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[Federal Register Volume 65, Number 209 (Friday, October 27, 2000)]
[Notices]
[Pages 64441-64443]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-27638]

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FEDERAL EMERGENCY MANAGEMENT AGENCY

National Flood Insurance Program; Desktop Rating of Flood 
Insurance Policies

AGENCY: Federal Emergency Management Agency (FEMA).

ACTION: Notice of forum with request for ideas and participants.

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SUMMARY: We (FEMA) will hold a forum on the feasibility of identifying 
alternative methods for obtaining necessary risk and elevation 
information to rate flood insurance policies. The goal of the forum is 
to foster the development of a desktop system that supports the 
actuarial rating of a flood insurance policy and the floodplain 
management requirements of the National Flood Insurance Program. We 
seek a solution that makes the risk, base flood elevation and lowest 
floor elevation data necessary to rate a flood insurance policy 
available to agents at their desks.

DATES: We will hold the forum on December 13, 2000.
    Please send written responses to the ideas and questions that we 
pose by November 27, 2000.

ADDRESSES: We will hold the forum in the Horizon Ballroom of the 
International Trade Center, Ronald Reagan Building, 1300 Pennsylvania 
Avenue, NW., Washington, DC 20004.
    Please send written responses to Edward Pasterick at the address 
immediately below.

FOR FURTHER INFORMATION CONTACT: Edward Pasterick, Federal Insurance 
Administration, Federal Emergency Management Agency, 500 C Street, SW., 
Washington DC 20472, (202) 646-3443, or (email) 
[email protected].

SUPPLEMENTARY INFORMATION:

Background

    The National Flood Insurance Program (NFIP) provides coverage 
against flood damage to property owners in communities that agree to 
adopt and enforce regulations designed to ensure safer future 
construction of buildings in high-risk flood zones. The provision of 
insurance, the regulation of the floodplain and the enforcement of the 
mandatory purchase requirements depend on three things:
     Flood risk information or certain key information about 
the nature and extent of the flood risk in a given area,
     Elevation of the structure, and
     Structural characteristics, such as the number of floors 
and occupancy type.
    Flood Risk Information. The Federal Emergency Management Agency 
(FEMA) provides flood-zone information in the form of a Flood Insurance 
Study and Flood Insurance Rate Map (FIRM). The FIRM outlines the degree 
and extent of the flood risk in a given jurisdiction and serves as the 
guiding document for communities in the regulation of floodplain 
construction and for lenders in enforcing the mandatory purchase 
requirements. It also serves insurance companies and agents as the 
source of needed risk information for writing and rating applications 
for flood insurance under the NFIP. The primary flood risk 
characteristics shown on the FIRMs are the areas inundated by the one 
percent annual probability flood and the elevation relative to the mean 
sea level to which the floodwaters will rise. The latter is the Base 
Flood Elevation (BFE).
    Elevation of the Structure. Individual property owners, through 
licensed surveyors and engineers, provide the elevation information 
needed to guide floodplain construction and to rate insurance 
applications. The elevation certificate contains this information, 
which shows the elevation relative to the mean sea level of the lowest 
floor of a structure or lowest floor elevation (LFE). The community 
must ensure that the LFE of a new structure built in the Special Flood 
Hazard Area (SFHA) \1\ after the effective date of a FIRM is at or 
above the BFE shown on the FIRM. The insurance agent writing an 
application for flood insurance on the structure must calculate the 
difference between the BFE and the LFE to determine the proper rate for 
coverage. As a condition of its participation in the NFIP the community 
must maintain this elevation information in its records.
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    \1\ The Special Flood Hazard Area is an area of land that would 
be inundated by a flood having a one percent chance of occurring in 
any given year (also referred to as the base or 100-year flood). 
Flood insurance is required for insurable structures within the SFHA 
to protect Federal financial investments and assistance used for 
acquisition and/or construction purposes within communities 
participating in the NFIP.
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    Structural Characteristics. The insurance agent obtains the 
relevant structural characteristics from the insured. For example, the 
property owner can supply information about the number of floors, 
occupancy type, date of construction, etc. to the agent.
    Several factors currently affect the ease of writing flood 
insurance:
     Access to flood risk information is more difficult for 
insurance agents than the risk information other lines of property 
insurance need. Since the flood zone and BFE needed for rating are on 
the community's FIRM, agents must maintain a paper copy of every 
effective FIRM for the communities in which they write policies. 
Locating a property on the paper copy of the FIRM has been a problem 
for agents from the outset of the NFIP, a problem that we have not 
diminished substantially over the years. Flood Zone Determination (FZD) 
companies and some Write Your Own (WYO) companies digitize much of the 
information on the FIRMs and now provide this information to some 
agents. However, zone information is far from

[[Page 64442]]

universally available from the WYO companies, and agents are unwilling 
to pay the fee that FZD companies charge for the service. The primary 
clients of the FZD companies are federally regulated lenders who need 
the information to comply with the mandatory flood insurance purchase 
requirements of the National Flood Insurance Reform Act of 1994. 
Lenders can pass along the fee for the service to borrowers as part of 
a mortgage loan's closing costs. However, insurance agents cannot do 
the same with their customers because charging for this service would 
jeopardize their competitive position. Over the next year, we plan to 
make all effective maps available in Raster scan version through the 
Map Service Center. The digital files, which support the Government 
Printing Office's requirement for computer-to-plate printing, will be 
available on FEMA's website and on CD. This will greatly improve 
accessibility for agents and should eliminate the need to maintain 
paper copies of maps.
     An applicant for flood insurance may need to provide the 
LFE of a property in the form of an elevation certificate completed by 
a licensed engineer or surveyor.\2\ The cost for the certificate is 
usually more than $200. Certain communities, notably those 
participating in the NFIP's Community Rating System (CRS), provide at 
least some certificates from their records, but again, elevation 
certificates are not universally available and not readily accessible.
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    \2\ A Pre-FIRM structure is a structure built before the 
issuance of a FIRM or before 1975, whichever is later. Structures 
built after a FIRM is issued are Post-FIRM. All Post-FIRM structures 
and Pre-FIRM structures electing an elevation rate must provide an 
elevation certificate. Pre-FIRM structures that are not elevation 
rated do not have to submit an elevation certificate, nor do 
structures outside the SFHA.
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Objective

    The reliance on data that are difficult to obtain has led the 
Federal Insurance Administration (FIA) and the Mitigation Directorate 
to pursue the feasibility of identifying alternative methods for 
obtaining necessary risk and elevation information to rate a flood 
insurance policy. We seek a solution that makes the risk and elevation 
data necessary to rate a flood insurance policy available to agents at 
their desks.
    We would like to see the private sector develop solutions to this 
problem and are trying to identify the optimum way to promote such. 
This can include the acceptance of risk information for rating purposes 
derived through methodologies other than those that we currently use, 
so long as we are sure that the information will stand up to actuarial 
analysis and support sound floodplain management.
    Our goal is to foster the development of a desktop system that 
supports the actuarial rating of a flood insurance policy and the 
floodplain management requirements of the NFIP. We have identified two 
possible strategies to develop a desktop rating system for flood 
insurance policies that we do not intend to be exclusive or preemptive. 
However, we welcome creative alternative approaches.
    Strategy A--Continue the current approach for identifying the flood 
risk and rating a flood insurance policy, but develop a means to 
provide elevation information in a more easily accessible manner at the 
point of sale. The current method uses FEMA flood hazard zones, FEMA 
base flood elevations and the difference between a structure's lowest 
floor and the base flood elevation to determine risk. This strategy 
requires elevation information for each individual structure and a 
means to efficiently gather into a single, accessible database all 
available elevation certificates for structures in the floodplain and 
continually to update this database as new structure elevation 
information becomes available. Alternatively, this strategy would 
result in an efficient, cost-effective way of collecting LFE en masse.
    Strategy B--Continue the current approach for identifying the flood 
risk and rating a flood insurance policy, but relax the requirement for 
elevation certificates for individual structures. Explore ways to use 
new mapping technologies and approaches, combined with other property 
data, to gather elevation data. For example, Light Detection and 
Ranging (LIDAR) and InterFerometric Synthetic Aperture Radar (IFSAR) 
can provide information on the lowest adjacent grade near a structure 
from which it is possible to determine the ground elevation and 
estimate the structure's lowest floor elevation, measured from that 
ground elevation.

Approach

    We will hold a forum for parties interested in developing a desktop 
rating system for flood insurance policies. The purpose of the meeting 
is to exchange ideas on the best strategy to achieve our goals for a 
desktop rating system and to discuss alternatives for overcoming the 
difficulties and high cost of implementing such a system. The 
government does not require a desktop rating system; we are simply 
seeking industry input on the best strategy to develop such a system. 
Our vision is that the forum will attract entrepreneurial energies and 
disparate skills and communities of interest that were perhaps 
previously unaware of the difficulties associated with rating a flood 
insurance policy.
    We will hold the forum on Wednesday, December 13 from 9:00 a.m. to 
3:00 p.m in the Horizon Ballroom of the International Trade Center, 
Ronald Reagan Building, 1300 Pennsylvania Avenue, NW., Washington, DC 
20004. We invite all interested parties to present their ideas for 
developing a desktop system that supports the actuarial rating of a 
flood insurance policy and the floodplain management requirements of 
the NFIP. We have several key questions that we invite the attendees to 
address. The list is not exhaustive and we welcome additional questions 
for consideration.
     What is the degree of accuracy of current building 
elevation information?
     What existing databases can we apply to the flood rating 
process?
     Is there an easy way to translate highest adjacent grade 
and lowest adjacent grade data into lowest floor elevation?
     How well will elevation data collected using LIDAR or 
similar technologies meet the needs of local floodplain managers in 
enforcing NFIP regulations?
     Is there a market beyond the NFIP for data that would be 
part of a desktop rating system?
     What technologies for collecting and disseminating data 
are available for application to this problem?
     What are practical alternatives for distributing a desktop 
rating system?
    We must receive the text of your statement no later than November 
27, 2000, so that we can make copies available to all participants and 
we may ask you to discuss portions of your statement at the forum. With 
your permission, we may post your statement on our website for other 
persons who may be interested in this challenge but who would like more 
information.
    If you wish to participate in the Desktop Rating of Flood Insurance 
Policies Forum, please reply by e-mail to [email protected]. 
You may attend without submitting a written response. Please let us 
know who from your organization will attend and the questions that they 
will address. If you have any questions, please email or call Edward 
Pasterick at 202-646-3443. We look forward to your involvement in

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this effort and encourage your participation.

Jo Ann Howard,
Administrator, Federal Insurance Administration.
[FR Doc. 00-27638 Filed 10-26-00; 8:45 am]
BILLING CODE 6718-03-P
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