1 week ago
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The U.S. Federal Emergency Management Agency (FEMA) has provided a preliminary estimate of National Flood Insurance Program (NFIP) losses from hurricane Helene, putting the initial figure in a range from $3.5 billion to as much as $7 billion.
At the upper-end of that estimate it puts the lowest attaching of the NFIP’s FloodSmart Re catastrophe bonds on watch for possible losses.
Although with their coverage now attaching above a reported $6.52 billion (according to FEMA) it would require the NFIP’s flood insurance losses from Helene to rise close to the top-end of the estimated range.
FEMA now says that more than 55,000 flood loss claims have been reported to the National Flood Insurance Program (NFIP) from hurricane Helene, a slight increase on the 54,000 figure we discussed at the end of October, suggesting the influx of claims has slowed now.
FEMA’s initial hurricane Helene NFIP loss estimate of $3.5 billion to $7 billion includes loss adjustment expenses.
The loss estimate is based on flood insurance claims from across six US states, with the majority of claims coming from Florida, FEMA explained.
FEMA curently has $619.5 million in traditional reinsurance coverage, as well as a further $1.3 billion in reinsurance that covers flood events caused by named storms, from FloodSmart Re cat bond issuances brought to market in 2022, 2023 and earlier in 2024.
This almost $1.92 billion in reinsurance, from traditional and capital markets sources, currently attaches at $6.52 billion, FEMA said late yesterday. The traditional reinsurance attaches at $7 billion, but the cat bond coverage sits lower down.
Which suggests one of its cat bonds has been reset higher-up the tower, as at issuance a higher-risk Class C tranche of the $450 million FloodSmart Re Ltd. (Series 2022-1) attached at $6 billion.
FEMA explained yesterday, “FEMA’s reinsurance program includes an annual traditional reinsurance program with a $7 billion or more trigger for a percentage of coverage and three capital market placements with a coverage beginning at $6.52 billion in received claims payments. To recoup the full amount of reinsurance coverage, the National Flood Insurance Program would need to incur at least $11.5 billion in flood insurance claims losses from Hurricane Helene.”
Also saying, “The NFIP reinsurance program helps FEMA manage the future exposure of the NFIP through the transfer of NFIP flood risk to private reinsurance companies and through a transformer reinsurer to private capital market investors. By securing reinsurance at a fair and reasonable cost, FEMA has an additional method to fund payment of flood claims after catastrophic flood events.”
Whether any reinsurance recoveries will be made for hurricane Helene will take time to establish and so uncertainty could persist over the lowest-attaching of the FloodSmart Re catastrophe bonds.
FEMA said, “While Hurricane Helene is a significant flood insurance event that may trigger reinsurance payments, it will take many months for FEMA to determine if the NFIP is able to collect under its reinsurance agreements. ”
Read all about FEMA’s NFIP catastrophe bonds under the FloodSmart Re series of deals.
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