The California city of Fremont has become the first in the United States to purchase parametric flood insurance, which will provide payouts when flooding reaches a specified level. This will make it possible to address the effects of natural disasters promptly, without waiting for federal aid, which can take months to arrive.
This type of insurance is more advantageous than traditional insurance because payouts are made automatically when thresholds are reached—for example, if more than 0.58 square miles of the city is flooded. Fremont’s administration will be able to use the funds to clean streets, support affected residents and meet other needs.
Parametric insurance is usually used in areas prone to earthquakes and hurricanes, but this is the first time it has been used to protect an entire city from flooding. The move could set a trend for other municipalities, particularly as climate risks grow. While the insurance does not solve the problem of flooding itself, it gives cities a way to recover more quickly after a natural disaster.
