[Federal Register Volume 68, Number 62 (Tuesday, April 1, 2003)]
[Rules and Regulations]
[Pages 15666-15669]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-7685]


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DEPARTMENT OF HOMELAND SECURITY

Federal Emergency Management Agency

44 CFR Chapter I and Part 61

RIN 1660-AA25


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

AGENCY: Federal Emergency Managemnent Agency (FEMA), Emergency 
Preparedness and Response Directorate, Homeland Security.

ACTION: Final rule.

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SUMMARY: We (the Mitigation Division of the Emergency Preparedness and 
Response Directorate of DHS) are changing the way premiums are 
calculated for policyholders who purchase flood insurance coverage 
under the NFIP for ``Pre-FIRM'' buildings in Special Flood Hazard Areas 
(SFHAs). (The term ``Pre-FIRM buildings'' means buildings whose 
construction began on or before December 31, 1974, or before the 
effective date of the community's Flood Insurance Rate Map (FIRM), 
whichever date is later. Pre-FIRM buildings and their contents are 
eligible for subsidized rates under the NFIP.)
    These increased flood insurance rates will be implemented in 
coordination with the elimination of the Expense Constant, a flat 
charge that the policyholder previously paid to defray certain expenses 
of the Federal Government related to flood insurance. As a result of 
this change, the same amount of premium revenue will still be collected 
to cover those expenses previously paid for by the Expense Constant; 
however, policyholders will pay for those expenses through premiums 
that vary by the amount of insurance that they purchase, instead of a 
flat charge per policy. The end result will be revenue neutral. In 
addition, we are revising the CFR chapter heading for our rules to 
reflect the Homeland Security Act.

EFFECTIVE DATE: May 1, 2003, except for the revision of the heading of 
44 CFR chapter I, which is effective March 1, 2003.

FOR FURTHER INFORMATION CONTACT: Thomas Hayes, DHS, Mitigation 
Division, 500 C Street SW., Washington, DC 20472, 202-646-3419, 
(facsimile) 202-646-7970, or (e-mail) [email protected].

SUPPLEMENTARY INFORMATION:

Summary of Comments

    On February 3, 2003, we published at 68 FR 5264 a proposed rule to 
change the way premiums are calculated for policyholders who purchase 
flood insurance coverage under the NFIP for ``Pre-FIRM'' buildings in 
Special Flood Hazard Areas (SFHAs). (The term ``Pre-FIRM buildings'' 
means buildings whose construction began on or before December 31, 
1974, or before the effective date of the community's Flood Insurance 
Rate Map (FIRM), whichever date is later.)
    During the comment period, we received three sets of comments. All 
were in support of this change. These comments came from the 
Association of State Floodplain Managers (ASFPM), the Florida Division 
of Emergency Management, and an insurance company that participates in 
the NFIP's Write Your Own program.
    The following comment by the ASFPM is indicative of the other 
responses as well:

    We view this to be a positive effort by FIMA to encourage growth 
in the Program:
    [sbull] The change will be revenue neutral.
    [sbull] It will remove a perceived barrier to the sale of flood 
insurance--which may help the NFIP increase its policy base and 
increase revenue.

[[Page 15667]]

    [sbull] By making the NFIP ``more like other insurance industry 
standards'' it may remove some resistance to write flood policies by 
insurance agents.

Comparison of May 1, 2003 Rate Increases With Current Rates

    The following chart compares the current rates we charge for Pre-
FIRM SFHA properties with the May 1, 2003 rates for Pre-FIRM, SFHA 
properties. Also these rates 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):

----------------------------------------------------------------------------------------------------------------
                                       Current a zone \1\      May 1, 2003 a zone \1\  rates per year  per $100
                                    rates per year  per $100                     coverage on:
                                          coverage on:       ---------------------------------------------------
                                   --------------------------               Structure
         Type of structure                                   ---------------------------------------
                                                                      RCBAP \2\                        Contents
                                     Structure     Contents  --------------------------  All  other
                                                               High  rise   Low  rise
----------------------------------------------------------------------------------------------------------------
1. Residential:
    No Basement or Enclosure......          .68          .79          .85          .70          .76          .96
    With Basement or Enclosure....          .73          .79          .90          .75          .81          .96
2. All other including hotels and
 motels with normal occupancy of
 less than 6 months duration:
    No Basement or Enclosure......          .79         1.58          N/A          N/A          .83         1.62
    With Basement or Enclosure....          .84         1.58          N/A          N/A          .88        1.62
----------------------------------------------------------------------------------------------------------------
\1\ A zones are zones A1-A30, AE, AO, AH, and unnumbered A zones.
\2\ Residential Condominium Building Association Policies (RCBAP) are distinguished between High Rise (those
  structures that have 3 or more floors and 5 or more units) and Low Rise (those structures that have either
  less than 3 floors or less than 5 units).


----------------------------------------------------------------------------------------------------------------
                                       Current a zone \1\      May 1, 2003 a zone \1\  rates per year  per $100
                                    rates per year  per $100                     coverage on:
                                          coverage on:       ---------------------------------------------------
                                   --------------------------               Structure
         Type of structure                                   ---------------------------------------
                                                                      RCBAP \2\                        Contents
                                     Structure     Contents  --------------------------  All  other
                                                               High  rise   Low  rise
----------------------------------------------------------------------------------------------------------------
1. Residential:
    No Basement or Enclosure......          .91         1.06         1.08          .93          .99         1.23
    With Basement or Enclosure....          .98         1.06         1.15         1.00         1.06         1.23
2. All other including hotels and
 motels with normal occupancy of
 less than 6 months duration:
    No Basement or Enclosure......         1.06         2.10          N/A          N/A         1.10         2.14
    With Basement or Enclosure....         1.12         2.10          N/A          N/A         1.16        2.14
----------------------------------------------------------------------------------------------------------------
\1\ V zones are zones V1-V30, VE, and unnumbered V zones.
\2\ Residential Condominium Building Association Policies (RCBAP) are distinguished between High Rise (those
  structures that have 3 or more floors and 5 or more units) and Low Rise (those structures that have either
  less than 3 floors or less than 5 units).

    Prior to this change, as shown in the Current A Zone and Current V 
Zone table, RCBAP policyholders were always charged the same building 
rates as everyone else. In order to accomplish the elimination of the 
Expense Constant in a revenue-neutral manner, it is now necessary to 
vary the rates as shown in the accompanying tables.

National Environmental Policy Act (NEPA)

    Pursuant to section 102(2) (c) of the National Environmental Policy 
Act of 1969, 42 U.S.C. 4317 et seq., we conducted an environmental 
assessment of this final rule. This 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 and Finding of 
No Significant Impact are on file for inspection through the Rules 
Docket Clerk, DHS, room 840, 500 C St. SW., Washington, DC 20472.

Executive Order 12866, Regulatory Planning and Review

    We have prepared and reviewed this 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 rule is 
neither an economically significant nor a significant regulatory action 
under the

[[Page 15668]]

Executive Order. The rule will be premium neutral for the National 
Flood Insurance Fund. The adjustment in premiums rates will be offset 
by the elimination of the Expense Constant. It will 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 will create no serious inconsistency or 
otherwise interfere with an action taken or planned by another agency. 
It will 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 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 final rule under E.O.13132 and have 
determined that the rule does not have federalism implications as 
defined by the Executive Order. The rule will adjust the premiums for 
buildings in Pre-FIRM Special Flood Hazard 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.


0
Accordingly, we amend 44 CFR chapter I as follows:

Chapter I--Federal Emergency Management Agency, Department of Homeland 
Security

0
1. Revise the heading of 44 CFR chapter I to read as set forth above.

PART 61--INSURANCE COVERAGE AND RATES

0
2. 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.


0
3. Revise Sec.  61.9 (a) 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.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                   A zone \1\ rates per year  per $100 coverage on:    V zone \2\ rates per year  per $100 coverage on:
                                                 -------------------------------------------------------------------------------------------------------
                                                                structure                                           Structure
                Type of structure                ---------------------------------------             ---------------------------------------
                                                          RCBAP \3\                        Contents           RCBAP \3\                        Contents
                                                 --------------------------  All  other              --------------------------  All  other
                                                   High  rise   Low  rise                              High  rise   Low  rise
--------------------------------------------------------------------------------------------------------------------------------------------------------
1. Residential:
    No Basement or Enclosure....................          .85          .70          .76          .96         1.08          .93          .99         1.23
    With Basement or Enclosure..................          .90          .75          .81          .96         1.15         1.00         1.06         1.23
2. All other including hotels and motels with
 normal occupancy of less than 6 months
 duration:
    No Basement or Enclosure....................          N/A          N/A          .83         1.62          N/A          N/A         1.10         2.14
    With Basement or Enclosure..................          N/A          N/A          .88         1.62          N/A          N/A         1.16        2.14
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ 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.
\3\ Residential Condominium Building Association Policies (RCBAP) are distinguished between High Rise (those structures that have 3 or more floors and 5
  or more units) and Low Rise (those structures that have either less than 3 floors or less than 5 units).


[[Page 15669]]

* * * * *

    Dated: March 26, 2003.
Michael D. Brown,
Acting Under Secretary, Emergency Preparedness & Response.
[FR Doc. 03-7685 Filed 3-31-03; 8:45 am]
BILLING CODE 6718-03-P