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.
As an organization, it is always great to get recognition from the industry for the work that you are doing; and industry recognition does make a real difference to the teams that work so hard to produce robust, quality solutions that are solving the problems that the market faces. And so, on September 27, off we went to Cipriani 25 on Broadway in New York, for the Eleventh Reactions Annual North America Awards, with RMS receiving the “2018 North America Risk Modeler of the Year” award.
This award is decided by votes from the industry and it recognizes our reputation for providing best-in-class support and leadership to our North America clients, and especially at times when insight is so critical to a business — such as during the significant cat events that ran through 2017. It also provides an endorsement for the approach that RMS is taking more generally to anticipate and deliver on the needs of the North America market, to keep pushing the boundaries and break new ground, to help a growing client base across the industry ranging from reinsurers and carriers through to capital markets.