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FEMA renews NFIP reinsurance program for 2020

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FEMA renews NFIP reinsurance program for 2020

The Federal Emergency Management Agency transferred an additional $1.33 billion of the National Flood Insurance Program's financial risk to 27 private reinsurance companies under a traditional reinsurance placement.

The Federal Emergency Management Agency, or FEMA, paid a total premium of $205 million for the coverage. The placement covers 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. The annual reinsurance agreement is effective from Jan. 1, 2020, to Jan. 1, 2021.

Combined with the $500 million August 2018 capital markets reinsurance placement and the $300 million April 2019 capital markets reinsurance placement, the agency has transferred $2.13 billion of the NFIP's flood risk for the 2020 hurricane season to the private sector.

FEMA will receive the full $2.13 billion reinsurance coverage if a named storm event results in NFIP claims exceeding $10 billion.

In 2019, FEMA paid a total premium of $186 million. The 2019 placement covered 14% of losses between $4 billion and $6 billion, 25.6% of losses between $6 billion and $8 billion, and 26.6% of losses between $8 billion and $10 billion.

Guy Carpenter & Co. provided broker services to assist in securing the reinsurance placement, while Aon provided financial advisory services for the placement.