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Testing a New Tool to Strengthen Flood Insurance

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My recent visits with Baton Rouge, Louisiana flood survivors reinforce the critical role flood insurance plays in returning our citizens to home, work and school after disasters. Already, nearly 29,000 survivors have filed claims for the flooding in Louisiana, and FEMA has paid out over $400 million to policyholders.

One of our priorities at FEMA is to mitigate the impact of natural disasters by building resilient communities and helping Americans recover when damage occurs. A key resiliency resource is the National Flood Insurance Program (NFIP), which saves our country $1.7 billion in avoided flood losses every year.

Today, Americans in all 50 states and territories, hold approximately 5.1 million flood insurance policies guaranteed by the U.S. government through the NFIP. The program has been challenged, however, as the power and frequency of floods have been rising since Hurricane Katrina ravaged the Southern coast in 2005, the 2008 floods devastated the Gulf Coast and Midwest, and Hurricane Sandy raked the East Coast in 2012.

Flood insurance claims have risen beyond the amount that policyholders pay into the program, leaving the NFIP $23 billion in debt to the U.S. Treasury. Let me be clear: while the National Flood Insurance Program is in debt, FEMA retains the ability to pay out flood claims to policyholders quickly and fully. However, to help put the flood insurance program on a firmer long-term financial footing we are making use of new tools provided by Congress to diversify our risk and to lessen the need to borrow from the Treasury. These tools include establishing a reserve fund so additional funding is available when large flood events occur, and creating a reinsurance program.

Reinsurance, a form of insurance for insurance providers, allows the NFIP to share flood risk with private reinsurance companies to help defray the cost of claims from large and unexpected insured events like devastatingly large hurricane-driven floods.

Just this week, we have launched the reinsurance initiative. FEMA purchased reinsurance from three reinsurers, Transatlantic Reinsurance Company, Swiss Re America Corporation, and Munich Reinsurance America, Inc., with brokerage support from Guy Carpenter and Company, a subsidiary of Marsh & McLennanan Companies. We will expand the program in January 2017.

Sharing this risk with the private market will expand the flood insurance program’s ability to cover claims. Reinsurance won’t eliminate the current NFIP debt, but, as we move forward with a long term reinsurance strategy, we expect it will reduce the need to borrow from the Treasury in the future.

The NFIP reinsurance program, when fully implemented, will strengthen the flood insurance program.

Like all insurance, reinsurance requires the insured to pay premiums. Our initial steps will be small enough that the reinsurance we negotiate to buy at a fair and reasonable price to the government will fit within FEMA’s existing budget. Flood insurance policyholders’ rates won’t increase as a result of the reinsurance purchased this week. As we develop the program, FEMA will work with the White House and Congress to determine how to cover the costs.

Reinsurance is a tested, commonly used tool in the private and public sectors around the world, including in the United States. Several states already have reinsurance programs to help defray the cost of losses they must cover due to damage from natural disasters, such as the Citizens Property Insurance Corporation of Florida, California Earthquake Authority, and the Texas Windstorm Insurance Association.

Flooding is the most common and costly disaster we see in America, and FEMA is working hard to ensure that flood insurance is always there when Americans need it most. Watch this space for continued updates as the Reinsurance Program unfolds.

For more information on the NFIP Reinsurance Initiative, please see our frequently asked questions.

Last Updated: 
01/05/2018 - 09:52

Comments

A small amount to be sure, but a step in the right direction. Good luck, as the NFIP was built for the benefit of the U.S. populace. Climb Mt. Fuji, snail. Slowly. Slowly

This is interesting to hear about flood insurance but this is also needed i think.

Would like more info.. I have flood insurance ( building/content), how am I just reading this..and just by chance now? How was this approved and by whom? Thank you

Mortgage Lenders who sell or transfer Mortgages to multiple Servisers should be held accountable for cancelling Flood Insurances and mishandling of all Real Estate related Insurances by putting homeowners at Risk.

When is my next payment due. Have not heard from your insurance company, is a payment due if not when.

What are my options if my flood insurance claims my manufactured home to be totaled and FEMA claims its not substantially damaged. How is it possible to file for an ICC Claim? I have a home that needs demolition and when i get a new one it has to be elevated 6 feet. I talked with the county engineers and they go by what FEMA says. Please Help. I also asked my insurance company about ICC and they acted like they did not know what I was talking about.

What are my options if my flood insurance claims my manufactured home to be totaled and FEMA claims its not substantially damaged. How is it possible to file for an ICC Claim? I have a home that needs demolition and when i get a new one it has to be elevated 6 feet. I talked with the county engineers and they go by what FEMA says. Please Help. I also asked my insurance company about ICC and they acted like they did not know what I was talking about.

I live in paris Texas we had a 3 bedroom 2 bath home was water demaged we lived there 13 years we liked 12 years and we would own it and bank of america fannie mae gave us evition notice we moved in to 1 bedroom apt. in nov. 2013 we are still here can you get us in a 3bedroom 2 bath or at least 2 bedroom 2 bath thank you keith smith

How can this program benifit the people of Harvey Louisiana 70058 and how is the premium cost for home owners accessed.

Flood insurance is an important tool and I am interested in seeing a flood insurance plan.

We have lived in Redding California for 19 years and in the same house and one day about 15years ago FEMA sent us a letter and told us that we had to insure our house with flood insurance, that was a tremendous shock and financial hardship on us after all we went 15 years and a real bad storm in 1997,1998 and Interstate 5 was also starting to flood from all the creeks around the sides. But guess what we never had a bet of a problem with water. All I can see is that a WHOLE lot of MONEY has been going out to FIMA and we haven't used them yet and in fact we have been in a drought for the past 5years. This whole thing has almost caused me to have a break down. Thank you for listening to me. Cathy

I'v had NFIP for last 21 years, during Storm Sandy and Irene not a ounce of water. We live 2 blocks from Long Island sound. Although in a low lying area no water accumulated. A 50/50 rule should be implemented. If mortgage value is equivalent to what land/property alone is worth without house, Home owners should have option of taking entire risk. Selling land to gov. or private individuals to pay off mortgage. NFIP page should contain information about Private Flood insurance available threw http://www.privatemarketflood.com/ https://www.thefloodinsuranceagency.com/ http://www.lexingtoninsurance.com/insights-innovations/current-product-releases/private-market-flood-insurance spread the risk make it affordable. Thanks for listening in advance Howard K .

When will the senate vote on H.R.2901 - Flood Insurance Market Parity and Modernization Act?

A very important bill before the senate about Private Mortgage Insurance ....... H.R.2901 - Flood Insurance Market Parity and Modernization Act A real estate agent informed me that private market flood insurance was a option to NFIP it will save our family more than 50% ( i hope this comment helps and gets posted)

Is anyone updating this page and reviewing posts? Only 11 comments?