FEMA discloses Quantedge as fronted investor in 2025 traditional reinsurance program

FEMA disclosed the participants in its 2025 traditional reinsurance program for the National Flood Insurance Program (NFIP) this week and it shows that alternative investment manager Quantedge Capital participated on a fronted basis, which appears to be the first year an investor has taken a line on the program in this way.

It’s notably late for the U.S. Federal Emergency Management Agency (FEMA) to be disclosing the participants in the NFIP’s reinsurance tower for 2025. More typically that information has been disclosed within the first two months of the year.

But with all the uncertainty around government agencies and their services in the United States this year, which affected FEMA as much as any agency, this information has been very late to emerge in 2025.

Also notable is the fact there has not been a public notice of a traditional reinsurance placement for 2026 published by FEMA yet. So, at this stage, we are not sure if the government agency is returning for more reinsurance to cover the National Flood Insurance Program’s risk for the coming year.

Recall that, FEMA renewed the National Flood Insurance Program’s (NFIP) traditional reinsurance tower for 2025 at the start of the year.

That renewal for 2025 saw 22% more in reinsurance limit protection secured for this calendar year compared to 2024, at just over $757.8 million, while FEMA also noted that this came from a broader panel of reinsurer counterparties.

The $757.835 million of traditional reinsurance secured for calendar year 2025 cost FEMA a total premium of $139.9 million.

The 2025 reinsurance tower has provided FEMA with cover for NFIP flood insurance losses at a rate of 12.0334% of losses between $7 billion and $9 billion and 25.8584% of losses between $9 billion and $11 billion.

There are a number of new and returning reinsurance counterparties for the 2025 program detailed in the fresh disclosure from FEMA.

Most notable for our readership is the inclusion of a line taken by investment firm Quantedge Capital, an asset manager that allocates to insurance-linked securities (ILS) opportunities and reinsurance.

Quantedge’s participation in the NFIP’s 2025 traditional reinsurance program was fronted by global reinsurer Hannover Re, the disclosure shows.

While there are likely other third-party capital sources participating in the NFIP reinsurance tower, through Lloyd’s syndicates or perhaps via other fronting entities, Quantedge is the only investor directly named.

Presumably, Quantedge will have posted its collateral to a Hannover Re entity, which fronted the reinsurance line participation on its behalf to help the investor access this opportunity.

Other notable first time participants in the NFIP reinsurance tower for 2025 included: Korean Re; Oak Re; and Fidelis’ Pinewalk.

It will be interesting to see whether FEMA places traditional flood reinsurance for the NFIP for 2026. As we said, no public notice is visible at this time when previously this was usually made available in September.

Recall that there is also uncertainty over the use of catastrophe bonds for the NFIP’s reinsurance needs, with FEMA having halted preparatory work for a planned FloodSmart Re Ltd. Series 2025-1 cat bond back in March this year, which we were told at the time was a consequence of the additional oversight and focus on government agencies and their budgets.

FEMA’s catastrophe bonds and reinsurance have both demonstrated their worth in the past, with recoveries made after major events to assist in paying the NFIPS’s flood insurance claims.

A number of cat bond tranches remain in extension after some recoveries already made, with some further erosion of principal possible due to 2024’s hurricane Helene, we understand. While the traditional reinsurance tower paid out in full after the 2017 hurricane season storms.

Transferring the risk of major flood loss events off the government’s and ultimately tax payer’s balance sheets has been a positive step for FEMA. We hope to see it continue and over-time expect that if it does, more third-party capital investors might find these opportunities something they can support and a way to access US flood reinsurance-linked returns.