The U.S. Federal Emergency Management Agency (FEMA) has begun the procurement process for a 2018 flood reinsurance program renewal for the National Flood Insurance Program (NFIP), to be effective on or about January 1st, 2018.
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.
Now, FEMA has announced that it’s started the procurement process for a 2018 flood reinsurance program renewal for the NFIP, which it states will be “an agreement of indemnity between FEMA and private reinsurance firms.”
The 2018 program will again cover a one year period, although FEMA states that the 2017 program set the foundation for a multi-year strategy. It’s assumed that the 2017 program paid out for losses from flooding due to hurricane Harvey, underlining the necessity of a renewal program and also that the NFIP might increase the size of the 2018 program.
The insurance and reinsurance market is clearly willing to take on more flood risk and reduce the burden further for U.S. taxpayers, and FEMA has called on reinsurers to submit their interest in participating and a request to participate in the program by December 1st, 2017.
According to FEMA, either an A.M. Best A-, a Lloyd’s A- or better, an S&P BBB+ or better, or a policyholder surplus of at least $350 million is a required condition to be a reinsurer participating in the NFIP 2018 program renewal.
Further conditions for reinsurers that wish to participate can be found within FEMA’s procurement notice, here.
It will be interesting to see if the 2018 renewal is secured on similar terms and at a similar size to the 2017 program, with the impacts of recent hurricanes fresh in everyone’s minds and the willingness and ability of the private markets to take on more U.S. flood risk from the struggling NFIP.