KBRA releases research discussing the uncertainty surrounding the future of the Federal Emergency Management Agency's (FEMA) role in disaster recovery efforts, as well as the potential impacts to U.S. state and local governments and the insurance industry.

FEMA has been the subject of numerous reports citing shortcomings in response timeliness, staffing adequacy, and funding certainty. The U.S. Government Accountability Office (GAO) recently issued a report detailing FEMA’s limitations, and a January White House executive order intends to address the agency’s deficiencies. Persistent uncertainty surrounding the federal government’s role in disaster recovery will impose burdens on state and local issuers and have significant implications for the insurance industry.

Key Takeaways

• While examination of FEMA’s role and responsibilities remains under consideration by Congress and the Trump Administration, states and localities are likely to be expected to assume a greater share of disaster recovery costs, and there is no certainty that future funding would match current levels of federal support.
• Contemplated reforms suggest a shift in thinking about the federal government’s role as the ultimate backstop for the wide range of climate change-related risks.
• FEMA’s coordination with the insurance industry remains critical, particularly through its management of the National Flood Insurance Program (NFIP) and its support of resilience, modeling, and mitigation initiatives.
• Any material change in FEMA’s mandate or a reduction in its funding could have broad market repercussions, potentially affecting insurers, reinsurers, capital markets, and policyholders through increased financial exposure and risk volatility.

Click here to view the report.

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About KBRA

KBRA, one of the major credit rating agencies, is registered in the U.S., EU, and the UK. KBRA is recognized as a Qualified Rating Agency in Taiwan, and is also a Designated Rating Organization for structured finance ratings in Canada. As a full-service credit rating agency, investors can use KBRA ratings for regulatory capital purposes in multiple jurisdictions.

Doc ID: 1012202

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