[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) [email protected].

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.L[email protected].

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