By chance, a few months before the 2019 Mississippi River flood, Wellenkamp learned of a novel, little-known form of insurance that was quietly developing in disaster-prone areas around the world—not a way to cover individual homes, but a way to protect entire cities and ecosystems from natural disasters. It began appearing in farmlands in eastern and southern Africa in the early 2010s, particularly in Malawi and Ethiopia. It then began to spread to war zones and other places once considered uninsurable.
This is called parametric insurance and relies heavily on sensors, satellites and artificial intelligence. The idea is what it sounds like: Once sensors confirm that certain predetermined parameters have been met – say, half an inch of rain falls in an hour, or winds exceed 100 miles per hour for 60 consecutive seconds – any participating government or company in an eligible area can receive a payout. By making determinations based on remote weather readings rather than actual damage assessments, insurance companies may dispense with human assistance. And by processing claims using artificial intelligence, they can get money into people’s hands within days. The money is typically drawn from a pool to which various parties contribute: often governments, nonprofits, and companies with financial interests in their local ecosystems.
In 2018, some United Nations staff contacted the nonprofit Wellenkamp to discuss disaster resilience, and parametric insurance emerged. They had seen it work in other parts of the world and offered to broker a conversation between Wellenkamp and several major parametric insurers to see if a similar model could work in the Mississippi River basin. Since then, it has been in talks with one of the world’s largest insurers, Munich Re, in an attempt to develop a plan to prevent what happened during the 2019 floods.
Wellenkamp is in good company. As disasters multiply and conventional home insurance collapses under the weight of climate change, the parametric model continues to make inroads into North America’s top markets, insuring against a litany of previously hard-to-hide disasters. Last year, the Bay Area city of Fremont became the first municipality in the country to purchase a citywide parametric flood insurance plan. A homeowners association near Lake Tahoe, California, has a joint parametric fire insurance plan, and a group of nonprofits in Modern York City has partnered with the city to purchase a joint parametric flood insurance plan that will cover several particularly low-lying neighborhoods in Modern York City. Hoteliers and local governments in Hawaii and Cancun, Mexico, have used parametric plans to insure coral reefs against storm damage. For 16 years, national governments in the Caribbean have paid for a single parametric hurricane plan; after Hurricane Beryl reached set parameters in 2024, the plan quickly sent payments, including almost $44 million to Grenada alone. The money enabled the rapid reopening of hospitals and schools, repaired roads and public water supplies, and supported farmers and petite businesses.