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Home > Blog > FEMA Intends to Add Reinsurance from Private Markets
TUESDAY, APRIL 10, 2018

FEMA Intends to Add Reinsurance from Private Markets

FEMA

The Federal Emergency Management Agency, or FEMA, recently announced its intentions to bolster its reinsurance for the National Flood Insurance Program (NFIP) through a catastrophe bond. 

According to Insurance Journal:

FEMA began purchasing private reinsurance in 2017 and recovered $1.042 billion from the private markets due to losses from Hurricane Harvey. In early January 2018, FEMA continued the practice by securing $1.46 billion in reinsurance from 28 private reinsurers to cover any qualifying NFIP flood losses in excess of $4 billion per event occurring in calendar year 2018.

FEMA said it now plans to transfer additional risk by engaging the capital markets for the first time through an insurance-linked securities (ILS) transaction on or about July 1, 2018.

FEMA also announced recently that premiums will rise about eight percent in 2018.  Due, in part, to underestimating the amount claims would cost the federal agency. 

Director of the NFIP, Roy Wright said, “The NFIP requires a stronger financial framework built on expanding our portfolio of actuarially-priced policies. Transferring more of the risk burden to the private capital markets continues to be part of that strategy.”

There certainly seems to be a correlation between an evolving climate, increasingly catastrophic storms, and more expensive claims to assist in rebuilding communities.  Regardless of one’s feelings toward government run agencies versus private business, currently, FEMA is the only option homeowners have to insure against flood damage, and those experiencing the stress of a natural disaster would understandably want the agency responsible for helping them recover to be well funded.

With the Spring season upon us we encourage everyone to examine their current insurance policies and inquire about flood insurance if you currently don’t have it.  As we like to point out at every convenient opportunity, flood damage is not included in a homeowners or renters policy and has to be issued separately. 

As always, if you have any questions about flood insurance or any other insurance policies you’ve been considering or just want to know more about, feel free to call us at 636.391.0700 where we have agents and customer service representatives ready to speak with you, or you can send an email to questions@clhins.com, or even chat with us on our website, clhins.com.

Posted 2:50 PM

Tags: personal lines, commercial lines, flood insurance, fema
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