NYC parametric scheme looks to plug flood affordability gap

New York City has launched a ground-breaking parametric flood cover which is designed to support the Big Apple’s low and moderate income residents.

The pilot project is designed to provide $1.1 million of emergency funding in the case of major flooding incidents to those who can least afford insurance coverage. It has been hailed as a blueprint for similar scheme in cities across the world.

It has been created by the Centre for NYC Neighbourhoods (CNYCN) in partnership with the Mayor’s Office of Climate & Environmental Justice (MOCEJ), the Environmental Defence Fund, and SBP, a social impact organization.

IT is targeted at low and moderate income (LMI) communities in high-flood-risk neighbourhoods, ensuring equitable access to financial resources that ease post-flood recovery and build financial resilience.

The parametric solution has been delivered by reinsurance broker Guy Carpenter, Swiss Re Corporate Solutions, and ICEYE, a provider of natural catastrophe data. It has been funded through a Civic Innovation Challenge award, a joint effort of the National Science Foundation and the Department of Homeland Security.

In the pilot, payments will be triggered to CNYCN for qualifying flood events, using a mix of satellite data, on the ground real-time sensors, and social media images, compiled by ICEYE. Once a qualified weather event triggers the payment to the centre it will open an application portal. Households can apply on their own or through the help of CNYCN’s network partners. Those who qualify can receive a grant up to $15,000 from CNYCN within days of a major flood.

“I am proud of the strong partnership and bold innovation that led to this creative pilot, which will help frontline communities,” said Kizzy Charles-Guzmán, executive director, Mayor’s Office of Climate & Environmental Justice. “As our city faces increasing flood risk from heavy rainfall and coastal storm surge, we need nimble tools aimed toward protecting the financial health and livelihood of New Yorkers.”

Flooding is worsening in NYC and many households are unaware of and unprepared for the risk, the CNYCN warned. “Without access to funding immediately after a disaster, residents and business owners within affected communities often delay important spending, fall behind on bills, and postpone necessary work such as mould remediation.”

Due to the high cost of homeownership in New York City, many 1-4 family homeowners are considered “housing rich, cash-poor,” meaning they have more equity locked into the value of the home than they have available in liquid assets.

While parametric products have been around for decades, their use in community-based solutions is novel. If a flood occurs, using reported flood extent from ICEYE, Swiss Re Corporate Solutions and ICEYE will determine the percentage of each neighbourhood that falls within the flooded area. If the percentage is above a threshold agreed to in the derivative contract, Swiss Re Corporate Solutions will issue a payment to CNYCN, which will then distribute the grants to households.

“This innovative inclusive program will stimulate real change in providing immediate access to funds that will allow traditionally marginalized communities to start building towards recovery,” said Christie Peale, CEO and Executive Director, CNYCN.

“With the increasing frequency and severity of adverse weather impacting communities, it is crucial that we take steps to protect the most vulnerable,” added Jake Clark, head of public sector North America, Guy Carpenter. “Guy Carpenter is honoured to be a part of this important solution and we encourage other communities to use these approaches as a component of disaster risk management efforts.”

“This innovative product allows New York City to optimise its resources and focus on helping low- and moderate-income communities recover more quickly after a severe flooding event,” explained Jackie Higgins, Head of Public Sector Solutions North America, Swiss Re Corporate Solutions.

“Current recovery options are not well suited to meet the needs of our most vulnerable populations,” said Helen Wiley, Disaster Preparedness Program Director, SBP. “This pilot offers important lessons for other communities seeking to fill financial gaps in recovery.”