorized by FEMA.
Under this proposal, if the owner of a target repetitive flood loss
building declines such an offer of mitigation funding to relocate,
elevate, or flood-proof the structure, then that owner would upon the
next policy renewal have to pay full-risk premiums for flood insurance
coverage under the NFIP. To allow us to consistently track and to
minimize the burden on companies writing flood insurance under the
Write Your Own program, we plan for companies to begin referring on May
1, 2000, all renewals for coverage of target repetitive loss buildings
and new policy applications for such buildings to the NFIP Servicing
Facility. In this way, we can centralize the processing and data
collection needed to implement this strategy.
National Environmental Policy Act
Pursuant to section 102 (2) (C) of the National Environmental
Policy Act of 1969, 42 U.S.C. 4371 et seq., and the implementing
regulations of the Council on Environmental Quality, 40 CFR parts 1500-
150, FEMA is conducting an environmental assessment of this proposed
rule. This assessment will be available for inspection through the
Rules Docket Clerk, Federal Emergency Management Agency, room 840, 500
C St. SW., Washington, DC 20472.
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, and has not been reviewed by the Office of Management and
Budget. Nevertheless, this proposed rule adheres to the regulatory
principles set forth in E.O. 12866.
Paperwork Reduction Act
This proposed rule does not contain a collection of information and
is therefore not subject to the provisions of the Paperwork Reduction
Act.
Executive Order 12612, Federalism
This proposed rule involves no policies that have federalism
implications under Executive Order 12612, Federalism, dated October 26,
1987.
Executive Order 12778, Civil Justice Reform
This proposed rule meets the applicable standards of section
2(b)(2) of Executive Order 12778.
List of Subjects in 44 CFR Part 61
Claims, Flood insurance.
Accordingly, we propose to 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. In Sec. 61.8, paragraphs (b) and (c) are redesignated as
paragraphs (c) and (d), respectively, and a new paragraph (b) is added,
reading as follows:
Sec. 61.8 Applicability of risk premium rates.
* * * * *
(b) Any target repetitive loss building whose owner has declined an
offer of mitigation assistance authorized under any FEMA mitigation
program. (A target repetitive loss building is one that has had within
a ten-year period two or more losses, each resulting in at least a
$1,000 claim payment. In addition, the building has suffered four or
more insured flood losses or two insured flood losses cumulatively
greater than the building's value.)
* * * * *
Dated: July 27, 1999.
Jo Ann Howard,
Administrator, Federal Insurance Administration.
[FR Doc. 99-20171 Filed 8-4-99; 8:45 am]
BILLING CODE 6718-03-P
