Flood insurance plays a crucial role in helping our citizens return to school, work and home after any disaster. In Louisiana, around 29,000 survivors filed claims for the flood and FEMA paid out more than $400 million to their policyholders.
FEMA has a priority to mitigate the effect of natural disasters through creating resilient communities and helping people recover whenever a damage occurs. The National Flood Insurance Program is a great resource that saves the country $1.7 billion by avoiding flood losses yearly.
Nowadays, Americans in all of the 50 states hold around 5.1 million flood insurance policies that the U.S. government guaranteed through the NFIP. They challenged the program, but the frequency and power of waves increased since the destruction of Sandy in 2012 in the East Coast, Hurricane Katrina in the Southern coast in 2005 and the devastation of the Midwest and Gulf Coast in 2008.
Claims in flood insurance paid more than the amount that the policyholders put into the program which left the NFIP in $23 billion debt to the U.S. Treasury. However, even if the National Flood Insurance Program is in debt, FEMA can still pay out flood claims to policyholders fast and in full. The flood insurance program should be on a firm and long-term financial footing by using tools that the Congress provided to lessen the need to borrow from the Treasury and diversify our risk. One of these tools is the establishment of a reserve fund to create a reinsurance program so that additional funding is available whenever significant flood events happen.
The form of insurance for insurance providers is called reinsurance. It allows the NFIP to share flood risks with private reinsurance companies to defray the cost of claims of unexpected and significant insured events such as massive and devastating hurricane-driven flood.
They launched the reinsurance initiative previously. FEMA bought reinsurance from three reinsurers Munich Reinsurance America, Inc., Transatlantic Reinsurance Company, and Swiss Re America Corporation. They received brokerage support from a subsidiary of Marsh & McLennanan Companies called Guy Carpenter and Company. They expanded the program last January 2017.
By sharing the risks with the private market the flood insurance program’s ability to cover claims may grow. Even if reinsurance will not eliminate the current debt in NFIP, the long-term protection strategy reduces the need to borrow from the Treasury hereafter.
The NFIP reinsurance program will strengthen the flood insurance program when they fully implement this.
The tested and commonly used tool in private and public sectors all over the world is reinsurance. Some states now have reinsurance programs that will defray the cost of losses from natural disasters. These programs are the Texas Windstorm Insurance Association, Citizens Property Insurance Corporation of Florida, and the California Earthquake Authority.
The most common and expensive disaster that we see here in the U.S. is flooding. FEMA is doing everything it can to ensure that flood insurance is available when the Americans need it.
At NoBSFloodInsurance we take pride in making sure our clients are protected from losses caused by floods at prices they can afford. To learn more about how we can help you, please contact our agency at 1-800-747- 5311 or Click Here to request a free quote.