Sources Sought.pdf

Federal Emergency Management Agency (FEMA) FEMA/Federal Insurance Mitigation Administration (FIMA) Reinsurance Broker Services

Request for Information (RFI) March 30, 2021

NOTE: This notice is being issued for market research purposes only. The information obtained as a result of this notice may be used to assist the Government in its acquisition strategy.

THIS IS A REQUEST FOR INFORMATION (RFI) AND SOURCES SOUGHT (SS) to identify sources that can provide continued support of the FEMA/Federal Insurance Mitigation Administration (FIMA) Reinsurance Broker Services. The information provided in this RFI is subject to change and is not binding on the Government. Issuance of this notice does not constitute any obligation on the part of the Government to procure these services. No contract awards will be made from this notice and no solicitation is available at this time. No entitlement to payment of direct or indirect costs or charges by the Government will arise as a result of submission of responses to this announcement or the Government use of such information.

Proprietary, confidential, privileged commercial or financial information submitted in the RFI response should be marked accordingly to ensure appropriate handling and disposition by the Government. No classified information shall be submitted in the RFI response. Do not use Government security classification markings. Do not mark the entire response as proprietary. All submissions become Government property and will not be returned.

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 homeowners.

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 $24.6 billion as a result of the flood disasters and the carrying charges on the debt. Historically, the Federal Insurance and Mitigation Administration (FIMA) have 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 and sharing risk with the private sector.

The Federal Emergency Management Agency (FEMA) has evaluated the NFIP’s risk profile in order to quantify its financial risks and to explore ways to better manage the potentially large losses that the NFIP could incur. Previous analyses show the potential annual losses with a probable maximum loss (PML) estimated at over $20 billion at the 1% level and over $40 billion at the 0.1% level.

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.

Per congressional mandate, FIMA implemented the NFIP Reinsurance Program (NRP) on January 1, 2017. The primary objective of the NRP is to reduce the risk and volatility of the NFIP through implementation of a shared financial risk model. It is FIMA’s intention to institute a long term NRP, and

Request for Information (RFI) March 30, 2021 the program office is currently analyzing ways to continue the services initially implemented on January 1st and provide a service that is sustainable for the agency. FIMA’s primary condition of success for the NRP will be the extent to which the NRP reduces the risk and volatility of the NFIP at a financially rewarding and viable price to the Government. Additional success metrics are being defined as the NRP evolves. As a result, FIMA requires reinsurance broker support services to continue performance of the

NRP.

Objective Through this requirement, FEMA looks to achieve the following high-level objectives:

1. Determine if a vendor has the capability and capacity to provide single Broker Reinsurance

Services.

2. Determine if a vendor has or will have the capability and capacity to perform full Broker

Services on day one of contract award.

3. Help FEMA determine the most appropriate contract type and approach.

4. Determine if vendor can meet FEMA’s cyber security requirements, specifically pertaining to processing NFIP policy holder’s Personally Identifiable Information (PII).

With this RFI, FEMA seeks to understand what is available in industry to provide single broker reinsurance services.

Tasks Areas FEMA is looking for sources that can provide these services in the task areas listed below:

Task Area 0 – Financial Advisory Services

• The Broker will provide ongoing overall financial advisory services to FEMA-FIMA as needed, particularly through the development of annual and long-term goals, metrics, and strategy.

Task Area 1 – Explore Within this Work Area, the Broker is required to provide reinsurance strategy development and financial advisory services. The Work Area 1 objectives are:

• The Broker will develop comprehensive strategies for the following reinsurance structures that could be implemented by FEMA-FIMA:

o Work area 1.1: Expansion on existing reinsurance structure o Work area 1.2: Alternative or new traditional reinsurance structures o Work area 1.3: Capital markets structures

• FEMA-FIMA may also choose to market a single strategy to both traditional and capital markets.

• The strategies should consider the NFIP’s current financial status, political realities, federal regulations, FEMA leadership priorities, and work within existing and future capital market and traditional placements

• The Broker will review modeling results to inform reinsurance strategies

• Assist FEMA-FIMA in identifying legal and administrative hurdles to overcome in order to place any given structure

• Provide administrative support for leadership and staff meetings To support development of these strategies, the Broker will have access to NFIP data, modeling results, and FEMA-FIMA staff to learn more about NFIP financial framework and leadership priorities. The

Request for Information (RFI) March 30, 2021

Broker will be given the opportunity to ask questions and give feedback on the data modeling process and results.

For each work area, FEMA will select the most effective strategy. The Broker who developed the selected strategies will implement the “Build” and/or “Finish” for those strategies (see below for description of “Build” and “Finish”).

Task Area 2 – Build This Work Area is only applicable when a new reinsurance structure is selected. Strategies that are expansions of existing reinsurance structures will not require a Build phase (Work Area 2) and will immediately move into the Finish phase (Work Area 3).

The Work Area 2 objectives are:

• Unless otherwise specified, for brokers whose strategies are selected, Work Area 2 requires the

Broker to create new reinsurance structures for the NRP for the following:

o Work area 2.1: Alternative or new traditional reinsurance structures o Work area 2.2: Capital market structures

Work Area 2.1 is expected to be a significantly smaller level of effort than Work Area 2.2.

• The Broker will align FEMA-FIMA leadership and staff to purpose and outcomes of the new structure, including holding educational sessions

• The Broker will design the infrastructure for the new structure to include the development of programmatic and contractual materials and assist in updating any standard operating procedures.

• The Broker will provide ongoing legal and administrative support to the FEMA-FIMA legal and program teams

Task Area 3 – Finish This Work Area encompasses the market outreach and placement of the FEMA-FIMA approved structure. Compensation for work performed under this Work Area is contingent on the placement being successful.

The Work Area 3 objectives are:

• For brokers whose strategies are selected, Work Area 3 requires the Broker to market and place the following structures:

o Work area 3.1: Expansion on existing reinsurance structure o Work area 3.2: Alternative or new traditional reinsurance structures o Work area 3.3: Capital markets structures

• The Broker will support FEMA-FIMA in the market outreach effort as described in the Explore and Build phases and should include a detailed analysis of the reinsurance markets

• The Broker will support FEMA-FIMA in preparation, solicitation, negotiation and award of reinsurance agreement(s) prior to launching the full scale reinsurance program o Furthermore, the Broker will assist FEMA-FIMA in the preparation of legal documentation associated with reinsurance agreements. The Broker will serve as an advisor during the quote evaluation and award process. FEMA-FIMA will make the final decision about reinsurers’ price/Final Order Terms (FOT).

• The Brokers will assist FEMA in presenting a single NFIP risk profile to the market and ensure placements are well coordinated amongst brokers. This will be achieved through collaborative management of the market outreach and placement processes amongst all selected brokers

• The Broker will provide operational support of the NRP after the reinsurance agreement(s) are awarded, including, but not limited to:

Request for Information (RFI) March 30, 2021 o Assistance in premium payments and claim recoveries o Continuous monitoring of the NFIP’s risk profile, portfolio modeling, and data analysis o Continuous monitoring and analysis of individual reinsurers and the reinsurance market as a whole o Cooperation with any additional reinsurance brokers that are under contract with FIMA to assist in their understanding of the objectives and progress of the NRP

Task Area 4 – Data Modeling This Work Area requires the Broker to perform data modeling and analysis to inform yearly NRP design as well as enable successful delivery of the NFIP’s risk profile to reinsurance markets. A single Broker will provide the data modeling services each year. However, the other participating brokers will be able to provide input and feedback on the modeling results.

Beginning in 2022, all modeling services will be completed within the FEMA IT systems environment.

The Work Area 4 objectives are:

• The Broker will review and understand the NFIP data provided by FEMA-FIMA, and enhance and augment as necessary. The NFIP has approximately four million contracts in the U.S. The NFIP premiums are based on a number of factors including number of floors, occupancy, elevation, location and differentiation based on basement/crawl-space.

o FEMA-FIMA will provide the following data:

Limited structure value data Limited data on foundation or crawl space Elevation for some, but not all, policies Specific Address data and Lat/Longs of insured buildings Number of floors Basement/crawl space description Coverage and deductible amounts Loss data and historical exposure data Exposure validation reports Year of construction Sample contract explaining exclusions on any type of loss Premium information Other pricing and insurance policy data o FEMA-FIMA is not able to provide the following data:

Foundation and construction type Construction materials Complete demarcations of subsidized and grandfathered policies Complete current replacement value data Complete FIRM (Flood Insurance Rate Map) zone information on insured buildings.

(Zone data is based on the FIRM zone used for insurance ratings. I.e., grandfathered buildings may have a different actual zone than that used for rating purposes.)

• Using the latest NFIP exposure and claims data provided by FEMA-FIMA, the Broker will refine and enhance that data so that it is suitable for catastrophic risk modeling. Then, using the refined data, model the NFIP risk profile using at least three flood risk models, commercial or proprietary, to account for inland flood and coastal storm surge. Flood related perils that cannot be modeled with the use of available models shall be incorporated using additional approaches.

Request for Information (RFI) March 30, 2021

• The Broker will analyze the modeling results to produce a detailed explanation of the NFIP risk profile in a manner that will build reinsurance markets’ confidence in the data and models.

• Using the distribution of losses derived from the prior step, and assumptions as to the projected growth of NFIP policies, premiums and coverages, the Broker will 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 over a period of years in order to decide the parameters of the proposed NRP to present to the reinsurance markets. The PMM may also be used by FIMA with the support of the Broker to assist in other important financial analyses.

As model results are being developed, the Broker will update and adjust the model as necessary

Request for Information (RFI) Questions

1. Please provide a capability statement that would support providing Reinsurance Broker Services.

2. What services does your company offer to meet the needs of the government? (Reinsurance Broker Services)

3. What would be an appropriate scope or level of effort for a project like this? What would be the biggest cost drivers?

4. Please describe any previous experience helping clients of a similar size with reinsurance services, to include the standard/industry pricing approach for these services.

5. What type of timeframe and ramp up would your company require to be fully functional to support the Reinsurance Broker Services on day one of the contract award?

6. Describe your ability to provide modeling software that FEMA does not currently own. For example, FEMA currently has licensing for the following: (AIR, Katrisk, and Corelogic).

7. Describe your ability to accomplish applying available commercial modeling license(s) within FEMA’s modeling system. (FEMA is not able to have its policy data analyzed outside of FEMA data systems due to PII. FEMA has a cloud data system, that a vendor would be able to apply model licenses to FEMA’s data system)

8. What tools do you have available for post processing of cat models?

General /Administrative

1. Company Information (e.g. name, business address, point of contact, telephone number, e-mail address). Also include DUNS Number or CAGE Code;

2. Summarization of projects showing capabilities and past performance in the applicable areas and list relevant projects.

Request for Information (RFI) March 30, 2021

3. Statement of current business size and socioeconomic status (i.e., HUBZone small business concern, service-disabled veteran-owned small business firm, 8(a) contractor, woman-owned small business, small business, et cet., or large business concern). Also business size in relation to the NAICS code size standards assigned to this acquisition.

4. Please disclose any Organizational Conflict of Interest (OCI) concerns that you foresee at this time. At this time, an interested party should very carefully determine whether or not it has an actual or perceived OCI because the US Government shall thoroughly investigate and take appropriate action relative to this issue during the entire procurement process. Please review FAR subpart 9.5.

5. Do you currently have a DHS Strategic Sourcing Vehicle or a GSA schedule that would be able to provide the required services? If yes, please provide your Strategic Source Contract Vehicle or GSA schedule.

This Request for Information is an advance notice for informational and acquisition strategy planning purposes only and is not a solicitation. In order to receive an award for any resultant solicitation, should be one issued, the successful offer must be registered in the System for Award Management (SAM). The SAM website is https://www.sam.gov. Failure to be registered in SAM shall preclude a vendor from participation in any future, subject buy. Therefore, vendors are invited to review their SAM registration, any expiration date(s), et cet.

RFI Response Format In order to better assist in the review of submittals to this RFI, respondents are encouraged to prepare a capabilities statement that closely adheres to the following format:

RFI Response for Reinsurance Broker Services shall be in the subject line of your e-mail. All responses shall be unclassified. The document format shall be either Microsoft Word (.doc or .docx), or Adobe Acrobat (.pdf) formats. Responses shall be prepared using Times New Roman 12 pt. font, 1-inch margins, and 8.5” by 11” paper and shall not exceed ten (10) pages in length (20 pages front and back), including images, data displays, charts, graphs, and tables. Page limitation does not include: 1 cover page or 1 letter of introduction. Do not include promotional materials.

Any proprietary information should be clearly marked.

Respondents are encouraged to ensure that their submittals are complete and address all RFI Questions, formatted by each question, as outlined above. Respondents may provide additional promotional literature in addition to their response as long as the literature conforms to the response format.

Submissions in response to this RFI shall not exceed ten (10) pages.

Response Due Date and Point of Contact Information Submissions in response to this notice shall be in the form of Microsoft Word and/or PDF documents attached to emails received no later than 2:00 PM Eastern Standard Time on 04/16/2021, addressed to Jimmy Nguyen, Contracts Specialist, at jimmy.nguyen@associates.fema.dhs.gov.

The responses received will assist FEMA with identifying the number and nature of the entities that consider themselves potential technical solution providers. Each respondent, by submitting a response, https://www.sam.gov/ mailto:jimmy.nguyen@associates.fema.dhs.gov

Request for Information (RFI) March 30, 2021 agrees that any cost incurred in response to this RFI, or in support of activities associated with this RFI, shall be the sole responsibility of the respondent. FEMA shall incur no obligations or liabilities whatsoever, to anyone, for any costs or expenses incurred by the respondent in responding to this RFI.