The U.S. Federal Emergency Management Agency (FEMA) has announced the renewal of its flood reinsurance program to protect the National Flood Insurance Program (NFIP), securing $1.33 billion of protection.
The coverage was secured from a panel of 27 reinsurance companies, and protects the NFIP from events on a per-occurrence basis for one year, beginning from January 1, 2020.
The overall amount of coverage is roughly in line with the $1.33 billion that FEMA purchased last year, although the premium paid was slightly higher, at $205 million this year versus $186 million previously.
This could reflect changes to the structure of the reinsurance renewal, which now covers a larger portion of the upper range of NFIP losses, but a smaller portion of the lower ranges.
Specially, the new reinsurance program will cover 10.25% of NFIP losses between $4 billion and $6 billion, 34.68% of losses between $6 billion and $8 billion, and 21.80% of losses between $8 billion and $10 billion.
This compares to the 2019 renewal, when the program covered 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.
As with previous years, the program was placed by the reinsurance arm of Marsh, Guy Carpenter, with Aon providing advisory services for the placement.
David Maurstad, Deputy Associate Administrator of the National Flood Insurance Program, commented on the successful renewal, “It takes the whole community to prepare for disasters, and that includes participation from the private sector.
“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.”
It was reported back in November that FEMA was planning to return to the reinsurance market for the fifth year running, having first obtained $1 million of flood reinsurance coverage for the NFIP in 2016.
The Agency returned in 2017 with a much larger program that provided $1.024 billion of flood reinsurance, and then expanded the coverage to $1.46 billion in 2018.
While traditional reinsurance coverage has been slightly scaled down over the last two renewals, FEMA has sought additional protection from the capital markets with a $500 million catastrophe bond in August 2018, and a second $300 million cat bond in April 2019.
Participating re/insurers in FEMA’s latest program include: Allied World, Antares, Apollo, Ariel Re, Ascot, Brit, Canopius, Chaucer, Faraday, Hannover Re, Hiscox, Liberty Mutual, Managing Agency Partners, Markel, MS Amlin, Munich Re US, Navigators US, QBE Reinsurance, RenaissanceRe, SCOR, Swiss Re America, Cincinnati Insurance, Validus, and XL Catlin.