This story was originally published here. St. Louis Public Radio.
Early on Election Day, highways in the St. Louis area were flooded. Over several days, intense storms pounded Missouri, dropping 6 to 10 inches of rain. This is a record amount for November.
died in flash flood At least 5 peopleIncluding two elderly poll workers whose vehicle was swept off a state highway.
Mayors along the Mississippi River have watched for years as intensifying storms and flooding wreaked havoc on their communities.
Grafton, Illinois, avoided Election Day flash flooding but suffered between $160,000 and $170,000 in damage from heavy rains in July. The town’s main intersection was blocked by logs and debris, and the storm had burst waterways and left streets in need of repair.
However, Grafton has never received a federal disaster declaration and was not eligible for assistance from the Federal Emergency Management Agency (FEMA). Instead, road and waterway repairs were paid for through the Department of Public Works’ annual budget. As a result, the city will no longer be able to purchase new snow removal trucks this year as planned.
“What this means is we’re going to be limping along for another year, keeping cars running,” said Grafton Mayor Michael Morrow, who oversees a $1.2 million annual budget for the small riverside city of about 600 people. “He said.
River communities have suffered repeated losses. But it could take weeks, months, or even years for federal disaster funds to be distributed. Traditional insurance programs are tied to property and require proof of loss for payment. This can be burdensome and time consuming.
So this fall Mississippi River Cities and Towns Initiative (MRCTI) has announced a new insurance pilot to better help riverside towns recover.
MRCTI represents 105 cities along the 10 major states of the Mississippi River Valley. munich leA German multinational insurance company created the insurance product.
The final pilot will test a new type of insurance pool (parametric insurance) designed to quickly fund emergency response after natural disasters such as floods.
The pilot tests the usefulness of a new “parametric” insurance policy.
probable cause Increasing rainfall and flooding Climate change is said to be climate change caused by humans. The Fifth National Climate Assessment is a scientific report prepared every four years for the U.S. Congress and the President. Impacts, risks and vulnerabilities associated with a changing global climate.
In 2019, basin communities experienced months of flooding across the Mississippi, Missouri, and Arkansas rivers. Reported losses amounted to nearly $25 billion in at least 17 states, according to the National Oceanic and Atmospheric Administration.
The central United States is emerging as a new flash flood hotspot, according to a study published in Nature’s. Communications Earth and Environment newspaper. Its new role as a hotspot means more disaster damage and the need for insurance to address it.
While traditional property damage insurance requires the policy owner to gather evidence and present pre-storm documentation to prove specific losses, parametric insurance quickly pays out when agreed-upon “triggers” such as wind speed or river height reach certain levels.
Brent Jones / St. Louis Public Radio
For the MRCTI pilot, Munich Re proposed using watershed data from the US Geological Survey to determine the best gauge to measure flood depth along a river. Payments occur when river flooding reaches a certain depth.
Pulling the right trigger is important, said Kathy Baughman McLeod, CEO of Climate Resilience for All, a nonprofit focused on climate adaptation.
“You want to have a good understanding of how you set up the trigger in a particular place and why,” she said. “It takes a lot of engagement to make sure everyone is on the same page about what the product is, how it works, and what the triggers are.”
The goal of Munich Re’s pilot program is to demonstrate in real time how parametric insurance payment policies work in current insurance market conditions and how rapid payments can better support a city’s disaster response immediately after a flood.
Colin Wellenkamp, MRCTI’s executive director, said that firstly, MRCTI will develop an insurance model for one risk (floods) with the understanding that multiple risks, such as heat waves or droughts, can be added later. Newly elected on November 6th State Representative for Missouri’s 105th District.
The model calculates the various premium costs and theoretical payment options available to cities of different sizes along the river. But the pilot won’t cost the city a penny, and nothing will be paid until the pilot is implemented. Because it is in the early stages of development, it is unclear which company will ultimately bear the costs of the pilot and final product.
Once Munich Re comes into effect, individual city governments will maintain their policies and receive payments. Wellenkamp hopes to persuade large corporations that depend on healthy, functioning Mississippi River hydrology to pay the premium, he said.
A faster payment could ease the burden on the city.
“Even very little money can go a long way in the first 24 to 72 hours after a disaster,” Wellenkamp said. “We use that time to evacuate and protect people from further harm in the aftermath.”
But soon after the initial emergency response, municipalities begin looking for funding for long-term cleanup and repairs. In the current paradigm, it can be difficult to leverage that money.
In the spring of 2019, massive flooding on the Mississippi River inundated many communities, including Grafton, where downtown was partially closed and people were forced to evacuate.
The Trump administration did not declare a major disaster until September of that year, months after the floods had receded. Morrow said it took until 2022 for federal funding to reach Grafton.
“The previous administration had that flood,” Morrow said. “I’m mayor now and I was getting a portion of the money they invested years ago.”
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That wait puts stress on the city’s finances, especially those of smaller ones like Grafton, Morrow added.
Traditional insurance doesn’t always help either. Grafton does have a flood policy, but it only applies to city-owned properties. Residents and businesses in the community must take their own flood prevention measures. The National Flood Insurance Program (NFIP), which covers many flood insurance products, has various coverage limitations. For example, NFIP does not cover roads or wastewater infrastructure.
Additionally, because insurance policies cover certain types of damage, such as to a specific building or its contents, they require proof of loss before a check is issued. This “evidence” can take days to document and even longer to process, delaying the speed at which local governments can begin repairs. Without proper documentation before a storm occurs, proving damage can be nearly impossible.
Parametric insurance, which works with measurable triggers and is not tied to documentable losses, can ease the process.
Cities from the upper Mississippi River to its mouth could embrace this policy to create a pool that spreads out the risks faced by individual communities.
“Not every city will flood every year, but flooding will affect at least one part of the river,” said Raghuveer Vinukollu, head of climate insights and advisory at Re in Munich, USA.
The insurance pool would protect cities from the risk of ruin, he said, adding that more timely payments would make cities more resilient through rapid reinvestment in infrastructure.
Parametric Insurance in the Mississippi Delta and Beyond
This kind of insurance risk pool for river floods is new territory, Vinukollu said. As climate risks become more extreme, the insurance industry is working with communities to address their evolving needs, he said.
Parametric insurance is still in developmentOne of the earliest examples from Vinukollu stands out. Caribbean Catastrophe Risk Insurance Facility (CCRIF).
CCRIF consolidates the risk of Caribbean countries facing hurricane risk each year. By pooling the risks together, each island can receive greater rewards than if it had taken separate policies.
In July, just 14 days after Hurricane Beryl destroyed 90% of buildings and agriculture on the islands of Carriacou and Petite Martinique, the government of Grenada received its first payment from CCRIF to fund disaster recovery.
Tropical cyclone policies have resulted in higher costs. $42 million to GrenadaThis is CCRIF’s largest single payment since its founding in 2007.
In the Mississippi River basin, Vinukollu hopes to apply this kind of shared risk pool to insure cities at risk of inland flooding.
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“The triggers are different, the risks are different, but the concept is the same,” Vinukollu said.
Located at the tip of the Mississippi River, New Orleans knows the devastating effects of extreme weather events. Several city-run institutions, such as NOLA Public Schools, have adopted parametric insurance policies to protect their critical infrastructure.
One of the first tests of these policies came in September, when Hurricane Francine’s storm surge, rain and winds pounded southern Louisiana.
But NOLA Public Schools never received a payout from its insurance with Swiss Re.
Wind speeds were high, but not high enough to meet the policy’s trigger of more than 100 miles per hour for one minute.
New Orleans is more likely to experience recurring and significant losses from named storms than cities in the upper basin, such as Minneapolis, so cities closer to the Gulf Coast could end up paying higher insurance premiums once the policy is officially implemented, Wellenkamp said. said. MRCTI.
Cities that choose to insure more risks or lower-level catastrophes may pay higher premiums because they can make payments more frequently, Wellenkamp said. Ultimately, municipalities may still end up bearing the costs of events like the July floods in Grafton or the Election Day storms in St. Louis.
McLeod argues that communities should not expect payouts from parametric insurance so often. “Due to the nature of the product, that is not possible. [pay every year]“She said, “Insurance is for the worst of the worst.”
Munich Re advises that parametric insurance is best suited to complement, rather than replace, traditional insurance policies. But company officials believe these new policies provide an opportunity for insurance to adapt to a changing risk environment as extreme weather events become more extreme.
Despite its potential to promote faster disaster response, parametric insurance is not a panacea, said McLeod of Climate Resilience for All.
For her, the best solution is to reduce the underlying risks from climate change.
“The big picture is that these are really important tools for managing and financing the risks of climate change, and we need all of them,” she said.
But McLeod said the most effective fiscal measures, more than any new fiscal tool, would be to address the root causes of climate change and build or rebuild natural protections like wetlands.
“We have to reduce the risk. [or] You wouldn’t be able to afford insurance for that,” she said. “If you know this is going to happen, it’s not insurance.”
Marta Jewishon of The Lens contributed to reporting on this story.
This story is a product of . Mississippi River Basin Ag & Water DeskIndependent reporting network based on University of Missouri. Disclosure: Both the desk and MRCTI receive funding from the Walton Family Foundation. Support our independent reporting network. donation.
