[Federal Register Volume 66, Number 91 (Thursday, May 10, 2001)]
[Proposed Rules]
[Pages 23874-23876]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-11365]


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FEDERAL EMERGENCY MANAGEMENT AGENCY

44 CFR Part 62

RIN 3067-AD23


National Flood Insurance Program; Assistance to Private Sector 
Property Insurers

AGENCY: Federal Emergency Management Agency (FEMA).

ACTION: Proposed rule.

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SUMMARY: Based on recent cost information, we (FEMA) propose to adjust 
the expense allowance under the Financial Assistance/Subsidy 
Arrangement between the Federal Insurance Administrator and the private 
sector insurers that sell and service flood insurance.

DATES: Comments on this proposed rule should be received on or before 
June 11, 2001.

ADDRESSES: Please submit any written 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: Edward L. Connor, Federal Emergency 
Management Agency, Federal Insurance Administration, 500 C Street SW., 
Washington, DC 20472, 202-646-3443, (facsimile) 202-646-3445, (email) 
[email protected].

SUPPLEMENTARY INFORMATION: Under the Financial Assistance/Subsidy 
Arrangement between the Federal Insurance Administrator and the private 
sector insurers that sell and service flood insurance under the Write 
Your Own (WYO) program, participating insurers are entitled to an 
expense allowance--a portion of the flood premiums from the policies 
that the insurers sell. The expense allowance is based on data for the 
property/casualty industry published, as of March 15 of the prior 
Arrangement year, in Part III of the Insurance Expense Exhibit in A.M. 
Best Company's Aggregates and Averages for five property coverages.
    Based on our analysis of recent expense information from the 
companies, we conclude that we should increase the current expense 
allowance under the Arrangement. We are therefore proposing a change in 
the expense allowance to reflect this new cost information.

National Environmental Policy Act (NEPA)

    NEPA imposes requirements for considering the environmental impacts 
of agency decisions. It requires that an agency prepare an 
Environmental Impact Statement (EIS) for ``major federal actions 
significantly affecting the quality of the human environment.'' If an 
action may or may not have a significant impact, the agency must 
prepare an environmental assessment (EA). If, as a result of this 
study, the agency makes a Finding of No Significant Impact (FONSI), no 
further

[[Page 23875]]

action is necessary. If it will have a significant effect, then the 
agency uses the EA to develop an EIS.
    Categorical Exclusions. Agencies can categorically identify actions 
(for example, repair of a building damaged by a disaster) that do not 
normally have a significant impact on the environment. The purpose of 
this proposed rule is to adjust the expense allowance under the 
Financial Assistance/Subsidy Arrangement between the Federal Insurance 
Administrator and the private sector insurers that sell and service 
flood insurance.
    Accordingly, we have determined that this rule is excluded from the 
preparation of an environmental assessment or environmental impact 
statement under 44 CFR 10.8(d)(2)(ii), where the rule is related to 
actions that qualify for categorical exclusion under 44 CFR 
10.8(d)(2)(i), which addresses the preparation, revision, and adoption 
of regulations, directives, and other guidance documents related to 
actions that qualify for categorical exclusions. We have not prepared 
an environmental assessment or environmental impact statement as 
defined by NEPA.

Executive Order 12866, Regulatory Planning and Review

    We have prepared and reviewed this proposed rule under the 
provisions of E.O. 12866, Regulatory Planning and Review. Under 
Executive Order 12866, 58 FR 51735, October 4, 1993, a significant 
regulatory action is subject to OMB review and the requirements of the 
Executive Order. The Executive Order defines ``significant regulatory 
action'' as one that is likely to result in a rule that may:
    (1) Have an annual effect on the economy of $100 million or more or 
adversely affect in a material way the economy, a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local, or tribal governments or 
communities;
    (2) Create a serious inconsistency or otherwise interfere with an 
action taken or planned by another agency;
    (3) Materially alter the budgetary impact of entitlements, grants, 
user fees, or loan programs or the rights and obligations of recipients 
thereof; or
    (4) Raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles set forth in 
the Executive Order.
    For the reasons that follow we have concluded that the proposed 
rule is neither an economically significant nor a significant 
regulatory action under the Executive Order. The rule would adjust the 
expense allowance under the Financial Assistance/Subsidy Arrangement 
between the Federal Insurance Administrator and the private sector 
insurers that sell and service flood insurance. The adjustment would 
increase by approximately $14 million the expense allowance paid to the 
WYO private sector insurers. It would not have an annual effect on the 
economy of $100 million or more or adversely affect in a material way 
the economy, the insurance sector, competition, or other sectors of the 
economy. It would create no serious inconsistency or otherwise 
interfere with an action taken or planned by another agency. It would 
not materially alter the budgetary impact of entitlements, grants, user 
fees, or loan programs or the rights and obligations of recipients 
thereof. Nor does it raise novel legal or policy issues arising out of 
legal mandates, the President's priorities, or the principles set forth 
in the Executive Order.
    The Office of Management and Budget has not reviewed this proposed 
rule under the principles of Executive Order 12866.

Paperwork Reduction Act

    This rule does not contain a collection of information and is 
therefore not subject to the provisions of the Paperwork Reduction Act.

Regulatory Flexibility Act

    Under the Regulatory Flexibility Act agencies must consider the 
impact of their rulemakings on ``small entities'' (small businesses, 
small organizations and local governments). When 5 U.S.C. 553 requires 
an agency to publish a notice of proposed rulemaking, the Act requires 
a regulatory flexibility analysis for both the proposed rule and the 
final rule if the rulemaking could ``have a significant economic impact 
on a substantial number of small entities.'' The Act also provides that 
if a regulatory flexibility analysis is not required, the agency must 
certify in the rulemaking document that the rulemaking will not ``have 
a significant economic impact on a substantial number of small 
entities.''
    This proposed rule revises the NFIP regulations to adjust the 
expense allowance under the Financial Assistance/Subsidy Arrangement 
between the Federal Insurance Administrator and the private sector 
insurers that sell and service flood insurance. Therefore, I certify 
that a regulatory flexibility analysis is not required for this rule 
because it would not have a significant economic impact on a 
substantial number of small entities.

Executive Order 13132, Federalism

    Executive Order 13132 sets forth principles and criteria that 
agencies must adhere to in formulating and implementing policies that 
have federalism implications, that is, regulations that have 
substantial direct effects on the States, or on the distribution of 
power and responsibilities among the various levels of government. 
Federal agencies must closely examine the statutory authority 
supporting any action that would limit the policymaking discretion of 
the States, and to the extent practicable, must consult with State and 
local officials before implementing any such action.
    We have reviewed this proposed rule under E.O.13132 and have 
determined that the rule does not have federalism implications as 
defined by the Executive Order. The rule would adjust the expense 
allowance under the Financial Assistance/Subsidy Arrangement between 
the Federal Insurance Administrator and the private sector insurers 
that sell and service flood insurance. The rule in no way that we 
foresee affects the distribution of power and responsibilities among 
the various levels of government or limits the policymaking discretion 
of the States.

List of Subjects in 44 CFR Part 62

    Flood insurance.

    Accordingly, amend 44 CFR Part 62 as follows:

PART 62--INSURANCE COVERAGE AND RATES

    1. The authority citation for part 62 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. Revise Article III.B of appendix A to part 62 to read as 
follows:

Appendix A to Part 62--Federal Emergency Management Agency, Federal 
Insurance Administration, Financial Assistance/Subsidy Arrangement

* * * * *

Article III--Loss Costs, Expenses, Expense Reimbursement, and Premium 
Refunds

* * * * *
    B. The Company may withhold as operating and administrative 
expenses, other than 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

[[Page 23876]]

and unallocated loss adjustment expenses described in C. of this 
article. This amount will equal the sum of the average of industry 
expense ratios for ``Other Acq.'', ``Gen. Exp.'', and ``Taxes'' 
calculated by aggregating premiums and expense amounts for each of 
five property coverages using direct premium and expense information 
to derive weighted average expense ratios. For this purpose, we (the 
Federal Insurance Administration) will use data for the property/
casualty industry published, as of March 15 of the prior Arrangement 
year, in Part III of the Insurance Expense Exhibit in A.M. Best 
Company's Aggregates and Averages for the following five property 
coverages: Fire, Allied Lines, Farmowners Multiple Peril, Homeowners 
Multiple Peril, and Commercial Multiple Peril (non-liability 
portion). In addition, this amount will be increased by one 
percentage point to reimburse expenses beyond regular property/
casualty expenses.
    The Company may retain fifteen percent (15%) of the Company's 
written premium on the policies covered by this Arrangement as the 
commission allowance to meet commissions or salaries of their 
insurance agents, brokers, or other entities producing qualified 
flood insurance applications and other related expenses.
    The amount of expense allowance retained by the Company may 
increase a maximum of two percentage points, depending on the extent 
to which the Company meets the marketing goals for the Arrangement 
year contained in marketing guidelines established pursuant to 
Article II.G. We will pay the company the amount of any increase 
after the end of the Arrangement year.
    The Company, with the consent of the Administrator as to terms 
and costs, may use the services of a national rating organization, 
licensed under state law, to help us undertake and carry out such 
studies and investigations on a community or individual risk basis, 
and to determine equitable and accurate estimates of flood insurance 
risk premium rates as authorized under the National Flood Insurance 
Act of 1968, as amended. We will reimburse the Company for the 
charges or fees for such services under the provisions of the WYO 
Accounting Procedures Manual.
* * * * *

(Catalog of Federal Domestic Assistance No. 83.100, ``Flood 
Insurance'')
    Dated: May 1, 2001.
Howard Leikin,
Acting Administrator, Federal Insurance Administration.

[FR Doc. 01-11365 Filed 5-9-01; 8:45 am]
BILLING CODE 6718-03-P