Community Catastrophe Insurance: Innovative Models to Enhance Resilience

Understanding the Insurance Gap

Many households and small businesses lack sufficient savings to recover from natural disasters, making insurance a crucial source of recovery funds. However, a significant portion of the population remains uninsured or underinsured, which not only hampers individual resilience but also slows community recovery. Community-based catastrophe insurance (CBCI) offers a potential solution by providing affordable disaster coverage and linking it directly to community-level hazard mitigation.

Exploring CBCI Models

A recent Marsh & McLennan report examines various CBCI models, including the facilitator, group policy, aggregator, and captive models. Each model assigns different roles and responsibilities to the community, ranging from being a facilitator and negotiator to an insured entity and claims disburser. For instance, the aggregator model sees the community as both the insured and the disburser, leveraging a contract with a reinsurer.

Implementation and Incentives

The report outlines a five-part roadmap for CBCI implementation, emphasizing the importance of voluntary coverage and the need for purchase incentives to achieve widespread adoption. Recent data from the Insurance Information Institute shows that only 60% of homeowners in disaster-prone areas have flood insurance, highlighting the urgency of innovative solutions like CBCI. To enhance community resilience, it is essential to explore these models and implement them effectively.

For readers, a useful tip is to stay informed about local insurance options and community initiatives aimed at enhancing disaster preparedness. Engaging with local governments and community groups can also provide valuable insights and opportunities for collaboration.