44 CFR Part 62

Pt. 62

44 CFR Ch. I (10–1–11 Edition)

PART 62—SALE OF INSURANCE
AND ADJUSTMENT OF CLAIMS
Subpart A—Issuance of Policies
Sec.
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.

Subpart B—Claims Adjustment, Claims
Appeals, and Judicial Review
62.20
62.21
62.22

Claims appeals.
Claims adjustment.
Judicial review.

Subpart C—Write-Your-Own (WYO)
Companies
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.
nization Plan No. 3 of
CFR, 1978 Comp., p. 329;
1979, 44 FR 19367, 3 CFR,

4001 et seq,; Reorga1978, 43 FR 41943, 3
E.O. 12127 of Mar. 31,
1979 Comp., p. 376.

SOURCE: 43 FR 2573, Jan. 17, 1978, unless
otherwise noted. Redesignated at 44 FR 31177,
May 31, 1979.

Subpart A—Issuance of Policies
§ 62.1 Purpose of part.
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 Federal Insurance Administrator exercises his/
her responsibility regarding the manner in which claims for losses are paid.
§ 62.2 Definitions.
The definitions set forth in part 59 of
this subchapter are applicable to this
part.
§ 62.3 Servicing agent.
(a) Pursuant to sections 1345 and 1346
of the Act, the Federal Insurance Ad-

ministrator 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 Federal
Insurance Administrator and to accept
responsibility for delivery of policies
and payment of claims for losses as
prescribed by and at the discretion of
the Federal Insurance 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.

(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 Federal Insurance 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.
(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

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Federal Emergency Management Agency, DHS
to the
trator.

Federal

Insurance

Adminis-

[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.
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.

§ 62.20

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 ...........................

15
5

(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:
Premium amount

Commissions (percent)

First $2,000 of Premium ................
Excess of $2,000 ...........................

15
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.

[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]

[46 FR 13515, Feb. 23, 1981, as amended at 53
FR 15221, Apr. 28, 1988; 57 FR 19541, May 7,
1992]

§ 62.6 Minimum commissions.
(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

Subpart B—Claims Adjustment,
Claims Appeals, and Judicial
Review
§ 62.20

Claims appeals.

(a) Definitions.
Appeal decision means the disposition
of the appeal by the Federal Insurance
Administrator.

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§ 62.20

44 CFR Ch. I (10–1–11 Edition)

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.
(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:

DHS/FEMA, Mitigation Directorate,
Federal Insurance Administrator, 1800
South Bell Street, Arlington, VA 20598–
MS3010;
(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

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Federal Emergency Management Agency, DHS
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 Federal Insurance 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 Federal Insurance Administrator to gather more information.
The Federal Insurance Administrator will
ensure that all information necessary
to rule on the appeal has been provided
prior to making an appeal decision.
(3) The Federal Insurance Administrator will review the appeal documents, including any reinspection report, if appropriate. The Federal Insurance Administrator will provide specific information on what grounds the
claim was denied initially. The Federal
Insurance Administrator will provide

§ 62.22

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 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 oneyear 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; 74 FR 56123, Oct. 30,
2009]

§ 62.21 Claims adjustment.
(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.
(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-YourOwn 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

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§ 62.23

44 CFR Ch. I (10–1–11 Edition)

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
the Administrator of FEMA 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
§ 62.23

WYO Companies authorized.

(a) Pursuant to section 1345 of the
Act, the Federal Insurance Administrator may enter into arrangements
with individual private sector property
insurance companies or other insurers,
such as public entity risk sharing 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 in-

cluded 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 Federal Insurance Administrator under the Act.
(f) To facilitate the marketing of
flood insurance coverage under the
Program to policyholders of WYO Companies, the Federal Insurance 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 Federal Insurance Administrator has established ‘‘A Plan to
Maintain Financial Control for Business Written Under the Write Your

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Federal Emergency Management Agency, DHS
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 Federal Insurance 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 Federal Insurance 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,

§ 62.23

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.

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§ 62.23

44 CFR Ch. I (10–1–11 Edition)

(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 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 Chief Counsel
(OCC), will forward the cause of action
to OCC 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 investiga-

tions, 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 Chief 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

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Federal Emergency Management Agency, DHS
(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 Chief Financial Officer 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.
(7) Cooperate with DHS’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 Federal Insurance 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:

§ 62.23

(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

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§ 62.24

44 CFR Ch. I (10–1–11 Edition)

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.
(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.
[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; 74 FR 15341, Apr. 3,
2009]

§ 62.24 WYO participation criteria.
New companies or organizations eligible for the pilot project we describe
in paragraph (b) of this section that
seek to participate in the WYO program, as well as former WYO companies seeking to return to the WYO program, must meet standards for financial capability and stability for statistical and financial reporting and for
commitment to program objectives.
(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 State-sponsored 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;
(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

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Federal Emergency Management Agency, DHS
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
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.

Pt. 62, App. A

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 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

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Pt. 62, App. A

44 CFR Ch. I (10–1–11 Edition)

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
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 Federal Insurance 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 Federal Insurance Administrator in accordance with
the Act.
3. All such policies of insurance shall conform to the regulations prescribed by the
Federal Insurance Administrator pursuant
to the Act, and be issued on a form approved
by the Federal Insurance 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 Federal Insurance Administrator and
only where the Company is licensed by State

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Federal Emergency Management Agency, DHS
law to engage in the property insurance business.
5. The Federal Insurance 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.
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.’’,

Pt. 62, App. A

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 Federal Insurance 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 Federal Insurance
Administrator.
3. Special allocated loss expenses shall be
reimbursed to the Company in accordance
with guidelines issued by the Federal Insurance Administrator.
D. Loss Payments.

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Pt. 62, App. A

44 CFR Ch. I (10–1–11 Edition)

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 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 Federal Insurance 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 Chief Counsel
(‘‘OCC’’) 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 OCC
shall make a recommendation to the Federal
Insurance Administrator regarding whether
all or part of the litigation is significantly
outside the scope of the Arrangement.
b. In the event the Federal Insurance Administrator agrees with the determination of
the FEMA OCC under Article III, Section
D.3.a then the Company will be notified in
writing within thirty (30) days of the Federal
Insurance 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 OCC shall make a recommendation to
the Federal Insurance 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 Federal Insurance 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 Federal Insurance Administrator. The Federal
Insurance 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 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.

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Federal Emergency Management Agency, DHS
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 the
FEDERAL REGISTER and 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 accom-

Pt. 62, App. A

panied 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
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.

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Pt. 62, App. A

44 CFR Ch. I (10–1–11 Edition)

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 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

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Federal Emergency Management Agency, DHS
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.
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

Pt. 62, App. A

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 Federal Insurance 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.

The Company shall not discriminate
against any applicant for insurance because

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Pt. 62, App. B

44 CFR Ch. I (10–1–11 Edition)

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 risksharing 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
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 Federal Insurance 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.
(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 Federal Insurance Administrator. The Standards Committee will review and recommend to the Federal Insurance 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.

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Federal Emergency Management Agency, DHS
(2) The Federal Insurance Administrator
appoints the members of the Standards Committee, which consists of five (5) members
from FIA, one (1) member from FEMA’s Office of Chief Financial Officer, 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 DHS’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 incor-

Pt. 63

porated 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;
(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]

PART 63—IMPLEMENTATION OF
SECTION 1306(c) OF THE NATIONAL FLOOD INSURANCE ACT
OF 1968
Subpart A—General
Sec.
63.1 Purpose of part.
63.2 Condemnation in lieu of certification.
63.3 Requirement to be covered by a contract for flood insurance by June 1, 1988.
63.4 Property not covered.
63.5 Coverage for contents removal.
63.6 Reimbursable relocation costs.
63.7 Amount of coverage and deductible on
effective date of condemnation or certification.
63.8 Limitation on amount of benefits.
63.9 Sale while claim pending.
63.10 Demolition or relocation contractor to
be joint payee.
63.11 Requirement for a commitment before
October 1, 1989.
63.12 Setback and community flood plain
management requirements.

Subpart B—State Certification of Structures
Subject to Imminent Collapse
63.13 Purpose of subpart.
63.14 Criteria for State qualification to perform imminent collapse certifications.
63.15 State application for eligibility to certify structures subject to imminent collapse.
63.16 Review of State application by the
Federal Insurance Administrator.
63.17 Procedures and data requirements for
imminent collapse certifications by
States.

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