Request for Information on the National Flood Insurance Program's Community Rating System Redesign Effort

AGENCY:

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

ACTION:

Request for information and notice of meetings.

SUMMARY:

The Federal Emergency Management Agency (FEMA) is issuing this Request for Information (RFI) to receive the public's input on potential future changes to the Community Rating System (CRS) under the National Flood Insurance Program (NFIP). This RFI seeks further input on suggested alternative program features and approaches for a redesigned CRS program, based upon public input from the August 23, 2021 “Request for Information on the National Flood Insurance Program's Community Rating System” published in the Federal Register . FEMA will host virtual public meetings at the times and dates listed below.

DATES:

Comments must be received on or before September 9, 2024. Submissions received after that date may not be considered.

For Public Meetings: FEMA will hold virtual public meetings on Wednesday, August 21, 2024 from 2:00 p.m. to 3:30 p.m. EDT and Thursday, August 22, 2024 from 3:00 p.m. to 4:30 p.m. EDT for a general audience and on Tuesday, August 27, 2024 from 3:00-4:30 p.m. EDT focused on issues specific to Indian Tribal governments. Depending on the number of speakers, the meeting may end before the time indicated, following the last call for comments. Requests to participate must be received via the virtual meeting website no later than Monday, August 19, 2024. Registration must be completed using the links below specific to each meeting:

• Register for the August 21, 2024 meeting using https://cgstrategy.zoom.us/webinar/register/WN_4lNLtBUUQaqI2dxRPJtwHg .
• Register for the August 22, 2024 meeting using https://cgstrategy.zoom.us/webinar/register/WN_qKV8jzlgQe6rt2LnpDqWOA .
• Register for the August 27, 2024 Tribal focused meeting using https://cgstrategy.zoom.us/webinar/register/WN_t7ex0KIyRJGX8J0qYHHqDg .

Reasonable accommodations are available for people with disabilities. To request a reasonable accommodation ( e.g., Communication Access Real-Time Translation [CART], sign language interpretation), contact the person listed in the FOR FURTHER INFORMATION CONTACT section below by Monday, August 19, 2024. Last minute requests will be accepted but may not be possible to fulfill.

ADDRESSES:

Interested persons may submit comments responsive to this RFI electronically through the Federal eRulemaking Portal at https://www.regulations.gov. Follow the instructions for submitting comments and use docket ID: FEMA-2024-0022. Submitting this information makes it public; you may wish to read the Privacy and Security Notice on https://www.regulations.gov.

Commenters are encouraged to identify specific question or questions they are responding to by number. All submissions received must include the agency name and Docket ID, and will be posted, without change, to the Federal eRulemaking Portal at https://www.regulations.gov and will include any personal information you provide. Therefore, submitting this information makes it public. You may wish to read the Privacy and Security Notice that is available via a link on the homepage of https://www.regulations.gov. Responses should not include any personally identifiable information or confidential commercial information.

For Public Meetings: Public meetings for a general audience will be held virtually on Wednesday, August 21, 2024 from 2:00 p.m. to 3:30 p.m. EDT and Thursday, August 22, 2024 from 3:00 p.m. to 4:30 p.m. EDT and for issues specific to Indian Tribal governments on Tuesday, August 27, 2024 from 3:00 p.m. to 4:30 p.m. EDT. Links to register for the meetings are provided above. If you would like to speak at a meeting, please so indicate on the registration form. For the August 27, 2024 Tribal meeting, FEMA will be prioritizing comments from representatives and members of Indian Tribal governments.

FOR FURTHER INFORMATION CONTACT:

Shilpa Mulik, CRS Redesign Program Manager, Hazard Mitigation Directorate, Resilience, FEMA. Phone: (202) 212-7313; Email: FEMA-CRS-Redesign@fema.dhs.gov.

SUPPLEMENTARY INFORMATION:

I. Background

A. The Community Rating System

Between 2000 and 2024, floods have cost approximately $107.7 billion dollars in damage throughout the United States. Standard homeowners and commercial property insurance policies do not cover flood losses. To meet the need for vital flood insurance coverage, FEMA administers the National Flood Insurance Program (NFIP), which offers flood insurance coverage for buildings and/or contents in communities that comply with the NFIP's minimum standards for floodplain management. To be covered by an NFIP flood insurance policy, a property must be in a community that participates in the NFIP. To qualify to participate in the NFIP, a community adopts and enforces local floodplain management standards which regulate development in the Special Flood Hazard Area (SFHA). Today, over 22,600 communities in the United States participate in the NFIP.

In 1990, FEMA implemented the Community Rating System (CRS) as a voluntary program for recognizing and encouraging community floodplain management activities exceeding the NFIP's minimum standards for floodplain management. Communities that undertake floodplain management activities exceeding the NFIP's minimum standards for floodplain management may apply to join the CRS program and the community will earn CRS program credits (often referred to as “points/credits”) for those activities exceeding the minimum floodplain management requirements of the NFIP which are approved by FEMA. In CRS communities, credits lead to flood insurance premium discounts to reflect the reduced flood risk resulting from the community's higher floodplain management standards or programs. As of October 2023, approximately 1,500 communities participate in the CRS program nationwide. This represents about seven percent of NFIP participating communities, which represent nearly 3.6 million (more than 70 percent) of all NFIP policies that are written. CRS program discounts on flood insurance premiums range from 5 percent up to 45 percent based on the level of CRS program credits awarded to communities.

FEMA is exploring changes and improvements to the CRS program through a programmatic review and improvement effort (called “CRS Redesign”). With the continuous learning around flood, flood risk management, and flood risk reduction techniques, FEMA now has more information about, and understanding of, multi-frequency analysis, pluvial flooding, climate change, and the extent of flood risk outside of the SFHA. This new understanding has led FEMA to take a holistic look at the CRS program to determine how the program can best meet FEMA and NFIP consumer needs through the CRS Redesign.

FEMA seeks input on ways the agency can improve the CRS program, specifically: (1) to incentivize communities to take measurable actions and make sustained progress to reduce current and future flood risk; (2) to embed equity as a foundation of the CRS program; (3) to incentivize communities to encourage property owners to purchase flood insurance and thus reduce their financial exposure to flood risk; and (4) to deliver a community participant-centered and modernized program.

FEMA continually evaluates its programs, regulations, and policies to identify opportunities to modify, streamline, expand, or repeal, as appropriate. FEMA does so through legally mandated review requirements ( e.g., Unified Agenda reviews and reviews under section 610 of the Regulatory Flexibility Act ), through existing RFIs, and through other informal and long-established mechanisms ( e.g., use of Advisory Councils, feedback from FEMA field personnel, input from internal working groups, outreach to regulated entities and the public, and Government Accountability Office program reports). This Federal Register notice supplements these existing extensive FEMA regulatory and program review efforts.

B. Overview of 2021 CRS RFI and Public Comments on Suggested Changes to the CRS Program

1. 2021 CRS RFI Summary

On August 23, 2021, FEMA published a request for information entitled “Request for Information on the National Flood Insurance Program's Community Rating System” in the Federal Register (called “2021 CRS RFI”). The 2021 CRS RFI sought input from the public that would help the agency determine public interest in potential improvements to the CRS program. Specifically, the 2021 CRS RFI sought public input on broad CRS programmatic issues, such as:

• Strengths and challenges of the CRS program;
• Methods to increase equity and participation of disadvantaged communities;
• Methods to reduce flood risk to communities through the CRS program;
• Methods to incentivize participation and increase floodplain management standards;
• Methods to streamline administrative burdens, CRS program credits, and decrease program participation burdens of the CRS program;
• Methods to decrease future losses to repetitive loss structures; and
• Methods to increase collaboration and participation through cross jurisdictional entities and increase integration with other floodplain management activities, such as building standards.

2. 2021 CRS RFI Comments

FEMA received comments from 211 commenters addressing 116 unique topics in response to the 2021 CRS RFI. Commenters included private citizens; State, local, and Tribal governments; non-profit organizations; and professional associations. FEMA completed a thorough review of the comments and considered whether to explore alternative CRS program features and approaches suggested by stakeholders. Stakeholder feedback proposed a wide range of alternative program features and approaches for the CRS program. FEMA also hosted virtual public meetings to solicit input about the CRS program during the 2021 CRS RFI comment period. A non-exhaustive overview of the comments from the 2021 CRS RFI and associated public meetings is provided below:

Comments on CRS Strengths

Commenters indicated that the CRS program offers flexibility for communities to select among many CRS activities, that the CRS program has strengthened communities' floodplain management efforts, and that CRS' incentives resulted in reduced flood risk.

Comments on CRS Challenges

Commenters stated that the complexity and administrative burden of the CRS program make it difficult for communities to participate in CRS, that the CRS program raises equity concerns, and commenters questioned the degree to which the CRS incentivizes (or does not sufficiently incentivize) increases in community flood risk reduction. Commenters also expressed concern regarding CRS's alignment with the NFIP's current pricing approach and the overall affordability of NFIP flood insurance. Additionally, commenters questioned whether the CRS program is needed given the NFIP's current pricing approach which calculates actuarially based premiums, whether the CRS discount classes should be modified, and whether NFIP policy premiums will need to increase to support CRS's premium discounts.

Comments on CRS and Equity

Commenters suggested providing direct technical assistance and grant funds to underserved communities to increase CRS participation and to build local floodplain management capacity. Commenters also expressed a desire for CRS to provide more effective outreach tools for underserved communities and for a CRS scoring system that accounts for multiple aspects of a community including, but not limited to, a community's size, development density, economic status, and administrative capacity.

Commenters also suggested that CRS program credits should be shared with the community, if not fully provided to the community instead of only being provided to the policyholders as communities are doing the work to reduce flood risk. Commenters also suggested that the communities should be allowed to decide how to use the available CRS program credits, including the ability to get a cost share to support local CRS staff or mitigation funds to reduce a community's flood risk.

Comments on CRS and Future Conditions

Commenters indicated a desire to better incorporate future conditions through mapping and modeling of future risk, to incentivize communities to adopt programs related to future conditions, to create a flexible credit system for creative efforts and innovative approaches that improve communities' resilience, and for FEMA to disseminate more guidance and data to communities to better incorporate future conditions and climate resiliency into a community's CRS program.

Comments on Floodplain Management and Flood Risk Management

Commenters stated that the CRS program should continue to support and should expand incentives for community-level action and floodplain management and to better align measurable risk reduction in communities of both current and future risks with program incentives ( e.g., creditable activities and discounts). Commenters also suggested that FEMA should continue to incentivize effective floodplain management and community involvement through more effective outreach, technical assistance, capability-building, and funding to support floodplain management efforts in the CRS program.

Commenters also suggested that CRS activities and credits should be limited to those activities that lower flood risk and result in development that is less susceptible to flooding. Commenters noted that the cost of CRS to the NFIP is too high, that credits must be given more carefully, and that enforcement of compliance with NFIP minimum floodplain management requirements within CRS communities must be improved. Commenters noted that many CRS activities and credits are unrelated to flood risk reduction, such as providing credits to incentivize community activities to protect endangered species.

Comments on CRS Simplification

Commenters requested simplification of the CRS program application process and simplification of CRS credits and activities. Commenters suggested that the document submittal procedures to initially join the CRS program and the scoring system in the CRS Coordinator's Manual should be simplified to increase transparency. Commenters also suggested that the CRS activities should be simplified by reducing the number of activities that receive credit to allow communities to focus on activities that result in the largest flood risk reduction ( e.g., higher elevation standards or limiting development in the SFHA).

Comments on CRS Collaboration, Integration, and Alignment

Comments suggested that FEMA should establish a grant program to fund local CRS positions or establish a cost-share program across multiple municipalities to support CRS implementation. Commenters also suggested the FEMA should increase the sharing of success stories and best practices among CRS participating communities and allow multi-jurisdictional or regionalized activities/elements where communities could work together to submit regional documentation allowing multi-jurisdictional partnerships to make CRS more accessible ( e.g., communities could work together through a multi-jurisdictional entity to regionally implement the CRS program).

Commenters also suggested that the CRS should be fully integrated into the NFIP by reimagining the NFIP's current pricing approach and enrolling all communities into the CRS program as part of NFIP participation starting at a CRS class 0 if the community only meets the NFIP minimum floodplain management standards. Under this suggestion, communities could move up in CRS class rating to increase their CRS discount with a maximum discount of up to a 50%. Commenters also suggested that a community should also be penalized for actions that increase flood risk in the community ( e.g., such as allowing violations of adopted floodplain management development standards) down to a CRS negative class with corresponding premium surcharges on all NFIP policies in that community.

C. Overview of GAO-23-105977 Report's Findings and Agency Recommendations

On July 31, 2023, the Government Accountability Office (GAO) issued report number GAO-23-105977, Flood Insurance: FEMA's New Rate-Setting Methodology Improves Actuarial Soundness but Highlights Need for Broader Program Reform. GAO-23-105977 included the following two FEMA agency recommendations relating to improving the CRS program:

• The Assistant Administrator of FEMA's Federal Insurance Directorate (FID) should adjust CRS by calculating a community's rating based only on community activities that reduce flood risk and by incorporating discounts into the full-risk premium based on the actuarial evaluation of risk reduction. (Recommendation 1); and
• The Assistant Administrator of FEMA's FID should evaluate other means for incentivizing desirable community activities that cannot be actuarially justified but are currently a basis for discounts in CRS. (Recommendation 2).

The GAO-23-105977 report stated that the premium discounts provided under the CRS program are not actuarially justified and are paid for, in large part, through a cross-subsidization by NFIP policyholders that are not receiving the CRS discount. The GAO-23-105977 report also stated that it is likely that policyholders receiving CRS discounts are paying lower premiums that do not fully reflect their flood risk. The amounts of CRS discounts—both to individual properties and program wide—are not closely linked to potential loss reduction of currently insured properties. While the activities that FEMA promotes through CRS are important, few of them directly mitigate flood risk to the property. For example, the GAO-23-105977 report noted that the CRS discounts related to public information, warning and response, and mapping and regulations do not reduce the potential for flood loss to currently insured properties. The GAO-23-105977 report also stated that the NFIP's new pricing approach accounts for some individual premium rating variables, such as a structure's elevation in relation to flood sources, which are also included in CRS' community-wide activities and credits. This may result in NFIP double counting risk reduction techniques/measures during rating and discount determination and policyholders in certain CRS communities receiving a CRS discount that is not based on the actuarial reduction of flood risk to currently insured properties.

II. Maximizing the Value of Public Feedback

The impacts of Federal regulations and policies tend to be widely dispersed on society. Members of the public are likely to have useful information, data, and perspectives on the benefits and burdens of FEMA's existing programs, regulations, information collections, and policies. FEMA seeks additional public feedback relevant to FEMA's potential redesign and improvement efforts for the CRS program given the 2021 CRS RFI comments and the findings and agency recommendations summarized above from the GAO-23-105977 report.

The following is meant to assist members of the public in formulating comments. This notice contains a list of questions, the answers to which will assist FEMA in understanding which suggested alternative program features and approaches CRS program stakeholders support or oppose and why. FEMA encourages public comment on these questions and seeks any other national-level data commenters believe are relevant to FEMA's CRS redesign efforts. Commenters should identify, with specificity, the program feature, policy, or process at issue. Below are recommendations for commenters to use when making comments in response to this RFI, so that FEMA can better evaluate the suggested changes to the CRS program:

• Commenters should explain, with as much detail as possible, why an aspect of the CRS program should be modified, streamlined, expanded, or repealed, and provide specific suggestions of ways the agency can better achieve its objectives;
• Commenters should provide specific national-level data that document the costs, burdens, and benefits of potentially new requirements to the extent they are available. Commenters might also address how FEMA can best obtain and consider accurate, objective information and data about the costs, burdens, and benefits of a redesigned CRS program and whether there are existing sources of data that FEMA can use to evaluate the effects of the CRS program over time; and,
• Commenters should identify with specificity administrative burdens, CRS program requirements, information collection burdens, waiting time, or unnecessary complexity that may impose unjustified barriers in general, or that may have adverse effects on equity for all, including those in underserved communities.

III. Specific Information Requested

FEMA seeks comments on all suggested program features of a redesigned CRS program, and specifically, FEMA has additional follow-up questions from the 2021 CRS RFI on suggested CRS program changes. FEMA's goal is to obtain diverse feedback on the CRS program that helps inform FEMA decision-making on the future of the CRS program.

List of Questions for Commenters

(1) Should FEMA provide each community with a report highlighting potential CRS program credits (often referred to as “points/credits”) that the community could earn to mitigate risk and reduce insurance premiums, explaining strategies on how to receive more points, and flagging NFIP minimum floodplain management standards compliance issues? Why or why not?

(2) Should FEMA auto enroll all NFIP participating communities into the CRS program to give the community CRS credit for activities that they already undertake that exceed NFIP minimum floodplain management standards ( e.g., community has an open space preservation program to reduce flooding)? Auto enrollment means all communities would automatically participate in CRS by virtue of participating in the NFIP.

(3) Would there be any advantage if FEMA were to assess an escalating surcharge on NFIP policy premiums for NFIP participating communities that are not in compliance with the NFIP minimum floodplain management standards? This would be in addition to the NFIP Probation policy surcharge that is in 44 CFR 59.24(b).

(4) What are the advantages and/or disadvantages of providing technical assistance to communities to support CRS participation? Would communities take advantage of technical assistance and if so, what type(s) of technical assistance would be most helpful? Examples of suggested technical assistance include assisting communities with the preparation of required CRS documents, CRS project management, CRS program support, and preparation of repetitive loss analysis.

(5) FEMA currently offers premium discounts for many CRS activities through the NFIP's current pricing approach. In CRS participating communities, this may lead to policyholders receiving “double” discounts for the same CRS activities ( e.g., elevation of individual structure above the NFIP's minimum elevation requirement resulting in a structure level discount through the NFIP's current pricing approach and a CRS credit for a community-wide higher structure elevation regulation).

(a) If FEMA were to provide NFIP premium discounts to individual policyholders for CRS activities, through the NFIP's current pricing approach, should FEMA offer duplicate CRS discounts for the same activities that are already reflected in individual premiums? Why or why not?

(b) Assuming no to (a), would communities be incentivized to adopt measures in excess of FEMA's minimum floodplain management standards for community-wide activities that reduce future flood risk ( e.g., stormwater management regulations or enhanced future land use planning) if FEMA were to only offer CRS discounts for those community-wide activities that reduce future flood risk?

(6) Are there additional community-level activities that are not currently included in the CRS program that measurably reduce flood risk to property? Please describe and, if available, provide national-level data that demonstrate how the activities measurably reduce current and/or future flood risk reduction to property.

(7) Would a participating CRS community be willing to exchange CRS insurance policyholder premium discounts ( e.g., all, some, or none) in a community for other comparable community-level benefits, such as enhanced technical assistance for the local CRS program or capacity-building grants? For example, if the aggregate amount of CRS discounts offered to individuals in the community totals $100,000, would the community be interested in redistributing the total individual CRS discounts ( e.g., $100,000) among the community and the individual policyholders ( e.g., $50,000 to the community for enhanced technical assistance grants and $50,000 to be distributed to individual policyholders in the form of CRS discounts)? By redistributing the CRS insurance policyholder premium discount benefits from the policyholders to the community, there would be a potential for both wider risk reduction and larger financial benefit to the community. Would such an approach make non-participating CRS communities more inclined to join the CRS program?

(8) Besides individual flood insurance financial premium discounts, what other benefits would best incentivize communities to maintain participation in or to join the CRS program?

(9) The current CRS program credits 19 activities and 90+ elements recognized by the CRS program and identified in the CRS Coordinator's Manual along with the credit points assigned to each activity. An activity is a floodplain management activity for which CRS credit has been established ( e.g., mapping and regulations—higher regulatory standards). Elements are discrete parts of an activity that if implemented result in CRS credit points under that activity ( e.g., community-wide prohibition of outdoor storage in the SFHA, which is an element of the activity of higher regulatory standards). What are some advantages and/or disadvantages of reducing the number of activities and elements, and streamlining CRS reporting requirements?

(10) What are the advantages and/or disadvantages of communities working with other communities to implement CRS under a regional approach? For example, a regional approach may include a regional watershed or planning commission that implements a CRS program for multiple communities or a shared CRS coordinator position among several communities.

(11) What else should FEMA consider for potential improvements to the CRS program and how can FEMA better engage with stakeholders to effectively implement the CRS program?

FEMA notes that this notice is issued solely for information and program-planning purposes. The suggested approaches do not reflect an agency position or official action. Responses to this notice do not bind FEMA to any further actions related to the response.