Subpart I: Public Assistance Insurance Requirements
Summary: Subpart I implements the "Obtain and Maintain" requirement, which is the most significant long-term obligation of any FEMA grant. It mandates that if a facility receives federal funds for permanent repair, the subrecipient must purchase insurance to protect that facility against future disasters. This requirement is "attached to the land," meaning future administrations are legally bound to keep the insurance in place. This subpart also includes the "Insurance Reduction" rule, where FEMA will subtract any potential insurance proceeds from the grant award, even if the subrecipient didn't have a policy. It encourages the use of "Parametric" or "Captive" insurance to meet these federal mandates in a cost-effective way. Subpart I is the "Sustainability Clause" of the FEMA program, ensuring that the federal government doesn't pay for the same damage twice.
This subpart enforces the "Obtain and Maintain" (O&M) rule and prevents the Duplication of Benefits (DoB). FEMA will reduce grant awards by the amount of any insurance proceeds that were received or should have been received. CFOs must ensure that any facility receiving FEMA funds is insured for that peril in perpetuity.
- Key Takeaways & Call to Action:
- Insurance Reductions: Subtract all insurance settlements from the final claim to FEMA to avoid the "Duplication of Benefits" penalty.
- O&M Commitment: Add every FEMA-funded facility to the entity’s insurance schedule at the required limit to maintain future eligibility.
- The "Anticipated" Settlement Rule: Do not wait for insurance checks to arrive; report anticipated settlements to FEMA to prevent overpayment findings.
- CTA: Certify with your insurance broker that all FEMA-repaired buildings meet the "Obtain and Maintain" requirements for the current policy year.
- §206.252 Insurance Requirements for Public Assistance
- Call to Action: You must provide a "Certificate of Insurance" proving that the rebuilt facility is covered for the "amount of the eligible damage." This section is essential because failure to "Maintain" this insurance will make the facility permanently ineligible for any future FEMA assistance. It requires a long-term "Fiscal Resiliency" plan to budget for increasing insurance premiums as infrastructure is rebuilt. You must coordinate with your "Risk Manager" to ensure the policy meets FEMA’s "Type and Extent" requirements. This section transforms a one-time grant into a permanent operational commitment.
