The Federal Emergency Management Agency (“FEMA”) has secured reinsurance for the National Flood Insurance Program (“NFIP”) effective January 1, 2017 through January 1, 2018.
Congress provided FEMA the authority to secure reinsurance from the private reinsurance and capital markets, although historically the Federal Insurance and Mitigation Administration (“FIMA”) was limited to using flood insurance premiums, available surplus, borrowing capacity from the U.S. Treasury, and, in some cases, direct appropriations from Congress to pay claims.
“Securing reinsurance through the NFIP reinsurance program is a key step towards achieving the NFIP's long-term vision of building a stronger financial framework,” said Deputy Associate Administrator of FIMA, Roy Wright. “This reinsurance agreement places the NFIP in a better position to manage losses incurred from major events like Hurricane Sandy.”
FEMA executed the 2017 reinsurance agreement with a consortium of 25 reinsurers representing some of the largest insurance and reinsurance groups around the globe. FEMA contracted with Guy Carpenter and Company, a subsidiary of Marsh & McLennan Companies, to provide broker services to assist in securing the reinsurance placements.
Under the agreement, reinsurers agreed to indemnify FEMA for flood claims on an occurrence basis. The layer is structured to cover 26 percent of losses between $4 billion and $8 billion. A combined total of $1.042 billion of the NFIP's flood risk was transferred to the private reinsurance market through this agreement, according to FEMA.
FEMA received the authority to secure reinsurance through the Biggert-Waters Flood Insurance Reform Act of 2012 and the Homeowner Flood Insurance Affordability Act of 2014. The 2017 reinsurance placement is an expansion of a smaller placement made by FEMA in September 2016.
Learn more: https://www.fema.gov/.
Victoria Spears
Victoria Prussen Spears is senior vice president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. A graduate of Sarah Lawrence College and Brooklyn Law School, Ms. Spears was an attorney at a leading New York City law firm before joining Meyerowitz Communications. She may be contacted at [email protected].