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Reinsurers Expected to Sign on to NFIP Pact despite 2017 Claim

Business Insurance

The Federal Emergency Management Agency’s tapping of a $1 billion reinsurance agreement to pay Hurricane Harvey claims is unlikely to discourage most reinsurers from participating in the next reinsurance arrangement, although some may decide the risk is greater than the reward, experts say.


“Reinsurers look at data and they look at risk management, and it was an anomaly this year because they had these three storms that happened within eight weeks,” said Alan Rubin, a principal with law firm Blank Rome L.L.P. in New York. “A number of reinsurers will step away. Some will be willing to take the risk, but I think they will shorten the term … so they can make an analysis every year, so they can determine whether the risk is worth the reward.”

The NFIP is in debt to the tune of about $25 billion, even with Congress forgiving $16 billion, due to the impact of the storms of 2017.

“Now you have a whole host of new claims from Irma, Harvey and Maria,” Mr. Rubin said. “If they don’t do something on a more permanent basis, they’re just going to continue to happen. Unfortunately … people just forget what the situation was. But you can’t simply do that any longer if you’re going to address storm surge and flood.”

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"Reinsurers Expected to Sign on to NFIP Pact despite 2017 Claim," by Gloria Gonzalez was published in Business Insurance on December 12, 2017.