FEMA announced that the agency is transferring $619.5 million more of the National Flood Insurance Program’s financial risk to the private reinsurance market as part of its 2024 reinsurance placement.

The 2024 reinsurance placement covers portions of NFIP losses above $7 billion arising from a single qualifying flood event.

FEMA will pay a total premium of $121.1 million for the coverage.

The agreement is structured to cover:

  • 8.9125 percent of losses between $7 billion and $9 billion (or $178 million)
  • 22.0625 percent of losses between $9 billion and $11 billion (or $441 million)

This annual reinsurance agreement provides coverage in 2024 through the support of 18 private reinsurance companies.

Combined with the three capital markets reinsurance placements in 2021-2023, FEMA has transferred $1.9195 billion of the NFIP’s flood risk to the private sector, the announcement said.

If a named storm flood event is large enough to trigger all reinsurance agreements, FEMA will receive qualifying payments.

If a qualifying catastrophic flood event occurs, reinsurance companies cover a portion of the NFIP’s losses to enhance FEMA’s ability to pay flood insurance claims without borrowing from the U.S. Treasury.

“With continued difficult market conditions this year, FEMA remains committed to long-term use of private sector reinsurance,” said David Maurstad, FEMA’s deputy associate administrator for Resilience and senior executive of the NFIP, in the media statement. “However, the program will adjust NFIP reinsurance investments whenever necessary to reflect market conditions as we did again this year.”

FEMA contracted with Guy Carpenter and Company, a subsidiary of Marsh & McLennan Companies, to provide broker services to assist in securing the reinsurance placement.

The agency received authority to secure reinsurance through the Biggert-Waters Flood Insurance Reform Act of 2012 and the Homeowner Flood Insurance Affordability Act of 2014.

FEMA’s 2024 reinsurance placement builds upon its previous reinsurance placements as further development toward a stronger financial framework.

Source: FEMA