4 January 2017Insurance

FEMA completes $1bn placement with 25 reinsurers to cover flood

The Federal Emergency Management Agency (FEMA) has secured more than $1 billion of reinsurance coverage for the National Flood Insurance Program (NFIP) for 2017 in a deal involving some 25 reinsurers brokered by Guy Carpenter.

Under the agreement, reinsurers agreed to indemnify FEMA for flood claims on an occurrence basis. The layer is structured to cover 26 percent of losses between $4 billion and $8 billion. A combined total of $1.042 billion of the NFIP’s flood risk was transferred to the private reinsurance market through this agreement.

Historically, the Federal Insurance and Mitigation Administration (FIMA) was limited to using flood insurance premiums, available surplus, borrowing capacity from the US Treasury, and in some cases direct appropriations from Congress to pay claims.

In the past 11 years, the US has experienced many devastating flooding disasters, particularly in Hurricanes Katrina, Ike, and Sandy. Flood insurance claims far exceeded the amount of funds available to pay for the insured losses.

Congress provided FEMA the authority to secure reinsurance from the private reinsurance and capital markets.

“Securing reinsurance through the NFIP Reinsurance Program is a key step towards achieving the NFIP’s long-term vision of building a stronger financial framework,” said deputy associate administrator of FIMA, Roy Wright. “This reinsurance agreement places the NFIP in a better position to manage losses incurred from major events like Hurricane Sandy.”

FEMA received the authority to secure reinsurance through the Biggert-Waters Flood Insurance Reform Act of 2012 (BW-12), and the Homeowner Flood Insurance Affordability Act of 2014 (HFIAA). The 2017 reinsurance placement is an expansion of a smaller placement made by FEMA in September of 2016.

Already registered?

Login to your account

To request a FREE 2-week trial subscription, please signup.
NOTE - this can take up to 48hrs to be approved.

Two Weeks Free Trial

For multi-user price options, or to check if your company has an existing subscription that we can add you to for FREE, please email Elliot Field at efield@newtonmedia.co.uk or Adrian Tapping at atapping@newtonmedia.co.uk


More on this story

News
27 June 2017   With the National Flood Insurance Program (NFIP) due to sunset in September, now is the time to embrace and facilitate the development of a private flood market, say Nicole Austin and Dennis Burke of the Reinsurance Association of America.
Insurance
17 March 2017   Trump Administration’s proposed spending cuts to the Federal Emergency Management Agency (FEMA) would put lives, property and taxpayer dollars at risk, according to SmarterSafer.
Insurance
6 October 2014   Catastrophe risk modelling firm AIR Worldwide has released a probabilistic inland flood model for the US.