Pursuant to 42 U.S.C. § 4081(a),1 the Federal Emergency Management Agency (FEMA) is authorized to engage private insurers to sell National Flood Insurance Program (NFIP) policies under the Write Your Own (WYO) program. Pursuant to 44 C.F.R. § 62.23, WYO companies "may offer flood coverage to policyholders insured by them under their own property business lines of insurance." Such WYO Companies, include "any duly authorized insurer so engaged in the [NFIP]" as well as the following kinds of insurers: "public entity risk-sharing organizations, an association of local governments, a State association of political subdivisions, a State-sponsored municipal league, and other intergovernmental risk-sharing pool for covering public entity structures."
Section 62.23 further provides that "arrangements entered into by WYO companies or other insurers . . . must be in the form and substance of the standard arrangement, titled 'Financial Assistance/Subsidy Arrangement'" (the Arrangement). It is the Arrangement that enumerates the compensation metrics for the WYO program, including operating and administrative expense withholding for WYO companies and rates for agent and broker compensation (see, generally, Article IV: Loss Costs, Expenses, Expense Reimbursement, and Premium Refunds).
Per Section 62.23, "each year, at least six months before the effective date of the [Arrangement], FEMA must publish in the Federal Register and make available to the WYO companies the terms for subscription or re-subscription to the [Arrangement]." Pursuant to this process, FEMA has issued its Fiscal Year 2026 FASA, to be effective October 1, 2025 (the 2026 Arrangement).2 The 2026 Arrangement includes some edits to the compensation provisions of the prior iteration for Fiscal Year 2025 (the 2025 Arrangement),3 as follows:
- Clarifying "Insurance" and "Broker" Additions (Throughout Article IV): FEMA is making some clarifying changes by inserting "insurance" before the term "agent" when "referring to licensed insurance professionals that sell property and flood insurance and have an agency contract with the [WYO] Company, distinguishing the term from other types of 'agents' referred to in the Arrangement (e.g., 'fiscal agent,' 'customer service agents' and 'direct servicing agent')." This is seen in Article IV.A and Article IV.B.2, where FEMA clarifies that insurance agents' and brokers' commissions are the liability of the WYO Company and that the 15% retention by WYO Companies for commissions applies to both "agents" and "brokers." It is also seen in Article IV.E.3.a, where FEMA added "broker" to "clarify that it will not reimburse the [WYO] Company for awards or judgements for damages and costs to defend litigation involving issues of broker negligence, errors or omissions, pursuant to 42 U.S.C. § 4081(c)."
- Change in Source for P&C Industry Data (Article IV.B.1): FEMA is "changing the reference to the source used to obtain the data for the property/casualty industry [for the purpose of calculating operating and administrative expenses], from A.M. Best to the National Association of Insurance Commissioners (NAIC)," because "A.M. Best's data is derived from the NAIC," and "this will enable FEMA to use the latest available data gathered directly from the primary source."
- Clarification Regarding No Reimbursement for Failures to Respond and/or Remove (Article IV.E.3.g-h): FEMA added two new categories to its limitations on reimbursement and payments for litigation expenses. These are intended to "clarify that FEMA will not reimburse the [WYO] Company for awards, judgments and costs to defend litigation when a default is entered against it, or the [WYO] Company fails to remove a case filed in State court to Federal court in a timely manner." The two new categories are: "g. when a [WYO] Company fails to respond to a lawsuit and a default is entered; or h. when a [WYO] Company fails to remove a case filed in State court to Federal court in a timely manner."
Note that the above summarizes only the changes made to Article IV (governing Loss Costs, Expenses, Expense Reimbursement, and Premium Refunds) and does not summarize all of the changes being implemented to the Arrangement for 2026. For a comprehensive list of changes, please reference the 2026 Arrangement, and/or the linked redline comparison we have provided in the footnotes to this update.
Footnotes
1. 42 U.S.C. § 4081(a) states as follows: "(a) Contracting for services and facilities. In administering the flood insurance program under this subchapter, the Administrator is authorized to enter into any contracts, agreements, or other appropriate arrangements which may, from time to time, be necessary for the purpose of utilizing, on such terms and conditions as may be agreed upon, the facilities and services of any insurance companies or other insurers, insurance agents and brokers, or insurance adjustment organizations; and such contracts, agreements, or arrangements may include provision for payment of applicable operating costs and allowances for such facilities and services as set forth in the schedules prescribed under section 4018 of this title."
2. Available at: https://agents.floodsmart.gov/sites/default/files/media/document/2025-07/FY-2026-financial-assistance-subsidy-arrangement.pdf
3. The 2026 FASA includes a summary page regarding changes made, but to aid in our analysis we have prepared this redline of the 2026 FASA against the 2025 FASA: https://www.foley.com/wp-content/uploads/2025/08/Redline-FY-2025-financial-assistance-subsidy-arrangement-and-FY-2026-financial-assistance-subsidy-arrangement-1.pdf
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