Federal Emergency Management Agency Emergency Management Agency The National Flood Insurance Program...
Transcript of Federal Emergency Management Agency Emergency Management Agency The National Flood Insurance Program...
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Federal Emergency Management AgencyThe National Flood Insurance ProgramJune 9, 2017 – Presentation to Advisory Committee on Risk Sharing Mechanisms
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National Flood Insurance Program…it is not all about flood insurance
2016 Flood policies in Force 5.1 Million
Insurance in Force $1.25 Trillion
Communities 22,235
Cash On Hand $1.08 Billion
Reserve Fund $160 Million
Available to borrow $5.8 Billion
Outstanding borrowing $24.6 Billion
14% 11%31%
5.1m Policies
$1.3 Trillion Insured Limit
3
NFIP
INSURANCE MITIGATION & INCENTIVES
FLOOD INSURANCERATE MAPS
BUILDING CODES &
REGULATIONS
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0%
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60%
80%
100%
120%
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$ M
$500 M
$1000 M
$1500 M
$2000 M
$2500 M
$3000 M
$3500 M
$4000 M
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Cumulative Loss RatioPremium & Losses
Losses Paid Earned Premium Cum. Loss Ratio
$17.77B $9.52B
The 21st Century has brought a new landscape…..
NFIP’s obligation to the US TreasuryEarned Premium & Loss Paid by Year
Source: FEMA website
Katrina Sandy
$-
$5.0
$10.0
$15.0
$20.0
$25.0
$30.0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016B
illio
ns
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2012 NFIP Reauthorization and The Flood Insurance Risk Study (FIRS)
38%
31%
19%
7%5%
Annual Average Loss
Blended Surge
AIR Inland*
HU Precip Loss
Named TS Loss
ALAE-Attritional
* Scaled to reflect NFIP experience
Flood risk analytics (surge, riverine)
Flood modeling study
Reinsurance viability study
Flood privatization study
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2016 FEMA becomes first Federal Agency to secure reinsurance
Phase 1 – Administrative Reinsurance Test (ART):
• Execute reinsurance placement per authority granted to FEMA• Test internal processes to ensure smooth reinsurance build-out• Keep it simple, but achieve robust system check
• Term: 9/19/16 – 3/19/17• Reinsured Limit: $1,000,000 with 1 reinstatement
− Limit 1: Aggregate Coverage xs $5.0 Million− Limit 2: Occurrence Coverage xs $5.5 Billion
• Premium mechanics designed to tested billing processes• Program designed to experience loss and test claim reporting
and collection processes
PROGRAM PARAMETERS
MECHANICS
GOALS
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2017 NFIP expand reinsurance with its “Cornerstone” Placement
$10Bclaimspaying
capacity
~ $3B from premium net of expenses and normal loss, plus reserve
fund levy
$6B claims paying capacity from authorized
borrowing
Issues & Challenges
• Creating Stakeholder Buy-In & Related Risk Metrics
• Federal Regs v. Market Practice
• Handling Data & Completing Analytics
• Establishing Reinsurer Selection Process
• Determining Appropriate Structure given competing priorities
• Establishing communication protocols as initiative moved through the execution phase
Net Premiums
Available Borrowing Authority
Reserve Fund
Congress
Reinsurance
26% of $4b xs $4b
Summary
• Occurrence based coverage• $150M premium spend• 25 reinsurers on the panel• Very good response in
challenging circumstance
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Flooding is a significant challenge that requires more respect The risk goes well beyond the Special Flood Hazard Areas
# of Flood Event by County 1996-2015- Over past 2 decades,
- 80% of counties have seen ≥ 10 floods- 97% have seen at least 2
- >50% of US GDP originates in Gulf-East Coast
- > 50% of population in water-born counties
# of NFIP Policies / Housing Units- 92% of counties see take-up ≤ 5%- 62% of counties see take-up ≤ 1%- NFIP’s portfolio is large but marked by
peak concentrations
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NFIP Moonshots
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FEMA and the NFIP can not do it alone…all Stakeholders must step-up
Public Sector Distribution Risk
Transfer PPP Choice
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Sound Financial Framework
noun cus·tom·er ex·pe·ri·ence\ˈkəs-tə-mər\ \ik-ˈspir-ē-ən(t)s\
A customer’s perception of their interactions with an organization across multiple touchpoints and channels throughout the duration of that relationship.
Customer experience
NFIP Initiatives
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