Flood catastrophe bond news

Before hurricane Ian devastated western Florida, the U.S. Federal Emergency Management Agency (FEMA) had already begun the process towards a January 2023 renewal of the National Flood Insurance Program’s (NFIP) traditional reinsurance tower.

Recent severe inland flooding across the United States, including the Kentucky floods that have devastated many communities, are not expected to result in losses that would trouble the National Flood Insurance Program’s (NFIP) reinsurance or catastrophe bonds.

The National Flood Insurance Program’s (NFIP) traditional reinsurance tower has been renewed by the U.S. Federal Emergency Management Agency (FEMA) at $1.064 billion in size for 2022, a slight downsizing on the prior year.

According to our sources, an early estimate of the National Flood Insurance Program’s (NFIP) losses from hurricane Ida suggests that its reinsurance program and catastrophe bonds are less likely to face any impact from the catastrophic event.

A hurricane Ida industry loss estimate update from RMS has put the National Flood Insurance Program’s (NFIP) reinsurance counterparties and catastrophe bond investors on-watch for potential losses, as the estimate suggests the traditional reinsurance component at-least is likely to attach and face losses.

The U.S. Federal Emergency Management Agency (FEMA) is back in the reinsurance market, beginning the process towards a January 2022 renewal of the National Flood Insurance Program’s (NFIP) traditional reinsurance program, alongside which is expected to be a new catastrophe bond as well.

Data and analytics company CoreLogic has provided an insurance market loss estimate for the flooding caused by hurricane Ida’s remnants in the northeastern states of the US, saying it will range from $5 billion to as much as $8 billion.

Catastrophe risk modeller RMS has provided the clearest view of the escalation in industry loss estimates for recent hurricane Ida, pegging the total onshore and offshore losses for the Gulf region at between $25 billion and $35 billion.

There’s likely to be some uncertainty  in the secondary market pricing of the outstanding FloodSmart Re catastrophe bonds that provide reinsurance from the capital markets to FEMA’s National Flood Insurance Program (NFIP), after the remnants of hurricane Ida flooded north eastern US states, ILS investment manager Plenum has said.

Estimates for insurance and reinsurance market losses from recent hurricane Ida are rising with the inclusion of damages from the storms remnants that occurred further north, according to analysts at Goldman Sachs.