Hurricane Matthew was the largest tropical storm to hit the Southeastern US in over a decade, causing billions of dollars in insured losses and threatening the National Flood Insurance Program, which recently announced it would acquire reinsurance.

CoreLogic estimates that Matthew will have caused an estimated $4 to 6 billion in insured property losses, 90 percent from wind, 10 percent from storm surge. That does not include losses from additional flooding, BI or contents.

RMS sees primary insurers facing the largest losses, while reinsurers that have taken bets in the Southeast could see meaningful losses as well. RMS expects commercial lines to drive insured flood losses, since a proportion of residential property losses will be covered by the National Flood Insurance Program (NFIP).

In September, the NFIP sited $23 billion in debt, prompting FEMA to secure reinsurance from the private reinsurance and capital markets for the first time.

Michael Quigley, Head of Property Underwriting at Munich Re America, says FEMA had been looking at acquiring reinsurance since Congress allowed it in the Biggert-Waters Flood Insurance Reform Act of 2012. He says reinsurance provides FEMA with another tool to protect the tail risk in the NFIP. He believes it will allow for more stable delivery of flood insurance so it is there when they need it. (See more of WRIN.tv’s discussion with Michael Quigley from the On Demand Library.)

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