Traditional Home Insurance Is Collapsing. Here’s What Could Fill the Gap | WIRED

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In 2019, when the worst flooding in recorded history spread across the entire Mississippi River basin, Colin Wellenkamp’s phone rang for weeks. Wellenkamp runs a nonprofit called the Mississippi River Cities & Towns Initiative, which coordinates between mayors’ offices in more than 100 river communities from northern Minnesota to southern Louisiana. As he describes it, his headquarters served as “one big virtual situation room” for relief agencies and municipalities up and down the central US.

The damage reports were gut-wrenching: Underneath historic downtowns, sewer systems filled, swelled, and popped; roads above them buckled and collapsed. Not too far from Wellenkamp’s office in St. Louis, stranded residents had to be rescued by boats as rushing waters rose and coursed through their living rooms, and a young couple drowned in a submerged vehicle. In one town—Davenport, Iowa—the sewage treatment plant became an island, and the city had to boat its employees to the site. Workers stayed there for nine solid days, sleeping on cots, to keep wastewater from backing up into homes and businesses.

Colin Wellenkamp with Mike Morrow, the mayor of Grafton, Illinois, in a selfie taken during a Mississippi River flood.

Photograph: Colin Wellenkamp

Wellenkamp knew that in the aftermath of any natural disaster, the first days and weeks can be brutally decisive for the fate of a town. As modest city budgets were being triaged to handle the most dire of emergencies—rescuing the stranded, restacking sandbags, getting power plants back online—damage to other systems was mercilessly stacking up. City leaders could see the future with sickening clarity: Public relief money from agencies like the Federal Emergency Management Agency would take weeks, months, or even years to arrive. As road and sewer repairs waited for funding, destruction would compound over time: Water would continue to flow into busted drainage networks; inundated homes would get moldier. Private insurance payouts would be similarly slow, when they weren’t denied outright. Churches, gas stations, and grocery stores—often the only ones for miles—would close for good. Some residents would leave and never move back. And sure enough, much of it came to pass. “Our cities didn't need a lot of money to respond. Most of them just needed 50 grand, $75,000, $100,000 … but it wasn't there,” Wellenkamp says. “Who's helping you within the first 72 hours? Nobody.”

Flooding in West Alton, Missouri—a town located entirely on a floodplain—in 2019.

Photograph: Scott Olson/Getty Images

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.

> This story is part of The Future of Home, a collaboration between the editors of WIRED and Architectural Digest to help you understand what “home” will look like tomorrow and beyond.

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-co