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History of NFIP Reinsurance Program

2012 - 2014: Legislative AuthorityCongress granted FEMA authority to secure reinsurance for the National Flood Insurance Program (NFIP) from the private reinsurance and capital markets. Biggert-Waters Flood Insurance Reform Act of 2012 Homeowner Flood Insurance Affordability Act of 2014 2015 – early 2016: Flood Insurance Risk Study (FIRS) FEMA completed this study to determine the feasibility and benefits of a reinsurance program for the NFIP. 2016: Reinsurance Test Placement FEMA transferred $1 million of the NFIP’s financial risk to three reinsurance companies to test the implementation of the agency’s authorities and systems. 2017: Cornerstone Reinsurance Placement FEMA secured $1.042 billion in traditional reinsurance from 25 reinsurance companies. Effective from January 1, 2017 to January 1, 2018. FEMA paid a reinsurance premium of $150 million for this coverage. The agreement was structured to cover, for a given flood event, 26 percent of losses between $4 billion and $8 billion. 2017: Hurricane Harvey As of May 31, 2018, FEMA has paid NFIP policyholders over $8.6 billion for claims resulting from Hurricane Harvey. Therefore, FEMA recovered the entire $1.042 billion in reinsurance as of December 15, 2017. 2018: Expanded Traditional Reinsurance FEMA secured $1.46 billion in traditional reinsurance coverage from 28 reinsurance companies. Effective January 1, 2018 to January 1, 2019, FEMA paid a reinsurance premium of $235 million for this coverage. The agreement is structured to cover, for a given flood event, 18.6 percent of losses between $4 billion and $6 billion, and 54.3 percent of losses between $6 billion and $8 billion. 2018: Reinsurance Backed by Capital Markets FEMA secured reinsurance that for the first time engages the capital markets, complemeting the NFIP’s existing traditional reinsurance coverage. Effective on August 1, 2018, FEMA entered into a three-year reinsurance agreement with reinsurance company, Hannover Re (Ireland) Designated Activity Company (DAC). Hannover Re acted as a “transformer,” transferring $500 million of the NFIP’s financial risk to capital markets investors by sponsoring the issuance of a catastrophe bond through a special purpose reinsurer. FEMA will pay $62 million in premium for the first year of coverage. FEMA secured $1.32 billion in traditional reinsurance coverage from 28 reinsurers. FEMA entered into a 3 year reinsurance agreement that transfers $300 million in NFIP risk to the capital markets.

Timeline history of NFIP Reinsurance Program

Photo by FEMA Graphic - Apr 24, 2019
Last Updated: April 24, 2019