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FEMA begins process to renew NFIP flood reinsurance for 2024


The U.S. Federal Emergency Management Agency (FEMA) has begun the process to renew the National Flood Insurance Program’s (NFIP) traditional reinsurance tower for 2024 this week.

fema-logoThe FEMA flood reinsurance renewal journey always begins around this time of year, as the organisation files documents describing the NFIP approach and appetite to another year of reinsurance, to begin from January 1st 2024.

As ever, FEMA says that it is open to single and multi-year traditional reinsurance, although to-date it has only purchased annual contracts, with all of its multi-year NFIP flood reinsurance coming from the catastrophe bond market so far.

FEMA is now working to renew its reinsurance tower for 2024, represented by its broker Guy Carpenter, to secure flood risk reinsurance for NFIP exposure across the United States.

For 2023, the NFIP reinsurance tower shrank dramatically to just $502.5 million in size, which was a more than 50% reduction on the prior year’s $1.064 billion of flood reinsurance secured for the 2022 calendar year.

In years before that, FEMA had renewed its traditional reinsurance program with $1.33 billion of flood reinsurance at the January 2020 renewals, and in January 2019 renewed a $1.32 billion traditional reinsurance placement.

The first full placement of the NFIP reinsurance tower was in 2018, when FEMA secured $1.024 billion of traditional reinsurance.

The shrinkage in 2023 was likely partly due to the hard market and higher reinsurance costs, but equally due to hurricane Ian and the fact the NFIP loss from that was still developing.

The NFIP’s claims from hurricane Ian had reached $3.9 billion back in May and with the 2022 reinsurance tower attaching at $4 billion, there remains a chance of recoveries being made.

Which, alongside the continuing hard market and also reinsurers reluctance to write so much in the way of secondary perils, including flood, could influence the renewal outcome again for FEMA.

Of course, the NFIP’s reinsurance tower is complemented by its now more significant, in size terms, FloodSmart Re catastrophe bond program.

At this time, FEMA has $1.3 billion of in-force cat bonds providing reinsurance coverage, so the capital markets continue to make up the largest share of its NFIP flood reinsurance arrangements.

Remember, the FloodSmart Re cat bonds only cover flooding from tropical storms and hurricanes, not other flood events.

We expect FEMA will look to utilise the catastrophe bond market again, to leverage the competitive capacity that is available and that will complement again whatever traditional reinsurance it can procure for 2024.

FEMA is looking for reinsurers to submit a request to participate in the reinsurance renewal by December 1st,  which is the date when it anticipates Firm Order Terms will be issued.

Final offers of capacity will be required by December 5th, which is when FEMA anticipates final authorizations will be due from the reinsurance markets, while the renewed NFIP flood reinsurance tower will come on-risk as of January 1st 2024.

2024’s reinsurance renewal will likely be a delicate negotiation for FEMA and its reinsurance brokers, given hurricane Ian still develops for the NFIP, while the balancing of capacity sources, across traditional and alternative or ILS sides of the market, could be critical this year.

View details of every issuance in the FloodSmart Re catastrophe bond program.

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