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Federal Register / Vol. 86, No. 226 / Monday, November 29, 2021 / Rules and Regulations 4001 et seq., authorizes the Administrator of the Federal Emergency Management Agency FEMA to establish and carry out the National Flood Insurance Program NFIP to enable interested persons to purchase insurance against loss resulting from physical damage to, or loss of, real or personal property arising from flood in the United States. See 42 U.S.C. 4011a.
Congress intended the NFIP to be a program of flood insurance with largescale participation of the Federal Government and carried out to the maximum extent practicable by the private insurance industry. See 42
U.S.C. 4001b. Under the NFIA, FEMA
may carry out the NFIP through the facilities of the Federal Government, using for the purposes of providing flood insurance coverage, insurance companies and other insurers, insurance agents and brokers, and insurance adjustment organizations, as fiscal agents of the United States. See 42
U.S.C. 4071.
Pursuant to this authority, FEMA
works closely with the insurance industry to facilitate the sale and servicing of flood insurance policies. A
person can purchase an NFIP flood insurance policy, also known as the Standard Flood Insurance Policy SFIP, either: 1 Directly from the Federal Government through a direct servicing agent, or 2 from a private insurance company referred to as a Write Your Own WYO company through the WYO Program. The SFIP sets out the terms and conditions of insurance.
FEMA establishes terms of insurance and rates, which are the same whether purchased directly from the NFIP or through the WYO Program.
FEMA enters into a standard Financial Assistance/Subsidy Arrangement Arrangement with the WYO companies, which addresses the terms and conditions for administering the NFIP policies, including compensation. FEMA publishes the annual Arrangement in the Federal Register. See 44 CFR 62.23a. FEMA
published the Fiscal Year 2021
Arrangement in March 2020, which became effective October 1, 2020. 85 FR
17339 Mar. 27, 2020.
FEMA regulations at 44 CFR part 62, the Sale of Insurance and Adjustment of Claims, set forth the manner in which NFIP flood insurance is made available to the public in participating communities, prescribes the general method by which FEMA exercises its responsibility regarding the manner in which claims for losses are paid, and states reasons for which a policy may be nullified or cancelled and the associated refunds. Section 62.24, WYO

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participation criteria, establishes the criteria with which private insurance companies wishing to enter or reenter the WYO Program must comply. Section 62.24d outlines requirements that private companies must follow to demonstrate their plans to market flood insurance policies.
As part of 62.24d FEMA requires WYO companies to submit a marketing plan to ensure each company is taking reasonable steps to market flood insurance to the public. As a result, FEMA has set a goal for each WYO
company to provide positive net new growth of NFIP flood policies, and encourages these companies by providing growth incentives. See Fiscal Year 2021 Arrangement, IV.B.3. FEMAs intent behind the policy growth incentive is to motivate WYO
companies to help FEMA in closing the insurance gap and to reach FEMAs goal of doubling the number of properties covered against flood by 2022.1 Through the policy growth incentives, FEMA
provides to WYO companies a flat dollar amount for each new policy they write. The actual incentive amount varies by the extent of net policy growth a WYO company achieves i.e., a larger net growth will lead to a larger incentive. FEMA limits the total policy growth incentives paid to all WYO
companies to two percent of aggregate written premium for all companies. Id.
To qualify for the incentive, a WYO
company must have an overall net policy growth of at least one policy, and the new policies it writes must be new to the NFIP, not a renewal previously written by another WYO company.
FEMA pays the incentive to qualifying WYO companies at the end of each Arrangement year. Id.
The last sentence of 62.24d states, A private insurance company applying for participation in the WYO program shall also furnish its Bests Financial Size Category for the purpose of setting marketing goals. Bests, also known as AM Best, is a credit rating agency.
AM Best rating services assess the creditworthiness of and/or reports on over 16,000 insurance companies 1 In 2017, the Federal Insurance and Mitigation Administration set two ambitious goals: 1 To quadruple the investment in mitigation across the nation by 2022, and 2 to double the number of insurance policies across the nation by 2022. These goals have become the basis for FEMAs Strategic Objective 1.1: Incentivize investments that reduce risk, including pre-disaster mitigation, and reduce disaster costs at all levels; and Objective 1.2: Close the insurance gap. For more information, please see FEMAs Strategic Plan 20182022 at https
www.fema.gov/sites/default/files/2020-03/femastrategic-plan_2018-2022.pdf. Accessed Sept. 16, 2021.

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worldwide.2 Currently, FEMA does not require companies to provide their specific financial size category along with their marketing plan. This is because FEMA does not consider the size of an insurance carrier when formulating marketing strategies.
Section 62.24d relates solely to information needed for marketing, not information relating to assessing a companys financial strength. If FEMA
wanted to assess a carriers size, it could do so without requiring information from AM Best. Carriers of all sizes use a rating agency, whether AM Best or a competitor, to comply with their state Department of Insurance, so FEMA
could ask for that information if it wanted. In addition, most large carriers, which comprise the majority of WYO
carriers, already have an AM Best rating and could make that information available. Moreover, in lieu of rating agency information, FEMA could also use the number of policies in force to assess carrier size. However, because the AM Best requirement in 62.24d relates only to information needed to set marketing goals, and because FEMA
neither requires nor uses this information for marketing, FEMA is removing from its regulations this requirement upon the public.
II. Regulatory Analysis A. Administrative Procedure Act The Administrative Procedure Act APA generally requires agencies to publish a notice of proposed rulemaking in the Federal Register and provide interested persons the opportunity to submit comments. See 5 U.S.C. 553b and c. The APA provides an exception to this prior notice and comment requirement for rules of agency organization, procedure, or practice. 5
U.S.C. 553b3A. This final rule is a procedural rule promulgated for agency efficiency purposes. This action is limited to updating FEMAs regulations to remove a requirement upon WYO
applicants to furnish a particular piece of information regarding their financial size for the purpose of setting marketing goals that FEMA does not actually need from them or use in practice. As such, this rule simply updates FEMAs regulations to align with current Agency practice. This rule does not affect the substantive rights or interests of WYO
applicants. The AM Best requirement in the last sentence of 62.24d was only related to the determination of marketing strategies; FEMA has never considered information from AM Best in 2 See https www.ambest.com/home/
default.aspx. Accessed June 24, 2021.

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