Source: https://www.federalregister.gov/documents/2001/05/08/01-11364/national-flood-insurance-program-nfip-pilot-project-public-entity-insurers
Timestamp: 2018-07-20 19:11:42
Document Index: 740167718

Matched Legal Cases: ['art 62', 'art 62', '§\u200962', '§\u200962', '§\u200962', '§\u200962', '§\u200962', 'art 62', 'art 62', '§\u200962', '§\u200962', 'art 62', '§\u200962']

A Proposed Rule by the Federal Emergency Management Agency on 05/08/2001
Please submit any comments on this proposed rule by July 9, 2001.
23200-23204 (5 pages)
The NFIP's Write Your Own Program: Successes
Possible Expansion of the WYO Program
Appendix A to Part 62 [Amended]
Addendum to Appendix A to Part 62—Federal Emergency Management Agency, Federal Insurance Administration, Financial Assistance/Subsidy Arrangement
https://www.federalregister.gov/d/01-11364 https://www.federalregister.gov/d/01-11364
We (the Federal Insurance Administration of FEMA) are proposing to launch a three-year pilot project that would permit intergovernmental risk-Start Printed Page 23201sharing pools sponsored by State municipal leagues to sell flood insurance to public entities under the National Flood Insurance Program's Write Your Own (WYO) effort. We would limit the participants in this pilot effort to three such insurers that would be able to provide flood insurance only to public entities for their public buildings. The participants in this pilot effort would also have to comply with comparable eligibility criteria and performance standards for operations, reporting, and customer service that we require of private insurance companies that participate under the WYO program. This proposal includes the eligibility criteria for participation in the proposed pilot and an addendum to the WYO Arrangement that would construe the term “the company” used in the Arrangement to mean not only WYO companies but also the insurers selected for this proposed pilot.
Edward T. Pasterick, Federal Emergency Management Agency, Federal Insurance Administration, 500 C Street SW., Washington, DC 20472, 202-646-3443, (facsimile) 202-646-4335, or (email) Edward.Pasterick@fema.gov.
Since 1983, when we (FIA) established the WYO program, we have worked in close partnership with private insurance companies to serve a national goal: to protect more of the Nation's property owners against flood loss through insurance. The expertise of our private insurance industry partners, especially in marketing, underwriting, and claims adjustment, has been invaluable in helping us not only provide a high level of customer service to policyholders under the National Flood Insurance Program (NFIP) but also increase the number of property owners covered by flood insurance—a national objective. In fact, as the WYO program has grown so has the number of policyholders nationwide covered by flood insurance. Our flood insurance policy base has more than doubled since the WYO program's inception on October 1, 1983, with policies increasing from 1.9 million to more than 4.3 million policies in force today.
One of the inherent strengths of the WYO program, and one of the reasons for its success, is that private insurance companies, writing property insurance for other perils such as wind and fire, provide convenient access to flood insurance coverage for their customers in need of flood insurance protection. This model may also apply to the unique relationship that public entity insurers, especially State municipal league-sponsored or other intergovernmental risk-sharing pools, such as those sponsored by school districts and transit districts, enjoy with local governments. Such public entity insurers that already provide property insurance coverage to public entities for their public buildings may be in an ideal position to provide the same high level of customer service and easy access to local governments in need of flood insurance protection for their public buildings. This is an avenue that we would like to explore for the benefit of public entities in need of flood insurance protection.
We believe that there may be considerable merit in expanding the framework of the WYO program to include not only our current participants—the property insurance companies that meet financial and operating standards—but also other insurers of public buildings, such as State municipal league-sponsored and other risk pools meeting comparable standards that can serve the specialized insurance market of public entities. By permitting State municipal league-sponsored and other intergovernmental risk-sharing pools to sell flood insurance, we would be providing public entities with the same kind of insurance channel that many use for their other property insurance needs.
This proposal then would add, on a pilot project basis, a new class of insurer to the WYO program. Specifically, we would add to § 62.23 and § 62.24 language that would authorize us to launch the pilot project and enter into an arrangement under the WYO program with up to three State municipal league-sponsored intergovernmental risk-sharing pools to sell flood insurance directly to municipalities provided these intergovernmental risk-sharing pools meet comparable eligibility, performance, and customer service standards as we have established for the private insurance companies. Our proposed revision to § 62.24 includes the criteria that the participants in the pilot project would have to meet as a condition for participation.
We would limit the three-year proposed pilot to no more than three State municipal league-sponsored intergovernmental risk-sharing pools that meet the eligibility criteria that we include in the proposal. Should the pilot succeed in increasing the number of public buildings covered by flood insurance while maintaining the program's standards for customer service, we would be willing to broaden the effort permanently to include other intergovernmental risk-sharing pools, such as those sponsored by school districts and transit districts, that provide property insurance to public entities and that meet our eligibility criteria. Such a pilot would also furnish us with data and experience that would help us improve operations should State municipal league-sponsored and other intergovernmental risk-sharing pools become permanent adjuncts to the WYO program.
It is our hope that the proposed pilot project would provide local governments with an accessible and familiar channel to meet their flood insurance needs through State municipal league sponsored intergovernmental risk-sharing pools since these organizations meet and deal with local governments daily. Such intergovernmental risk-sharing pools already provide expertise in a number of areas such as risk management, and these entities would be in a position to better serve the needs of the localities by providing and servicing flood coverage to the locality for their public buildings. Such organizations bring with them risk management expertise and a unique insight into the needs of their customers—local public entities.
We propose, therefore, to launch a pilot project beginning with the 2001-2 Arrangement Year for the WYO program that begins October 1, 2001. The pilot project would enable up to three State municipal league-sponsored intergovernmental risk-sharing pools—to be nominated by the National League of Cities—to provide flood insurance to communities to cover their public buildings. Under the pilot project, the participating State municipal league-sponsored intergovernmental risk-sharing pools would provide flood insurance only to the buildings of public entities. Private buildings and private personal property would remain the exclusive marketing domain of the private insurance companies participating in the WYO program.
The proposed pilot project would be for a period of three years, but we would begin our analysis at the end of the second year to determine whether the pilot project is meeting our goals. Specifically, we would determine whether the participating State municipal league-sponsored Start Printed Page 23202intergovernmental risk-sharing pools had positioned themselves to write flood insurance on a large number of public buildings and whether they had maintained the same level of customer service and the same level of performance that we require of participating companies under the WYO program. The analysis at the end of the proposed pilot project would help us determine whether the pilot project should continue, and if so, whether we should expand the program beyond the limited participants of the pilot effort, and whether we need to modify or adjust the program based on project experience.
Categorical Exclusions. Agencies can categorically identify actions (for example, repair of a building damaged by a disaster) that do not normally have a significant impact on the environment. The purpose of this proposed rule is to launch a three-year pilot project that would permit intergovernmental risk-sharing pools sponsored by State municipal leagues to sell flood insurance to public entities under the National Flood Insurance Program's WYO effort.
For the reasons that follow we have concluded that the proposed rule is neither an economically significant nor a significant regulatory action under the Executive Order.
The proposed rule would accomplish one primary purpose: to determine the merit of permanently expanding the WYO program to permit State municipal league-sponsored intergovernmental risk-sharing pools to sell flood insurance to public entities to cover their buildings against flood loss. The proposed rule would permit us to analyze the three-year pilot project to determine the merit of permitting such insurers to be eligible to sell flood insurance permanently under the WYO program. There are no major economic impacts resulting from implementation of this proposal. Rather, the proposed rule would add a new marketing avenue for writing flood insurance for public buildings.
In accordance with the provisions of the Paperwork Reduction Act of 1995, 44 U.S.C. 3501 et seq., the Office of Management and Budget (OMB) approved the following collections of information applicable to this proposed rule:
1. Title: Write Your Own (WYO) Program.
OMB Number: 3067-0169 (expires March 31, 2002).
Number of Respondents: 120. The pilot limits the number of additional participants to 3. Therefore, we do not anticipate that there will be an overall increase in the annual number of respondents for this collection.
Estimated Hour Burden: 33 minutes per respondent.
Estimated Total Annual Burden: 792 hours. We do not anticipate that there will be an overall increase in the annual burden hours for this collection.
Frequency of Response: Respondents are required to submit the information on a monthly basis.
2. Title: Write Your Own (WYO) Company Participation Criteria; New Applicants.
OMB Number: 3067-0259 (expires April 30, 2002).
Number of Respondents: 5. The pilot limits the number of additional participants to 3. Therefore, we do not anticipate that there will be an overall increase in the annual number of respondents for this collection.
Estimated Hour Burden: 7 hours per respondent.
Estimated Total Annual Burden: 35 hours. We do not anticipate that there will be an overall increase in the annual burden hours for this collection.
Frequency of Response: Respondents are required to submit the information one-time only.
The proposed rule will launch a 3-year pilot project that would add intergovernmental risk-sharing pools sponsored by State municipal leagues as a new category of insurer under the Write Your Own (WYO) program. For this pilot, the number of participants is limited to three such insurers that would be able to provide flood insurance only to public entities for their public buildings. The participants must also comply with comparable eligibility criteria and performance standards for operations, reporting, and customer service that we require of private insurance companies that participate in the WYO program. The OMB approval for these collections include the collections of information referenced in § 62.23(a), titled “Financial Assistance/Subsidy Arrangement,” appendix A, and contained in § 62.24 of the proposed rule.
The requirements under the Financial Assistance/Subsidy Arrangement (appendix A to part 62) include standards for insurers participating in Start Printed Page 23203the Write Your Own program to complete transactions, claims, underwriting, customer service, reporting, marketing, and handling litigation to ensure adequate customer service and to safeguard the use of Federal funds drawn from the National Flood Insurance Fund. The requirements for financial control for insurers participating in the Write Your Own program (set forth in the Financial Control Plan, appendix B to part 62) include standards for: independent auditing, auditing of flood insurance financial statements, and monthly reporting, as well as requirements by FEMA's Office of Financial Management on Letter of Credit use.
Comments: We ask for your comments on our need for this information, the accuracy of our burden estimates, and any methods you can suggest for minimizing the burden on respondents, including automated collection techniques. Please send comments on the collections of information described above to the Office of Management and Budget, Office of Information and Regulatory Affairs; Attention: Desk Officer for FEMA, 725 17th Street, NW., Washington, DC 20503. Written comments should include the OMB number (3067-0259) and may be submitted up to July 9, 2001, but comments will be most useful if received by OMB within 30 days of the Federal Register publication date. We will also accept comments up to July 9, 2001. Written comments to us should be addressed to the Chief, Records Management Branch, Program Services Division, Operations Support Directorate, FEMA, 500 C Street, SW., Washington, DC 20472. We will respond to any OMB or public comments on the collections of information contained in the proposed rule.
For Additional Information Contact: You may obtain a copy of the approved OMB clearance packages for the collections of information by mail at FEMA, 500 C Street, SW., room 316, Washington, DC 20472, by e-mail at muriel.anderson@fema.gov, or by calling (202) 646-2625.
For the reasons that follow I certify that a regulatory flexibility analysis is not required for this rule because it would not have a significant economic impact on a substantial number of small entities. This proposed rule revises the National NFIP regulations to launch a three-year pilot project that would permit intergovernmental risk sharing pools sponsored by State municipal leagues to sell insurance to public entities under the NFIP's WYO Program. We would limit the participants to three such insurers that would be able to provide flood insurance only to public entities for public buildings. Participation in the pilot program is voluntary.
We have reviewed this proposed rule under E.O. 13132 and have concluded that the rule does not have federalism implications as defined by the Executive Order. The rule is a proposal to add a new category of insurer under the WYO program—an insurer that would provide another marketing avenue to protect public buildings from flood loss. Inasmuch as the insurance benefits and requirements derive from a Federal statute and program exclusively administered by the Federal Government for the benefit of State, local and tribal governments, individuals, and not-for-profit organizations, the rule neither limits nor preempts any policymaking discretion of the State that the State might otherwise have. We have, nevertheless, consulted with local officials, with the National League of Cities, and with several State municipal leagues.
2. Revise paragraphs (a) and (b) of § 62.23 to read as follows:
WYO Companies Authorized
(a) Pursuant to section 1345 of the Act, the Administrator may enter into arrangements with individual private sector property insurance companies or other insurers whereby such companies may offer flood insurance coverage under the program to eligible applicants for such insurance including policyholders insured by them under their own property business lines of insurance pursuant to their customary business practices including their usual arrangements with agents and producers, in any State in which such WYO companies are authorized to engage in the business of property insurance. Arrangements entered into by WYO Companies under this subpart must be in the form and substance of the standard arrangement, titled “Financial Assistance/Subsidy Arrangement,” a copy of which is included in appendix A of this part and made a part of these regulations.
(b) Any duly authorized insurer so engaged in the Program shall be a WYO Company. (The term “WYO Company” shall include the following kinds of insurers: an association of local governments, a State municipal league-sponsored and other intergovernmental risk-sharing pool for covering public entity structures.)
3. Revise § 62.24 to read as follows:
WYO Participation Criteria
New companies or organizations eligible for the pilot project we describe in paragraph (b) of this section that seek to participate in the WYO program, as well as former WYO companies seeking to return to the WYO program, must meet standards for financial capability and stability for statistical and financial reporting and for commitment to program objectives.Start Printed Page 23204
(5) Submit, as data become available, information to indicate that the company meets or exceeds NAIC standards for risk-based capital and surplus; and
(b) To demonstrate the ability to meet the financial requirements, an association of local governments, or a State municipal league-sponsored intergovernmental risk-sharing pool for covering public entity structures, wishing to enter the WYO pilot program commencing on October 1, 2001, must:
(3) Disclose any legal proceedings, suspensions, judgments, settlements, or agreements reached with any State insurance department, State attorney general, State corporation commission, or the Federal Government during the immediate prior five (5) years regarding the company's business practices; and
(4) Submit its most recent two annual audits from an independent accounting firm performed in compliance with generally accepted accounting principles that show no material negative findings; and submit, as data become available, information to indicate that the association or the pool meets or exceeds standards comparable to those of the NAIC for risk-based capital and surplus.
(c) An applicant for entry or reentry in the WYO program must also pass a test to determine the applicant's ability to process flood insurance and meet the Transaction Record Reporting and Processing (TRRP) Plan requirements of the WYO Financial Control Plan. Unless the test requirement is waived, e.g., where the applicant's reporting requirements will be fulfilled by an already qualified performer, the applicant must prepare and submit test output monthly tape(s) and monthly financial statements and reconciliations for processing by the NFIP Bureau and Statistical Agent contractor. For test purposes, no error tolerance will be allowed. If the applicant fails the initial test, a second test will be run, which the applicant must pass to participate in the Program.
(d) To satisfy the requirement for commitment to Program goals, including marketing of flood insurance policies, the applicant shall submit information concerning the company's plans for the WYO Program including plans for the training and support of producers and staff, marketing plans and sales targets, and claims handling and disaster response plans. Applicants must also identify those aspects of their planned flood insurance operations to be performed by another organization, managing agent, another WYO Company, a WYO vendor, a service bureau or related organization. Applicants shall also name, in addition to a Principal Coordinator, a corporate officer point of contact—an individual, e.g., at the level of Senior Executive Vice President, who reports directly to the Chief Executive Officer or the Chief Operating Officer. Each applicant shall furnish the latest available information regarding the number of its fire, allied lines, farmowners multiple peril, homeowners multiple peril, and commercial multiple peril policies in force, by line. A private insurance company applying for participation in the WYO program shall also furnish its Best's Financial Size Category for the purpose of setting marketing goals.
This Addendum to Appendix A to Part 62 applies only to public entity insurers participating in the pilot project established in § 62.24(b) that permits State municipal league-sponsored intergovernmental risk-sharing pools to provide flood insurance to public entities to cover public buildings.
“Company” in the preceding Arrangement includes “public entity insurer.”
The references to “marketing guidelines” in Article II—Undertaking of the Company and to “marketing goals” in Article III—Loss Costs, Expenses, Expense Reimbursement, and Premium Refunds shall apply only to the private insurance companies participating in the WYO program.
[FR Doc. 01-11364 Filed 5-7-01; 8:45 am]