The groundbreaking community-based parametric scheme set up to provide emergency funding to New York neighbourhoods impacted by flooding has potential to scale up to cover thousands of cities across the US, according to Guy Carpenter’s Julian Enoizi.
Launched earlier this month with participation from Guy Carpenter and Swiss Re, the $1.1mn pilot will provide low- and moderate-income households with payouts in the aftermath of a major flood, with cover purchased at community level through the Center for NYC Neighborhoods rather than at the individual level.
Enoizi, who leads the broker’s global public sector practice, told The Insurer TV community-based solutions could also extend to additional perils such as wildfire, wind and earthquake.
“The idea behind it is to sell to a vulnerable community as opposed to trying to sell flood insurance on a one-to-one basis,” he explained.
“You can then create resilience among a community of people who otherwise wouldn't be able to afford to buy flood insurance. You also then get the quid pro quo that goes along with that, which is the build-out of resilience.
“So as well as protecting them financially you are also protecting them by building resilience in the community – in this case, New York.
“The scheme is the first of its kind – the first time it's been done. New York City neighbourhoods have actually invested in the product. It is something we at Guy Carpenter have been working on with the public sector team in the US for some time now.
“The idea here is to take this concept and essentially multiply it, taking it to hundreds if not thousands of cities across the US. As well as flood, there is no reason why it can’t apply to other kinds of natural perils such as wildfire, earthquake or wind.”
Enoizi said the initial pilot was aimed at building community-level resilience through protecting several thousand people against flood as opposed to having to sell a flood policy thousands of times.
“People probably wouldn't be able to afford to buy it, even if you were able to offer it to them,” he said.
Enoizi said the affordability gap was one of the major challenges in bringing cover to communities currently under-served by insurance, as well as a lack of awareness around the potential flood risks among vulnerable communities.
“Poorer communities tend to be the ones that are most vulnerable as they often live in locations susceptible to flood by dint of the factor property there tends to be cheaper.
“But anywhere it rains it can flood, so we need to devise products that tempt people to protect themselves, even in locations where it is less likely.”
Enoizi said engagement between governments and the sector around the role insurance can play in enhancing resilience was increasing, partly out of necessity as governments seek to avoid exposing taxpayers to risks that could be passed to the private market.
“Community-based catastrophe insurance is one example where a community can come together to protect its people through the purchase of insurance, married with risk mitigation measures that increase resilience and reduce susceptibility to the peril,” he said.
The Insurer TV speaks to Guy Carpenter’s Global Head of the Public Sector Practice, Julian Enoizi.
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