The Federal Emergency Management Agency (FEMA) has estimated that Hurricane Helene could lead to National Flood Insurance Program (NFIP) losses ranging from $3.5 billion to $7 billion, including expenses related to loss adjustment.
This projection is based on initial flood insurance claims from six states, with the majority of claims filed in Florida, FEMA said in a statement.
As of November 7, over 55,000 flood-related claims have been reported to the NFIP, with the agency already paying about $830 million in claims to policyholders.
FEMA's estimate incorporates several data points, such as policy information, daily claims and payment reports, historical claim patterns, economic conditions, and observations from claims adjusters. While the hurricane is expected to be a significant event for flood insurance, it may take several months for FEMA to determine whether the NFIP can collect payments under its reinsurance agreements.
FEMA explained that as flood insurance claims are submitted, they are paid out from the National Flood Insurance Fund and Reserve Fund. The program is authorized to borrow up to an additional $9.9 billion to cover any shortfalls.
The agency holds $1.92 billion in reinsurance coverage for fiscal year 2024. If claims exceed an agreed threshold, reinsurers will pay a portion of the flood risk. The program includes an annual reinsurance scheme with a $7 billion or higher trigger and three capital market placements that begin coverage after $6.52 billion in claims payments.
To recover the full reinsurance coverage, the NFIP would need to incur at least $11.5 billion in flood claims from Hurricane Helene.
Industry estimates also reflect potential losses. Gallagher Re has set the high end of insured loss estimates for the hurricane at $10 billion, though this figure may change. Meanwhile, KCC has projected nearly $6.4 billion in onshore losses, and CoreLogic forecasts total insured losses could range from $10.5 billion to $17.5 billion, including NFIP claims.
How do you think the impact of Hurricane Helene will affect flood insurance in the coming months? Let us know your thoughts in the comments.
