[Federal Register Volume 60, Number 114 (Wednesday, June 14, 1995)]
[Notices]
[Pages 31360-31366]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-14541]
[[Page 31359]]
_______________________________________________________________________
Part IV
Federal Emergency Management Agency
_______________________________________________________________________
Offer To Assist Insurers in Underwriting Flood Insurance Using the
Standard Flood Insurance Policy; Notices
Federal Register / Vol. 60, No. 114 / Wednesday, June 14, 1995 /
Notices
[[Page 31360]]
FEDERAL EMERGENCY MANAGEMENT AGENCY
Offer To Assist Insurers in Underwriting Flood Insurance Using
the Standard Flood Insurance Policy
AGENCY: Federal Insurance Administration, FEMA.
ACTION: Notice.
-----------------------------------------------------------------------
SUMMARY: The Federal Insurance Administration is publishing in this
notice the Financial Assistance/Subsidy Arrangement for 1995-1996
governing the duties and obligations of insurers participating in the
Write Your Own Program (WYO) of the National Flood Insurance Program
(NFIP). The Financial Assistance/Subsidy Arrangement sets forth the
responsibilities of the Government to provide financial and technical
assistance to the insurers. It is verbatim with what is set out as
appendix A to 44 CFR part 62 and is republished for information and
convenience.
This notice relates to the final rule which was published in the
Federal Register regarding changes in the National Flood Insurance
Program's regulations dealing with the issuance of flood insurance
policies and the adjustment of claims and the establishment of a
program of assistance to private sector property insurance companies in
underwriting flood insurance using the Standard Flood Insurance Policy.
In 1985, a copy of the offer to participate in the Arrangement was
incorporated in a final rule and, this year, as in the years since, a
copy of the offer is being published as a Notice.
DATES: The offer is effective June 14, 1995. The Financial Assistance/
Subsidy Arrangement is effective with respect to flood insurance
policies written under the Arrangement with an effective date of
October 1, 1995, and later.
SUPPLEMENTARY INFORMATION: By way of background, the Federal Insurance
Administration (FIA), working with insurance company executives, FEMA's
Office of Financial Management and FEMA's Office of the Inspector
General, addressed the operating and financial control procedures for
the Write Your Own Program. The Transaction Record Reporting and
Processing Plan, Accounting Procedures, and the Financial Control Plan
were specifically referenced in the final rule, as amended, and, in
addition, procedural manuals have been issued by the FIA in aid of
implementation by the WYO companies of the procedures published in the
final rule, as amended, such as the Flood Insurance Manual, Flood
Insurance Adjuster's Manual, and FEMA Letter of Credit Procedures, all
of which comprise the operating framework for the WYO Program.
The purposes of this Notice are:
(1) To offer, publicly, financial assistance to protect against
underwriting losses resulting from floods on Standard Flood Insurance
Policies written by private sector insurers;
(2) To provide a method by which the offer may be accepted; and
(3) To provide notice of the duties and obligations under the
Financial Assistance/Subsidy Arrangement for the Arrangement year 1995-
96.
Method of Acceptance of Offer
1. Acceptance of this offer shall be by telegraphed or mailed
notice of acceptance or signed Arrangement to the Administrator prior
to midnight EDT September 30, 1995.
2. The telegraphed or mailed notice of acceptance to the
Administrator must be authorized by an official of the insurance
company who has the authority to enter into such arrangements.
3. A duly signed original copy of the Notice of Acceptance must be
on file with the Administrator by November 16, 1995.
4. If 1., 2., or 3. above are not satisfied, the acceptance will be
considered by the Administrator as conditional and the commitment of
NFIP resources to fulfill the ``Undertakings of the Government'' under
Article IV of the Arrangement will take a lower priority than those
needed to fulfill the requirement of the other participating insurance
companies.
5. Send all acceptances of this offer to: Federal Emergency
Management Agency, Attn: Federal Insurance Administrator, WYO Program,
Washington, DC 20472.
Offer To Provide Financial Assistance
Pursuant to the provisions of the National Flood Insurance Act of
1968, as amended, 42 U.S.C. 4001 et seq., Reorganization Plan No. 3 of
1978, 43 FR 41943, 3 CFR, 1978 Comp., p. 329, and Executive Order 12127
of March 31, 1979, 44 FR 19367, 3 CFR, 1979 Comp., p. 376, Federal
Emergency Management Agency, subject to all regulations promulgated
thereunder, and to the duties, obligations and rights set forth in the
Financial Assistance/Subsidy Arrangement as printed below, the Federal
Insurance Administrator, herein the ``Administrator,'' offers to enter
into the Financial Assistance/Subsidy Arrangement with any individual
private sector property insurance company. This offer is effective only
in a State in which such private sector insurance company is licensed
to engage in the business of property insurance. Federal Emergency
Management Agency, Federal Insurance Administration, Financial
Assistance/Subsidy Arrangement.
Purpose: To assist the company in underwriting flood insurance
using the Standard Flood Insurance Policy.
Accounting Data: Pursuant to section 1310 of the Act, a Letter of
Credit shall be issued for payment as provided for herein from the
National Flood Insurance Fund.
Effective Date: October 1, 1995.
Issued By: Federal Emergency Management Agency, Federal Insurance
Administration, Washington, DC 20472.
Article I--Findings, Purpose, and Authority
Whereas, the Congress in its ``Finding and Declaration of Purpose''
in the National Flood Insurance Act of 1968, as amended, (``the Act'')
recognized the benefit of having the National Flood Insurance Program
(the Program) ``carried out to the maximum extent practicable by the
private insurance industry''; and
Whereas, the Federal Insurance Administration (FIA) recognizes this
Arrangement as coming under the provisions of section 1345 of the Act;
and
Whereas, the goal of the FIA is to develop a program with the
insurance industry where, over time, some risk-bearing role for the
industry will evolve as intended by the Congress (section 1304 of the
Act); and
Whereas, the Program, as presently constituted and implemented, is
subsidized, and the insurer (hereinafter the ``Company'') under this
Arrangement shall charge rates established by the FIA; and
Whereas, this Arrangement will subsidize all flood policy losses by
the Company; and
Whereas, this Financial Assistance/Subsidy Arrangement has been
developed to involve individual Companies in the Program, the initial
step of which is to explore ways in which any interested insurer may be
able to write flood insurance under its own name; and
Whereas, one of the primary objectives of the Program is to provide
coverage to the maximum number of structures at risk and because the
insurance industry has marketing access through its existing facilities
not directly available to the FIA, it has been concluded that coverage
will be extended to those who would not
[[Page 31361]]
otherwise be insured under the Program; and Whereas, flood insurance
policies issued subject to this Arrangement shall be only that
insurance written by the Company in its own name pursuant to the Act;
and
Whereas, over time, the Program is designed to increase industry
participation, and, accordingly, reduce or eliminate Government as the
principal vehicle for delivering flood insurance to the public; and
Whereas, the direct beneficiaries of this Arrangement will be those
Company policyholders and applicants for flood insurance who otherwise
would not be covered against the peril of flood.
Now, therefore, the parties hereto mutually undertake the
following:
Article II--Undertakings of the Company
A. In order to be eligible for assistance under this Arrangement
the Company shall be responsible for:
1.0 Policy Administration, including
1.1 Community Eligibility/Rating Criteria
1.2 Policyholder Eligibility Determination
1.3 Policy Issuance
1.4 Policy Endorsements
1.5 Policy Cancellations
1.6 Policy Correspondence
1.7 Payment of Agents Commissions
The receipt, recording, control, timely deposit and disbursement of
funds in connection with all the foregoing, and correspondence relating
to the above in accordance with the Financial Control Plan
requirements.
2.0 Claims processing in accordance with general Company standards
and the Financial Control Plan. The Write Your Own Claims Manual, the
Federal Emergency Management Agency Adjuster Manual, the FIA National
Flood Insurance Program Policy Issuance Handbook, the Write Your Own
Operational Overview, and other instructional material also provide
guidance to the Company.
3.0 Reports
3.1 Monthly Financial Reporting and Statistical Transaction
Reporting shall be in accordance with the requirements of National
Flood Insurance Program Transaction Record Reporting and Processing
Plan for the Write Your Own (WYO) Program and the Financial Control
Plan for business written under the WYO Program. These data shall be
validated/edited/audited in detail and shall be compared and balanced
against Company financial reports.
3.2 Monthly financial reporting shall be prepared in accordance
with the WYO Accounting Procedures.
3.3 The Company shall establish a program of self audit acceptable
to the FIA or comply with the self audit program contained in the
Financial Control Plan for business written under the WYO Program. The
Company shall report the results of this self-audit to the FIA
annually.
B. The Company shall use the following time standards of
performance as a guide:
1.0 Application Processing - 15 days (Note: If the policy cannot
be mailed due to insufficient or erroneous information or insufficient
funds, a request for correction or added monies shall be mailed within
10 days);
1.1 Renewal Processing--7 days;
1.2 Endorsement Processing--7 days;
1.3 Cancellation Processing--15 days;
1.4 Correspondence, Simple and/or Status Inquiries--7 days;
1.5 Correspondence, Complex Inquiries--20 days;
1.6 Supply, Materials, and Manual Requests--7 days;
1.7 Claims Draft Processing--7 days from completion of file
examination;
1.8 Claims Adjustment--45 days average from receipt of Notice of
Loss (or equivalent) through completion of examination.
1.9 For the elements of work enumerated above, the elapsed time
shown is from the date of receipt through the date of mail out. Days
means working, not calendar days.
In addition to the standards for timely performance set forth
above, all functions performed by the Company shall be in accordance
with the highest reasonably attainable quality standards generally
utilized in the insurance and data processing industries.
These standards are for guidance. Although no immediate remedy for
failure to meet them is provided under this Arrangement, nevertheless,
performance under these standards and the marketing guidelines provided
for in Section G. below can be a factor considered by the Federal
Insurance Administrator (the Administrator) in requiring corrective
action by the Company, in determining the continuing participation of
the Company in the Program, or in taking other action, e.g., limiting
the Company's authority to write new business.
C. To ensure maximum responsiveness to the National Flood Insurance
Program's (NFIP) policyholders following a catastrophic event, e.g., a
hurricane, involving insured wind and flood damage to policyholders,
the Company shall agree to the adjustment of the combined flood and
wind losses utilizing one adjuster under an NFIP-approved Single
Adjuster Program in the following cases and under procedures issued by
the Administrator:
1.0 Where the flood and wind coverage is provided by the Company;
2.0 Where the flood coverage is provided by the Company and the
wind coverage is provided by a participating State Property Insurance
Plan, Windpool Association, Beach Plan, Joint Underwriting Association,
FAIR Plan, or similar property insurance mechanism;
3.0 Where the flood coverage is provided by the Company and the
wind coverage is provided by another WYO Company and the necessary
information on the dual coverage is part of the Claims Coordinating
Office (CCO) system; and
4.0 Where the flood coverage is provided by the Company and the
wind coverage is provided by another property insurer and the State
Insurance Regulator has determined that such property insurer shall, in
the interest of consumers, facilitate the adjustment of its wind loss
by the adjuster engaged to adjust the flood loss of the Company.
The Government shall provide for the direct business flood losses
to be adjusted by a single adjuster where the wind damage coverage is
insured by a state market mechanism described in 2.0, above, or by a
WYO Company as described in 3.0 above, or by a property insurer, as
described in 4.0 above.
Except for 1.0, above, the Company shall submit its flood losses
that are reasonably believed to involve wind damage to the Single
Adjuster Program's Stationary CCO in Lanham, Maryland at the following
address: National Flood Insurance Program, Stationary Claims
Coordinating Office, 10115 Senate Drive, Lanham, Maryland 20706.
Such flood losses shall be reported on the ACORD Notice of Loss
form, ``ACORD 1 (1/93),'' or a like form calling for the reporting of
losses involving both flood and wind damage arising out of a single
hurricane event under the following procedures:
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
[[Page 31362]]
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 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 and apart
from all other Company accounts, at a bank of its choosing for the
collection, retention and disbursement of funds relating to its
obligation under this Arrangement, less the Company's expenses as set
forth in Article III, and the operation of the Letter of Credit
established pursuant to Article IV. All funds not required to meet
current expenditures shall be remitted to the United States Treasury,
in accordance with the provisions of the WYO Accounting Procedures
Manual.
F. The Company shall investigate, adjust, settle and defend all
claims or losses arising from policies issued under this Arrangement.
Payment of flood insurance claims by the Company shall be binding upon
the FIA.
G. The Company shall market flood insurance policies in a manner
consistent with the marketing guidelines established by the Federal
Insurance Administration.
Article III--Loss Costs, Expenses, Expense Reimbursement, and Premium
Refunds
A. The Company shall be liable for operating, administrative and
production expenses, including any taxes, dividends, agent's
commissions or any board, exchange or bureau assessments, or any other
expense of whatever nature incurred by the Company in the performance
of its obligations under this Arrangement.
B. The Company shall be entitled to withhold, on a provisional
basis, as operating and administrative expenses, including agents' or
brokers' commissions, an amount from the Company's written premium on
the policies covered by this Arrangement in reimbursement of all of the
Company's marketing, operating and administrative expenses, except for
allocated and unallocated loss adjustment expenses described in C. of
this Article, which amount shall be 32.6% of the Company's written
premium on the policies covered by this Arrangement. The final amount
retained by the Company shall be determined by an increase or decrease
depending on the extent to which the Company meets the marketing goals
for the combined 1994-1995 and 1995-1996 Arrangement years contained in
marketing guidelines established pursuant to Article II. G.
The decrease or increase in the amount retained by the Company
shall be made after the end of the 1995-1996 Arrangement year. Any
decrease from 32.6% made as a result of a Company not meeting its
marketing goals shall be directly related to the extent to which the
Company's goal was not achieved, but shall not exceed two (2)
percentage points (providing for a minimum of 30.6%). The amount of any
decrease shall be calculated for each month, and each month's decrease
shall be subject to interest compounded at rates provided for by 31
U.S.C. 3717(a)(1). Upon notice of the cumulative monthly decreases and
interest, the Company agrees to promptly remit to the Government the
total amount due.
The increase, which shall be distributed among the Companies
exceeding their marketing goals, shall be drawn from a pool composed of
the difference between 32.6% of all WYO Companies' written premium in
Arrangement years 1994-1995 and 1995-1996, and the total amount, prior
to the increase, provided to the Companies on the basis of the extent
to which they have met their marketing goals. A distribution formula
will be developed and distributed to WYO Companies which will consider
the extent to which the Company has exceeded its goal and the size of
the Company's book of business in relation to the total number of WYO
policies. The amount of any increase shall be paid promptly to the
Company after the end of the 1995-1996 Arrangement year.
If the Company does not enter into the Arrangement for 1995-1996,
the extent to which the Company met its goals shall be based upon its
Arrangement year 1994-1995 performance, and the final amount retained
shall be determined after the end of the 1994-1995 Arrangement year,
but the Company shall not be entitled to any increase above the
provisional amount.
Premium income net of provisional reimbursement (net premium
income) and Federal Policy Fee shall be deposited in a special account
for the payment of losses and loss adjustment expenses (see Article II,
Section E).
The Company, with the consent of the Administrator as to terms and
costs, shall be entitled to utilize the services of a national rating
organization, licensed under state law, to assist the FIA in
undertaking and carrying out such studies and investigations on a
community or individual risk basis, and in determining more equitable
and accurate estimates of flood insurance risk premium rates as
authorized under
[[Page 31363]]
the National Flood Insurance Act of 1968, as amended. The Company shall
be reimbursed in accordance with the provisions of the WYO Accounting
Procedures Manual for the charges or fees for such services.
C. Loss Adjustment Expenses shall be reimbursed as follows:
1. Unallocated loss adjustment shall be an expense reimbursement of
3.3% of the incurred loss (except that it does not include ``incurred
but not reported'').
2. Allocated loss adjustment expense shall be reimbursed to the
Company pursuant to Exhibit A, entitled ``Fee Schedule.''
3. Special allocated loss expenses shall be reimbursed to the
Company for only those expenses the Company has obtained prior approval
of the Administrator to incur.
D.1. Loss payments under policies of flood insurance shall be made
by the Company from funds retained in the bank account established
under Article II, Section E and, if such funds are depleted, from funds
derived by drawing against the Letter of Credit established pursuant to
Article IV.
2. Loss payments will include payments as a result of awards or
judgments for damages arising under the scope of this Arrangement,
policies of flood insurance issued pursuant to this Arrangement, and
the claims processing standards and guides set forth at Article II,
Section A, 2.0 of this Arrangement. Prompt notice of any claim for
damages as to claims processing or other matters arising outside the
scope of this section (D)(2) shall be sent to the Assistant
Administrator of the FIA's Office of Insurance Policy Analysis and
Technical Services (OIPATS), along with a copy of any material
pertinent to the claim for damages arising outside of the scope of the
matters set forth in this section (D)(2).
Following receipt of notice of such claim, the General Counsel
(OGC), FEMA, shall review the cause and make a recommendation to FIA as
to whether the claim is grounded in actions by the Company which are
significantly outside the provisions of this section (D)(2). After
reviewing the General Counsel's recommendation, the Administrator will
make her decision and the Company will be notified, in writing, within
thirty (30) days of the General Counsel's recommendation, if the
decision is that any award or judgment for damages arising out of such
actions will not be recognized under Article III of this Arrangement as
a reimbursable loss cost, expense or expense reimbursement. In the
event that the Company wishes to petition for reconsideration of the
notification that it will not be reimbursed for the award or judgment
made under the above circumstances, it may do so by mailing, within
thirty days of the notice declining to recognize any such award or
judgment as reimbursable under Article III, a written petition to the
Chairman of the WYO Standards Committee established under the Financial
Control Plan. The WYO Standards Committee will, then, consider the
petition at its next regularly scheduled meeting or at a special
meeting called for that purpose by the Chairman and issue a written
recommendation to the Administrator, within thirty days of the meeting.
The Administrator's final determination will be made, in writing, to
the Company within thirty days of the recommendation made by the WYO
Standards Committee.
E. Premium refunds to applicants and policyholders required
pursuant to rules contained in the National Flood Insurance Program
(NFIP) ``Flood Insurance Manual'' shall be made by the Company from
funds retained in the bank account established under Article II,
Section E and, if such funds are depleted, from funds derived by
drawing against the Letter of Credit established pursuant to Article
IV.
Article IV--Undertakings of the Government
A. Letter(s) of Credit shall be established by the Federal
Emergency Management Agency (FEMA) against which the Company may
withdraw funds daily, if needed, pursuant to prescribed procedures as
implemented by FEMA. The amounts of the authorizations will be
increased as necessary to meet the obligations of the Company under
Article III, Sections (C), (D), and (E). Request for funds shall be
made only when net premium income has been depleted. The timing and
amount of cash advances shall be as close as is administratively
feasible to the actual disbursements by the recipient organization for
allowable Letter of Credit expenses.
Request for payment on Letters of Credit shall not ordinarily be
drawn more frequently than daily nor in amounts less than $5,000, and
in no case more than $5,000,000 unless so stated on the Letter of
Credit. This Letter of Credit may be drawn by the Company for any of
the following reasons:
1. Payment of claim as described in Article III, Section D; and
2. Refunds to applicants and policyholders for insurance premium
overpayment, or if the application for insurance is rejected or when
cancellation or endorsement of a policy results in a premium refund as
described in Article III, Section E; and
3. Allocated and unallocated Loss Adjustment Expenses as described
in Article III, Section C.
B. The FIA shall provide technical assistance to the Company as
follows:
1. The FIA's policy and history concerning underwriting and claims
handling.
2. A mechanism to assist in clarification of coverage and claims
questions.
3. Other assistance as needed.
Article V--Commencement and Termination
A. Upon signature of authorized officials for both the Company and
the FIA, this Arrangement shall be effective for the period October 1
through September 30. The FIA shall provide financial assistance only
for policy applications and endorsements accepted by the Company during
this period pursuant to the Program's effective date, underwriting and
eligibility rules.
B. By June 1, of each year, the FIA shall publish in the Federal
Register and make available to the Company the terms for the re-
subscription of this Financial Assistance/Subsidy Arrangement. In the
event the Company chooses not to re-subscribe, it shall notify the FIA
to that effect by the following July 1.
C. In the event the Company elects not to participate in the
Program in any subsequent fiscal year, or the FIA chooses not to renew
the Company's participation, the FIA, at its option, may require (1)
The continued performance of this entire Arrangement for one (1) year
following the effective expiration date only for those policies issued
during the original term of this Arrangement, or any renewal thereof,
or (2) the transfer to the FIA of:
a. All data received, produced, and maintained through the life of
the Company's participation in the Program, including certain data, as
determined by FIA, in a standard format and medium; and
b. A plan for the orderly transfer to the FIA of any continuing
responsibilities in administering the policies issued by the Company
under the Program including provisions for coordination assistance; and
c. All claims and policy files, including those pertaining to
receipts and disbursements which have occurred during the life of each
policy. In the event of a transfer of the services provided, the
Company shall provide the FIA with a report showing, on a policy basis,
any amounts due from or
[[Page 31364]]
payable to insureds, agents, brokers, and others as of the transition
date.
D. Financial assistance under this Arrangement may be cancelled by
the FIA in its entirety upon 30 days written notice to the Company by
certified mail stating one of the following reasons for such
cancellation: (1) Fraud or misrepresentation by the Company subsequent
to the inception of the contract, or (2) nonpayment to the FIA of any
amount due the FIA. Under these very specific conditions, the FIA may
require the transfer of data as shown in Section C., above. If transfer
is required, the unearned expenses retained by the Company shall be
remitted to the FIA.
E. In the event the Act is amended, or repealed, or expires, or if
the FIA is otherwise without authority to continue the Program,
financial assistance under this Arrangement may be cancelled for any
new or renewal business, but the Arrangement shall continue for
policies in force which shall be allowed to run their term under the
Arrangement.
F. In the event that the Company is unable to, or otherwise fails
to, carry out its obligations under this Arrangement by reason of any
order or directive duly issued by the Department of Insurance of any
Jurisdiction to which the Company is subject, the Company agrees to
transfer, and the Government will accept, any and all WYO policies
issued by the Company and in force as of the date of such inability or
failure to perform. 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 and the Company will
immediately transfer to the Government all funds in its possession with
respect to all such policies transferred and the unearned portion of
the Company expenses for operating, administrative and loss adjustment
on all such policies.
Article VI--Information and Annual Statements
The Company shall furnish to the FIA such summaries and analyses of
information in its records as may be necessary to carry out the
purposes of the National Flood Insurance Act of 1968, as amended, in
such form as the FIA, in cooperation with the Company, shall prescribe.
The Company shall be a property/casualty insurer domiciled in a State
or territory of the United States. Upon request, the Company shall file
with the FIA a true and correct copy of the Company's Fire and Casualty
Annual Statement, and Insurance Expense Exhibit or amendments thereof,
as filed with the State Insurance Authority of the Company's
domiciliary State.
Article VII--Cash Management and Accounting
A. FEMA shall make available to the Company during the entire term
of this Arrangement and any continuation period required by FIA
pursuant to Article V, Section C., the Letter of Credit provided for in
Article IV drawn on a repository bank within the Federal Reserve System
upon which the Company may draw for reimbursement of its expenses as
set forth in Article IV which exceed net written premiums collected by
the Company from the effective date of this Arrangement or continuation
period to the date of the draw.
B. The Company shall remit all funds not required to meet current
expenditures to the United States Treasury, in accordance with the
provisions of the WYO Accounting Procedures Manual.
C. In the event the Company elects not to participate in the
Program in any subsequent fiscal year, the Company and FIA shall make a
provisional settlement of all amounts due or owing within three months
of the termination of this Arrangement. This settlement shall include
net premiums collected, funds drawn on the Letter of Credit, and
reserves for outstanding claims. The Company and FIA agree to make a
final settlement of accounts for all obligations arising from this
Arrangement within 18 months of its expiration or termination, except
for contingent liabilities which shall be listed by the Company. At the
time of final settlement, the balance, if any, due the FIA or the
Company shall be remitted by the other immediately and the operating
year under this Arrangement shall be closed.
Article VIII--Arbitration
A. If any misunderstanding or dispute arises between the Company
and the FIA with reference to any factual issue under any provisions of
this Arrangement or with respect to the FIA's non-renewal of the
Company's participation, other than as to legal liability under or
interpretation of the standard flood insurance policy, such
misunderstanding or dispute may be submitted to arbitration for a
determination which shall be binding upon approval by the FIA. The
Company and the FIA may agree on and appoint an arbitrator who shall
investigate the subject of the misunderstanding or dispute and make a
determination. If the Company and the FIA cannot agree on the
appointment of an arbitrator, than two arbitrators shall be appointed,
one to be chosen by the Company and one by the FIA.
The two arbitrators so chosen, if they are unable to reach an
agreement, shall select a third arbitrator who shall act as umpire, and
such umpire's determination shall become final only upon approval by
the FIA.
The Company and the FIA shall bear in equal shares all expenses of
the arbitration. Findings, proposed awards, and determinations
resulting from arbitration proceedings carried out under this section,
upon objection by FIA or the Company, shall be inadmissible as evidence
in any subsequent proceedings in any court of competent jurisdiction.
This Article shall indefinitely succeed the term of this
Arrangement.
Article IX--Errors and Omissions
The parties shall not be liable to each other for damages caused by
ordinary negligence arising out of any transaction or other performance
under this Arrangement, nor for any inadvertent delay, error, or
omission made in connection with any transaction under this
Arrangement, provided that such delay, error, or omission is rectified
by the responsible party as soon as possible after discovery.
However, in the event that the Company has made a claim payment to
an insured without including a mortgagee (or trustee) of which the
Company had actual notice prior to making payment, and subsequently
determines that the mortgagee (or trustee) is also entitled to any part
of said claim payment, any additional payment shall not be paid by the
Company from any portion of the premium and any funds derived from any
Federal Letter of Credit deposited in the bank account described in
Article II, section E. In addition, the Company agrees to hold the
Federal Government harmless against any claim asserted against the
Federal Government by any such mortgagee (or trustee), as described in
the preceding sentence, by reason of any claim payment made to any
insured under the circumstances described above.
Article X--Officials Not To Benefit
No Member or Delegate to Congress, or Resident Commissioner, shall
be admitted to any share or part of this Arrangement, or to any benefit
that may arise therefrom; but this provision shall not be construed to
extend to this Arrangement if made with a corporation for its general
benefit.
Article XI--Offset
At the settlement of accounts the Company and the FIA shall have,
and may exercise, the right to offset any
[[Page 31365]]
balance or balances, whether on account of premiums, commissions,
losses, loss adjustment expenses, salvage, or otherwise due one party
to the other, it successors or assigns, hereunder or under any other
Arrangements heretofore or hereafter entered into between the Company
and the FIA. This right of offset shall not be affected or diminished
because of insolvency of the Company.
All debts or credits of the same class, whether liquidated or
unliquidated, in favor of or against either party to this Arrangement
on the date of entry, or any order of conservation, receivership, or
liquidation, shall be deemed to be mutual debts and credits and shall
be offset with the balance only to be allowed or paid. No offset shall
be allowed where a conservator, receiver, or liquidator has been
appointed and where an obligation was purchased by or transferred to a
party hereunder to be used as an offset. Although a claim on the part
of either party against the other may be unliquidated or undetermined
in amount on the date of the entry of the order, such claim will be
regarded as being in existence as of the date of such order and any
credits or claims of the same class then in existence and held by the
other party may be offset against it.
Article XII--Equal Opportunity
The Company shall not discriminate against any applicant for
insurance because of race, color, religion, sex, age, handicap, marital
status, or national origin.
Article XIII--Restriction on Other Flood Insurance
As a condition of entering into this Arrangement, the Company
agrees that in any area in which the Administrator authorizes the
purchase of flood insurance pursuant to the Program, all flood
insurance offered and sold by the Company to persons eligible to buy
pursuant to the Program for coverages available under the Program shall
be written pursuant to this Arrangement.
However, this restriction applies solely to policies providing only
flood insurance. It does not apply to policies provided by the Company
of which flood is one of the several perils covered, or where the flood
insurance coverage amount is over and above the limits of liability
available to the insured under the Program.
Article XIV--Access to Books and Records
The FIA and the Comptroller General of The United States, or their
duly authorized representatives, for the purpose of investigation,
audit, and examination shall have access to any books, documents,
papers and records of the Company that are pertinent to this
Arrangement. The Company shall keep records which fully disclose all
matters pertinent to this Arrangement, including premiums and claims
paid or payable under policies issued pursuant to this Arrangement.
Records of accounts and records relating to financial assistance shall
be retained and available for three (3) years after final settlement of
accounts, and to financial assistance, three (3) years after final
adjustment of such claims. The FIA shall have access to policyholder
and claim records at all times for purposes of the review, defense,
examination, adjustment, or investigation of any claim under a flood
insurance policy subject to this Arrangement.
Article XV--Compliance with Act and Regulations
This Arrangement and all policies of insurance issued pursuant
thereto shall be subject to the provisions of the National Flood
Insurance Act of 1968, as amended, the Flood Disaster Protection Act of
1973, as amended, 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 ____________ , 1995.
----------------------------------------------------------------------
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.
Notice of Acceptance Form 1995-1996; Federal Emergency Management
Agency; Federal Insurance Administration; Financial Assistance/Subsidy
Arrangement (Arrangement)
Whereas, in 1995, there was published a Notice of Offer by the
Federal Emergency Management Agency to enter into a Financial
Assistance/Subsidy Arrangement (hereafter the Arrangement).
Whereas, the above cited Arrangement, as published in and reprinted
from the Federal Register, does not provide sufficient space to type in
the name of the Company.
Whereas, the Arrangement may include several individual companies
within a Company Group and the Arrangement as published in and
reprinted from the Federal Register does not provide sufficient space
to type in a list of companies.
Therefore, the parties hereby agree that this Notice of Acceptance
form is incorporated into and is an integral part of the entire
Arrangement and is substituted in place of the signature block
contained in the Federal Register under Article XVI of the Arrangement.
The above mentioned Arrangement is effective in the States in which the
insurance company (ies) listed below is (are) duly licensed to engage
in the business of property insurance:
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
In witness whereof, the parties hereto have accepted this
Arrangement on this ____________ day of ______________, 1995.
[[Page 31366]]
----------------------------------------------------------------------
Company
By:--------------------------------------------------------------------
Title:-----------------------------------------------------------------
The United States of America
Federal Emergency Management Agency
By:--------------------------------------------------------------------
Title: Federal Insurance Administrator
Dated: June 6, 1995.
Elaine A. McReynolds,
Administrator, Federal Insurance Administration.
[FR Doc. 95-14541 Filed 6-13-95; 8:45 am]
BILLING CODE 6718-05-P