The U.S. Federal Emergency Management Agency (FEMA) has said that Hurricane Helene could drive National Flood Insurance Program (NFIP) claims of up to $7 billion, including loss adjustment expenses, with more than 55,000 flood loss claims reported to the NFIP as of November 7th, 2024.
Currently, the NFIP has paid roughly $830 million in claim payments to policyholders from the impacts of Hurricane Helene, the fourth named storm to make landfall in the US during the 2024 Atlantic hurricane season. The over 55,000 flood claims filed is an increase on the more than 54,000 reported as of October 25th.
In an initial loss estimate, FEMA has reported that Helene could potentially result in NFIP claims losses between $3.5 billion to $7 billion, which includes flood insurance claims received from six states, with the majority of these coming from Florida, where Helene made landfall on September 26th as a Category 4 storm.
FEMA’s NFIP loss estimate range is based on policy information, daily reports of claims and payments made, significant historical events patterns of reported claims and payments, current economic conditions, and claim adjuster observations.
Through a mix of traditional reinsurance ($619.5m) and capital markets placements ($1.3bn), FEMA has roughly $1.92 billion of reinsurance protection for 2024, which the agency confirmed attaches at $6.52 billion. The traditional coverage attaches at $7 billion, but the coverage from its FloodSmart Re catastrophe bonds attach lower at $6.52 billion.
So, at the upper end of the initial estimated NFIP loss range, the lowest attaching of the catastrophe bonds will be on watch for possible losses.
“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,” explained FEMA.
Adding: “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.”
Although Hurricane Helene is a significant flood event that may well trigger reinsurance recoveries, FEMA notes that it will take many months to establish whether the NFIP is able to collect under its reinsurance arrangements.
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