The Federal Emergency Management Agency (FEMA) has selected flood risk innovator Milliman to design a new rating plan for National Flood Insurance Programme (NFIP) policies nationwide.
The U.S. government programme to provide homeowners with flood insurance, NFIP, has recently been reauthorised and is undergoing reforms after it was hit with an estimated $7-10 billion in claims from hurricane Harvey, triggering its $1 billion of reinsurance cover.
Miliman will use its technology and analysis for sophisticated modelling and pricing techniques for FEMA, as the government agency initiates the redesigning of flood insurance products used across the National Flood Insurance Programme (NFIP).
“The NFIP has a wealth of knowledge and experience with the flood peril, and their resources combined with our innovative technology will allow them to design a flood insurance solution for the 21st century,” says Nancy Watkins, a Milliman principal and project lead.
“Our goal is to help modernize the NFIP’s insurance product, reflect industry best practices, and improve policyholder experience through increased transparency and a better understanding of risk,” she said.
With Milliman’s new rating plan, FEMA can update its rating techniques for better understanding of price flood risk on a granular level nationwide.
In addition to Milliman, FEMA recently announced it will use AIR Worldwide’s Inland Flood and Storm Surge risk models in the evaluation of actuarially sound rates for NFIP insurance policies and to analyse the impacts of major flooding events in real-time.
The NFIP is vital to protecting U.S. communities from flood loss, and has been offering flood insurance to homeowners, renters, and businesses since 1968.
In 2016 FEMA tested the waters with reinsurance protection, purchasing just $1 million of protection for the NFIP from the middle of September until the middle of March, 2017.
After this, FEMA announced a $1.024 billion flood reinsurance program for the NFIP, which was supplied by a panel of 25 reinsurers and designed to place the NFIP in a better position to manage catastrophe losses.