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Public and Private Partnerships Strengthen Flood Protection with Reinsurance

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After last year’s devastating floods in Texas and Florida, I saw firsthand how critical flood insurance is for recovery after extreme events. But too few Americans have the proper coverage for their homes. As we shift the nation’s mindset about preparedness, closing the insurance coverage gap for homeowners and renters stands as a critical path for each of us to consider. It is time to think beyond our standard, historical approaches and work towards much needed growth and resiliency in the flood insurance market.

In 2017, FEMA took a significant step to shift the conventional norms on flood insurance by sharing a meaningful portion of our flood risk with the private market. FEMA’s National Flood Insurance Program purchased reinsurance. This risk transfer mechanism is commonly used by private insurance companies and public entities alike to protect from large financial losses.

We did this with several goals in mind. First, we want to expand the flood insurance program’s ability to cover claims from large and unexpected events, such as Hurricane Harvey. Second, we want to reduce the need to borrow from the U.S. Treasury in the future. And third, we want to expand the role of the private sector in covering our nation’s flood risk.

As of January 1, 2018, more than 91 thousand survivors filed claims for Hurricane Harvey, and FEMA has paid over $7.6 billion in losses to those policyholders. And because we purchased reinsurance a year ago (2017), FEMA recovered $1.042 billion from the private markets.

To build upon FEMA’s commitment to strengthen our ability to cover future flood losses, we secured $1.46 billion in reinsurance to cover any qualifying flood losses occurring in 2018. This placement demonstrates our commitment to expand reinsurance coverage as part of a multi-year strategy.

In 1968, Congress enacted the National Flood Insurance Program (NFIP) in response to the lack of availability of private insurance and continued increases in federal disaster assistance due to floods. At the time, coverage was virtually unavailable from private insurance markets.

As we enter the 50 year anniversary of the federal government underwriting flood insurance, we are looking to double the amount of Americans who are covered by flood insurance by the year 2023. The only way to get there is by thinking creatively and forming strong partnerships with the private sector.

Last Updated: 
01/05/2018 - 12:00

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