(Reuters) - The Federal Emergency Management Agency (FEMA) has transferred $1.46 billion of risk from its flood insurance program to 28 private reinsurers for 2018, the agency said on Friday.
FEMA, which paid $235 million for the coverage, said the reinsurance agreement covers portions of its National Flood Insurance Program (NFIP) losses above $4 billion stemming from a single flooding event.
NFIP, a federal program that is the only source of flood insurance for most Americans, has been saddled with tens of billions of dollars in debt to the U.S. Treasury. Hurricanes Harvey, Irma and Maria added to the program’s woes in 2017.
Buying reinsurance helps NFIP offset some of its financial risks. It is a fairly new practice for NFIP, which Congress empowered to undertake through laws in 2012 and 2014.
Previously, NFIP had to pay claims by using only flood insurance premiums, surplus, borrowing capacity from the U.S. Treasury and appropriations from Congress.
The 2018 reinsurance program covers 18.6 percent of NFIP losses of between $4 billion and $6 billion and 54.3 percent of losses between $6 billion and $8 billion, FEMA said.
More than 91,000 Hurricane Harvey survivors filed NFIP claims as of Jan. 1, with FEMA paying over $7.6 billion to those policyholders, the agency said. FEMA recovered $1.04 billion of those losses through reinsurance it bought in 2017, the agency said.
Reporting by Suzanne Barlyn; Editing by Jonathan Oatis and Leslie Adler