National Flood Insurance Program Installment Payment Plan, 87299-87309 [2024-25213]

Agencies

• Federal Emergency Management Agency
• DEPARTMENT OF HOMELAND SECURITY

[Federal Register Volume 89, Number 212 (Friday, November 1, 2024)]
[Rules and Regulations]
[Pages 87299-87309]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-25213]


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DEPARTMENT OF HOMELAND SECURITY

Federal Emergency Management Agency

44 CFR Parts 61 and 62

[Docket ID FEMA-2024-0030]
RIN 1660-AB16


National Flood Insurance Program Installment Payment Plan

AGENCY: Federal Emergency Management Agency, Department of Homeland 
Security (DHS).

ACTION: Final rule.

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SUMMARY: The National Flood Insurance Program (NFIP) is a voluntary 
program in which interested persons can purchase flood insurance for 
their property, if it is located in a community that participates in 
the NFIP by adopting and enforcing a set of minimum floodplain 
management requirements to reduce future flood damages. FEMA is 
revising the NFIP's regulations to offer NFIP policyholders the option 
of paying their annual flood insurance premium in monthly installments.

DATES: This rule is effective December 31, 2024.

ADDRESSES: The docket for this rulemaking is available for inspection 
using the Federal eRulemaking Portal at https://www.regulations.gov and 
can be viewed by following that website's instructions.

FOR FURTHER INFORMATION CONTACT: Kelly Bronowicz, Director, 
Policyholder Services Division, Federal Insurance Directorate, 
Resilience, Federal Emergency Management Agency, (202) 557-9488, 
[email protected].

SUPPLEMENTARY INFORMATION:

I. Background

A. The National Flood Insurance Program

    Congress created the National Flood Insurance Program (NFIP) 
through enactment of the National Flood Insurance Act of 1968 (NFIA) 
(title XIII of Pub. L. 90-448, 82 Stat. 572), 42 U.S.C. 4001 et seq. 
The NFIP is a Federal program enabling property owners in participating 
communities that adopt and enforce floodplain management regulations to 
purchase insurance as a protection against flood losses. A consumer may 
purchase an NFIP federally-backed flood insurance policy either: (1) 
directly from the Federal Government through a direct servicing agent 
(referred to as ``NFIP Direct''); or (2) from a participating private 
insurance company through the Write Your Own (WYO) Program. The 
Standard Flood Insurance Policy (SFIP) sets out the terms and 
conditions of insurance. See 44 CFR part 61, appendix A. FEMA 
establishes terms and conditions of coverage and sets premiums for 
coverage. The terms, coverage limits, and flood insurance premiums are 
the same whether a policy is purchased from the NFIP Direct or a 
private WYO insurance company in the WYO Program. See 44 CFR 62.23(a). 
Under the regulations in place prior to this rule change, FEMA required 
policyholders to pay their applicable SFIP annual premium in full at 
the time of application.\1\ 44 CFR 61.4(b). Requiring payment of the 
annual premium in full at the time of application reduced 
administrative costs to the program, and because of the seasonal nature 
of flooding, ensured the receipt of premium and exposure to risk

[[Page 87300]]

would align.\2\ In 2012, Congress passed the Biggert-Waters Flood 
Insurance Reform Act (BW-12), amending the NFIA to mandate that FEMA 
provide NFIP policyholders who were ``not required to escrow their 
premiums and fees for flood insurance as set forth under section 102 of 
the Flood Disaster Protection Act of 1973 (42 U.S.C. 4012a) \3\ with 
the option of paying their premiums annually or in more frequent 
installments.'' Sec. 100205(d), Public Law 112-141, 126 Stat 405. The 
Homeowner Flood Insurance Affordability Act of 2014 (HFIAA) amended BW-
12 and the NFIA regarding the frequency of the installments by striking 
the language ``annually or in more frequent installments'' and 
inserting ``annually or monthly'' instead. 42 U.S.C. 4001 et seq.; sec. 
11, Public Law 113-89, 128 Stat. 1025 (2014). The NFIP, having operated 
for several decades within an annual payment structure for premiums, 
provides payment compliance measures that will apply to the amended 
regulations discussed herein.\4\ The changes in this rule will bring 
FEMA's regulations into compliance with the nondiscretionary statutory 
mandate to provide policyholders with the option of paying their 
premiums annually or in monthly installments.
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    \1\ Policyholders must also pay policy fees and statutory 
surcharges at the time of application or policy renewal. See 44 CFR 
61.10.
    \2\ The NFIA requires FEMA to account for administrative costs 
when setting rates. See 42 U.S.C. 4014(a)(1)(B); 42 U.S.C. 
4015(b)(3)). See also 44 CFR 61.5(c) (2018) (restricting ability to 
refund premium due to seasonal nature of flooding).
    \3\ Pursuant to section 102 of the Flood Disaster Protection Act 
of 1973, federal entities responsible for regulating lenders must 
require federally backed lenders to allow borrowers who are required 
to purchase flood insurance as a condition of a loan to escrow flood 
insurance premiums ``with the same frequency as payments on the loan 
are made, for the duration of the loan.'' 42 U.S.C. 4012a(d). 
Mortgage payments are typically made monthly which means mortgagees 
who are required to have flood insurance already pay for their flood 
insurance premiums on a monthly basis.
    \4\ See e.g., Insufficient Premium or Rating Information at 44 
CFR part 61, appendix A(1), art. VII.D.
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B. Installment Plans Reduce Barriers To Purchasing Flood Insurance

    This rulemaking, in addition to fulfilling a statutory mandate, 
will also reduce barriers to purchasing flood insurance. In 
administering the NFIP, FEMA provides information to help communities 
and individuals better understand their flood risk. However, flood risk 
knowledge by itself is not enough if households cannot act to protect 
themselves. Providing an option for monthly installments will expand 
access to flood insurance to meet the evolving needs of the Nation. The 
option to pay in installments may also increase policyholders' 
budgetary flexibility by alleviating cash flow pressure, as they could 
use the deferred payment to address other monthly needs.
    Some consumers may lack the financial ability to pay the entire 
premium at one time.\5\ In this scenario, consumers will need to either 
finance their purchase of flood insurance through debt (e.g., interest-
bearing credit cards) or forego flood insurance protection entirely. 
Both outcomes can exacerbate negative financial outcomes following a 
flood disaster, as many consumers may lack adequate funds to recover. 
The installment plan relieves the immediate financial pressure on 
policyholders from paying the entire premium amount at one time.
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    \5\ See Lending Club, 9.3 Million More Consumers Ended 2022 
Living Paycheck to Paycheck Than in 2021, Jan. 30, 2022, available 
at https://ir.lendingclub.com/news/news-details/2023/9.3-Million-More-U.S.-Consumers-Ended-2022-Living-Paycheck-to-Paycheck-Than-in-2021/default.aspx (reporting that 64 percent of the 166 million 
consumers in the U.S. were living paycheck to paycheck in 2022) 
(last accessed October 7, 2024).
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    Finally, the ability to pay in installments may result in more 
policyholders retaining their flood insurance protection. Under the 
NFIP's current annual premium payment requirement, a policyholder who 
pays annually typically only interacts with their flood insurance 
coverage at the time of initial purchase or renewal. The policyholder 
must pay the full cost of flood insurance all at once, creating a 
different trade-off dynamic than when the cost is spread out. Facing a 
one-time annual payment, a policyholder may rationalize a decision to 
opt out of renewing on grounds that they perceive their risk to be low 
or that they will instead save the money spent on premium to self-fund 
repairs. In contrast, policyholders who make more frequent flood 
insurance payments will have an ongoing reminder that they are 
protected against flood, and may be more aware of flood alerts, news 
about flooding, and more accurately perceive their risk. At the time of 
renewal, the ability to pay in installments may support a decision to 
retain flood insurance.

II. Final Rule

    FEMA is revising 44 CFR parts 61 and 62 as follows to add an 
installment plan payment option for NFIP policies.

A. 44 CFR 61.4: Special Terms and Conditions

    Section 61.4(b) requires that flood insurance applicants pay their 
full policy premium at the time of application. FEMA is removing 
paragraph (b) because it conflicts with the option to pay by monthly 
installment plan. FEMA will retain paragraph (a) of Sec.  61.4, as that 
section is unrelated to installment plans, will undesignate paragraph 
(a), and will rename Sec.  61.4 ``Properties in violation of law, 
regulation or ordinance'' as this more accurately describes the 
contents of this revised section.

B. 44 CFR 61.10: Requirements for Issuance or Renewal of Flood 
Insurance Coverage

    Section 61.10 provides that FEMA will not issue or renew flood 
insurance unless FEMA receives: (a) the full amount due (including 
applicable premiums, surcharges, and fees); and (b) a complete 
application, including the information necessary to establish a premium 
rate for the policy, or submission of corrected or additional 
information necessary to calculate the premium for the renewal of the 
policy. FEMA is revising paragraph (a) to specify that FEMA will not 
issue or renew flood insurance unless it receives the full amount due, 
which is either presentment of the full annual premium, or presentment 
of the first of a series of monthly premium installment payments 
inclusive of all surcharges, fees, and assessments.
    The revised paragraph (a) requires the first payment to include all 
surcharges, fees, and assessments because the NFIA categorizes premiums 
separately from the surcharges, fees, and assessments of administrative 
expenses the agency is authorized to collect. See, e.g., 42 U.S.C. 
4014(a)(1)(B)(ii); 42 U.S.C. 4014(a)(1)(B)(iii). In 1990, Congress 
authorized the Federal Policy Fee (FPF) which helps pay for the 
administrative expenses of the program, including the floodplain 
management and mapping activities FEMA is required to fund.\6\ 42 
U.S.C. 4017a.; sec. 100212, Public Law 112-141, 126 Stat. 992. In BW-
12, Congress also authorized FEMA to establish and maintain a National 
Flood Insurance Program Reserve Fund to cover future claim and debt 
expenses, especially those from catastrophic disasters. 42 U.S.C. 
4014(a)(1)(B)(iii).
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    \6\ 42 U.S.C. 4014(a)(1)(B)(iii); see also Congressional 
Research Service, Introduction to the National Flood Insurance 
Program, R44593, pg. 18 available at https://crsreports.congress.gov/product/pdf/R/R44593/42 (last accessed 
October 7, 2024).
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    As a result of these statutory distinctions, FEMA currently 
separates the premium from the fees/surcharges/assessments in the 
annual bill, allowing policyholders to see their flood risk. Combining 
divided fees and surcharges with all the installment premium payments 
might distort the important

[[Page 87301]]

risk assessment signal to policyholders. See, e.g., 42 U.S.C. 
4014(a)(1)(B)(ii)-(iii). In this rulemaking, FEMA continues to separate 
the premium from the fees/surcharges/assessments and requires payment 
of the fees and surcharges up front instead of dividing them over the 
life of the policy. Fees and surcharges are both used to carry out 
certain mandatory operational activities, such as floodplain management 
and mapping, and fund the interest-earning National Flood Insurance 
Reserve Fund. 42. U.S.C. 4017(a); 42 U.S.C. 4017(c). Upfront payment of 
fees and surcharges with the initial premium payment will reduce 
administrative costs for the NFIP, a benefit to all policyholders, and 
align the NFIP with other commercial services familiar to policyholders 
(e.g., cable, where installation fees, taxes and the like are due up 
front).
    FEMA is moving to paragraph (a) the language currently in paragraph 
(b) that explains FEMA must receive a complete application or 
submission of corrected or additional information necessary to 
establish a premium.
    FEMA is revising paragraph (b) to include paragraphs (b)(1) and 
(2). The Standard Flood Insurance Policy currently provides that FEMA 
will reduce coverage on a policy if the premium it receives is not 
sufficient to buy the kinds and amounts of coverage requested. See 
e.g., 44 CFR part 61, appendix A(1), art. VII.D.2. This makes sense in 
the context of an annual premium payment but not for monthly payments; 
as such, FEMA has revised paragraph (b) to provide that FEMA will not 
reduce coverage or reform the policy for any policyholder who makes 
timely installment payments in accordance with the terms identified in 
paragraph (a)(1)(i)(B). If a policyholder misses an installment 
payment, current regulations provide an opportunity to cure, as a 
policyholder can provide any missed or additional payment and avoid 
reductions in coverage or policy reformation. See e.g., 44 CFR part 61, 
appendix A(1), art. VII.D.3.a.(1).
    Revised paragraph (b)(1) will further provide that in the event of 
a claim occurring prior to a policyholder completing all installment 
payments, the policyholder must remit the balance of the premium owed. 
The policyholder may settle their balance out of claim proceeds in 
accordance with the Standard Flood Insurance Policy. See e.g., 44 CFR 
part 61, appendix A(1), art. VII.D.3.a(3). FEMA is adding this language 
to avoid a scenario where the policyholder would consider withholding 
premium for reasons other than ability to pay, such as when they 
disagree with aspects of FEMA's claim handling, and FEMA would be 
forced to reduce coverage. See e.g., id. at appendix A(1), art. 
VII.D.2-3. Giving policyholders the option to pay their remaining 
premium out of their claims proceeds mitigates this risk.
    Revised paragraph (b)(2) will provide that FEMA will require 
payment in full for premiums in the next policy term for any 
policyholder who fails to make all installment payments in accordance 
with the terms identified in paragraph (a)(1).\7\ A significant portion 
of policyholders are subject to seasonal flooding risk, meaning that 
the likelihood they will file a claim is higher during certain months 
of the year. For example, many policyholders in Florida face the risk 
of flooding due to tropical storms and hurricanes, which typically 
occur from the start of June through November. The purpose of paragraph 
(b)(2) will be to ensure policyholders are not incentivized to miss 
payments or cancel their coverage before the end of the policy term 
(for instance, at the end of hurricane season), as this could 
potentially create adverse financial consequences for the NFIP.\8\
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    \7\ FEMA does not have discretion in whether to implement the 
statutory requirement to make installment payments available to NFIP 
policy holders. However, FEMA relies on 42 U.S.C. 4013(a) and 4015 
which provide the terms and conditions of insurability, including 
premium payments. Section 4013 includes a non-exhaustive list of 
items to include in regulations, such as ``any other terms and 
conditions relating to insurance coverage or exclusion which may be 
necessary to carry out the purposes of this chapter.'' Id. at 
4013(a)(6).
    \8\ For example, imagine a scenario where a policyholder's 
annual premium is $6,000, with $5,000 being the proportion of the 
risk attributable to hurricane season (June-November). If a 
policyholder obtains coverage in June but fails to pay any 
installments after November, the NFIP will have only collected 
$3,000 ($500 x 6) but will have provided a transfer of risk valued 
at $5,000. If this occurs on a large enough scale, it would 
negatively impact the NFIP's financial position and could require 
FEMA to increase rates among all policyholders.
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C. 44 CFR 62.23: WYO Companies Authorized

    Section 62.23 governs FEMA's WYO program. Paragraph (h) describes 
the procedures used by WYO companies in underwriting and servicing 
flood insurance policies. Paragraph (h)(7) currently authorizes WYO 
companies to offer premium payment plans so long as the net premium 
depository requirements specified under the NFIP/WYO Program accounting 
procedures are met. This subsection also states that a WYO company's 
cancellation of a policy for non-payment of premium will not produce a 
pro rata return of the net premium deposit to the WYO company. In 
effect, this subsection authorizes WYO companies to offer installment 
payment plans if they pay the full annual premium to the NFIP and bear 
the risk of policyholders' non-payment of installments.
    FEMA is revising paragraph (h)(7) to explain that WYO companies 
must offer premium payment plans under the terms prescribed by the FEMA 
Administrator in Sec.  61.10(a)(1). FEMA's current regulations have 
provided WYO companies the ability to offer payment via installment 
plan, but to date, no WYO company has chosen to offer it. Because FEMA 
has a statutory obligation to offer policyholders the option of paying 
their premium via monthly installment plan, FEMA will require WYO 
companies to offer installment plans consistent with this rule. See 42 
U.S.C. 4015. Requiring adherence to FEMA's installment plan terms will 
ensure that all eligible policyholders with federally backed flood 
insurance will be treated similarly.

III. Regulatory and Economic Analysis

A. Administrative Procedure Act

1. Good Cause Exemption
    The Administrative Procedure Act (APA) generally requires agencies 
to publish a notice of proposed rulemaking in the Federal Register and 
provide interested persons the opportunity to submit comments. See 5 
U.S.C. 553(b) and (c). The Administrative Procedure Act, 5 U.S.C. 
553(b)(3)(B), provides that, when an agency for good cause finds that 
public notice and comment procedures are impracticable, unnecessary, or 
contrary to the public interest, the agency may issue a rule without 
providing notice and an opportunity for public comment. FEMA has 
determined that there is good cause to issue this rulemaking without 
prior proposal and opportunity for comment. The amendments to the NFIA 
require FEMA to offer policyholders the option to pay their premiums in 
monthly installments and the agency lacks discretion to reach a 
different outcome in response to comment. This rule revises two 
sections in FEMA's prior regulations requiring policyholders to pay the 
full amount due on a flood insurance policy before it would issue a 
policy for flood insurance. FEMA previously interpreted the full amount 
due to include the annual premium, fees and surcharges, or the amount 
of premium due at the time of the claim. Previously, the regulations 
authorized, but did not require, WYO companies to offer the monthly 
installment plan option to policyholders. The

[[Page 87302]]

amendment to the NFIA requires FEMA and servicing agent, NFIP Direct, 
to offer the monthly installment plan as an option to policyholders. 
The regulations now accurately reflect the statutory language of the 
NFIA. Considering the statutory mandate, FEMA revises these sections 
without discretion.
2. Contract Exemption
    Section 553(a)(2) of the APA provides an exception to this prior 
notice and comment requirement for matters relating to public property, 
loans, grants, benefits, or contracts. The exemption covers both narrow 
``managerial'' proprietary decisions and broader proprietary ``matters 
of interpretation and policy.'' Alphapointe v. Dep't of Veterans 
Affairs, 416 F. Supp. 3d (D.D.C. 2019) (quoting Nat'l Wildlife Fed'n v. 
Snow, 561 F.2d 227, 231-32 (D.C. Cir. 1976)). The case law interpreting 
the requirement sets forth a relatively brief framework for analysis: 
namely, that the exempted subject matters are ``clearly and directly'' 
implicated in the rulemaking at issue. Humana of S.C., Inc. v. 
Califano, 191 U.S. App. D.C. 368, 590 F.2d 1070, 1082 (1978) (That the 
governmental function is not strictly ``proprietary,'' or the 
regulation's character is not ``mechanical,'' does not curtail section 
553(a)(2)'s permissive effect. Public policy may be sorely affected, 
and the wisdom of public input manifest, but the statutory exemption 
still prevails when ``grants,'' ``benefits,'' or other named subjects 
are ``clearly and directly'' implicated.).
    As described more fully in the background section, supra, this rule 
is clearly and directly related to contracts. The NFIP is a Federal 
program enabling property owners in participating communities to 
purchase insurance as a protection against flood losses. A consumer may 
purchase a SFIP either: (1) directly from the Federal Government 
through a direct servicing agent (referred to as ``NFIP Direct''); or 
(2) from a participating private insurance company through the Write 
Your Own (WYO) Program. The SFIP sets out the terms and conditions of 
insurance. See 44 CFR part 61, appendix A. FEMA establishes terms and 
conditions of coverage and sets premiums for coverage. The terms, 
coverage limits, and flood insurance premiums are the same whether 
purchased from the NFIP Direct or the WYO Program. See 44 CFR 62.23(a). 
For an eligible policyholder to obtain flood insurance from the NFIP, 
they must pay their premium and any surcharges, fees and assessments, 
and in exchange, they will be covered by the SFIP (i.e., an insurance 
contract). This rule provides an additional approach to payment of 
premium to complete the contractual relationship. This statutory 
construct is similar to other Federal programs in which Congress has 
authorized an agency to enter into contracts with individuals and 
upheld the application of the APA contract exemption to a subsequent 
agency policy change that ultimately resulted in a change in terms for 
individual contractees or policyholders. See, e.g., Rainbow Valley 
Citrus Corp. v. FCIC, 506 F.2d 467 (9th Cir. 1974) (Plaintiffs, three 
citrus growers in Arizona, sued the Federal Crop Insurance Corporation 
(FCIC) challenging the FCIC's decision to discontinue citrus insurance 
in their area, and argued that the decision was in violation of the 
notice and comment rulemaking requirement under the APA. The Court 
found in favor of the FCIC, citing to the APA contract exemption.); 
Housing Authority of the City of Omaha vs. U.S. Housing Authority, 468 
F.2d 1 (8th Cir. 1972) (Plaintiffs, local housing authorities, sued the 
Department of Housing and Urban Development (HUD) alleging that two 
circulars issued by HUD that required Plaintiffs to include certain 
tenant's rights in contracts the housing authorities entered into with 
renters was in violation of the notice and comment rulemaking 
requirement under the APA. The Court found in favor of HUD citing to 
the APA contract exemption.).
    FEMA acknowledges its general policy to provide for public 
participation in rulemaking unless it determines that circumstances 
warrant a departure from that general policy. 44 CFR 1.3(a) and (c). 
The circumstances presented here warrant such a departure. The statute 
requires FEMA to offer policyholders the option to pay in monthly 
installments and notice and opportunity for comment on the revisions is 
unnecessary because the agency lacks discretion to reach a different 
outcome regarding installment plan payments for policyholders in 
response to comment.

B. Executive Orders 12866, ``Regulatory Planning and Review,'' and 
13563, ``Improving Regulation and Regulatory Review''

    Executive Orders 12866 (Regulatory Planning and Review), as amended 
by Executive Order 14094 (Modernizing Regulatory Review), and 13563 
(Improving Regulation and Regulatory Review) direct agencies to assess 
the costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, reducing costs, harmonizing rules, and promoting flexibility.
    The Office of Management and Budget (OMB) has not designated this 
rule a significant regulatory action under section 3(f) of Executive 
Order 12866, as amended by Executive Order 14094. Accordingly, OMB has 
not reviewed this regulatory action.
Need for Regulation
    In BW-12 and the HFIAA, Congress amended the NFIA requiring FEMA to 
provide certain eligible policyholders with a federally backed SFIP, 
``the option of paying their premiums annually or monthly.'' Sec. 
100205(d), Public Law 112-141, 126 Stat. 405, 919 (2012) (codified at 
42 U.S.C. 4015(g)), as amended by sec. 11(a), Public Law 113-89, 128 
Stat. 1020, 1025 (2014). Currently, FEMA and WYO companies bill their 
customers' NFIP premiums on an annual basis as a lump sum. This rule 
will fulfill the statutory requirement by allowing residential and 
commercial policyholders to pay their premiums in 11 to 12 payments 
over the course of the year.\9\
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    \9\ Customers will make 11 payments in their first year due to a 
30-day waiting period for their initial enrollment in the NFIP. 
Following years will have 12 monthly payments.
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    FEMA, through its subcomponent the Federal Insurance Directorate, 
is promulgating this rule to implement a monthly installment payment 
plan option for policyholders not currently paying flood insurance 
premiums through escrow.\10\ The installment plan option is available 
for residential and non-residential SFIP policyholders.
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    \10\ Mortgage lenders set aside a portion of monthly mortgage 
payments to cover annual costs such as property taxes and 
homeowners' insurance premiums.
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    A monthly installment payment plan is in keeping with the property 
and casualty insurance industry standard. Aligning with these consumer 
expectations will make it easier for consumers to consider acquiring 
flood insurance. Additionally, some consumers may lack the financial 
ability to pay the entire premium at one time. The option to pay in 
installments may increase policyholders' budgetary flexibility by 
alleviating cash flow pressure, as they could use the deferred payment 
to address other needs.

[[Page 87303]]

Affected Population
    NFIP enables homeowners, renters, and businesses in participating 
communities to purchase Federal insurance protection against losses 
from floods. Communities participate in the NFIP after they agree to 
adopt and enforce minimum floodplain development regulations designed 
to reduce future flood risk in Special Flood Hazard Areas (SFHAs).
    As of April 30, 2024, according to FEMA's PIVOT database,\11\ there 
were 4,664,515 NFIP policies in force, including 3,248,737 residential 
Dwelling Form Policies, 290,800 Commercial Policies, 1,115,443 
Condominium Association Policies and 9,535 Group Flood Insurance 
Policies (GFIPs). GFIPs are not included in the population of 
policyholders that will pay monthly,\12\ which means the affected 
population of potentially eligible individual policies is 4,654,980 
(3,248,737 + 290,800 + 1,115,443).
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    \11\ FEMA's PIVOT database contains NFIP information. Please 
note that PIVOT is the name of the database, and it is not an 
acronym.
    \12\ A GFIP is a policy covering all individuals named by a 
State as recipients of assistance under FEMA's Individual Assistance 
(IA) program. 44 CFR 61.17(a). FEMA or the State pays the premium on 
behalf of recipients by withholding the applicable amount from the 
IA ``other needs assistance'' (ONA) award for which recipients are 
eligible. 44 CFR 61.17(b) and 206.119. ONA is provided to recipients 
as a one-time award, i.e., on a non-continuing basis; as such, FEMA 
will continue to make those one-time payments at the time of ONA 
award.
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    FEMA expects the number of individual policyholders who will make 
the change from paying annually to paying monthly will be much less 
than the total eligible affected population. FEMA estimates that 45 
percent \13\ of potentially eligible individual policyholders are 
residential mortgage holders who already pay their NFIP premiums on a 
regular basis (generally monthly) into an escrow account as required 
under section 102 of the Flood Disaster Protection Act of 1973. FEMA 
does not have enough information to estimate how many condominium 
association policyholders might switch from an annual payment to a 
monthly payment. Condominium associations typically include flood 
insurance payments in their condominium association fees \14\ which 
means such associations typically collect the premium before the 
renewal premium is due. FEMA does not expect condo associations to 
utilize installment plans because these associations will have the 
available cash reserves to pay a yearly premium. Switching to monthly 
payments would increase uncertainty and unnecessarily complicate their 
accounting practices.
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    \13\ Derived by subtracting the 1,794,911 policies without a 
mortgage from the 3,248,737 total Dwelling Form Policies and finding 
the percent of that whole [(3,248,737-1,794,911) / 3,248,737].
    \14\ Residential Condominium Building Association Policies 
(RCBAP) are sold to the condominium associations to cover the whole 
building. Condominium associations pass on their costs to their 
members in the form of condo fees https://www.fema.gov/pdf/nfip/manual201110/content/06condo.pdf, pg.1.
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    Excluding these two populations from the analysis decreases the 
total population from approximately 4.7 million policyholders to 1.9 
million policyholders. Specifically, according to PIVOT data, in 2023 
there were 1,794,911 residential policyholders who did not have a 
mortgage \15\ and were not condominium associations who would most 
likely opt for installment plans as they must currently make an annual 
lump sum payment. Additionally, FEMA expects 76,876 small businesses 
and houses of worship (according to PIVOT data) to change to monthly 
payment installments because they typically have smaller cash reserves 
on hand.\16\ This makes a total of 1,871,787 (1,794,911 + 76,876) out 
of 4,664,515 policyholders that will utilize monthly installment plans 
to pay their flood insurance premiums. For the purposes of this 
analysis, FEMA assumed that all eligible policyholders, excluding 
residential mortgage holders, condominium associations, and larger 
commercial policyholders will utilize installment plans. This leaves 
1,453,826 mortgage-paying residential policyholders, 1,115,443 
condominium association policyholders, and 211,175 commercial property 
policyholders that are not expected to opt for installment plans. This 
may overestimate the number of policyholders paying in installments and 
the overall economic impact of this rule.
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    \15\ This group includes condominium owners that have purchased 
flood insurance for their individual units outside of their 
condominium association.
    \16\ On average, small businesses hold $12,000 in cash. JP 
Morgan Chase & Co., Cash is King: Flows, Balances, and Buffer Days 
(jpmorganchase.com) available at https://www.jpmorganchase.com/institute/research/small-business/report-cash-flows-balances-and-buffer-days#finding-2 (last accessed October 7, 2024).
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Baseline and Affected Population
    Following OMB Circular A-4 guidance, FEMA assessed impacts of this 
rule against a no-action baseline. The no-action baseline considers 
what the world will look like without this rule. Accordingly, measuring 
the rule against a no-action baseline shows the effects of the rule as 
compared to current FEMA practice, because FEMA has not implemented the 
option to pay flood insurance premiums through installment plans. 
Currently, SFIPs are issued on a one-year term, and policyholders must 
pay full annual premiums at the inception of policy coverage and at 
annual renewal.
    FEMA used policies-in-force data from 2023 to 2024 \17\ to estimate 
the number of affected NFIP policyholders. During this period, the 
number of NFIP policies was 4,720,559 on April 1, 2023 and 4,672,375 
policies on April 1, 2024. FEMA was not able to forecast an increase in 
currently uninsured property owners purchasing flood insurance once the 
installment plan option is available. However, FEMA anticipates the 
flexibility provided through implementation of an installment payment 
plan will likely result in greater retention of policyholders and 
incentivize greater participation in the NFIP.
---------------------------------------------------------------------------

    \17\ The data was limited due to the implementation of a new 
risk rating approach on April 1, 2023. Because of these changes, 
pre-2023 data are not directly comparable to data after April 1, 
2023.
---------------------------------------------------------------------------

    Flood insurance premiums are subject to change year-to-year due to 
any number of factors that may cause unexpected increases in yearly 
premiums. The option to pay in installments may relieve some of the 
burden of changes in flood insurance premiums. Due to the numerous 
factors affecting premium rates and the rate of flood insurance uptake 
nationwide, FEMA is unable to forecast the impact that the availability 
of installment plans may have on affordability or future participation 
in the NFIP.
Costs
    This rule will result in start-up (upfront) and annual costs to 
FEMA and WYO insurance companies. Over 10 years, FEMA estimates a total 
cost of $34,181,503 undiscounted. The following is a breakdown of the 
specific costs to FEMA,WYO companies, and NFIP Policyholders.
    Federal Costs: FEMA expects to incur development costs to adapt 
current NFIP systems to handle the administration of installment plans 
and payments that will be processed by the existing pay.gov system.\18\ 
Based on estimates from FEMA subject matter experts, development work 
will require one General Schedule (GS)-13 Step 5 and eight GS-12 Step 5 
equivalent contractors for a total of 700 hours. According to the 
Office of Personnel Management (OPM), hourly wage rates in the 
Washington-Baltimore-Arlington locality for GS-13 Step 5 is $60.83 and

[[Page 87304]]

GS-12 Step 5 staff is $51.15.\19\ FEMA assumes the contractors would 
have equivalent salaries to their respective GS levels. The combined 
hourly staff wage rate equals $470.03 ((1 x $60.83) + (8 x $51.15)). 
Additionally, FEMA adds a 1.45 wage multiplier to the wage rate to 
account for the full cost of employment, making it $681.54 ($470.03 x 
1.45) per hour for 700 hours for a total of $477,078 (((1 x $60.83) + 
(8 x $51.15)) x 1.45 x 700).\20\
---------------------------------------------------------------------------

    \18\ Pay.gov is a website where users can fill out a government 
or pay a bill to a U.S. Government agency. See https://www.pay.gov/public/about-us/pay-gov (last accessed October 7, 2024).
    \19\ OPM 2023 Pay and Leave Tables for the Washington-Baltimore-
Arlington, DC-MD-VA-WV-PA locality, available at: https://www.opm.gov/policy-data-oversight/pay-leave/salaries-wages/salary-tables/23Tables/html/DCB_h.aspx (last accessed October 7, 2024).
    \20\ The national wage multiplier is calculated by dividing 
total compensation for all workers of $42.48 by wages and salaries 
for all workers of $29.32 per hour yielding a benefits multiplier of 
approximately 1.45.U.S. Bureau of Labor Statistics (BLS), Employer 
Costs for Employee Compensation, Table 1. Available at https://www.bls.gov/news.release/archives/ecec_03172023.pdf. (last accessed 
October 7, 2024).
---------------------------------------------------------------------------

    To create marketing materials, FEMA subject matter experts estimate 
a team of four GS-14 level employees working for 40 hours each on this 
project. Using the prior methodology, OPM wage rate for a GS-14 Step 5 
is $71.88 per hour and including the wage multiplier equals $104.23 
($71.88 x 1.45) per hour for a total cost of $16,677 ($104.23 x 4 staff 
x 40 hours). FEMA expects a total of $493,755 (477,078 + $16,677) for 
startup costs.
    For ongoing costs, FEMA expects to hire two additional GS-13 Step 5 
employees to handle the installment plan program full time. This would 
cost $368,152 (2 GS-13 Step 5 x $126,949 annual salary x 1.45) per 
year.\21\ These costs include the cost for FEMA developing and testing 
guidance materials, systems, trainings, and marketing content as well 
as ongoing support for managing installment plans. FEMA anticipates 
that it will largely use existing NFIP infrastructure and resources to 
support implementation of installment plans and that annual costs 
associated with maintaining installment plan policies are comparable to 
annual policies and thus do not represent an additional cost.
---------------------------------------------------------------------------

    \21\ OPM 2023 Pay and Leave Tables for the Washington-Baltimore-
Arlington, DC-MD-VA-WV-PA locality, available at https://www.opm.gov/policy-data-oversight/pay-leave/salaries-wages/salary-tables/pdf/2023/DCB.pdf (last accessed October 7, 2024).
---------------------------------------------------------------------------

    WYO Costs: FEMA's current regulations have provided WYO companies 
the ability to offer payment via installment plan, but to date, no WYO 
company has chosen to offer it. Because FEMA has a statutory obligation 
to offer policyholders the option of paying their premium via monthly 
installment plan, FEMA will require WYO companies to offer installment 
plans consistent with this rule. WYO insurers will use their customary 
business practices to secure monthly payment of flood insurance 
premiums from policyholders.\22\ However, for many WYO insurers, flood 
insurance premiums are handled separately and will require additional 
systems or modification of existing systems and infrastructure to 
support flood insurance installment payment plans. FEMA does not have 
access to internal WYO insurance company data on their information 
technology (IT) costs. However, based on FEMA's experience with 
managing IT costs for insurance purposes, FEMA estimates eight WYO 
vendors \23\ to each incur $200,000 in costs for updating their 
internal systems for a total upfront starting cost of $1,600,000 
($200,000 x 8) in year 1.\24\ Based on feedback from WYO vendors and 
their finance teams, FEMA expects each of the eight WYO vendors to hire 
2 additional staff members for the support and operation of installment 
plan systems, incurring $1,986,152 (8 x 2 x $85,610 x 1.45) per 
year.\25\ Bureau of Labor Statistics data regarding insurance 
underwriters is used as a proxy for the salary of the additional hires.
---------------------------------------------------------------------------

    \22\ ``Write Your Own'' refers to private insurance companies 
that work with FEMA in providing NFIP policies and are able to write 
and service NFIP policies in their own names.
    \23\ There are 8 vendors (i.e., companies) that support the 50+ 
WYOs. All but one WYO work with an outside company to support them 
in operational work such as management of systems, customer 
services, financial reporting, servicing of policies, etc.
    \24\ Implementation costs are derived from an estimate of IT 
infrastructure and development costs FEMA anticipates would be borne 
by WYO vendors servicing payments but paid for by WYO companies.
    \25\ Based on 2023 BLS mean salary data for Insurance 
Underwriters (SOC 13-2053), available at: https://www.bls.gov/oes/2023/may/oes132053.htm (last accessed October 7, 2024).
---------------------------------------------------------------------------

    Policyholder Costs: FEMA estimates that there will be no additional 
financial costs to policyholders.\26\ However, it may result in a small 
amount of time burden to make 12 installment payments in lieu of one 
annual payment. Policyholders will make payments via automatic payments 
from a bank account, debit card, or credit card through the pay.gov 
system.\27\ FEMA estimates a total burden hour cost of $8,544,708 for 
NFIP policyholders to enroll in pay.gov. This estimate is based on an 
expectation that pay.gov account creation takes 6 minutes on average 
\28\ for a total of 187,179 hours for the estimated 1,871,787 
policyholders that will use the system. At a fully loaded wage rate of 
$45.65 ($31.48 x 1.45) per hour 29 30 for all workers, this 
makes a total of $8,544,708 one-time cost for account creation. 
Policyholders that do not have access to pay.gov payment methods will 
not be eligible. Policyholders that decide to switch to installment 
plans will receive their information via already existing marketing 
sources and thus will not incur additional familiarization costs.
---------------------------------------------------------------------------

    \26\ Installment plans will be implemented by FEMA using 
operational dollars within the NFIP and the WYO vendors will use 
their expense allowance received under their financial agreements 
with FEMA. The current financial agreements include provisions for 
WYOs to implement installment plans.
    \27\ All policyholders, NFIP Direct and WYO, will go through 
pay.gov to make their installment payment.
    \28\ Dep't. of Treasury, OMB Approval No.1530-0071, available at 
https://www.reginfo.gov/public/do/PRAViewICR?ref_nbr=202308-1530-001 
(last accessed October 7, 2024).
    \29\ Information on the mean wage rate from the U.S. Department 
of Labor, Bureau of Labor Statistics is available at: https://www.bls.gov/oes/2023/may/oes_nat.htm (last accessed October 7, 
2024).
    \30\ The national wage multiplier is calculated by dividing 
total compensation for all workers of $45.42 by wages and salaries 
for all workers of $31.29 per hour yielding a benefits multiplier of 
approximately 1.45.Bureau of Labor Statistics, Employer Costs for 
Employee Compensation, Table 1, available at: https://www.bls.gov/news.release/archives/ecec_03132024.pdf (last accessed October 7, 
2024).
---------------------------------------------------------------------------

    Table 1 shows FEMA, WYO, and policyholder estimated costs over a 
10-year period. The total cost over 10 years equals $34,181,503 
undiscounted and $31,577,602 discounted at 2 percent in 2023 dollars.

                                       Table 1--Total Costs Over 10 Years
                                                     [2023$]
----------------------------------------------------------------------------------------------------------------
                                                                                                   Annual costs
              Year                Policyholder     FEMA costs     WYO insurance     Total costs    discounted at
                                      costs                       company costs    undiscounted         2%
----------------------------------------------------------------------------------------------------------------
1..............................      $8,544,708        $861,907       $3,586,152     $12,992,767     $12,738,007

[[Page 87305]]

 
2..............................               0         368,152        1,986,152       2,354,304       2,262,884
3..............................               0         368,152        1,986,152       2,354,304       2,218,513
4..............................               0         368,152        1,986,152       2,354,304       2,175,013
5..............................               0         368,152        1,986,152       2,354,304       2,132,366
6..............................               0         368,152        1,986,152       2,354,304       2,090,555
7..............................               0         368,152        1,986,152       2,354,304       2,049,563
8..............................               0         368,152        1,986,152       2,354,304       2,009,376
9..............................               0         368,152        1,986,152       2,354,304       1,969,976
10.............................               0         368,152        1,986,152       2,354,304       1,931,349
                                --------------------------------------------------------------------------------
    Total......................       8,544,708       4,175,275       21,461,520      34,181,503      31,577,602
                                --------------------------------------------------------------------------------
    Annualized.................  ..............  ..............  ...............  ..............       3,515,425
----------------------------------------------------------------------------------------------------------------

Benefits
    The benefits from a monthly installment plan option will include 
increased NFIP policy retention and improved flexibility to 
policyholders. Allowing policyholders the option of making flood 
insurance payments in monthly installments rather than a single annual 
payment provides increased budgetary flexibility on how to use the 
deferred payment which may be especially relevant for policyholders 
unable to pay a lump-sum annual premium or otherwise experiencing a 
financial burden thereby alleviating some cash flow pressure. FEMA 
believes offering installment plans will help policyholders remain in 
the program. Policyholder retention also maintains the societal and 
policyholder benefits associated with the NFIP in proportion to those 
policyholders retained. FEMA does not have data available to estimate 
the number of policyholders that will remain in the program due to the 
installment plan option, or to project any growth in the number of 
policies.
    Providing a monthly installment brings the NFIP into alignment with 
other insurance (auto, homeowners) that typically allow monthly 
payments, making the flood insurance product more attractive to 
potential policyholders, and potentially increasing participation in 
the NFIP.
Transfers
    FEMA does not expect transfers from this rule since it does not 
impact what policyholders pay in premiums, but the timing of when they 
pay. Policyholders may make investment gains or interest savings based 
on retaining money throughout the year that they would have spent on a 
lump sum payment. However, FEMA is unable to estimate if and how 
policyholders will adjust their behavior based on the ability to pay in 
installments.
Alternatives Considered
    FEMA did not consider any alternatives to issuing this regulation 
allowing monthly installments. BW-12 and HFIAA collectively mandated 
FEMA to promulgate a rule allowing the option of paying flood insurance 
premiums either annually or monthly. As such, FEMA must pursue a 
regulatory action to accomplish this requirement. While FEMA could have 
set a different premium schedule in addition to monthly payments (i.e., 
quarterly or biannual), FEMA considers monthly payments to be the most 
appropriate payment schedule that poses the least burden on 
policyholders.
Conclusion
    In summary, FEMA quantitatively estimated the impacts of the rule. 
This includes estimating the costs to FEMA, WYO companies, and 
policyholders. In terms of benefits, FEMA anticipates the 
implementation of an installment payment plan will result in greater 
retention of policyholders and incentivize greater participation in the 
NFIP. Transfer payments will be minimal. This rule fulfills a statutory 
requirement in a cost-effective manner and warrants implementation. For 
the future 10-year period, the estimated costs of the rule are 
$34,181,503 undiscounted. The Present Value (PV), discounted at 2 
percent, is $31,577,602 ($3,515,425 annualized). The primary benefit 
associated with installment plans is increased retention and potential 
increased participation in the NFIP.

C. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) (5 U.S.C. 601-612) and section 
213(a) of the Small Business Regulatory Enforcement Fairness Act of 
1996, Public Law 104-121, 110 Stat. 847, 858-9 (Mar. 29, 1996) (5 
U.S.C. 601 note), require that special consideration be given to the 
effects of regulations on small entities. The RFA applies only when an 
agency is ``required by section 553 . . . to publish general notice of 
proposed rulemaking for any proposed rule.'' 5 U.S.C. 603(a). An RFA 
analysis is not required for this rulemaking because the Regulatory 
Flexibility Act is inapplicable to final rules issued pursuant to an 
exemption from notice and comment. FEMA issues the NFIP Installment 
Plans rulemaking pursuant to the 5 U.S.C. 553(a)(2), for all rules 
relating to ``public property, loans, grants, benefits or contracts,'' 
as well as 5 U.S.C. 553(b)(3)(B), which provides that, when an agency 
for good cause finds that public notice and comment procedures are 
impracticable, unnecessary, or contrary to the public interest, the 
agency may issue a rule without providing notice and an opportunity for 
public comment.

D. Unfunded Mandates Reform Act

    The Unfunded Mandates Reform Act of 1995, 2 U.S.C. 658, 1501-1504, 
1531-1536, 1571, pertains to any rulemaking which is likely to result 
in the promulgation of any rule that includes a Federal mandate that 
may result in the expenditure by State, local, and Tribal governments, 
in the aggregate, or by the private sector, of $100 million (adjusted 
annually for inflation) or more in any one year. If the rulemaking 
includes a Federal mandate, the Act requires an agency to prepare an 
assessment of the anticipated costs and benefits of the Federal 
mandate. The Act also pertains to any regulatory requirements that 
might significantly or uniquely affect small governments. Before 
establishing

[[Page 87306]]

any such requirements, an agency must develop a plan allowing for input 
from the affected governments regarding the requirements.
    FEMA has determined that this rulemaking will not result in the 
expenditure by State, local, and Tribal governments, in the aggregate, 
nor by the private sector, of $100,000,000 or more in any one year as a 
result of a Federal mandate, and it will not significantly or uniquely 
affect small governments. Therefore, no actions are deemed necessary 
under the provisions of the Unfunded Mandates Reform Act of 1995 
(UMRA).
    Additionally, regulations are only reviewable under UMRA when an 
agency has published a notice of proposed rulemaking as defined by 5 
U.S.C. 553(b). See 2 U.S.C. 658(10); 5 U.S.C. 601(2). FEMA is not 
required to publish a notice of proposed rulemaking; thus, this rule is 
exempt from UMRA's requirements pertaining to the preparation of a 
written statement.

E. National Environmental Policy Act of 1969 (NEPA)

    Section 102 of the National Environmental Policy Act of 1969 
(NEPA), Public Law 91-190, 83 Stat. 852 (Jan. 1, 1970) (42 U.S.C. 4321 
et seq.), as amended, requires Federal agencies to evaluate the impacts 
of a proposed major Federal action that significantly affect the 
quality of the human environment, consider alternatives to the proposed 
action, provide public notice and opportunity to comment, and properly 
document its analysis. DHS and its component agencies analyze proposed 
actions to determine whether NEPA applies to those actions and, if so, 
what level of documentation and analysis is required. 40 CFR 1501.3.
    DHS Directive 023-01, Rev. 01 and DHS Instruction Manual 023-01-
001-01, Rev. 01 (Instruction Manual) establish the policies and 
procedures DHS and its component agencies use to comply with NEPA and 
the Council on Environmental Quality (CEQ) regulations for implementing 
the procedural requirements of NEPA codified at 40 CFR parts 1500 
through 1508. The CEQ regulations allow Federal agencies to establish, 
in their NEPA implementing procedures, with CEQ review and concurrence, 
categories of actions (``categorical exclusions'' or ``Catex'') that 
experience has shown normally do not, individually or in the aggregate, 
have a significant effect on the human environment and, therefore, do 
not require preparation of an environmental assessment or environmental 
impact statement. 40 CFR 1501.4, 1507.3(c)(8), 1508.1(e). DHS 
Instruction Manual, Appendix A, lists the categorical exclusions 
established by DHS in conformity with CEQ's regulations. Under DHS NEPA 
implementing procedures, for an action to be categorically excluded it 
must satisfy each of the following conditions: (1) the entire action 
clearly fits within one or more of the categorical exclusions; (2) the 
action is not a piece of a larger action; and (3) no extraordinary 
circumstances exist that create the potential for a significant 
environmental effect. Instruction Manual, section V.B. (2) (a-c).
    This rulemaking is a major Federal action subject to NEPA. Under 
DHS Instruction Manual 023-01-001-01, Appendix A, DHS has established 
that certain categories of rulemaking, to include (1) the promulgation 
of rules that are of a strictly administrative or procedural nature and 
(2) rules that implement, without substantive change, statutory or 
regulatory requirements, meet the criteria for categorical exclusion 
and therefore do not require preparation of an environmental assessment 
or environmental impact statement. (Catex A3(a) and (b)). This 
rulemaking satisfies the conditions for categorical exclusion 
established under DHS Instruction Manual, section V.B.(2) and Appendix 
A because: (1) the final rule is both strictly administrative in nature 
and is intended only to implement, without substantive change, the 
statutory requirement that FEMA offer policyholders the option of 
paying their annual flood insurance premiums in monthly installments; 
(2) the impact of the final rule affects only payment schedules 
available under the NFIP and is not part of a larger action that would 
impact other FEMA programs; and (3) the final rule will not result in 
any extraordinary circumstances that would make application of a 
categorical exclusion inappropriate or trigger the need for additional 
analysis. See DHS Instruction Manual 023-01-001-01 V(B)(2). FEMA has 
therefore determined that this rulemaking is categorically excluded 
under both Catex A3(a) and (b) of DHS Instruction Manual 023-01-001-01, 
Appendix A and no further NEPA analysis or documentation is required.

F. Privacy Act/E-Government Act

    Under the Privacy Act of 1974, 5 U.S.C. 552a, an agency must 
determine whether implementation of a proposed regulation will result 
in a system of records. A ``record'' is any item, collection, or 
grouping of information about an individual that is maintained by an 
agency, including, but not limited to, his/her education, financial 
transactions, medical history, and criminal or employment history and 
that contains his/her name, or the identifying number, symbol, or other 
identifying particular assigned to the individual, such as a finger or 
voice print or a photograph. 5 U.S.C. 552a(a)(4). A ``system of 
records'' is a group of records under the control of an agency from 
which information is retrieved by the name of the individual or by some 
identifying number, symbols, or other identifying particular assigned 
to the individual. An agency cannot disclose any record that is 
contained in a system of records except by following specific 
procedures. The E-Government Act of 2002, 44 U.S.C. 3501 note, also 
requires specific procedures when an agency takes action to develop or 
procure information technology that collects, maintains, or 
disseminates information that is in an identifiable form. This Act also 
applies when an agency initiates a new collection of information that 
will be collected, maintained, or disseminated using information 
technology if it includes any information in an identifiable form 
permitting the physical or online contacting of a specific individual.
    In accordance with DHS policy, FEMA has completed a Privacy 
Threshold Analysis (PTA) for this rule. DHS/FEMA has determined that 
this rulemaking does not affect the 1660-0006 OMB Control Number's 
current compliance with the E-Government Act of 2002 or the Privacy Act 
of 1974, as amended. As a result, DHS/FEMA has concluded that the 1660-
0006 OMB Control Number is covered by the DHS/FEMA/PIA-011--National 
Flood Insurance Program Information Technology Systems (NFIP ITS) 
Privacy Impact Assessment (PIA). Additionally, DHS/FEMA has decided 
that the 1660-0006 OMB Control Number is covered by the DHS/FEMA-003 
National Flood Insurance Program Files, 79 FR 28747, May 19, 2014, 
System of Records Notice.

G. Paperwork Reduction Act of 1995

    Under the Paperwork Reduction Act of 1995 (PRA), as amended, 44 
U.S.C. 3501-3520, an agency may not conduct or sponsor, and a person is 
not required to respond to, a collection of information unless the 
agency obtains approval from OMB for the collection and the collection 
displays a valid OMB control number. See 44 U.S.C. 3506,3507. This 
rulemaking does not call for a new collection of information under the 
PRA. There is an existing collection of information, 1660-0006,

[[Page 87307]]

the NFIP Policy Forms, Public Law 90-448 (1968) (expanded by Pub. L. 
93-234 (1973)), included in this rulemaking. BW-12 and HFIAA required 
modifications to the NFIP. Program changes resulting from BW-12 and 
HFIAA necessitated revision of the NFIP Policy Forms to assure proper 
classification of properties for rating purposes and to rate and issue 
the policies in accordance with the provisions of BW-12 and HFIAA. 
However, this rule will not impact this collection because the forms 
have already been updated as needed.

H. Executive Order 13175, ``Consultation and Coordination With Indian 
Tribal Governments''

    Executive Order 13175, ``Consultation and Coordination with Indian 
Tribal Governments,'' 65 FR 67249 (Nov. 9, 2000), applies to agency 
regulations that have Tribal implications, that is, regulations that 
have substantial direct effects on one or more Indian Tribes, on the 
relationship between the Federal Government and Indian Tribes, or on 
the distribution of power and responsibilities between the Federal 
Government and Indian Tribes. Under this Executive order, to the extent 
practicable and permitted by law, no agency shall promulgate any 
regulation that has Tribal implications, that imposes substantial 
direct compliance costs on Indian Tribal governments, and that is not 
required by statute, unless funds necessary to pay the direct costs 
incurred by the Indian Tribal government in complying with the 
regulation are provided by the Federal Government or the agency 
consults with Tribal officials. Nor, to the extent practicable by law, 
may an agency promulgate a regulation that has Tribal implications and 
preempts Tribal law, unless the agency consults with Tribal officials. 
This rule involves no policies that have Tribal implications under 
Executive Order 13175.
    The purpose of this rulemaking is to implement the statutory 
requirement that FEMA offer policyholders the option of paying their 
flood insurance premiums in installments. FEMA lacks discretion to 
change course based on public comment which applies to comments from 
Indian Tribal governments. Further, the benefits anticipated for the 
general public are similarly shared amongst Indian Tribal Governments. 
Allowing Tribal Nation citizen policyholders to pay in smaller 
installments reduces barriers to entry in the flood insurance 
marketplace. The ability to pay in installments may also result in more 
Tribal Nation citizen policyholders retaining their flood insurance 
protection.
    Under the NFIP's current annual premium payment requirement, a 
Tribal Nation citizen policyholder who is making annual payments 
typically only interacts with their flood insurance coverage at the 
time of initial purchase or renewal. Additionally, the Tribal Nation 
citizen policyholder must consider the full cost of flood insurance all 
at once, creating a different trade-off dynamic than when the cost is 
spread out. Facing a one-time annual payment, the policyholder may 
rationalize a decision to not renew on grounds that they perceive their 
risk to be low or that they will instead save the money spent on 
premium to self-fund repairs. In contrast, Tribal Nation citizen 
policyholders who make more frequent flood insurance payments will have 
an ongoing relationship with their insurer and a consistent reminder 
that they are protected against flood, and may be more aware of flood 
alerts, news about flooding, and more accurately perceive their risk.
    This rulemaking would benefit Indian Tribal governments subject to 
the NFIP, offering existing Tribal Nation citizen policyholders the 
option of paying their premiums in monthly installments rather than in 
one annual lump sum. The rulemaking would not have substantial negative 
direct effects on citizens of Tribal Nations, on the relationship 
between the Federal Government and Indian Tribes, or the distribution 
of power and responsibilities between the Federal Government and Indian 
Tribes.

I. Executive Order 13132, ``Federalism''

    Executive Order 13132, ``Federalism,'' 64 FR 43255 (Aug. 10, 1999), 
sets forth principles and criteria that agencies must adhere to in 
formulating and implementing policies that have federalism 
implications, that is, regulations that have ``substantial direct 
effects on the States, on the relationship between the national 
government and the States, or on the distribution of power and 
responsibilities among the various levels of government.'' For the 
purposes of this Executive order, the term States also includes local 
governments or other subdivisions established by the States. Under this 
Executive order, Federal agencies must closely examine the statutory 
authority supporting any action that would limit the policymaking 
discretion of the States. Further, to the extent practicable and 
permitted by law, no agency shall promulgate any regulation that has 
federalism implications, that imposes substantial direct compliance 
costs on State and local governments, and that is not required by 
statute, unless the Federal Government provides funds necessary to pay 
the direct costs incurred by the State and local governments in 
complying with the regulation, or the agency consults with State and 
local officials. Nor, to the extent practicable by law, may an agency 
promulgate a regulation that has federalism implications and preempts 
State law, unless the agency consults with State and local officials.
    FEMA has reviewed this rule under Executive Order 13132 and has 
determined that it does not have substantial direct effects on the 
States, on the relationship between the National Government and the 
States, or on the distribution of power and responsibilities among the 
various levels of government, and therefore does not have federalism 
implications as defined by the Executive order. This rulemaking 
implements the statutory requirement that FEMA offer policyholders the 
option of paying their annual flood insurance premiums in monthly 
installments. As such, it would not have substantial direct effects on 
the States or participating communities, on the relationship between 
the National Government and the States or participating communities, or 
the distribution of power among the various levels of government.

J. Executive Order 11988, ``Floodplain Management''

    Executive Order 11988, 42 FR 26951 (May 25, 1977), as amended by 
Executive Order 13690, ``Establishing a Federal Flood Risk Management 
Standard (FFRMS) and a Process for Further Soliciting and Considering 
Stakeholder Input,'' 80 FR 6425 (Feb. 4, 2015), and Executive Order 
14030, ``Climate-Related Financial Risk,'' 86 FR 27967 (May 25, 2021), 
requires each Federal agency to provide leadership and take action to 
reduce the risk of flood loss, to minimize the impact of floods on 
human safety, health and welfare, and to restore and preserve the 
natural and beneficial values served by floodplains in carrying out its 
responsibilities for (1) acquiring, managing, and disposing of Federal 
lands and facilities; (2) providing federally undertaken, financed, or 
assisted construction and improvements; and (3) conducting Federal 
activities and programs affecting land use, including but not limited 
to water and related land resources planning, regulating, and licensing 
activities. In carrying out these responsibilities, each agency must 
evaluate the potential effects of any

[[Page 87308]]

actions it may take in a floodplain; ensure that its planning programs 
and budget requests reflect consideration of flood hazards and 
floodplain management; and prescribe procedures to implement the 
policies and requirements of the Executive order.
    Before promulgating any regulation, an agency must determine 
whether the proposed regulations will affect a floodplain(s), and if 
so, the agency must consider alternatives to avoid adverse effects and 
incompatible development in the floodplain(s). If the head of the 
agency finds that the only practicable alternative consistent with the 
law and with the policy set forth in Executive Order 11988 is to 
promulgate a regulation that affects a floodplain(s), the agency must, 
prior to promulgating the regulation, design or modify the regulation 
to minimize potential harm to or within the floodplain, consistent with 
the agency's floodplain management regulations. It must also prepare 
and circulate a notice containing an explanation of why the action is 
proposed to be located in the floodplain.
    FEMA regulations at 44 CFR part 9 implement E.O.s 11988 and 13690 
by establishing an 8-step decision-making process for actions which 
have the potential to affect floodplains or their occupants, or which 
are subject to potential harm by location in floodplains. Under 44 CFR 
9.5, actions affecting floodplains include actions which have the 
potential to result in the long- or short-term impacts associated with: 
(1) the occupancy or modification of floodplains, and the direct or 
indirect support of floodplain development; or (2) the destruction and 
modification of wetlands and the direct or indirect support of new 
construction in wetlands. Pursuant to 44 CFR 9.5(f), FEMA generally 
must apply the 8-step process for program-wide actions under the NFIP 
such as regulations, procedures, or other issuances making or amending 
program policy. This rulemaking implements the statutory requirement 
under the NFIP that FEMA offer policyholders the option of paying their 
annual flood insurance premiums in monthly installments. FEMA has 
determined that the changes in this rule do not meet the definition of 
an action as outlined in 44 CFR 9.4 and the rulemaking therefore does 
not trigger the requirements of 44 CFR part 9 as described in 44 CFR 
9.5, including those outlined in 44 CFR 9.5(f).

K. Executive Order 11990, ``Protection of Wetlands''

    Executive Order 11990, ``Protection of Wetlands,'' 42 FR 26961 (May 
24, 1977), sets forth that each agency must provide leadership and take 
action to minimize the destruction, loss or degradation of wetlands, 
and to preserve and enhance the natural and beneficial values of 
wetlands in carrying out the agency's responsibilities. These 
responsibilities include (1) acquiring, managing, and disposing of 
Federal lands and facilities; and (2) providing federally undertaken, 
financed, or assisted construction and improvements; and (3) conducting 
Federal activities and programs affecting land use, including but not 
limited to water and related land resources planning, regulating, and 
licensing activities. Each agency, to the extent permitted by law, must 
avoid undertaking or providing assistance for new construction located 
in wetlands unless the head of the agency finds (1) that there is no 
practicable alternative to such construction, and (2) that the proposed 
action includes all practicable measures to minimize harm to wetlands 
which may result from such use. In making this finding, the head of the 
agency may take into account economic, environmental, and other 
pertinent factors.
    In carrying out the activities described in Executive Order 11990, 
each agency must consider factors relevant to a proposal's effect on 
the survival and quality of the wetlands. These include public health, 
safety, and welfare, including water supply, quality, recharge and 
discharge; pollution; flood and storm hazards; sediment and erosion; 
maintenance of natural systems, including conservation and long-term 
productivity of existing flora and fauna, species and habitat diversity 
and stability, hydrologic utility, fish, wildlife, timber, and food and 
fiber resources. They also include other uses of wetlands in the public 
interest, including recreational, scientific, and cultural uses.
    This rulemaking implements the statutory requirement that FEMA 
offer policyholders the option of paying their annual flood insurance 
premiums in monthly installments. FEMA has determined that the changes 
in this rule do not meet the definition of an action as outlined in 44 
CFR 9.4 and the rulemaking therefore does not trigger the requirements 
of 44 CFR part 9 as described in 44 CFR 9.5, including those outlined 
in 44 CFR 9.5(f).

L. Executive Order 12898, ``Environmental Justice''

    Under Executive Order 12898, ``Federal Actions to Address 
Environmental Justice in Minority Populations and Low-Income 
Populations,'' 59 FR 7629 (Feb. 16, 1994), as amended by Executive 
Order 12948, 60 FR 6381 (Feb. 1, 1995), FEMA incorporates environmental 
justice into its policies and programs. The Executive order requires 
each Federal agency to identify and address disproportionately high and 
adverse human health or environmental effects of its programs, 
policies, and activities on minority populations and low-income 
populations.
    This rulemaking will not have a disproportionately high or adverse 
human health or environmental effect on low-income or minority 
populations.

M. Congressional Review of Agency Rulemaking

    Before a rule can take effect, the Congressional Review of Agency 
Rulemaking Act (CRA), 5 U.S.C. 801-808, requires the Federal agency 
promulgating the rule to submit to Congress and to the Government 
Accountability Office (GAO) a copy of the rule, a concise general 
statement relating to the rule, including whether it is a major rule, 
the proposed effective date of the rule, a copy of any cost-benefit 
analysis, descriptions of the agency's actions under the Regulatory 
Flexibility Act and the Unfunded Mandates Reform Act, and any other 
information or statements required by relevant Executive orders.
    FEMA will send this rule to the Congress and to GAO pursuant to the 
CRA. This rule is not a ``major rule'' within the meaning of the CRA. 
It will not have an annual effect on the economy of $100,000,000 or 
more or result in a major increase in costs or prices for consumers, 
individual industries, Federal, State, or local government agencies, or 
geographic regions. Nor will it have significant adverse effects on 
competition, employment, investment, productivity, innovation, or on 
the ability of United States-based enterprises to compete with foreign-
based enterprises in domestic and export markets.

List of Subjects

44 CFR Part 61

    Flood insurance, Reporting and recordkeeping requirements.

44 CFR Part 62

    Claims, Flood insurance, Reporting and recordkeeping requirements.

    For the reasons stated in the preamble, FEMA amends 44 CFR chapter 
I as follows:

[[Page 87309]]

PART 61--INSURANCE COVERAGE AND RATES

0
1. The authority citation for part 61 continues to read as follows:

    Authority: 42 U.S.C. 4001 et seq.; 6 U.S.C. 101 et seq.


0
2. Revise Sec.  61.4 to read as follows:


Sec.  61.4   Properties in violation of law, regulation, or ordinance.

    No new flood insurance or renewal of flood insurance policies will 
be written for properties declared by a duly constituted State or local 
zoning or other authority to be in violation of any floodplain, 
mudslide (i.e., mudflow), or flood-related erosion area management or 
control law, regulation, or ordinance.

0
3. Revise Sec.  61.10 to read as follows:


Sec.  61.10   Requirements for issuance or renewal of flood insurance 
coverage.

    (a) Issuance or renewal of flood insurance. FEMA will not issue or 
renew flood insurance unless FEMA receives:
    (1) The full amount due, which is:
    (i) Either:
    (A) Presentment of the full premium; or
    (B) Presentment of the first of a series of monthly premium 
installment payments; and
    (ii) Presentment of the full amount of surcharges, fees, and 
assessments; and
    (2) A complete application, including the information necessary to 
establish a premium rate for the policy, or submission of corrected or 
additional information necessary to calculate the premium for the 
renewal of the policy.
    (b) Impact of installment payments. (1) FEMA will not reduce 
coverage or reform the policy for any policyholder who makes timely 
installment payments in accordance with the terms identified in 
paragraph (a)(1)(i)(B) of this section. In the event of a claim 
occurring prior to a policyholder completing all installment payments, 
the policyholder must remit the balance of payment. The policyholder 
may settle their balance out of claim proceeds in accordance with the 
Standard Flood Insurance Policy.
    (2) FEMA shall require payment in full in the next policy term for 
any policyholder who fails to make all installment payments in 
accordance with the terms identified in paragraph (a)(1)(i)(B) of this 
section.

PART 62--SALE OF INSURANCE AND ADJUSTMENT OF CLAIMS

0
4. The authority citation for part 62 continues to read as follows:

    Authority: 42 U.S.C. 4001 et seq.; 6 U.S.C. 101 et seq.


0
5. Revise Sec.  62.23(h)(7) to read as follows:


Sec.  62.23   WYO Companies authorized.

* * * * *
    (h) * * *
    (7) Premium payment plans must be offered by the WYO Company under 
the terms prescribed by the Administrator in Sec.  61.10(a)(1).
* * * * *

Deanne Criswell,
Administrator, Federal Emergency Management Agency.
[FR Doc. 2024-25213 Filed 10-31-24; 8:45 am]
BILLING CODE 9111-52-P