NFIP Increases Reinsurance Coverage
The Federal Emergency Management Agency (FEMA) announced Friday, January 5, 2018, that it has secured $1.46 billion in reinsurance coverage for the National Flood Insurance Program (NFIP) for 2018.
Natural disasters caused $330 billion in total damages in 2017, with insured losses representing $135 billion. Hurricane Harvey caused $85 billion in damages alone, and the NFIP has paid out more than $8 billion in flood insurance claims during the year.
This year’s reinsurance coverage is underwritten by 28 reinsurers and applies to portions of NFIP losses above $4 billion that arise from a single flood event. The agreement covers 18.6% of losses between $4 billion and $6 billion, and 54.3% of losses between $6 billion and $8 billion. In 2017, the program ceded a portion of its risk to reinsurers, which allowed it to recover $1.04 billion to pay claims after Hurricane Harvey losses surpassed $8 billion.
“Expanding the role of the private markets in sharing the nation’s flood risk remains a central tenant of FEMA’s move toward a sustainable financial framework for the NFIP,” said Roy E. Wright, Director of the NFIP.
The private flood insurance market has demonstrated its health and ability to support the federal program. The success of the reinsurance agreement in 2017 and increased coverage in 2018 shows that the NFIP understands what is best for consumers, and the partnership will likely prove valuable in the event of future flood losses.