Earlier this week, FEMA published an Advanced Notice of Proposed Rulemaking, “Revisions to Methodology for Payments to Write Your Own (WYO) Companies,” to the Federal Register for public comment. This proposed rulemaking follows the Biggert-Waters mandate to modify the way FEMA pays private insurance companies participating in the WYO program for the NFIP. Insurers use a portion of the WYO reimbursement to compensate agents.
The proposed rule outlines the current WYO payment methodology, which calculates the WYO ratio based on an A.M. Best-weighted average of the expense ratios from five lines of property-casualty insurance. In addition, it outlines three proposed methodologies that would use actual expense data for flood insurance, including:
- A credibility weighting methodology that incorporates actual flood expense data into the current methodology.
- A methodology based completely on flood expense data.
- A methodology based on invoices of direct expenses from WYOs.
FEMA requests comments on the proposals by Sept. 6 and solicits responses to 12 specific questions. The Big “I” plans to submit comments before the Sept. 6 deadline.
Wyatt Stewart is Big “I” senior director of federal government affairs.