By chance, a few months before the 2019 Mississippi River flood, Wellenkamp learned about a new, little-known form of insurance that was quietly expanding in disaster-prone areas around the world—not a way to cover individual homes but a means to insure entire towns and ecosystems against calamities. It had started taking off in the farmlands of eastern and southern Africa in the early 2010s, particularly in Malawi and Ethiopia. Then it began to spread into war zones and other settings once deemed uninsurable.
It’s called parametric insurance, and it relies heavily on sensors, satellites, and AI. The idea is just what it sounds like: When sensors confirm that certain predetermined parameters have been hit—say, half an inch of rain falls in a single hour, or winds north of 100 miles per hour are sustained for 60 consecutive seconds—any participating government or business within the qualifying area can get a payout. By making determinations based on remote weather readings instead of actual damage assessments, insurance companies can do away with human field adjusters. And by processing claims with AI, they can get money into people’s hands within days. The cash is usually drawn from a pool that a range of parties pays into: often governments, nonprofits, and businesses with a financial stake in their local ecosystems.
In 2018, some staffers at the United Nations had reached out to Wellenkamp’s nonprofit to discuss disaster resilience, and parametric insurance came up. They’d seen it work in other parts of the world and offered to broker a conversation between Wellenkamp and some major parametric insurance providers to see if a similar model could serve in the Mississippi River basin. Since then, he’s been in conversations with one of the world’s largest insurers, Munich Re, trying to come up with a plan to prevent what happened in the 2019 floods.
Wellenkamp is in good company. As disasters multiply and traditional home insurance crumples under the weight of climate change, the parametric model has been moving steadily into prime North American markets, insuring against a litany of previously hard-to-cover catastrophes. Last year, the Bay Area city of Fremont became the first municipality in the country to take out a city-wide parametric flood insurance plan. A homeowners association near Lake Tahoe, California, has a joint parametric wildfire insurance plan, and a group of nonprofits in New York has partnered with the city to purchase a shared parametric flood insurance plan that will cover a handful of particularly low-lying New York City neighborhoods. Hoteliers and local governments in Hawaii and Cancun, Mexico, have used parametric plans to insure coral reefs against storm damage. For years, 16 national governments in the Caribbean have paid into a single parametric hurricane plan; after 2024’s Hurricane Beryl met the set parameters, the plan quickly sent out payments, including nearly $44 million to Grenada alone. The money allowed hospitals and schools to reopen quickly, fixed roads and public water lines, and supported farmers and small businesses.