From January 1, 2017, FEMA – the Federal Emergency Management Agency – secured increased reinsurance protection to share a meaningful portion of the risk of large and unexpected flooding with private reinsurance markets.
This placement of reinsurance transferred $1.042 billion in risk above a $4 billion deductible to 25 reinsurance companies.
Under this agreement, the reinsurers can cover 26 percent of losses between $4 billion and $8 billion arising from a single flooding event.
As Artemis blog reports here, with flood losses from Hurricanes Harvey and Irma on the rise, estimates suggest that the NFIP reinsurance program will pay out in full with losses from Hurricane Harvey alone.
Also noted by Artemis at the very end of its blog post, the NFIP reinsurance layer does not have a reinstatement provision.
This means that the NFIP cannot also claim on the program for its losses from Hurricane Irma as a second and separate event.
Nevertheless, it’s a good thing that NFIP secured first event coverage. A reinsurance payment for Hurricane Harvey flood losses will be welcome.