[Federal Register Volume 64, Number 51 (Wednesday, March 17, 1999)]
[Rules and Regulations]
[Pages 13115-13116]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-6466]


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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: Final rule.

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SUMMARY: We (the Federal Insurance Administration) are increasing 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 are 
increasing rates for pre-FIRM, V-zone properties to recognize the 
inherently greater flood risk of these properties.

EFFECTIVE DATE: This rule is effective on May 1, 1999.

FOR FURTHER INFORMATION CONTACT: Charles M. Plaxico, Jr., Federal 
Emergency Management Agency, Federal Insurance Administration, 500 C 
Street, SW., room 840, Washington, DC 20472, 202-646-3422, (facsimile) 
202-646-4327, or (email) [email protected]. 202-646-4536, or 
(email) [email protected].

SUPPLEMENTARY INFORMATION: We proposed a rule at 64 FR 3909, January 
26, 1999, that would increase the premium rates that we charge under 
the National Flood Insurance Program for pre-FIRM, V-zone properties. 
We received comments from: the Association of State Floodplain 
Managers, Inc., the Amite River Basin Drainage and Water Conservation 
District, and the Coast Alliance.
    The Association of State Floodplain Managers, Inc. raised three 
issues. The first issue deals with the subsidy. The Association said 
that ``we believe that any rate increase, however justified, needs to 
be made in the context established by Congress--that owners of 
buildings constructed before the communities joined the NFIP are 
intended to be subsidized.'' This rule does not eliminate the subsidy 
for pre-FIRM, V-zone structures. It only reduces the subsidy. The 
change in rates for the pre-FIRM, V-zone policyholders, currently 
paying an average annual premium of $440, will result in an average 
increase of about seven percent. The rule remains consistent with the 
National Flood Insurance Program's enabling legislation and the 
discretionary authority granted to FEMA to administer the program.
    The second issue the Association raised is that the National Flood 
Insurance Reform Act of 1994 requires FEMA to conduct a study ``of the 
impact of reducing the subsidy of pre-FIRM policies.'' The Association 
pointed out correctly that FEMA has not yet finished that study. 
However, the Association's comment incorrectly characterizes the nature 
of the study, which involves examining economic impacts of eliminating 
the subsidy by charging full actuarial premiums to pre-FIRM structures. 
Our current regulatory action calls for a modest rate increase for pre-
FIRM, V-zone properties and does not need to await completion of the 
study.
    The Association's third issue is that ``any rate increase must be 
part of an overall effort to evaluate all measures to reduce flood 
losses, and such measures must not be based solely on increasing income 
by increasing the cost of insurance, but needs to focus on mitigation 
measures to reduce claims against the NFIP.'' We have not forsaken nor 
do we intend to forsake mitigation efforts in favor of merely raising 
premiums for a small group of policyholders. Experience shows us that 
we can make small improvements to the program without jeopardizing or 
delaying larger initiatives such as the agency's repetitive for dealing 
with properties with multiple flood losses.
    The Amite River Basin Drainage and Water Conservation District 
agreed with our overall objective of minimizing losses, but disagreed 
with the rule as proposed saying that ``we do not agree on the proposed 
rules to increase the subsidized rates for pre-FIRM properties in A and 
V zones.'' The District went on to say that any ``increase in 
subsidized insurance rates should be considered in the context of an 
overall strategy and program to reduce flood losses at this time, which 
FEMA has not done. The overall strategy and program should include a 
very critical and important `phase-out' program that will lead us from 
a `high loss' status to a `low loss' status. This will require time 
(years) and funding at the federal, state, and local level.''
    There are several misunderstandings by the District. First, the 
rule does not affect pre-FIRM, A-zone properties. The rule affects only 
the rates for pre-FIRM, V-zone properties. The affected properties 
currently constitute a little more than one percent of the National 
Flood Insurance Program's policies in force. Second, our action 
complements rather than stands apart from other initiatives that FEMA 
has undertaken or is currently developing, particularly with regard to 
structures with multiple flood losses. The agency is currently looking 
at permanent solutions, including funding, technical assistance, and 
insurance approaches, to the recurring problems of multiple-flood-loss 
structures. Taking this action now in no way diminishes any of those 
other initiatives. Third, we have phased in rate increases for pre-FIRM 
properties over time. The last time we increased subsidized premium 
rates was in 1996. So we believe we are consistent with the District's 
recommendation for a phased-in approach.
    The Coast Alliance agreed with the proposed rule saying, ``We 
support the Federal Emergency Management Agency's proposed rule to 
increase the amount of premium paid by the policyholder for flood 
insurance for `pre-FRM' buildings in coastal areas subject to high 
velocity waters and wind-driven waves (`V' zones).'' The Coast 
Alliance, however, expressed concern about any availability of 
subsidized or non-actuarial premium rates in coastal areas and 
recommended that ``FEMA must take the next logical step to deny new 
flood policies in high risk areas.'' We believe that this 
recommendation should be dealt with legislatively, as were the two 
precedents for denying flood insurance coverage in certain geographical 
areas at 42 U.S.C.

[[Page 13116]]

4028-4029. As required by the National Flood Insurance Reform Act of 
1994, we are evaluating the impact of erosion hazards on the NFIP. Part 
of that study will explore the economic impact of denying insurance in 
areas subject to coastal erosion. It is premature for us to comment on 
the Alliance's recommendation before we complete that study and report 
to Congress.
    In summary, we believe that targeting a particularly risky class of 
properties with higher premium rates supports FEMA's overall program of 
loss reduction. It more accurately reflects the loss exposure of pre-
FIRM, V-zone properties, which are at a greater exposure to flood loss 
than pre-FIRM, A-zone properties. Also, it helps make policyholders 
aware of the danger of their V-zone properties.

National Environmental Policy Act

    Under 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, we conducted 
an environmental assessment of this rule. The assessment concludes that 
there will be no significant impact on the human environment as a 
result of the issuance of this final rule, and no Environmental Impact 
Statement will be prepared. Copies of the environmental assessment are 
on file for inspection through the Rules Docket Clerk, Federal 
Emergency Management Agency, room 840, 500 C Street SW., Washington, DC 
20472.

Executive Order 12866, Regulatory Planning and Review

    This 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 rule has not been reviewed by the Office of Management and 
Budget under E.O. 12866.

Paperwork Reduction Act

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

Executive Order 12778, Civil Justice Reform

    This 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 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. We are revising Section 61.9 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.

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                                                   A zone rates\1\ per year per    V zone rates \2\ per year per
                                                         $100 coverage on:               $100 coverage on:
                Type of structure                ---------------------------------------------------------------
                                                     Structure       Contents        Structure       Contents
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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
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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: March 11, 1999.

Jo Ann Howard
Administrator,
Federal Insurance Administration.
[FR Doc. 99-6466 Filed 3-16-99; 8:45 am]
BILLING CODE 6718-03-P