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

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AGENCY:

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

ACTION:

Final rule.

SUMMARY:

We (the Mitigation Division of the Emergency Preparedness and Response Directorate of DHS) are changing the way premiums are calculated for policyholders who purchase flood insurance coverage under the NFIP for “Pre-FIRM” buildings in Special Flood Hazard Areas (SFHAs). (The term “Pre-FIRM buildings” means buildings whose construction began on or before December 31, 1974, or before the effective date of the community's Flood Insurance Rate Map (FIRM), whichever date is later. Pre-FIRM buildings and their contents are eligible for subsidized rates under the NFIP.)

These increased flood insurance rates will be implemented in coordination with the elimination of the Expense Constant, a flat charge that the policyholder previously paid to defray certain expenses of the Federal Government related to flood insurance. As a result of this change, the same amount of premium revenue will still be collected to cover those expenses previously paid for by the Expense Constant; however, policyholders will pay for those expenses through premiums that vary by the amount of insurance that they purchase, instead of a flat charge per policy. The end result will be revenue neutral. In addition, we are revising the CFR chapter heading for our rules to reflect the Homeland Security Act.

EFFECTIVE DATE:

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

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FOR FURTHER INFORMATION CONTACT:

Thomas Hayes, DHS, Mitigation Division, 500 C Street SW., Washington, DC 20472, 202-646-3419, (facsimile) 202-646-7970, or (e-mail) Thomas.Hayes@fema.gov.

End Further Info End Preamble Start Supplemental Information

SUPPLEMENTARY INFORMATION:

Summary of Comments

On February 3, 2003, we published at 68 FR 5264 a proposed rule to change the way premiums are calculated for policyholders who purchase flood insurance coverage under the NFIP for “Pre-FIRM” buildings in Special Flood Hazard Areas (SFHAs). (The term “Pre-FIRM buildings” means buildings whose construction began on or before December 31, 1974, or before the effective date of the community's Flood Insurance Rate Map (FIRM), whichever date is later.)

During the comment period, we received three sets of comments. All were in support of this change. These comments came from the Association of State Floodplain Managers (ASFPM), the Florida Division of Emergency Management, and an insurance company that participates in the NFIP's Write Your Own program.

The following comment by the ASFPM is indicative of the other responses as well:

We view this to be a positive effort by FIMA to encourage growth in the Program:

  • The change will be revenue neutral.
  • It will remove a perceived barrier to the sale of flood insurance—which may help the NFIP increase its policy base and increase revenue. Start Printed Page 15667
  • By making the NFIP “more like other insurance industry standards” it may remove some resistance to write flood policies by insurance agents.

Comparison of May 1, 2003 Rate Increases With Current Rates

The following chart compares the current rates we charge for Pre-FIRM SFHA properties with the May 1, 2003 rates for Pre-FIRM, SFHA properties. Also these rates apply only to the rates charged for the “first layer” of flood insurance coverage set by Congress in Section 1306 of the National Flood Insurance Act of 1968, as amended (Pub. L. 90-448):

Type of structureCurrent a zone 1 rates per year per $100 coverage on:May 1, 2003 a zone 1 rates per year per $100 coverage on:
StructureContentsStructureContents
RCBAP 2All other
High riseLow rise
1. Residential:
No Basement or Enclosure.68.79.85.70.76.96
With Basement or Enclosure.73.79.90.75.81.96
2. All other including hotels and motels with normal occupancy of less than 6 months duration:
No Basement or Enclosure.791.58N/AN/A.831.62
With Basement or Enclosure.841.58N/AN/A.881.62
1 A zones are zones A1-A30, AE, AO, AH, and unnumbered A zones.
2 Residential Condominium Building Association Policies (RCBAP) are distinguished between High Rise (those structures that have 3 or more floors and 5 or more units) and Low Rise (those structures that have either less than 3 floors or less than 5 units).
Type of structureCurrent a zone 1 rates per year per $100 coverage on:May 1, 2003 a zone 1 rates per year per $100 coverage on:
StructureContentsStructureContents
RCBAP 2All other
High riseLow rise
1. Residential:
No Basement or Enclosure.911.061.08.93.991.23
With Basement or Enclosure.981.061.151.001.061.23
2. All other including hotels and motels with normal occupancy of less than 6 months duration:
No Basement or Enclosure1.062.10N/AN/A1.102.14
With Basement or Enclosure1.122.10N/AN/A1.162.14
1 V zones are zones V1-V30, VE, and unnumbered V zones.
2 Residential Condominium Building Association Policies (RCBAP) are distinguished between High Rise (those structures that have 3 or more floors and 5 or more units) and Low Rise (those structures that have either less than 3 floors or less than 5 units).

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

National Environmental Policy Act (NEPA)

Pursuant to section 102(2) (c) of the National Environmental Policy Act of 1969, 42 U.S.C. 4317 et seq., we conducted an environmental assessment of this final rule. This assessment concludes that there will be no significant impact on the human environment as a result of the issuance of this final rule, and no Environmental Impact Statement will be prepared. Copies of the environmental assessment and Finding of No Significant Impact are on file for inspection through the Rules Docket Clerk, DHS, room 840, 500 C St. SW., Washington, DC 20472.

Executive Order 12866, Regulatory Planning and Review

We have prepared and reviewed this rule under the provisions of E.O. 12866, Regulatory Planning and Review. Under Executive Order 12866, 58 FR 51735, October 4, 1993, a significant regulatory action is subject to OMB review and the requirements of the Executive Order. The Executive Order defines “significant regulatory action” as one that is likely to result in a rule that may:

(1) Have an annual effect on the economy of $100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities;

(2) create a serious inconsistency or otherwise interfere with an action taken or planned by another agency;

(3) materially alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or

(4) raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in the Executive Order.

For the reasons that follow we have concluded that the rule is neither an economically significant nor a significant regulatory action under the Start Printed Page 15668Executive Order. The rule will be premium neutral for the National Flood Insurance Fund. The adjustment in premiums rates will be offset by the elimination of the Expense Constant. It will not have an annual effect on the economy of $100 million or more or adversely affect in a material way the economy, the insurance sector, competition, or other sectors of the economy. It will create no serious inconsistency or otherwise interfere with an action taken or planned by another agency. It will not materially alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof. Nor does it raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in the Executive Order.

The Office of Management and Budget has not reviewed this rule under the provisions of Executive Order 12866.

Paperwork Reduction Act

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

Executive Order 13132, Federalism

Executive Order 13132 sets forth principles and criteria that agencies must adhere to in formulating and implementing policies that have federalism implications, that is, regulations that have substantial direct effects on the States, or on the distribution of power and responsibilities among the various levels of government. Federal agencies must closely examine the statutory authority supporting any action that would limit the policymaking discretion of the States, and to the extent practicable, must consult with State and local officials before implementing any such action.

We have reviewed this final rule under E.O.13132 and have determined that the rule does not have federalism implications as defined by the Executive Order. The rule will adjust the premiums for buildings in Pre-FIRM Special Flood Hazard Areas. The rule in no way that we foresee affects the distribution of power and responsibilities among the various levels of government or limits the policymaking discretion of the States.

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List of Subjects in 44 CFR Part 61

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Accordingly, we amend 44 CFR chapter I as follows:

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

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

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PART 61—INSURANCE COVERAGE AND RATES

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2. The authority citation for part 61 continues to read as follows:

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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.

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3. Revise § 61.9 (a) to read as follows:

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Establishment of chargeable rates.

(a) Under section 1308 of the Act, we are establishing annual chargeable rates for each $100 of flood insurance coverage as follows for Pre-FIRM, A zone properties, Pre-FIRM, V-zone properties, and emergency program properties.

Type of structureA zone 1 rates per year per $100 coverage on:V zone 2 rates per year per $100 coverage on:
structureContentsStructureContents
RCBAP 3All otherRCBAP 3All other
High riseLow riseHigh riseLow rise
1. Residential:
No Basement or Enclosure.85.70.76.961.08.93.991.23
With Basement or Enclosure.90.75.81.961.151.001.061.23
2. All other including hotels and motels with normal occupancy of less than 6 months duration:
No Basement or EnclosureN/AN/A.831.62N/AN/A1.102.14
With Basement or EnclosureN/AN/A.881.62N/AN/A1.162.14
1 1 A zones are zones A1-A30, AE, AO, AH, and unnumbered A zones.
2 V zones are zones V1-V30, VE, and unnumbered V zones.
3 Residential Condominium Building Association Policies (RCBAP) are distinguished between High Rise (those structures that have 3 or more floors and 5 or more units) and Low Rise (those structures that have either less than 3 floors or less than 5 units).
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Dated: March 26, 2003.

Michael D. Brown,

Acting Under Secretary, Emergency Preparedness & Response.

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[FR Doc. 03-7685 Filed 3-31-03; 8:45 am]

BILLING CODE 6718-03-P