The estimated NFIP losses from Hurricane Helene have increased, reaching the upper limit of $7.4 billion.

FEMA Updates NFIP Loss Estimates for Hurricane Helene, Raising the Upper Limit to $7.4 Billion

The U.S. Federal Emergency Management Agency (FEMA) has revised its estimated losses for the National Flood Insurance Program (NFIP) from Hurricane Helene, increasing the upper limit to $7.4 billion.

Initially, FEMA projected NFIP claims related to Hurricane Helene’s flooding to range between $3.5 billion and $7 billion as of November 2024. By January, sources indicated that NFIP losses were estimated at approximately $6.75 billion, leading to the extension of maturity dates for two FloodSmart Re catastrophe bond tranches, with partial principal repayments planned.

In an update on February 6, 2025, FEMA reported receiving 57,400 flood insurance claims from Hurricane Helene, amounting to more than $4.5 billion in payouts. Based on data as of January 31, the total projected losses for NFIP now range from $6.4 billion to a maximum of $7.4 billion.

With existing maturity extensions tied to the FloodSmart Re Ltd. (Series 2022-1) catastrophe bond issuance from February 2022, and the $6.75 billion estimate already suggesting potential losses for a FloodSmart Re bond tranche, the newly extended upper limit heightens the likelihood of further principal erosion.

The most vulnerable layer of the FloodSmart Re 2022-1 cat bond is the $25 million Class C tranche, which has an attachment point of around $6.52 billion. Meanwhile, the $100 million Class B tranche has an attachment point of approximately $7.4 billion. Depending on how high final NFIP losses fall within the revised range, the Class C notes could experience increased losses, while the Class B notes now face greater risk if losses exceed the top estimate.

Additionally, the FloodSmart Re Ltd. (Series 2023-1) catastrophe bond includes a $50 million Class B tranche with an initial attachment at $7 billion in NFIP losses from a named storm flood event. While its current attachment point post-reset is unknown, if it remains close to the original level, it may also be impacted by any further loss creep from Helene.

With the expanded upper limit of estimated NFIP losses, FloodSmart Re catastrophe bonds exposed to this event now have an increased probability of experiencing principal losses.

Moreover, FEMA’s traditional reinsurance tower for the 2024 calendar year provides $619.5 million in coverage starting at a $7 billion attachment point, making it another layer potentially at risk.

Hurricane Milton’s Impact on the NFIP

As of February 6, 2025, FEMA has received over 21,100 flood insurance claims from Hurricane Milton, totaling more than $740 million. Based on data from January 31, total NFIP losses for Milton are estimated to fall between $1.2 billion and $2.9 billion.

Due to significant flood insurance claims from the 2024 hurricane season, FEMA has exercised its borrowing authority under the National Flood Insurance Act of 1968, securing $2 billion from the U.S. Treasury to pay eligible NFIP claims.

"The NFIP is not designed to cover multiple catastrophic events in a single year without additional financial assistance," FEMA stated, noting that cumulative losses from 2024 have exhausted NFIP’s premium-generated funds.

FEMA’s total borrowing authority stands at $30.425 billion, with $20.525 billion already borrowed in response to hurricanes Katrina, Sandy, and Harvey between 2005 and 2017. This has now increased NFIP’s debt to $22.525 billion.

Dr. Elizabeth Asche, Senior Executive of the NFIP, emphasized the severe financial strain caused by Hurricanes Helene and Milton, stating:

“The widespread, devastating flooding highlights the financial impact on both survivors and the NFIP. We are strategically utilizing short-term borrowings in 60-day increments, demonstrating careful and responsible management of our borrowing authority. Despite these challenges, the NFIP remains committed to fully paying all valid claims, ensuring policyholders receive the compensation they are entitled to.”

Notably, FEMA renewed the NFIP’s traditional reinsurance program for 2025, increasing coverage by 22% to over $757.8 million.

For more details on FEMA’s NFIP catastrophe bonds under the FloodSmart Re program, refer to our directory of catastrophe bonds facing losses, deemed at risk, or already paid out.