Sources Sought Notice – REINSURANCE BROKERAGE SERVICES

Notice Type: Sources Sought Notice

Posted Date: 07-APR-16

Office Address: Department of Homeland Security; Federal Emergency Management Agency; Mitigation Branch; 500 C Street SWPatriots Plaza -- 5th Floor Washington DC 20472

Subject: REINSURANCE BROKERAGE SERVICES

Classification Code: R - Professional, administrative, and management support services

Solicitation Number: HSFE6016S0001

Contact: David R Orris, Contracting Officer, Phone 301 447 1830, Email [email protected] - Marianne McCallum, Contract Specialist, Phone 202 646 4623, Email [email protected]

Setaside: N/AN/A

Place of Performance (address): Anywhere - Contractor's office; Delivery to FEMAWashington, DC

Place of Performance (zipcode): 20472

Place of Performance Country: US

Description: Department of Homeland Security

Federal Emergency Management Agency

Mitigation Branch

Title: National Flood Insurance Program (NFIP) Reinsurance Program Sources Sought Notice. (See disclaimer below.) Purpose: The Federal Emergency Management Agency's (FEMA) Federal Insurance & Mitigation Administration (FIMA) is seeking parties with reinsurance capabilities to participate in market research about a National Flood Insurance Program (NFIP) Reinsurance Program.

Background: The NFIP was created in 1968 as a result of continuing periodic flood disasters experienced by communities throughout the US that damaged or destroyed infrastructure, buildings, and homes, making it difficult for the communities and their residents to recover. The mission of the NFIP is to (1) identify Special Flood Hazard Areas (SFHAs), (2) develop standards for effective floodplain management in those SFHAs and (3) provide flood insurance to building and home owners.

By law, flood insurance is required of borrowers as a condition of making, increasing, extending, or renewing loans from federally regulated or insured lending institutions for improved real property in identified Special Flood Hazard Areas. Flood insurance policies are sold through insurance agents with premium rates, coverage and terms determined by FEMA.

Project Scope: FIMA envisions obtaining support from a broker as it designs, tests, implements and launches the NRP. FEMA is considering a two phased reinsurance initiative as described below. Elements one and two are expected to occur simultaneously. Phase 1: Preparation

1. Element 1: Procedures and Protocols Validation and operational testing of procedures and protocols necessary for a long term reinsurance program. The operational test, including a live reinsurance contract, is to occur on a limited scale in 2016. 2. Element 2: Risk Modeling Understand and enhance data in preparation for development of risk modeling, decide which perils will be modeled or handled with alternative methods and perform comprehensive analyses of NFIP risk profile to support engaging the reinsurance markets in November and December 2016. In addition, several preliminary NFIP reinsurance program designs will be designed and analyzed.

Phase 2: Build Out

3. Element 3: Program Design Design the proposed NFIP reinsurance program, engage with the reinsurance markets, negotiate and finalize reinsurance contracts targeted for January 1, 2017. 4. Element 4: Full Program Design and Launch Launch finalized reinsurance program target for January 1, 2017.

This project scope, phasing and elements have not been finalized. The attached draft Statement of Objectives (SOO) provides additional information. FIMA is seeking industry feedback and ideas on project specifics.

Questions: Email questions to [email protected] no later than April 12th 2016, 16:00 EDT. Mark any question as proprietary to limit question answer to the requester.

Response: Interested parties with relevant experience and capabilities will be invited to participate in a direct market research phone call. To be considered for participation send a capability statement of no more than 2 pages to [email protected] no later than April 19th 2016, 16:00 EDT. Please indicate if your firm is considered a small business.

Disclaimer: THIS IS A SOURCES SOUGHT NOTICE ONLY. This notice is issued solely for information and planning purposes - it does not constitute a Request for Proposal (RFP) or a promise to issue an RFP in the future. This notice does not commit the Government to contract for any supply or service whatsoever. Further, FIMA is not at this time seeking proposals and will not accept unsolicited proposals. Respondents are advised that the U.S. Government will not pay for any information or administrative costs incurred in response to this notice; all costs associated with responding to this notice will be solely at the interested party's expense. Not responding to this notice or market research does not preclude participation in any future RFP, if any is issued. Proprietary or company-sensitive information shared or provided in response to this notice will not be further distributed outside of FEMA.

Draft Statement of Objectives is appended: Publication of the draft SOO does not bind the Government to issue a request for proposal.

DRAFT STATEMENT OF WORK

A. Background The National Flood Insurance Program (NFIP) was created in 1968 as a result of the continuing periodic flood disasters experienced by communities throughout the US that damaged or destroyed infrastructure, buildings, and homes, making it difficult for the communities and their residents to recover. The mission of the NFIP is to (1) identify the special flood hazard areas (SFHAs), (2) develop standards for effective floodplain management in those SFHAs and (3) provide flood insurance to building and home owners. The NFIP has experienced many large flood disasters over its history, particularly in the years 2005, 2008 and 2012, and has thereby incurred a significant debt to the US Treasury of $23 billion as a result of the flood disasters and the carrying charges on the debt. Historically, FIMA has utilized a limited set of tools in managing the volatility of the NFIP's risk exposure. Therefore FIMA is exploring reinsurance as an additional method of managing its financial risk. FEMA has determined reinsurance to be an important mechanism to transfer a portion of the NFIP's insurance risk to the private sector reinsurance and capital markets. The reinsurance model allows primary insurers to transfer some portion of the financial consequences of certain insurance loss exposures to the reinsurance markets. This risk transfer spreads the impact of the insured risks of disasters across the global financial system rather than falling on a single insurer or handful of institutions. The Federal Insurance and Mitigation Administration (FIMA) is pursuing a partnership with the reinsurance brokerage community to establish an NFIP Reinsurance Program (NRP) with target coverage in place effective no later than January 1, 2017. B. Scope The purpose of this acquisition is to obtain support from a broker for FEMA as it designs, tests, implements and launches the NRP. FEMA is considering a two phased reinsurance initiative as described below as well as in the attached "FEMA 2016 Reinsurance Initiative Approach and Timeline." Element one and two are expected to occur simultaneously. Phase 1: Preparation

Element 1: Procedures and Protocols

The first element includes the validation and operational testing of procedures and protocols necessary for a long term reinsurance program. The operational test is to occur on a limited scale in fiscal year 2016.

Element 2: Risk Modeling

The second element includes the development of data modeling and analysis to support engaging the reinsurance markets in 2017.

Phase 2: Build Out (optional)

Element 3: Program Design

If FIMA decides to go forward, the optional third element is to build out the resulting reinsurance program, which includes engaging with the reinsurance market as well as negotiating and finalizing reinsurance contracts by January 1, 2017.

Element 4: Full Program Design and Launch

If FIMA decides to go forward, FIMA would launch the NRP operations protocol and start a full scale reinsurance program.

This SOO and the objectives contained herein are intended to convey to industry the overall context and objectives of the NRP in order for offerors to propose an approach to meeting the objectives, together with performance metrics to demonstrate the desired outcomes are achieved.

C. Objectives The ultimate goal of the FEMA Reinsurance Initiative is to implement an NFIP Reinsurance Program by January 1, 2017. Phase 1 describes the necessary preparatory steps to be completed prior to implementing phase 2. While phase 2 is contingent on a variety of factors, including phase 1 results, appropriations, feasibility, timeline, etc., please note that phase 2 describes the critical elements needed to accomplish FEMA/FIMA's ultimate goal. Phase 1: Prepare 1. Validate and upgrade draft FEMA NRP operations protocol o FEMA will upgrade a draft operations protocol with expert input to inform how the NRP should operate. o Operations protocol includes processes and procedures (e.g. administrative, accounting, legal), governance (includes roles and responsibilities), reporting, and documentation. 2. Conduct reinsurance program operational test o FEMA will issue at least one contract to a reinsurer to enable an actual end to end test of the reinsurance program. The operational test includes a live contract, decision making, financial flows, and operations protocol implementation. 3. Perform data modeling and analysis to inform preliminary NRP design as well as enable successful delivery of NFIP risk profile to reinsurance markets o Using the latest NFIP exposure and claims data, refine and enhance that data so that it is suitable for financial risk modeling. Then, using the refined data, model the NFIP risk using various commercial flood risk models. Finally, analyze the results of the modeling to produce a detailed explanation of the NFIP risk profile in a way that can be presented to the reinsurance markets. o Using the distribution of losses derived from the prior step, and assumptions as to the projected the growth of NFIP policies, premiums and coverages, develop a probabilistic multi-year model (PMM) of projected cash flows. The purpose of the PMM is to test the financial performance of a number of alternative NFIP reinsurance programs in order to decide the parameters of the proposed NRP to present to the reinsurance markets.

Phase 2: Build Out 4. Build out NRP to be effective January 1, 2017 (Optional at FIMA's discretion) o The preliminary reinsurance program design will be refined and finalized in parallel with a market outreach effort to engage various reinsurance markets. o With the assistance of the broker FEMA will negotiate and award reinsurance contract(s) prior to launching the full scale reinsurance program. 5. Ensure operational execution of NRP (Optional at FIMA's discretion) o NRP execution support includes steady state operations as well as catastrophic event operational support. o A fully functioning NRP will also require monitoring of the NFIP's risk profile, portfolio modeling, data analysis, and rate evaluations.

D. Constraints

1. Aggressive timeline to have full reinsurance program in place to be effective January 1, 2017 2. NFIP risk profile may not be generally well understood by the reinsurance markets 3. Significant effort required to update NFIP modeling and analysis to reflect current exposure and model versions 4. Reinsurance industry decision making processes need to adapt to inherently governmental decision making restrictions 5. The concept of catastrophe property reinsurance and the intricacies of designing, negotiating, placing, and managing a major reinsurance program are unfamiliar to many individuals within the multi-tiered Federal decision making process. Therefore, FEMA, taken as a whole, faces a significant learning curve when initiating a reinsurance program. 6. The NFIP as a Federal program may be constrained from sharing data with persons and firms located outside the USA.

E. Deliverables

Deliverables from this effort shall include (but are not limited to): 1. Finalized operations protocol 2. Summarized reinsurance operational test results 3. Data analysis reports, models, etc. 4. NFIP risk profile report 5. Preliminary reinsurance program design 6. Finalized reinsurance program design (optional) 7. Annual updates to NFIP risk profile, various data models, NFIP portfolio elements, etc. (optional) 8. Weekly status meetings will be conducted during the project 9. Written status report every month 10. Kick off meeting

F. Acquisition Elements

1. Period of Performance (dates are targets) o Base: Includes Element 1 & 2; approximately June - October 2016 o Option 1: Element 3; approximately October - December 2016 o Option 2: Element 4; approximately January - December 2017, with continuing one year options 2. Place of Performance: Department of Homeland Security (DHS) FEMA facilities in the Washington Metropolitan area and offsite work environments 3. Contract Type: FEMA intends to award a contract on a firm fixed price basis

G. Applicable Documents

1. Approach and Timeline visualization 2. Flood Insurance Risk Studies (FIRS) 3. Dynamic Financial Analysis PowerPoint

Link/URL: https://www.fbo.gov/spg/DHS/FEMA/FFMD/HSFE6016S0001/listing.html