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FEMA sees decline in participating Lloyd’s Syndicates at 2022 NFIP reinsurance renewal

10th January 2022 - Author: Luke Gallin

The U.S. Federal Emergency Management Agency’s (FEMA) January 2022 flood reinsurance renewal for the National Flood Insurance Program (NFIP) saw a reduction in the number of participating Lloyd’s syndicates, which could be a reflection of the heavy catastrophe load.

lloyd'sFEMA recently announced the procurement of $1.064 billion of flood reinsurance for the NFIP at the renewals, at a total cost of $171.9 million.

The agency has been obtaining reinsurance protection for the NFIP since 2017, after testing the market with a limited placing in 2016.

Over the years, the level of protection FEMA has secured for the NFIP’s reinsurance tower has varied, from a high of $1.46 billion in 2018 to a low of $1.024 billion for the 2017 placement.

After the larger renewal in 2018, FEMA returned with a $1.32 billion programme in 2019, which was followed by a $1.33 billion placement in 2020 and a $1.153 billion placement for 2021.

Last year’s programme included 32 participating reinsurers, of which 17 were Lloyd’s syndicates, which is the highest number of Lloyd’s syndicates to feature in any of FEMA’s NFIP flood reinsurance renewals.

For the 2022 placement, which shrank year-on-year by almost 8%, the number of participating reinsurers also fell by four to 28, with the reduction attributable solely to Lloyd’s syndicates.

The Lloyd’s syndicates that dropped out of the 2022 placement include: Apollo’s Syndicate 1969; Faraday’s Syndicate 0435; Beazley’s Syndicate 2623; Beazley’s Syndicate 623; and Hamilton’s Syndicate 4000.

On the other side of the equation, Inigo’s Syndicate 1301 was the only new Lloyd’s syndicate to feature on the 2022 NFIP placement.

In fact, Inigo was the only new reinsurance company to participate in this year’s NFIP tower, with the remaining 27 all having featured at least once since 2017.

The reason for the year-on-year decline in Lloyd’s syndicates is unclear, but this could be a result of some being badly impacted by catastrophe losses once again, meaning they either may not currently have the appetite for flood risk, or might not be able to write much more cat risk and are instead focusing on their core portfolios.

Another change highlighted with the 2022 programme compared with last year’s, concerns the removal of broker Aon’s Reinsurance Solutions unit as a provider of broker services to assist in securing the reinsurance placement.

Instead, FEMA reverted to its usual contract with just Guy Carpenter, the reinsurance arm of Marsh McLennan, as the provider of broker services to assist in securing the reinsurance placement. Additionally, Guy Carpenter is providing financial advisory services and modeling.

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