Re-Insurance Dynamic Financial Analyses

Added: Jul 28, 2015 11:30 am

Capabilities Required:
The ability to perform dynamic financial analyses runs using the Flood Insurancee Risk Study data input files, and conduct in depth discussions with financial institutions capable of accepting reinsurance risks and/or taking a privatization interest in National Flood Insurance program. The contractor would need to have in house modeling capability and have active licenses from three premier flood risk modeling firms.

A Statement of Objectives is imbedded in this notice so a responding vendor understands what would be required if a contract is awarded. No proposals are required at this time.

BACKGROUND AND PURPOSE
The Federal Insurance and Mitigation Administration (FIMA) is a component of the Department of Homeland Security (DHS), Federal Emergency Management Agency (FEMA), which operates the National Flood Insurance Program (NFIP). The purpose of this Statement of Objectives (SOO) is to obtain meaningful reinsurance quotes and a robust set of NFIP financial model results to assist in the discussions with Congress and Congressional staff regarding the "Report to Congress on Reinsuring NFIP Insurance Risk and on Options for Privatizing the NFIP," required by Section 100232(a)(2) and (c)(1) of the Biggert-Waters Insurance Reform Act of 2012.

For over 40 years, FEMA's National Flood Insurance Program has been offering flood insurance coverage to homeowners, renters and businesses as protection against flood losses. In return, local governments provide commitments to sound floodplain management and related flood disaster mitigation efforts. In addition to offering flood insurance, the duties of the NFIP include identifying communities' flood risks, mapping and publishing Flood Insurance Rate Maps of those risks, helping communities meet floodplain management requirements, and communicating the benefits of flood insurance protection so that more Americans are reimbursed for flood damage through the insurance mechanism, rather than through Federal disaster assistance funds. Flood insurance policies are sold through insurance agents and the premium rates, coverage and terms are determined by FEMA. 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.

In the Biggert-Waters Insurance Reform Act of 2012 (BW-12), Congress directed FEMA to assess the capacity of the private sector reinsurance and capital markets to assume a portion of the insurance risk of the NFIP. Further, FEMA is to report the results of that assessment to Congress.

Contract HSFE60-14-C-0057 produced a Flood Insurance Risk Study (FIRS), a flood insurance risk model, and the data needed for to make that assessment. Multiple scenario assessments were generated using a Dynamic Financial Assessment (DFA). FIMA now finds that some additional work is needed provide additional data to support FEMA's leadership when they discuss the report with Congress, Congressional staff, and other NFIP stakeholders.

PLACE AND PERIOD OF PERFORMANCE

The expected period of performance is three months. The National Flood Insurance Program is headquartered in Washington, DC and the Contractor will be expected to meet with NFIP representatives via conference calls.

STATEMENT OF OBJECTIVES

Current Market Pricing of an NFIP Reinsurance Program - Non-binding Quotes

FEMA finds that it would be helpful to determine real market price points for reinsuring the NFIP insurance risk. On a "non-binding" basis, a vendor is needed to utilize the analytics and financial model methodology developed as part of the FIRS Project and the assessment portfolio to explore quotations with a handful of reinsurers (e.g., 4 to 6 influential markets that would be involved in either the traditional / capital market spheres of the reinsurance market in the event FIMA were to seek reinsurance).

What is required is for the contractor to contact potential reinsures, and, on a "non-binding" basis, negotiate or develop reinsurance quotes under various scenarios.

The benefits anticipated are:

1. Such "non-binding" quotes would supplement FIRS.
2. These quotes would buttress FIMA's deliberations with Congress as to the merits and approaches required to pursue reinsurance.
3. More realistic and firmer price indicators for FIMA's consideration would result.
4. Insights as to benefits of reinsurance and privatization options would be enhanced.
5. It would enable FIMA to begin to engage with and start building its own relationships with the reinsurance markets and capital providers.

Additional DFA Runs and Model Descriptions Requested:

1. Up to 15 additional runs would be specified during the follow on contract with the following assumptions:
a. Increase the aggregate NFIP premium by the amount of (1) the net and
(2) the gross reinsurance premiums.
b. Assume the ultimate Reinsurance program (Aggregate XOL $16.9B excess of $7.9B) is purchased in all years.
c. Scale back the loss distribution so that the AAL is assumed to be $3.5B.
2. Several conference calls would be needed to discuss the assumption sets and the results of the runs.
3. Further detailed descriptions and documentation of the inner workings of the model would be required, such as the distributions used for nor'easter and tropical storm surge and precipitation events and attritional losses, and how market cycles and economic scenarios interacted with the loss model.
4. Detailed output of DFA runs, including detailed loss information, the exceedance probability distributions, and the specific underlying assumptions such as the interest rate scenarios.
5. Financial modelling licenses from three sources would be required to perform the DFAs.

 

Documentation of the Quoting Process, NFIP Financial Model and the Additional DFA Runs:

1. Detailed listing of and explanations of all the assumptions used in modeling the NFIP's financial results.
2. All data files used in producing the modeled financial projections useful to FIMA in understanding the results as well as for future development efforts.
3. Complete documentation of the sources used to provide non-binding quotes from the various reinsurance markets and a detailed description of the process followed in obtaining those quotes.

Capabilities Required

The ability to perform the DFA runs using the FIRS data input files, and conduct in depth discussions with financial institutions capable of accepting reinsurance risks and/or taking a privatization interest in National Flood Insurance program. The contractor would need to have in house modeling capability and have active licenses from three premier flood risk modeling firms.

DELIVERABLES AND MILESTONE SCHEDULE
Project Management Plan - A work plan for each task that identifies the work elements of each task, the resources assigned to the task, the time allotted to each element, and the items to be delivered. The plan will also identify the staffing, travel and cost requirements for this Task Order.

Final Report - The Final Report should present the results of the quoting process and the DFA results. It will also describe the methods, data-related needs and issues and the potential gaps and limitations of the methods used.

DESCRIPTION FREQUENCY DUE DATES
Initial Project Meeting Once Within 7 days of award
Project Management Plan Once Within 7 days of award

Final Report Once Within 90 days of award
Project Status Reporting Monthly and Weekly when required Within 30 days of award, monthly and/ or weekly thereafter

Note: Deliverables will be delivered to the COR by the due date listed. Some of these deliverables could be shared with other FEMA stakeholders.

GOVERNMENT FURNISHED RESOURCES
The Government will provide data input files for running flood risk models as well as any NFIP data that the contractor would find useful. FEMA will also provide guidance for the contractor in interpreting the data.

PROPOSAL REQUIREMENTS
The Government requires the following:

The contractor's proposal meets the objectives.

PROPOSED SOLUTION
Proposed solution meets the objectives.

STAFFING
The proposed staffing plan including number, skills mix, qualifications and experience of the proposed staff including key personnel, core staff and other staff is sufficient and reasonable to achieve the proposed solutions.

COST/PRICE
The proposed fixed price and the estimated cost for travel and other direct cost shall be reasonable and realistic.
TRAVEL REQUIREMENTS
Travel shall not be required to support this requirement.

SECURITY
Contractor access to unclassified, but Security Sensitive Information will be required under this SOO. Contractor employees will need to sign non-disclosure aggrements (NDAs) and would be required to safeguard the information against unauthorized disclosure or dissemination.

QUALITY ASSURANCE SURVEILLANCE PLAN

Organization, the QASP is organized in accordance with the five bullets below.

• Column 1 - Performance Objective. Lists the performance objective that the Government will survey. The absence of any contract requirement from the QASP shall not detract from its enforceability to limit the rights or remedies of the Government under any other provisions of the contract, including the clauses entitled "Inspection of Services" and "Default."
• Column 2 - Required Service. Defines the standard of performance for each listed column.
• Column 3 - Performance Standard. Sets forth the maximum allowable deviation from standard performance for that service that may occur before the Government will invoke the incentive/disincentive.
• Column 4 - Method of Surveillance. Sets forth the surveillance methods the Government will use to evaluate the Contractor's performance for the listed tasks. This column also establishes the period of performance of the planned surveillance.
• Column 5 - Performance/Calculation. Sets forth the performance evaluation area percentage weighting that the listed contract requirements represents.
Government Quality Assurance
Contractor performance will be surveyed to determine if it meets the contract standards.

100% Inspection
This level of inspection shall be accomplished by monitoring and documentation. Each month, the COR shall review the generated documentation, including monthly contractor status calls.

Periodic inspection of the process or output
FEMA shall conduct weekly reviews either on report or at the Contractor's site; FEMA may conduct periodic inspection when the COR or designated FEMA representative chooses the location and time to conduct surveillance in other than a statistically random manner.

Performance Evaluation
Performance of a service will be evaluated to determine whether or not it meets the performance requirements of this contract. When the performance requirement is not met, the Contracting Officer will issue a Discrepancy Report (DR) to the Contractor. The Discrepancy Report is drafted by the COR, who forwards it to the Contracting Officer; this follows the program's contracting monitoring procedures. The Contractor shall respond to the DR by completing the appropriate blocks of the form and returning it to the Contracting Officer within fifteen (15) days of receipt.

QUALITY ASSURANCE SURVEILLANCE PLAN

Timeliness 100% of deliverables are submitted within the time frames stated in the contract.

Accurate billing, presented monthly, is considered to be part of the required deliverables.

No more than 0% of deliverables may be later than the specified time. 100% Inspection:
- Submission dates
- Management reports
- Status reviews Period: Monthly

Quality of Studies & Reports Work products will not require major re-writes.

No work products require major re-writes.

Periodic inspection:
-Status review meetings with FEMA

Period: As required