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FEMA secures $1.153bn of NFIP flood reinsurance for 2021

5th January 2021 - Author: Luke Gallin

The U.S. Federal Emergency Management Agency (FEMA) has secured $1.153 billion of flood reinsurance for the National Flood Insurance Program (NFIP) for 2021, at a premium of $195.8 million.

nfipIt was announced in September of 2020 that FEMA had returned to the traditional reinsurance market and commenced the procurement of reinsurance for the NFIP for 2021.

After securing $1.33 billion of traditional reinsurance from a panel of 27 reinsurers at the start of 2020, it was suggested that FEMA could increase the size of the program for 2021, dependent on both appetite and price.

However, the State agency has revealed that for 2021 the amount of risk transfered to the traditional reinsurance market stands at $1.153 billion, which represents a decline of more than 13% from the previous year. FEMA notes that the 2021 program came at a premium of $195.8 million and featured an upsized panel of 32 reinsurers.

In fact, more reinsurers are backing the program this year than ever before, including a number of first time participants. This includes the likes of Convex; Fidelis; Odyssey Re; Beazley’s Lloyd’s Syndicates 2623 and 623; Hamilton’s Lloyd’s Syndicate 4000; and Lancashire’s Lloyd’s Syndicate 2010.

Further details of the Jan 2021 traditional reinsurance placement reveals that, global reinsurance brokers Aon Reinsurance Solutions and Guy Carpenter provided broker services to assist in the placement.

For Aon, this is the first time it has been listed as a broker, having previously just provided financial advice to the placement.

For the 2021 reinsurance placement, Guy Carpenter provided financial advisory services and also modelling for the renewal.

FEMA has been leveraging reinsurance for the NFIP for a number of years, after testing the market with a limited placement in 2016, before securing its first full placement ahead of the Jan 1st, 2017 renewals.

A larger, restructured renewal followed in 2018, while FEMA also looked to the capital markets for additional protection and subsequently launched the world’s first catastrophe bond designed to provide reinsurance coverage solely for flood risks, called FloodSmart Re Ltd. (Series 2018-1).

FEMA returned in 2019, securing $1.32 billion of protection for the renewal of its flood reinsurance program to protect the NFIP, and again accessed the capital markets, sponsoring its second cat bond in as many years, with FloodSmart Re Ltd. (Series 2019-1).

As mentioned previously, the 2019 placement was followed by a $1.33 billion reinsurance placement for 2020, a year which saw FEMA again enter the catastrophe bond market and sponsor its third transaction, FloodSmart Re Ltd. (Series 2020-1).

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