Increased Cost of Compliance Coverage - Final Rule
[Federal Register: December 16, 1999 (Volume 64, Number 241)] [Rules and Regulations] [Page 70191-70193] From the Federal Register Online via GPO Access [wais.access.gpo.gov] [DOCID:fr16de99-6] ============================================= --------------------------------------------------------------------
FEDERAL EMERGENCY MANAGEMENT AGENCY
44 CFR Part 61
RIN 3067-AD05
National Flood Insurance Program (NFIP); Standard Flood Insurance Policy
AGENCY: Federal Emergency Management Agency (FEMA). ACTION: Final rule. ----------------------------------------------
SUMMARY: We (FEMA) are increasing the limit of liability under Coverage D--Increased Cost of Compliance of the Standard Flood Insurance Policy from $15,000 to $20,000. New information indicates an expected decrease in annual claims, and based on this decrease, we believe the limit of liability can be increased with no change in premium.
EFFECTIVE DATE: May 1, 2000.
FOR FURTHER INFORMATION CONTACT: Charles M. Plaxico, Jr., Federal Emergency Management Agency, Mitigation Division, (202) 646-3422, (facsimile) (202)646-4327, or (email) charles.plaxico@fema.gov.
SUPPLEMENTARY INFORMATION: On February 25, 1997, we published in the Federal Register, 62 FR 8391, a final rule that adds Coverage D-- Increased Cost of Compliance (ICC) to the Standard Flood Insurance Policy. We set the limit of liability for this coverage at $15,000. We considered several issues in arriving at that figure.
First, the pricing for this coverage has to be actuarially sound with premiums varying, to the extent possible, by risk. Second, Sec. 555 of the National Flood Insurance Reform Act of 1994, which mandates ICC coverage, sets a cap of $75 that we may charge for this coverage. Third, our initial estimates were that the number of policyholders receiving benefits under ICC coverage would be between 3400-3700 each year. Fourth, we considered the uncertainties associated with the introduction of the product, especially since we had had no direct experience with ICC coverage.
In making initial estimates of ICC claims, we had access to our loss experience from 1978 through 1994. The latest experience period for estimating ICC claims runs through 1998. Based on our additional experience with flood losses--losses large enough to trigger community declarations of substantial damage--we have decreased the number of expected annual ICC claims to a range of 2700--2900. On this basis, we are confident that the limit of liability for ICC coverage can be increased from $15,000 to $20,000 (a 33% increase) with no change in premium. The number of ICC claims actually filed since the introduction of this coverage is small compared to the number that we expected based on our flood claims filed under building coverage. We intend to continue analyzing this discrepancy, make further adjustments in premium charges, coverage amounts, or both as warranted, and to continue our education efforts with policyholders and local officials to make sure that they adequately understand the coverage.
Administrative Procedure Act Determination
We are publishing this final rule without opportunity for prior public comment under the Administrative Procedure Act, 5 U.S.C. 553. This final rule is a rule of agency procedure or practice that is excepted from the prior public comment requirements of Sec. 553(b). The rule makes nonsubstantive, nonsignificant changes to 44 CFR part 61 by conferring a benefit to flood insurance policyholders, increasing coverage for the increased cost of compliance without an increase in premium.
National Environmental Policy Act
The requirements of 44 CFR Part 10, Environmental Consideration, categorically exclude this final rule. We have not prepared an environmental impact assessment.
Executive Order 12866, Regulatory Planning and Review
This final rule is not a significant regulatory action within the meaning of Sec. 2(f) of E.O. 12866 of September 30, 1993, 58 FR 51735, but attempts to adhere to the regulatory principles set forth in E.O. 12866. The Office of Management and Budget has not reviewed this final rule under E.O. 12866.
Paperwork Reduction Act
The final rule is not subject to the provisions of the Paperwork Reduction Act of 1995.
Executive Order 13132, Federalism
This rule involves no policies that have federalism implications under Executive Order 13132, Federalism, dated August 4, 1999. The rule simply increases coverage for the increased cost of compliance from $15,000 to $20,000 without an increase in premium. It involves no preemption of State law nor does it limit State policymaking discretion. In light of the purpose of the rule and the absence of federalism implications, we have not consulted with State and local officials during preparation of this rule.
I certify that the requirements of Executive Order 13132 have been met in a meaningful and timely manner.
Executive Order 12778, Civil Justice Reform
This final rule meets the applicable standards of Sec. 2(b)(2) of E.O. 12778.
Congressional Review of Agency Rulemaking
We have sent this final rule to the Congress and to the General Accounting Office under the Congressional Review of Agency Rulemaking Act, Pub. L. 104-121. The rule is not a ``major rule'' within the meaning of that Act. It is an administrative action in support of normal day-to-day activities that increases a benefit to policyholders without increasing premiums. It does not result in nor is it likely to result in an annual effect on the economy of $100,000,000 or more. It will not result in a major increase in costs or prices for consumers, individual industries, Federal, State, or local government agencies, or geographic regions. It will not have ``significant adverse effects'' on competition, employment, investment, productivity, innovation, or on the ability of United States-based enterprises to compete with foreign- based enterprises. This final rule is exempt (1) from the requirements of the Regulatory Flexibility Act, and (2) from the Paperwork Reduction Act. The rule is not an unfunded Federal mandate within the meaning of the Unfunded Mandates Reform Act of 1995, Pub. L. 104-4. It does not meet the $100,000,000 threshold of that Act, and any enforceable duties are imposed as a condition of Federal assistance or a duty arising from participation in a voluntary Federal program.
List of Subjects in 44 CFR Part 61
Flood insurance.
Accordingly, we amend 44 CFR part 61 as follows:
PART 61--INSURANCE COVERAGE AND RATES
1. The authority citation for part 61 continues to read as follows: Authority: 42 U.S.C. 4001 et seq.; Reorganization Plan No. 3 of 1978, 43 FR 41943, 3 CFR, 1978 Comp., p. 329; E.O. 12127 of Mar. 31, 1979, 44 FR 19367, 3 CFR, 1979 Comp., p. 376.
2. The first sentence of the second paragraph of Coverage D-- Increased Cost of Compliance in Article 4 of Appendix A(1) to Part 61 that begins ``The limit of liability * * *'' is revised to read as follows:
Appendix A(1) to Part 61
* * * * *
Article 4
* * * * *
Coverage D--Increased Cost of Compliance
* * * * *
The limit of liability under this Coverage D (Increased Cost of Compliance) is $20,000.
* * * * * * * *
2. The first sentence of the second paragraph of Coverage D-- Increased Cost of Compliance in Article 4 of Appendix A(2) to Part 61 that begins ``The limit of liability * * *'' is revised to read as follows:
Appendix A(2) to Part 61
* * * * *
Article 4
* * * * *
Coverage D--Increased Cost of Compliance
* * * * *
The limit of liability under this Coverage D (Increased Cost of Compliance) is $20,000.
* * * * * * * *
3. The first sentence of the second paragraph of Coverage D-- Increased Cost of Compliance in Article 4 of Appendix A(3) to Part 61 that begins ``The limit of liability * * *'' is revised to read as follows:
Appendix A(3)--to Part 61
* * * * *
Article 4
* * * * *
Coverage D--Increased Cost of Compliance
* * * * *
The limit of liability under this Coverage D (Increased Cost of Compliance) is $20,000.
* * ** * * * *
(Catalog of Federal Domestic Assistance No. 83.100, ``Flood Insurance''; No. 83.516, ``Disaster Assistance'')
Dated: December 13, 1999.
Jo Ann Howard, Administrator,
Mitigation Division.
[FR Doc. 99-32657 Filed 12-15-99; 8:45 am]
BILLING CODE 6718-03-P
Last Modified: Friday, 24-Mar-2006 14:38:23 EST