FEMA taps 28 reinsurers for NFIP
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The Federal Emergency Management Agency has returned to the reinsurance market to back the National Flood Insurance Program, tapping 28 reinsurers for a $1.32 billion program, FEMA said in a statement Wednesday.
The one-year term became effective Jan. 1 and covers portions of NFIP losses above $4 billion arising from a single flood event, the statement said, adding FEMA paid a total premium of $186 million for the coverage.
Once that threshold is reached, reinsurance will cover 14% of losses between $4 billion and $6 billion, 25.6% of losses between $6 billion and $8 billion, and 26.6% of losses between $8 billion and $10 billion, the statement said.
The program joins the $500 FloodSmart Re $500 million Series 2018-1 Notes, FEMA’s first catastrophe bond, placed in the capital markets in July.
The deals bring the agency’s combined transfer to $1.82 billion of the NFIP’s flood risk for the 2019 hurricane season to the private sector, the statement said, adding that if a named storm flood event is large enough to trigger both reinsurance agreements, FEMA would receive payments under both reinsurance agreements.
“Through reinsurance, FEMA partners with private markets to build a pillar that supports a sound financial framework for the NFIP by a meaningful transfer of flood risk,” David Maurstad, chief executive of the National Flood Insurance Program, said in the statement.
FEMA used Guy Carpenter & Co. LLC, a subsidiary of Marsh & McLennan Cos. Inc., as its broker and Aon PLC for financial advisory services for the placement, the statement said.
"The RAA has long advocated for the NFIP to utilize private reinsurance," Frank Nutter, president of the Reinsurance Association of America, said in a statement from the group. “The placement confirms FEMA’s commitment to expanding reinsurance coverage and the financial protections it will afford American taxpayers."
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