“Fire took everything, please help.”
The headline was one of hundreds like it on GoFundMe campaigns that launched even as the embers of the fires in the Pacific Palisades and Altadena were still smoldering. They were a grim reminder that even in more affluent areas of the US, there are always people who are uninsured or, despite having insurance, still need help with immediate needs like clothing and shelter after a disaster.
Three-hundred and fifty miles to the north of Los Angeles, another California city is pioneering a form of disaster insurance that could provide more reliable relief than the kindness of strangers.
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Fremont, a Bay Area city of 226,000, in September became the first municipality in the nation to buy its own citywide flood insurance policy. It’s what’s known as parametric insurance: If the agreed-upon threshold, or “parameter,” for flooding is met, that will trigger an immediate payout. Fremont could use the money for anything it needed, whether cleaning up debris or helping uninsured citizens to get back on their feet, or even just replenishing the general budget.
While there are plenty of smaller experiments in community-wide parametric insurance — there are homeowner associations in California, for example, that carry wildfire insurance — Fremont’s marks a major step forward since it involves public monies and coverage for an entire city.
It comes as pressure for communities to do more to protect themselves is growing intense. Private insurers are leaving more households exposed by dropping policies and exiting some markets altogether. Meanwhile, the Trump administration has fired hundreds of employees at the Federal Emergency Management Agency, which responds to natural disasters, and has targeted more at an office of the Department of Housing and Urban Development that is key to funding disaster relief. President Donald Trump has said he’d like to close down FEMA altogether and have states handle their own disaster response and recovery.
“It’s clear that more innovative solutions need to be brought to the table” to protect Americans, said Daniel Kaniewski, a former FEMA official who now leads the public sector practice at Marsh McLennan, a risk management firm. “We feel that community-based catastrophe insurance is one such approach.”
The US is vastly underinsured for catastrophes. Home insurance doesn’t cover flood damage, and only about 4% of Americans purchase it separately through the federal government’s National Flood Insurance Program. Roughly 12% of US homeowners have no home insurance at all, says the Insurance Information Institute. (Lenders require mortgage holders to have insurance, but homeowners without mortgages are under no such obligation.)
Local governments may insure key public buildings, like city halls. But when disaster strikes, they mostly rely on aid from FEMA and HUD to recover. The president must declare a major disaster for FEMA funds to kick in. Even then, it can take a very long time for residents’ claims to be processed, a delay that has financial repercussions for cities and towns as the tax base shrinks.
Fremont has flooded before, although that wasn’t entirely what inspired the recent purchase. The city was required to take out flood insurance for its police headquarters building because it serves as collateral for municipal bonds. But that building is on a hill and never floods, even when other parts of the city are inundated.
Steven Schwarz, the city’s risk manager, reasoned that at a slightly higher cost, Fremont could get more extensive protection. “The parametric basically allows me to provide specific coverage and then broaden it,” he said. “I’m actually covering the event and not the building itself.” The additional cost is just 20% more than the city was paying for a traditional policy on the police HQ, which had a deductible, Schwarz said.
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The policy starts paying out when flooding is observed in a contiguous area of at least 0.58 square miles, anywhere within the city’s 78 square miles of land. That would trigger a $200,000 payout that could increase with worse flooding.
Although mainstream insurers only began to offer parametric insurance in the 1990s, it’s becoming a favored way to insure against catastrophes like earthquakes, droughts and hurricanes, especially in Africa and the Caribbean.
It is more affordable than traditional insurance because it only triggers if and when the parameter is met — for example, with 1 inch of water on the ground following heavy rains or when storm winds reach 145 miles per hour. Then the money is paid automatically, without need of claims or adjusters. The downside is that if a catastrophe misses the prescribed metric by a tiny amount, the policyholder gets nothing.
Parametric insurance for earthquake damage has been available in California for several years. Crafting an option for flooding has become possible only more recently, with new mapping technology that can accurately measure flooding and flood severity, said Bessie Schwarz, the chief executive officer of New York City startup Floodbase (and no relation to Fremont’s Schwarz).
“This coverage requires a dataset that can monitor flooding inside the entire extent of the city all the time,” she said. Floodbase is providing just that to underpin Fremont’s policy: constant, real-time flood monitoring.
Fremont couldn’t have gotten parametric flood insurance in 2017, when it experienced major flooding. But if it had its current policy then, the city would have received more than $710,000, Floodbase estimates. (The city’s conventional policy on the police building did not pay out.) With the new policy, there hasn’t been a rain event yet that threatened to trigger a payout, Steven Schwarz said, but it’s still early.
While Fremont put its own money toward the policy, which insurance brokers say is a first, there is at least one similar pilot out there. In New York City, non-profit groups including the Environmental Defense Fund and the Center for NYC Neighborhoods, working with the mayor’s office, banded together to buy parametric flood insurance to cover some low- and moderate-income neighborhoods. The policy was active in both 2023 and 2024, and so far it has not paid out.
Alliant Insurance Services Inc. and Amwins Group Inc., the retailer and wholesaler respectively behind Fremont’s plan, believe there is widespread appetite for this type of insurance.
“I am seeing a lot of interest in this right now,” said Rob Lowe, Fremont’s broker with Alliant. Lowe, who has been selling insurance to public entities in California for 15 years, says recent extreme events like downpours caused by atmospheric rivers have awakened cities to their vulnerabilities, and they see parametric insurance as a way to close that gap.
Floodbase’s Schwarz said the company hopes to scale citywide parametric flood insurance across California, and eventually to flood-prone regions around the country. She said she’s received inquiries from cities in the Southeast affected by Hurricane Helene.
Jesse Keenan, a professor at Tulane University who studies cities and climate risk, says local governments, in particular, could use these policies to reduce the disruptions to their tax base brought by disasters. “This would likely be very positively viewed in the muni bond credit rating agencies,” he said.
But, he added, cities would basically be kicking the can down the road unless they take bigger, more expensive steps — like reining in new construction — to lower risk and adapt to the climate that is coming.
“Ultimately, local governments will need to reduce risk through appropriate land use, zoning and building controls,” he said. “Without this, parametric insurance might not even be available in the future.”
Top photo: The Warm Springs area of Fremont, California.
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