Property Claim Services (PCS) and the National Flood Insurance Programme (NFIP) have agreed to partner for the first time to offer flood insurance loss estimates, after the recent series of severe weather events left the re/insurance industry bracing in anticipation of their full insured fall-out.
After Hurricane Harvey battered parts of the U.S. and the Caribbean in late August, bringing intense rainfall, strong winds, and subsequent widespread damage, the NFIP received over 87,000 claims leading to $15.8 million in losses to date.
In Florida, Georgia, and South Carolina, the NFIP received 23,000 claims and incurred losses of $15.8 million so far.
For future events, the NFIP plans to report claim totals and incurred losses together with PCS’ reporting cycle, in a collaborative effort to enhance re/insurer’s understanding of the industry’s U.S. flood risk and capital management, PCS said the decision comes “particularly in light of the NFIP’s decision to secure reinsurance protection earlier this year.”
Ted Gregory, director, PCS, said; “The benefits of our combined effort reach beyond risk transfer. With Hurricanes Harvey, Irma, and Maria, flood losses are expected to be a significant portion of the insured losses from these events.
“Both insurers and independent adjusters can serve claimants more effectively when they have access to more event-specific data. With demand for claims-related services escalating rapidly because of the three storms, I’m proud that PCS is in an immediate position to help.”
“We see this as an opportunity to better integrate with the insurance industry,” said Roy Wright, FEMA’s director of the National Flood Insurance Program; “This better understanding of flood losses is in the interest of FEMA and our private sector partners. It can deepen the understanding of flood risk as the industry explores broader use of private lines in this space.”
PCS is creating a database for NFIP catastrophe loss data – separate from its existing insured loss database – to ensure that forms of reinsurance protection currently in force, such as industry loss warranties (ILWs), are not unexpectedly affected.
Tom Johansmeyer, assistant vice president, PCS, explained that with the ILW market providing an important source of capacity for insurers and reinsurers worldwide, “we want to respect the careful efforts made for the risk-transfer transactions currently in force. With this in mind, we encourage companies planning new ILWs or catastrophe bonds to contact us with any questions.”
“We appreciate the opportunity to work on this important initiative with the NFIP. The combined effort is the direct result of requests from our clients around the world to report NFIP losses, particularly in light of the program’s recent engagement with the global reinsurance community. Improved reinsurer risk and capital management should benefit both the NFIP and the policyholders it protects,” Johansmeyer added.
Existing PCS subscribers will be notified when the database of NFIP loss information is completed.
Once this is complete, NFIP losses will likely be added to the U.S. database as a fourth and separate category alongside auto, personal, and commercial.
PCS recommends that in future other forms of risk transfer that reference PCS data specify the classes of business included, instead of simply using a PCS insured loss total in the trigger.
