via FEMA

USA - FEMA's New FloodSmart Re Cat Bond Could Be Its Largest, at up to $575M

The U.S. Federal Emergency Management Agency (FEMA) looks set to secure its largest FloodSmart Re catastrophe bond yet, as the target size for the FloodSmart Re Ltd. (Series 2021-1) transaction has been lifted to between $500 million and $575 million, we’re told.

FEMA returned to the catastrophe bond market in late January seeking at least a $350 million source of additional flood reinsurance coverage from the capital market for its National Flood Insurance Program (NFIP).

But with a $500 million FloodSmart Re Ltd. (Series 2018-1) cat bond due to mature before the start of this year’s U.S. named storm season, as we said at the time it always seemed likely FEMA would look to upsize on the initial $350 million target of the 2021 deal, if market conditions and investor appetite allowed.

Now, we understand from our market sources that the targeted size for FEMA’s fourth flood catastrophe bond has been lifted significantly higher, with the deal likely to complete offering somewhere between $500 million and $575 million of collateralized flood reinsurance protection.

At the same time, we’re told that investor demand has been high for the transaction and that FEMA will benefit by both tranches of notes pricing their coupons at or below the bottom-ends of their initial price guidance.

The reinsurance protection from the fourth FloodSmart Re cat bond will be used to cover some of the NFIP’s losses from major flood events specifically caused by named storms, so tropical depressions, storms and hurricanes, as in the other FloodSmart cat bonds, with the protection extending across the United States, Puerto Rico, U.S. Virgin Islands and D.C.

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