The U.S Federal Emergency Management Agency (FEMA) has begun the 2019 reinsurance program renewal process for its National Flood Insurance Program (NFIP), with the possibility of a multi-year deal being sought.
FEMA first entered the reinsurance market in 2016 with $1 million of flood protection running from 19 September 2016 to 19 March 2017.
Subsequently, in January 2017 FEMA returned for a reinsurance placement covering a $1.024 billion layer of risk, supplied by a panel of 25 reinsurers.
Following that, the agency looked once more in January 2018 and purchased an enlarged and restructured $1.46 billion reinsurance placement, secured with the help of a panel of 28 private market reinsurers.
Most recently FEMA for the first time successfully secured $500 million of reinsurance for the NFIP from the capital markets with the issuance of its FloodSmart Re 2018-1 catastrophe bond.
The transaction, which was backed by more than 35 capital markets investors, significantly expanded FEMA’s reinsurance program, which by that point had transferred $1.96 billion of NFIP’s flood risk for the 2018 hurricane season to the private sector.
Looking forward to January 2019, we will likely see an expansion of the program’s size and the possibility of a multi-year deal.
In order to participate in the NFIP reinsurance renewal for 2019 vendors must submit a request to participate by 19 November, with final tenders needed by 29 November. Guy Carpenter remains the FEMA reinsurance broker for this placement.
The coverage will be indemnity based, for which FEMA will pay a reinsurance premium to transfer some of the NFIP’s flood-risk to reinsurers, which will as a result be responsible for paying potential NFIP losses as defined under the reinsurance agreement.
The size of the 2019 NFIP reinsurance placement has not been specified, but it’s assumed that it will be larger than the expiring contract.