FEMA TRANSFERS FLOOD RISK TO CAPITAL MARKETS FOR FIRST TIME..

The Federal Emergency Management Agency (FEMA) has for the first time secured reinsurance directly backed by capital markets investors. With Hannover Re acting as transformer, the agency transferred $500m of National Flood Insurance Program (NFIP) risk to investors through a catastrophe bond. The agreement is structured to cover, for a given flood event, 3.5% of losses between $5bn and $10bn, and 13% of losses between $7.5bn and $10bn. FEMA will pay $62m in premium for the first year of coverage. Guy Carpenter and GC Securities acted as structuring agent and GC Securities was one of two book runners on the placement. GC Securities and Aon Benfield acted as book runners. KatRisk LLC, a catastrophe modeler, analysed NFIP risk for investors.