[Federal Register Volume 64, Number 16 (Tuesday, January 26, 1999)]
[Proposed Rules]
[Pages 3909-3910]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-1745]


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FEDERAL EMERGENCY MANAGEMENT AGENCY

44 CFR Part 61

RIN 3067-AC96


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) propose a rule that would increase the amount of 
premium you (the flood insurance policyholder) pay for flood insurance 
coverage for ``pre-FIRM'' buildings in coastal areas subject to high 
velocity waters, such as storm surges, and wind-driven waves (``V'' 
zones.). (``Pre-FIRM'' buildings are those whose construction was 
started before January 1, 1975, or the effective date of a community's 
Flood Insurance Rate Map (FIRM), whichever is later. Pre-FIRM buildings 
and their contents are eligible for subsidized rates.) We propose this 
rate increase to bring the subsidized premiums that we currently charge 
for pre-FIRM, V-zone properties more in line with their actual risk.

DATES: Please send any comments received on or before February 25, 
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) [email protected].

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:

Background

    The National Flood Insurance Act of 1968, as amended, authorizes 
the sale of flood insurance under the National Flood Insurance Program 
(NFIP). The NFIP makes flood insurance available in communities that 
adopt and enforce floodplain management ordinances designed to reduce 
future flood damage. Until we can complete a detailed flood risk study 
that produces a FIRM for your community (or in some cases if we decide 
that such a study is not cost effective), your community participates 
in what we call the ``emergency program.'' Only a limited amount of 
flood insurance is available in the emergency program. We refer to 
construction started before January 1, 1975, or the effective date of 
the FIRM, whichever is later, as ``pre-FIRM'' construction. The premium 
rates we charge you for flood insurance coverage on pre-FIRM buildings 
are less than full risk premiums. (Throughout this proposed rule, we 
use the terms ``subsidized rates'' and ``chargeable rates'' 
interchangeably to describe less than full-risk premiums under the 
NFIP.)

Statutory Mandates for Setting Flood Insurance Premiums

    Pub. L. 93-234 requires us to charge full-risk premiums for flood 
insurance coverage on buildings when their construction began after 
December 31, 1974, or the effective date of FEMA's Flood Insurance Rate 
Map, if the second date is later. (We call such construction ``post-
FIRM'' construction.)
    Pub. L. 93-234 authorizes us to apply chargeable rates to pre-FIRM 
property and gives the Federal Insurance Administrator flexibility to 
set the flood insurance rates for pre-FIRM construction. This 
legislation calls for us to balance the need to offer reasonable rates 
that encourage people to buy flood insurance with the statutory goal to 
distribute burdens fairly between all who will be protected by flood 
insurance and the general public.

Proposed Change and Its Purposes

    We are proposing to increase the subsidized rates we charge for the 
initial limits of coverage under the NFIP for pre-FIRM properties that 
are in ``V'' zones on FEMA's FIRMs. (``V'' zones represent coastal 
areas subject to high velocity water such as wind-driven waves from 
storms or tidal surges that are extremely hazardous to people and 
property). Subsidized rates are the same currently for properties in V 
and A zones). We are proposing this rate increase to distribute 
economic burdens more fairly among policyholders of the NFIP and the 
general body of taxpayers.

Need To Build Reserves for Future Catastrophic Losses

    One of the goals of the NFIP is to shift the financial burden for 
flood disasters from the general body of taxpayers to those who live or 
own businesses at risk in the flood plains. The NFIP is doing that. 
Bringing our subsidized premiums as close to full risk premiums as our 
loss experience permits will work toward that goal and will reflect 
some of the variations in risk among properties eligible for subsidized 
premiums rates.
    We currently use the same chargeable rates throughout the country 
for:
    (1) buildings and contents in communities in the Emergency Program 
or initial phase of the NFIP, and
    (2) certain structures in the Regular Program.
    But the sum of the chargeable or subsidized premium and other 
administrative fees that you pay for flood coverage is less than our 
expenses and loss payments.

Recognition of Inherently Greater Risks

    Until now, we have charged the same subsidized premium rate for 
flood insurance coverage in different risk zones of pre-FIRM property. 
Pre-FIRM properties in V zones are inherently greater risks than 
similar properties in A zones. This truth is born out by our loss 
experience. Our loss experience tells us that we must reflect in our 
chargeable rates the greater degree of hazard of a pre-FIRM property in 
a V-zone area than the hazard of a similar pre-FIRM property in an A-
zone area.

Subsidized Rate Increases in the Past

    We have increased the chargeable or subsidized premium rates three 
times during the program's history for the same reason that we are 
proposing this rule: to distribute burdens fairly among all who will be 
protected by flood insurance and among the general public. The changes 
proposed in this rule would move us closer toward that goal by bringing 
subsidized premiums more in line with the actual risk.

Comparison of Proposed Rate Increases With Current Rates

    The following chart shows the existing subsidized rates for A-zone 
properties and the proposed increases for V-zone properties:

[[Page 3910]]



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                                                              A zone rates\1\ per year  V zone rates\2\ per year
                                                                per $100 coverage on:     per $100 coverage on:
                      Type of structure                      ---------------------------------------------------
                                                               Structure     Contents    Structure     Contents
----------------------------------------------------------------------------------------------------------------
1. Residential
    No Basement or Enclosure................................          .68          .79          .82          .95
    With Basement or Enclosure..............................          .73          .79          .88          .95
2. All other including hotels and motels with normal
 occupancy of less than 6 months duration
    No Basement or Enclosure................................          .79         1.58          .95         1.90
    With Basement or Enclosure..............................          .84         1.58         1.01        1.90
----------------------------------------------------------------------------------------------------------------
\1\ A zones are zones A1-A30, AE, AO, AH, and unnumbered A zones.
\2\ V zones are zones V1-V30, VE, and unnumbered V zones.

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 1500-1508, FEMA 
is conducting an environmental assessment of this proposed rule. The 
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, but attempts to adhere to the regulatory principles set forth in 
E.O. 12866. The proposed rule has not been reviewed by the Office of 
Management and Budget under E.O. 12866.

Paperwork Reduction Act

    This proposed 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 proposed rule involves no policies that have federalism 
implications under E.O. 12612, Federalism, dated October 26, 1987.

Executive Order 12778, Civil Justice Reform

    This proposed rule meets the applicable standards of Sec. 2(b)(2) 
of E.O. 12778.

List of Subjects in 44 CFR Part 61

    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. Section 61.9 is revised to read as follows:


Sec. 61.9  Establishment of chargeable rates.

    (a) Under section 1308 of the Act, we are establishing annual 
chargeable rates for each $100 of flood insurance coverage as follows 
for pre-FIRM A zone properties, pre-FIRM V zone properties, and 
emergency program properties.

----------------------------------------------------------------------------------------------------------------
                                                              A zone rates\1\ per year  V zone rates\2\ per year
                                                                per $100 coverage on:     per $100 coverage on:
                      Type of structure                      ---------------------------------------------------
                                                               Structure     Contents    Structure     Contents
----------------------------------------------------------------------------------------------------------------
1. Residential
    No Basement or Enclosure................................          .68          .79          .82          .95
    With Basement or Enclosure..............................          .73          .79          .88          .95
2. All other including hotels and motels with normal
 occupancy of less than 6 months duration
    No Basement or Enclosure................................          .79         1.58          .95         1.90
    With Basement or Enclosure..............................          .84         1.58         1.01        1.90
----------------------------------------------------------------------------------------------------------------
\1\ A zones are zones A1-A30, AE, AO, AH, and unnumbered A zones.
\2\ V zones are zones V1-V30, VE, and unnumbered V zones.

    (b) We will charge rates for contents in pre-FIRM buildings 
according to the use of the building.
    (c) A-zone rates for buildings without basements or enclosures 
apply uniformly to all buildings throughout emergency program 
communities.

(Catalog of Federal Domestic Assistance No. 83.100, ``Flood 
Insurance''; No. 83.516, ``Disaster Assistance'')

    Dated: January 18, 1999.
Jo Ann Howard,
Administrator, Federal Insurance Administration.
[FR Doc. 99-1745 Filed 1-25-99; 8:45 am]
BILLING CODE 6718-03-P