California Launches Parametric Flood Recovery Program

The California state government is providing $200,000 for a novel insurance program to help residents of the city of Isleton recover from future flooding, testing an approach that could be expanded to other communities.

The grant funds from the California Department of Water Resources (DWR) would enable Isleton’s Delta Geologic Hazard Abatement District (Delta GHAD) to pay for parametric insurance coverage that would be triggered in the event of flooding that reaches preselected depths. Funding to pay insurance premiums would be divided evenly between the current and next budget years, which begin on July 1.

Residents of the Sacramento County community would receive “relatively small but meaningful” payouts that could be used for food, lodging, and other necessities during an evacuation, or for longer-term needs following flooding such as repairing property damage or to offset business or job interruption, the California Insurance Department says.

The Delta GHAD and potential reinsurance providers would negotiate details of the parametric coverage, including the flooding depth that would trigger payouts and the size of those payouts, says DWR spokesperson Jason Ince. “It is possible that the reinsurance firm (private companies) would purchase, install, and monitor new instruments within Isleton that would trigger an alert when water levels were high enough to correspond with updated inundation maps, which DWR will be assisting in the creation of. DWR is also interested in including the new data in its statewide data collection networks.”

Sacramento television station KXTV reported that payouts would be capped at $10,000 per property owner.

This program is the result of ongoing collaboration by DWR, Delta GHAD, the state Insurance Department, and the University of California, Davis to establish affordable alternatives to the National Flood Insurance Program, Ince says. The cost of flood insurance in the Central Valley was emphasized in DWR’s 2017 Central Valley Flood Protection Plan, and the state subsequently formalized its recommendation to study insurance options beyond the federal program, Ince says.

Isleton is a city of roughly 800 within a 100-year floodplain in the Sacramento San Joaquin Delta. Flooding following a 1972 levee failure forced residents to evacuate for months, the Insurance Department said in a press release. The city in 2023 established the Delta GHAD to employ fee money to buy private flood insurance policies for residents. Delta GHAD is California’s initial special district to have prepared a community-based flood parametric insurance product.

“The primary factors in awarding the grant to the Delta GHAD was the community’s leadership in pursuing this effort on its own and the fact that Sacramento County completed a Small Community Flood Risk Reduction study (funded by DWR) that identified this as a viable action to reduce flood risk for the Delta legacy communities,” according to Ince.

The state hopes Isleton residents will continue paying the insurance premiums after the grant funds run out, he adds. A community vote is planned in 2025 on using property tax proceeds to maintain the program, KXTV reported.

“If there is no flood event, the state still has a practical example of a parametric insurance contract and gauging system to base long-term support for small communities across the state,” Ince notes. “This is a pilot program, so it’s the process and experience in setting up the program that is the most important element.”

Lessons learned in Isleton could be applied to potential expansion of the grant program in other areas, Ince adds.

The DWR’s Small Community Flood Risk Reduction Program has already more than $45 million to assist 35 communities in flood mitigation efforts. The agency has also since 2012 delivered $50 million in grants through its Flood Emergency Response Projects Grant Program.