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42 U.S. Code § 4014. Estimates of premium rates
(a) Studies and investigationsThe Administrator is authorized to undertake and carry out such studies and investigations and receive or exchange such information as may be necessary to estimate, and shall from time to time estimate, on an area, subdivision, or other appropriate basis—
(1) the risk premium rates for flood insurance which—
(A) based on consideration of—
(i)
the risk involved and accepted actuarial principles; and
(ii)
the flood mitigation activities that an owner or lessee has undertaken on a property, including differences in the risk involved due to land use measures, floodproofing, flood forecasting, and similar measures, and
(B) including—
(i)
the applicable operating costs and allowances set forth in the schedules prescribed under section 4018 of this title and reflected in such rates,
(ii)
any administrative expenses (or portion of such expenses) of carrying out the flood insurance program which, in his discretion, should properly be reflected in such rates,
(iii)
any remaining administrative expenses incurred in carrying out the flood insurance and floodplain management programs (including the costs of mapping activities under section 4101 of this title) not included under clause (ii), which shall be recovered by a fee charged to policyholders and such fee shall not be subject to any agents’ commissions, company expense allowances, or State or local premium taxes, and
(iv) all costs, as prescribed by principles and standards of practice in ratemaking adopted by the American Academy of Actuaries and the Casualty Actuarial Society, including—
(I)
an estimate of the expected value of future costs,
(II)
all costs associated with the transfer of risk, and
(III)
the costs associated with an individual risk transfer with respect to risk classes, as defined by the Administrator,
would be required in order to make such insurance available on an actuarial basis for any types and classes of properties for which insurance coverage is available under section 4012(a) of this title (or is recommended to the Congress under section 4012(b) of this title);
(2) the rates, if less than the rates estimated under paragraph (1), which would be reasonable, would encourage prospective insureds to purchase flood insurance, and would be consistent with the purposes of this chapter, and which, together with a fee charged to policyholders that shall not be not subject to any agents’ commission, company expenses allowances, or State or local premium taxes, shall include any administrative expenses incurred in carrying out the flood insurance and floodplain management programs (including the costs of mapping activities under section 4101 of this title), except that the Administrator shall not estimate rates under this paragraph for—
(A)
any residential property which is not the primary residence of an individual;
(B)
any severe repetitive loss property;
(C)
any property that has incurred flood-related damage in which the cumulative amounts of payments under this chapter equaled or exceeded the fair market value of such property;
(D)
any business property; or
(E) any property which on or after July 6, 2012, has experienced or sustained—
(i)
substantial damage exceeding 50 percent of the fair market value of such property; or
(ii)
substantial improvement exceeding 50 percent of the fair market value of such property; and