Public Assistance (PA) Insurance Requirements
Role of Insurance in a Disaster
Insurance is an important – and in fact primary – resource for damaged-impacted communities. In fact, insurance may be the only resource. If the disaster is Presidentially declared, FEMA Public Assistance (PA), Individual Assistance (IA) and other recovery resources may be available. However, FEMA PA, IA and other Federal assistance is generally supplemental when available.
In either case – whether the disaster is declared or not – insurance is the first line of defense.
Obtain & Maintain (O & M) Requirement
To protect the investment of Federal resources invested in the restoration of disaster-damaged facilities and to prevent against future loss, FEMA requires – as a condition of receiving FEMA Public Assistance (PA) funding – those receiving subgrants (called Subrecipients or Applicants) must obtain and maintain insurance. Coverage must at least equal the amount of the eligible damage to the facility receiving Federal assistance.
This is often called the obtain and maintain (O&M) requirement. If a Subrecipient (Applicant) does not obtain AND maintain insurance, FEMA will not provide assistance for that facility in future disasters.
While the purpose of the O&M requirement is to protect against future loss from the same type of peril, it has implications for a current disaster. Title 44 of the Code of Federal Regulations (44 CFR) 206.253 (f) indicates that IF the requirement to purchase (obtain) insurance is not met, FEMA may de-obligate (take back) funds provided for damage sustained in the current disaster.
There are some circumstances when a Subrecipient (Applicant) is exempt from the O&M requirement:
- Where eligible damage is less than $5,000, OR
- The facility is a temporary facility.
Failure to understand and follow FEMA insurance requirements may result in deobligation of funds already received . . .
As well as loss of eligibility for future disaster funds.
Insurance Commissioner’s Certification (ICC)
Insurance market conditions sometimes prevent a Subrecipient (Applicant) from reasonably meeting the O&M requirement. Insurance may not be affordable. OR insurance may not be available. Under the authority of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act), if insurance is not reasonably available Subrecipients (Applicants) can apply for an Insurance Commissioner’s Certification (ICC).
An ICC acts as a declaration that some portion of the O&M requirement is not reasonably available to the FEMA PA Subrecipient (Applicant).
ICCs certify that Subrecipients (Applicants) for FEMA PA funding have met their O&M insurance requirements using reduced coverage when full-coverage requirements are not reasonably available. If the required levels of insurance are not obtained and maintained on a previously damaged facility, that facility will receive no FEMA PA funding in a future event of the same type unless the Applicant has both applied for and received an ICC.
How it works
An ICC applies only to the O + M requirements applicable to the storm or hazard specified in the application. Once an Subrecipient (Applicant) provides evidence that the type and extent of insurance required by the FEMA PA Program is not reasonably available, the Insurance Commissioner can issue an ICC.
It is important to know:
- If granted an ICC, a Subrecipient (Applicant) must maintain insurance coverage consistent with that in place at the time of the initial certification.
- Should another major disaster strike, resulting in the Subrecipient's (Applicant's) need for additional Stafford Act assistance, a NEW application for an ICC applicable to the NEW disaster is required.
An ICC is the best way to ensure continued eligibility for Public Assistance.
Criteria for receiving an ICC.
The Louisiana Commissioner of Insurance, working with GOHSEP, has established criteria a Subrecipient (Applicant) must meet to be eligible for an ICC. These are explained in detail and can be found at the GOHSEP Publications page. ICC is not an exemption + not a guarantee. Demonstrating you have met the criteria set by the Insurance Commissioner and followed the process is not a guarantee that an ICC will be granted. It is also important to know that an ICC does not exempt an Applicant from procuring insurance coverage. Applicants must still carry insurance to the extent that it is reasonably available.
Minimum budget required for insurance is expressed as a percentage of annual operating budget in this chart.
Organization Type
Percentage of Operating Budget
Elementary and Secondary Education
0.29%
Post-Secondary Education
0.17%
Nonprofit Association
2.91%
Nonprofit Religious
2.61%
*Please note that this is a minimum percentage schedule for the purpose of determining a reasonable insurance budget. It cannot be used as rationale to reduce insurance if the current expenditure exceeds the listed percentage amounts.
Certification Criteria
GOHSEP has worked closely with the Louisiana Department of Insurance (LDI) and the Insurance Commissioner to develop a process allowing Subrecipients (Applicants) to pursue an ICC when full O+M requirements cannot reasonably be met. The Subrecipient (Applicant) must demonstrate compliance with the criteria set by the Insurance Commissioner and follow the Commissioner’s certification process to be considered for an ICC.
National Flood Insurance Program
- To be considered for an ICC, a Subrecipient (Applicant) must obtain and maintain the maximum amount of insurance available through the NFIP for building and contents for every facility that sustained flood damage as a result of the disaster.
Minimum insurance budget
- A Subrecipient (Applicant) must allocate a reasonable portion of its current annual operating budget to the purchase of property insurance, including wind and flood, for each of its properties that are the subject of FEMA PA grants.
- The required yearly minimum insurance budget is expressed as a percent of the annual operating budget.
- The percent is defined specifically for different entities. See the chart to the left of this page.
- The schedule established by the Insurance Commissioner for Subrecipients (Applicants) to use in determining a minimum insurance budget is shown in the table to the left of this page.
- When calculating a minimum insurance budget . . .
- DO base your calculations on your prior year's audited financial statement.
- Do NOT include capital outlays.
Insurance procurement guidelines
A Subrecipient (Applicant) must also follow guidelines defined by the Insurance Commissioner for the type of insurance procured:
- Obtain and maintain NFIP coverage.
- Procure property coverage (including wind and other perils, exclusive of flood) up to replacement costs.
- With remaining funds, procure excess flood coverage.
NOTE: Cost of business interruption insurance is separate and cannot be used to meet your percent of budget requirement.
