[Federal Register Volume 62, Number 194 (Tuesday, October 7, 1997)]
[Proposed Rules]
[Pages 52304-52305]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-26527]


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FEDERAL EMERGENCY MANAGEMENT AGENCY

44 CFR Part 61

RIN 3067-AC73


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

AGENCY: Federal Emergency Management Agency (FEMA).

ACTION: Proposed rule.

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SUMMARY: This proposed rule would increase the amount of the deductible 
under the Standard Flood Insurance Policy--from $750 to $1,000--for 
structures with subsidized coverage.

DATES: All comments received on or before November 7, 1997 will be 
considered before final action is taken on the proposed rule.

ADDRESSES: Please submit any written comments to the Rules Docket 
Clerk, Office of General Counsel, Federal Emergency Management Agency, 
500 C Street, S.W., room 840, Washington, DC 20472, (facsimile) 202-
646-4536.

FOR FURTHER INFORMATION CONTACT:
Charles M. Plaxico, Jr., Federal Emergency Management Agency, Federal 
Insurance Administration, (202) 646-3422, (facsimile) (202) 646-4327.

SUPPLEMENTARY INFORMATION: This proposal is the result of an ongoing 
review and reappraisal of the National Flood Insurance Program (NFIP) 
to achieve greater administrative and fiscal effectiveness in the 
NFIP's operations. The proposed amendment is also intended to help the 
NFIP increase its capability to build reserves for catastrophic loss 
years. This can be handled either by rate increases, or by other means 
such as imposing coverage limitations or increasing deductibles, or by 
both.
    Section 1308(b)(2) of the National Flood Insurance Act of 1968, as 
amended, charges the Director of FEMA with the responsibility of 
establishing ``chargeable premium rates'' which are `` * * * adequate, 
on the basis of accepted actuarial principles, to provide reserves for 
anticipated losses, or if less than such amount, consistent with the 
objective of making flood insurance available where necessary at 
reasonable rates so as to encourage prospective insureds to purchase 
such insurance * * * ''.
    Since there have been three premium increases in the last three 
years--two in the subsidized premium rates and a premium surcharge 
mandated by Sec. 555 of the National Flood Insurance Reform Act of 
1994, for the addition of increased cost of compliance coverage, FEMA 
believes that the better approach to enhancing fiscal soundness would 
be by adjustment to the deductible provisions for policies which are 
issued using subsidized rates. Therefore, this proposed rule would 
increase the standard deductible for structures covered by insurance at 
subsidized premium rates from $750 to $1,000. Concurrent with this 
proposed change, insureds would be provided the option to pay a higher 
premium at full-risk rates to ``buy back'' a reduced deductible under 
their Standard Flood Insurance Policy (SFIP).

[[Page 52305]]

    New or renewed flood insurance policies issued on and after May 1, 
1998, for buildings and contents in Emergency Program communities as 
well as those policies issued for buildings and/or contents in Regular 
Program communities in Zones A, AO, AH, A1-A30, AE, VO, V1-V30, VE, or 
V, which are rated using subsidized rates, would be subject to the 
higher deductible of $1,000. These are buildings which, because they 
were built before the degree of flood risk had been ascertained and 
depicted on a Flood Insurance Rate Map (FIRM), are subject to a greater 
exposure to flood loss.
    This proposed change to the deductibles would provide a greater 
flexibility to the Program and to the goal of designing the Program 
with an eye toward ``* * * minimizing costs and distributing burdens 
equitably among those who will be protected by flood insurance and the 
general public'' (Section 1302(d) of the 1968 Act).
    In summary, this proposal is intended to balance the need for 
providing reasonable rates to the public for flood insurance as an 
incentive to purchase insurance against the requirement that the NFIP 
be flexible, minimize costs, and distribute burdens among those who 
will be protected by flood insurance and the general public. Loss cost 
savings, in a year equivalent to the historical average, are projected 
to be $6.3 million as a result of implementing this proposed rule.

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 1500-1508, FEMA 
is conducting an environmental assessment of this proposed rule. If the 
assessment concludes that there will be a significant impact on the 
human environment as a result of the issuance of the proposed rule, 
then an Environmental Impact Statement will be prepared. Copies of the 
environmental assessment, when developed, 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, but attempts to adhere to the regulatory principles set forth in 
E.O. 12866. The final rule has been reviewed by the Office of 
Management and Budget under E.O. 1266.

Paperwork Reduction Act

    This proposed rule does not contain a collection of information and 
therefore is not subject to the provisions of the Paperwork Reduction 
Act of 1995.

Executive Order 12612, Federalism

    This proposed rule involves no policies that have federalism 
implications under E.O. 12612, Federalism, dated October 26, 1987.

Executive Order 12778, Civil Justice Reform

    This proposed rule meets the applicable standards of Sec. 2(b)(2) 
of E.O. 12778.

List of Subjects in 44 CFR Part 61

    Flood insurance.

    Accordingly, 44 CFR Part 61 is proposed to be amended 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. Paragraph C. of Article 7 of Appendix A (l) is proposed to be 
revised follows:
* * * * *
    C. For any flood insurance policy issued or renewed for property 
located in an Emergency Program community or for any property located 
in a Regular Program community in Zones A, AO, AH, A1-A30, AE, VO, V1-
V30, VE, or V where the rates available for buildings built before the 
effective date of the initial Flood insurance Rate Map or December 31, 
1994, whichever is later, are used to compute the premium, the amount 
of the deductible for each loss occurrence is determined as follows: We 
shall be liable only when such loss exceeds $1,000, or the amount of 
any other deductible which you selected when you applied for this 
policy or subsequently by endorsement.
* * * * *
    2. Paragraph C. of Article 7 of Appendix A (2) is proposed to be 
revised as follows:
* * * * *
    C. For any flood insurance policy issued or renewed for a property 
located in an Emergency Program community or for any property located 
in a Regular Program community in Zones A, AO, AH, A1-A30, AE, VO, V1-
V30, VE, or V where the rates available for buildings built before the 
effective date of the initial Flood Insurance Rate Map or December 31, 
1994, whichever is later, are used to compute the premium, the amount 
of the deductible for each loss occurrence is determined as follows: We 
shall be liable only when such loss exceeds $1,000, or the amount of 
any other deductible which you selected when you applied for this 
policy or subsequently by endorsement.
* * * * *
    2. Paragraph C. of Article 7 of Appendix A(2) is proposed to be 
revised as follows:
* * * * *
    C. For any flood insurance policy issued or renewed for a property 
located in an Emergency Program community or for any property located 
in a Regular Program community in Zones A, AO, AH, A1-A30, AE, VO, V1-
V30, VE, or V where the rates available for buildings built before the 
effective date of the initial Flood Insurance Rate Map or December 31, 
1994, whichever is later, are used to compute the premium, the amount 
of the deductible for each loss occurrence is determined as follows: 
The Insurer shall be liable only when such loss exceeds $1,000, or the 
amount of any other deductible which the Insured selected when it 
applied for this policy or subsequently by endorsement.
* * * * *
    2. Paragraph C. of Article 7 of Appendix A (3) is proposed to be 
revised as follows:
* * * * *
    C. For any flood insurance policy issued or renewed for any 
property located in Zones A, AO, AH, A1-A30, AE, VO, V1-V30, VE, or V 
where the rates available for buildings built before the effective date 
of the initial Flood Insurance Rate Map or December 31, 1994, whichever 
is later, are used to compute the premium, the amount of the deductible 
for each loss occurrence is determined as follows: The Insurer shall be 
liable only when such loss exceeds $1,000, or the amount of any other 
deductible which the Insured selected when it applied for this policy 
or subsequently by endorsement.
* * * * *
(Catalog of Federal Domestic Assistance No. 83.100, ``Flood 
Insurance''; No. 83.516, ``Disaster Assistance'')

    Dated: September 26, 1997.
Edward T. Pasterick,
Acting Executive Administrator, Federal Insurance Administration.
[FR Doc. 97-26527 Filed 10-6-97; 8:45 am]
BILLING CODE 6718-03-M