Document ID: FEMA-2022-0051-0001
Agency: fema
Document Type: Notice
Title: National Flood Insurance Program (NFIP); Assistance to Private Sector Property Insurers, Notice of FY 2024 Arrangement
Posted Date: 2023-02-27T05:00Z

[Federal Register Volume 88, Number 38 (Monday, February 27, 2023)]
[Notices]
[Pages 12389-12397]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-03895]

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DEPARTMENT OF HOMELAND SECURITY

Federal Emergency Management Agency

[Docket ID FEMA-2022-0051]

National Flood Insurance Program (NFIP); Assistance to Private 
Sector Property Insurers, Notice of FY 2024 Arrangement

AGENCY: Federal Emergency Management Agency, Department of Homeland 
Security.

ACTION: Notice.

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SUMMARY: The Federal Emergency Management Agency announces the Fiscal 
Year 2024 Financial Assistance/Subsidy Arrangement for private property 
insurers interested in participating in the National Flood Insurance 
Program's Write Your Own Program.

DATES: Interested insurers must submit intent to subscribe or re-
subscribe to the Arrangement by May 30, 2023.

FOR FURTHER INFORMATION CONTACT: Sarah Devaney Ice, Federal Insurance 
and Mitigation Administration, FEMA, 400 C St. SW, Washington, DC 20472 
(mail); (202) 320-5577 (phone); or [email protected] 
(email).

SUPPLEMENTARY INFORMATION:

I. Background

    The National Flood Insurance Act of 1968 (NFIA) (42 U.S.C. 4001 et 
seq.) authorizes the Administrator of the Federal Emergency Management 
Agency (FEMA) to establish and carry out a National Flood Insurance 
Program (NFIP) to enable interested persons to purchase flood 
insurance. See 42 U.S.C. 4011(a). Under the NFIA, FEMA may use 
insurance companies and other insurers, insurance agents and brokers, 
and insurance adjustment organizations as fiscal agents of the United 
States to help it carry out the NFIP. See 42 U.S.C. 4071. To this end, 
FEMA may ``enter into any contracts, agreements, or other appropriate 
arrangements'' with private insurance companies to use their facilities 
and services in administering the NFIP on such terms and conditions as 
they agree upon. See 42 U.S.C. 4081(a).
    Pursuant to this authority, FEMA enters into a standard Financial 
Assistance/Subsidy Arrangement (Arrangement) with private sector 
property insurers, also known as Write Your Own (WYO) companies, to 
sell NFIP flood insurance policies under their own names and adjust and 
pay

[[Page 12390]]

claims arising under the Standard Flood Insurance Policy (SFIP). Each 
Arrangement entered into by a WYO company must be in the form and 
substance of the standard Arrangement, a copy of which is published in 
the Federal Register annually, at least 6 months prior to becoming 
effective. See 44 CFR 62.23(a). To learn more about FEMA's WYO Program, 
please visit https://nfipservices.floodsmart.gov/write-your-own-program.

II. Notice of Availability

    Insurers interested in participating in the WYO Program for Fiscal 
Year 2024 must contact Sarah Devaney Ice at [email protected] by May 30, 2023.
    Prior participation in the WYO Program does not guarantee FEMA will 
approve continued participation. FEMA will evaluate requests to 
participate in light of publicly available information, industry 
performance data, and other criteria listed in 44 CFR 62.24 and the FY 
2024 Arrangement, copied below. FEMA encourages private insurance 
companies to supplement this information with customer satisfaction 
surveys, industry awards or recognition, or other objective performance 
data. In addition, private insurance companies should work with their 
vendors and subcontractors involved in servicing and delivering their 
insurance lines to ensure FEMA receives the information necessary to 
effectively evaluate the criteria set forth in its regulations.
    FEMA will send a copy of the offer for the FY 2024 Arrangement, 
together with related materials and submission instructions, to all 
private insurance companies successfully evaluated by the NFIP. If 
FEMA, after conducting its evaluation, chooses not to renew a Company's 
participation, FEMA, at its option, may require the continued 
performance of all or selected elements of the FY 2023 Arrangement for 
a period required for orderly transfer or cessation of the business and 
settlement of accounts, not to exceed 18 months. See FY 2023 
Arrangement, Article II.D. All evaluations, whether successful or 
unsuccessful, will inform both an overall assessment of the WYO Program 
and any potential changes FEMA may consider regarding the Arrangement 
in future fiscal years.
    Any private insurance company with questions may contact FEMA at: 
Sarah Devaney Ice, Federal Insurance and Mitigation Administration, 
FEMA, 400 C St. SW, Washington, DC 20472 (mail); (202) 320-5577 
(phone); or [email protected] (email).

III. Fiscal Year 2024 Arrangement

    Pursuant to 44 CFR 62.23(a), FEMA must publish the Arrangement at 
least six months prior to the Arrangement becoming effective. The FY 
2024 Arrangement provided below is substantially similar to the 
previous year's Arrangement, but includes the following substantive 
changes:
    1. In Article III.A (Undertakings of the Company), under Operations 
Plan, FEMA is requiring WYO companies to submit a Policy Retention 
Plan, describing the Company's efforts and methods to retain and renew 
policies to better inform FEMA on how WYO companies communicate with 
policyholders and support policy retention.
    2. In Article III.A (Undertakings of the Company), under subsection 
(5) (Operations Plan), FEMA is redesignating subsections (c)-(h) as 
(d)-(i) because it has added a new requirement of a Policy Retention 
Plan under (c). Aside from the addition of a Policy Retention Plan, 
FEMA is not making any other substantive changes to its requirement 
that WYO companies submit an Operations Plan within ninety calendar 
days of the commencement of this Arrangement.
    3. In Article IV.C (Loss Costs, Expenses, Expense Reimbursement, 
and Premium Refunds), FEMA is removing ``geographic area'' from its 
determination of alternative Adjuster Fee Schedules to better ensure 
that adjuster resources are available throughout the Nation following a 
catastrophic flood. Alternative Adjuster Fee schedules for the FY 2024 
Arrangement will now be based solely on losses incurred during a 
specified time frame.
    4. In Article IV.D (Loss Costs, Expenses, Expense Reimbursement, 
and Premium Refunds), FEMA is requiring WYO companies to comply with 
the NFIP Litigation Manual in both its conduct and oversight of 
litigation. To the extent that the manual does not address specific 
issues, FEMA is directing WYO companies to continue to follow their own 
customary business practices for other lines of insurance not sold 
under the Arrangement.
    5. In Article IV.D (Loss Costs, Expenses, Expense Reimbursement, 
and Premium Refunds), FEMA is removing the requirement that WYO 
companies comply with their customary business practices in the 
oversight of litigation because this subsection (IV.D.3.d) is now 
addressed in IV.D.3.b, discussed above.

The Fiscal Year 2024 Arrangement reads as follows:

Financial Assistance/Subsidy Arrangement
Article I. General Provisions
    A. Parties. The parties to the Financial Assistance/Subsidy 
Arrangement are the Federal Emergency Management Agency (FEMA) and the 
Company.
    B. Purpose. The purpose of this Financial Assistance/Subsidy 
Arrangement is to authorize the Company to sell and service flood 
insurance policies made available through the National Flood Insurance 
Program (NFIP) and adjust and pay claims arising under such policies as 
fiscal agents of the Federal Government.
    C. Authority. This Financial Assistance/Subsidy Arrangement is 
authorized under the National Flood Insurance Act of 1968 (NFIA) (42 
U.S.C. 4001 et seq.), and in particular, section 1345(a) of the NFIA 
(42 U.S.C. 4081(a)), as implemented by 44 CFR 62.23 and 62.24.
Article II. Commencement and Termination
    A. The effective period of this Arrangement begins on October 1, 
2023, and terminates no earlier than September 30, 2024, subject to 
extension pursuant to Articles II.D and II.H. FEMA may provide 
financial assistance only for policy applications and endorsements 
accepted by the Company during this period pursuant to the Program's 
effective date, underwriting, and eligibility rules.
    B. Pursuant to 44 CFR 62.23(a), FEMA will publish the Arrangement 
and the terms for subscription or re-subscription for Fiscal Year 2025 
in the Federal Register no later than April 1, 2024. Upon such 
publication, the Company must notify FEMA of its intent to re- 
subscribe or not re-subscribe to the WYO Program for the following term 
within ninety (90) calendar days.
    C. Requesting Participation in WYO Program. Insurers interested in 
participating in the WYO Program, who have never participated in the 
program, or who are returning to the program after a period of non-
participation, must submit a written request to participate.
    1. Participation is then contingent on submission of both:
    a. A completed application package, the requirements and contents 
of which FEMA will outline in its written response to the request to 
participate.
    b. A completed operations plan, whose requirements and contents are 
outlined at Article III.A.5 of this Arrangement.

[[Page 12391]]

    2. Insurers who are already participating in the program must 
submit their operations plan within ninety (90) days as outlined in 
Article III.A.5 of this Arrangement.
    D. In addition to the requirements of Article II.B, in order to 
ensure uninterrupted service to policyholders, the Company must notify 
FEMA within thirty (30) calendar days of when the Company elects not to 
re-subscribe to the WYO Program during the term of this Arrangement. If 
so notified, or if FEMA chooses not to renew the Company's 
participation, FEMA, at its option, may require the continued 
performance of all or selected elements of this Arrangement for the 
period required for orderly transfer or cessation of business and 
settlement of accounts, not to exceed eighteen (18) months after the 
end of this Arrangement (September 30, 2024), and may either require 
transfer of activities to FEMA under Article II.D.1 or allow transfer 
of activities to another WYO company under Article II.D.2:
    1. FEMA may require the Company to transfer all activities under 
this Arrangement to FEMA. Within thirty (30) calendar days of FEMA's 
election of this option, the Company must deliver to FEMA the 
following:
    a. A plan for the orderly transfer to FEMA of any continuing 
responsibilities in administering the policies issued by the Company 
under the Program including provisions for coordination assistance.
    b. All data received, produced, and maintained through the life of 
the Company's participation in the Program, including certain data, as 
determined by FEMA, in a standard format and medium.
    c. All claims and policy files, including those pertaining to 
receipts and disbursements that have occurred during the life of each 
policy. In the event of a transfer of the services provided, the 
Company must provide FEMA with a report showing, on a policy basis, any 
amounts due from or payable to policyholders, agents, brokers, and 
others as of the transition date.
    d. All funds in its possession with respect to any policies 
transferred to FEMA for administration and the unearned expenses 
retained by the Company.
    e. A point of contact within the Company responsible for addressing 
issues that may arise from the Company's previous participation under 
the WYO Program.
    2. Within ninety (90) calendar days of receiving the Company's data 
and supporting documentation, FEMA will notify the Company of the date 
that FEMA will complete the transfer.
    3. FEMA may allow the Company to transfer all activities under this 
Arrangement to one or more other WYO companies. Prior to commencing 
such transfer, the Company must submit, and FEMA must approve, a formal 
request. Such request must include the following:
    a. An assurance of uninterrupted service to policyholders.
    b. A detailed transfer plan providing for either: (1) the renewal 
of the Company's NFIP policies by one or more other WYO companies; or 
(2) the transfer of the Company's NFIP policies to one or more other 
WYO companies.
    c. A description of who the responsible party will be for 
liabilities relating to losses incurred by the Company in this or 
preceding Arrangement years.
    d. A point of contact within the Company responsible for addressing 
issues that may arise from the Company's previous participation under 
the WYO Program.
    E. Cancellation by FEMA.
    1. FEMA may cancel financial assistance under this Arrangement in 
its entirety upon thirty (30) calendar days written notice to the 
Company stating one or more of the following reasons for such 
cancellation:
    a. Fraud or misrepresentation by the Company subsequent to the 
inception of the Arrangement.
    b. Nonpayment to FEMA of any amount due.
    c. Material failure to comply with the requirements of this 
Arrangement or with the written standards, procedures, or guidance 
issued by FEMA relating to the NFIP and applicable to the Company.
    d. Failure to maintain compliance with WYO company participation 
criteria at 44 CFR 62.24.
    e. Any other cause so serious or compelling a nature that affects 
the Company's present responsibility.
    2. If FEMA cancels this Arrangement pursuant to Article II.E.1, 
FEMA may require the transfer of administrative responsibilities and 
the transfer of data and records as provided in Article II.D.1.a-d. If 
transfer is required, the Company must remit to FEMA the unearned 
expenses retained by the Company. In such event, FEMA will assume all 
obligations and liabilities owed to policyholders under such policies, 
arising before and after the date of transfer.
    3. As an alternative to the transfer of the policies to FEMA 
pursuant to Article II.E.2, FEMA will consider a proposal, if it is 
made by the Company, for the assumption of responsibilities by another 
WYO company as provided in Article II.D.3.
    F. In the event that the Company is unable or otherwise fails to 
carry out its obligations under this Arrangement by reason of any order 
or directive duly issued by the Department of Insurance of any 
jurisdiction to which the Company is subject, including but not limited 
to being placed in receivership or run-off status by a State Department 
of Insurance, the Company agrees to transfer, and FEMA will accept, any 
and all WYO policies issued by the Company and in force as of the date 
of such inability or failure to perform. In such event FEMA will assume 
all obligations and liabilities within the scope of the Arrangement 
owed to policyholders arising before and after the date of transfer, 
and the Company will immediately transfer to FEMA all needed records 
and data and all funds in its possession with respect to all such 
policies transferred and the unearned expenses retained by the Company. 
As an alternative to the transfer of the policies to FEMA, FEMA will 
consider a proposal, if it is made by the Company, for the assumption 
of responsibilities by another WYO company as provided by Article 
II.D.3. The Company shall immediately notify FEMA if:
    1. An independent financial rating company downgrades its financial 
strength during its period of performance under this Arrangement; or
    2. It receives a State department of insurance order or directive 
making it unable to carry out its obligations under this Arrangement, 
including but not limited to being placed in receivership or run-off 
status by a State department of insurance.
    G. In the event the Act is amended, repealed, expires, or if FEMA 
is otherwise without authority to continue the Program, FEMA may cancel 
financial assistance under this Arrangement for any new or renewal 
business, but the Arrangement will continue for policies in force that 
shall be allowed to run their term under the Arrangement.
    H. If FEMA does not publish the Fiscal Year 2025 Arrangement in the 
Federal Register on or before April 1, 2024, then FEMA may require the 
continued performance of all or selected elements of this Arrangement 
through December 31, 2025, but such extension may not exceed the 
expiration of the six (6) month period following publication of the 
Fiscal Year 2025 Arrangement in the Federal Register.

[[Page 12392]]

Article III. Undertakings of the Company
    A. Responsibilities of the Company.
    1. Policy Issuance and Maintenance. The Company must meet all 
requirements of the Financial Control Plan and any guidance issued by 
FEMA. The Company is responsible for the following:
    a. Compliance with Rating Procedures.
    b. Eligibility Determinations.
    c. Policy Issuances.
    d. Policy Endorsements.
    e. Policy Cancellations.
    f. Policy Correspondence.
    g. Payment of Agents' Commissions.
    h. Fund management, including the receipt, recording, disbursement, 
and timely deposit of NFIP funds.
    2. The Company must provide a live customer service agent that (1) 
is accessible to all policyholders via telephone during business days, 
and (2) can resolve commonplace customer service issues.
    3. Claims Processing.
    a. In general. The Company must process all claims consistent with 
the Standard Flood Insurance Policy, Financial Control Plan, Claims 
Manual, other guidance adopted by FEMA, and as much as possible, with 
the Company's standard business practices for its non-NFIP policies.
    b. Adjuster registration. The Company may not use an independent 
adjuster to adjust a claim unless the independent adjuster:
    i. Holds a valid Flood Control Number issued by FEMA; or
    ii. Participates in the Flood Adjuster Capacity Program.
    c. Claim reinspections. The Company must cooperate with any claim 
reinspection by FEMA.
    4. Reports. The Company must certify its business under the WYO 
Program through monthly financial reports in accordance with the 
requirements of the Pivot Use Procedures. The Company must follow the 
Financial Control Plan and the WYO Accounting Procedures Manual. FEMA 
will validate and audit, in detail, these data and compare the results 
against Company reports.
    5. Operations Plan. Within ninety (90) calendar days of the 
commencement of this Arrangement, the Company must submit a written 
Operations Plan to FEMA describing its efforts to perform under this 
Arrangement. The plan must include the following:
    a. Private Flood Insurance Separation Plan. If applicable, a 
description of the Company's policies, procedures, and practices 
separating their NFIP flood insurance lines of business from their non-
NFIP flood insurance lines of business, including its implementation of 
Article III.E.
    b. Marketing Plan. A marketing plan describing the Company's 
forecasted growth, efforts to achieve that growth, and ability to 
comply with any marketing guidelines provided by FEMA.
    c. Policy Retention Plan. A retention plan describing the Company's 
efforts to retain and renew policies and methods of communicating with 
policyholders on renewals.
    d. Customer Service Plan. A description of overall customer service 
practices, including ongoing and planned improvement efforts.
    e. Distribution Plan. A description of the Company's NFIP flood 
insurance distribution network, including anticipated numbers of 
agents, efforts to train those agents, and an average rate of 
commissions paid to producers by state.
    f. Catastrophic Claims Handling Plan. A catastrophic claims 
handling plan describing how the Company will respond and maintain 
service standards in catastrophic flood events, including:
    i. Deploying mobile or temporary claims centers to provide 
immediate policyholder assistance, including submission of notice of 
loss and claim status information.
    ii. Preparing people, processes, and tools for claims processing in 
remote work scenarios.
    iii. Preparing communications in advance for readiness throughout 
the year including a suite of printed and digital materials (e.g., 
advertisements, educational materials, social media messaging, website 
blogs and announcements) that provide key messaging to stakeholders, 
including policyholders, agents, and the public following a 
catastrophic flood event.
    iv. Identifying the core areas of information technology that need 
to be scaled pre-event or are scalable post-event.
    g. Business Continuity Plan. A business continuity plan identifying 
threats and risks facing the Company's NFIP-related operations and how 
the Company will maintain operations in the event of a disaster 
affecting its operational capabilities.
    h. Privacy Protection Plan. A privacy protection plan that 
describes the Company's standards for using and maintaining personally 
identifiable information.
    i. System Security Plan. A system security plan that describes 
system boundaries, system environments of operation, how security 
requirements are implemented, and the relationships with or connections 
to other systems, including plans of action that describe how 
unimplemented security requirements will be met and how any planned 
mitigations will be implemented, prepared in accordance with either:
    i. National Institute of Standards and Technology (NIST) Special 
Publication (SP) 800-171 ``Protecting Controlled Unclassified 
Information in Nonfederal Information Systems and Organizations'', 
Revision 2, https://csrc.nist.gov/publications/detail/sp/800-171/rev-2/final; or
    ii. Another comparable standard deemed acceptable by FEMA.
    B. Time Standards. WYO companies must meet the time standards 
provided below. Time will be measured from the date of receipt through 
the date the task is completed. In addition to the standards set forth 
below, all functions performed by the Company must be in accordance 
with the highest reasonably attainable quality standards generally used 
in the insurance and data processing field. Applicable time standards 
are:
    1. Application Processing--fifteen (15) business days (Note: if the 
policy cannot be sent due to insufficient or erroneous information or 
insufficient funds, the Company must send a request for correction or 
added moneys within ten (10) business days.
    2. Renewal processing--seven (7) business days.
    3. Endorsement processing--fifteen (15) business days.
    4. Cancellation processing--fifteen (15) business days.
    5. File examination--seven (7) business days from the day the 
Company receives the final report.
    6. Claims draft processing--seven (7) business days from completion 
of file examination.
    7. Claims adjustment--forty-five (45) calendar days average from 
the receipt of Notice of Loss (or equivalent) through completion of 
examination.
    8. Upload transactions to Pivot--one (1) business day.
    C. Policy Issuance.
    1. The flood insurance subject to this Arrangement must be only 
that insurance written by the Company in its own name pursuant to the 
Act.
    2. The Company must issue policies under the regulations prescribed 
by FEMA, in accordance with the Act, on a form approved by FEMA.
    3. The Company must issue all policies in consideration of such 
premiums and upon such terms and conditions and in such states or areas 
or subdivisions thereof as may be designated by FEMA and only where

[[Page 12393]]

the Company is licensed by State law to engage in the property 
insurance business.
    D. Lapse of Authority or Appropriation. FEMA may require the 
Company to discontinue issuing policies subject to this Arrangement 
immediately in the event Congressional authorization or appropriation 
for the NFIP is withdrawn.
    E. Separation of Finances and Other Lines of Flood Insurance.
    1. The Company must separate Federal flood insurance funds from all 
other Company accounts, at a bank or banks of its choosing for the 
collection, retention and disbursement of Federal funds relating to its 
obligation under this Arrangement, less the Company's expenses as set 
forth in Article IV. The Company must remit all funds not required to 
meet current expenditures to the United States Treasury, in accordance 
with the provisions of the WYO Accounting Procedures Manual.
    2. Other Undertakings of the Company.
    a. Clear communication. If the Company also offers insurance 
policies covering the peril of flood outside of the NFIP in any 
geographic area in which Program authorizes the purchase of flood 
insurance, the Company must ensure that all public communications 
(whether written, recorded, electronic, or other) regarding non-NFIP 
insurance lines would not lead a reasonable person to believe that the 
NFIP, FEMA, or the Federal Government in any way endorses, sponsors, 
oversees, regulates, or otherwise has any connection with the non-NFIP 
insurance line. The Company may assure compliance with this requirement 
by prominently including in such communications the following 
statement: ``This insurance product is not affiliated with the National 
Flood Insurance Program.''
    b. Data protection. The company may not use non-public data, 
information, or resources obtained in course of executing this 
Arrangement to further or support any activities outside the scope of 
this Arrangement.
    F. Claims. The Company must investigate, adjust, settle, and defend 
all claims or losses arising from policies issued under this 
Arrangement. Payment of flood insurance claims by the Company bind 
FEMA, subject to appeal.
    G. Compliance with Agency Standards and Guidelines.
    1. The Company must comply with the Act, regulations, written 
standards, procedures, and guidance issued by FEMA relating to the NFIP 
and applicable to the Company, including, but not limited to the 
following:
    a. WYO Program Financial Control Plan.
    b. Pivot Use Procedures.
    c. NFIP Flood Insurance Manual.
    d. NFIP Claims Manual.
    e. NFIP Litigation Manual.
    f. WYO Accounting Procedures Manual.
    g. WYO Bulletins.
    2. The Company must market flood insurance policies in a manner 
consistent with marketing guidelines established by FEMA.
    3. FEMA may require the Company to collect customer service 
information to monitor and improve their program delivery.
    4. The Company must notify its agents of the requirement to comply 
with State regulations regarding flood insurance agent education, 
notify agents of flood insurance training opportunities, and assist 
FEMA in periodic assessment of agent training needs.
    H. Compliance with Appeals Process.
    1. In general. FEMA will notify the Company when a policyholder 
files an appeal. After notification, the Company must provide FEMA the 
following information:
    a. All records created or maintained pursuant to this Arrangement 
requested by FEMA.
    b. A comprehensive claim file synopsis, redacted of personally 
identifiable information, that includes a summary of the appeal issues, 
the Company's position on each issue, and any additional relevant 
information. If, in the process of writing the synopsis, the Company 
determines that it can address the issue raised by the policyholder on 
appeal without further direction, it must notify FEMA. The Company will 
then work directly with the policyholder to achieve resolution and 
update FEMA upon completion. The Company may have a claims examiner 
review the file who is independent from the original decision and who 
possesses the authority to overturn the original decision if the facts 
support it.
    2. Cooperation. The Company must cooperate with FEMA throughout the 
appeal process until final resolution. This includes adhering to any 
written appeals guidance issued by FEMA.
    3. Resolution of Appeals. FEMA will close an appeal when:
    a. FEMA upholds the denial by the Company.
    b. FEMA overturns the denial by the Company and all necessary 
actions that follow are completed.
    c. The Company independently resolves the issue raised by the 
policyholder without further direction.
    d. The policyholder voluntarily withdraws the appeal.
    e. The policyholder files litigation.
    4. Processing of Additional Payments from Appeal. The Company must 
follow established NFIP adjusting practices and claim handling 
procedures for appeals that result in additional payment to a 
policyholder when FEMA does not explicitly direct such payment during 
the review of the appeal.
    5. Time Standards.
    a. Provide FEMA with requested files pursuant to Article 
III.H.1.a--ten (10) business days after request.
    b. Provide FEMA with comprehensive claim file synopsis pursuant to 
Article III.H.1.b--ten (10) business days after request.
    c. Responding to inquiries from FEMA regarding an appeal--ten (10) 
business days after inquiry.
    d. Inform FEMA of any litigation filed by a policyholder with a 
current appeal--ten (10) business days of notice.
    I. Subrogation.
    1. In general. Consistent with Federal law and guidance, the 
Company must use its customary business practices when pursuing 
subrogation.
    2. Referral to FEMA. Pursuant to 44 CFR 62.23(i)(8), in lieu of the 
Company pursuing a subrogation claim, WYO companies may refer such 
claims to FEMA.
    3. Notification. No more than ten (10) calendar days after either 
the Company identifies a possible subrogation claim or FEMA notifies 
the Company of a possible subrogation claim, the Company must notify 
FEMA of its intent to pursue the claim or refer the claim to FEMA.
    4. Cooperation. Pursuant to 44 CFR 62.23(i)(11), the Company must 
extend reasonable cooperation to FEMA's Office of the Chief Counsel on 
matters related to subrogation.
    J. Access to Records. The Company must furnish to FEMA such 
summaries and analysis of information including claim file information 
and property address, location, and/or site information in its records 
as may be necessary to carry out the purposes of the Act, in such form 
as FEMA, in cooperation with the Company, will prescribe.
    K. System for Award Management (SAM). The Company must be 
registered in the System for Award Management. Such registration must 
have an active status during the period of performance under this 
Arrangement. The Company must ensure that its SAM registration is 
accurate and up to date.
    L. Cybersecurity.
    1. In general. Unless the Company uses a compliance alternative 
pursuant to Article III.L.2, the Company must

[[Page 12394]]

implement the security requirements specified by National Institute of 
Standards and Technology (NIST) Special Publication (SP) 800-171 
``Protecting Controlled Unclassified Information in Nonfederal 
Information Systems and Organizations'', Revision 2 (https://csrc.nist.gov/publications/detail/sp/800-171/rev-2/final) for any 
system that processes, stores, or transmits information that requires 
safeguarding or dissemination controls pursuant to and consistent with 
law, regulations, this Arrangement, or other applicable requirements, 
including information protected pursuant to Article XII.C and 
personally identifiable information of NFIP applicants and 
policyholders. Such implementation must be validated by a third-party 
assessment organization.
    2. Compliance alternatives. In lieu of compliance with Article 
IV.L.1, the Company may either:
    a. Provide FEMA with documentation that the Company is securing the 
systems subject to the requirements of Article III.L.1 with either:
    i. ISO/IEC 27001, https://www.iso.org/isoiec-27001-information-security.html;
    ii. NIST Cybersecurity Framework, https://csrc.nist.gov/publications/detail/sp/800-171/rev-2/final;
    iii. Cybersecurity Maturity Model Certification (CMMC 2.0), https://dodcio.defense.gov/CMMC/;
    iv. Service and Organization Controls (SOC) 2, https://www.aicpa.org/interestareas/frc/assuranceadvisoryservices/sorhome.html; 
or
    v. Another comparable standard deemed acceptable by FEMA.
    b. Provide a plan of action that describes how unimplemented 
security requirements of NIST SP 800-171, rev. 2, (https://csrc.nist.gov/publications/detail/sp/800-171/rev-2/final) will be met 
and how any planned mitigations will be implemented as part of the 
system security plan required under Article III.A.4.h.
Article IV. Loss Costs, Expenses, Expense Reimbursement, and Premium 
Refunds
    A. The Company is liable for operating, administrative, and 
production expenses, including any State premium taxes, dividends, 
agents' commissions or any other expense of whatever nature incurred by 
the Company in the performance of its obligations under this 
Arrangement but excluding other taxes or fees, such as municipal or 
county premium taxes, surcharges on flood insurance premium, and 
guaranty fund assessments.
    B. Payment for Selling and Servicing Policies.
    1. Operating and Administrative Expenses. The Company may withhold, 
as operating and administrative expenses, other than agents' or 
brokers' commissions, an amount from the Company's written premium on 
the policies covered by this Arrangement in reimbursement of all of the 
Company's marketing, operating, and administrative expenses, except for 
allocated and unallocated loss adjustment expenses described in Article 
IV.C. This amount will equal the sum of the average industry expenses 
ratios for ``Other Act.'', ``Gen. Exp.'' And ``Taxes'' calculated by 
aggregating premiums and expense amounts for each of five property 
coverages using direct premium and expense information to derive 
weighted average expense ratios. For this purpose, FEMA will use data 
for the property/casualty industry published, as of March 15 of the 
prior Arrangement year, in Part III of the Insurance Expense Exhibit in 
A.M. Best Company's Aggregates and Averages for the following five 
property coverages: Fire, Allied Lines, Farmowners Multiple Peril, 
Homeowners Multiple Peril, and Commercial Multiple Peril (non-liability 
portion).
    2. Agent Compensation. The Company may retain fifteen (15) percent 
of the Company's written premium on the policies covered by this 
Arrangement as the commission allowance to meet the commissions or 
salaries of insurance agents, brokers, or other entities producing 
qualified flood insurance applications and other related expenses.
    3. Growth Bonus. FEMA may increase the amount of expense allowance 
retained by the Company depending on the extent to which the Company 
meets the marketing goals for the Arrangement year contained in 
marketing guidelines established pursuant to Article III.G.2. The total 
growth bonuses paid to companies pursuant to this Arrangement may not 
exceed two (2) percent of the aggregate net written premium collected 
by all WYO companies. FEMA will pay the Company the amount of any 
increase after the end of the Arrangement year.
    C. FEMA will reimburse Loss Adjustment Expenses as follows:
    1. FEMA will reimburse unallocated loss adjustment expenses to the 
Company pursuant to a ``ULAE Schedule'' coordinated with the Company 
and provided by FEMA.
    2. FEMA will reimburse allocated loss adjustment expenses to the 
Company pursuant to a ``Fee Schedule'' coordinated with the Company and 
provided by FEMA. To ensure the availability of qualified insurance 
adjusters during catastrophic flood events, FEMA may, in its sole 
discretion, temporarily authorize the use of an alternative Fee 
Schedule with increased amounts during the term of this Arrangement for 
losses incurred during a time frame established by FEMA.
    3. FEMA will reimburse special allocated loss expenses and 
subrogation expenses reimbursable under 44 CFR 62.23(i)(8) to the 
Company in accordance with guidelines issued by FEMA.
    D. Loss Payments.
    1. The Company must make loss payments for flood insurance policies 
from federal funds retained in the bank account(s) established under 
Article III.E.1 and, if such funds are depleted, from Federal funds 
withdrawn from the National Flood Insurance Fund pursuant to Article V.
    2. Loss payments include payments because of litigation that arises 
under the scope of this Arrangement, and the Authorities set forth 
herein. All such loss payments and related expenses must meet the 
documentation requirements of the Financial Control Plan and of this 
Arrangement, and the Company must comply with the litigation 
documentation and notification requirements established by FEMA. 
Failure to meet these requirements may result in FEMA's decision not to 
provide reimbursement.
    3. Oversight of Litigation.
    a. Any litigation resulting from, related to, or arising from the 
Company's compliance with the written standards, procedures, and 
guidance issued by FEMA arises under the National Flood Insurance Act 
of 1968 or regulations, and such legal issues raise a Federal question.
    b. The Company must conduct and oversee litigation arising out of 
the Company's participation in the NFIP in accordance with the National 
Flood Insurance Program Litigation Manual. If not addressed by the NFIP 
Litigation Manual, the Company should utilize its customary business 
practices for its defense of property and casualty litigation, 
including billing rates and standards.
    c. FEMA will not reimburse the Company for any award or judgment 
for damages and any costs to defend litigation that is either:
    i. Grounded in actions by the Company that are significantly 
outside the scope of this Arrangement; or
    ii. Involves issues of agent negligence.

[[Page 12395]]

    E. Refunds. The Company must make premium refunds required by FEMA 
to applicants and policyholders from Federal flood insurance funds 
referred to in Article III.E.1, and, if such funds are depleted, from 
funds derived by withdrawing from the National Flood Insurance Fund 
pursuant to Article V. The Company may not refund any premium to 
applicants or policyholders in any manner other than as specified by 
FEMA since flood insurance premiums are funds of the Federal 
Government.
    F. Suspension and Debarment.
    1. In general. The Company may not contract with or employ any 
person who is suspended or debarred from participating in federal 
transactions pursuant to 2 CFR part 180 (covering federal 
nonprocurement transactions) or 48 CFR part 9, subpart 9.4 (covering 
federal procurement transactions) in relation to this Arrangement.
    2. Reimbursement. FEMA will not reimburse the company for any 
expenses incurred in violation of Article IV.F.1.
    3. Compliance. The Company may ensure compliance with Article 
IV.F.1 by:
    a. Checking the System for Awards Management at sam.gov;
    b. Collecting a certification from that person; or
    c. Adding a clause or condition to the transaction with that 
person.
Article V. Undertakings of the Government
    A. FEMA must enable the Company to withdraw funds from the National 
Flood Insurance Fund daily, if needed, pursuant to prescribed 
procedures implemented by FEMA. FEMA will increase the amounts of the 
authorizations as necessary to meet the obligations of the Company 
under Article IV.C-E. The Company may only request funds when net 
premium income has been depleted. The timing and amount of cash 
advances must be as close as is administratively feasible to the actual 
disbursements by the recipient organization for allowable expenses. 
Request for payment may not ordinarily be drawn more frequently than 
daily. The Company may withdraw funds from the National Flood Insurance 
Fund for any of the following reasons:
    1. Payment of claims, as described in Article IV.D.
    2. Refunds to applicants and policyholders for insurance premium 
overpayment, or if the application for insurance is rejected or when 
cancellation or endorsement of a policy results in a premium refund, as 
described in Article IV.E.
    3. Allocated and unallocated loss adjustment expenses, as described 
in Article IV.C.
    B. FEMA must provide technical assistance to the Company as 
follows:
    1. NFIP policy and history.
    2. Clarification of underwriting, coverage, and claims handling.
    3. Other assistance as needed.
    C. FEMA must provide the Company with a copy of all formal written 
appeal decisions conducted in accordance with Section 205 of the 
Bunning-Bereuter-Blumenauer Flood Insurance Reform Act of 2004, Public 
Law 108-264 and 44 CFR 62.20.
    D. Prior to the end of the Arrangement period, FEMA may provide the 
Company a statistical summary of their performance during the signed 
Arrangement period. This summary will detail the Company's performance 
individually, as well as compare the Company's performance to the 
aggregate performance of all WYO companies and the NFIP Direct 
Servicing Agent.
Article VI. Cash Management and Accounting
    A. FEMA must make available to the Company during the entire term 
of this Arrangement the ability to withdraw funds from the National 
Flood Insurance Fund provided for in Article V. The Company may 
withdraw funds from the National Flood Insurance Fund for reimbursement 
of its expenses as set forth in Article V.A that exceed net written 
premiums collected by the Company from the effective date of this 
Arrangement or continuation period to the date of the draw. In the 
event that adequate funding is not available to meet current Company 
obligations for flood policy claim payments issued, FEMA must direct 
the Company to immediately suspend the issuance of loss payments until 
such time as adequate funds are available. The Company is not required 
to pay claims from their own funds in the event of such suspension.
    B. The Company must remit all funds, including interest, not 
required to meet current expenditures to the United States Treasury, in 
accordance with the provisions of the WYO Accounting Procedures Manual 
or procedures approved in writing by FEMA.
    C. In the event the Company elects not to participate in the 
Program in this or any subsequent fiscal year, or is otherwise unable 
or not permitted to participate, the Company and FEMA must make a 
provisional settlement of all amounts due or owing within three (3) 
months of the expiration or termination of this Arrangement. This 
settlement must include net premiums collected, funds withdrawn from 
the National Flood Insurance Fund, and reserves for outstanding claims. 
The Company and FEMA agree to make a final settlement, subject to 
audit, of accounts for all obligations arising from this Arrangement 
within eighteen (18) months of its expiration or termination, except 
for contingent liabilities that must be listed by the Company. At the 
time of final settlement, the balance, if any, due FEMA or the Company 
must be remitted by the other immediately and the operating year under 
this Arrangement must be closed.
    D. Upon FEMA's request, the Company must provide FEMA with a true 
and correct copy of the Company's Fire and Casualty Annual Statement, 
and Insurance Expense Exhibit or amendments thereof as filed with the 
State Insurance Authority of the Company's domiciliary State.
    E. The Company must comply with the requirements of the False 
Claims Act (41 U.S.C. 3729-3733), which prohibits submission of false 
or fraudulent claims for payment to the Federal Government.
Article VII. Arbitration
    If any misunderstanding or dispute arises between the Company and 
FEMA with reference to any factual issue under any provisions of this 
Arrangement or with respect to FEMA's nonrenewal of the Company's 
participation, other than as to legal liability under or interpretation 
of the Standard Flood Insurance Policy, such misunderstanding or 
dispute may be submitted to arbitration for a determination that will 
be binding upon approval by FEMA. The Company and FEMA may agree on and 
appoint an arbitrator who will investigate the subject of the 
misunderstanding or dispute and make a determination. If the Company 
and FEMA cannot agree on the appointment of an arbitrator, then two 
arbitrators will be appointed, one to be chosen by the Company and one 
by FEMA.
    The two arbitrators so chosen, if they are unable to reach an 
agreement, must select a third arbitrator who must act as umpire, and 
such umpire's determination will become final only upon approval by 
FEMA. The Company and FEMA shall bear in equal shares all expenses of 
the arbitration. Findings, proposed awards, and determinations 
resulting from arbitration proceedings carried out under this section, 
upon objection by FEMA or the Company, shall be inadmissible as 
evidence in any subsequent proceedings in any court of competent 
jurisdiction.

[[Page 12396]]

    This Article shall indefinitely succeed the term of this 
Arrangement.
Article VIII. Errors and Omissions
    A. In the event of negligence by the Company that has not resulted 
in litigation but has resulted in a claim against the Company, FEMA 
will not consider reimbursement of the Company for costs incurred due 
to that negligence unless the Company takes all reasonable actions to 
rectify the negligence and to mitigate any such costs as soon as 
possible after discovery of the negligence. The Company may choose not 
to seek reimbursement from FEMA.
    B. If the Company has made a claim payment to an insured without 
including a mortgagee (or trustee) of which the Company had actual 
notice prior to making payment, and subsequently determines that the 
mortgagee (or trustee) is also entitled to any part of said claim 
payment, any additional payment may not be paid by the Company from any 
portion of the premium and any funds derived from any Federal funds 
deposited in the bank account described in Article III.E.1. In 
addition, the Company agrees to hold the Federal Government harmless 
against any claim asserted against the Federal Government by any such 
mortgagee (or trustee), as described in the preceding sentence, by 
reason of any claim payment made to any insured under the circumstances 
described above.
Article IX. Officials Not To Benefit
    No Member or Delegate to Congress, or Resident Commissioner, may be 
admitted to any share or part of this Arrangement, or to any benefit 
that may arise therefrom; but this provision may not be construed to 
extend to this Arrangement if made with a corporation for its general 
benefit.
Article X. Offset
    At the settlement of accounts, the Company and FEMA have, and may 
exercise, the right to offset any balance or balances, whether on 
account of premiums, commissions, losses, loss adjustment expenses, 
salvage, or otherwise due one party to the other, its successors or 
assigns, hereunder or under any other Arrangements heretofore or 
hereafter entered into between the Company and FEMA. This right of 
offset shall not be affected or diminished because of insolvency of the 
Company.
    All debts or credits of the same class, whether liquidated or 
unliquidated, in favor of or against either party to this Arrangement 
on the date of entry, or any order of conservation, receivership, or 
liquidation, shall be deemed to be mutual debts and credits and shall 
be offset with the balance only to be allowed or paid. No offset shall 
be allowed where a conservator, receiver, or liquidator has been 
appointed and where an obligation was purchased by or transferred to a 
party hereunder to be used as an offset.
    Although a claim on the part of either party against the other may 
be unliquidated or undetermined in amount on the date of the entry of 
the order, such claim will be regarded as being in existence as of the 
date of such order and any credits or claims of the same class then in 
existence and held by the other party may be offset against it.
Article XI. Equal Opportunity
    A. Age Discrimination Act of 1975. The Company must comply with the 
requirements of the Age Discrimination Act of 1975, Public Law 94-135 
(42 U.S.C. 6101 et seq.) which prohibits discrimination on the basis of 
age in any program or activity receiving federal financial assistance.
    B. Americans with Disabilities Act. The Company must comply with 
the requirements of Titles I, II, and III of the Americans with 
Disabilities Act, Public Law 101-336 (42 U.S.C. 12101-12213), which 
prohibits recipients from discriminating on the basis of disability in 
the operation of public entities, public and private transportation 
systems, places of public accommodation, and certain testing entities.
    C. Civil Rights Act of 1964--Title VI. The Company must comply with 
the requirements of Title VI of the Civil Rights Act of 1964 (42 U.S.C. 
2000d et seq.), which provides that no person in the United States 
will, on the grounds of race, color, or national origin, be excluded 
from participation in, be denied the benefits of, or be subjected to 
discrimination under any program or activity receiving federal 
financial assistance. Department of Homeland Security implementing 
regulations for the Act are found at 6 CFR part 21 and 44 CFR part 7.
    D. Civil Rights Act of 1968. The Company must comply with Title 
VIII of the Civil Rights Act of 1968, which prohibits recipients from 
discriminating in the sale, rental, financing, and advertising of 
dwellings, or in the provision of services in connection therewith, on 
the basis of race, color, national origin, religion, disability, 
familial status, and sex as implemented by the U.S. Department of 
Housing and Urban Development at 24 CFR part 100.
    E. Rehabilitation Act of 1973. The Company must comply with the 
requirements of Section 504 of the Rehabilitation Act of 1973 (29 
U.S.C. 794), which provides that no otherwise qualified handicapped 
individuals in the United States will, solely by reason of the 
handicap, be excluded from participation in, be denied the benefits of, 
or be subjected to discrimination under any program or activity 
receiving federal financial assistance.
Article XII. Access to Books and Records
    A. Audits. FEMA, the Department of Homeland Security, and the 
Comptroller General of the United States, or their duly authorized 
representatives, for the purpose of investigation, audit, and 
examination shall have access to any books, documents, papers and 
records of the Company that are pertinent to this Arrangement. The 
Company shall keep records that fully disclose all matters pertinent to 
this Arrangement, including premiums and claims paid or payable under 
policies issued pursuant to this Arrangement. Records of accounts and 
records relating to financial assistance shall be retained and 
available for three (3) years after final settlement of accounts, and 
to financial assistance, three (3) years after final adjustment of such 
claims. FEMA shall have access to policyholder and claim records at all 
times for purposes of the review, defense, examination, adjustment, or 
investigation of any claim under a flood insurance policy subject to 
this Arrangement.
    B. Nondisclosure by FEMA. FEMA, to the extent permitted by law and 
regulation, will safeguard and treat information submitted or made 
available by the Company pursuant to this Arrangement as confidential 
where the information has been marked ``confidential'' by the Company 
and the Company customarily keeps such information private or closely-
held. To the extent permitted by law and regulation, FEMA will not 
release such information to the public pursuant to a Freedom of 
Information Act (FOIA) request, 5 U.S.C. 552, without prior 
notification to the Company. FEMA may transfer documents provided by 
the Company to any department or agency within the Executive Branch or 
to either house of Congress if the information relates to matters 
within the organization's jurisdiction. FEMA may also release the 
information submitted pursuant to a judicial order from a court of 
competent jurisdiction.
    C. Nondisclosure by Company.

[[Page 12397]]

    1. In general. The Company, to the extent permitted by law, must 
safeguard and treat information submitted or made available by FEMA 
pursuant to this Arrangement as confidential where the information has 
been marked or identified as ``confidential'' by FEMA and FEMA 
customarily keeps such information private or closely-held. The Company 
may not disclose such confidential information to a third-party without 
the express written consent of FEMA or as otherwise required by law.
    2. Other protections. Article XII.C.1 shall not be construed as to 
limit the effect of any other requirement on the Company to protect 
information from disclosure, including a joint defense agreement or 
under the Privacy Act.
Article XIII. Compliance With Act and Regulations
    This Arrangement and all policies of insurance issued pursuant 
thereto are subject to Federal law and regulations.
Article XIV. Relationship Between the Parties and the Insured
    Inasmuch as the Federal Government is a guarantor hereunder, the 
primary relationship between the Company and the Federal Government is 
one of a fiduciary nature, that is, to ensure that any taxpayer funds 
are accounted for and appropriately expended. The Company is a fiscal 
agent of the Federal Government, but is not a general agent of the 
Federal Government. The Company is solely responsible for its 
obligations to its insured under any policy issued pursuant hereto, 
such that the Federal Government is not a proper party to any lawsuit 
arising out of such policies.
    Authority: 42 U.S.C. 4071, 4081; 44 CFR 62.23.

Jeffrey Jackson,
Assistant Administrator (Acting) for Federal Insurance, Federal 
Emergency Management Agency.
[FR Doc. 2023-03895 Filed 2-24-23; 8:45 am]
BILLING CODE 9111-52-P