[Federal Register Volume 68, Number 41 (Monday, March 3, 2003)]
[Rules and Regulations]
[Pages 9895-9897]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-4902]


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FEDERAL EMERGENCY MANAGEMENT AGENCY

44 CFR Part 61

RIN 3067-AD33


National Flood Insurance Program (NFIP); Standard Flood Insurance 
Policy

AGENCY: Federal Emergency Management Agency (FEMA).

ACTION: Final rule.

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SUMMARY: We (the Federal Insurance and Mitigation Administration of 
FEMA) are increasing the limit of liability under Coverage D--Increased 
Cost of Compliance (ICC) of the Standard Flood Insurance Policy from 
$20,000 to $30,000. New information has led us to decrease our estimate 
of annual ICC claims, and based on this decrease, we believe the limit 
of liability can be increased with no change in premium.

[[Page 9896]]


EFFECTIVE DATE: May 1, 2003.

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 (email) [email protected].

SUPPLEMENTARY INFORMATION:

Background

    On December 16, 1999, we published at 64 FR 70191 a final rule that 
increased the limit of liability under Coverage D--Increased Cost of 
Compliance of the Standard Flood Insurance Policy from $15,000 to 
$20,000. This is how we summarized our reasons for the increase in 1999 
at 64 FR 70191:
    ``In making initial estimates of ICC claims, we had access to our 
loss experience from 1978 through 1994. The latest experience period 
for estimating ICC claims runs through 1998. Based on our additional 
experience with flood losses--losses large enough to trigger community 
declarations of substantial damage--we have decreased the number of 
expected annual ICC claims to a range of 2700-2900. On this basis, we 
are confident that the limit of liability for ICC coverage can be 
increased from $15,000 to $20,000 (a 33% increase) with no change in 
premiums.''
    With this rule, we are proposing to further increase the limit of 
liability to $30,000.
    First, the pricing for this coverage has to be actuarially sound 
with premiums varying, to the extent possible, by risk. Second, section 
555 of the National Flood Insurance Reform Act of 1994, which mandates 
ICC coverage, sets a cap of $75 that we may charge for this coverage. 
Third, our previous estimate was that the number of policyholders 
receiving benefits under ICC coverage would be 2700-2900 each year. 
Fourth, we considered the uncertainties associated with the 
introduction of the product and which extend through the first few 
years of the coverage.
    In making our revised estimate of ICC claims on which we based the 
increase in the coverage limit to the current level of $20,000, we 
relied on our loss experience available at the time--both for ICC 
during the limited time that it had been offered, and on our total 
program experience from 1978 through 1998. Based on our additional loss 
experience, which includes data through calendar year end 2001, and 
concentrating on losses large enough to trigger community declarations 
of substantial damage, we have further decreased our estimate of the 
expected annual number of ICC claims to a range of 2200-2500. On this 
basis, we are confident that the limit of liability can be increased 
from $20,000 to $30,000 (a 50% increase) with no change in premium. The 
number of ICC claims actually filed since the introduction of this 
coverage is small compared to the number that we expected based on our 
flood claims filed under building coverage. We intend to continue 
analyzing this discrepancy, make further adjustments in premium 
charges, coverage amounts, or both as warranted, and to continue our 
education efforts with policyholders and local officials to make sure 
that they adequately understand this coverage.

Administrative Procedure Act Determination

    We are publishing this final rule without opportunity for prior 
public comment under the Administrative Procedure Act, 5 U.S.C. 553. 
This final rule is a rule of agency procedure or practice that is 
excepted from the prior public comment requirements of section 553(b). 
The rule makes nonsubstantive, nonsignificant changes to 44 CFR part 61 
by conferring a benefit to flood insurance policyholders, increasing 
coverage for increased cost of compliance without an increase in 
premium.

National Environmental Policy Act (NEPA)

    The requirements of 44 CFR part 10, Environmental Consideration, 
categorically exclude this final rule. We have not prepared an 
environmental impact assessment.

Executive Order 12866, Regulatory Planning and Review

    This final rule is not a significant regulatory action within the 
meaning of section 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 Office of Management and Budget has not reviewed this 
final rule under E.O. 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. We do not foresee the rule affecting the distribution of power 
and responsibilities among the various levels of government or limiting 
the policymaking discretion of the States.

Executive Order 12778, Civil Justice Reform

    This final rule meets the applicable standards of section 2(b)(2) 
of E.O. 12778.

Congressional Review of Agency Rulemaking

    We have sent this final rule to the Congress and to the General 
Accounting Office under the Congressional Review of Agency Rulemaking 
Act, Public Law 104-1221. The rule is not a ``major rule'' within the 
meaning of that Act. It is an administrative action in support of 
normal day-to-day activities that increases a benefit to policyholders 
without increasing premiums. It does not result in nor is it likely to 
result in an annual effect on the economy of $100,000,000 or more. It 
will not result in a major increase in costs or prices for consumers, 
individual industries, Federal, State, or local government agencies, or 
geographic regions. It will not have ``significant adverse effects'' on 
competition, employment, investment, productivity, innovation, or on 
the ability of United States-based enterprises to compete with foreign-
based enterprises. This final rule is exempt (1) from the requirements 
of the Regulatory Flexibility Act, and (2) from the Paperwork Reduction 
Act. The rule is not an unfounded Federal mandate within the meaning of 
the Unfunded Mandate Reform Act of 1995, Public Law 104-4. It does not 
meet the $100,000,000 threshold of that Act, and any enforceable duties 
are imposed as a condition of Federal assistance or a duty arising from 
participation in a voluntary Federal program.

List of Subjects in 44 CFR Part 61

    Flood insurance.

[[Page 9897]]


    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. In Appendix A(1) to part 61, revise the first sentence III. D. 
2. to read as follows: Appendix A(1) to part 61, Federal Emergency 
Management Agency, Federal Insurance Administration, standard flood 
insurance policy, dwelling form.
    III. * * *
    D. * * *
    2. Limit of Liability.

    We will pay you up to $30,000 under this Coverage D--Increased 
Cost of Compliance, which only applies to policies with building 
coverage (Coverage A). * * *
* * * * *

    3. In Appendix A(2) to part 61, revise the first sentence of III. 
D. 2. to read as follows: Appendix A(2) to part 61, Federal Emergency 
Management Agency, Federal Insurance Administration, standard flood 
insurance policy, general property form.
    III. * * *
    D. * * *
    2. Limit of Liability.

    We will pay you up to $30,000 under this Coverage D--Increased 
Cost of Compliance, which only applies to policies with building 
coverage (Coverage A). * * *
* * * * *

    4. In Appendix A (3) to part 61, revise the first sentence of III. 
D. 2. to read as follows: Appendix A(3) to part 61, Federal Emergency 
Management Agency, Federal Insurance Administration, standard flood 
insurance policy, residential condominium building association policy.
    III. * * *
    D. * * *
    2. Limit of Liability.

    We will pay you up to $30,000 under this Coverage D--Increased 
Cost of Compliance, which only applies to policies with building 
coverage (Coverage A). * * *
* * * * *

    Dated: February 26, 2003.
Anthony S. Lowe,
Administrator, Federal Insurance and Mitigation Administration.
[FR Doc. 03-4902 Filed 2-28-03; 8:45 am]
BILLING CODE 6718-03-P