FEMA Announces 2020 NFIP Reinsurance Program
The Federal Emergency Management Agency (FEMA) has announced its 2020 reinsurance placement for the National Flood Insurance Program (NFIP). For the 2020 period, FEMA transferred $1.33 billion of the NFIP’s risk to the private reinsurance market through 27 companies.
Total premium for the reinsurance coverage comes to $205 million. It will cover portions of loss above $4 billion arising from a single flood event. As part of the agreement, 10.25% of losses between $4 billion and $6 billion, 34.68% of losses between $6 billion and $8 billion, and 21.80% of losses between $8 billion and $10 billion will be covered.
FEMA received authority to purchase reinsurance coverage for the NFIP through the Biggert-Waters Flood Insurance Reform Act of 2012 and the Homeowner Flood Insurance Affordability Act of 2014. This year, FEMA contracted with Guy Carpenter and Company, a subsidiary of Marsh & McLennan Companies, to secure the reinsurance placement. The agency also contracted with Aon for financial advisory services.
This coverage is in addition to a $500 million capital markets reinsurance placement in August 2018 and a $300 million placement in April 2019. Overall, FEMA has transferred $2.13 billion in NFIP flood risk to the private market.
“It takes the whole community to prepare for disasters, and that includes participation from the private sector. Through reinsurance, FEMA partners with private markets to build a pillar that supports a sound financial framework for the NFIP by a meaningful transfer of flood risk,” said David Maurstad, Deputy Associate Administrator of the NFIP.