FEMA Expands Reinsurance Program To Manage 2025 Flood Risk

The Federal Emergency Management Agency (FEMA) has finalized its 2025 traditional reinsurance placement for the National Flood Insurance Program (NFIP), transferring an additional $757.835 million in financial risk to the private reinsurance market. This move continues FEMA's strategy of leveraging private sector support to manage catastrophic flood losses. 

The 2025 reinsurance agreement includes coverage supported by 27 private reinsurance companies, up from 18 participants in the previous year. The coverage will address portions of NFIP losses exceeding $7 billion from a single qualifying flood event. FEMA will pay a total premium of $139.9 million for this year's agreement, which is structured as follows. 

• 12.0334 percent of losses between $7 billion and $9 billion. 
• 25.8584 percent of losses between $9 billion and $11 billion. 

Together with prior capital markets placements in 2022, 2023, and 2024, FEMA has now transferred $2.058 billion of NFIP flood risk to the private sector. In the event of a qualifying storm, FEMA will receive payments from these reinsurance agreements to support its ability to pay claims. 

"In addition to announcing this year's traditional renewal, I'm also pleased to share that the NFIP has increased its reinsurer participation in the program. We now have 27 reinsurers, up from 18 last year," Elizabeth Asche, FEMA's assistant administrator for federal insurance and senior executive of the NFIP, said. 

Reinsurance ensures the NFIP can pay flood insurance claims without borrowing from the US Treasury in the event of a major flood event. 

FEMA worked with Guy Carpenter and Company, a subsidiary of Marsh & McLennan Companies, to secure the 2025 reinsurance placement. The agency's authority to procure reinsurance stems from the Biggert-Waters Flood Insurance Reform Act of 2012 and the Homeowner Flood Insurance Affordability Act of 2014.