The New York team implemented a parametric flood insurance policy, using data to inform a program to make emergency cash grants to low-to and moderate-income households in the wake of a disaster.
THE CHALLENGE
Flooding is the costliest natural disaster and the risk is escalating in many parts of the country. Prior research has found that low- and moderate-income households suffer disproportionately from disasters and recover less quickly. Financial resilience – the ability to recover from an economic shock – is foundational to all other aspects of recovery. The team’s overarching goal was to increase the financial resilience of LMI (low- to moderate-income) households in New York City to escalating flood risk through the use of an innovative insurance model.
THE TEAM
Research Partners:
Wharton Risk Center
Urban Institute
Global Parametrics
Civic Partners:
NYC Mayor’s Office of Resiliency
Center for NYC Neighborhoods
NYC Office of Management and Budget
THE APPROACH
Establishing the pilot required a detailed assessment of both financial need and pluvial flood risk to identify pilot communities; exploration of data and technology to define a trigger for the product; and exploration of a payout structure to maximize impact. The team settled on a trigger for the parametric product related to the percent of points (defined by areas where people live) that are flooded according to a flood footprint calculated using a combination of satellite data, FloodNet sensor data, social media postings, and other available photographs or video.
The pilot featured a parametric risk transfer program where the Center for NYC Neighborhoods (CNYCN) receives a payout after a damaging flood to make emergency cash grants to LMI households in the immediate aftermath of the disaster.
THE IMPACT
Developed prototypes for how microenterprises and small businesses in LMI communities can be financially protected from a disaster.
Quantified the financial recovery gaps of households and the community-wide benefits of increased take-up of insurance.
Produced tools and outreach materials to improve understanding of flood risk, financial recovery, and insurance.