RAA welcomes reported creation of FEMA cat bond

18-07-2018

The Reinsurance Association of America (RAA) has welcomed the reported creation of a Bermuda-domiciled cat bond created by the Federal Emergency Management Administration (FEMA).

According to Artemis FEMA is launching the cat bond to transfer risk from the National Flood Insurance Program (NFIP) to the capital markets through Flood Smart Re, an insurance vehicle that is domiciled on Bermuda.

The RAA said that this was significant step to utilise the private market to manage the financial burden of the NFIP’s catastrophic flood risk.

“The RAA has long advocated for the NFIP to utilise the private market to provide financial backing for the government’s flood risk,” said Frank Nutter, president of the RAA. “Along with its second successful placement of reinsurance coverage earlier this year, the cat bond issuance confirms FEMA’s continued commitment to expanding private sector backing and the financial protections it will afford the NFIP and American taxpayers.”

Commenting further on the upside of FEMA’s utilisation of the private market, Nutter noted that FEMA recovered the full $1.04 billion of reinsurance coverage it placed with the private reinsurance sector in January 2017.

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