The National Flood Insurance Program (NFIP) has now received more than 67,000 claims due to hurricane Harvey’s flooding in Texas alone, a figure which puts the NFIP’s reinsurance clearly in play.
The 67,000 claims had been recorded by the end of the 2nd September, having risen from 51,000 on the 31st August, so it’s safe to assume another 10,000 or more will have been received over the weekend.
So, assuming the NFIP had received say 80,000 flood insurance claims from hurricane Harvey by the end of today, just how big could the bill be?
Well, FEMA usefully provides data on some of the major losses that the NFIP has faced over the years and from that it appears that an average cost per claim of somewhere around $65k could be anticipated (which RMS confirmed as a reasonable estimate), which would suggest that the NFIP is already on the hook for somewhere around $5 billion of claims, which puts the reinsurance program in play.
The NFIP’s $1.042 billion reinsurance program transferred some of NFIP’s financial risk to a panel of 25 reinsurers at January 1st 2017.
The $1.042 billion of reinsurance covers 26% of the NFIP’s losses from an attachment point of $4 billion up to $8 billion arising from a single flooding event. The NFIP said at the time of its reinsurance purchase in January that there was a 17.2% chance of a loss high enough to trigger its reinsurance in 2017.
With hurricane Harvey’s claims already seemingly eating into the reinsurance layer it seems safe to assume that the chances of a full payout are very high.
Details of the NFIP’s major losses can be found below.
|EVENT||YEAR||# LOSSES||AMOUNT $||AVG LOSS|
|LOUISIANA SEVERE STORMS AND FLOODING||08/01/2016||26,992||$2,415,966,89264||$89,506.78|
|TEXAS FLOODING MAY JUN 2015||05/01/2015||6,754||$463,775,952.11||$68,666.86|
|TORRENTIAL RAIN – TEXAS||04/01/2016||7,410||$466,947,344.10||$63,015.84|
|TORRENTIAL RAIN SEPT 2009 GA||09/01/2009||2,068||$124,448,580.03||$60,178.23|
|TORRENTIAL RAIN – TN||04/01/2010||4,114||$230,276,147.88||$55,973.78|
|LATE WINTER SEVERE STORMS||03/01/2016||5,301||$281,554,514.93||$53,113.47|
|FLORIDA FLOODING APR 2014||04/01/2014||2,143||$111,314,398.58||$51,943.26|