92 92
INVESTMENT PROPERTY PRESERVATION TECH
$400M IN
FLOOD
PROTECTION
INSURANCE
ISSUED
e U.S. Federal Emergency Management
Agency (FEMA) has successfully transferred
$400 million of the National Flood Insurance
Program's (NFIP) flood risk to the capital
markets through the issuance of its third
catastrophe bond transaction, Reinsurance
News reports.
Under the terms of the latest agreement,
FEMA is set to pay $50.28 million in
premiums for the first year of reinsurance
protection. At the same time, FEMA states
that the agreement will cover 33.3% of losses
for any single flood event with losses between
$6 billion and $9 billion, and 30% if that same
event has losses of between $9 billion and $10
billion.
David Maurstad, FEMA's Deputy
Associate Administrator for Insurance and
Mitigation, and the senior executive in charge
of the NFIP, commented: "Reinsurance is
a lynchpin to help strengthen the financial
framework of the flood insurance program. By
engaging capital markets, FEMA can access
alternative capital and grow its reinsurance
program in a way that benefits policyholders
and taxpayers and expands the role of the
private markets in managing flood risk in the
United States."
After the NFIP's short-term extension,
the next steps will be reforming the program.
In a report by Christa Nadler, EVP of Risk
Placement Services, she dives into what
problems the NFIP has faced, and what the
future of the program looks like.
According to Nadler, open-market flood
coverage is becoming more and more vital, and
"data is king." With additional sources of data
available, more carriers than the NFIP alone
are looking at providing insurance.
e next steps for the NFIP involve private
sector reinsurance. As part of the next steps for
NFIP, the Federal Emergency Management
Agency announced earlier this month that
it has transferred an additional $1.33 billion
of the NFIP's financial risk to the private
reinsurance market in 2020 reinsurance
placement for the program.
