The US Federal Emergency Management Agency (FEMA) is seeking a further $300 million of flood protection from the capital markets with its third catastrophe bond issuance, FloodSmart Re Ltd. (Series 2020-1).
This is the third time FEMA has looked to secure flood reinsurance protection from the capital markets for its National Flood Insurance Program (NFIP).
In July of 2018, FEMA diversified its reinsurance program arrangements with its first catastrophe bond transaction, a $500 million FloodSmart Re Ltd. (Series 2018-1) deal, which was followed by a smaller $300 million transaction in 2019.
The latest transaction sees special purpose insurer FloodSmart Re Ltd. issue two tranches of notes that will be sold to funds and investors. The proceeds will be used to collateralise retrocessional reinsurance agreements with the ceding reinsurance company, Hannover Re, leveraging its Irish company Hannover Re (Ireland) DAC.
As reported by our sister site Artemis, FEMA is targeting $300 million of flood reinsurance protection for its NFIP program, which will be provided on an indemnity trigger and per-occurrence basis.
In line with the previous two deals, FEMA is seeking reinsurance cover for major flood loss events as a result of named storms. The coverage will be across the U.S., Puerto Rico, U.S. Virgin Islands and D.C., providing coverage over a three-year term.
The catastrophe bond backed reinsurance coverage enables FEMA to grow its NFIP reinsurance program, while at the same time diversify the capital sources that support it.
It’s expected that this deal will be completed in February of this year. Find details on this deal and over 650 other cat bond transactions in the Artemis Deal Directory.