The U.S. Federal Emergency Management Agency (FEMA) is set to recover the full $1.024 billion under its 2017 flood reinsurance program for the National Flood Insurance Program (NFIP), as its estimates show the entire layer blown by losses from hurricane Harvey.
The 2017 reinsurance program was placed in January 2017 and saw FEMA secure $1.024 billion of excess of loss flood reinsurance from a panel of 25 reinsurers, in an attempt to position the NFIP in a better place to manage its catastrophe losses without calling on taxpayer support.
The reinsurance covers 26% of a layer of the NFIP’s risk attaching at $4 billion of losses and running to $8 billion.
FEMA’s Roy Wright said yesterday that it surpassed its retention for claims paid due to the extreme flooding from hurricane Harvey as of November 6th and it is now working with the 25 reinsurers that provided the reinsurance to identify how much it can recover.
FEMA expects to recover the full $1.024 billion it seems, as the latest estimates suggest that the NFIP’s loss from hurricane Harvey will be between $8.5 billion and $9.5 billion.
That would blow through the entire billion dollar flood reinsurance layer, putting the 25 reinsurers on the hook for a full recovery.
FEMA said that the timing of payments it receives under the 2017 reinsurance program claim will not make any difference to its ability to payout insurance claims to its policyholders.
The 2017 reinsurance program has demonstrated the value of private market risk transfer for the NFIP, helping to reduce the burden from hurricane Harvey that would otherwise have fallen on taxpayers and enabling FEMA to access a new source of capital to help it pay its claims.
FEMA is now in the market for a 2018 reinsurance program renewal, at which it expects to place multi-year excess of loss coverage and likely expand the size of the program coverage as well.
The reinsurers that participated in its 2017 program and that now face losses are: Axis Reinsurance Company U.S., Everest Reinsurance Company, General Reinsurance Company, Hannover Ruck SE,Liberty Mutual Insurance Company, Lloyd’s Syndicate 2001 Amlin, Lloyd’s Syndicate 1414 Ascot, Lloyd’s Syndicate 2987 Brit, Lloyd’s Syndicate 435 Faraday, Lloyd’s Syndicate 033 Hiscox, Lloyd’s Syndicate 4472 Liberty Specialty Markets, Lloyd’s Syndicate 1458 RenaissanceRe, Lloyd’s Syndicate 4444 Sompo Canopius, Lloyd’s Syndicate 2003 XL Catlin, Market Global Reinsurance Company, Munich Reinsurance America Inc., National Indemnity (U.S.), Partner Reinsurance Company of the U.S., QBE Reinsurance Corporation, Renaissance Reinsurance U.S. Inc., SCOR Reinsurance Company, Swiss Reinsurance America Corporation, Transatlantic Reinsurance Company, Validus Reinsurance (Switzerland) Ltd., and XL Reinsurance America Inc.