Emily Grover-Kopec is Vice President and Head of Modeling Solutions at RMS where she is responsible for the solutions and services that drive adoption and additional value around RMS’ data and catastrophe model product suite. She is currently focused on the release of RMS’ U.S. Inland Flood Model solution.
Previously, she has overseen RMS’ business strategy and relationships with reinsurance intermediaries, and focused on the development of strategic relationships and collaborative programs of research with global reinsurers.
Prior to joining RMS in 2006 from Columbia University’s International Research Institute for Climate and Society, her work concentrated on mitigating climate risk in developing countries.
Emily holds B.S. and M.S. degrees in meteorology from the University of Michigan and Penn State University.
In my recent article in Reactions entitled Why Long-term NFIP Reform is a Must, I looked back at the flood events of 2018 through the lens of the need to reform the National Flood Insurance Program (NFIP). I made the argument that the NFIP is not effectively covering communities at risk or supporting the development of a private market that support that same goal.
Looking at Hurricane Florence, its impacts exemplify the type of event from which our communities need to recover from by leveraging the NFIP and a more robust private market. Both North Carolina and South Carolina each broke records for the amount of rainfall caused by a tropical cyclone. While the flooding due to storm surge was significant in areas such as New Bern, the majority of the flood damage was driven by that record rainfall in the inland areas.
The areas most impacted had the lowest take-up rates for flood insurance – the take-up rate for NFIP policies is less than two percent in the inland counties of North Carolina and South Carolina, while take-up rates in most coastal counties generally range from 10 to 25 percent. As a result, RMS analysis found that Florence caused US$3 billion to US$6 billion in uninsured losses, or about 4-5 times the losses expected to be incurred by the NFIP.
As we move full steam in to 2019, it is worth remembering that some good progress was made during 2018 with regards to advancing the private flood insurance market in the U.S. – even though Congress struggled with reform of the National Flood Insurance Program (NFIP).
Here’s five takeaway points from the past year:
1. Extending the Extension: The NFIP saw numerous extensions and a few short lapses. Just before the end of the year, Congress reauthorized the NFIP until May 31, 2019 right before the government shutdown commenced on December 22, 2018. But decisions by FEMA during the last week of the year brought uncertainty to the housing and insurance industry as it dealt with changing guidelines on whether policies could be sold or renewed during the shutdown. Ultimately, the NFIP is still operating, but the back and forth of 2018 did not bolster confidence in the stability of the program and left many asking … will 2019 be the breakthrough year?
2. FEMA Boosts the Private Flood Market: Although Congress struggled to act on the NFIP, FEMA did, with technical changes that came into force on October 1, 2018, to attract new private carriers and help existing carriers who participate in the NFIP “Write Your Own” (WYO) program.
First – removing a “non-compete” clause for carriers operating within WYO, now allows WYO carriers to offer their own private flood coverage as well as NFIP policies, with the condition that these businesses are kept separate. Second – policyholders can now cancel their NFIP policy mid-term, before its expiration date when a policyholder has obtained a duplicate policy. In combination, these steps removed hurdles that were hindering carriers from offering new flood products and making it difficult for consumers to purchase those products from the private market.
With positive changes under way to improve both public and private carrier participation across the U.S. flood market, many are looking to seize the opportunity that the U.S. flood market presents. Insurers, reinsurers, and the capital markets are exploring this opportunity which, in turn, has created a thirst for knowledge. I had the opportunity to see this first-hand when I was invited by Trading Risk magazine to take part in a panel discussion at the Trading Risk ILS: Reloaded and Resurgent event in New York last month. Sofia Geraghty from Trading Risk served as our moderator, and Joanna Syroka, Director of New Markets at Fermat Capital Management, and Ian Hanson, Vice President of Willis Re, were also on the panel.
One point that the audience wanted to understand was the level of demand to take on flood risk from an investor’s viewpoint, and also whether U.S. flood risk can be a portfolio diversifier. From the insurance-linked securities (ILS) side, Joanna confirmed the demand is there, but as with any peril, the ILS market needs to be able to clearly understand and define the risk to get comfortable enough to invest.