[Federal Register Volume 66, Number 232 (Monday, December 3, 2001)]
[Proposed Rules]
[Pages 60176-60178]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-29747]


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FEDERAL EMERGENCY MANAGEMENT AGENCY

44 CFR Part 61

RIN 3067-AD27


National Flood Insurance Program (NFIP); Increased Rates for 
Flood Coverage

AGENCY: Federal Emergency Management Agency (FEMA).

ACTION: Proposed rule.

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SUMMARY: We (the Federal Insurance and Mitigation Administration of 
FEMA) propose to increase the amount of premium policyholders pay for 
flood insurance coverage under the NFIP for ``pre-FIRM'' buildings in 
coastal areas subject to high velocity waters, such as storm surges, 
and wind-driven waves (``V'' zones). (The term ``pre-FIRM buildings'' 
means buildings whose construction began on or before December 31, 
1974, or the effective date of the community's Flood Insurance Rate Map 
(FIRM), whichever date is later. Most pre-FIRM buildings and their 
contents are eligible for subsidized rates under the NFIP.) We propose 
this rate increase to bring the premiums we currently charge for pre-
FIRM, V-zone properties more in line with their actual risk.

DATES: We invite comments on this proposed rule, which we should 
receive on or before January 2, 2002.

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 (e-mail) [email protected].

FOR FURTHER INFORMATION CONTACT: Thomas Hayes, Federal Emergency 
Management Agency, Federal Insurance and Mitigation Administration, 500 
C Street SW., Washington, DC 20472, 202-646-3419, (facsimile) 202-646-
7970, or (e-mail) [email protected].

SUPPLEMENTARY INFORMATION:

Background

    On March 17, 1999, we published at 64 FR 13115 a final rule that 
increased the subsidized premiums rates for ``pre-FIRM'' buildings in 
V-zones--areas subject to high velocity waters, such as storm surges 
and wind-driven waves. (We use the term ``pre-FIRM'' to describe 
construction that was started on or before December 31, 1974, or the 
effective date of the Flood Insurance Rate Map (FIRM) for a community, 
whichever date is later. The premium rates we charge for flood 
insurance coverage on pre-FIRM buildings are less than full-risk 
premiums.) This is how we summarized our reasons for the increase in 
1999 at 64 FR 13116:
    ``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.''
    Currently, the rates for pre-FIRM, V-zone properties that apply to 
the first-layer limits of flood insurance coverage established by 42 
U.S.C. 4013 are roughly twenty percent higher than the equivalent rates 
for pre-FIRM, A-zone properties. (For example, first layer coverage for 
single-family dwellings amounts to $35,000 out of $250,000--the maximum 
amount available for such structures under the National Flood Insurance 
Program.) We believe that the difference in loss exposure between these 
two groups of risks is much greater than that. Therefore, we are 
proposing a further increase in the pre-FIRM, V-zone rates.
    Section 572 of the National Flood Insurance Reform Act of 1994, 
Pub. L. 103-325, 42 U.S.C. 4015, however, imposes the following annual 
limitation on rate increases under the NFIP:

    ``Notwithstanding any other provision of this title, the 
chargeable risk premium rates for flood insurance under this title 
for any properties within any single risk classification may not be 
increased by an amount that would result in the average of such rate 
increases for properties within the risk classification during any 
12-month period exceeding 10 percent of the average of the risk 
premium rates for properties within the risk classification upon 
commencement of such 12-month period.'' (42 U.S.C. 4015)

    Our proposed rate increase for such properties would comply with 
this statutory limitation on annual rate increase under the NFIP.

Statutory Mandates for Setting Flood Insurance Premiums

    The Flood Disaster Protection Act of 1973 requires us to charge 
full-risk premiums for flood insurance coverage on buildings when their 
construction began after December 31, 1974, or on or after the 
effective date of the Flood Insurance Rate Map, if the second date is 
later. (We call such construction ``post-FIRM'' construction.)
    The Flood Disaster Protection Act of 1973 also authorizes us to 
apply chargeable premiums to pre-FIRM property and gives FEMA 
flexibility to set the flood insurance rates for such property. The 
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 Changes and Their Purposes

    We are proposing to increase the current subsidized rates we charge 
for the initial limits of coverage under the NFIP for pre-FIRM 
properties 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.) Currently, these premium rates are about twenty percent 
higher than the equivalent rates we charge for pre-FIRM, A-zone zone 
properties. We are proposing to further increase the rates we charge 
for V-zone, pre-FIRM properties to bring them more in line with their 
greater exposure to flood losses.

[[Page 60177]]

    Currently, the sum of the premium and other administrative fees one 
pays for flood insurance on subsidized pre-FIRM properties is less than 
our expected expenses and loss payments. This applies especially to 
pre-FIRM, V-zone properties.

Subsidized Rate Increases in the Past

    We have increased the chargeable or subsidized premium rates four 
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 to reduce the burden on the general 
public. The changes proposed in this rule for pre-FIRM, V-zone 
properties would move us closer toward that goal by bringing subsidized 
premiums charged for buildings in extremely hazardous areas more in 
line with the actual risk.

Comparison of Proposed Rate Increases With Current Rates

    The following chart compares the current rates we charge for pre-
FIRM, V-zone properties with the proposed rate increases for pre-FIRM, 
V-zone properties. The rates for pre-FIRM, A-zone properties would be 
unaffected by this proposal. Also these proposed increases apply only 
to the rates charged for the ``first layer'' of flood insurance 
coverage set by Congress in Section 1306 of the National Flood 
Insurance Act of 1968, as amended (Pub. L. 90-448):

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                                                              Current V Zone \1\ rates    Proposed V Zone rates
                                                                  per year per $100         per year per $100
                      Type of structure                             coverage on:              coverage on:
                                                             ---------------------------------------------------
                                                               Structure     Contents    Structure     Contents
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1. Residential:
    No Basement or Enclosure................................          .82          .95          .91         1.06
    With Basement or Enclosure..............................          .88          .95          .98         1.06
2. All other including hotels and motels with normal
 occupancy of less than 6 months duration:
    No basement or Enclosure................................          .95         1.90         1.06         2.10
    With basement or Enclosure..............................         1.01         1.90         1.12         2.10
----------------------------------------------------------------------------------------------------------------
\1\ V Zones are Zones V1-V30, VE, and unnumbered V Zones.

National Environmental Policy Act (NEPA)

    Pursuant to section 102(2) (C) of the National Environmental Policy 
Act (NEPA) of 1969, 42 U.S.C. 4317 et seq., we are 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

    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 result in a 
modest increase in premiums for V-zone, pre-FIRM buildings and their 
contents. The adjustment in premiums rates would increase by slightly 
less than $3 million the amount of premium collected and deposited in 
the National Flood Insurance Fund each year. 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 provisions 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.

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 premiums for 
pre-FIRM buildings in V-zone areas. 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 61

    Flood insurance.


[[Page 60178]]


    Accordingly, we propose to amend 44 CFR part 61 as follows:

PART 61--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 Sec. 61.9 to read as follows:


Sec. 61.9  Establishment of chargeable rates.

    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      V Zone rates \2\ per
                                                               year per $100 coverage    year per $100 coverage
                      Type of structure                      ------------on:-----------------------on:----------
                                                               Structure     Contents    Structure     Contents
----------------------------------------------------------------------------------------------------------------
1. 1. Residential:
    No Basement or Enclosure................................          .68          .79          .91         1.06
    With Basement or Enclosure..............................          .73          .79          .98         1.06
2. All other including hotels and motels with normal
 occupancy of less than 6 months duration:
    No basement or Enclosure................................          .79         1.58         1.06         2.10
    With basement or Enclosure..............................          .84         1.58         1.12         2.10
----------------------------------------------------------------------------------------------------------------
\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


    Dated: November 26, 2001.
Robert F. Shea,
Acting Administrator, Federal Insurance and Mitigation Administration.
[FR Doc. 01-29747 Filed 11-30-01; 8:45 am]
BILLING CODE 6718-03-P