[Federal Register Volume 88, Number 38 (Monday, February 27, 2023)]
[Notices]
[Pages 12389-12397]
[FR Doc No: 2023-03895]

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DEPARTMENT OF HOMELAND SECURITY

Federal Emergency Management Agency

[Docket ID FEMA-2022-0051]

National Flood Insurance Program (NFIP); Assistance to Private
Sector Property Insurers, Notice of FY 2024 Arrangement

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

ACTION: Notice.

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SUMMARY: The Federal Emergency Management Agency announces the Fiscal
Year 2024 Financial Assistance/Subsidy Arrangement for private property
insurers interested in participating in the National Flood Insurance
Program's Write Your Own Program.

DATES: Interested insurers must submit intent to subscribe or re-
subscribe to the Arrangement by May 30, 2023.

FOR FURTHER INFORMATION CONTACT: Sarah Devaney Ice, Federal Insurance
and Mitigation Administration, FEMA, 400 C St. SW, Washington, DC 20472
(mail);<PHONE_NUMBER> (phone); or [email protected]
(email).

SUPPLEMENTARY INFORMATION:

I. Background

    The National Flood Insurance Act of 1968 (NFIA) (42 U.S.C. 4001 et
seq.) authorizes the Administrator of the Federal Emergency Management
Agency (FEMA) to establish and carry out a National Flood Insurance
Program (NFIP) to enable interested persons to purchase flood
insurance. See 42 U.S.C. 4011(a). Under the NFIA, FEMA may use
insurance companies and other insurers, insurance agents and brokers,
and insurance adjustment organizations as fiscal agents of the United
States to help it carry out the NFIP. See 42 U.S.C. 4071. To this end,
FEMA may ``enter into any contracts, agreements, or other appropriate
arrangements'' with private insurance companies to use their facilities
and services in administering the NFIP on such terms and conditions as
they agree upon. See 42 U.S.C. 4081(a).
    Pursuant to this authority, FEMA enters into a standard Financial
Assistance/Subsidy Arrangement (Arrangement) with private sector
property insurers, also known as Write Your Own (WYO) companies, to
sell NFIP flood insurance policies under their own names and adjust and
pay

claims arising under the Standard Flood Insurance Policy (SFIP). Each
Arrangement entered into by a WYO company must be in the form and
substance of the standard Arrangement, a copy of which is published in
the Federal Register annually, at least 6 months prior to becoming
effective. See 44 CFR 62.23(a). To learn more about FEMA's WYO Program,
please visit https://nfipservices.floodsmart.gov/write-your-own-program.

II. Notice of Availability

    Insurers interested in participating in the WYO Program for Fiscal
Year 2024 must contact Sarah Devaney Ice at [email protected] by May 30, 2023.
    Prior participation in the WYO Program does not guarantee FEMA will
approve continued participation. FEMA will evaluate requests to
participate in light of publicly available information, industry
performance data, and other criteria listed in 44 CFR 62.24 and the FY
2024 Arrangement, copied below. FEMA encourages private insurance
companies to supplement this information with customer satisfaction
surveys, industry awards or recognition, or other objective performance
data. In addition, private insurance companies should work with their
vendors and subcontractors involved in servicing and delivering their
insurance lines to ensure FEMA receives the information necessary to
effectively evaluate the criteria set forth in its regulations.
    FEMA will send a copy of the offer for the FY 2024 Arrangement,
together with related materials and submission instructions, to all
private insurance companies successfully evaluated by the NFIP. If
FEMA, after conducting its evaluation, chooses not to renew a Company's
participation, FEMA, at its option, may require the continued
performance of all or selected elements of the FY 2023 Arrangement for
a period required for orderly transfer or cessation of the business and
settlement of accounts, not to exceed 18 months. See FY 2023
Arrangement, Article II.D. All evaluations, whether successful or
unsuccessful, will inform both an overall assessment of the WYO Program
and any potential changes FEMA may consider regarding the Arrangement
in future fiscal years.
    Any private insurance company with questions may contact FEMA at:
Sarah Devaney Ice, Federal Insurance and Mitigation Administration,
FEMA, 400 C St. SW, Washington, DC 20472 (mail);<PHONE_NUMBER>
(phone); or [email protected] (email).

III. Fiscal Year 2024 Arrangement

    Pursuant to 44 CFR 62.23(a), FEMA must publish the Arrangement at
least six months prior to the Arrangement becoming effective. The FY
2024 Arrangement provided below is substantially similar to the
previous year's Arrangement, but includes the following substantive
changes:
    1. In Article III.A (Undertakings of the Company), under Operations
Plan, FEMA is requiring WYO companies to submit a Policy Retention
Plan, describing the Company's efforts and methods to retain and renew
policies to better inform FEMA on how WYO companies communicate with
policyholders and support policy retention.
    2. In Article III.A (Undertakings of the Company), under subsection
(5) (Operations Plan), FEMA is redesignating subsections (c)-(h) as
(d)-(i) because it has added a new requirement of a Policy Retention
Plan under (c). Aside from the addition of a Policy Retention Plan,
FEMA is not making any other substantive changes to its requirement
that WYO companies submit an Operations Plan within ninety calendar
days of the commencement of this Arrangement.
    3. In Article IV.C (Loss Costs, Expenses, Expense Reimbursement,
and Premium Refunds), FEMA is removing ``geographic area'' from its
determination of alternative Adjuster Fee Schedules to better ensure
that adjuster resources are available throughout the Nation following a
catastrophic flood. Alternative Adjuster Fee schedules for the FY 2024
Arrangement will now be based solely on losses incurred during a
specified time frame.
    4. In Article IV.D (Loss Costs, Expenses, Expense Reimbursement,
and Premium Refunds), FEMA is requiring WYO companies to comply with
the NFIP Litigation Manual in both its conduct and oversight of
litigation. To the extent that the manual does not address specific
issues, FEMA is directing WYO companies to continue to follow their own
customary business practices for other lines of insurance not sold
under the Arrangement.
    5. In Article IV.D (Loss Costs, Expenses, Expense Reimbursement,
and Premium Refunds), FEMA is removing the requirement that WYO
companies comply with their customary business practices in the
oversight of litigation because this subsection (IV.D.3.d) is now
addressed in IV.D.3.b, discussed above.

The Fiscal Year 2024 Arrangement reads as follows:

Financial Assistance/Subsidy Arrangement
Article I. General Provisions
    A. Parties. The parties to the Financial Assistance/Subsidy
Arrangement are the Federal Emergency Management Agency (FEMA) and the
Company.
    B. Purpose. The purpose of this Financial Assistance/Subsidy
Arrangement is to authorize the Company to sell and service flood
insurance policies made available through the National Flood Insurance
Program (NFIP) and adjust and pay claims arising under such policies as
fiscal agents of the Federal Government.
    C. Authority. This Financial Assistance/Subsidy Arrangement is
authorized under the National Flood Insurance Act of 1968 (NFIA) (42
U.S.C. 4001 et seq.), and in particular, section 1345(a) of the NFIA
(42 U.S.C. 4081(a)), as implemented by 44 CFR 62.23 and 62.24.
Article II. Commencement and Termination
    A. The effective period of this Arrangement begins on October 1,
2023, and terminates no earlier than September 30, 2024, subject to
extension pursuant to Articles II.D and II.H. FEMA may provide
financial assistance only for policy applications and endorsements
accepted by the Company during this period pursuant to the Program's
effective date, underwriting, and eligibility rules.
    B. Pursuant to 44 CFR 62.23(a), FEMA will publish the Arrangement
and the terms for subscription or re-subscription for Fiscal Year 2025
in the Federal Register no later than April 1, 2024. Upon such
publication, the Company must notify FEMA of its intent to re-
subscribe or not re-subscribe to the WYO Program for the following term
within ninety (90) calendar days.
    C. Requesting Participation in WYO Program. Insurers interested in
participating in the WYO Program, who have never participated in the
program, or who are returning to the program after a period of non-
participation, must submit a written request to participate.
    1. Participation is then contingent on submission of both:
    a. A completed application package, the requirements and contents
of which FEMA will outline in its written response to the request to
participate.
    b. A completed operations plan, whose requirements and contents are
outlined at Article III.A.5 of this Arrangement.

    2. Insurers who are already participating in the program must
submit their operations plan within ninety (90) days as outlined in
Article III.A.5 of this Arrangement.
    D. In addition to the requirements of Article II.B, in order to
ensure uninterrupted service to policyholders, the Company must notify
FEMA within thirty (30) calendar days of when the Company elects not to
re-subscribe to the WYO Program during the term of this Arrangement. If
so notified, or if FEMA chooses not to renew the Company's
participation, FEMA, at its option, may require the continued
performance of all or selected elements of this Arrangement for the
period required for orderly transfer or cessation of business and
settlement of accounts, not to exceed eighteen (18) months after the
end of this Arrangement (September 30, 2024), and may either require
transfer of activities to FEMA under Article II.D.1 or allow transfer
of activities to another WYO company under Article II.D.2:
    1. FEMA may require the Company to transfer all activities under
this Arrangement to FEMA. Within thirty (30) calendar days of FEMA's
election of this option, the Company must deliver to FEMA the
following:
    a. A plan for the orderly transfer to FEMA of any continuing
responsibilities in administering the policies issued by the Company
under the Program including provisions for coordination assistance.
    b. All data received, produced, and maintained through the life of
the Company's participation in the Program, including certain data, as
determined by FEMA, in a standard format and medium.
    c. All claims and policy files, including those pertaining to
receipts and disbursements that have occurred during the life of each
policy. In the event of a transfer of the services provided, the
Company must provide FEMA with a report showing, on a policy basis, any
amounts due from or payable to policyholders, agents, brokers, and
others as of the transition date.
    d. All funds in its possession with respect to any policies
transferred to FEMA for administration and the unearned expenses
retained by the Company.
    e. A point of contact within the Company responsible for addressing
issues that may arise from the Company's previous participation under
the WYO Program.
    2. Within ninety (90) calendar days of receiving the Company's data
and supporting documentation, FEMA will notify the Company of the date
that FEMA will complete the transfer.
    3. FEMA may allow the Company to transfer all activities under this
Arrangement to one or more other WYO companies. Prior to commencing
such transfer, the Company must submit, and FEMA must approve, a formal
request. Such request must include the following:
    a. An assurance of uninterrupted service to policyholders.
    b. A detailed transfer plan providing for either: (1) the renewal
of the Company's NFIP policies by one or more other WYO companies; or
(2) the transfer of the Company's NFIP policies to one or more other
WYO companies.
    c. A description of who the responsible party will be for
liabilities relating to losses incurred by the Company in this or
preceding Arrangement years.
    d. A point of contact within the Company responsible for addressing
issues that may arise from the Company's previous participation under
the WYO Program.
    E. Cancellation by FEMA.
    1. FEMA may cancel financial assistance under this Arrangement in
its entirety upon thirty (30) calendar days written notice to the
Company stating one or more of the following reasons for such
cancellation:
    a. Fraud or misrepresentation by the Company subsequent to the
inception of the Arrangement.
    b. Nonpayment to FEMA of any amount due.
    c. Material failure to comply with the requirements of this
Arrangement or with the written standards, procedures, or guidance
issued by FEMA relating to the NFIP and applicable to the Company.
    d. Failure to maintain compliance with WYO company participation
criteria at 44 CFR 62.24.
    e. Any other cause so serious or compelling a nature that affects
the Company's present responsibility.
    2. If FEMA cancels this Arrangement pursuant to Article II.E.1,
FEMA may require the transfer of administrative responsibilities and
the transfer of data and records as provided in Article II.D.1.a-d. If
transfer is required, the Company must remit to FEMA the unearned
expenses retained by the Company. In such event, FEMA will assume all
obligations and liabilities owed to policyholders under such policies,
arising before and after the date of transfer.
    3. As an alternative to the transfer of the policies to FEMA
pursuant to Article II.E.2, FEMA will consider a proposal, if it is
made by the Company, for the assumption of responsibilities by another
WYO company as provided in Article II.D.3.
    F. In the event that the Company is unable or otherwise fails to
carry out its obligations under this Arrangement by reason of any order
or directive duly issued by the Department of Insurance of any
jurisdiction to which the Company is subject, including but not limited
to being placed in receivership or run-off status by a State Department
of Insurance, the Company agrees to transfer, and FEMA will accept, any
and all WYO policies issued by the Company and in force as of the date
of such inability or failure to perform. In such event FEMA will assume
all obligations and liabilities within the scope of the Arrangement
owed to policyholders arising before and after the date of transfer,
and the Company will immediately transfer to FEMA all needed records
and data and all funds in its possession with respect to all such
policies transferred and the unearned expenses retained by the Company.
As an alternative to the transfer of the policies to FEMA, FEMA will
consider a proposal, if it is made by the Company, for the assumption
of responsibilities by another WYO company as provided by Article
II.D.3. The Company shall immediately notify FEMA if:
    1. An independent financial rating company downgrades its financial
strength during its period of performance under this Arrangement; or
    2. It receives a State department of insurance order or directive
making it unable to carry out its obligations under this Arrangement,
including but not limited to being placed in receivership or run-off
status by a State department of insurance.
    G. In the event the Act is amended, repealed, expires, or if FEMA
is otherwise without authority to continue the Program, FEMA may cancel
financial assistance under this Arrangement for any new or renewal
business, but the Arrangement will continue for policies in force that
shall be allowed to run their term under the Arrangement.
    H. If FEMA does not publish the Fiscal Year 2025 Arrangement in the
Federal Register on or before April 1, 2024, then FEMA may require the
continued performance of all or selected elements of this Arrangement
through December 31, 2025, but such extension may not exceed the
expiration of the six (6) month period following publication of the
Fiscal Year 2025 Arrangement in the Federal Register.

Article III. Undertakings of the Company
    A. Responsibilities of the Company.
    1. Policy Issuance and Maintenance. The Company must meet all
requirements of the Financial Control Plan and any guidance issued by
FEMA. The Company is responsible for the following:
    a. Compliance with Rating Procedures.
    b. Eligibility Determinations.
    c. Policy Issuances.
    d. Policy Endorsements.
    e. Policy Cancellations.
    f. Policy Correspondence.
    g. Payment of Agents' Commissions.
    h. Fund management, including the receipt, recording, disbursement,
and timely deposit of NFIP funds.
    2. The Company must provide a live customer service agent that (1)
is accessible to all policyholders via telephone during business days,
and (2) can resolve commonplace customer service issues.
    3. Claims Processing.
    a. In general. The Company must process all claims consistent with
the Standard Flood Insurance Policy, Financial Control Plan, Claims
Manual, other guidance adopted by FEMA, and as much as possible, with
the Company's standard business practices for its non-NFIP policies.
    b. Adjuster registration. The Company may not use an independent
adjuster to adjust a claim unless the independent adjuster:
    i. Holds a valid Flood Control Number issued by FEMA; or
    ii. Participates in the Flood Adjuster Capacity Program.
    c. Claim reinspections. The Company must cooperate with any claim
reinspection by FEMA.
    4. Reports. The Company must certify its business under the WYO
Program through monthly financial reports in accordance with the
requirements of the Pivot Use Procedures. The Company must follow the
Financial Control Plan and the WYO Accounting Procedures Manual. FEMA
will validate and audit, in detail, these data and compare the results
against Company reports.
    5. Operations Plan. Within ninety (90) calendar days of the
commencement of this Arrangement, the Company must submit a written
Operations Plan to FEMA describing its efforts to perform under this
Arrangement. The plan must include the following:
    a. Private Flood Insurance Separation Plan. If applicable, a
description of the Company's policies, procedures, and practices
separating their NFIP flood insurance lines of business from their non-
NFIP flood insurance lines of business, including its implementation of
Article III.E.
    b. Marketing Plan. A marketing plan describing the Company's
forecasted growth, efforts to achieve that growth, and ability to
comply with any marketing guidelines provided by FEMA.
    c. Policy Retention Plan. A retention plan describing the Company's
efforts to retain and renew policies and methods of communicating with
policyholders on renewals.
    d. Customer Service Plan. A description of overall customer service
practices, including ongoing and planned improvement efforts.
    e. Distribution Plan. A description of the Company's NFIP flood
insurance distribution network, including anticipated numbers of
agents, efforts to train those agents, and an average rate of
commissions paid to producers by state.
    f. Catastrophic Claims Handling Plan. A catastrophic claims
handling plan describing how the Company will respond and maintain
service standards in catastrophic flood events, including:
    i. Deploying mobile or temporary claims centers to provide
immediate policyholder assistance, including submission of notice of
loss and claim status information.
    ii. Preparing people, processes, and tools for claims processing in
remote work scenarios.
    iii. Preparing communications in advance for readiness throughout
the year including a suite of printed and digital materials (e.g.,
advertisements, educational materials, social media messaging, website
blogs and announcements) that provide key messaging to stakeholders,
including policyholders, agents, and the public following a
catastrophic flood event.
    iv. Identifying the core areas of information technology that need
to be scaled pre-event or are scalable post-event.
    g. Business Continuity Plan. A business continuity plan identifying
threats and risks facing the Company's NFIP-related operations and how
the Company will maintain operations in the event of a disaster
affecting its operational capabilities.
    h. Privacy Protection Plan. A privacy protection plan that
describes the Company's standards for using and maintaining personally
identifiable information.
    i. System Security Plan. A system security plan that describes
system boundaries, system environments of operation, how security
requirements are implemented, and the relationships with or connections
to other systems, including plans of action that describe how
unimplemented security requirements will be met and how any planned
mitigations will be implemented, prepared in accordance with either:
    i. National Institute of Standards and Technology (NIST) Special
Publication (SP) 800-171 ``Protecting Controlled Unclassified
Information in Nonfederal Information Systems and Organizations'',
Revision 2, https://csrc.nist.gov/publications/detail/sp/800-171/rev-2/final; or
    ii. Another comparable standard deemed acceptable by FEMA.
    B. Time Standards. WYO companies must meet the time standards
provided below. Time will be measured from the date of receipt through
the date the task is completed. In addition to the standards set forth
below, all functions performed by the Company must be in accordance
with the highest reasonably attainable quality standards generally used
in the insurance and data processing field. Applicable time standards
are:
    1. Application Processing--fifteen (15) business days (Note: if the
policy cannot be sent due to insufficient or erroneous information or
insufficient funds, the Company must send a request for correction or
added moneys within ten (10) business days.
    2. Renewal processing--seven (7) business days.
    3. Endorsement processing--fifteen (15) business days.
    4. Cancellation processing--fifteen (15) business days.
    5. File examination--seven (7) business days from the day the
Company receives the final report.
    6. Claims draft processing--seven (7) business days from completion
of file examination.
    7. Claims adjustment--forty-five (45) calendar days average from
the receipt of Notice of Loss (or equivalent) through completion of
examination.
    8. Upload transactions to Pivot--one (1) business day.
    C. Policy Issuance.
    1. The flood insurance subject to this Arrangement must be only
that insurance written by the Company in its own name pursuant to the
Act.
    2. The Company must issue policies under the regulations prescribed
by FEMA, in accordance with the Act, on a form approved by FEMA.
    3. The Company must issue all policies in consideration of such
premiums and upon such terms and conditions and in such states or areas
or subdivisions thereof as may be designated by FEMA and only where

the Company is licensed by State law to engage in the property
insurance business.
    D. Lapse of Authority or Appropriation. FEMA may require the
Company to discontinue issuing policies subject to this Arrangement
immediately in the event Congressional authorization or appropriation
for the NFIP is withdrawn.
    E. Separation of Finances and Other Lines of Flood Insurance.
    1. The Company must separate Federal flood insurance funds from all
other Company accounts, at a bank or banks of its choosing for the
collection, retention and disbursement of Federal funds relating to its
obligation under this Arrangement, less the Company's expenses as set
forth in Article IV. The Company must remit all funds not required to
meet current expenditures to the United States Treasury, in accordance
with the provisions of the WYO Accounting Procedures Manual.
    2. Other Undertakings of the Company.
    a. Clear communication. If the Company also offers insurance
policies covering the peril of flood outside of the NFIP in any
geographic area in which Program authorizes the purchase of flood
insurance, the Company must ensure that all public communications
(whether written, recorded, electronic, or other) regarding non-NFIP
insurance lines would not lead a reasonable person to believe that the
NFIP, FEMA, or the Federal Government in any way endorses, sponsors,
oversees, regulates, or otherwise has any connection with the non-NFIP
insurance line. The Company may assure compliance with this requirement
by prominently including in such communications the following
statement: ``This insurance product is not affiliated with the National
Flood Insurance Program.''
    b. Data protection. The company may not use non-public data,
information, or resources obtained in course of executing this
Arrangement to further or support any activities outside the scope of
this Arrangement.
    F. Claims. The Company must investigate, adjust, settle, and defend
all claims or losses arising from policies issued under this
Arrangement. Payment of flood insurance claims by the Company bind
FEMA, subject to appeal.
    G. Compliance with Agency Standards and Guidelines.
    1. The Company must comply with the Act, regulations, written
standards, procedures, and guidance issued by FEMA relating to the NFIP
and applicable to the Company, including, but not limited to the
following:
    a. WYO Program Financial Control Plan.
    b. Pivot Use Procedures.
    c. NFIP Flood Insurance Manual.
    d. NFIP Claims Manual.
    e. NFIP Litigation Manual.
    f. WYO Accounting Procedures Manual.
    g. WYO Bulletins.
    2. The Company must market flood insurance policies in a manner
consistent with marketing guidelines established by FEMA.
    3. FEMA may require the Company to collect customer service
information to monitor and improve their program delivery.
    4. The Company must notify its agents of the requirement to comply
with State regulations regarding flood insurance agent education,
notify agents of flood insurance training opportunities, and assist
FEMA in periodic assessment of agent training needs.
    H. Compliance with Appeals Process.
    1. In general. FEMA will notify the Company when a policyholder
files an appeal. After notification, the Company must provide FEMA the
following information:
    a. All records created or maintained pursuant to this Arrangement
requested by FEMA.
    b. A comprehensive claim file synopsis, redacted of personally
identifiable information, that includes a summary of the appeal issues,
the Company's position on each issue, and any additional relevant
information. If, in the process of writing the synopsis, the Company
determines that it can address the issue raised by the policyholder on
appeal without further direction, it must notify FEMA. The Company will
then work directly with the policyholder to achieve resolution and
update FEMA upon completion. The Company may have a claims examiner
review the file who is independent from the original decision and who
possesses the authority to overturn the original decision if the facts
support it.
    2. Cooperation. The Company must cooperate with FEMA throughout the
appeal process until final resolution. This includes adhering to any
written appeals guidance issued by FEMA.
    3. Resolution of Appeals. FEMA will close an appeal when:
    a. FEMA upholds the denial by the Company.
    b. FEMA overturns the denial by the Company and all necessary
actions that follow are completed.
    c. The Company independently resolves the issue raised by the
policyholder without further direction.
    d. The policyholder voluntarily withdraws the appeal.
    e. The policyholder files litigation.
    4. Processing of Additional Payments from Appeal. The Company must
follow established NFIP adjusting practices and claim handling
procedures for appeals that result in additional payment to a
policyholder when FEMA does not explicitly direct such payment during
the review of the appeal.
    5. Time Standards.
    a. Provide FEMA with requested files pursuant to Article
III.H.1.a--ten (10) business days after request.
    b. Provide FEMA with comprehensive claim file synopsis pursuant to
Article III.H.1.b--ten (10) business days after request.
    c. Responding to inquiries from FEMA regarding an appeal--ten (10)
business days after inquiry.
    d. Inform FEMA of any litigation filed by a policyholder with a
current appeal--ten (10) business days of notice.
    I. Subrogation.
    1. In general. Consistent with Federal law and guidance, the
Company must use its customary business practices when pursuing
subrogation.
    2. Referral to FEMA. Pursuant to 44 CFR 62.23(i)(8), in lieu of the
Company pursuing a subrogation claim, WYO companies may refer such
claims to FEMA.
    3. Notification. No more than ten (10) calendar days after either
the Company identifies a possible subrogation claim or FEMA notifies
the Company of a possible subrogation claim, the Company must notify
FEMA of its intent to pursue the claim or refer the claim to FEMA.
    4. Cooperation. Pursuant to 44 CFR 62.23(i)(11), the Company must
extend reasonable cooperation to FEMA's Office of the Chief Counsel on
matters related to subrogation.
    J. Access to Records. The Company must furnish to FEMA such
summaries and analysis of information including claim file information
and property address, location, and/or site information in its records
as may be necessary to carry out the purposes of the Act, in such form
as FEMA, in cooperation with the Company, will prescribe.
    K. System for Award Management (SAM). The Company must be
registered in the System for Award Management. Such registration must
have an active status during the period of performance under this
Arrangement. The Company must ensure that its SAM registration is
accurate and up to date.
    L. Cybersecurity.
    1. In general. Unless the Company uses a compliance alternative
pursuant to Article III.L.2, the Company must

implement the security requirements specified by National Institute of
Standards and Technology (NIST) Special Publication (SP) 800-171
``Protecting Controlled Unclassified Information in Nonfederal
Information Systems and Organizations'', Revision 2 (https://csrc.nist.gov/publications/detail/sp/800-171/rev-2/final) for any
system that processes, stores, or transmits information that requires
safeguarding or dissemination controls pursuant to and consistent with
law, regulations, this Arrangement, or other applicable requirements,
including information protected pursuant to Article XII.C and
personally identifiable information of NFIP applicants and
policyholders. Such implementation must be validated by a third-party
assessment organization.
    2. Compliance alternatives. In lieu of compliance with Article
IV.L.1, the Company may either:
    a. Provide FEMA with documentation that the Company is securing the
systems subject to the requirements of Article III.L.1 with either:
    i. ISO/IEC 27001, https://www.iso.org/isoiec-27001-information-security.html;
    ii. NIST Cybersecurity Framework, https://csrc.nist.gov/publications/detail/sp/800-171/rev-2/final;
    iii. Cybersecurity Maturity Model Certification (CMMC 2.0), https://dodcio.defense.gov/CMMC/;
    iv. Service and Organization Controls (SOC) 2, https://www.aicpa.org/interestareas/frc/assuranceadvisoryservices/sorhome.html;
or
    v. Another comparable standard deemed acceptable by FEMA.
    b. Provide a plan of action that describes how unimplemented
security requirements of NIST SP 800-171, rev. 2, (https://csrc.nist.gov/publications/detail/sp/800-171/rev-2/final) will be met
and how any planned mitigations will be implemented as part of the
system security plan required under Article III.A.4.h.
Article IV. Loss Costs, Expenses, Expense Reimbursement, and Premium
Refunds
    A. The Company is liable for operating, administrative, and
production expenses, including any State premium taxes, dividends,
agents' commissions or any other expense of whatever nature incurred by
the Company in the performance of its obligations under this
Arrangement but excluding other taxes or fees, such as municipal or
county premium taxes, surcharges on flood insurance premium, and
guaranty fund assessments.
    B. Payment for Selling and Servicing Policies.
    1. Operating and Administrative Expenses. The Company may withhold,
as operating and administrative expenses, other than agents' or
brokers' commissions, an amount from the Company's written premium on
the policies covered by this Arrangement in reimbursement of all of the
Company's marketing, operating, and administrative expenses, except for
allocated and unallocated loss adjustment expenses described in Article
IV.C. This amount will equal the sum of the average industry expenses
ratios for ``Other Act.'', ``Gen. Exp.'' And ``Taxes'' calculated by
aggregating premiums and expense amounts for each of five property
coverages using direct premium and expense information to derive
weighted average expense ratios. For this purpose, FEMA will use data
for the property/casualty industry published, as of March 15 of the
prior Arrangement year, in Part III of the Insurance Expense Exhibit in
A.M. Best Company's Aggregates and Averages for the following five
property coverages: Fire, Allied Lines, Farmowners Multiple Peril,
Homeowners Multiple Peril, and Commercial Multiple Peril (non-liability
portion).
    2. Agent Compensation. The Company may retain fifteen (15) percent
of the Company's written premium on the policies covered by this
Arrangement as the commission allowance to meet the commissions or
salaries of insurance agents, brokers, or other entities producing
qualified flood insurance applications and other related expenses.
    3. Growth Bonus. FEMA may increase the amount of expense allowance
retained by the Company depending on the extent to which the Company
meets the marketing goals for the Arrangement year contained in
marketing guidelines established pursuant to Article III.G.2. The total
growth bonuses paid to companies pursuant to this Arrangement may not
exceed two (2) percent of the aggregate net written premium collected
by all WYO companies. FEMA will pay the Company the amount of any
increase after the end of the Arrangement year.
    C. FEMA will reimburse Loss Adjustment Expenses as follows:
    1. FEMA will reimburse unallocated loss adjustment expenses to the
Company pursuant to a ``ULAE Schedule'' coordinated with the Company
and provided by FEMA.
    2. FEMA will reimburse allocated loss adjustment expenses to the
Company pursuant to a ``Fee Schedule'' coordinated with the Company and
provided by FEMA. To ensure the availability of qualified insurance
adjusters during catastrophic flood events, FEMA may, in its sole
discretion, temporarily authorize the use of an alternative Fee
Schedule with increased amounts during the term of this Arrangement for
losses incurred during a time frame established by FEMA.
    3. FEMA will reimburse special allocated loss expenses and
subrogation expenses reimbursable under 44 CFR 62.23(i)(8) to the
Company in accordance with guidelines issued by FEMA.
    D. Loss Payments.
    1. The Company must make loss payments for flood insurance policies
from federal funds retained in the bank account(s) established under
Article III.E.1 and, if such funds are depleted, from Federal funds
withdrawn from the National Flood Insurance Fund pursuant to Article V.
    2. Loss payments include payments because of litigation that arises
under the scope of this Arrangement, and the Authorities set forth
herein. All such loss payments and related expenses must meet the
documentation requirements of the Financial Control Plan and of this
Arrangement, and the Company must comply with the litigation
documentation and notification requirements established by FEMA.
Failure to meet these requirements may result in FEMA's decision not to
provide reimbursement.
    3. Oversight of Litigation.
    a. Any litigation resulting from, related to, or arising from the
Company's compliance with the written standards, procedures, and
guidance issued by FEMA arises under the National Flood Insurance Act
of 1968 or regulations, and such legal issues raise a Federal question.
    b. The Company must conduct and oversee litigation arising out of
the Company's participation in the NFIP in accordance with the National
Flood Insurance Program Litigation Manual. If not addressed by the NFIP
Litigation Manual, the Company should utilize its customary business
practices for its defense of property and casualty litigation,
including billing rates and standards.
    c. FEMA will not reimburse the Company for any award or judgment
for damages and any costs to defend litigation that is either:
    i. Grounded in actions by the Company that are significantly
outside the scope of this Arrangement; or
    ii. Involves issues of agent negligence.

    E. Refunds. The Company must make premium refunds required by FEMA
to applicants and policyholders from Federal flood insurance funds
referred to in Article III.E.1, and, if such funds are depleted, from
funds derived by withdrawing from the National Flood Insurance Fund
pursuant to Article V. The Company may not refund any premium to
applicants or policyholders in any manner other than as specified by
FEMA since flood insurance premiums are funds of the Federal
Government.
    F. Suspension and Debarment.
    1. In general. The Company may not contract with or employ any
person who is suspended or debarred from participating in federal
transactions pursuant to 2 CFR part 180 (covering federal
nonprocurement transactions) or 48 CFR part 9, subpart 9.4 (covering
federal procurement transactions) in relation to this Arrangement.
    2. Reimbursement. FEMA will not reimburse the company for any
expenses incurred in violation of Article IV.F.1.
    3. Compliance. The Company may ensure compliance with Article
IV.F.1 by:
    a. Checking the System for Awards Management at sam.gov;
    b. Collecting a certification from that person; or
    c. Adding a clause or condition to the transaction with that
person.
Article V. Undertakings of the Government
    A. FEMA must enable the Company to withdraw funds from the National
Flood Insurance Fund daily, if needed, pursuant to prescribed
procedures implemented by FEMA. FEMA will increase the amounts of the
authorizations as necessary to meet the obligations of the Company
under Article IV.C-E. The Company may only request funds when net
premium income has been depleted. The timing and amount of cash
advances must be as close as is administratively feasible to the actual
disbursements by the recipient organization for allowable expenses.
Request for payment may not ordinarily be drawn more frequently than
daily. The Company may withdraw funds from the National Flood Insurance
Fund for any of the following reasons:
    1. Payment of claims, as described in Article IV.D.
    2. Refunds to applicants and policyholders for insurance premium
overpayment, or if the application for insurance is rejected or when
cancellation or endorsement of a policy results in a premium refund, as
described in Article IV.E.
    3. Allocated and unallocated loss adjustment expenses, as described
in Article IV.C.
    B. FEMA must provide technical assistance to the Company as
follows:
    1. NFIP policy and history.
    2. Clarification of underwriting, coverage, and claims handling.
    3. Other assistance as needed.
    C. FEMA must provide the Company with a copy of all formal written
appeal decisions conducted in accordance with Section 205 of the
Bunning-Bereuter-Blumenauer Flood Insurance Reform Act of 2004, Public
Law 108-264 and 44 CFR 62.20.
    D. Prior to the end of the Arrangement period, FEMA may provide the
Company a statistical summary of their performance during the signed
Arrangement period. This summary will detail the Company's performance
individually, as well as compare the Company's performance to the
aggregate performance of all WYO companies and the NFIP Direct
Servicing Agent.
Article VI. Cash Management and Accounting
    A. FEMA must make available to the Company during the entire term
of this Arrangement the ability to withdraw funds from the National
Flood Insurance Fund provided for in Article V. The Company may
withdraw funds from the National Flood Insurance Fund for reimbursement
of its expenses as set forth in Article V.A that exceed net written
premiums collected by the Company from the effective date of this
Arrangement or continuation period to the date of the draw. In the
event that adequate funding is not available to meet current Company
obligations for flood policy claim payments issued, FEMA must direct
the Company to immediately suspend the issuance of loss payments until
such time as adequate funds are available. The Company is not required
to pay claims from their own funds in the event of such suspension.
    B. The Company must remit all funds, including interest, not
required to meet current expenditures to the United States Treasury, in
accordance with the provisions of the WYO Accounting Procedures Manual
or procedures approved in writing by FEMA.
    C. In the event the Company elects not to participate in the
Program in this or any subsequent fiscal year, or is otherwise unable
or not permitted to participate, the Company and FEMA must make a
provisional settlement of all amounts due or owing within three (3)
months of the expiration or termination of this Arrangement. This
settlement must include net premiums collected, funds withdrawn from
the National Flood Insurance Fund, and reserves for outstanding claims.
The Company and FEMA agree to make a final settlement, subject to
audit, of accounts for all obligations arising from this Arrangement
within eighteen (18) months of its expiration or termination, except
for contingent liabilities that must be listed by the Company. At the
time of final settlement, the balance, if any, due FEMA or the Company
must be remitted by the other immediately and the operating year under
this Arrangement must be closed.
    D. Upon FEMA's request, the Company must provide FEMA with a true
and correct copy of the Company's Fire and Casualty Annual Statement,
and Insurance Expense Exhibit or amendments thereof as filed with the
State Insurance Authority of the Company's domiciliary State.
    E. The Company must comply with the requirements of the False
Claims Act (41 U.S.C. 3729-3733), which prohibits submission of false
or fraudulent claims for payment to the Federal Government.
Article VII. Arbitration
    If any misunderstanding or dispute arises between the Company and
FEMA with reference to any factual issue under any provisions of this
Arrangement or with respect to FEMA's nonrenewal of the Company's
participation, other than as to legal liability under or interpretation
of the Standard Flood Insurance Policy, such misunderstanding or
dispute may be submitted to arbitration for a determination that will
be binding upon approval by FEMA. The Company and FEMA may agree on and
appoint an arbitrator who will investigate the subject of the
misunderstanding or dispute and make a determination. If the Company
and FEMA cannot agree on the appointment of an arbitrator, then two
arbitrators will be appointed, one to be chosen by the Company and one
by FEMA.
    The two arbitrators so chosen, if they are unable to reach an
agreement, must select a third arbitrator who must act as umpire, and
such umpire's determination will become final only upon approval by
FEMA. The Company and FEMA shall bear in equal shares all expenses of
the arbitration. Findings, proposed awards, and determinations
resulting from arbitration proceedings carried out under this section,
upon objection by FEMA or the Company, shall be inadmissible as
evidence in any subsequent proceedings in any court of competent
jurisdiction.

    This Article shall indefinitely succeed the term of this
Arrangement.
Article VIII. Errors and Omissions
    A. In the event of negligence by the Company that has not resulted
in litigation but has resulted in a claim against the Company, FEMA
will not consider reimbursement of the Company for costs incurred due
to that negligence unless the Company takes all reasonable actions to
rectify the negligence and to mitigate any such costs as soon as
possible after discovery of the negligence. The Company may choose not
to seek reimbursement from FEMA.
    B. If the Company has made a claim payment to an insured without
including a mortgagee (or trustee) of which the Company had actual
notice prior to making payment, and subsequently determines that the
mortgagee (or trustee) is also entitled to any part of said claim
payment, any additional payment may not be paid by the Company from any
portion of the premium and any funds derived from any Federal funds
deposited in the bank account described in Article III.E.1. In
addition, the Company agrees to hold the Federal Government harmless
against any claim asserted against the Federal Government by any such
mortgagee (or trustee), as described in the preceding sentence, by
reason of any claim payment made to any insured under the circumstances
described above.
Article IX. Officials Not To Benefit
    No Member or Delegate to Congress, or Resident Commissioner, may be
admitted to any share or part of this Arrangement, or to any benefit
that may arise therefrom; but this provision may not be construed to
extend to this Arrangement if made with a corporation for its general
benefit.
Article X. Offset
    At the settlement of accounts, the Company and FEMA have, and may
exercise, the right to offset any balance or balances, whether on
account of premiums, commissions, losses, loss adjustment expenses,
salvage, or otherwise due one party to the other, its successors or
assigns, hereunder or under any other Arrangements heretofore or
hereafter entered into between the Company and FEMA. This right of
offset shall not be affected or diminished because of insolvency of the
Company.
    All debts or credits of the same class, whether liquidated or
unliquidated, in favor of or against either party to this Arrangement
on the date of entry, or any order of conservation, receivership, or
liquidation, shall be deemed to be mutual debts and credits and shall
be offset with the balance only to be allowed or paid. No offset shall
be allowed where a conservator, receiver, or liquidator has been
appointed and where an obligation was purchased by or transferred to a
party hereunder to be used as an offset.
    Although a claim on the part of either party against the other may
be unliquidated or undetermined in amount on the date of the entry of
the order, such claim will be regarded as being in existence as of the
date of such order and any credits or claims of the same class then in
existence and held by the other party may be offset against it.
Article XI. Equal Opportunity
    A. Age Discrimination Act of 1975. The Company must comply with the
requirements of the Age Discrimination Act of 1975, Public Law 94-135
(42 U.S.C. 6101 et seq.) which prohibits discrimination on the basis of
age in any program or activity receiving federal financial assistance.
    B. Americans with Disabilities Act. The Company must comply with
the requirements of Titles I, II, and III of the Americans with
Disabilities Act, Public Law 101-336 (42 U.S.C. 12101-12213), which
prohibits recipients from discriminating on the basis of disability in
the operation of public entities, public and private transportation
systems, places of public accommodation, and certain testing entities.
    C. Civil Rights Act of 1964--Title VI. The Company must comply with
the requirements of Title VI of the Civil Rights Act of 1964 (42 U.S.C.
2000d et seq.), which provides that no person in the United States
will, on the grounds of race, color, or national origin, be excluded
from participation in, be denied the benefits of, or be subjected to
discrimination under any program or activity receiving federal
financial assistance. Department of Homeland Security implementing
regulations for the Act are found at 6 CFR part 21 and 44 CFR part 7.
    D. Civil Rights Act of 1968. The Company must comply with Title
VIII of the Civil Rights Act of 1968, which prohibits recipients from
discriminating in the sale, rental, financing, and advertising of
dwellings, or in the provision of services in connection therewith, on
the basis of race, color, national origin, religion, disability,
familial status, and sex as implemented by the U.S. Department of
Housing and Urban Development at 24 CFR part 100.
    E. Rehabilitation Act of 1973. The Company must comply with the
requirements of Section 504 of the Rehabilitation Act of 1973 (29
U.S.C. 794), which provides that no otherwise qualified handicapped
individuals in the United States will, solely by reason of the
handicap, be excluded from participation in, be denied the benefits of,
or be subjected to discrimination under any program or activity
receiving federal financial assistance.
Article XII. Access to Books and Records
    A. Audits. FEMA, the Department of Homeland Security, and the
Comptroller General of the United States, or their duly authorized
representatives, for the purpose of investigation, audit, and
examination shall have access to any books, documents, papers and
records of the Company that are pertinent to this Arrangement. The
Company shall keep records that fully disclose all matters pertinent to
this Arrangement, including premiums and claims paid or payable under
policies issued pursuant to this Arrangement. Records of accounts and
records relating to financial assistance shall be retained and
available for three (3) years after final settlement of accounts, and
to financial assistance, three (3) years after final adjustment of such
claims. FEMA shall have access to policyholder and claim records at all
times for purposes of the review, defense, examination, adjustment, or
investigation of any claim under a flood insurance policy subject to
this Arrangement.
    B. Nondisclosure by FEMA. FEMA, to the extent permitted by law and
regulation, will safeguard and treat information submitted or made
available by the Company pursuant to this Arrangement as confidential
where the information has been marked ``confidential'' by the Company
and the Company customarily keeps such information private or closely-
held. To the extent permitted by law and regulation, FEMA will not
release such information to the public pursuant to a Freedom of
Information Act (FOIA) request, 5 U.S.C. 552, without prior
notification to the Company. FEMA may transfer documents provided by
the Company to any department or agency within the Executive Branch or
to either house of Congress if the information relates to matters
within the organization's jurisdiction. FEMA may also release the
information submitted pursuant to a judicial order from a court of
competent jurisdiction.
    C. Nondisclosure by Company.

    1. In general. The Company, to the extent permitted by law, must
safeguard and treat information submitted or made available by FEMA
pursuant to this Arrangement as confidential where the information has
been marked or identified as ``confidential'' by FEMA and FEMA
customarily keeps such information private or closely-held. The Company
may not disclose such confidential information to a third-party without
the express written consent of FEMA or as otherwise required by law.
    2. Other protections. Article XII.C.1 shall not be construed as to
limit the effect of any other requirement on the Company to protect
information from disclosure, including a joint defense agreement or
under the Privacy Act.
Article XIII. Compliance With Act and Regulations
    This Arrangement and all policies of insurance issued pursuant
thereto are subject to Federal law and regulations.
Article XIV. Relationship Between the Parties and the Insured
    Inasmuch as the Federal Government is a guarantor hereunder, the
primary relationship between the Company and the Federal Government is
one of a fiduciary nature, that is, to ensure that any taxpayer funds
are accounted for and appropriately expended. The Company is a fiscal
agent of the Federal Government, but is not a general agent of the
Federal Government. The Company is solely responsible for its
obligations to its insured under any policy issued pursuant hereto,
such that the Federal Government is not a proper party to any lawsuit
arising out of such policies.
    Authority: 42 U.S.C. 4071, 4081; 44 CFR 62.23.

Jeffrey Jackson,
Assistant Administrator (Acting) for Federal Insurance, Federal
Emergency Management Agency.
[FR Doc. 2023-03895 Filed 2-24-23; 8:45 am]
BILLING CODE 9111-52-P


[Federal Register: September 30, 2010 (Volume 75, Number 189)]
[Notices]
[Page 60473]
[DOCID:fr30se10-100]

=======================================================================
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DEPARTMENT OF HOMELAND SECURITY

Federal Emergency Management Agency

[Internal Agency Docket No. FEMA-1928-DR; Docket ID FEMA-2010-0002]

Iowa; Amendment No. 2 to Notice of a Major Disaster Declaration

AGENCY: Federal Emergency Management Agency, DHS.

ACTION: Notice.

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SUMMARY: This notice amends the notice of a major disaster declaration
for the State of Iowa (FEMA-1928-DR), dated July, 27, 2010, and related
determinations.

DATES: Effective Date: September 20, 2010.

FOR FURTHER INFORMATION CONTACT: Peggy Miller, Office of Response and
Recovery, Federal Emergency Management Agency, 500 C Street, SW.,
Washington, DC 20472,<PHONE_NUMBER>.

SUPPLEMENTARY INFORMATION: The Federal Emergency Management Agency
(FEMA) hereby gives notice that pursuant to the authority vested in the
Administrator, under Executive Order 12148, as amended, Thomas A. Hall,
of FEMA is appointed to act as the Federal Coordinating Officer for
this disaster.
    This action terminates the appointment of Michael R. Scott as
Federal Coordinating Officer for this disaster.

The following Catalog of Federal Domestic Assistance Numbers (CFDA)
are to be used for reporting and drawing funds: 97.030, Community
Disaster Loans; 97.031, Cora Brown Fund; 97.032, Crisis Counseling;
97.033, Disaster Legal Services; 97.034, Disaster Unemployment
Assistance (DUA); 97.046, Fire Management Assistance Grant; 97.048,
Disaster Housing Assistance to Individuals and Households In
Presidentially Declared Disaster Areas; 97.049, Presidentially
Declared Disaster Assistance--Disaster Housing Operations for
Individuals and Households; 97.050, Presidentially Declared Disaster
Assistance to Individuals and Households--Other Needs; 97.036,
Disaster Grants--Public Assistance (Presidentially Declared
Disasters); 97.039, Hazard Mitigation Grant.

W. Craig Fugate,
Administrator, Federal Emergency Management Agency.
[FR Doc. 2010-24497 Filed 9-29-10; 8:45 am]
BILLING CODE 9111-23-P


[Federal Register: January 17, 2007 (Volume 72, Number 10)]
[Notices]
[Page 2050-2052]
[DOCID:fr17ja07-89]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55060; File No. SR-ISE-2006-72]

Self-Regulatory Organizations; International Securities Exchange,
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule
Change Relating to Special Order Fees

January 8, 2007.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on December 1, 2006, the International Securities Exchange, LLC
(``ISE'' or ``Exchange'') filed with the Securities and Exchange
Commission (``Commission'' or ``SEC'') the proposed rule change as
described in Items I and II below, which Items have been substantially
prepared by ISE. The Exchange filed the proposal as a ``non-
controversial'' proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-4(f)(6) thereunder,\4\
which renders it effective upon filing with the Commission.\5\ The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
    \5\ The Exchange has asked the Commission to waive the 30-day
operative delay required by Rule 19b-4(f)(6)(iii), 17 CFR 240.19b-
4(f)(6)(iii). See discussion infra Section III.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The ISE is proposing to amend its Schedule of Fees to adopt a
customer fee for special orders. The text of the proposed rule change
is available at ISE, the Commission's Public Reference Room, and http://www.iseoptions.com
.

II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the ISE included statements
concerning the purpose of, and basis for, the proposed rule change and
discussed any

comments it received on the proposed rule change. The text of these
statements may be examined at the places specified in Item IV below.
The ISE has prepared summaries, set forth in Sections A, B, and C
below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of this proposed rule change is to amend ISE's Schedule
of Fees to adopt a customer fee for special orders. The Exchange
currently waives transaction fees for customers, except for when those
transactions occur in Premium Products.\6\ The Exchange has noted an
increase in volume in certain customer order transactions, particularly
in transactions that result from customer orders that are entered as
responses to special order broadcasts. These special order broadcasts
are sent to Exchange members when certain types of orders are entered,
such as facilitations, solicitations, block orders, and orders entered
in the Exchange's Price Improvement Mechanism. Customers, who have
access to highly developed trading systems enter orders in response to
these special order broadcasts, much like a broker or dealer would.
Customers that possess this advanced trading technology are able to
quickly receive and process substantial amounts of market-wide and ISE
data, thereby allowing them to selectively respond to special order
broadcasts.
---------------------------------------------------------------------------

    \6\ Premium Products is defined in the Schedule of Fees as the
products enumerated therein.
---------------------------------------------------------------------------

    The advanced trading systems utilized by these customers provide
them with the ability to rapidly respond to updates to the special
order broadcasts and market-wide data (such as changes to the NBBO and
the underlying market) by aggressively submitting orders within the 3
second exposure period. The Exchange thus proposes to charge an
execution and comparison fee of $0.15 and $0.03 per contract,
respectively, for these customer orders to put theses customers on more
equal footing with ISE members who currently pay a fee for this
functionality. The proposed fee will only apply to responses sent by
customers during the 3 second exposure period that all special orders
are subject to.
    The Exchange believes that the proposed fee is necessary to
equitably allocate the associated costs amongst ISE market participants
that fully utilize the special order broadcasts, a functionality that
is available only to ISE members and customers who possess highly
developed technology. The development and ongoing maintenance
associated with the broadcasts of, and updates to, special orders, is a
costly expenditure of ISE resources. ISE believes that the proposed fee
is objective in that it is based on the behavior of market participants
and the type of orders submitted. As noted above, since the behavior of
these public customers is similar to the behavior of an ISE member, it
is fair for the Exchange to charge these customers the same fees as
those charged to ISE members.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with
Section 6(b)(5) of the Act,\7\ in that it is designed to promote just
and equitable principles of trade, to remove impediments to and perfect
the mechanism of a free and open market and a national market system,
and, in general, protect investors and the public interest.\8\
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    \7\ 15 U.S.C. 78f(b)(5).
    \8\ The staff of the SEC revised this language to correct an
error in the statutory basis proposed rule change. Telephone
Conference between Samir Patel, Assistant General Counsel, ISE, and
Ronesha A. Butler, Special Counsel, Division of Market Regulation,
Commission, on January 5, 2007.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The proposed rule change does not impose any burden on competition
that is not necessary or appropriate in furtherance of the purposes of
the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others

    The Exchange has not solicited, and does not intend to solicit,
comments on this proposed rule change. The Exchange has not received
any written comments from members or other interested parties.

III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action

    Because the foregoing proposed rule change does not (1)
significantly affect the protection of investors or the public
interest; (2) impose any significant burden on competition; and (3)
become operative for thirty days from the date on which it was filed,
or such shorter time as the Commission may designate if consistent with
the protection of investors and the public interest, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \9\ and Rule 19b-
4(f)(6) \10\ thereunder.\11\
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6).
    \11\ Pursuant to Rule 19b-4(f)(6)(iii), the Exchange has given
the Commission written notice of its intent to file the proposed
rule change, along with a brief description and text of the proposed
rule change, at least five business days prior to the date on which
the Exchange filed the proposed rule change. See 17 CFR 240.19b-
4(f)(6)(iii).
---------------------------------------------------------------------------

    A proposed rule change filed under Commission Rule 19b-4(f)(6) \12\
normally does not become operative prior to thirty days after the date
of filing. The Exchange requests that the Commission waive the 30-day
operative delay, as specified in Rule 19b-4(f)(6)(iii), and designate
the proposed rule change to become operative immediately because this
proposal is substantially similar to a Boston Options Exchange proposed
rule change that was recently approved by the Commission.\13\ The
Commission hereby grants the request. The Commission believes that
waiving the 30-day operative delay is consistent with the protection of
investors and the public interest because such waiver will allow the
Exchange to allocate reasonable dues, fees, and other charges among its
members and other persons using its facilities. For these reasons, the
Commission designates the proposed rule change as effective and
operative upon filing.\14\
---------------------------------------------------------------------------

    \12\ 17 CFR 240.19b-4(f)(6).
    \13\ See Securities Exchange Act Release No. 54328 (August 16,
2006), 71 FR 49493 (August 23, 2006).
    \14\ For the purposes only of waiving the operative date of this
proposal, the Commission has considered the proposed rule's impact
on efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of such proposed rule
change, the Commission may summarily abrogate such rule change if it
appears to the Commission that such action is necessary or appropriate
in the public interest, for the protection of investors, or otherwise
in furtherance of the purposes of the Act.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml.
); or     Send an e-mail to<EMAIL_ADDRESS>Please include

File

No. SR-ISE-2006-72 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, Station Place, 100 F
Street, NE., Washington, DC 20549-1090.

All submissions should refer to File No. SR-ISE-2006-72. This file
number should be included on the subject line if e-mail is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml
). Copies of the submission, all subsequent amendments, all

written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for inspection and
copying in the Commission's Public Reference Room. Copies of the filing
also will be available for inspection and copying at the principal
office of the Exchange.
    All comments received will be posted without change; the Commission
does not edit personal identifying information from submissions. You
should submit only information that you wish to make available
publicly.
    All submissions should refer to File No. SR-ISE-2006-72 and should
be submitted on or before February 7, 2007.

    For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-478 Filed 1-16-07; 8:45 am]

BILLING CODE 8011-01-P