A week after hurricane Ian caused significant flooding in the State of Florida, FEMA’s National Flood Insurance Program (NFIP) has received over 25,000 claims. The average claims cost of previous significant flood events suggests that the claims received by the NFIP as of October 4th, 2022, amounts to well over a billion dollars.
To date, FEMA says that it has provided $3.5 million in advance payments to policyholders who have begun the claim process following the devastating impacts of hurricane Ian.
“We know that rebuilding after a flood can be difficult. We want to remove as many obstacles as possible and ease our customers’ burden to help them recover more quickly. Regardless of how much flooding your home experienced, FEMA’s National Flood Insurance Program stands ready to assist its policyholders,” said David Maurstad, Deputy Associate Administrator for Resilience and senior executive of the NFIP.
As of Tuesday October 4th, FEMA had received more than 25,000 NFIP claims, and is urging those affected by the storm with an NFIP policy to begin filing their claim.
As our readers will be aware, FEMA secured $1.064 billion of flood reinsurance protection for the NFIP at the January 2022 renewals, which covers portions of NFIP losses above $4 billion arising from a single flood event.
The tower is structured to cover 4.163% of losses between $4 billion and $6 billion; 26.565% of losses between $6 billion and $8 billion; and 22.453% of losses between $8 billion and $10 billion. Higher up the reinsurance tower sits FEMA’s FloodSmart Re catastrophe bonds, with the riskiest attaching at somewhere around $5.3 billion of losses to the NFIP from a named storm event.
While it’s impossible to know the value of the 25,000+ claims received so far, it’s interesting to look at previous major flood events with NFIP payouts.
According to data from the Insurance Information Institute, 2005’s hurricane Katrina had an average NFIP paid loss amount of nearly $96,000. In total, the NFIP paid more than 168,000 claims from the event.
Hurricane Irma in 2017 had an average NFIP paid loss amount of almost $50,000, with the NFIP paying more than 23,000 claims; while hurricane Harvey of the same year had an average NFIP paid loss amount of over $117,000, with the NFIP paying more than 78,000 claims.
Based on the the Insurance Information Institute’s data from 2015 onwards, which includes other major storms where the NFIP has paid losses, the average paid loss by the NFIP is around the $78,500 mark. 25,000 NFIP claims at an average cost of around that level amounts to more than $1.96 billion, which is almost half-way to the $4 billion attachment for the lowest level of its private reinsurance tower.
Of course, more NFIP claims have likely been received by FEMA and will continue to do so in the weeks ahead.
“The NFIP is committed to processing claims quickly and fairly,” continued Maurstad. “We remain in close coordination with our Write Your Own insurance companies, the NFIP Direct and the state insurance commissioners’ offices to ensure that policyholders are paid every dollar owed for covered flood loss.”
Catastrophe risk modeller RMS has said that losses to the NFIP could reach $10 billion, which, if correct, would see the NFIP’s reinsurance protection and cat bonds payout in full. As noted above, the reinsurance tower only runs up to $10 billion of losses.
