Reinsurance News

FEMA secures smaller $1.064bn NFIP flood reinsurance placement for 2022

7th January 2022 - Author: Luke Gallin

The U.S. Federal Emergency Management Agency (FEMA) has renewed the National Flood Insurance Program’s (NFIP) reinsurance for 2022, securing $1.064 billion of flood protection for a total premium of $171.9 million.

nfipThe 2022 renewal sees FEMA transfer less of the NFIP’s financial risk to the private reinsurance market when compared with a year ago, when the agency procured $1.153 billion of flood reinsurance at a cost of $195.8 million.

This year’s coverage also featured a smaller panel of reinsurers with 28 private firms participating, compared with 32 for the 2021 renewal.

The latest renewal 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.

Tremor - The modern way to place reinsurance

Combined with FEMA’s three catastrophe bond transactions, the additional $1.064 billion of traditional flood protection provides it with around $2.3 billion of reinsurance protection for the year.

David Maurstad, FEMA’s senior executive of the NFIP, commented: “FEMA remains committed to reinsurance as a risk transfer measure to ensure the NFIP has the capacity to pay claims, especially now with the growing intensity and frequency of weather patterns brought on by climate change.

“Our No. 1 job is to provide policyholders peace of mind in knowing that the NFIP will be there when they need it most.”

FEMA notes that if a named storm flood event is large enough to trigger all reinsurance agreements, it will receive qualifying payments. And for named storms resulting in NFIP claims of more than $10 billion, the agency will receive the full $2.3 billion of reinsurance coverage from the private markets.

Reinsurance broker Guy Carpenter acted as the broker on the 2022 traditional reinsurance renewal placement.

FEMA has been procuring 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 2017 renewals.

larger 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), which has now matured.

The agency 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).

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).

Last year, FEMA secured $1.153 billion of flood reinsurance for the NFIP, and also issued a $575 million FloodSmart Re Ltd. (Series 2021-1) transaction.

Print Friendly, PDF & Email

Recent Reinsurance News