FEMA deputy administrator for insurance Roy Wright said that the agency is pursuing a possible mid-year reinsurance placement that would build on its January purchase of $1.5bn of cover.
Both ILS and other forms of reinsurance were under consideration, he added, speaking at the Sifma IRLS conference in Miami today.
"I like (ILS) from a capacity and a pricing competitiveness issue."
Wright said a further mid-year purchase was not guaranteed. It is working with Guy Carpenter and Aon Benfield on the programme.
There are political restrictions on FEMA dealing with Bermudian entities directly, although if US or European entities it buys cover from in turn retrocede risk to Bermuda this would not be a concern for the agency, Wright noted.
"We have been convinced that there is efficient capacity available...we have to find the best way (to access it)," he said.
"It's going to require creativity."
Fema was focussed on closing the insurance gap in the US for flood and other risks, and continuing to build on its reinsurance programme to support that to reach the point where it transfers billions of cover annually, he emphasised.
The NFIP claimed a full $1bn payout last year, the first year it had placed reinsurance cover, due to Hurricane Harvey claims.
It has focussed its reinsurance buying on the $4bn-$10bn loss range, the FEMA executive said during a panel debate.
At these levels, the main risk exposure is due to hurricane-related storm surge rather than the less well-modelled inland flood peril, added panellist Angela A'Zary, RenaissanceRe corporate risk vice president.
However, the NFIP alone cannot provide enough cover to meet goals of significantly expanding flood take-up.
"The private market needs to exponentially grow," Wright said. "We welcome private markets."
A'Zary noted that more than 20 insurers had started writing flood covers competing with NFIP policies in recent years, all of which were looking for reinsurance support.
For now they have mostly sought quota share covers but in the next couple of years she tipped demand would grow for excess of loss cover that would make it easier for ILS funds to participate.