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ADMINISTRATION, DEPARTMENT OF
HOUSING AND URBAN DEVELOPMENT

SUBCHAPTER A-NATIONAL INSURANCE DEVELOPMENT PROGRAM

Part
1905 Statewide "FAIR” Plans.
1906 Standard reinsurance contract.

State reimbursement requirement.

SUBCHAPTER B-NATIONAL FLOOD INSURANCE PROGRAM

1909 General provisions. 1910 Criteria for land management and use. 1911 Insurance coverage and rates. 1912 Sale of insurance and adjustment of claims. 1914 Areas eligible for the sale of insurance. 1915 Identification of special hazard areas. 1916 Consultation with local officials. 1917 Appeals from flood elevation determination and judicial review. 1918 Appeals of the Administrator's proposed flood elevation determinations by

administrative hearings.

SUBCHAPTER C-FEDERAL CRIME INSURANCE PROGRAM

1930 Description of program and offer to agents.
1931 Purchase of insurance and adjustment of claims.
1932 Protective device requirements.
1933 Coverages, rates, and prescribed policy forms.
1934 Classification of territories.

SUBCHAPTER A-NATIONAL INSURANCE DEVELOPMENT

PROGRAM

PART 1905-STATEWIDE "FAIR" piration of a specified period of time PLANS

after an application for inspection and

insurance; Sec.

(f) “Eligible property," "eligible risk," 1905.1 Definitions.

or "risk eligible under the Plan" means 1905.2 Composition and supervision of FAIR Plan.

any real property, personal property, or 1905.3 Coverage and operation of the

mixed real and personal property, poPlan.

tentially insurable under one or more 1905.4 Insurer participation and placement lines of essential property insurance, program.

subject to an inspection to ascertain 1905.5 Inspections and applications for in.

insurability and applicable premium surance,

rates; 1905.6 Deemer or binder requirement. 1905.7 Placement action after inspection

(g) "Environmental hazard” means report.

any hazardous condition that might give 1905.8 Prohibition of unnecessary rein

rise to loss under an insurance contract, spections.

but which is beyond the control of the 1905.9 Notice of cancellation or nonre- property owner or tenant; newal

(h) “Essential property insurance" 1905.10 Impartial selection of adjusters.

means insurance against direct loss to 1905.11 Coding and reports under the Plan.

property as defined and limited in stand1905.12 Inapplicability and waiver of regu

ard fire policies and extended coverage lations.

endorsement thereon, as approved by the AUTHORITY: The provisions of this part

State insurance authority, and insurance 1905 issued under sec. 7(d), 79 Stat. 670;

against the perils of vandalism and ma42 U.S.C. 3535(d); sec. 1103, 82 Stat. 566;

licious mischief. Such insurance shall not 12 U.S.C. 1749bbb-17

include automobile insurance and shall SOURCE: The provisions of this part 1905 not include insurance on such type of appear at 36 F.R. 24751, Dec. 22, 1971, unless

manufacturing risks as may be excluded otherwise noted.

by the State insurance authority; 8 1905.1 Definitions.

(i) "FAIR Plan" or "Plan" means &

statewide Plan to assure "fair access to As used in this part

insurance requirements that is approved (a) "Act” means the Urban Property

by the Administrator as meeting the criProtection and Reinsurance Act of 1968,

teria of Part A of the Act, including such codified as title XII of the National

modifications thereof as the AdminisHousing Act (12 U.S.C. 1749bbb-1749

trator may promulgate from time to time bbb-21), which authorized the program. Section references are to the National

under this part in accordance with sub

section 1214(b) of the Act (12 U.S.C. Housing Act;

1749bbb-6(b)); (b) “Administrator" means the Federal Insurance Administrator within the

(j) "Inspection facility," with respect

to any State, means any rating bureau Department of Housing and Urban De

or other person duly authorized and desvelopment, to whom the Secretary has

ignated to perform inspections under a delegated the administration of the pro

Plan; gram (34 F.R. 2680, Feb. 27, 1969); (c) “Applicant” means any property

(k) "Insurer" includes any property owner, or his authorized representative,

insurance company, or group of comwho duly requests essential property in

panies under common ownership or comsurance for a risk eligible under a FAIR

mon management, authorized to engage

in the insurance business under the laws Plan; (d) “Binder" means a temporary and

of at least one State; preliminary contract of insurance to pro

(1) “Participating insurer" means any tect owner against loss from the occur- insurer eligible for membership in a Plan rence of an insurable event before a and fully participating in that Plan. The policy is issued;

term shall not include any insurer in any (e) “Deemer provision" means a pro- State in any year in which such insurer vision in a Plan whereby interim cover

does not participate in the Plan on a age for an eligible risk is deemed risk-bearing or potentially risk-bearing automatically to attach upon the ex

basis;

if any;

(m) "Person" includes any individual, method and procedures used by the State, group of individuals, corporation, part- the required documentation comprising nership, association, or any other orga- each Plan could include any or all of the nized group of persons;

following, as relevant: (n) "Placement facility” means the (1) The State law, where one has been facility established under a Plan to place enacted; or provide essential property insurance (2) The industry agreement or proto persons making application for one or gram, more lines of such insurance under the (3) The approval action by the State Plan;

insurance authority with respect to the (0) "Pool” means any pool or associa- industry agreement or program, or by tion of insurance companies in any State court order or other approval authority, that is formed, associated, or otherwise if applicable; and created for the purposes of sharing risks (4) Implementing rules, regulations, and of making property insurance more and orders, together with operating proreadily available;

cedures and forms. (p) “Property owner" or "owner," with (b) The Plan shall include a certificarespect to any real property, personal tion by che State insurance authority of property, or mixed real and personal the date on which the Plan was placed property, means any person having an in effect and on which any amendments insurable interest in such property;

to the Plan are effective. (q) "Secretary" means the Secretary (c) The Plan shall evidence that it has of Housing and Urban Development; been approved by, and is to be adminis

(r) "State” means the several States, tered under the supervision of, the State the District of Columbia, the Common- insurance authority. wealth of Puerto Rico, the territories and (d) The Plan shall provide for a conpossessions, and the Trust Territory of tinuing public education program by parthe Pacific Islands;

ticipating insurers, agents, and brokers, (s) "State insurance authority” means in order to assure that the Plan receives the person having legal responsibility for adequate public attention. For example, regulating the business of insurance a brochure or other publication should within a State;

be made widely available for distribution (t) "Surcharge" means (1) any con- through all agents, brokers, and other dition charge, and (2) any general or producers. All participating insurers, other charge added to the basic insur- agents, and brokers should include such ance rates or premium ordinarily appli- a publication with each notice of cancelcable to the same class of property; but lation or nonrenewal in order to provide does not include specific rates that apply policyholders with the required informato all property in a Plan on the basis of tion concerning the placement of insuractual self-rating experience;

ance under the Plan. (u) "Urban area" includes any mu

$ 1905.3 Coverage and operation of tho nicipality or other political subdivision of

Plan. a State, subject to population or other limitations defined in rules and regula

(a) At a minimum, the Plan shall protions of the Secretary, and such addi

vide for insurance against direct loss to tional areas as may be designated by the property as defined and limited in standState insurance authority; and

ard fire policies and in (1) extended cov(v) "Year" means a calendar year;

erage, and (2) vandalism and malicious fiscal year of a company, association, or

mischief endorsements thereon, as appool; reinsurance contract year; or such

proved by the State insurance authority. other period of 12 months as may be

It shall not include automobile insurance designated by the Administrator.

nor such types of manufacturing risks

as may be excluded by the State insur$ 1905.2 Composition and supervision

ance authority. The Plan shall specifically of FAIR Plan.

provide for insurance against direct loss (a) The Administrator will periodi- to property that is being constructed or cally review each State's FAIR Plan in its rehabilitated (including builder's risk entirety for conformity to statutory cri- coverage). To avoid the need for amendterla (12 U.S.C. 1749bbb_3—1749bbb-6) ment to the Plan and delays in securing and this part. Although the number and new approval action, the Plan should location of the required elements in a provide for the inclusion of such addiPlan will vary according to the particular tional lines of property insurance as from time to time may be designated essential provide that the placement facility shall by the Administrator pursuant to section assist in seeking to place the excess 1203(a) (2) of the Act, 12 U.S.C. 1749bbb- portion. 2(a) (2).

(d) As soon after May 1 of each year (b) The Plan shall specify its geo- as practicable, each State insurance augraphic area of coverage. If the entire thority under whose jurisdiction a Plan State is not designated as the area of has been put into operation shall notify coverage, the Plan must specify-by the Administrator of the names of all name, by population size, or by class- insurers that are fully participating (on the political subdivisions and other areas a risk-bearing basis) in the FAIR Plan eligible under the Plan. The area of cov- of such State on that date in accordance erage may not be limited to communities with the conditions of the Standard Rethat have a blighted or deteriorating area insurance Contract in effect at that time. or an area approved by the Secretary for For a Plan in which participation by inan urban renewal project.

surers is voluntary, the notification shall (c) Each State insurance authority

include an estimate by the authority of under whose jurisdiction a Plan has been the aggregate premium volume of essenput into operation shall keep the Ad- tial property insurance written by parministrator fully and currently informed ticipating insurers in relation to the total of any modifications or changes in the premium volume in such lines written by organization or operation of the Plan in all property insurers in the State. his State, whether or not such changes (e) Federal riot reinsurance will be directly affect the availability of cover- offered only to those insurers that (1) age under the Plan.

have direct writings in one or more lines f 1905.4 Insurer participation and place

of essential property insurance and (2)

are actually or potentially risk-bearing ment program.

members of any pool organized under the (a) The Plan's placement program Plan, as certified by the State insurance may take any of a variety of forms; for authority. example, it may involve a syndicated or direct writing pool, an assigned risk

$ 1905.5 Inspections and applications for

insurance. facility, a reinsurance pool or association, or combinations of the foregoing.

(a) The Plan shall designate one or (b) The Plan shall not discriminate more inspection facilities, which may also against, shall provide for full coopera

operate placement facilities if tion with, and shall seek cooperation

desirable. from all agents and brokers licensed to

(b) The Plan shall make its inspection write property lines in the State. The and placement facilities readily available inclusion of agents and brokers on FAIR and accessible to the general public by Plan governing boards is encouraged. providing a central source of information

(c) The Plan shall include one or more on the services it provides and on all-industry placement facilities, doing the manner of application. To assure the business with every insurer participating public's access to such information, the in the Plan, to perform the following telephone information number of the functions for properties meeting reason- Plan shall be listed alphabetically as able underwriting standards:

"FAIR Plan" (1) in the white sections (1) Upon request by or on behalf of

and (2) under "Insurance" in the classia property owner requesting an inspec

fied sections of the telephone directories tion under the Plan, distribute the place

of each city where these facilities mainment or risks equitably among the in

tain an office. surers with which it does business; and

(c) The Plan shall require that there (2) Place insurance up to the full in

will be an inspection of any eligible risk surable value of the risk to be insured

that is submitted to a placement facility with one or more insurers with which it is doing business, except to the extent

or to a servicing insurer if such facility that deductibles, percentage participa

or insurer is unwilling to write coverage tion clauses, and other underwriting de

at regular rates. The Plan may not revices are employed to meet special prob- quire as a precondition for obtaining an lems of insurability. In the case of very inspection that the property owner make large risks not accommodated by the a showing or certification that he has Plan (e.g., those whose full insurable been unable to obtain insurance in the value exceeds $1,500,000), the Plan shall regular market.

as

(d) The Plan shall provide that in- (c) Plans adopting a binder provision spections may be requested by the shall provide that an applicant may property owner or his authorized rep- apply for and obtain temporary coverage resentative, the insurer, or the insurance for a risk eligible under the Plan upon agent, broker, or other producer. The payment of a provisional premium at the Plan shall also provide that the request time of requesting the inspection. The for an inspection need not be in writing, Plan, at its option, may also provide that although it can provide for the transcrib- coverage under the binder shall be exing of the pertinent information on a tended for a sufficient period of time, form.

after receipt of an unfavorable inspec(e) An inspection under the Plan shall tion report, to enable the applicant to be without cost to the property owner. bring the property up to insurable standPayment of a deposit premium may not ards, but during the period of such be required as a precondition to inspec- rehabilitation reasonable condition surtion. However, the Plan may allow a charges may be added to the normal property owner, at his option, to pay a premium rates otherwise applicable to deposit or provisional premium at the such property. time of application, rather than at the (d) Coverage provided under

the time insurance under a deemer or binder deemer or binder provisions of the Plan provision becomes effective.

shall be at the normal rates for the class (f) The Plan may not require the of property to be insured, exclusive of presence of the owner of the building any surcharge, but shall be subject to an for a tenant to obtain an inspection, appropriate premium adjustment, if but the inspection facility must be pro- necessary, after the property has been vided access to the relevant portions of inspected. the building in which the property to be (e) It is expected that no policyholder insured is located.

will be without coverage following a can$ 1905.6 Deemer or binder requirement.

cellation or nonrenewal under the Plan

or otherwise, due solely to delays in in(a) Each Plan shall contain either a specting and placing the risk under the deemer or a binder provision in order to Plan, and the Plan shall set forth the prevent lapses of insurance coverage for manner in which the objective of maxirisks eligible under the Plan before cov- mum possible continuity of coverage is erage has been provided or declined un- to be accomplished. Binding coverage der the Plan. A Plan may contain both immediately, subject to inspection, would a deemer and a binder provision.

accomplish this and is encouraged. (b) Plans adopting a deemer provision shall provide that eligible risks are

$ 1905.7 Placement action after inspec.

tion report. automatically deemed insured if, (1) through no fault of the applicant, cov- (a) The placement facility or insurer erage has not been either offered or to which a risk is referred by the inspecdenied within 20 calendar days after the tion facility shall complete an action redate the request for inspection was re- port and promptly notify the applicant ceived, and (2) the applicant, at the of the following: time of requesting the inspection or at

(1) The amount of coverage that it any time prior to the receipt of an in

agrees to write; and, if the coverage is spection report indicating that the prop

with a surcharge, the amount of such erty is uninsurable, pays either the esti

surcharges and the improvements needed mated annual premium or the portion

for coverage at a lower surcharged rate

and at an unsurcharged rate; thereof that is appropriate for the

(2) The amount of coverage it agrees period of time for which the coverage is

to write if specified improvements are provided. The period of coverage pro

made; or vided under any such deemer provision

(3) That it declines to write the covershall not be less than the time required

age because the property does not meet to complete the inspection and to process reasonable underwriting standards, in fully in the ordinary course of business

which case it will also state the specific any related application for insurance of information from the inspection report the property submitted either directly to and other sources that constitutes the the placement facility or first to a design basis for this determination. nated insurer and thereafter to the place- (b) No surcharge shall be made on ment facility if necessary.

any risk unless it is based upon an ad

39-082-75- 34

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