Sale of Insurance and Adjustment of Claims Regulation

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PART 62—SALE OF INSURANCE AND ADJUSTMENT OF CLAIMS

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Section Contents

Subpart A—Issuance of Policies
§ 62.1
§ 62.2
§ 62.3
§ 62.4
§ 62.5
§ 62.6

Purpose of part.
Definitions.
Servicing agent.
Limitations on sale of policies.
Premium refund.
Minimum commissions.

• List of CFR
Sections Affected

Subpart B—Claims Adjustment, Claims Appeals, and Judicial Review

• Regulations.gov

§ 62.20 Claims appeals.
§ 62.21 Claims adjustment.
§ 62.22 Judicial review.

• Unified Agenda
• All NARA Publications

Subpart C—Write-Your-Own (WYO) Companies
Ben's Guide
to U.S.
Government

§ 62.23 WYO Companies authorized.
§ 62.24 WYO participation criteria.
Appendix A to Part 62—Federal Emergency Management Agency, Federal Insurance
Administration, Financial Assistance/Subsidy Arrangement
Appendix B to Part 62—National Flood Insurance Program

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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Source: 43 FR 2573, Jan. 17, 1978, unless otherwise noted. Redesignated at 44 FR 31177,
May 31, 1979.
Subpart A—Issuance of Policies
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§ 62.1 Purpose of part.
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The purpose of this part is to set forth the manner in which flood insurance under the Program is made
available to the general public in those communities designated as eligible for the sale of insurance
under part 64 of this subchapter, and to prescribe the general method by which the Administrator
exercises his/her responsibility regarding the manner in which claims for losses are paid.

§ 62.2 Definitions.
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The definitions set forth in part 59 of this subchapter are applicable to this part.

§ 62.3 Servicing agent.
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(a) Pursuant to sections 1345 and 1346 of the Act, the Administrator has entered into the Agreement
with a servicing agent to authorize it to assist in issuing flood insurance policies under the Program in
communities designated by the Administrator and to accept responsibility for delivery of policies and
payment of claims for losses as prescribed by and at the discretion of the Administrator.
(b) National Con-Serv, Inc., whose offices are located in Rockville, Maryland, is the servicing agent for
the Federal Insurance Administration.
(c) The servicing agent will arrange for the issuance of flood insurance to any person qualifying for such
coverage under parts 61 and 64 of this subchapter who submits an application to the servicing agent in
accordance with the terms and conditions of the contract between the Agency and the servicing agent.
[43 FR 2573, Jan. 17, 1978. Redesignated at 44 FR 31177, May 31, 1979, as amended at 48 FR
44544, Sept. 29, 1983; 49 FR 4751, Feb. 8, 1984; 58 FR 62447, Nov. 26, 1993]

§ 62.4 Limitations on sale of policies.
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(a) The servicing agent shall be deemed to have agreed, as a condition of its contract that it shall not
offer flood insurance under any authority or auspices in any amount within the maximum limits of
coverage specified in §61.6 of this subchapter, in any area the Administrator designates in part 64 of
this subchapter as eligible for the sale of flood insurance under the Program, other than in accordance
with this part, and the Standard Flood Insurance Policy.

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(b) The agreement and all activities thereunder are subject to title VI of the Civil Rights Act of 1964, 42
U.S.C. 2000d, and to the applicable Federal regulations and requirements issued from time to time
pursuant thereto. No person shall be excluded from participation in, denied the benefits of, or subjected
to discrimination under the Program, on the ground of race, color, sex, creed or national origin. Any
complaint or information concerning the existence of any such unlawful discrimination in any matter
within the purview of this part should be referred to the Administrator.
[43 FR 2573, Jan. 17, 1978. Redesignated at 44 FR 31177, May 31, 1979, as amended at 48 FR
44544, Sept. 29, 1983; 49 FR 4751, Feb. 8, 1984]

§ 62.5 Premium refund.
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A Standard Flood Insurance Policyholder whose property has been determined not to be in a special
hazard area after the map revision or a Letter of Map Amendment under part 70 of this subchapter may
cancel the policy within the current policy year provided (a) he was required to purchase or to maintain
flood insurance coverage, or both, as a condition for financial assistance, and (b) his property was
located in an identified special hazard area as represented on an effective FHBM or FIRM when the
financial assistance was provided. If no claim under the policy has been paid or is pending, the full
premium shall be refunded for the current policy year, and for an additional policy year where the
insured had been required to renew the policy during the period when a revised map was being
reprinted. A Standard Flood Insurance Policyholder may cancel a policy having a term of three (3)
years, on an anniversary date, where the reason for the cancellation is that a policy of flood insurance
has been obtained or is being obtained in substitution for the NFIP policy and the NFIP obtains a written
concurrence in the cancellation from any mortgage of which the NFIP has actual notice; or the
policyholder has extinguishing the insured mortgage debt and is no longer required by the mortgagee to
maintain the coverage. In such event, the premium refund shall be pro rata but with retention of the
expense constant.
[43 FR 2573, Jan. 17, 1978. Redesignated at 44 FR 31177, May 31, 1979, as amended at 49 FR
33658, Aug. 24, 1984; 53 FR 16279, May 6, 1988]

§ 62.6 Minimum commissions.
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(a) The earned commission which shall be paid to any property or casualty insurance agent or broker
duly licensed by a state insurance regulatory authority, with respect to each policy or renewal the agent
duly procures on behalf of the insured, in connection with policies of flood insurance placed with the
NFIP at the offices of its servicing agent, but not with respect to policies of flood insurance issued
pursuant to Subpart C of this part, shall not be less than $10 and is computed as follows:
(1) In the case of a new or renewal policy, the following commissions shall apply based on the total
premiums paid for the policy term:

Premium amount

Commissions (percent)

First $2,000 of Premium
Excess of $2,000
(2) In the case of mid-term increases in amounts of insurance added by endorsements, the following
commissions shall apply based on the total premiums paid for the increased amounts of insurance:

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15
5

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Premium amount

Commissions (percent)

First $2,000 of Premium

15

Excess of $2,000

5

(b) Any refunds of premiums authorized under this subchapter shall not affect a previously earned
commission; and no agent shall be required to return that earned commission, unless the refund is
made to establish a common policy term anniversary date with other insurance providing coverage
against loss by other perils in which case a return of commission will be required by the agent on a pro
rata basis. In such cases, the policy shall be immediately rewritten for a new term with the same amount
(s) of coverage and with premium calculated at the then current rate and, as to return premium,
returned, pro rata, to the insured based on the former policy's premium rate.
[46 FR 13515, Feb. 23, 1981, as amended at 53 FR 15221, Apr. 28, 1988; 57 FR 19541, May 7, 1992]

Subpart B—Claims Adjustment, Claims Appeals, and Judicial Review
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§ 62.20 Claims appeals.
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(a) Definitions.
Administrator means the Federal Insurance Administrator.
Appeal decision means the disposition of the appeal by the Administrator.
Decision means the insurer's final claim determination, which is the insurer's written denial, in whole or
in part, of the insured's claim.
(b) Appeal. A National Flood Insurance Program (NFIP) policyholder, whether insured by a participating
Write-Your-Own (WYO) Company or directly by the Federal Emergency Management Agency (FEMA),
may appeal a decision , including a determination of any insurance agent, adjuster, insurance company,
or any FEMA employee or contractor with respect to a claim, proof of loss, and loss estimate. In order to
file an appeal, the insured must comply with all requirements set out in the Standard Flood Insurance
Policy (SFIP). This appeals process is available after the issuance of the insurer's final claim
determination, which is the insurer's written denial, in whole or in part, of the insured's claim. Once the
final claim determination is issued, an insured may appeal any action taken by the insurer, FEMA
employee, FEMA contractor, insurance adjuster, or insurance agent.
(c) Limitations on Appeals.
The appeals process is intended to resolve claim issues and is not intended to grant coverage or limits
that are not provided by the SFIP. Filing an appeal does not waive any of the requirements for
perfecting a claim under the SFIP or extend any of the time limitations set forth in the SFIP.
(1) Disputes that are or have been subject to appraisal as provided for in the SFIP cannot be appealed
under this section.
(2) When a policyholder files an appeal on any issue, that issue is no longer subject to resolution by
appraisal or other pre-litigation remedies.

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(d) Litigation preclusion. An insured who files suit against an insurer on the flood insurance claim issue
is prohibited from filing an appeal under this section. All appeals submitted for decision but not yet
resolved shall be terminated upon notice of the commencement of litigation regarding the claim.
(e) Procedures. To pursue an appeal under this section a policyholder must:
(1) Submit a written appeal to FEMA within 60 days from the date of the decision. The appeal should be
sent to: Federal Emergency Management Agency, Federal Insurance Administrator, Mitigation Division,
500 C Street, SW., Washington, DC 20472;
(2) Provide a copy of the insurer's written denial, in whole or in part, of the claim;
(3) Identify relevant policy and claim information and state the basis for the appeal; and
(4) Submit relevant documentation to support the appeal. The policyholder should submit only the
documentation that pertains to his or her claim. The following are examples of the kinds of
documentation which FEMA will require to adjudicate the appeal: A copy of the proof of loss submitted
to the insurer as required in the policy; room by room itemized estimates from the adjuster (includes
contractors' estimates), detailing unit cost and quantities for the items needing repair or replacement;
replacement cost proofs of loss; Preliminary Report; Final Report; detailed damaged personal property
inventories that include the approximate age of the items; completed Mobile Home Worksheet; Mobile
Home Title, including Salvage Titles; real estate appraisals that exclude land values; advance payment
information; clear photographs (exterior and interior) confirming damage resulted from direct physical
loss by or from flood; proof of prior repair; evidence of insurance and policy information , i.e.
declarations page; Elevation Certificate, if the risk is an elevated building; the community's
determination made concerning substantial damage; information regarding substantial improvement;
zone determinations; pre-loss and post-loss inventories; financial statements; tax records, lease
agreements, sales contracts, settlement papers, deed, etc. ; emergency (911) address change
information; salvage information (proceeds and sales); condominium association by-laws; proof of other
insurance, including homeowners or wind policies and any claim information submitted to the other
companies; Waiver, Letter of Map Revision (LOMR) or Letter of Map Amendment (LOMA) information;
paid receipts and invoices including cancelled checks that support an insured's out-of-pocket expenses
pertaining to the claim; underwriting decisions; architectural plans and drawings; death certificates; a
copy of the will; divorce decree, power of attorney; current lienholder information; current loss payee
information; paid receipts and invoices documenting damaged stock; detailed engineering reports
specifically addressing flood-related damage and pre-existing damage; engineering surveys; market
values; documentation of Flood Insurance Rate Maps (FIRM) dates; documentation reflecting date(s) of
construction and substantial improvement; loan documents including closings; evidence of insurability
as a Residential Condominium Association; Franchise Agreements; letters of representation, i.e.
attorneys and public adjusters; any assignment of interest in a claim; and, any other pertinent
information which FEMA may request in processing a claim.
(f) Appeal resolution. (1) FEMA will acknowledge, in writing, receipt of a policyholder's appeal and
include in the acknowledgement contact information for a FEMA point of contact who can advise the
policyholder as to the status of his or her claim.
(2) The Administrator will review the appeal documents and may notify the policyholder in writing of the
need for additional information. A request for the additional information will include the date by which
the information must be provided, and shall in no case be less than 14 calendar days. Failure to provide
the requested information in full, or to request an extension by the due date, may result in a dismissal of
the appeal. A re-inspection of the policyholder's property may be conducted at the discretion of the
Administrator to gather more information. The Administrator will ensure that all information necessary to
rule on the appeal has been provided prior to making an appeal decision.
(3) The Administrator will review the appeal documents, including any reinspection report, if appropriate.
The Administrator will provide specific information on what grounds the claim was denied initially. The
Administrator will provide an appeal decision in writing to the policyholder and insurer within 90 days
from the date that all information has been submitted by the policyholder and include specific
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information for the resolution of the appeal. No further administrative review will be provided to the
insured.
(4) A policyholder who does not agree with FEMA's appeal decision should refer to the SFIP, for options
for further action ( see Part 61, App. A(1) VII.R., Part 61, App. A(2) VII.R., and Part 61, App. A(3) VIII.
R.). The one-year period to file suit commences with the written denial from the insurer and is not
extended by the appeals process.
[71 FR 30298, May 26, 2006, as amended at 71 FR 60438, Oct. 13, 2006]

§ 62.21 Claims adjustment.
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(a) In accordance with the Agreement, the servicing agent shall arrange for the prompt adjustment and
settlement and payment of all claims arising from policies of insurance issued under the program.
Investigation of such claims may be made through the facilities of its subcontractors or insurance
adjustment organizations, to the extent required and appropriate for the expeditious processing of such
claims.
(b) All adjustment of losses and settlements of claims shall be made in accordance with the terms and
conditions of the policy and parts 61 and 62 of this subchapter.

§ 62.22 Judicial review.
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(a) Upon the disallowance by the Federal Insurance Administration, a participating Write-Your-Own
Company, or the servicing agent of any claim on grounds other than failure to file a proof of loss, or
upon the refusal of the claimant to accept the amount allowed upon any claim after appraisal pursuant
to policy provisions, the claimant within one year after the date of mailing by the Federal Insurance
Administration, the participating Write-Your-Own Company, or the servicing agent of the notice of
disallowance or partial disallowance of the claim may, pursuant to 42 U.S.C. 4072, institute an action on
such claim against the insurer only in the U.S. District Court for the district in which the insured property
or the major portion thereof shall have been situated, without regard to the amount in controversy.
(b) Service of process for all judicial proceedings where a claimant is suing Director pursuant to 42 U.S.
C. 4071 shall be made upon the appropriate United States Attorney, the Attorney General of the United
States, and the Federal Insurance Administrator of the Federal Emergency Management Agency.
[43 FR 2573, Jan. 17, 1978. Redesignated at 44 FR 31177, May 31, 1979, as amended at 47 FR 43061
Sept. 30, 1982; 49 FR 33879, Aug. 27, 1984; 69 FR 45610, July 30, 2004]

Subpart C—Write-Your-Own (WYO) Companies
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§ 62.23 WYO Companies authorized.
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(a) Pursuant to section 1345 of the Act, the Administrator may enter into arrangements with individual
private sector property insurance companies or other insurers, such as public entity risk sharing

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organizations. Under these arrangements, such companies or other insurers may offer flood insurance
coverage under the program to eligible applicants. Such WYO companies may offer flood coverage to
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. WYO
companies may sell flood insurance coverage in any State in which the WYO company is authorized to
engage in the business of property insurance. Other WYO insurers may offer flood insurance coverage
to their pool members insured by them under their own property business lines of coverage, pursuant to
their customary business practices. These other WYO insurers may provide flood coverage in any State
that has authorized the other insurer to provide property coverage to its members. Arrangements
entered into by WYO Companies or other insurers 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: Public entity risk-sharing organizations, an
association of local governments, a State association of political subdivisions, a State-sponsored
municipal league, and other intergovernmental risk-sharing pool for covering public entity structures.)
(c) A WYO Company is authorized to arrange for the issuance of flood insurance in any amount within
the maximum limits of coverage specified in §61.6 of this subchapter, as Insurer, to any person
qualifying for such coverage under parts 61 and 64 of this subchapter who submits an application to the
WYO Company; coverage shall be issued under the Standard Flood Insurance Policy.
(d) A WYO Company issuing flood insurance coverage shall arrange for the adjustment, settlement,
payment and defense of all claims arising from policies of flood insurance it issues under the Program,
based upon the terms and conditions of the Standard Flood Insurance Policy.
(e) In carrying out its functions under this subpart, a WYO Company shall use its own customary
standards, staff and independent contractor resources, as it would in the ordinary and necessary
conduct of its own business affairs, subject to the Act and regulations prescribed by the Administrator
under the Act.
(f) To facilitate the marketing of flood insurance coverage under the Program to policyholders of WYO
Companies, the Administrator will enter into arrangements with such companies whereby the Federal
Government will be a guarantor in which the primary relationship between the WYO Company and the
Federal Government will be one of a fiduciary nature, i.e., to assure that any taxpayer funds are
accounted for and appropriately expended. In furtherance of this end, the Administrator has established
“A Plan to Maintain Financial Control for Business Written Under the Write Your Own Program”, a copy
of which is included in appendix B of this part and made a part of these regulations.
(g) A WYO Company shall act as a fiscal agent of the Federal Government, but not as its general agent.
WYO Companies are solely responsible for their obligations to their insured under any flood insurance
policies issued under agreements entered into with the Administrator, such that the Federal
Government is not a proper party defendant in any lawsuit arising out of such policies.
(h) To facilitate the underwriting of flood insurance coverage by WYO Companies, the following
procedures will be used by WYO Companies:
(1) To expedite business growth, the WYO Company will encourage its present property insurance
policyholders to purchase flood insurance through the NFIP WYO Program.
(2) To conform its underwriting practices to the underwriting rules and rates in effect as to the NFIP, the
WYO Company will establish procedures to carry out the NFIP rating system and provide its
policyholders with the same coverage as is afforded under the NFIP.
(3) The WYO Company may follow its customary billing practices to meet the Federal rules on the
presentment of premium and net premium deposits to a Letter of Credit bank account authorized by the

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Administrator and reduction of coverage when an underpayment is discovered.
(4) The WYO Company is expected to meet the recording and reporting requirements of the WYO
Transaction Record Reporting and Processing Plan. Transactions reported by the WYO Company
under the WYO Transaction Record Reporting and Processing Plan will be analyzed by the NFIP
Bureau & Statistical Agent. A monthly report will be submitted to the WYO Company and the FIA. The
analysis will cover the timeliness of WYO Company submissions, the disposition of transactions that
have not passed systems edits and the reconciliation of the totals generated from transaction reports
with those submitted on the WYO Company's reconciliation reports.
(5) If a WYO Company rejects an application from an agent or a producer, the agent or producer shall
be notified so that the business can be placed through the NFIP Servicing Agent, or another WYO
Company.
(6) Flood insurance coverage will be issued by the WYO Company on a separate policy form and will
not be added, by endorsement, to the Company's other property insurance forms.
(7) Premium payment plans can be offered by the WYO Company so long as the net premium
depository requirements specified under the NFIP/WYO Program accounting procedures are met. A
cancellation by the WYO Company for non-payment of premium will not produce a pro rata return of the
net premium deposit to the WYO Company.
(8) NFIP business will not be assumed by the WYO Companies at any time other than at renewal time,
at which time the insurance producer may submit the business to the WYO Company as new business.
However, it is permissible to cancel and rewrite flood policies to obtain concurrent expiration dates with
other policies covering the property.
(i) To facilitate the adjustment of flood insurance claims by WYO Companies, the following procedures
will be used by WYO Companies.
(1) Under the terms of the Arrangement set forth at appendix A of this part, WYO Companies will adjust
claims in accordance with general Company standards, guided by NFIP Claims manuals. The
Arrangement also provides that claim adjustments shall be binding upon the FIA. For example, the
entire responsibility for providing a proper adjustment for both combined wind and water claims and
flood-alone claims is the responsibility of the WYO Company. The responsibility for providing a proper
adjustment for combined wind and water claims is to be conducted by listing in concert with the Single
Adjuster provisions listed in appendix A.
(2) The WYO Company may use its staff adjusters, independent adjusters, or both. It is important that
the Company's Claims Department verifies the correctness of the coverage interpretations and
reasonableness of the payments recommended by the adjusters.
(3) An established loss adjustment Fee Schedule is part of the Arrangement and cannot be changed
during an Arrangement year. This is the expense allowance to cover costs of independent or WYO
Company adjusters.
(4) The normal catastrophe claims procedure currently operated by a WYO Company should be
implemented in the event of a claim catastrophe situation. Flood claims will be handled along with other
catastrophe claims.
(5) It will be the WYO Company's responsibility to try to detect fraud (as it does in the case of property
insurance) and coordinate its findings with FIA.
(6) Pursuant to the Arrangement, the responsibility for defending claims will be upon the Write Your
Own Company and defense costs will be part of the unallocated or allocated claim expense allowance,
depending on whether a staff counsel or an outside attorney handles the defense of the matter. Claims
in litigation will be reported by WYO Companies to FIA upon joinder of issue and FIA may inquire and
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be advised of the disposition of such litigation.
(7) The claim reserving procedures of the individual WYO Company can be used.
(8) Regarding the handling of subrogation, if a WYO Company prefers to forego pursuit of subrogation
recovery, it may do so by referring the matter, with a complete copy of the claim file, to FIA. Subrogation
initiatives may be truncated at any time before suit is commenced (after commencing an action, special
arrangement must bemade). FIA, after consultation with FEMA's Office of the General Counsel (OGC),
will forward the cause of action to OGC or to the NFIP Bureau and Statistical Agent for prosecution. Any
funds received will be deposited, less expenses, in the National Flood Insurance Fund.
(9) Special allocated loss adjustment expenses will include such items as: nonstaff attorney fees,
engineering fees and special investigation fees over and above normal adjustment practices.
(10) The customary content of claim files will include coverage verification, normal adjuster
investigations, including statements where necessary, police reports, building reports and
investigations, damage verification and other documentation relevant to the adjustment of claims under
the NFIP's and the WYO Company's traditional claim adjustment practices and procedures. The WYO
Company's claim examiners and managers will supervise the adjustment of flood insurance claims by
staff and independent claims adjusters.
(11) The WYO Company will extend reasonable cooperation to FEMA's Office of the General Counsel
on matters pertaining to litigation and subrogation, under paragraph (i)(8) of this section.
(j) To facilitate establishment of financial controls under the WYO Program, the WYO Company will:
(1) Have a biennial audit of the flood insurance financial statements conducted by an independent
Certified Public Accountant (CPA) firm at the Company's expense to ensure that the financial data
reported to us accurately represents the flood insurance activities of the Company. The CPA firm must
conduct its audits in accordance with the generally accepted auditing standards (GAAS) and
Government Auditing Standards issued by the Comptroller General of the United States (commonly
known as “yellow book” requirements). The Company must file with us (the Federal Insurance
Administration) a report of the CPA firm's detailed biennial audit, and, after our review of the audit
report, we will convey our determination to the Standards Committee.
(2) Participate in a WYO Company/FIA Operation review. We will conduct a review of the WYO
Company's flood insurance claims, underwriting, customer service, marketing, and litigation activities at
least once every three (3) years. As part of these reviews, we will reconcile specific files with a listing of
transactions submitted by the Company under the Transaction Record Reporting and Processing
(TRPP) Plan (Part 5). We will file a report of the Operation Review with the Standards Committee.
(3) Meet the recording and reporting requirements of the WYO Transaction Record Reporting and
Processing Plan and the WYO Accounting Procedures Manual. Transactions reported to the National
Flood Insurance Program's (NFIP's) Bureau and Statistical Agent by the WYO Company under the
WYO Transaction Record Reporting and Processing Plan and the WYO Accounting Procedures Manual
will be analyzed by the Bureau and Statistical Agent and a monthly report will be submitted to the WYO
Company and the FIA. The analysis will cover the timeliness of the WYO Company submissions, the
disposition of transactions which do not pass systems edits and the reconciliation of the totals
generated from transaction reports with those submitted on WYO Company reconciliation reports.
(4) Cooperate with FEMA's Office of Financial Management on Letter of Credit matters.
(5) Cooperate with FIA in the implementation of a claims reinspection program.
(6) Cooperate with FIA in the verification of risk rating information.

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(7) Cooperate with FEMA's Office of the Inspector General on matters pertaining to fraud.
(k) To facilitate the operation of the WYO Program and in order that a WYO Company can use its own
customary standards, staff and independent contractor resources, as it would in the ordinary and
necessary conduct of its own business affairs, subject to the Act, the Administrator, for good cause
shown, may grant exceptions to and waivers of the regulations contained in this title relative to the
administration of the NFIP.
(l)(1) WYO Companies may, on a voluntary basis, elect to participate in the Mortgage Portfolio
Protection Program (MPPP), under which they can offer, as a last resort, flood insurance at special high
rates, sufficient to recover the full cost of this program in recognition of the uncertainty as to the degree
of risk a given building presents due to the limited underwriting data required, to properties in a lending
institution's mortgage portfolio to achieve compliance with the flood insurance purchase requirements of
the Flood Disaster Protection Act of 1973. Flood insurance policies under the MPPP may only be issued
for those properties that:
(i) Are determined to be located within special flood hazard areas of communities that are participating
in the NFIP, and
(ii) Are not covered by a flood insurance policy even after a required series of notices have been given
to the property owner (mortgagor) by the lending institution of the requirement for obtaining and
maintaining such coverage, but the mortgagor has failed to respond.
(2) WYO Companies participating in the MPPP must provide a detailed implementation package to any
lending institution that, on a voluntary basis, chooses to participate in the MPPP to ensure the lending
institution has full knowledge of the criteria in that program and must obtain a signed receipt for that
package from the lending institution. Participating WYO Companies must also maintain evidence of
compliance with paragraph (l)(3) of this section for review during the audits and reviews required by the
WYO Financial Control Plan contained in appendix B of this part.
(3) The mortgagor must be protected against the lending institution's arbitrary placing of flood insurance
for which the mortgagor will be billed by being sent three notification letters as described in paragraphs
(l)(4) through (6) of this section.
(4) The initial notification letter must:
(i) State the requirements of the Flood Disaster Protection Act of 1973, as amended;
(ii) Announce the determination that the mortgagor's property is in an identified special flood hazard
area as delineated on the appropriate FEMA map, necessitating flood insurance coverage for the
duration of the loan;
(iii) Describe the procedure to follow should the mortgagor wish to challenge the determination;
(iv) Request evidence of a valid flood insurance policy or, if there is none, encourage the mortgagor to
obtain a Standard Flood Insurance Policy (SFIP) promptly from a local insurance agent (or WYO
Company);
(v) Advise that the premium for a MPPP policy is significantly higher than a conventional SFIP policy
and advise as to the option for obtaining less costly flood insurance; and
(vi) Advise that a MPPP policy will be purchased by the lender if evidence of flood insurance coverage
is not received by a date certain.
(5) The second notification letter must remind the mortgagor of the previous notice and provide
essentially the same information.

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(6) The final notification letter must:
(i) Enclose a copy of the flood insurance policy purchased under the MPPP on the mortgagor's
(insured's) behalf, together with the Declarations Page,
(ii) Advise that the policy was purchased because of the failure to respond to the previous notices, and
(iii) Remind the insured that similar coverage may be available at significantly lower cost and advise that
the policy can be cancelled at any time during the policy year and a pro rata refund provided for the
unearned portion of the premium in the event the insured purchases another policy that is acceptable to
satisfy the requirements of the 1973 Act.
(Approved by the Office of Management and Budget under OMB control number 3067–0229)
[61 FR 51219, Oct. 1, 1996, as amended at 64 FR 56176, Oct. 18, 1999; 67 FR 13549, Mar. 22, 2002;
69 FR 45610, July 30, 2004]

§ 62.24 WYO participation criteria.
top
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.
(a) To demonstrate the ability to meet the financial requirements, a private insurance company wishing
to enter or reenter the WYO program must:
(1) Be a licensed property insurance company;
(2) Have a five (5) year history of writing property insurance;
(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 immediately prior five (5) years regarding the company's business practices;
(4) Submit its most recent National Association of Insurance Commissioners (NAIC) annual statement;
(5) Submit information, as data become available, to indicate that the company meets or exceeds NAIC
standards for risk-based capital and surplus; and
(6) Submit its last State or regional audit, which should contain no material negative findings.
(b) To demonstrate the ability to meet the financial requirements, a public entity risk-sharing
organization, an association of local governments, a State association of political subdivisions, a Statesponsored municipal league, and any other intergovernmental risk-sharing pool for covering public
entity structures, wishing to enter the WYO program, which will end September 30, 2004, must:
(1) Have authority by a State to provide property coverage to its members;
(2) Have a five (5) year history of writing property coverage;

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(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 immediately prior five (5) years regarding the other insurer'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 other insurer 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 an already qualified performer will fulfill the applicant's reporting requirements,
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 will submit information concerning its 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 will 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, farm-owners multiple peril, homeowners multiple peril, and commercial multiple peril
policies or coverage documents 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.
[67 FR 13550, Mar. 22, 2002]

Appendix A to Part 62—Federal Emergency Management Agency, Federal Insurance
Administration, Financial Assistance/Subsidy Arrangement
top
Purpose: To assist the company in underwriting flood insurance using the Standard Flood Insurance
Policy.
Accounting Data: Pursuant to Section 1310 of the Act, a Letter of Credit shall be issued for payment as
provided for herein from the National Flood Insurance Fund.
Effective Date: October 1, 2004.
Issued By: Federal Emergency Management Agency, Federal Insurance Administration, Washington,
DC 20472.
Article I—Findings, Purpose, and Authority
Whereas, the Congress in its “Finding and Declaration of Purpose” in the National Flood Insurance Act
of 1968, as amended, (“the Act” or “Act”) recognized the benefit of having the National Flood Insurance
Program (the “Program” or “NFIP”) “carried out to the maximum extent practicable by the private

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insurance industry”; and
Whereas the Federal Insurance Administration (FIA) within the Mitigation Division recognizes this
Arrangement as coming under the provisions of Section 1345 of the Act (42 U.S.C. 4081); and
Whereas, the goal of the FIA is to develop a program with the insurance industry where, over time,
some risk-bearing role for the industry will evolve as intended by the Congress (Section 1304 of the Act
(42 U.S.C. 4011)); and
Whereas, the insurer (hereinafter the “Company”) under this Arrangement shall charge rates
established by the FIA; and
Whereas, FIA has promulgated regulations and guidance implementing the Act and the Write-Your-Own
Program whereby participating private insurance companies act in a fiduciary capacity utilizing Federal
funds to sell and administer the Standard Flood Insurance Policies, and has extensively regulated the
participating companies' activities when selling or administering the Standard Flood Insurance Policies;
and
Whereas, any litigation resulting from, related to, or arising from the Company's compliance with the
written standards, procedures, and guidance issued by FEMA or FIA arises under the Act, regulations,
or FIA guidance, and legal issues thereunder raise a federal question; and
Whereas, through this Arrangement, the Federal Treasury will back all flood policy claim payments by
the Company; and
Whereas, this Arrangement has been developed to enable any interested qualified insurer to write flood
insurance under its own name; and
Whereas, one of the primary objectives of the Program is to provide coverage to the maximum number
of structures at risk and because the insurance industry has marketing access through its existing
facilities not directly available to the FIA, it has been concluded that coverage will be extended to those
who would not otherwise be insured under the Program; and
Whereas, flood insurance policies issued subject to this Arrangement shall be only that insurance
written by the Company in its own name under prescribed policy conditions and pursuant to this
Arrangement and the Act; and
Whereas, over time, the Program is designed to increase industry participation, and accordingly, reduce
or eliminate Government as the principal vehicle for delivering flood insurance to the public; and
Whereas, the sole parties under this Arrangement are the WYO Companies and the Federal
Government.
Now, therefore, the parties hereto mutually undertake the following:
Article II—Undertaking of the Company
A. Eligibility Requirements for Participation in the NFIP:
1. Policy Administration. All fund receipt, recording, control, timely deposit requirements, and
disbursement in connection with all Policy Administration and any other related activities or
correspondences, must meet all requirements of the Financial Control Plan. The Company shall be
responsible for:
a. Compliance with the Community Eligibility/Rating Criteria

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b. Making Policyholder Eligibility Determinations
c. Policy Issuance
d. Policy Endorsements
e. Policy Cancellations
f. Policy Correspondence
g. Payment of Agents' Commissions
2. Claims Processing. All claims processing must be processed in accordance with the processing of all
the companies' insurance policies and with the Financial Control Plan. Companies will also be required
to comply with FIA Policy Issuances and other guidance authorized by FIA or the Federal Emergency
Management Agency (“FEMA”).
3. Reports.
a. Monthly Financial Reporting and Statistical Transaction reporting requirements. All monthly financial
reporting and statistical transaction reporting shall be in accordance with the requirements of the NFIP
Transaction Record Reporting and Processing Plan for the Company Program and the Financial Control
Plan for business written under the WYO (Write Your Own) Program. 44 CFR part 62, appendix B.
These data shall be validated/edited/audited in detail and shall be compared and balanced against
Company reports.
b. Monthly financial reporting procedure shall be in accordance with the WYO Accounting Procedures.
B. Time Standards. Time will be measured from the date of receipt through the date mailed out. All
dates referenced are working days, not calendar days. In addition to the standards set forth below, all
functions performed by the company shall be in accordance with the highest reasonably attainable
quality standards generally utilized in the insurance and data processing field. Continual failure to meet
these requirements may result in limitations on the company's authority to write new business or the
removal of the Company from the program. Applicable time standards are:
1. Application Processing—15 days (note: if the policy cannot be mailed due to insufficient or erroneous
information or insufficient funds, a request for correction or added moneys shall be mailed within 10
days);
2. Renewal Processing—7 days.
3. Endorsement Processing—15 days.
4. Cancellation Processing—15 days.
5. Claims Draft Processing—7 days from completion of file examination.
6. Claims Adjustment—45 days average from the receipt of Notice of Loss (or equivalent) through
completion of examination.
C. Single Adjuster Program. To ensure the maximum responsiveness to the NFIP policy holders
following a catastrophic event, e.g., a hurricane, involving insured wind and flood damage to
policyholders, the Company shall agree to the adjustment of the combined flood and wind losses
utilizing one adjuster under an NFIP-approved Single Adjuster Program using procedures issued by the

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Administrator. The Single Adjuster procedure shall be followed in the following cases:
1. Where the flood and wind coverage is provided by the Company;
2. Where the flood coverage is provided by the Company and the wind coverage is provided by a
participating State Property Insurance Plan, Windpool Association, Beach Plan, Joint Underwriting
Association, FAIR Plan, or similar property insurance mechanism; and
3. Where the flood coverage is provided by the Company and the wind coverage is provided by another
property insurer and the State Insurance Regulator has determined that such property insurer shall, in
the interest of consumers, facilitate the adjustment of its wind loss by the adjuster engaged to adjust the
flood loss of the Company.
D. Policy Issuance.
1. The flood insurance subject to this Arrangement shall be only that insurance written by the Company
in its own name pursuant to the Act.
2. The Company shall issue policies under the regulations prescribed by the Administrator in
accordance with the Act.
3. All such policies of insurance shall conform to the regulations prescribed by the Administrator
pursuant to the Act, and be issued on a form approved by the Administrator.
4. All policies shall be issued 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 the Administrator and only
where the Company is licensed by State law to engage in the property insurance business.
5. The Administrator may require the Company to discontinue issuing policies subject to this
Arrangement immediately in the event Congressional authorization or appropriation for the National
Flood Insurance Program is withdrawn.
E. The Company shall 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 III, and the
operation of the Letter of Credit established pursuant to Article IV. All funds not required to meet current
expenditures shall be remitted to the United States Treasury, in accordance with the provisions of the
WYO Accounting Procedures Manual.
F. The Company shall investigate, adjust, settle and defend all claims or losses arising from policies
issued under this Arrangement. Payment of flood insurance claims by the Company shall be binding
upon the FIA.
G. Compliance with Agency Standard and Guidelines.
1. The Company shall comply with written standards, procedures, and guidance issued by FEMA or FIA
relating to the NFIP and applicable to the Company.
2. The Company shall market flood insurance policies in a manner consistent with marketing guidelines
established by FIA.
3. The Company shall 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.

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Article III—Loss Costs, Expenses, Expense Reimbursement, and Premium Refunds
A. The Company shall be 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 surcharges on flood insurance premium and guaranty fund assessments.
B. 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 C. of this article.
This amount will equal the sum of the average of industry expense ratios for “Other Acq.”, “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, we (the Federal Insurance Administration) 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). In addition, this amount will be increased by one percentage point to reimburse
expenses beyond regular property/casualty expenses.
The Company may retain fifteen percent (15%) of the Company's written premium on the policies
covered by this Arrangement as the commission allowance to meet commissions or salaries of
insurance agents, brokers, or other entities producing qualified flood insurance applications and other
related expenses.
The amount of expense allowance retained by the Company may increase a maximum of two
percentage points, depending on the extent to which the Company meets the marketing goals for the
Arrangement year contained in marketing guidelines established pursuant to Article II.G. We will pay the
company the amount of any increase after the end of the Arrangement year.
The Company, with the consent of the Administrator as to terms and costs, may use the services of a
national rating organization, licensed under state law, to help us undertake and carry out such studies
and investigations on a community or individual risk basis, and to determine equitable and accurate
estimates of flood insurance risk premium rates as authorized under the National Flood Insurance Act of
1968, as amended. We will reimburse the Company for the charges or fees for such services under the
provisions of the WYO Accounting Procedures Manual.
C. Loss Adjustment Expenses shall be reimbursed as follows:
1. Unallocated loss adjustment expense shall be reimbursed to the Company pursuant to a “ULAE
Schedule” coordinated with the Company and provided by the Federal Insurance Administrator.
2. Allocated loss adjustment expense shall be reimbursed to the Company pursuant to a “Fee
Schedule” coordinated with the Company and provided by the Administrator.
3. Special allocated loss expenses shall be reimbursed to the Company in accordance with guidelines
issued by the Administrator.
D. Loss Payments.
1. Loss payments under policies of flood insurance shall be made by the Company from Federal funds
retained in the bank account(s) established under Article II, Section E and, if such funds are depleted,
from Federal funds derived by drawing against the Letter of Credit established pursuant to Article IV.
2. Loss payments include payments as a result of litigation that arises under the scope of this
Arrangement, and the Authorities set forth herein. All such loss payments and related expenses must
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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 the Administrator's decision not to provide
reimbursement.
3. Limitation on Litigation Costs.
a. Following receipt of notice of such litigation, the FEMA Office of the General Counsel (“OGC”) shall
review the information submitted. If the FEMA OGC finds that the litigation is grounded in actions by the
Company that are significantly outside the scope of this Arrangement, and/or involves issues of agent
negligence, then the FEMA OGC shall make a recommendation to the Administrator regarding whether
all or part of the litigation is significantly outside the scope of the Arrangement.
b. In the event the Administrator agrees with the determination of the FEMA OGC under Article III,
Section D.3.a then the Company will be notified in writing within thirty (30) days of the Administrator's
decision that any award or judgment for damages and any costs to defend such litigation will not be
recognized under Article III as a reimbursable loss cost, expense or expense reimbursement.
c. In the event a question arises whether only part of a litigation is reimbursable, the FEMA OGC shall
make a recommendation to the Administrator about the appropriate division of responsibility, if possible.
d. In the event that the Company wishes to petition for reconsideration of the determination that it will
not be reimbursed for any part of the award or judgment or any part of the costs expended to defend
such litigation made under Article III, Section D.3.a–c, it may do so by mailing, within thirty (30) days of
the notice that reimbursement will not be made, a written petition to the Administrator, who may request
advice on other than legal matters of the WYO Standards Committee established under the WYO
Financial Control Plan. The WYO Standards Committee will consider the request at its next regularly
scheduled meeting or at a special meeting called for that purpose by the Chairman and issue a written
recommendation to the Administrator. The Administrator's final determination will be made in writing
within a reasonable time to the Company.
E. Premium refunds to applicants and policyholders required pursuant to rules contained in the National
Flood Insurance Program (NFIP) “Flood Insurance Manual” shall be made by the Company from
Federal flood insurance funds referred to in Article II, Section E, and, if such funds are depleted, from
funds derived by drawing against the Letter of Credit established pursuant to Article IV. As fiscal agent,
the Company shall not refund any premium to applicants or policyholders in any manner other than as
specified in the NFIP's “Flood Insurance Manual” since flood insurance premiums are funds of the
Federal Government.
Article IV—Undertakings of the Government
A. Letter(s) of Credit shall be established by the Federal Emergency Management Agency (FEMA)
against which the Company may withdraw funds daily, if needed, pursuant to prescribed procedures
implemented by FEMA. The amounts of the authorizations will be increased as necessary to meet the
obligations of the Company under Article III, Sections C, D, and E. Request for funds shall be made
only when net premium income has been depleted. The timing and amount of cash advances shall be
as close as is administratively feasible to the actual disbursements by the recipient organization for
allowable Letter of Credit expenses.
Request for payment on Letters of Credit shall not ordinarily be drawn more frequently than daily nor in
amounts less than $5,000, and in no case more than $5,000,000 unless so stated on the Letter of
Credit. This Letter of Credit may be drawn by the Company for any of the following reasons:
1. Payment of claim as described in Article III, Section 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
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described in Article III, Section E; and
3. Allocated and unallocated Loss Adjustment Expenses as described in Article III, Section C.
B. The FIA shall provide technical assistance to the Company as follows:
1. The FIA's policy and history concerning underwriting and claims handling.
2. A mechanism to assist in clarification of coverage and claims questions.
3. Other assistance as needed.
Article V—Commencement and Termination
A. The initial period of this Arrangement is from October 1, 2004 through September 30, 2005.
Thereafter the Arrangement will be effective on an annual basis for the period October 1 through
September 30. The FIA shall 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. Each year, the FIA shall publish in theFederal Registerand make available to the Company the terms
for subscription or re-subscription to this Financial Assistance/Subsidy Arrangement. The Company
shall notify the FIA of its intent to re-subscribe or not re-subscribe within thirty days of publication.
C. In order to assure uninterrupted service to policyholders, the Company shall promptly notify the FIA
in the event the Company elects not to participate in the Program during the Arrangement year. If so
notified, or if the FIA chooses not to renew the Company's participation, the FIA, 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 18
months, and may either require Article V.C.1 or allow Article V.C.2:
1. The delivery to the FIA of:
a. A plan for the orderly transfer to the FIA of any continuing responsibilities in administering the policies
issued by the Company under the Program including provisions for coordination assistance; and
b. All data received, produced, and maintained through the life of the Company's participation in the
Program, including certain data, as determined by FIA, in a standard format and medium; and
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
shall provide the FIA with a report showing, on a policy basis, any amounts due from or payable to
insureds, agents, brokers, and others as of the transition date; and
d. All funds in its possession with respect to any policies transferred to FIA for administration and the
unearned expenses retained by the Company.
2. Submission of plans for the renewal of the business by another WYO Company or Companies or the
submission of detailed plans for another WYO Company to assume responsibility for the Company's
NFIP policies. Such plans shall assure uninterrupted service to policyholders and shall be accompanied
by a formal request for FIA approval of such transfers.
D. Financial assistance under this Arrangement may be canceled by the FIA in its entirety upon thirty
(30) days written notice to the Company by certified mail stating one of the following reasons for such
cancellation: (i) Fraud or misrepresentation by the Company subsequent to the inception of the

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Arrangement; or (ii) Nonpayment to the FIA of any amount due the FIA; or (iii) Material failure to comply
with the requirements of this Arrangement or with the written standards, procedures, or guidance issued
by FEMA or FIA relating to the NFIP and applicable to the Company. Under these specific conditions,
the FIA may require the transfer of administrative responsibilities and the transfer of data and records
as provided in Article V, Section C.1.a through d. If transfer is required, the unearned expenses retained
by the Company shall be remitted to the FIA. In such event, the Government will assume all obligations
and liabilities owed to policyholders under such policies, arising before and after the date of transfer. As
an alternative to transfer of the policies to the Government, the FIA will consider a proposal, if it is made
by the Company, for the assumption of responsibilities by another WYO Company as provided in Article
V, Section C.2.
E. 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, the Company agrees to transfer, and the Government 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 the Government 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 the Government 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 transfer of the policies to the Government, the FIA will consider a
proposal, if it is made by the Company, for the assumption of responsibilities by another WYO Company
as provided by Article V, Section C.2.
F. In the event the Act is amended, or repealed, or expires, or if the FIA is otherwise without authority to
continue the Program, financial assistance under this Arrangement may be canceled for any new or
renewal business, but the Arrangement shall continue for policies in force that shall be allowed to run
their term under the Arrangement.
Article VI—Information and Annual Statements
The Company shall furnish to FEMA such summaries and analyses 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 National Flood Insurance Act of 1968, as amended, in such form as the
FIA, in cooperation with the Company, shall prescribe. The Company shall be a property/casualty
insurer domiciled in a State or territory of the United States. Upon request, the Company shall file with
the FIA 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.
Article VII—Cash Management and Accounting
A. FEMA shall make available to the Company during the entire term of this Arrangement and any
continuation period required by FIA pursuant to Article V, Section C., the Letter of Credit provided for in
Article IV drawn on a repository bank within the Federal Reserve System upon which the Company may
draw for reimbursement of its expenses as set forth in Article IV 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 Letter of Credit funding is not available to meet current
Company obligations for flood policy claim payments issued, FIA shall direct the Company to
immediately suspend the issuance of loss payments until such time as adequate funds are available.
The Companies are not required to pay claims from their own funds in the event of such suspension.
B. The Company shall 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 the FIA.
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 FIA shall make a
provisional settlement of all amounts due or owing within three months of the expiration or termination
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of this Arrangement. This settlement shall include net premiums collected, funds drawn on the Letter of
Credit, and reserves for outstanding claims. The Company and FIA agree to make a final settlement,
subject to audit, of accounts for all obligations arising from this Arrangement within 18 months of its
expiration or termination, except for contingent liabilities that shall be listed by the Company. At the time
of final settlement, the balance, if any, due the FIA or the Company shall be remitted by the other
immediately and the operating year under this Arrangement shall be closed.
Article VIII—Arbitration
If any misunderstanding or dispute arises between the Company and the FIA with reference to any
factual issue under any provisions of this Arrangement or with respect to the FIA's non-renewal 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 shall be binding upon approval by the FIA. The Company and the FIA may agree on and appoint an
arbitrator who shall investigate the subject of the misunderstanding or dispute and make a
determination. If the Company and the FIA cannot agree on the appointment of an arbitrator, then two
arbitrators shall be appointed, one to be chosen by the Company and one by the FIA.
The two arbitrators so chosen, if they are unable to reach an agreement, shall select a third arbitrator
who shall act as umpire, and such umpire's determination shall become final only upon approval by the
FIA.
The Company and the FIA 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 FIA or the Company, shall be inadmissible as evidence in any subsequent proceedings in
any court of competent jurisdiction.
This Article shall indefinitely succeed the term of this Arrangement.
Article IX—Errors and Omissions
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. Further, (i) if the claim
against the Company is grounded in actions significantly outside the scope of this Arrangement or (ii) if
there is negligence by the agent, FEMA will not reimburse any costs incurred due to that negligence.
The Company will be notified in writing within thirty (30) days of a decision not to reimburse. In the event
the Company wishes to petition for reconsideration of the decision not to reimburse, the procedure in
Article III, Section D.3.d shall apply.
However, in the event that 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 shall not be paid by the Company from any portion of the premium
and any funds derived from any Federal Letter of Credit deposited in the bank account described in
Article II, section E. 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 X—Officials Not to Benefit
No Member or Delegate to Congress, or Resident Commissioner, shall be admitted to any share or part
of this Arrangement, or to any benefit that may arise therefrom; but this provision shall not be construed
to extend to this Arrangement if made with a corporation for its general benefit.

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Article XI—Offset
At the settlement of accounts the Company and the FIA shall 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 the FIA.
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 XII—Equal Opportunity
The Company shall not discriminate against any applicant for insurance because of race, color, religion,
sex, age, handicap, marital status, or national origin.
Article XIII—Restriction on Other Flood Insurance
As a condition of entering into this Arrangement, the Company agrees that in any area in which the
Administrator authorizes the purchase of flood insurance pursuant to the Program, all flood insurance
offered and sold by the Company to persons eligible to buy pursuant to the Program for coverages
available under the Program shall be written pursuant to this Arrangement.
However, this restriction applies solely to policies providing only flood insurance. It does not apply to
policies provided by the Company of which flood is one of the several perils covered, or where the flood
insurance coverage amount is over and above the limits of liability available to the insured under the
Program.
Article XIV—Access to Books and Records
The FIA 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. The FIA 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.
Article XV—Compliance With Act and Regulations
This Arrangement and all policies of insurance issued pursuant thereto shall be subject to the provisions
of the National Flood Insurance Act of 1968, as amended, the Flood Disaster Protection Act of 1973, as
amended, the National Flood Insurance Reform Act of 1994, and Regulations issued pursuant thereto
and all Regulations affecting the work that are issued pursuant thereto, during the term hereof.

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Article XVI—Relationship Between the Parties (Federal Government and Company) 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, i.e. , to assure 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.
Addendum to Appendix A to Part 62—Federal Emergency Management Agency, Federal Insurance and
Mitigation Administration, Financial Assistance/Subsidy Arrangement

Note: This Addendum to Appendix A to Part 62 applies only to a public entity risk-sharing
organization, an association of local governments, a State association of political subdivisions, a
State-sponsored municipal league, and any other intergovernmental risk-sharing pool for
covering public entity structures participating in the pilot project established in §62.24(b) that
permits intergovernmental risk-sharing pools to provide flood insurance to public entities to
cover public buildings.
(1) “Company” in the preceding Arrangement includes “a public entity risk-sharing organization, an
association of local governments, a State association of political subdivisions, a State-sponsored
municipal league, and any other intergovernmental risk-sharing pool for covering public entity
structures.”
(2) 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.
[62 FR 39910, July 24, 1997, as amended at 63 FR 32761, June 16, 1998; 64 FR 27709, May 21, 1999;
65 FR 36634, June 9, 2000; 66 FR 40917, Aug. 6, 2001; 67 FR 13550, Mar. 22, 2002; 67 FR 51769,
Aug. 9, 2002; 68 FR 52701, Sept. 5, 2003; 68 FR 75454, Dec. 31, 2003; 69 FR 23659, Apr. 30, 2004;
69 FR 45611, July 30, 2004; 73 FR 18187, 18188, Apr. 3, 2008]

Appendix B to Part 62—National Flood Insurance Program
top
A Plan to Maintain Financial Control for Business Written Under the Write Your Own Program.
(a) In general. Under the Write Your Own (WYO) Program, we (the Federal Insurance Administration
(FIA), Federal Emergency Management Agency (FEMA)) may enter into an arrangement with individual
private sector insurance companies licensed to engage in the business of property insurance. The
arrangement allows these companies—using their customary business practices—to offer flood
insurance coverage to eligible property owners. To assist companies in marketing flood insurance
coverage, the Federal Government will be a guarantor of flood insurance coverage for WYO policies
issued under the WYO Arrangement. To account for and ensure appropriate spending of any taxpayer
funds, the WYO companies and we will implement this Financial Control Plan (Plan). Only the
Administrator may approve any departures from the requirements of this Plan.
(b) Financial Control Plan. (1) The WYO Companies are subject to audit, examination, and regulatory
controls of the various States. Additionally, the operating department of an insurance company is
customarily subject to examinations and audits performed by the company's internal audit or quality
control departments, or both, and independent Certified Public Accountant (CPA) firms. This Plan will
use to the extent possible the findings of these examinations and audits as they pertain to business
written under the WYO Program.

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(2) This Plan contains several checks and balances that can, if properly implemented by the WYO
Company, significantly reduce the need for extensive on-site reviews of the Company's files by us or
our designee. Furthermore, we believe that this process is consistent with customary reinsurance
practices and avoids duplication of examinations performed under the auspices of individual State
Insurance Departments, NAIC Zone examinations, and independent CPA firms.
(c) Standards Committee established. (1) We establish in this Plan a Standards Committee for the WYO
Program to oversee the performance of WYO companies under this Plan and to recommend
appropriate remedial actions to the Administrator. The Standards Committee will review and
recommend to the Administrator remedies for any adverse action arising from the implementation of the
Financial Control Plan. Adverse actions include, but are not limited to, not renewing a particular
company's WYO Arrangement.
(2) The Administrator appoints the members of the Standards Committee, which consists of five (5)
members from FIA, one (1) member from FEMA's Office of Financial Management, and one (1)
member from each of the six (6) designated WYO Companies, pools, or other entities.
(3) A WYO company must—
(A) Have a biennial audit of the flood insurance financial statements conducted by a CPA firm at the
Company's expense to ensure that the financial data reported to us accurately represents the flood
insurance activities of the Company. The CPA firm must conduct its audits in accordance with generally
accepted auditing standards (GAAS) and the Government Auditing Standards issued by the Comptroller
General of the United States (commonly known as “yellow book” requirements). The Company must file
with us a report of the CPA firm's detailed biennial audit, and, after our review of the audit report, we will
convey our determination to the Standards Committee.
(B) Participate in a WYO Company/FIA Operation review. We will conduct a review of the WYO
Company's flood insurance claims, underwriting, customer service, marketing, and litigation activities at
least once every three (3) years. As part of these reviews, we will reconcile specific files with a listing of
transactions submitted by the Company under the Transaction Record Reporting and Processing Plan
(Part 5). We will file a report of the Operation Review with the Standards Committee (Part 7).
(C) Meet the recording and reporting requirements of the WYO Transaction Record Reporting and
Processing (TRRP) Plan and the WYO Accounting Procedures Manual. The National Flood Insurance
Program's (NFIP) Bureau and Statistical Agent will analyze the transactions reported under the TRRP
Plan and submit a monthly report to the WYO company and to us. The analysis will cover the timeliness
of the WYO submissions, the disposition of transactions that do not pass systems edits, and the
reconciliation of the totals generated from transaction reports with those submitted on the WYO
Company's reports. (Parts 2 and 6).
(D) Cooperate with FEMA's Office of Financial Management on Letter of Credit matters.
(E) Cooperate with us in the implementation of a claims reinspection program (Part 3).
(F) Cooperate with us in the verification of risk rating information.
(G) Cooperate with FEMA's Office of Inspector General on matters pertaining to fraud.
(d) This Plan incorporates by reference a separate document, “The Write Your Own Program Financial
Control Plan Requirements and Procedures,” that contains the following parts, each of which is
incorporated by reference into and is applicable to the Financial Control Plan:
(1) Part 1—Financial Audits, Audits for Cause, and State Insurance Department Audits;
(2) Part 2—Transaction Record Reporting and Processing Plan Reconciliation Procedures;

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(3) Part 3—Claims Reinspection Program;
(4) Part 4—Report Certifications and Signature Authorization;
(5) Part 5—Transaction Record Reporting and Processing Plan;
(6) Part 6—Write Your Own (WYO) Accounting Procedures Manual; and
(7) Part 7—Operation Review Procedures.
(e) Interested members of the public may obtain a copy of “The Write Your Own Program Financial
Control Plan Requirements and Procedures” by contacting the FEMA Distribution Center, P.O. Box
2012, Jessup, MD 20794.”
[64 FR 56176, Oct. 18, 1999]
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