FEMA secures a further $575m of flood reinsurance for NFIP
- September 9, 2025
- Posted by: Web workers
- Category: Finance
The U.S. Federal Emergency Management Agency (FEMA) has obtained reinsurance coverage through insurance-linked securities (ILS) reinsurance for the seventh time by entering a three-year reinsurance agreement, securing $575 million of coverage for the National Flood Insurance Program (NFIP).
FEMA entered into the agreements with its transformer reinsurer, Hannover Re (Ireland) Designated Activity Company, which transferred $575 million of the program’s financial flood risk to qualified capital market investors through a special purpose insurer, FloodSmart Re Ltd, for sponsoring catastrophe bonds.
Combined with FEMA’s existing reinsurance coverage via FloodSmart 2022-1 and FloodSmart 2023-1, and the January 2024 traditional reinsurance placement, the agency has transferred $1.92 billion of the NFIP’s flood risk to the private sector ahead of the 2024 hurricane season.
FEMA continues to engage reinsurance markets to help strengthen the financial framework of the NFIP and promote private sector participation in flood-risk management.
FEMA will pay about $85.7 million in premiums, excluding initial expenses, for the first year of reinsurance coverage as part of these agreements. The agreement also covers 10% of losses for any single flood event between $8 billion and $9 billion and 23.75% of losses between $9 billion and $11 billion.
David Maurstad, FEMA’s Assistant Administrator for the Federal Insurance Directorate and Senior Executive of the National Flood Insurance Program commented, “I’m pleased that FEMA has successfully secured favorable terms for this year’s capital market reinsurance and retained our current level of reinsurance coverage at acceptable rates.
“This latest investment in our reinsurance program reinforces FEMA’s objectives to expand financial tools to achieve a sound financial framework and bolster the programs’ claims paying capacity following extreme flooding events.”
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